Heart of Stone: African Diamonds
- The Heart of The Matter: Sierra Leone, Diamonds & Human Security
By Ian Smillie, Lansana Gberie and Ralph Hazleton
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.
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
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
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
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
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
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.
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
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
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
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
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 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
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
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.
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
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.
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
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
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.
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/.
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
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
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
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.
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."
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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