Botswana Profits from Russia’s Invasion of Ukraine – Report

Global demand for rough diamonds was strong in 2022 and Botswana diamond exports benefitted from sanctions on Russia’s diamond exports because of its invasion in Ukraine in February 2022, a report by Econsult says. In its Q1 2023 report, the think tank indicates that total diamond exports recorded an increase of 20.4 percent y-o-y in 2022. However, on a quarter-on-quarter basis total exports fell by 35.2 percent between Q3 and Q4 2022. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,4,3,2" ihc_mb_template="3" ] The international market for rough diamonds experienced a rough start to 2023, although Econsult found that De Beers’ Global Sightholder Sales (DBGSS) recording lower sales in the first three sales cycles of the year. Compared to the previous year, total sales in the first three cycles of 2023 were 20.6 percent lower than the same in 2022. China and the US Econsult economist Sethunya Kegakgametse says this reflects subdued global demand for diamonds and diamond jewellery from the world’s two biggest markets, China and the USA. “However, this was largely expected, given that Botswana diamond exports rose significantly by 20.4 percent in 2022, benefitting from sanctions on Russia’s diamond exports,” she says. Diamonds accounts for most of Botswana’s total exports. With the world opening up resulting in increased international trade activity in 2022, the country recorded more exports than imports and its first balance of trade surplus in four years. Total exports increased by 24.5 percent to P102.39 billion in 2022, up from P82.26 billion in 2021. Total imports also rose during the year, by 7.1 percent to P99.82 billion, up from P93.16 in 2021. The greater value of exports compared to imports resulted in a trade surplus of P2.57 billion in 2022, significantly increasing from a trade deficit of P10.90 billion 2021. At a ceratin point last year, The Business Weekly & Review reported that 2019 statistics showed that Botswana accounted for about 25 percent of global diamond production, according to the Kimberly Process. Russia, through Alrosa, accounted for 30 percent. But after Russia’s invasion of Ukraine in February last year that soon triggered a surge in commodity prices, Alrosa - which is the world’s largest diamond producer - is now subject to US-EU sanctions for trading and payments. Bankers saw this as an opportunity for Botswana diamond exports, given that Russia is one of the biggest rough diamond producers: if Russian supply of diamonds is impacted, it meant Botswana was tipped to step into the gap. Rules of origin At an economic forum in Gaborone last year, Dr Keith Jefferis, Senior Policy Advisor for the Ministry of Finance, explained that the way international trade works was that once diamonds from Russia are cut and polished in India, they are no longer Russian diamonds. “They are Indian because of the way that rules of origin work under WTO rules,” Jefferis said at the Absa Economic Forum. This sparked fears that Russian diamonds may still find their way into the market. But Jefferis quickly allayed such fears. “That is a technicality that is not going to change the picture, which is that these are still diamonds of Russia and there is going to be serious resistance to them in the US,” he said. The US is the biggest market of diamond jewellery. Jefferis said the US Department of Trade indeed changed the rules to make sure that Russian diamonds were not available for sale in the country even if they had been processed in India. Second to pharmaceuticals According to Ian Smillie, author of “Freedom from Want, Blood on the Stone: Greed, Corruption and War in the Global Diamond Trade, and Diamonds,” America has the Countering America’s Adversaries Through Sanctions Act (CAATSA) at its disposal. In a blog that Smillie posted last year, he said this law allows the US to impose sanctions on any nation that has significant transactions with countries such as Iran, North Korea and Russia. Indian diamond exports to the US are second in value only to pharmaceuticals, and almost half of the worldwide sales of diamond jewellery takes place in the US, he wrote. Diamond traceability A key development touted is the emerging technology of using blockchains on diamond traceability. Essentially this is enabling the traceability of individual diamonds from mining right through to the price of jewellery. Lucara Diamond Corp is using it in partnership with Clara. Last year, De Beers Group announced that it deployed the Tracr™ blockchain platform at scale for its diamond production. According to the giant miner, Tracr™ is the world’s only distributed diamond blockchain that starts at the source and provides tamper-proof source assurance at scale, enabling Sightholders to provide an immutable record of a diamond’s provenance and empowering jewellery retailers to have confidence in the origin of the diamonds they purchase. Not kept separate The Minister of Minerals and Energy, Lefoko Moagi, commented: “Confidence in diamond origin is extremely important and we look forward to seeing the rollout of this new programme delivering new benefits to the diamond industry and giving more assurance to consumers.” In general, when it comes to the cutting and polishing stage, Botswana diamonds and Russian diamonds all get mixed together and are not kept separate. It was expected that the technology would be ramped up so that when a consumer buys a diamond ring in the US, they will know that it was mined in Jwaneng. [/ihc-hide-content]

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Botswana Profits from Russia’s Invasion of Ukraine – Report

With Russian supply of diamonds impacted by US and EU sanctions after the country invaded Ukraine in February lasy year, Botswana was tipped to step into the gap. In the result, Botswana diamond exports rose by 20.4 percent and the country recorded a balance of trade surplus of P2.57bn in 2022

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Botswana Profits from Russia’s Invasion of Ukraine – Report

With Russian supply of diamonds impacted by US and EU sanctions after the country invaded Ukraine in February lasy year, Botswana was tipped to step into the gap. In the result, Botswana diamond exports rose by 20.4 percent and the country recorded a balance of trade surplus of P2.57bn in 2022

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