Surat, not Belgium: India pushes back on G7's diamond checks

Ten out of 11 of the world’s rough diamonds are cut and polished in India. (Mint)
Ten out of 11 of the world’s rough diamonds are cut and polished in India. (Mint)

Summary

India's counter to the G7's proposal for a diamond verification centre in faraway Belguim is traceability centres in Surat or Mumbai, the country's diamond processing hubs

MUMBAI , NEW DELHI : India is scrambling to soften the impact of curbs on diamond exports to G7 nations, which want the gems tested in Belgium to ensure they did not originate in Russia. Instead, India proposes to have its gems vetted in Surat or Mumbai, the country's diamond processing hubs.

The G7 nations plan to set up diamond traceability centres, also known as rough nodes, in Belgium to ensure that no diamond originating from Russia is sold in its member nations. This would mean that beginning 1 September, Indian diamantaires will have to send their roughs to Belgium for verification, which would significantly raise their costs.

The proposal, made by a G7 technical committee, is particularly troubling for Indian diamantaires since the domestic industry cuts or processes 10 out of 11 of the world's rough diamonds.

India's commerce ministry has taken up the matter with the European Commission, said three people familiar with the government’s plans, speaking on condition of anonymity. 

The government has also formed a panel comprising officials from the ministries of external affairs and commerce as well as representatives from the Indian diamond processing industry to negotiate with European authorities on the issue, they said.

"The G7 isn't a union of customs, rather an informal grouping of advanced economies to look after its interests," said one of the people familiar with the negotiations. “We have suggested setting up a 'rough node' in India where the stones can be segregated… We hope the matter will be resolved by September, which will see the bloc ban imports of diamonds from India of 0.5 carats and below if they are made from roughs originating from Russia," this person added.

As part of the G7's three-phase plan to completely block Russian diamonds, its member nations—including the US and the UK, which are also major importers of diamonds—have announced a complete ban on non-industrial diamonds that are mined, processed or produced in Russia starting 1 January. 

They have also announced phased restrictions on the import of Russian diamonds to G7 countries that are processed in other countries on diamonds of 1 carat and above from 1 March.

"We are keeping our fingers crossed until clarity emerges after G7 puts in place a system identification module by September. So far, we are exporting to the group countries by self declaration," said Vipul Shah, managing director and chief executive of Asian Star Co. Ltd, a diamond processing company.

“We hope this matter is resolved at the earliest as there is pressure on supply (of roughs) and on demand for soft (polished diamonds) in the US, which has seen a sharp jump in interest rates, and in the Middle East because of the Gaza conflict and its fallout, though demand for gold jewellery is improving," Shah said. 

Also read: Indian exports shielded from G7 ban on Russian diamonds

A second person said G7's opposition to diamonds from Russia, following its attack on Ukraine, has led to a situation where payments of Indian companies are also being withheld.

This has resulted in a decline in diamond exports in FY24, shows provisional data from the Gem and Jewellery Export Promotion Council, an industry body. India's polished diamond exports between April 2023 and March 2024 fell 27.6% from the corresponding year-earlier period to $15.97 billion.

India used to source about a third of its rough diamonds from Russia, a country that accounted for about 30% of the global supply. However, supplies from Russia have stopped because of the sanctions, and Indian diamantaires have since largely turned to DeBeers' trading arm, Diamond Trading Co. DeBeers is owned by Anglo American, a global mining giant.

India accounted for 4.3% of the world's gem and jewellery exports amounting to $917.20 billion in 2022, ahead of China's 3.3% share.

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