As the gradual thawing of relations between Israel and some of its Arab neighbours continues, one of the more unlikely consequences has been a direct trade deal between Israel and Dubai’s diamond bourses. Of course, the two bourses have been co-operating behind the scenes for many years, but the recent improvement in diplomatic relations between the two states has enabled the reintroduction of direct flights and the facilitation of free movement of goods, freight and people. This could have a profound effect on the industry as Ramat Gan, the main diamond district of Tel Aviv, and the Dubai Diamond Bourse handle as much as 50% of the world’s diamond distribution between their combined networks. Although at this stage the agreement is largely one of good faith on the part of both the Israelis and the Emiratis, it could be the catalyst for further and deeper cooperation between the two markets, and indeed the two countries they represent. In the words of Yoram Dvash, President of the Israel Diamond Exchange and President of the World Federation of Diamond Bourses, “As geopolitical relations ease, it makes globalisation more realistic and easier.” It is the widely held view of industry experts that this deal will stimulate diamond market activity and the free the movement of stones around the nodes of distribution across Asia and beyond.
The diamond market has faced considerable headwinds over the past two years. The steady growth of lab grown diamonds, especially driven by demand from Chinese consumers, coupled with over supply and the more recent Covid-19 pandemic have weighed heavily on investor confidence and consumer demand globally. It is estimated that Covid-19 lockdowns in spring 2020 alone cost the global diamond market at least 80% of its normal revenue in those months. Many in the industry hope that new technology, such as blockchain, renewed consumer demand post lock down and efficiencies in the diamond supply and distribution networks, such as the Israel-Dubai agreement, will reverse the fortunes of the industry as we enter 2021! Yoram Dvash summarised the importance of the new accord by stating that “Dubai is a very wealthy city that brings lots of (luxury retail) customers from abroad as well, so people travel there like our important clients in Europe, for example,” emphasising the truly international nature of the market and its key participants. It is interesting to note that Israel’s consumer market is quite youthful in terms of its demographics, with an average consumer age of just 30. Many of the Emirati diamond businesses looking to capitalise on the newly opening Israeli market are targeting their advertising and social media strategy at the 20 – 40-year-old age segment.
The general vibe within the industry is that Dubai will probably take the lion’s share of the rough-stone market and it is likely that more rough will flow east to west versus more polished stones west to east. It is possible that Antwerp’s diamond market may feel the pinch as a result of the new agglomeration of the much larger Dubai and Ramat Gan bourses, sometimes dubbed the ‘Israel-Dubai axis’ by industry commentators. With the closure of the Rio Tinto’s Argyle mine in Western Australia by the end of 2020, further emphasis will shift towards Asia and pink diamond prices may be set to saw! It may also take some time for the full effects of the Israel-Dubai deal to take root, as the diamond industry is remarkably slow to change its habits and many of the traditional players will prefer to stick to what they know! There are also cultural issues and contrasting business practices to be overcome. In the words of Alex Peterfreund, Managing Director of Dubai based Espeka Diamonds, “Israelis are very transactional. They like to make business quick. They like (to have) two meetings and close the deal,” whereas “the Emiratis are much more polite. They are much more social. They don’t make business with the company, they make business with the person.” There can be little doubt that this agreement represents a seismic shift in the tectonics of the diamond market, although it may be some time yet before we can fully survey the new lay of the land.