Western countries are "very close" to establishing a traceability system to sanctioning Russian diamonds, Belgian Prime Minister Alexander De Croo said during a surprise visit of President Volodymr Zelenskyy to Brussels.
"That means the Russian blood diamonds won't be able to finance the Russian war anymore," De Croo told reporters on Wednesday afternoon, speaking next to the Ukrainian leader.
"We're very close to a system that will exclude them completely from the retail markets."
Across 11 packages of sanctions imposed by the European Union on the Kremlin since February 2022, diamonds have been conspicuously spared from any restrictive measure, despite repeated pleas from Kyiv and Eastern member states.
Diamonds are an important source of revenue for Russia: in 2021, the year before launching the full-scale invasion of Ukraine, the country exported around $4 billion (€3.77 billion) worth of rough diamonds. The prime destination was Belgium, which hosts a trading centre in Antwerp with nearly 500 years of history.
It is estimated that 84% of the world's rough diamonds and 50% of the polished diamonds pass through Antwerp, making the city a key pillar in global commerce.
"Belgium plays an important role in diamonds trade and what we want is to do is to cut off Russian diamonds completely from our retail markets," De Croo said. "The best way to do that is a full traceability system to exclude Russian diamonds from the markets."
Traceability refers to a technology that digitally scans each diamond and its modifications in order to track its journey across markets, ensure the piece is always the same and boost credibility in the notoriously secretive industry.
The hot-button issue of banning Russian diamonds has long been on the agenda of Western allies but progress has been slow going, causing Kyiv's visible frustration.
The process is being coordinated at the EU and G7 levels in order to expand the ban's geographic scope as much as possible and therefore prevent outlawed diamonds from falling underground and popping up somewhere else under a different guise.
"It has taken some time because we want to avoid that diamond bans will be circumvented," De Croo said.
"If you only do it on the wholesale market, then it will be traded to other diamond centres in the world and we will still have them in our shops. It will make no difference for Russia."
According to De Croo, the traceability system should be in place by 1 January 2024, a quite ambitious deadline given that each package of sanction entails arduous negotiations among member states and is always vulnerable to national vetoes.
'Make Russia pay'
During the joint press conference with President Zelenskyy, the prime minister also announced plans to set up a €1.7 billion fund to support Ukraine's reconstruction. The fund will be financed by taxing the proceedings obtained from the Russian-owned assets that have been immobilised as a result of EU sanctions.
Over €180 billion in assets of the Russian Central Bank have been reportedly frozen at Euroclear, a Brussels-based financial services company, representing the largest amount by far in any member state.
However, under current EU rules, De Croo noted, the Belgian government is not allowed to either access the assets or manage the proceedings, meaning it can only resort to taxation to extract additional funds for Ukraine.
"We've always been clear from the start: any taxation on the Russian assets, it will not go into our budget, it will directly go to the Ukrainians," De Croo said.
"If at some point access to those proceeds would be legally possible, of course, we would be an enthusiastic partner in that."
The European Commission has promised to present a legislative text to "make Russia pay" by managing the immobilised assets, possibly through a windfall tax. But the proposal has been delayed several times and still lacks a presentation date.
The European Central Bank, financial experts and legal scholars have all raised serious concerns about the unprecedented initiative, warning the unilateral move could trigger financial instability and damage the euro's credibility.