No one seems to really know yet. Diamond supply chains are long and complicated, with stones typically passing through dozens of hands in multiple countries before making it to market.
Keeping track of where stones originated while navigating this web of hard-to-police middlemen is notoriously difficult. That’s particularly true for the smaller diamonds Russia is known for producing, which are typically sold in large quantities and often mixed with other stones from other places.
So far, the EU and G7 have only painted a broad outline of their plans for a system to trace and verify stones’ origins, with a pilot system set to be operational at the beginning of March. Industry groups including the World Diamond Council, Antwerp World Diamond Centre, the Gem and Jewellery Export Council of India and the Gemological Institute of America (GIA) have been working together to develop an effective solution.
“It’s a bit of a work in progress,” said Morgane Winterholer, general manager of strategic brands and sustainability diamond manufacturer Dimexon. “At the moment it is extremely important that the roadmap needs to be developed.”
Technology could help. The GIA is able to triangulate data gathered from a rough stone and match it to finished diamonds, but still relies on documentation of where the stone came from to begin with. De Beers has developed a blockchain based traceability system known as Tracr, while other companies are developing their own offerings.
But none of these solutions are operating at scale and there’s currently no scientific method to trace a diamond right back to the mine.
The new sanctions will dramatically accelerate efforts to build traceability into the diamond industry, in a way that will restructure supply chains that stretch around the world.
Big businesses have been preparing for the change. LVMH-owned Tiffany and Richemont both said they stopped sourcing Russian stones shortly after the war in Ukraine broke out. Dimexon has segregated its supply chain to ensure Russian stones don’t reach Western clients, tracking each transaction and relying on direct commercial relationships with mining companies to demonstrate the origin of each package of stones.
These changes have market ramifications too. Russia accounts for roughly one third of the world’s diamond supply, but while Russian stones will likely still end up sparkling in engagement rings, necklaces and tennis bracelets bought by consumers in places outside of the new sanctions regime, the countries that will adhere to the diamond ban account for nearly three quarters of global jewelry demand, according to Zimnisky.
“In the medium- to longer-term, there will be times the industry runs into supply shortages because of this,” he said.