Antwerp's Diamond Capital Status Under Threat. Dubai is taking over the diamond industry

Antwerp's Diamond Capital Status Under Threat

Dutch FD | Rutger Overstegen & Evi Timp

In Antwerp’s Diamond District, once the bustling epicenter of the global diamond trade, tensions are rising. Strict sanctions on Russian diamonds and growing competition from Dubai are jeopardizing the city’s centuries-old status as the world’s diamond capital.

A ban on Russian diamonds and declining demand are plunging the diamond sector into crisis.

• Antwerp risks losing its position to Dubai, which imposes no Russian restrictions.
• Experts warn that African nations could suffer the most.

Russian is no longer spoken in Antwerp’s Diamond District, and the offices of Russian diamond producer Alrosa have long been closed. The atmosphere in this hub of diamond trading is tense. Since the beginning of the year, Russian diamonds have been banned in the city, with sanctions tightening further on September 1.

The sector is also grappling with declining demand from China and the United States, exacerbating the situation. Antwerp risks losing its status as a diamond hub to Dubai, where no sanctions are imposed on Russia. "The sector is in crisis," says one expert.

A City in Transition
A five-minute walk from Antwerp’s Central Station lies Hoveniersstraat, which underwent a €1.7 million renovation this year to "give the neighborhood a bit more shine," as a city official told VRT. Yet, it remains anything but inviting, dominated by police checkpoints and heavily secured office buildings.

At the heart of Hoveniersstraat stands a synagogue, next to a branch of the State Bank of India. Opposite is the headquarters of the Antwerp World Diamond Centre (AWDC), an umbrella organization representing 1,600 companies, including traders, polishers, and diamond labs.

“We want to demystify the diamond sector, which is why we’re engaging with journalists more than before,” says Ine Tassignon, AWDC’s head of communications. She’s been busy, especially since September 1, when trading Russian diamonds over 0.5 carats was banned—down from the previous 1-carat threshold. Despite the official ban, 40% of Russia’s diamond production remains outside G7 sanctions due to this new carat limit.

Shiny State Revenues
About 85% of the world’s rough diamonds pass through Antwerp, with 30-35% originating from Russia, the world’s largest producer. According to Belgium’s Ministry of Foreign Affairs, a significant portion of diamond trade revenue feeds Russia’s state coffers, helping fund the war in Ukraine.

Alrosa, one of the world’s largest diamond companies, is at the center of this. Two-thirds owned by the Russian government, the company was added to the EU sanctions list in January. In the first half of 2024, Alrosa’s profits fell by 34%, though it’s unclear whether sanctions or weaker demand from China and the US were to blame. De Beers, a competitor, saw its 2023 revenue drop by 34%, citing difficult market conditions.

Sanctions and Divergence
The G7 implemented an import ban on Russian diamonds starting January 1, 2024, prohibiting Russia from exporting diamonds directly or indirectly to G7 countries, including the EU. Belgium initially resisted, arguing the measures would hurt Antwerp more than they would Putin.

The diamond industry in Antwerp employs 6,600 people and indirectly supports 26,000 jobs, according to AWDC. Diamond exports accounted for 15% of Belgium’s total exports outside the EU in 2022 and 5% of the country’s total exports.

Sanctions lawyer Heleen over de Linden notes the significant blow these sanctions deal to Russia’s war finances—Russian diamond exports totaled $3.7 billion in 2023—but questions enforcement. While it’s relatively easy to monitor sanctioned individuals and companies, tracking a diamond’s origin is much more challenging.

Violating the sanctions carries severe penalties, including lengthy prison sentences, business dissolution, and asset seizures. “They will utterly destroy you,” warns Over de Linden.

A Fractured G7
Despite the import ban being in effect for less than a year, the US is already reconsidering its stance. “We aim to balance harming Russia with ensuring the sanctions remain enforceable,” a White House spokesperson told Reuters earlier this year.

This reveals a significant weakness, one that concerns AWDC as well. “There’s insufficient unity among G7 members,” says Tassignon. Not all countries enforce the measures as strictly as Antwerp, where the Diamond Office ensures compliance.

Since September, traders have been allowed to “grandfather” pre-war Russian diamonds or those of unknown origin under strict conditions—a policy AWDC lobbied for heavily. However, smaller traders find the required paperwork burdensome.

Diplomatic Pressures and Blockchain Solutions
Efforts are underway to implement a blockchain-based tracking system that would trace a diamond’s origin throughout its journey. Initially set to launch in September, the rollout has been delayed to March 2025 to give companies more time to prepare.

These systems are separate from the existing Kimberley Process, designed to eliminate conflict diamonds from the market. While flawed, the Kimberley Process unites 85 countries in addressing sector issues.

Filip Reyniers, director of the IPIS research institute, warns that the Western-imposed ban on Russian diamonds risks creating a new "diamond bloc" of African countries, Russia, and China against the West. “The sector is in crisis,” he says.

A Shifting Landscape
Antwerp’s diamond industry is under significant pressure, losing ground to Dubai—a rival city unaffected by Russian diamond restrictions. The shift is also detrimental to African producers, who may face undervaluation of their resources. Antwerp, Reyniers argues, can play a pivotal role in countering such practices.

For AWDC, there’s much work ahead. Karen Rentmeesters took over leadership just months ago, following the abrupt resignation of former CEO Ari Epstein in April amidst internal disagreements over the Russian diamond boycott. While change often meets resistance, Tassignon acknowledges, “All change brings challenges.”

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