Dubai Stole the Diamond Trade

Part of: The Israeli Diamond Economy

The Olam · Diamonds & the Bourse

Dubai did not stumble into being the world's largest rough diamond hub. The UAE Cabinet engineered the win — zero VAT at wholesale, a free-zone framework, banking infrastructure, and bilateral trade architecture built piece by piece. The most deliberate trade migration in modern commodities history.

In February 2022, Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Centre (DMCC) and chairman of the Dubai Diamond Exchange (DDE), announced from the stage of the Dubai Diamond Conference that the United Arab Emirates had become the world's largest rough diamond trading hub. The data point: $22.8 billion in rough diamond trade in 2021. The reference point: Antwerp, the historical center of the global rough trade for roughly three centuries, had been overtaken.

By 2024, Dubai's combined rough and polished diamond volumes had grown another 12 percent in the first half alone, to 119.4 million carats. The DMCC's broader free zone had passed 25,000 registered companies across all commodity verticals, contributing roughly 7 percent of Dubai's GDP and 15 percent of its annual foreign direct investment. The shift is most of a decade old, and accelerating.

It is also the most deliberately engineered trade migration in modern commodities history. Dubai's diamond architecture is a regulatory product. It did not emerge from accumulated cutting expertise — the UAE has no domestic cutting industry of consequence. It did not emerge from proximity to mining — the UAE produces no diamonds. It did not emerge from a deep Jewish trade community — the UAE's organized Jewish community remains small. It emerged from policy decisions, taken deliberately, beginning around 2002 and refined for two decades.

How it was built

The DDE was founded in 2002, initially as a small trading floor inside the DMCC's Almas Tower in Jumeirah Lakes Towers. The Almas Tower itself — at 360 meters, one of the tallest diamond-trade-focused buildings in the world — was completed in 2008 and houses what is now the world's largest single rough diamond tender floor.

The DMCC's regulatory pitch was sharp: no corporate income tax, no personal income tax, no capital gains tax, and — critically — no value-added tax on diamonds at the wholesale level. The UAE Cabinet had introduced a general 5 percent VAT in 2018; in May 2018 the same Cabinet specifically reversed VAT for diamond wholesale, recognizing that the wholesale trade was uniquely tax-sensitive and would simply route elsewhere. This single policy decision is the foundation of everything that followed.

The combination — zero tax, free-zone regulatory framework, fast customs clearing, deep banking access through Emirates NBD and other UAE banks, and 24-hour cargo connectivity to Surat (India's cutting capital) and the African producer states — was unique. No other diamond hub in the world matched the package. Belgium could not match the tax framework. Israel could not match the regulatory speed. New York could not match the proximity to Asian markets. Hong Kong could not match the political stability.

The intentional architecture

Three policy levers, deliberately stacked, drove the migration.

First, the tax architecture. The 2018 VAT reversal was not an exception — it was a strategic signal that the UAE would maintain the diamond trade's tax exemption indefinitely, even as other parts of the economy moved toward broader taxation. Combined with the zero corporate income tax of the DMCC free zone, this gave Dubai a multi-hundred-basis-point cost advantage over Antwerp and a thousand-basis-point advantage over New York.

Second, the logistics architecture. The Almas Tower is integrated directly with Dubai International Airport's cargo operations and with the Jebel Ali port complex. Rough diamonds clear UAE customs in hours rather than days. The DMCC operates its own diamond tender platform, hosting more than 85 rough tenders in 2024 alone. The combination of physical infrastructure and regulatory speed compresses the time-from-mine-to-trade by an order of magnitude relative to Antwerp.

Third, the bilateral trade architecture. The Abraham Accords of September 2020 normalized commercial relations between Israel and the UAE. The Israel–UAE Comprehensive Economic Partnership Agreement (CEPA), signed in May 2022, eliminated tariffs on diamonds and precious stones bilaterally. The 2022 India–UAE CEPA achieved equivalent results for the Indian cutting industry. Bilateral diamond trade between Israel and the UAE moved from zero to roughly $1.75 billion within two years of the Accords.

Within months, the institutional infrastructure followed the policy. In 2022, the Israel Diamond Exchange opened a representative office at the DDE in Dubai. The same year, the DDE opened a reciprocal office at the IDE in Ramat Gan — the first time two competing diamond bourses had opened cross-offices in each other's premises. The bourses are technically competitors. They are also, increasingly, co-located.

What the numbers say

Dubai's diamond trade in 2024 by available figures: combined rough and polished volumes of 119.4 million carats in the first half alone, a 12 percent year-over-year increase. Lab-grown diamond trade volumes surged 51 percent to 15.9 million carats in the same period, with a 62 percent rise in rough lab-grown trade. The DMCC hosted 85 rough tenders in 2024 and launched Dubai Diamond Week with more than 500 attendees and over 7,000 visitors.

By contrast, Israel's net rough imports in 2024 fell to roughly $800 million (down 13 percent year-over-year); net rough exports fell to about $630 million (down 24 percent); polished exports fell 35.6 percent to roughly $1.8 billion. Antwerp's diamond industry, in January 2025, formally petitioned the Belgian government for "decisive" support, acknowledging that the decline of its position was no longer reversible without intervention. India's polished diamond exports in fiscal year 2025 fell 16.75 percent to about $13.3 billion, the lowest post-COVID volume.

Dubai grew. Everywhere else shrank.

What stayed in Israel

The Dubai shift did not empty the Israeli diamond trade. It restructured it. What remained:

The high end. Large polished stones — three carats and above, particularly D-flawless and other premium grades — continue to trade and be certified in Israel at scale. The certification and grading infrastructure in Ramat Gan is dense and trusted in a way Dubai's nascent certification ecosystem has not yet replicated.

The technology layer. Sarine Technologies, TASE-listed and Israel-headquartered, supplies the planning, scanning, and inclusion-mapping equipment used by roughly 100 million diamonds annually across the global cutting industry. The Israeli technology stack is the global standard.

The financing relationships. Israeli banks (Discount, Leumi, Hapoalim) retain deep historical lending relationships with the IDE's membership. The $508 million in active diamond financing in Israel in 2024 represents a contracted but functional credit base.

The institutional memory. The IDE's arbitration system, its membership credentialing, and the historical knowledge of specific stones and dealers held inside the four-tower compound is non-replicable. Dubai is building its own arbitration infrastructure but has roughly two decades of accumulated practice. Israel has six.

Where the capital went

The capital that exited the Israeli mid-market trade did not always exit the country. Much of it rotated into Israeli real estate, family office vehicles, technology investments, and adjacent commodity exposures — gold, colored stones, the certification and software businesses. A meaningful share followed the trade itself to Dubai, with Israeli diamantaires establishing DDE-registered entities while maintaining residency and tax base in Israel. The arbitrage was efficient: trade in Dubai's free zone for tax and clearing advantage, hold high-end inventory and financing relationships in Israel, deploy realized capital into property and private investment globally.

The lesson

The diamond trade is one of the most internationally mobile commercial sectors in the global economy. It needs no port, no factory, no large land footprint. A meaningful share of the global trade fits inside a single tower. The cost of relocating is low. The incentive to relocate — when one jurisdiction offers materially better tax, regulatory, banking, and logistics arrangements — is overwhelming.

Antwerp lost the trade because Belgium's tax and regulatory regime is materially worse than Dubai's, and the EU's broader anti-money-laundering and Russian sanctions frameworks added compliance cost. Israel lost the mid-market because its tax base, regulatory burden, and geopolitical risk profile no longer compete with the UAE's. India retained the cutting layer because its labor costs remain materially below any competitor.

Dubai won because it engineered the win. The UAE Cabinet did not stumble into being the world's largest rough diamond hub. It explicitly reversed VAT on wholesale, expanded free-zone protections, invested in Almas Tower's infrastructure, signed bilateral CEPAs with Israel and India, and positioned the DDE as a neutral, low-friction settlement venue. Each move was sequenced. Each was deliberate.

Trade flows follow policy. The diamond trade, untethered from geography, has demonstrated this more starkly than almost any other industry. The next decade's question is not whether Dubai's dominance can be reversed — it almost certainly cannot — but whether the IDE, the AWDC, and 47th Street can hold their specialized niches at the top and bottom of the value chain while the bulk trade settles permanently in the Gulf.

The bourse is no longer where the diamonds are. It is where the diamonds clear. Dubai built the clearing house. The cutting, the certification, the high-end retail, and the institutional memory remain elsewhere. The question is how long that distribution survives the next round of policy competition — which is to say, whether some other jurisdiction will engineer a win the way Dubai did.