Jewel In The Crown: Can India be the node for diamond verification as EU defers sanctions on Russian rock to Mar '25

New Delhi, along with the Indian diamond lobby, has been relentlessly making a strong case for India as the key nodal checkpoint for diamond verification.

In the midst of these discussions, one might reflect on Leonardo da Vinci's timeless insight, "A diamond is just a lump of coal that stuck to its job." This quote resonates with India's ambitious bid to consolidate its position in the diamond industry, especially as it navigates through challenges posed by tightened sanctions on Russian diamonds.

Here’s a closer look at why shifting the nodal point from Belgium to India could be a game-changer for the global diamond industry while benefiting India, especially after the stricter sanctions are imposed on March 1, 2025.

The current scenario: G7 sanctions

On December 6, 2023, G7 leaders announced import restrictions on non-industrial diamonds mined, processed, or produced in Russia. These sanctions, effective March 1, 2024, initially targeted rough stones of one carat and above processed in  countries like India. The threshold was set to lower to 0.5 carats and above from September 1, 2024, a date that has now been pushed back to March 1, 2025. This will significantly impact India, a major player in the diamond industry.

Centred in Surat, India processes over 90 percent of the world's rough diamonds, playing a crucial role in its economy, generating significant employment and substantial export earnings. However, recent changes in diamond certification standards pose challenges. Lowering the certification threshold to 0.5 carats expands scrutiny, straining India's advanced processing infrastructure and requiring technology upgrades. This intensification could lead to supply chain bottlenecks and higher operational costs, potentially impacting job stability in Surat, and slowing export revenues. Moreover, India's competitive edge in the global diamond market faces scrutiny, as streamlined processes elsewhere could attract business away from India, possibly reshaping the global diamond supply chain dynamics.

The diamond industry in Surat, Gujarat, is staring at renewed challenges following the impending tightening of sanctions, which came as a result of the Russia-Ukraine war. Industry insiders indicate that these stricter measures will significantly impact Surat's diamond sector, which heavily relies on importing Russian rough diamonds for processing.

The new regulations will necessitate detailed tracking of diamond origins, with oversight from Antwerp, Belgium. Diamond baron Dinesh Navadiya noted that approximately one third of diamonds polished in Surat originate from Russia, directly or indirectly. This development comes amid broader global challenges affecting India's diamond exports, with declining figures in the last financial year attributed to fluctuating demand in key markets like the USA and China. Additionally, logistical challenges and increased processing in countries like Namibia, Botswana, and Angola have compounded the Indian diamond industry's woes.

So, how can India become the nodal point of verification for diamonds, after the stricter restrictions start hurting the business here?

India’s argument for becoming a nodal point

1.       Existing infrastructure and expertise

India’s significant imports and processing of rough diamonds make the country a natural choice for a nodal checkpoint. The country already has advanced 3D scanning and profiling technology, has invested heavily in the latest technology required for diamond certification, and also boasts skilled labour.

2.       Logistical efficiency

Routing diamonds through India instead of Belgium could eliminate the need for additional transit to and from Belgium, saving significant transit time.

Furthermore, fewer transit points mean lower shipping and handling costs, as well as reduced potential delays.

3.       Proximity to diamond sources

India’s geographical proximity to major diamond mining countries like Botswana and Namibia offers a clear logistical advantage over Belgium.

Key points of support that might tilt the scale in India's favour

“Key considerations during the transition period include how quickly the EU will be able to develop and introduce an effective technological platform that has interoperability with existing traceability technologies in the industry, and how each G7 member will adopt/evolve its approach to imports to enable the responsible, non-Russian diamond trade to flow.

``The diamond industry will continue to engage with the G7 to ensure we can help shed light on how the industry operates, what different approaches could mean in terms of unintended consequences, and what the eventual implementation approach is expected to be for each G7 nation,” said Feriel Zerouki, Senior Vice President, Provenance, Ethics and Industry Relations, De Beers.

Although not particularly supportive of India or any other country as the sole nodal point, De Beers believes that giving the authority for certification to multiple countries makes more sense.

“De Beers believes that any single rough diamond node would be ineffective as it would create bottlenecks, increase delays, and add costs for responsible diamond-producing countries and companies. We believe that origin certification should be carried out in the country of origin wherever possible, as this maximises the effectiveness and efficiency of the process, minimises the risk of mixing with other sources, and avoids unintended consequences on responsible actors in the industry,” explained Zerouki.

However, noting India’s potential role in the digital traceability arena, Zerouki said, “We also believe digital traceability will be an important part of the solution, and once the diamond's origin has been certified at source and added to digital platforms, we believe there will be an important role for diamond centres to play in confirming and carrying through such digitally-recorded origin information as diamonds move through the value chain.

``For example, the enhanced transparency measures supported by the majority of Kimberley Process (KP) participants and observers in May, to proactively list countries of origin on KP certificates for mixed parcels, complementing digitisation efforts. India and other key trading centres will have a key role in implementing these changes.''

Also, the influence of Indian diamantaires in Antwerp, a significant hub in the diamond trade, cannot be overlooked. Recent elections at the Antwerp World Diamond Centre (AWDC) saw a majority of board members elected from the Indian community. This consolidation of power could bolster India’s position and support its proposal for being the nodal checkpoint for diamond verification.

Economic and industry benefits

India as the nodal point for diamond traceability and certification instead of Belgium can sustain and enhance the economic benefits derived from its dominant position in the diamond industry. With lower operational costs and significant investments, India stands to gain economically.

The current industry practice involves significant processing and trade through India. Maintaining these processes will prevent disruptions. Shifting the nodal point to Belgium could disrupt the global diamond supply chain. India, with its established infrastructure, offers a less disruptive alternative.

The G7 and EU propose a blockchain-based certification system to ensure diamond traceability. Shifting this system from Belgium to India could require significant adjustments, but India is capable of integrating with this technology.

India's advanced infrastructure, logistical efficiency, cost-effectiveness, and significant influence in the global diamond market make it a suitable alternative. Addressing regulatory compliance and building international trust will be crucial in realising this shift. As the EU examines India's proposal, a balanced approach considering all factors will be essential for the global diamond industry's future.