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Heart of Stone: African Diamonds

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    The Heart of The Matter: Sierra Leone, Diamonds & Human Security By Ian Smillie, Lansana Gberie and Ralph Hazleton
    Message 1 of 1 , Feb 1, 2007
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      The Heart of The Matter: Sierra Leone, Diamonds & Human Security
      By Ian Smillie, Lansana Gberie and Ralph Hazleton
      http://www.diamonds.net/news/NewsItem.aspx?ArticleID=3705


      PREFACE

      This study grew from a discussion among members of an informal group
      in Ottawa called the "Sierra Leone Working Group." Meeting under the
      auspices of Partnership Africa Canada (PAC), the group concluded that
      diamonds were central to the conflict in Sierra Leone, and that a
      highly criminalized war economy had developed a momentum of its own.
      The group believed that no peace would be sustainable until problems
      related to mining and selling diamonds had been addressed, both inside
      Sierra Leone and internationally.

      The study was conducted between February and December 1999. Many
      organizations and individuals supported this study. To all of them the
      authors and PAC are very grateful.

      INTRODUCTION

      This study is about how diamonds — small pieces of carbon with no
      great intrinsic value — have been the cause of widespread death,
      destruction and misery for almost a decade in the small West African
      country of Sierra Leone. Through the 1990s, Sierra Leone's rebel war
      became a tragedy of major humanitarian, political and historic
      proportions, but the story goes back further — almost 60 years, to the
      discovery of the diamonds. The diamonds are, to use the title of
      Graham Greene's classic 1948 novel about diamond smuggling in Sierra
      Leone, The Heart of the Matter.

      In the 1960s and 1970s, a weak post-independence democracy was
      subverted by despotism and state-sponsored corruption. Economic
      decline and military rule followed. The rebellion that began in 1991
      was characterized by banditry and horrific brutality, wreaked
      primarily on civilians. Between 1991 and 1999, the war claimed over
      75,000 lives, caused half a million Sierra Leoneans to become
      refugees, and displaced half of the country's 4.5 million people.
      There is a view that Sierra Leone's war is a crisis of modernity,
      caused by the failed patrimonial systems of successive post-colonial
      governments. Sierra Leonean writers have rejected this analysis on
      several grounds. While there is no doubt about widespread public
      disenchantment with the failing state, with corruption and with a lack
      of opportunity, similar problems elsewhere have not led to years of
      brutality by forces devoid of ideology, political support and ethnic
      identity. Only the economic opportunity presented by a breakdown in
      law and order could sustain violence at the levels that have plagued
      Sierra Leone since 1991.

      Traditional economics, political science and military history are of
      little assistance in explaining Sierra Leone's conflict. The point of
      the war may not actually have been to win it, but to engage in
      profitable crime under the cover of warfare. Diamonds, in fact, have
      fueled Sierra Leone's conflict, destabilizing the country for the
      better part of three decades, stealing its patrimony and robbing an
      entire generation of children, putting the country dead last on the
      UNDP Human Development Index.

      Over the years, the informal diamond mining sector, long dominated by
      what might be called "disorganized crime," became increasingly
      influenced by organized crime and by the transcontinental smuggling
      not just of diamonds, but of guns and drugs, and by vast sums of money
      in search of a laundry. Violence became central to the advancement of
      those with vested interests. As the mutation of the war in Sierra
      Leone continued and spread through the 1990s, so did the number and
      type of predators, each seeking to gain from one side of the conflict
      or another.

      The Diamond Industry and De Beers

      In 1998 the international diamond industry produced an estimated 115
      million carats of rough diamonds with a market value of $6.7 billion.
      At the end of the diamond chain, this was converted into 67.1 million
      pieces of jewelry worth close to $50 billion.

      The De Beers group of companies mines, or partners in mining, the
      majority of the world's diamonds. De Beers purchases by far the
      majority of all diamonds produced, and more or less sets the price of
      rough diamonds on the global market. Manipulation of both the supply
      and demand for rough diamonds on world markets is managed through its
      Central Selling Organization (CSO), headquartered in London.

      The CSO sources diamonds from De Beers mines as well as from the
      "outside market" — diamonds produced by non-De Beers firms. Diamonds
      purchased by the CSO are in turn sold at ten annual sights (sales) to
      160 sightholders. Sightholders are designated by De Beers and are
      presented with mixed parcels of diamonds. The parcels are packages of
      combined rough gem quality and industrial diamonds, and may include
      stones from a combination of countries. Parcels are priced by De Beers
      and are bought by sightholders — ironically enough, sight unseen.
      Sightholders then take the diamonds to other cities where they are
      resorted and repackaged for onward sale, or for cutting and polishing.

      Until the 1980s, De Beers was directly involved in Sierra Leone, had
      concessions to mine diamonds offshore, and maintained an office in
      Freetown. Since then, however, the relationship has been indirect. De
      Beers maintains a diamond trading company in Liberia and a buying
      office in Conakry, Guinea. Both countries produce very few diamonds
      themselves, and Liberia is widely understood to be a "transit" country
      for smuggled diamonds. Many "Liberian" diamonds are of Sierra Leonean
      origin, and others reportedly originate as far away as Russia and
      Angola. De Beers says that it does not purchase Sierra Leonean
      diamonds. Through its companies and buying offices in West Africa,
      however, and in its attempts to mop up supplies everywhere in the
      world, it is virtually inconceivable that the company is not — in one
      way or another — purchasing diamonds that have been smuggled out of
      Sierra Leone.

      Belgium and the Diamond High Council

      Antwerp is the world centre for rough diamonds. More that half of the
      CSO sightholders reside in Antwerp. Antwerp is also the principal
      "outside market" serving as a funnel for more than half of all the
      diamonds produced in the world. The formal trading of diamonds in
      Belgium is structured around the Hoge Raad voor Diamant (HRD) — the
      Diamond High Council. The HRD is a non-profit umbrella organization
      officially acknowledged as the voice of the entire Belgian diamond
      industry. The mission of the HRD is to maintain and strengthen the
      position of Antwerp as the world centre for diamonds. Smuggling in the
      Belgian context refers to diamonds which enter Belgium without being
      declared to customs officials, and which are not licensed for import
      by the Ministry of Economic Affairs and the HRD Diamond Office.
      Neither the Government of Belgium nor the HRD have estimates of the
      quantity or source of smuggled diamonds. In addition, there are few
      active policies aimed at controlling diamond smuggling.

      A factor which eases large-scale diamond smuggling and inhibits the
      tracking of diamond movements is the manner in which the HRD documents
      diamond purchases. The HRD records the origin of a diamond as the
      country from which the diamond was last exported. Therefore diamonds
      produced in Sierra Leone, say, may be officially imported and
      registered as originating in Liberia, Guinea, Israel or the UK,
      depending on their journey from one trading centre to another.

      A major problem with the Belgian environment — as it pertains to
      Sierra Leone or any other diamond producing country — is the lack of
      interest and information on the true source of the diamonds entering
      the country. A comparison of West African diamond export figures with
      Belgian imports is revealing. For example:

      • while the Government of Sierra Leone recorded exports of only 8,500
      carats in 1998, the HRD records imports of 770,000 carats;

      • annual Liberian diamond mining capacity is between 100,000 and
      150,000 carats, but the HRD records Liberian imports into Belgium of
      over 31 million carats between 1994 and 1998 — an average of over six
      million carats a year;

      • Ivory Coast, where the small diamond industry was closed in the mid
      1980s, apparently exported an average of more than 1.5 million carats
      to Belgium between 1995 and 1997.

      Of further interest where transparency and accountability are
      concerned, is the question of who actually monitors imports and
      exports on behalf of the Belgian government. Oddly, this role is
      carried out largely by the HRD itself, the representative and lobbying
      institution for the Belgian diamond industry. In recent years there
      have been a number of judicial inquiries which have shown that the
      overall system violates almost any definition of neutrality, and is an
      invitation to corruption. Cases of fraud in the Antwerp diamond trade
      are legendary and Antwerp has become one of the primary world centres
      for Russian organized crime.

      The Sierra Leone Diamonds

      The first Sierra Leonean diamond was found in 1930, and significant
      production commenced in 1935. Sierra Leonean production is
      characterized by a high proportion of top-quality gem diamonds. The
      Star of Sierra Leone, a magnificent 969-carat diamond, was discovered
      in the Koidu area. By 1937 Sierra Leone was mining one million carats
      annually, reaching a peak of 2 million carats in 1960. From 1930 to
      1998, approximately 55 million carats were mined (officially) in
      Sierra Leone. At an average price in 1996 dollars of $270 per carat,
      the total value is close to $15 billion.

      In 1935, the colonial authorities concluded an agreement with De
      Beers' Sierra Leone Selection Trust (SLST), giving the company
      exclusive mining and prospecting rights over the entire country for 99
      years. By 1956, however, there were an estimated 75,000 illicit miners
      in Kono District — the heart of the diamond area — leading to
      smuggling on a vast scale, and causing a general breakdown of law and
      order. The buyers and smugglers at that time were mainly Madingo and
      Lebanese traders. With the tightening of security between Kono and
      Freetown in the early 1950s, Lebanese smugglers began moving their
      goods to Liberia. Antwerp, and then Israeli-based diamond merchants
      soon noticed the booming diamond trade in Monrovia, and many
      established offices there. De Beers itself set up a buying office in
      Monrovia in 1954, in order to keep as much of the trade under its
      control as possible.

      In 1955, the colonial authorities scrapped SLST's nation-wide
      monopoly, confining its operations to Yengema and Tongo Field, an area
      of about 450 square miles. In 1956, they introduced the Alluvial
      Mining Scheme, under which both mining and buying licenses were
      granted to indigenous miners. Many of these licenses came to be held
      by Lebanese traders who had begun to settle in Sierra Leone at the
      turn of the century.

      Siaka Stevens became Prime Minister seven years after independence in
      1968. A populist, he quickly turned diamonds and the presence of SLST
      into a political issue, tacitly encouraging illicit mining, and
      becoming involved himself in criminal or near-criminal activities. In
      1971, Stevens created the National Diamond Mining Company (NDMC) which
      effectively nationalized SLST. All important decisions were now made
      by the prime minister and his right-hand man, a Lebanese businessman
      named Jamil Mohammed. From a high of over two million carats in 1970,
      legitimate diamond exports dropped to 595,000 carats in 1980 and then
      to only 48,000 in 1988. In 1984, SLST sold its remaining shares to the
      Precious Metals Mining Company (PMMC), a company controlled by Jamil.
      Stevens retired in 1985, handing over power to Joseph Momoh, who
      placed even greater responsibility in the hands of Jamil.

      From the late 1970s to the early 1990s, aspects of Lebanon's civil war
      were played out in miniature in Sierra Leone. Various Lebanese militia
      sought financial assistance from their compatriots in Sierra Leone,
      and the country's diamonds became an important informal tax base for
      one faction or the other. This was of great interest to Israel, in
      part because the leader of the important Amal faction, Nabih Berri,
      had been born in Sierra Leone and was a boyhood friend of Jamil.
      Following a failed (and probably phoney) 1987 coup attempt in Sierra
      Leone, Jamil went into exile, opening the way for a number of Israeli
      "investors' with close connections to Russian and American crime
      families, and with ties to the Antwerp diamond trade.

      The Revolutionary United Front (RUF) rebel war began in 1991 and soon
      after, Momoh was replaced by a military government — the National
      Provisional Ruling Council (NPRC). Despite the change in government,
      however, RUF attacks continued. From the outset of the war, Liberia
      acted as banker, trainer and mentor to the RUF, although the Liberian
      connection was hardly new. With a negligible diamond potential of its
      own, Liberia's dealings in stolen Sierra Leone diamonds have been a
      major concern to successive Sierra Leone governments since the great
      diamond rush of the 1950s.

      What was different and more sinister after 1991 was the active
      involvement of official Liberian interests in Sierra Leone's brutal
      war — for the purpose of pillage rather than politics. By the end of
      the 1990s, Liberia had become a major centre for massive
      diamond-related criminal activity, with connections to guns, drugs and
      money laundering throughout Africa and considerably further afield. In
      return for weapons, it provided the RUF with an outlet for diamonds,
      and has done the same for other diamond producing countries, fueling
      war and providing a safe haven for organized crime of all sorts.

      The "Juniors" and Private Security Firms

      President Momoh's search for new investors in the early 1990s was
      carried forward by the NPRC military government. With De Beers out of
      the picture, and with the disappointing and short-lived Israeli
      experience behind it, the government now began to receive overtures
      from small mining firms, known in the business as "juniors." Three of
      these juniors became heavily involved in Sierra Leone during the
      1990s, some with interests that extended far beyond the mining of
      diamonds.

      All three companies trade on Canadian stock exchanges, no doubt
      because of Canada's reputation as a source of easy venture capital for
      small mining and exploration companies. The first, Rex Diamond — with
      de facto headquarters in Antwerp — has an integrated mining, sorting,
      cutting and marketing operation, holding Sierra Leonean concessions in
      Zimmi and Tongo Field. Although Rex claims friends among both
      government and the RUF, this is denied by the RUF, perhaps
      understandably. In 1998, Sierra Leone lost its only combat helicopter
      — a serious problem because the Soviet-built gunship had been the
      government's most effective weapon against the RUF. Zeev Morgenstern,
      Rex's Managing Director, and Serge Muller, the company's President,
      came to the government's aid by making an arrangement to supply
      engines, parts and ammunition worth $3.8 million. The deal went sour
      as a result of defective parts supplied from Russia. According to the
      Washington Post, Morgenstern and Muller have both said, "...the arms
      deals were unrelated to Rex's mining activities."

      The second firm is Toronto-based AmCan Minerals, which holds various
      exploration licenses in Sierra Leone. Because of the security
      situation, AmCan has so far done little diamond mining, although it
      recently acquired a South African-owned firm, ArmSec International
      (SL) with connections to both the diamond and the security industries.
      AmCan's Sierra Leone lawyer is Chairman of the Government Gold and
      Diamond Office, the body responsible for overseeing the monitoring,
      valuation and taxation of the diamond industry.

      The third "Canadian" firm is the London-headquartered DiamondWorks, an
      outgrowth of Carson Gold and Vengold, companies promoted by Robert and
      Eric Friedland. In 1995, DiamondWorks acquired Branch Energy Ltd., a
      private company registered on the Isle of Man. DiamondWorks and Branch
      Energy have become the subject of widespread interest because of their
      apparent but much-denied connections with two major international
      security firms, Executive Outcomes and Sandline. In 1995, The
      Government of Sierra Leone, backed militarily onto the Freetown
      peninsula by the RUF and facing certain defeat, engaged the services
      of Executive Outcomes (EO) to help in its defense. With 200 imported
      soldiers, air support, and sophisticated communications equipment, EO
      pushed the RUF back from Freetown within a week, and within another
      month had cleared the major diamond areas of Kono as well. Shortly
      after EO took control of the diamond areas, Branch Energy — which had
      introduced EO to the GOSL — secured a 25 year lease on Sierra Leonean
      diamond concessions.

      In 1997, DiamondWorks' Sierra Leone country manager was seconded — as
      a "private citizen" — to Sandline, in connection with a controversial
      arms shipment intended for the briefly exiled government of Tejan Kabbah.

      The juniors arrived in Sierra Leone after the formal instruments of
      the state — notably law, order, probity and justice — had all but
      disappeared. They also arrived in the midst of a war which had at its
      epicentre the same thing that brought them to the country — diamonds.
      Lawlessness, however, was not new. The government of Sierra Leone had
      — from the 1950s — given up pretending that it could police the
      diamond areas. From the days of the SLST Diamond Protection Force, it
      had encouraged and even required foreign investors to make their own
      security arrangements. This goes a long way to explaining why the
      juniors appear to have such an intimate relationship with private
      security firms.

      There is a distinction to be made, however, between the need to hire a
      private security firm in order to police a mining operation, and the
      provision of troops and weapons in support of a faction in a civil
      war. Some would argue that regardless of Executive Outcome's own
      purpose, its involvement in Sierra Leone was in a good cause. EO
      successfully protected a democratically elected government against a
      brutal and illegitimate rebel force. And EO was certainly cheered in
      the streets of Freetown for its efforts. Some would also argue that
      the provision of weapons to the democratically elected government of
      Tejan Kabbah — a UN arms embargo notwithstanding — made sense and was
      in support of a good cause.

      The problem is not the individual episodes, but the bigger picture
      which they help to form — of a world in which beleaguered and
      legitimate governments find little formal international protection
      against internal predators, and are forced into Faustian bargains in
      order to survive.

      In the absence of a governmental capacity for self-protection, and in
      the absence of effective mechanisms for international protection,
      private security firms and mercenaries may be seen by some as the way
      of the future. Closely connected to mining interests, the phenomenon,
      however, is more than just a convenient way to let the international
      community "off the hook." It begins to look like a protection racket,
      with the payment for assistance made in future mineral concessions —
      "concessions for protection."

      It is unclear whether junior mining companies have the capacity to
      undertake serious mining ventures in Sierra Leone. Only time and peace
      will tell. On the latter point, however, a peace agreement is only one
      step in a long process that will be required to provide real security
      in the diamond areas. An important next step will the demobilization
      of fighters and a return to the rule of law under government
      authority, and major investments in long-term human development.
      Before government authority can be established, however, there may
      well be a lengthy interregnum required for UN peacekeeping forces.

      RECOMMENDATIONS

      Any recommendations for solutions to Sierra Leone's terrible and
      complex problems must be pragmatic enough for at least a reasonable
      chance of success. In other words, they should be realistic. Some of
      what follows is optimistic, but where Sierra Leone diamonds are
      concerned, business as usual is not realistic.

      No single recommendation on its own will solve the problems of Sierra
      Leone's diamond industry, and most of the recommendations are part of
      a comprehensive set of changes that need to be addressed together. In
      fact taken together, the recommendations have major policy
      implications not only for governments and international organizations,
      but for civil society organizations in Sierra Leone and abroad, for
      private sector firms and for individual consumers.

      In addition to national and international dimensions, there are
      important regional dimensions to the diamond trade and the conflict in
      Sierra Leone. There will be no lasting results to peacekeeping,
      peace-building and reconstruction unless all three dimensions are
      addressed.

      The recommendations fall under seven broad headings. The first set has
      to do with the environment in Sierra Leone. The second and third sets
      deal with De Beers and with the diamond environment in Belgium. The
      fourth set has to do with neighboring states, particularly Liberia.
      One recommendation deals with the concept of a consumer campaign —
      possibly a necessary precursor to change elsewhere.

      The general thrust of the recommendations aims at improved human and
      economic security, a sustainable peace, and at changing the economics
      of the diamond trade. If smuggling can be made more difficult, and if
      legal mining, investing and trading can be made more attractive, the
      potential for change can be turned into reality.

      Framework for the Recommendations

      1.1 A Permanent Independent International Diamond Standards Commission
      should be created under United Nations auspices in order to establish
      and monitor codes of conduct on governmental and corporate
      responsibility in the global diamond industry. It should draw members
      from intergovernmental institutions such as the Commonwealth and the
      OAU, from the diamond industry, from international law enforcement
      agencies and from international civil society organizations

      1.2 In addition to the diamond-specific recommendations in this
      report, the development of sustainable peace in Sierra Leone will
      require major investment by the government of Sierra Leone and by
      donors in long-term basic human development and the creation of
      democratic institutions. Diamond-specific initiatives must be
      integrated into wider programmes aimed at building fundamental human
      security and democracy, involving parliamentarians, journalists,
      teachers and a broad cross-section of civil society.

      Recommendations for Action in Sierra Leone

      2.1 Establishment of the rule of law and human security throughout the
      country is of primary and urgent importance for a return to peace, and
      for appropriate exploitation of the country's mineral resources. In
      the short- and medium-term, donor agencies, friendly governments, the
      UN Peacekeeping Force and ECOMOG must facilitate the disarmament and
      demobilization of extra-governmental forces. Force must be used in a
      timely fashion to halt a resurgence of conflict.

      2.2 Special long-term UN security forces must be deployed in all major
      diamond

      areas.

      2.3 Attention should also be given by the UN Peacekeeping force to
      blocking or destabilizing major smuggling routes from Sierra Leone
      into neighbouring countries.

      2.4 Donors should actively support current British government efforts
      to rebuild Sierra Leone's army and police force. A professional
      diamond unit should be created with the ability to anticipate and
      counteract criminal activities. This reform should place training in
      human rights law and international humanitarian law at the centre of
      its efforts to create a credible, non-partisan army.

      2.5 The Government of Sierra Leone must ensure full transparency, high
      standards and rigorous probity in the implementation of its diamond
      purchasing, valuation and oversight activities. Corruption and
      conflicts of interest must be dealt with quickly and decisively. There
      is an important role to be played in this effort by Sierra Leonean
      civil society. Assistance in reviewing current systems and developing
      an enforceable code of conduct should be sought from appropriate donor
      agencies.

      2.6 Systems must be developed in Sierra Leone for the payment of fair
      prices to legitimate small miners. The banking system must be able to
      provide adequate and timely funding to finance such purchases. Schemes
      which actively promote participation in small-scale artisanal mining
      by Sierra Leoneans, and which actively discourage the participation of
      non-citizens should be given top priority.

      2.7 Effective and honest monitoring and inspection systems must be
      established throughout the mining and trading system. External
      assistance should be sought in developing these. Competent UN
      inspectors should be posted at different points in the system.

      2.8 In creating incentives for foreign investment in larger-scale
      mining operations, the Government of Sierra Leone should raise its
      standards for investors, insisting on a minimum per annum exploration
      budget and/or minimum levels of market capitalization and/or assets.
      Full corporate transparency must also be provided. Assistance in
      developing such standards should be sought from international
      securities commissions.

      2.9 While it is reasonable to expect mining firms to provide security
      within their immediate areas of operation, under no circumstances
      should they be provided with concessions in return for larger security
      or military operations, or in return for the supply of weapons.

      De Beers

      De Beers is part of the problem. In its efforts to control as much of
      the international diamond market as possible, it is no doubt
      purchasing diamonds from a wide variety of dubious sources, either
      wittingly or unwittingly. The breadth of its control, however, is also
      its major strength, and is part of the solution to the problem. If De
      Beers were to take a greater interest in countries like Sierra Leone,
      and if it were to stop purchasing large amounts of diamonds from
      countries with a negligible production base, much could be done to end
      the current high levels of theft and smuggling.

      3.1 As a matter or urgency, more rigorous oversight on the issue of
      origin must be instituted by the CSO.

      3.2 Strong efforts should be made by the Government of Sierra Leone,
      international bodies such as the United Nations and the World Bank,
      and concerned governments, to persuade De Beers to return to Sierra
      Leone. At a minimum, De Beers should be persuaded to open a purchasing
      office in Freetown and should be given every incentive to do so.

      3.3 Strong efforts should be made by the same international community
      to persuade De Beers to halt the purchase of all diamonds originating
      in Liberia and Ivory Coast until clear international guidelines have
      been developed for proving that any diamonds sold in these countries
      are genuinely of local origin. De Beers and all other foreign firms
      should be encouraged to close their purchasing offices in these two
      countries.

      Belgium

      The structure of the Belgian diamond industry may have served useful
      purposes when the industry was smaller. Today, however, it looks
      irresponsible, secretive and seriously under-regulated. It has a
      demonstrated attraction for new forms of organized crime, and is
      complicit in fueling African wars. The following recommendations are
      made to the Diamond High Council and the Government of Belgium, but
      they are also made to the European Union, and to other governments and
      institutions in Europe and Belgium with the potential to influence the
      outcome of events.

      4.1 The Government of Belgium must take full and direct responsibility
      for oversight of the Belgian diamond industry. This includes taking
      direct responsibility for customs, valuation and statistical procedures.

      4.2 The conflict of interest posed by the government's current
      customs-related arrangements with the HRD should be terminated.

      4.3 A high-level commission of enquiry should be instituted into the
      Belgian diamond industry as a whole, with particular reference to its
      lack of transparency and questionable paper work, and its possible
      infiltration by organized criminal elements. Such an enquiry, while of
      primary interest to Belgian authorities, has implications that extend
      far beyond Belgium. The Belgian Government should invite
      representatives of international bodies and/or other governments to
      participate in the enquiry.

      4.4 The HRD and/or the Government of Belgium should immediately
      prohibit the processing of all diamonds that are said to be of
      Liberian and Ivory Coast origin.

      4.5 As a matter or urgency, more rigorous oversight on the issue of
      origin must be instituted by the HRD and the Government of Belgium.

      4.6 The Government of Belgium and the HRD should, as a matter of
      urgency, investigate the diamond "fingerprinting" technology being
      developed by the Royal Canadian Mounted Police. The sooner this
      technology is in widespread use, the easier questions of
      identification will become.

      There is concern in Belgium that tougher controls would drive the
      diamond industry away to countries such as Israel, where oversight may
      be equally lax.

      This is not a good enough reason to ignore the Belgian problem, but it
      is a reason for rigorous international investigation of other diamond
      trading centres (see Recommendation 8).

      Liberia and Ivory Coast

      Liberia has become a major criminal entrepot for diamonds, guns, money
      laundering, terror and other forms of organized crime. The
      astoundingly high levels of its diamond exports bear no relationship
      to its own limited resource base. By accepting Liberian exports as
      legitimate, the international diamond industry actively colludes in
      crimes committed or permitted by the Liberian government.

      5.1 The United Nations Security Council should place a full embargo on
      the purchase of any diamonds originating in, or said to originate in
      Liberia until a full and objective international review can be carried
      out of the country's legitimate resource base, and until exports fall
      into line with that resource base.

      5.2 The United Nations Security Council should place a full embargo on
      the purchase of any diamonds said to originate in Ivory Coast until a
      full review can be carried out of the country's legitimate resource
      base, and until exports fall into line with that resource base.
      Consideration should be given to imposing the same restrictions on
      Guinean diamonds.

      Canada

      As "home" to a high proportion of the world's junior mining companies,
      Canada has a particular responsibility to ensure good corporate
      citizenship abroad. New standards and codes of conduct have been
      implemented by some companies and provincial securities commissions in
      recent years, but these are directed largely at matters of financial
      transparency, professional competence and issues dealing with
      capitalization. Some deal with environmental issues. They do not,
      however, deal with issues of corporate behavior in war zones or with
      issues such as contravention of the International Convention Against
      the Recruitment, Use,

      Financing and Training of Mercenaries.

      6.1 All Canadian securities commissions should initiate discussion
      among their members about issues relating to corporate conduct in war
      zones, with special reference to direct or arm's length trade in
      weapons and materiel, involvement with individuals and companies
      recruited abroad to engage in hostilities in a third country, or the
      arrangement of mining concessions in return for protection of any
      sort. Guidelines dealing with such issues should be created or added
      to existing codes.

      6.2 The Royal Canadian Mounted Police should be encouraged and
      supported in its development of diamond "fingerprinting." Efforts
      should be made to develop systems for adopting the technology as a
      matter of course in diamond producing countries and in major trading
      centres around the world, including the CSO and Antwerp.

      A Consumer Campaign

      Like diamonds, the Atlantic slave trade essentially served non-African
      markets. And like the diamond trade, the impact of slavery was
      devastating for many West African countries: it spawned predatory
      bandit groups acting like the RUF, UNITA and the NPFL, and mercenary
      regimes based entirely on violence and slave raiding. These regimes
      and bandit groups were sustained and motivated by the slave trade — by
      the arms and other resources they received for selling captive human
      beings to Europeans. With the end of the Atlantic slave trade,
      however, they collapsed or were swept aside in short order. The
      abolition of the slave trade was significantly influenced by a
      consumer campaign in Britain, aimed at the products of slave labour —
      mainly sugar from the Caribbean. The political and commercial damage
      to the slave trade of such campaigns was as much responsible for
      abolition as the humanitarian imperative.

      At the bottom of the UNDP Human Development Index and wracked by
      almost a decade of war, Sierra Leone could not possibly be in worse
      condition today than if it never had any diamonds. Diamonds have, in
      fact, been a curse, not a blessing. This does not have to be the case,
      but concerted action on all the recommendations above will be
      necessary just to start making a difference. The recommendations will
      not be easy to implement, nor will they be cost-free. The easiest
      thing for the major actors — De Beers, the HRD, the Governments of
      Belgium and Sierra Leone, the UN Security Council — will be to do as
      little as possible.

      One way of drawing greater attention to the urgency of the matter and
      of gaining broader support for change, would be a consumer campaign,
      One has already been started in Europe and it would not be difficult
      to expand it.

      Imagine:

      • Diamonds are not a girl's best friend — witness the brutalized
      little girl with no hands that President Kabbah took with him to the
      Lomé talks in 1999;

      • For some people, diamonds are more "forever" than for others —
      witness 75,000 violent deaths in Sierra Leone;

      • Diamonds are a guerilla's best friend — witness Sierra Leone's
      coups, rampaging criminals, etc etc.

      Sixty million individual pieces of diamond jewelry are sold every
      year, indicating a sizeable target audience.

      An effective consumer campaign could inflict damage on an industry
      which is important to developing economies and to poor people working
      in the diamond industries of other countries such as Namibia, South
      Africa, India and Botswana. Those considering the possibility of
      initiating or joining a campaign, therefore, would have to consider
      how many lives in countries like Sierra Leone, Angola and the Congo
      these jobs are worth. Speaking in November 1999, De Beers Chairman
      Nicky Oppenheimer said, Damage to the diamond market will not on its
      own deprive the warlords of their treasuries, but it will kill
      prosperity and encourage poverty in other well regulated African
      countries and in the cutting centres of India and around the world...
      Indeed, damage the market and you undermine orderly mining regimes and
      ensure instead that there will be more Angolas, more Congos, more
      Sierra Leones. It could ensure that there will be no more Botswanas,
      South Africas or Namibias.

      Diamond analyst Martin Rapaport, while critical of the UN, Global
      Witness and what he sees as hypocritical politicians and bureaucrats,
      also fears a consumer campaign, but understands that it could hurt.
      "The bottom line," he says, "is that the diamond industry does not
      need or want conflict with government or NGOs. It is in our economic
      interest to cooperate and find reasonable and responsible ways to deal
      with war diamonds." He says that "from a humanitarian and moral
      perspective, our industry must do everything it reasonably can to
      ensure that diamond money is not used to fuel conflict... As an
      industry we must take responsibility for our actions and develop
      trade-wide practices that we believe are correct and moral." Nelson
      Mandela has said the same thing: "We would be concerned that an
      international campaign... does not damage this vital industry. Rather
      than boycotts being instituted, it is preferable that through our own
      initiatives the industry takes a progressive stance on human rights
      issues."

      The word "boycott" does not appear in this report. Certainly a boycott
      could damage the industry. But the idea of a campaign is different: it
      is about transparency, change and urgency. Where people's lives are
      concerned — as they are in Sierra Leone — time is of the essence. In
      the absence of clear and meaningful movement within the industry and
      among other international actors, the point of a campaign would be to
      help the industry "take responsibility for its actions" — not damaging
      it, but improving it.

      Further Study

      This report has not dealt with the problems of Angolan and Congolese
      diamonds and their relationship to other countries in the region.
      Angola's problems — which are similar to those of Sierra Leone — were
      under consideration by a United Nations panel of experts when this
      report was being finalized. Recommendations emerging from that panel
      will no doubt need to be considered in relation to what has been
      recommended here.

      This report has also not addressed the diamond trade in other parts of
      the world, most notably in Russia, Ukraine, New York, Israel and
      India. Further solutions to some of the problems identified here might
      follow additional research into these and other trading, cutting and
      polishing centres.

      Humanitarian Aid

      The following two organizations offer humanitarian aid to Sierre Leone.

      International Book Bank: 2201 Eagle St Unit D, Baltimore, MD 21223

      Tel: 410-362-0334 Fax: 410-362-0336

      IBB is a nonprofit, charitable organization. IBB supports literacy
      development projects and education in developing countries of the
      World. IBB's mission is to procure, process and ship books and other
      educational materials to appropriate recipents.

      Leonenet Street Children Project: 326 Timothy Way, Richmond, KY 40475

      Tel: 606-626-0099 Fax: 606-623-8921

      The Leonenet Street Children Project(LSCP) provides foster-care for
      orphaned and homeless child-victims of the civil war in Sierra Leone.
      LSCP advocates a national foster-care policy to forestall a burgeoning
      street(neglected, abandoned, and abused) children crisis. Funds
      provided by the Project cover shelter, food, clothing, counseling and
      formal schooling and/or vocational education.

      Further Information

      This report is available at www.web.net/pac, in both English and
      French, or in printed form from PAC. Further information on diamonds
      and the conflict in Sierra Leone can be found in the full 90-page
      report (English only) which is available from Partnership Africa
      Canada at a price of Can$25.00 or US$20.00, including postage and
      handling. A general overview of the diamond industry can be found in
      The Diamond World (David Koskoff, Harper Collins, New York, 1981).
      Specific books on Sierra Leonean diamonds include: The Sierra Leone
      Diamonds (H.R. Van Der Laan, Oxford University Press, 1965); The Knave
      of Diamonds (Michael Harbottle, Seeley, London, 1976); Corruption and
      State Politics in Sierra Leone (William Reno, Cambridge University
      Press, 1995). Africa Development (Vol. XXII, Nos. 3/4, 1997) contains
      many excellent articles by Sierra Leoneans on the war. A daily source
      of reliable information on Sierra Leone can be found on the Sierra
      Leone Web: www.Sierra-Leone.org/.







      RAPAPORT
      Information that means Business








      Africa's Diamond Wars
      Africa's Gems: Warfare's Best Friend
      By Blaine Harden

      New York Times
      April 6, 2000

      Across vast stretches of Africa, diamonds fuel war. Diamonds are so
      lucrative for predatory governments and marauding rebels that war has
      become a useful cover for hugely profitable smuggling enterprises. For
      millions of Africans who happen to get in the way, diamonds are agents
      of terror.

      The rough stone emerges from the African soil at fortress-like mines
      in the war zones of Angola or straight from the muck of a dammed-up
      river in Congo. After journeying across continents and oceans, after
      being graded, cut, polished and set in gold along the way, a diamond
      lands in a display window in Manhattan, transformed into a pricey
      symbol of eternal love and beckoning to brides-to-be. The journey can
      take months or even years. To enforce the myth that diamonds are rare
      and valuable, most of the world's rough stones are hoarded in London
      and then carefully fed back into the world market.

      De Beers, the South African conglomerate that controls two-thirds of
      the world's rough diamonds, decides how many will be sold, when, to
      whom and at what price. Where they are mined responsibly, as in
      Botswana, South Africa or Namibia, diamonds can contribute to
      development and stability. But where governments are corrupt, rebels
      are pitiless and borders are porous, as in Angola, Congo or Sierra
      Leone, the glittering stones have become agents of slave labor,
      murder, dismemberment, mass homelessness and wholesale economic collapse.

      While market manipulation guarantees their price in world markets, the
      portability and anonymity of diamonds - millions of dollars worth can
      be smuggled in a sock, and identifying where they came out of the
      ground is often impossible - have made them the currency of choice for
      predators with guns in modern Africa. "You can't wage war without
      money, and diamonds are money," said Willy Kingombe Idi, who buys
      diamonds from diggers in Congo. "People are fighting for money.
      Everything that happens, it's about money."

      De Beers estimates that only 3 percent of global rough diamonds now
      come from conflict areas in Africa, according to Andrew Lamont, a
      company spokesman who repeatedly said it was difficult to define a
      conflict area. But Christine Gordon, a London-based journalist and
      independent diamond expert who has been critical of De Beers, said
      that as recently as the mid-1990's, diamonds from African war zones
      accounted for 10 to 15 percent of world supply. In any case, violent
      goings-on in diamond-rich Africa have done nothing, thus far, to
      change the consuming habits of Americans, who buy more than half the
      world's diamond jewelry. Sales jumped about 11 percent last year.
      Diamond sales are also booming around the world, with De Beers showing
      record sales last year of more than $5 billion.

      Digging in the Mud

      At the bottom rung of the international diamond trade, the need to
      scrap together enough money to eat sends Africans like Mati Balemo
      clawing through the mud of a Congolese stream bed. Mr. Balemo is a
      digger. On a recent morning, he and six other diggers set off from
      Kisangani, in north-central Congo, traveling first by bicycle taxi and
      then on foot. Along the way, a soldier armed with a stubby machine gun
      demanded to come along. But he hired another bicycle taxi, which took
      a spill on a hill, pleasing the diggers. They arrived after three
      hours at a small stream where the thick canopy of bamboo and vines
      made the early afternoon as dark as twilight. The diggers had been
      working this site for a month and had found only a few diamonds. They
      used shovels to dam off small sections of the stream. Then they heaped
      mounds of mud onto the bank. They picked out big rocks from the mud
      and sifted through what was left with metal screens nailed to wooden
      frames.

      Diggers like Mr. Balemo are driven by the dream of one stone that will
      change their lives. For weeks or months they work bent over in shallow
      rivers or in pits. In three years as a digger, the biggest diamond Mr.
      Balemo ever found was a stone of 2.16 carats worth $800. That diamond,
      if it were of flawless color and clarity, could retail for as much as
      $10,000 in New York, experts say. Mr. Balemo split his $800 with five
      fellow diggers. Miki Galedem, 30, another digger who started when he
      was 16, once found a monstrous stone of nine carats. He was paid
      $4,800. But he was young then, in 1993, and the money disappeared, he
      said, on "beer and women."

      Standing in a pool of water stilled by mounds of mud, the diggers
      professed not to think much about their business - where the diamonds
      go, who wears them and at what price. "Diamonds are beautiful," Mr.
      Balemo said. "Everyone wants to be beautiful. That is normal." He was
      knee-deep in the stream, and had been sifting mud - a brown stew with
      pebbles and quartz - for an hour. Suddenly, he found a diamond. He
      popped it in his mouth to clean it and then showed off a shiny white
      stone half the size of a raisin. His friends clapped, and one digger
      guessed that traders back in Kisangani would pay $20 at most for the
      stone. "I'm very glad," Mr. Balemo said, not smiling much. This was
      the first diamond in nearly a week. "It's not much money for all that
      work." The soldier with the stubby machine gun, who had been watching
      closely from the river bank, then came over and took the diamond. He
      folded it into a scrap of paper backed with gold foil and stuffed the
      packet into his chest pocket. By the rules of Congo, the guy with the
      gun got the diamond. Even when the stones are taken from the ground
      using the most sophisticated equipment, the game is roughly the same.

      Financing the Arms

      In northeast Angola, the Catoca diamond mine - one of a half dozen
      such sites in that Texas-sized country - is an island of modernity in
      a sea of civil war. Huge earthmovers gouge out the diamond-bearing
      earth and feed it into a sorting plant, where water, electric
      vibrators and X-rays separate out about $8 million worth of diamonds a
      month, an amount expected to quadruple as the mine expands. The
      diamonds are stored in a high-security sorting room before they are
      flown to Europe. As technicians grade the uncut stones,
      Israeli-trained security guards watch from every angle to make sure
      that no one slips a rock into his pocket. The mine has satellite TV
      and 24-hour Internet access, but the only way in or out is by air. To
      protect employees from attack, they are locked inside the mine's gates
      every night by guards with automatic weapons.

      Until four years ago, the men with guns were rebel soldiers working
      for Unita, the Angolan rebel group led by Jonas Savimbi. Delfi Rui, a
      39-year-old digger, recalled seeing rebels whip an elderly man who
      refused to dig. He said they had threatened to shoot those who would
      not give them at least half the diamonds they found. The Angolan
      military took Catoca from Unita in 1996, and within two years modern
      mining began atop one of the planet's largest veins of diamonds. The
      mine now employs 1,100 Angolans and has the potential to anchor an
      economic revival in a part of the country where there are no other
      industries, no money for war reconstruction and no government
      services. Jobs at the mine are expected to last for at least four decades.

      But the persistence of fighting in the area means that men with guns
      still find ways to milk the diamond business. A private security force
      controlled by the chief of staff of the Angolan Army, Gen. João de
      Matos, protects Catoca. About 300 armed guards, most of them former
      Angolan soldiers, have staked out a fortified perimeter around the
      mine. They charge $500,000 a month to protect the mine from Unita.
      Since they were chased away from the mine, Unita soldiers have stayed
      in the area and terrorized the local citizenry with hit-and-run
      guerrilla raids. They have forced about 56,000 nearby civilians from
      their homes. Most are destitute. Land mines have maimed many. Without
      international food aid, they would starve.

      Unita's behavior led the United Nations to impose a diamond embargo on
      the group in 1998, making it the only African rebel force subjected to
      such action. For years, the United States and the white government of
      South Africa supported Unita, an acronym in Portuguese for the
      National Union for the Total Independence of Angola, as a counter to
      the Moscow-backed government in Luanda. But with the end of the cold
      war and of apartheid, Unita lost its military patrons. International
      isolation deepened when Mr. Savimbi, its leader, lost an election in
      Angola 1992. Rather than accept a vote foreign observers judged free
      and fair, Mr. Savimbi returned to the bush and resumed war against the
      Angolan government. His fighters seized control of the Cuango River
      valley, Angola's richest diamond territory, and began a major mining
      operation that more than compensated for the lost cold-war aid, and
      made them the richest rebels in Africa.

      Diamond money paid for Unita offensives that in the 1990's elevated
      Angola's civil war to a new plateau of savagery. Highland cities like
      Cuito and Huambo were all but flattened by artillery shells. More than
      half a million Angolans were killed. Land mines maimed about 90,000.
      Fighting displaced 4 million Angolans, and about 1 million continue to
      depend on foreign food aid. The United Nations Children's Fund now
      ranks Angola as the worst place on earth to be a child. At Andulo,
      Unita's headquarters in the central highlands of Angola, Mr. Savimbi
      personally haggled with arms merchants and diamond traders who flew in
      from Europe. The rebel boss bargained using small bags of diamonds,
      each of which contained several million dollars worth of gems,
      according to Robert R. Fowler, the Canadian ambassador to the United
      Nations and chairman of a committee that investigated violations of
      the embargo against Unita.

      "If the price was $22 million, Savimbi would reach down for four of
      those bags and two of those," Mr. Fowler said. "The arms dealers had
      their diamond experts, and Savimbi had his, and they would inspect the
      diamonds to see if they really were worth $22 million. And then they
      haggled some more and somebody would throw in an extra bag of
      diamonds, and off the arms dealers flew." Mr. Savimbi became a major
      buyer on the international arms scene. Giant Russian-made Il-76 cargo
      planes made as many as 22 deliveries a night at Andulo, said Mr.
      Fowler. The primary source for most of the arms was Bulgaria, the
      report said, although Bulgarian officials deny it.

      The United Nations waited nearly six years before imposing an embargo
      on Unita diamonds, even though there was never any doubt what Mr.
      Savimbi was doing with his little bags. With an estimated $3 billion
      in legal diamond sales, he built Unita into a highly mobile war
      machine with 35,000 well-armed troops. By the early summer of last
      year, Unita seemed on the verge of toppling the government in Angola.
      The rebels were turned back only because the government went on a
      $500-million weapons-buying spree of its own, financed by Western oil
      companies that paid the government more than $900 million for rights
      to new offshore oil finds. Although Unita's sales of diamonds are down
      sharply from the mid-1990's, the United Nations report said gems
      continued to play a "uniquely important role" for the rebels.

      Making a Wasteland

      There is no United Nations embargo on diamonds from Congo or Sierra
      Leone. Hunger for looted diamonds is a major reason why six other
      countries have sent soldiers into Congo. Angola, Namibia and Zimbabwe
      have sent troops to protect the government of Laurent Kabila, while
      Burundi, Rwanda and Uganda have sent soldiers to assist rebels trying
      to overthrow him. Altogether, they have succeeded in shattering much
      of the economy of eastern Congo, transforming Kisangani, the major
      city of eastern Congo, into a gaudy and ghostly ruin.

      The streets of Kisangani are nearly empty of cars. The textile plant
      is closed, and the once-thriving port on the Congo River is quiet.
      Apart from spotty electricity from a hydroelectric dam, there are
      hardly any public services left. Public salaries go unpaid. Prices
      have soared. The only businesses that seem alive are those buying
      diamonds from diggers coming in from the dense forest that encircles
      Kisangani. To catch their eye, storefronts have been dressed in garish
      paint that shouts the names of diamond buyers like Mr. Cash, Jihad the
      King of Diamonds and Jehovah Ire, run by one Papa Samuel, "in
      connection with Jesus Christ." One store is painted with an image of
      Rambo, his machine gun replaced with a shovel. Inside the diamond
      shops it is possible to see hundreds of thousands of dollars worth of
      stones. Shop owners say the diamonds are often flown out of Congo to
      Rwanda or Uganda, as commanders from those countries reward themselves
      for their revolutionary efforts.

      "What do you think is the reason for this war?" asked a diamond buyer
      named Papa Ben, who plies his trade in Kisangani. "It's only about the
      riches of this country." Only about a third of Congo's annual diamond
      production is being sold through the country's official market,
      according to diamond experts in Antwerp. They say the rest is being
      smuggled away for sale in bordering countries. By far the biggest
      diamond prize in the Congo is more than 1,000 miles to the southwest
      of Kisangani, near the city of Mbuji Mayi. Diamond experts say
      President Kabila has allocated a substantial percentage of that huge
      diamond complex to Zimbabwe, which has sent 11,000 troops to prop up
      Mr. Kabila's wobbly government.

      So Zimbabwe has recently become a major diamond exporter, although it
      has a negligible local industry. With their eyes on the prize at Mbuji
      Mayi, large numbers of Congolese rebels and supporting troops from
      Rwanda began massing about a year ago to the north and east of the
      city. If they take the diamond mines there, many military experts
      believe, Zimbabwe would lose its will to fight and Mr. Kabila's
      government would probably fall.

      Allying With Smugglers

      In Freetown, the capital of Sierra Leone, the surgeons were frantic.
      Scores of men, women and children, their hands partly chopped off by
      machetes, had flooded the main hospital. Amputating as quickly as they
      could, doctors tossed severed hands into a communal bucket. The
      Revolutionary United Front, a rebel outfit that barters diamonds for
      weapons, was trying early last year to conquer Freetown. Chopping off
      limbs was their trademark strategy, as it greatly simplified conquest
      in the diamond fields of eastern Sierra Leone. When word got out that
      rebels were moving in, tens of thousands of terrified people would
      take off. The rebels chased half the country's population of 4.5
      million out of their homes in the 1990's. Half a million people fled
      the country.

      One day during last year's carnage in Freetown, a diamond trader
      approached a reporter at the Cape Sierra Hotel. He stuck out his
      tongue and from beneath it plucked out a stone, which he offered to
      sell. When the sale did not happen, the trader popped the diamond back
      in his mouth and moved on. In fact, most of Sierra Leone's diamonds
      were - and still are - smuggled into neighboring Liberia for sale,
      according to several human rights groups and diamond industry experts.
      The leader of the Sierra Leone rebels, Foday Sankoh, has established a
      lucrative partnership with his longtime Liberian friend, Charles
      Taylor, the rebel-boss-turned-president. Both had training in Libya,
      both their rebellions began in the late 1980's, and their armies have
      helped each other fight.

      Mr. Sankoh's access to the world's diamond bourses and to arms was
      secured when Mr. Taylor was elected president of Liberia in 1997. The
      Liberian government denies this trade, as does Mr. Sankoh. But a
      number of diplomats, international relief officials and mining experts
      say there is persuasive evidence. Liberia was a marginal exporter of
      diamonds until the mid-1990's. Since then it has it exported some 31
      million carats - more than 200 years' worth of its own national
      capacity, according to trading records in Antwerp. After Mr. Sankoh
      failed to take Freetown last year, he signed a peace deal granting his
      rebels amnesty for war crimes. The deal, which was brokered by the
      United Nations, also gave him a government job - chairman of the
      Strategic Minerals Commission, which controls diamond mining.

      Part Two

      Making Diamonds Work

      Diamonds need not lead to horror. Botswana, the world's largest
      diamond producer, is one of the most stable and prosperous countries
      in Africa. The diamond industry there employs nearly a fourth of the
      country's 1.5 million people and accounts for two-thirds of government
      income. De Beers and the government control the industry in a 50-50
      partnership, but there is far more to the country's success than
      corporate paternalism. For starters, the borders of Botswana, unlike
      the borders of so many countries in Africa, make sense. Inside the
      borders, there is ethnic and linguistic unity. There is also a long
      history of democratic decision-making.

      Traditional chiefs rarely take action without first consulting
      ordinary villagers, who are invited to speak freely. It also helped
      that Botswana gained independence peacefully. The country was so poor
      that the British decided it was not worth fighting for, so it was
      never inundated with guns or soldiers. When De Beers discovered
      diamonds in Botswana in 1969, the government had been independent for
      three years, and the men running it were traditional chiefs who owned
      cattle. They came from a desert culture where people have to scrimp
      and save to survive the long, dry season. During three decades,
      Botswana's leaders have carefully guided what became the world's
      fastest-growing economy. They invested in roads, schools and clinics.
      In stark contrast to the rulers of Angola and Congo, they created an
      African nation devoted to improving the lives of its people. In 1965,
      only about half of primary school-aged children attended school.
      Today, 90 percent of that group is enrolled. Life expectancy, which
      was less than 50 at independence, is now near 70.

      Phones work in Botswana, potholes get repaired, garbage gets picked
      up, and a lively press pokes fun at the government without fear. At
      $3,600 per year, the gross national product per capita is seven times
      higher than the average for sub-Saharan Africa. The standard of living
      is higher than in South Africa, Turkey or Thailand. "Diamonds are not
      devils," said Terry Lynn Karl, professor of political science at
      Stanford and author of "The Paradox of Plenty," (University of
      California Press, 1997), a book about the poisonous mix of natural
      resources, big money and thieving elites in developing countries.
      "What matters is that there be a tradition of good government and
      compromise in place prior to the exploitation of these resources."

      Exploiting a Continent

      The miseries of modern Africa are, in many ways, a legacy of its
      history. In the case of both Angola and Congo, colonialism obliterated
      whatever political culture may have predated the arrival of Europeans.
      It invented huge, largely fictive nations - Angola is the size of
      Texas, Congo of the United States east of the Mississippi - roping
      together people who regarded one other as foreigners. To make their
      nation-building pay, colonialists used force to haul off everything
      from ivory to rubber to human beings.

      In Congo, the Belgian colonial state was famously greedy and cruel.
      Its agents set impossible quotas for production of rubber and ivory,
      killing or chopping off the hands of villagers who failed to meet
      them. The novelist Joseph Conrad called it "the vilest scramble for
      loot that ever disfigured the history of human conscience." In Angola,
      the Portuguese were less brutal, but no less toxic. At independence in
      1975, several hundred thousand Portuguese residents, virtually the
      entire educated population, abandoned the country. Some took even
      their doorknobs with them. They left behind a place where almost no
      Angolans had any training in statecraft, business or agriculture. Then
      for the better part of the last 50 years, the cold war and the
      white-minority governments of southern Africa injected cash and arms
      into regional wars.

      The Central Intelligence Agency, for instance, supported Unita in the
      early 1970's and again in the late 1980's. The Marxist government of
      Angola received military assistance from the Soviet Union and up to
      50,000 troops from Cuba. When the C.I.A. was not helping Unita, the
      rebels got military backup from white-ruled South Africa. Sierra
      Leone, a small country in West Africa, had a more benign colonial
      history under British rule. But since the 1940's, predators who
      smuggle diamonds have warped every aspect of the nation's economic and
      political life. The meddling of colonialists, superpowers and white
      governments all but stopped at the start of the 1990's, leaving
      diamonds, oil and other natural resources as the primary forage for
      rebels and governments.

      In those countries where there was nothing to trade for weapons - as
      in Mozambique, where post-apartheid South Africa stopped financing
      rebellion and post-Communist Eastern Europe stopped financing the
      government - war simply fizzled out. But Angola, Congo and Sierra
      Leone had plenty of diamonds left over to excite greed, fuel war and
      to buy favors. The United Nations report on the embargo against Unita
      described how Mr. Savimbi gave a "passport sized" packet of diamonds
      to the president of Togo, Gnassingbe Éyadéma, as payment for allowing
      his children to live in Togo and go to school there. Togo has denied
      it. Mr. Savimbi "sealed" his friendship with the president of Burkina
      Faso, Blaise Compaoré, by giving him a number of envelopes full of
      diamonds, as well as contributing to his political campaign and
      helping his government pay debts, according to the report. In return,
      it said, Burkina Faso sent Mr. Savimbi three flights of diesel fuel.
      The government of Burkina Faso denies that. "Oh, the diamonds,
      diamonds, diamonds," said a character in Graham Greene's "The Heart of
      the Matter," a 1948 novel set in Sierra Leone. "You cannot understand
      how many bribes are necessary."

      Manipulating Scarcity

      De Beers created its cartel 110 years ago when the company's founder,
      Cecil Rhodes, realized that the sheer abundance of diamonds in
      southern Africa would make them virtually worthless. By carefully
      manipulating scarcity, De Beers prospered as perhaps the most powerful
      cartel in the annals of modern commerce. In the process, however, De
      Beers has run afoul of antitrust laws in the United States. The
      company's senior executives dare not enter this country because of an
      outstanding antitrust indictment that charges De Beers with fixing the
      prices of industrial diamonds. The company's grip on the diamond
      market has slipped a bit from near-total dominance at mid-century, but
      it has continued to keep the price of gem-quality diamonds high by
      being both aggressive and flexible. Through the years, it has sponged
      up periodic floods of diamonds from Russia, Australia and, until
      recently, across parts of war-ravaged Africa where it does not own all
      the mines. Together with the artificial perception of rarity, what
      makes diamonds profitable to more than 2.5 million miners, traders,
      cutters and wholesalers around the world - and what energizes the
      $50-billion-a-year retail diamond jewelry industry - is romance.

      That, for the most part, is also an invention of De Beers. In 1938, De
      Beers hired a New York advertising company to convince millions of
      couples that the larger the diamond on an engagement ring, the greater
      their love. In the 1960's, a similar campaign in Japan created a
      diamond engagement ring "tradition." Diamonds spilling out of Angola's
      war zone have had a destabilizing effect on the cartel, first by
      increasing the supply of gem-quality stones and then by tarring the
      reputation of De Beers as a company that trafficked in blood-stained
      goods. To maintain world prices, De Beers bought up a sizable amount
      of what Unita was selling - although the company insists that it
      bought the diamonds on the open market without any direct dealings
      with the rebels, and that it stopped all buying when the embargo was
      imposed in 1998.

      Global Witness, a London-based human rights group, embarrassed De
      Beers in October of 1998 with a report that showed - citing the
      company's own annual reports - how the cartel had pumped large amounts
      of money into the coffers of the rebels as the war escalated. A year
      later, De Beers took decisive action. The company declared last
      October that it would not buy any diamonds that originate in Angola,
      except from one government-controlled mine. Some diamond experts said
      De Beers' announcement, while laudable, came late - after Unita,
      having exhausted the easy pickings in Angola's alluvial mines and
      having lost considerable territory to Angolan government forces, could
      no longer roil the world market with high quality stones.

      De Beers moved again last month to sanitize the image of the diamonds
      it sells. As of March 26, the company says it can guarantee that none
      of its diamonds originate with African rebels, but come instead from
      its own mines in South African, Botswana or Namibia, or are bought
      from mines in Russia or Australia. Human rights groups have welcomed
      De Beers' moves and praise the company for taking steps they say the
      entire diamond industry should follow. Rebel-mined diamonds, though,
      can still find their way out of Africa. About a third of diamonds
      imported into the United States are purchased from traders who are not
      employed by De Beers and are not bound by its new rules.

      Tracing the Stones

      Near Antwerp's train station, police barricades seal off three narrow
      streets. In warren-like rooms above the streets, men hunch over
      precision turntables, grinding rough diamonds to coax forth shapes and
      colors that lure wholesaler jewelers to Belgium from around the globe.
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