G7 Pressure Mounts—but U.S. Exceptions Undermine Impact of Sanctions on Russian Diamond Trade

Amid global condemnation of Russia’s invasion of Ukraine, the U.S. (under the Biden administration) implemented sanctions on Russian-sourced, non-industrial diamonds. However, under the Trump administration in 2025, new exemptions have been introduced—allowing certain "legacy" diamonds to be imported through 2026. These carveouts have drawn criticism for enabling Russia to continue profiting from the diamond trade, even as it wages war against Ukraine.

U.S. Temporary Licensing: What It Permits

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) issued licenses permitting imports of Russian-origin diamonds under specific conditions until September 1, 2026:

• Diamonds over 1 carat are allowed if they were outside of Russia before March 1, 2024.

• Diamonds over 0.5 carats are allowed if they were outside Russia before September 1, 2024.

These exceptions apply despite broader U.S. sanctions enacted in February 2023 and effective March 1, 2024, that targeted non-industrial Russian diamonds.

Why Critics Call It a Loophole

• The U.S. "substantial transformation" principle allows diamonds mined in Russia, polished elsewhere (like India), to lose their Russian designation—permitting them into U.S. markets.

• Critics argue this weakens sanctions, providing Russia continued revenue from diamond exports, an industry worth billions annually.

• Trade associations warn the G7 traceability measures may burden the industry and slow compliance, potentially creating bottlenecks or a shadow market.

G7’s Coordinated Stance

The G7—comprising the U.S., U.K., Canada, France, Germany, Italy, Japan, and supported by the EU—has agreed to a phased, comprehensive ban on Russian diamond imports:

• By January 1, 2024: Ban on all Russian-origin non-industrial diamonds and products incorporating them.

• By March 1, 2024: Extension of ban covers diamonds ≥ 1 carat, even if processed in third countries.

• By September 1, 2024: Ban expanded to include ≥ 0.5 carat natural or synthetic diamonds, jewelry, and watches.

To enforce this rigorously, G7 members are developing a traceability-based verification and certification system, intended to track diamonds from "mine to finger," using digital identifiers (e.g., blockchain-based “digital twins”). This system is set to become mandatory by January 1, 2026, although pilot phases began earlier.

Tensions Within the G7

Despite the coordinated stance on sanctions:

• At the Canada G7 Summit in June 2025, EU Commission President Ursula von der Leyen urged stronger sanctions to pressure Russia, but U.S. President Donald Trump expressed reluctance—citing economic costs and skepticism about sanctions' efficacy.

• Trump even advocated for Russia's return to the G8, arguing its exclusion contributed to the Ukraine war—further complicating consensus.

• G7 finance ministers—including Germany’s Lars Klingbeil—expressed optimism about unified support for Ukraine, despite disagreement over wording (e.g., calling Russia’s invasion “illegal”).

Why These Discrepancies Matter

1. Mixed Messaging: U.S. exceptions—even if marketed as transitional—signal tolerance for continued trade with Russia.

2. Enforcement Gaps: Without immediate, enforceable traceability, sanctions lose teeth—even as diamonds undergo complex supply chain transformations.

3. Industry Pushback: Trade groups caution that the new system may centralize power in places like Antwerp and hurt small-scale players in producer nations.

While the G7 has converged on a structured, traceability-driven strategy to eliminate Russian diamond revenue, U.S. practical exemptions—especially those tied to Trump administration decision-making—dilute the impact. Critics argue these allowances undermine not just sanctions but moral clarity at a time when Ukraine continues to suffer. As long as loopholes persist, questions remain about the political will to enforce ethical consistency over commercial expediency.