By Philip Blenkinsop

ANTWERP, Belgium, Oct 16 (Reuters) - Congo Republic has almost done enough to end a diamond trading embargo, while the threat of sanctions against Ghana and Venezuela has faded, the chair of the world's conflict diamond watchdog said on Tuesday.

The central African country was expelled in 2004 from the Kimberley Process (KP), which tries to stop the illicit trade in "conflict diamonds", because it could not account for most of its exports -- some 100 times more than estimated local output.

Industry officials believe the Congo Republic had been used as a conduit for diamonds mined across its borders in the larger Democratic Republic of Congo, scene of devastating war in 1998-2003 that was funded in part by illicit gems.

A visit by international experts had revealed significant progress since then, Karel Kovanda, deputy director-general of external relations at the European Commission, told Reuters.

"The results are such that Congo Brazzaville is almost there," Kovanda said in an interview, referring to Congo Republic. "It is a matter of administrative measures rather than fundamental compliance.

Venezuela and Ghana were threatened with expulsion from the KP, likely triggering United Nations sanctions.

However, Venezuela submitted a vital report on Tuesday to counter complaints by several countries that diamonds smuggled out of the country were undermining KP rules, Kovanda said.

"This has certainly now changed the tone," he added.

The threat of suspension has also faded for Ghana, once suspected of being the route by which 'conflict diamonds' from Ivory Coast reached world markets.

The Commission holds the rotating chair of the KP, which has been criticised for not acting fast enough against errant countries. The issue has came to prominence after last year's Hollywood blockbuster "Blood Diamond".

Both critics and supporters argue the KP should look beyond diamonds to include other 'conflict resources', such as coltan, which helped fuel war in DRC, and rubies from Myanmar, where military rulers have cracked down on pro-democracy protesters.

But Kovanda cautioned against over-extension.

"The idea is very attractive, but the difficulty is in translating the general idea into the nitty-gritty," he said.

Similarly, Kovanda was cautious about expanding the process to tackle issues such as environmental damage, child labour or poor social conditions linked to diamonds.

"We felt we had enough on our plate as it was," he said.

Members of the alliance are expected to discuss Congo and other states at a meeting in Brussels on Nov. 5-8.

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