Managing Director of Viree Diamond Club Dubai Ksenia Kostina on how sanctions will affect the trade in Russian diamonds

The managing director of Viree Diamond Club Dubai, a member company of the Dubai Diamond Exchange, told Kommersant about how sanctions will affect the trade in Russian stones. Ksenia Kostina.

— What risks do anti-Russian sanctions pose for your business?

— The main risks for both our business and consumers are the rise in price of stones.

— What is the current situation with the implementation of sanctions?

— Initially, the G7, in parallel with the EU, introduced sanctions against first Russian diamonds, and on March 1, sanctions against diamonds that were cut from Russian raw materials came into force. In my opinion, now there is a period of sobering up, when approximately all players begin to understand that, firstly, sanctions are unprofitable for many, secondly, they are expensive and, thirdly, it may be impossible to implement them. From March 1 to September 1, there will be a period when it is no longer possible to buy and sell diamonds if they are made from diamonds of Russian origin. The process of proof is not defined.

From September 1, some systems and certificates will definitely be defined, and how exactly this needs to be proven. Therefore, now all the major players have naturally perked up and actively turned on their lobby. For example, De Beers already has a defined diamond origin tracking system called Tracr. They sell diamonds along with a QR code from which you can find out a beautiful marketing story: where it was mined, how this sale helps the people of Botswana get better schools, improve working conditions, how the country is developing, etc. Accordingly, De Beers is lobbying for Tracr. so that it becomes one of, or even the only, tool for tracking the origin of diamonds.

— Is this a universal tool?

– No. The sanctions also affect De Beers because they mix and aggregate their diamonds mined in Botswana, Canada, Namibia, and South Africa. Now they are confused whether they will be allowed to sell mixed diamonds under these sanctions if they are of non-Russian origin. Naturally, they are lobbying to be allowed. Each player wants to find a benefit for themselves, so everyone looks at De Beers and waits for a decision: if they are allowed to mix, then everyone will do so.

“And this will be a huge loophole for the entire market.”

– Yes. Discussions are ongoing. As part of the G7 sanctions, it was decided that all rough diamonds will have to go through a certification center in Belgium, from where they will be sent to the USA, Mumbai, Israel or Dubai. Most players are against this story because it is double costs. There are doubts that Belgium will even cope with such a volume. Therefore, the World Federation of Diamond Bourses proposes to grant certification powers to Dubai, Mumbai and Tel Aviv.

— Rapaport Group Chairman Martin Rapaport criticizes the so-called G7 Diamond Protocol, calling it biased in favor of large companies.

— Martin Rapaport cares most about the American market for jewelers and cutters. He proposes that all stones should be sent immediately to American customs, and that they should allocate companies that will take responsibility for proving non-Russian origin. And we will assume that if the stones ended up in the USA, then everything is fine with them.

— What recommendations do you give to your clients?

— According to the explanations of the European Commission, if an EU citizen buys some jewelry or diamonds for personal use, then he does not bear any responsibility for compliance with sanctions. We give our clients a recommendation to buy, because there are no prerequisites for stones to become cheaper in the near future. Obviously, due to the sanctions, there will be less supply on the market, because during the transition period there will be uncertainty with stones of Russian origin.

— How do prices behave after the announcement of sanctions?

— There was a slight increase in price for certain carat forms.

— In your opinion, can sanctions on diamonds be effective?

— Probably, the effectiveness of sanctions depends on the goodwill of all players. As a result, I think that large companies receive preferences and benefits, as has always happened in other industries after various sanctions. I don’t think that sanctions will have a negative impact on Russia, since prices for stones of non-Russian origin will increase and there will be more temptation to buy Russian stones. Diamonds are a small commodity. It’s convenient to mix them.

— How will the market eventually be restructured?

— I recently read an article that said that Russian diamonds were found in Cartier watches. At the same time, the manufacturer stated that it refused to purchase Russian diamonds. The smallest stones will be impossible to track. I think nothing will change globally, except that stones in Europe and the USA will definitely cost more. Maybe more people will travel to Dubai to buy European jewelry.

Interviewed by Evgeniy Zainullin