The week that Israel and the United Arab Emirates normalised ties, Israeli diamond trader Zvi Shimshi headed to the United Arab Emirates to open a company in Dubai, a regional trade hub that is a major centre for the precious stones.
He is among 38 Israelis whom the Dubai Multi Commodities Centre (DMCC), home to Dubai Diamond Exchange, said have recently contacted it to set up a presence, in a sign of how shifting regional politics could alter global trade dynamics.
Traders in Dubai say they have been inundated with enquiries from Israelis, who traditionally trade in Belgium’s Antwerp — the world’s biggest centre for traders of rough and polished diamonds.
South African company Trans Atlantic Gems Sales (TAGS), which auctions and tenders diamonds in Dubai, had close to 50 Israeli firms interested in participating in tenders register with the company in just a few weeks, said owner Anthony Peters.
“It’s a massive game changer,” Peters told Reuters.
Dubai, with $21.2 billion in diamonds traded last year according to DMCC, and Israel, with around $12 billion according to its exchange, are the Middle East’s main diamond centres.
Before last month’s U.S.-brokered accords that saw the UAE and Bahrain become the first Arab states in a quarter century to establish formal ties with Israel, trade between the centres was small and discreet due to regional political sensitivities.
Transactions were processed through third countries or risked being stopped by UAE banks if Israeli links were spotted.
“This is a big opportunity for any young Israeli that wants to start any business in Dubai, not only the diamond business,” Shimshi, 41, told Reuters.
Like in past visits over the last decade, Shimshi entered the Gulf Arab state on a German passport but has filed company registration documents using his Israeli passport and said he plans to move his business activity to Dubai.
The UAE has scrapped a law banning trade with Israel and Emirati and Israeli officials have touted significant economic opportunities created by the opening, which will also allow direct flights between the two countries.
“You will see traders from Israel coming to Dubai to buy diamonds in droves,” said David Zabinsky, chief executive of Dubai diamond services company TRIGEM, who said the firm has been fielding “countless” calls from Israelis.
Dubai, mainly a centre for rough diamonds, has grown its industry from some $3 million in 2000 by leveraging its proximity to Africa, where many diamonds are mined, and India, where 90% of the world’s diamonds are polished.
“The missing link here in Dubai was the Israeli presence,” said Alex Peterfreund, the Dubai managing director of Antwerp-headquartered diamond trader Espeka.
“I don’t see a reason (now) why people will organise tenders in Antwerp rather than Dubai,” he added.
Tenders have in the past been organised in Antwerp in part so Israelis could participate.
Antwerp, which saw total diamond trade of $37.1 billion last year according to the Antwerp World Diamond Centre (AWDC), has kept its share of the rough diamond market steady since 2017, Kimberley Process figures show, while Dubai’s share has risen.
The UAE is the third biggest trading hub for rough diamonds after Belgium and India. Israel and China round out the top five.
“Dubai and India are taking market share from other places like China and Israel – but they’re not taking it away from Antwerp,” said Karen Rentmeesters, head of communications and industry relations at the AWDC. “Antwerp’s expertise is still unrivalled.”
Rentmeesters said Dubai is a rival in terms of rough diamond trade, and looser regulations and the ease of setting up a company could be a draw, but she did not see Dubai overtaking Antwerp.
In terms of polished diamonds, Rentmeesters said the value of polished trade through Dubai has been falling since 2012.
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DMCC figures show Dubai imported $4.2 billion of polished diamonds in 2018, down from $7.3 billion in 2012 – and exported $3.96 billion in 2018 compared to $5.35 billion in 2012.
“Dubai has an opportunity to develop as a global diamond trading network for polished, and open up channels to the rest of the Arab world for diamonds and jewellery,” said Martin Rapaport, the chairman of Rapaport Group.
For Israel, in which there is a substantial market for polished stones, Dubai offers closer links to India and connects it to the Arab world, where most countries still do not have formal ties with the Jewish state.
“We see Dubai as a golden gate,” Israel Diamond Exchange President Yoram Dvash told Reuters.
Ezra Boaron, who owns Israeli manufacturing factory Rising Star Diamonds, agreed: “The entire Arab world passes through Dubai. It’s a giant market.”
It could take time for a visible shift, especially due to COVID-19 which had slammed the industry with closures of mines, offices and retailers around the world.
In Dubai, coronavirus restrictions have largely been lifted and activity in the diamond exchange is back, but another wave of infections has taken Israel into a second lockdown.
Dubai Diamond Exchange Chairman Ahmed bin Sulayem is optimistic: “We will see the business grow a bit more and more in the coming months.”