A specialist works with rough diamonds at the ALROSA Diamond Sorting Centre in Mirny, Sakha (Yakutiya) Republic, Russia, 19 June 2019. (Photo: EPA-EFE/SERGEI ILNITSKY) G7 envoys had discussed flipping the existing sanctions regime around, with all exports barred unless exempted. Under the current criteria all exports are allowed unless sanctioned. The exemptions would have included medicines, agricultural goods and food.
However, the latest draft of a statement that G7 leaders are set to adopt at their summit in Hiroshima that started on Friday doesn’t include the provision.
The move would have been too complicated for some members to implement given different legal and regulatory systems, including those in the European Union, the people said. Such a near-total ban would also have required the agreement of all EU states.
The G7 will instead broaden the list of banned goods to restrict items critical to Russia’s war in Ukraine, including those used on the battlefield, such as exports of industrial machinery and tools, according to the draft statement. The G7 will also further target key sectors, such as manufacturing, construction, transportation and business services.
Beyond hitting Moscow’s revenue, a main focus of the G7 is to close sanctions loopholes and strengthen enforcement, especially in regards to third countries through which Russia is importing banned goods.
As part of those efforts, the G7 is also set to announce that members will work together to restrict trade in Russian diamonds, and take action against countries they believe materially support Moscow’s war.
The move to track and trace Russian diamonds across borders could pave the way for an import ban in the future.
Earlier attempts to sanction Russian gems in Europe have met resistance from importer nations like Belgium, who argue doing so would just shift the diamond trade elsewhere.
According to a draft seen by Bloomberg, the leaders will say they will work together to “restrict trade in and use of diamonds mined, processed or produced in Russia” and “co-ordinate future measures, including through tracing technologies”.
One G7 member state that would stop all imports of Russian diamonds is the UK, which since Brexit is no longer bound by the need for consensus with the European Union. Prime Minister Rishi Sunak also announced that the UK would end imports of Russian-origin nickel, copper and aluminum, although such shipments are dwarfed by what goes to the EU.
A diamond’s origin is clear at the start of the supply chain when it is issued a certificate under the Kimberley Process, which was designed to end the sale of so-called blood diamonds that financed wars. After that, they can become difficult to track.
Cut and polished stones are often intermingled at trading houses and the original certificate will be replaced with “mixed origin” documentation, making it near-impossible to keep track of where Russian diamonds are eventually sold.
On metals, the G7 leaders will simply affirm a broad effort to reduce Russia’s revenue, according to the draft statement seen by Bloomberg.
While the flow of many commodities from Russia to Europe has dropped since the war broke out, metal producers like MMC Norilsk Nickel PJSC and United Rusal International PJSC have continued to sell nickel, copper and aluminum to European buyers.
Politicians have been wary of the impact on western supply chains of sanctioning Russian metals following the experience of 2018, when the US imposed penalties on Rusal that triggered chaos for European manufacturers until they were lifted the following year. BM/DM