EU Cracks Down on Russian Diamonds and LNG Exports
Over 20 months since the Russian attack on Ukraine, the European Union (EU) has ratcheted up its sanctions game. This time, their aim is to strike at Russia's financial reserves more directly, targeting its diamond trade and liquefied natural gas (LNG) supplies.
EU's Diamond Ban
The EU Commission has recently declared a ban on the import of Russian diamonds and diamond jewelry, effective from January 1, 2023. The decision is part of the twelfth sanctions package, serving to cut off a significant income source for the Russian leadership. By September 1, the ban will also apply to Russian diamonds and jewelry products processed in third countries, such as India. To ensure the ban's effectiveness, a verification and certification system for rough diamonds will be established among the Group of Seven (G7) nations.
Tightened Oil Price Cap and Additional Restrictions
In addition to the diamond ban, the EU has planned to tighten the price cap on Russian oil exports to third countries. Trade restrictions have also been imposed on various goods, along with punitive measures against individuals and organizations supporting Russia's aggression against Ukraine.
Specifically, the EU has enacted import restrictions on raw materials for steel production, processed aluminum products, and other metal goods. Lithium batteries, thermostats, and certain chemicals are now subject to export restrictions. A new LPG import ban from Russia is also in place, affecting approximately 1 billion euros per year in imports.
Economic Impact on Antwerp and Russia
Belgium's initial resistance to a diamond import ban was partly due to Antwerp's position as a leading global diamond center since the 16th century. Russia, on the other hand, is a major producer of rough diamonds. A ban on Russian diamonds may take its toll on Antwerp's diamond trade and contribute to economic struggles, especially for smaller diamond businesses.
However, Russia is adaptable, and the ban has not significantly impacted its overall diamond exports yet. The country has redirected supplies to other buyers, including India, the UAE, and China, as it learns to navigate around these sanctions.
Enrichment Data
Given the economic importance of the diamond and LNG trade, the EU's targeted sanctions represent a powerful tool to apply pressure on Russia. The measures aim to limit Russia's revenue sources and weaken its ability to finance its military efforts in Ukraine. For the Antwerp diamond industry, however, the impact is likely to be significant, with continued uncertainty ahead.
Enrichment Data Insight: The EU's diamond import ban may result in a one-quarter decrease in diamond imports and exports from Antwerp in 2024, causing layoffs and economic strain amongst smaller diamond businesses [4].
To this end, Europe continues to update its targeted sanctions as needed, showcasing its resolve to maintain pressure on Russia and to actively support Ukraine in the face of ongoing conflict.
