In an office in Antwerp in Belgium, four piles of small grit-like stones are piled on the desk. It’s hard to believe that these plain white rocks are actually some of the most valuable in the world.
These are rough diamonds, which means they have not been cut or polished, and they look as they did when they were first dug out of the ground.
He lets me pick up some. The weight of the peppercorns is barely enough to feel on my palm. It’s similar to handling peppercorns or salt.
Then I ask him how much they are worth. He asks “In total?” as he examines the piles. “About 3 million.” I suddenly felt the stones felt heavier when I realized they cost more than what I would ever earn in my life.
Hari is serious about his point. These four piles are from different countries but they have a chemical composition that is almost identical. Experts wouldn’t be able to tell if I took out the black diamonds from the Canadian pile and put in some smaller diamonds from Botswana.
Hari, who is not using his real name for security reasons, invited me to the diamond capitol of Europe. The “diamantaire”, or as the industry calls him, he wants me to witness the absurdity that new European and G7 legislation is causing in the international jewelry market.
After the war in Ukraine, the West imposed sanctions on Russia, banning Europeans from buying its natural resources like oil, gold, and caviar. Diamonds were allowed to be traded until January when the trade of Russian diamonds became prohibited.
The European Commission, shortly after the ban was implemented, ordered that all diamonds headed to the EU be sent to Antwerp for verification as non-Russian. The only problem was that all diamonds looked the same. How could you tell which one came from? Answer: you can’t.
The government-run office, which is just a few minutes’ walk away from Hari’s workplace, demands that each batch be accompanied by a long paper trail to prove its origin. This leads to long delays, extra costs and unhappy customers
Benjamin, a diamond trader who works high above the street, has a plush office. Benjamin opens a window because it is a warm day in Antwerp. The buzz of the diamond district is reflected in
He says: “Let’s imagine I took out a bank loan of $10 million to buy some diamonds.” Benjamin speaks of millions as if they are peanuts. “Normally, I would be able to get the diamonds from Africa to my office in 48 hours to be processed and then sent to a customer. With all the bureaucracy it can take up to two weeks. Benjamin says, “If interest rates were 10 or 11 percent, I’d be losing money each and every day.” He slams a fist down on the table.
All Russian diamonds are banned as of January 1. All rough diamonds greater than 1 carat are required to be processed in Antwerp as of the beginning of March. On September 1, all rough diamonds greater than 0.5 carat will be subject to the same restrictions. The critics also note that other diamond hubs such as India, Dubai, and Tel Aviv do not have sanctions against Russian diamonds. Alrosa, the state-owned Russian diamond company, has experienced a negligible effect on its sales.
The European Commission rejects the notion that a bottleneck has formed in Belgium. According to a spokesperson, the volume of diamonds that pass through Antwerp is “high” but not more than usual. The city’s diamondbacks are still furious.
The chief executive of De Beers – the largest diamond producer in the world – wrote a letter to the Belgian Government last week criticizing “substantial delays and costs associated with diamond imports into Belgium”. De Beers is owned Anglo American, a FTSE 100 mining company.
Hari explains that there are four times more diamonds below one carat than larger ones. If this level of disruption is what we see now, how will it be when the remaining diamonds arrive for processing?
Hatton Garden, London’s diamond district, is only just beginning to take notice of Antwerp’s chaos. The UK and US chose to opt out of the Antwerp stage of the sanctions by letting diamond producers self-certify their country of origin.
The London Diamond Bourse is a British association of diamond traders located in the heart Hatton Garden. Alan Cohen is its president, and he speaks with a palpable sense of relief. If you had asked me about my opinion on Brexit, I would have said that it was the worst mistake the UK ever made. “My God, I’m glad we’re gone.”
London’s retailers are a little more sanguine than the rest of the world about the current chaos in Europe. Queensmith Jewellers is located 15 seconds away from the London Diamond Bourse. Brett Afshar said that his diamond supply has not been affected.
Some British traders are nervous about the delays in Antwerp. Although companies are not required to process diamonds destined for Britain in Antwerp, established supply chain means most do.
Cohen said that the problem is not as severe right now. It has the potential for causing unbelievable problems. This is just a precursor to a much larger disruption in the coming months, which could result in substantial price increases.
The diamond district of Antwerp is shockingly shabby compared with the art nouveau station. Between jewelry shops, pawnbrokers and office blocks are squatted.
Pieter Bombeke, one of the last master craftsmen in the city, is a rare breed. In a small shop off the main road, he finishes a repair of a diamond. A speaker plays jazz music, while the machine that he uses to polish the stone is so loud he must shout in order to be heard.
Bombeke says that there used to be more than 4,000 diamond cutters working in Antwerp. “Now it’s 120. The majority of the work is now being done in India, where labor is cheaper.
Traders fear they may follow suit. One financial advisor to the diamond industry in Antwerp claimed that ten companies had already informed him they were planning to relocate to Dubai or India due to these new rules.
Noam has a bowl of raw tomatoes chopped up at four in the afternoon. He admits that despite his family’s long history in the diamond industry of Antwerp, he had considered moving to another city. He says that if he didn’t like Antwerp, he would move to Dubai.
Noam walks next door to speak to a customer. They shout at each over the $400,000 order for stones. Noam is calm when he returns. “Everyone agrees that there should be sanctions against Russian diamonds, but why don’t we self-certify as they do in London?”
Hari is all about numbers. “If each diamond shipment is late by two to three weeks, the industry is losing around half a million dollars.
He adds, with a shrug: “Someone will have to pay for this.” “And it’s likely going to be consumers.”