EU and G7 target Russian diamond trade with new sanctions

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EU and G7 target Russian diamond trade with new sanctions

In a coordinated effort to further isolate Russia economically due to its ongoing war in Ukraine, the European Union, with the support of the G7 and Belgium, has unveiled its 12th package of sanctions. This latest round of punitive measures specifically targets Russia's non-industrial diamond trade, a significant revenue source for the country.

Belgian Prime Minister Alexander De Croo has committed to taking a stand against what he referred to as "Russian blood diamonds." Antwerp, a key player in the global diamond trade and a notable point of entry for Russian diamonds into Europe, is poised to play a central role in the enforcement of these sanctions.

The European Commission's proposal, announced today, includes an indirect import ban on Russian-processed diamonds in non-EU countries, which is expected to evolve into a complete prohibition by January 2024. This move is designed to curb the influx of Russian diamonds that have continued to enter the European market despite previously imposed sanctions.

To ensure compliance with the new restrictions, the EU and its G7 partners are developing a system to track diamond sales. This initiative aims to prevent sanctioned goods from slipping through enforcement nets and reaching markets illicitly.

Alrosa, the company that dominates Russia's diamond exports and represents 28% of global diamond mining output, had already come under U.S. Treasury Department sanctions in April 2022. Nevertheless, the EU's current focus on diamonds signals a ramping up of economic pressure on Moscow.

The proposed sanctions extend beyond diamonds, seeking to tighten an existing oil cap and introduce penalties for third-party nations that assist Russia in circumventing these measures. The comprehensive sanction package will require unanimous approval from all 27 EU member states before it can take effect.

Josep Borrell, High Representative of the EU for Foreign Affairs and Security Policy, views these measures as a strategic move to cut down on Russia's export revenues and destabilize its economy. Yet there is some skepticism about the effectiveness of EU sanctions. Gazprombank, which handles many of Russia's energy transactions with Europe, appears to have been spared from the harshest penalties levied against other Russian entities. This has raised questions about the EU's capacity to implement impactful sanctions.

Earlier this year in April, Poland and Baltic nations had pushed for Gazprombank's exclusion from SWIFT, the international payment system critical for global financial transactions. Despite their efforts and increasing frustration within the European Parliament over perceived shortcomings in sanction strategies against Russia, Gazprombank continues to operate within SWIFT.

As tensions escalate and the war in Ukraine persists without a clear end in sight, Europe is striving to find new avenues to apply economic pressure on Russia while grappling with the complexities of enforcing effective sanctions across its member states.

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