Behind the sparkle of diamonds lies a complex supply chain that spans the globe. What does it look like? Who are the main producers? And, what will change after the G7 ban on Russian diamonds has come into force? In this article, we dive into the history of diamond mining, supply chain, traceability, and regulations, as well as the recent G7 rules and potential technologies to track the entire gemstone supply chain.
A brief history of diamonds exploration
The first diamonds were discovered in India around the 4th century BC. Since that time, they have become central to many cultures due to their strength and natural beauty. India was the dominant country for sourcing diamonds for several centuries before diamonds were found in Brazil in the 1700s. However, the biggest boom in the diamond industry happened after the discovery of diamonds in Kimberley, South Africa in 1866. The Kimberley mine became the first large-scale diamond mining operation in the world. Cecil Rhodes founded the company De Beers to capitalize on discovered African mines.
Though the industry was long monopolized by De Beers, and in its peak, the company managed about 90% of the world’s diamonds, the situation started to change. In the 20th century diamonds were discovered in the Soviet Union and Botswana, which are the two world leaders in diamond production these days. World diamond mining expanded dramatically with the discovery of sources in Australia in 1985 and important new deposits in northern Canada in 2000.
The Diamond Supply Chain
Before being a part of a beautiful piece of jewelry sold to the end consumer, rough diamonds go through several stages: mining, cutting and polishing, cleaving, inspecting and certification, and finally, manufacturing and sales of diamond jewelry. Today the diamond supply chain is global and involves several continents and dozens of countries. The largest rough diamond producers are Russia, Botswana, Canada, and the Democratic Republic of Congo (DRC). South Africa, Angola, Zimbabwe, Namibia, Sierra Leone, and Lesotho are also among the top diamond-producing countries.
All of the processes within the diamond supply chain are rarely performed in one country. For example, diamond cutting requires very qualified artisans, tools, equipment, and techniques. Over the years, diamond-cutting centers have been in the Netherlands, South Africa, the United States, and Israel, however now due to the lower cost of labor, about 90% of diamonds are cut in India. After diamonds have been cut and polished, they are then sold on one of the 28 diamond exchanges across the world, also called bourses.
Conflict Diamonds and Traceability
Every diamond is unique - they form from carbon deep in the earth under high heat and pressure, approximately 90-240 miles below the earth’s surface. They are then ejected violently upward until arriving at or near the earth’s surface. Then the diamond is mined, cut, and polished by artisans. For many years, diamonds were sourced primarily from artisanal mining that involves digging and sifting through mud or gravel river-bank deposits and requires intense human labor and hard working conditions. Artisanal and Small-Scale Mining (ASM) diamond mining is most common in poor countries such as West Africa, Angola, and the Democratic Republic of the Congo.
Over the years, ASM has presented a certain challenge for the diamond industry. A significant share of mined diamonds were produced in war zones and sold to finance insurgencies, invading armies, terrorism, or warlords' activities. The term "conflict diamond" was first used in the late 1990s, when civil wars in diamond-producing African countries, such as Sierra Leone and Angola, were driving calls for a boycott of diamonds in general. Some rebel forces used conflict diamonds to purchase weapons and arms, in addition to other illegal activities.
To address the situation with conflict diamonds, certain projects appeared. One of the most known is The Kimberley Process (KP) established in 2003. This is the initiative that unites governments, civil society, and businesses to address the issue of blood diamonds and prevent their circulation ensuring all trade diamonds are conflict-free. Each shipment of rough diamonds crossing a border must be transported in a tamper-resistant container and accompanied by a certificate from Kimberley Process. These shipments can only be exported to another participant country. The Kimberley Process is criticized by industry experts for not addressing human rights, labor, or environmental issues, especially with the recent ban on Russian diamonds - the organization did not pose any sanctions against Russian Alrosa and kept silent.
Besides The Kimberley Process, there have been several private and governmental initiatives to address the matter of conflict diamonds and track diamond supply chains. For example, Canada introduced the Canadian Diamond Code of Conduct which defines certain standards for tracking diamonds from mine to the retailer.
The G7 Ban and Rethinking Conflict Diamonds
Historically, Russia has played a crucial role in the diamond market. Alrosa, one of the world’s largest rough diamond producers originating from Russia, has a 28% global market share and has been involved in activities performed by the international diamond industry associations for many years. For instance, Alrosa has been on the Board of the Responsible Jewellery Council and the World Diamond Council. That has made it hard to exclude one of the key market players from the industry and, until recently, the diamond business operated almost as usual. Still, there appeared a need to rethink the term conflict diamonds after the war began between Russia and Ukraine.
The G7 nations, including the European Union, have implemented a ban on Russian diamonds, including natural and lab-grown diamonds, jewelry, and watches containing diamonds. The ban will be implemented in phases, with a direct ban on non-industrial natural and synthetic diamonds mined, processed, or produced in Russia starting on January 1, 2024. As of the 1st of March 2024, a ban on Russian diamonds polished in a third country will take effect and, as of the 1st of September 2024, the ban will be expanded to include lab-grown diamonds, jewelry, and watches containing diamonds.
The new G7 rules can significantly change the industry and help to distinguish lab-grown diamonds from natural diamonds, enhancing overall transparency of the diamond supply chain and setting clear quality standards, as a result, driving sustainable and informed consumers’ consumption.
Traceability of Diamonds
The G7 ruling states that ‘a robust traceability-based verification and certification mechanism for rough diamonds’ will be needed within the G7. To date, there is no single solution to serving the whole industry, however, it’s clear that the industry requires new technologies for tracking the diamonds’ journey from the mine to the seller.
Blockchain and IoT could be mentioned among some of the potential technologies for diamond traceability, as they have been tested and rolled out at scale for other materials. For instance, blockchain-based product passports combined with physical tracking technologies, such as laser inscriptions, gemological fingerprints, RFID tags or NFC chips, can collect and communicate important product data, including information on the country of origin, unique characteristics and certificates ensuring each change is tracked and any diamonds or diamond jewelry are fully-compliant with the new ruling.
At Minespider, we have recently launched the Diamond Passport. Minespider’s advanced technology ensures every step of a diamond's supply chain, from mine to end consumer, is traceable, transparent, and tamper-proof so your consumers are confident about the authenticity and origin of their diamonds. Contact us here to learn more about the Diamond Passport and how we can help you comply with G7 regulations.
