Wednesday, May 25, 2005

Conflict Diamonds

Economics 136
International Economics

Economics Research Paper: Conflict Diamonds

Diamonds. One of the hardest substances known to man, a diamond is basically carbon compressed to a crystalline form. It glitters and sparkles in a dazzling brilliance. It is the oldest and most precious of all minerals. A diamond now signifies a never-ending love and commitment between newlyweds, starting with a gift of an engagement ring, and culminating to the 75th wedding anniversary diamond. To quote a famous song line, “Diamonds are a girl’s best friend.”

But there is a darker side to a diamond’s sparkle. It is a side of death, of war, of smuggled profits and riches to few, and economic poverty and misery to many. These are the conflict or “blood” diamonds. Conflict diamonds are rough diamonds mined and smuggled out of the African states of Angola, Sierra Leone, Liberia, and the Democratic Republic of Congo by rebel organizations, which then utilize the proceeds from the sales of these smuggled diamonds to finance their military operations against the legitimate African governments of these states. This paper is divided into three parts. The first part defines how conflict diamonds are mined and smuggled out of Africa. The second part examines the link between conflict diamonds and weapons purchases. Finally, there is an analysis of conflict diamonds and how to reduce their presence in the world markets.

Conflict diamonds comprised an estimated 3.7% to 15% of the value of global diamond trade in 2000 (Cook, 2003). In 2001, the production of rough diamonds was estimated to be around $7.885 billion, with the United States importing $597.38 million of rough diamonds in 2001 (Cook, 2003). Cook estimated the total value of worked, but uncounted diamonds imported into the United States to be even larger than that of rough diamonds at $10.06 billion in 2001. Goreux stated that rough diamonds purchased at the mine gates in 1999 were valued at $7.3 billion (2001). Diamonds sorted, polished and then sold to jewelers were valued at $14 billion. When jewelers add gold, platinum, and precious stones other than diamonds, this increases the costs by another $14 billion, bringing total production costs to $28 billion. Add a 100 percent retail profit margin, and Goreux estimated the value paid by consumers of diamond jewelry to be around $56 billion worldwide (Goreux, 2001). This increasingly stream of revenue in the diamond market provides a powerful incentive for individuals to profit in the sales of conflict diamonds.

Before any analysis of conflict diamonds can start, a few words must be said about De Beers Corporation. De Beers is the dominant force within the diamond industry. For almost 70 years, De Beers has created a diamond cartel by carefully maintaining the pricing and supply of diamonds in the world market. It has achieved this cartel by owning over 40 percent of the diamond mines and a large buffer-stock of unpolished diamonds, almost to the equivalent to a full year of world production in 1998 (Goreux, 2000). However, new supplies of diamonds have been discovered in Canada and Australia. This increase in supply has threatened De Beer’s control of world prices. The company has released its control of world prices and has reduced its buffer stock from $5 billion in 1998 to less than $3 billion in 2000 (Goreux, 2000). De Beers originally started its successful “A diamond is forever” marketing campaign, but as both new independent suppliers took advantage of the free De Beers advertising, and as the issue of conflict diamonds received greater public awareness, De Beers adapted it strategy. De Beers stopped buying diamonds on the open market in Africa and in Antwerp—the world’s diamond trading capital—and instead relied on the supply in its own mines and in joint ventures with local producers (Soggot, 2002). De Beers created a new concept of “branded diamonds,” where diamonds are engraved with De Beers’ brand on special machinery, guaranteeing that the stones are conflict free (Soggot, 2002). This strategy allowed De Beers to project a new image as “the Supplier of choice,” (Goreux, 2000).

Mining diamonds are classified by two processes—kimberlite and alluvial. Kimberlite mining occurs where the diamonds are mined from the volcanic pipes, which push the diamond-rich magma to the surface. Once the diamond material is exposed to weathering and erosion, it is broken apart and carried down through rivers and streams to alluvial, or stream bed, deposits (Conflict Diamonds: Possibilities for the Identification, Certification and Control of Diamonds, 2000). What is important to note is that kimberlite mining requires advanced mining technology and capital necessary either to utilize heavy mining machinery to dig down into the volcanic crater to access the exposed kimberlite, or to develop the underground mine shafts in order to tap these diamond-rich volcanic pipes. Such mining can only be done by a national government, or large mining corporations, which must develop economic and business relationships with the current government of the state in order to access the resources within the territory of that state. Rebel organizations involved in a dispute against the state, do not have the knowledge, technology, or skills necessary to capitalize on these resources. However, alluvial diamonds are located on the surface of streams or riverbeds. They can be picked up, or dug up using rudimentary tools such as pick-axes or shovels. Alluvial diamond mining is basically small-scale, or artisan in nature (Goreux, 2001). It is practiced in poor and remote areas by a largely itinerant and poorly educated population with little employment opportunities. Goreux estimated that 13 million people in about 30 countries are small-scale/artisan miners (2001). Mining conditions are harsh, unhealthy, and the artisan miners are poorly paid. There is no health insurance, no legal, labor, or fiscal regulations. Goreux said that a sizable part of the artisan mining population consists of young male workers living in an insecure environment (2001). Artisan mining provides an income for those young males to spend on widely available illicit drugs and the sex trade (Goreux, 2001). Blaine Harden described an account where a digger Miki Galedem, 30, had found a rough stone of nine carats in a Congolese streambed, when he was 16 in 1993 (2000). He was paid $4,800 for the stone, but Galedem wasted the money on “beer and women,” (Harden, 2000). With artisan diamond mining, the rules are that the guy with the gun gets the diamond (Harden, 2000). Harden said of a digger Mati Balemo finding a diamond about the size of a raisin after digging for an hour in the mud. Diamond traders in Kisangani would pay about $20 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 riverbank, 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,” (Harden, 2000).

In the Democratic Republic of Congo, diamond mining is also undertaken using the artisan mining process. While mining of diamonds could take place in the 1980s, the selling of diamonds was restricted within the mining zone, or in adjacent villages (Dietrich, 2002). It was illegal to sell diamonds in Kinshasa and in the urban areas of the Kasai provinces, however corrupted officials did allow some trade to exist. De Beers held a monopoly of exports in the DRC, but that changed when DRC strongman Mobutu Sese Seko terminated the De Beers monopoly in 1981 (Dietrich, 2002). This resulted in a liberalization of the diamond sector in 1982, increasing both mining and exports of diamonds in the DRC. In 1982, artisan production was not more than a million carats per annum (Dietrich, 2002). Production increased to six million carats in 1983, and fourteen million carats in 1986 (Dietrich, 2002). Diamond smuggling also occurred where Angolan diamonds were moved across the border to be sold in the DRC (Dietrich, 2002).

Diamond mining in Sierra Leone is undertaken in a unique way. In a report by the USAID Office of Transition Initiatives, artisan miners in Sierra Leone must go through a feudalistic process for mining diamonds (Diamonds and Armed Conflict in Sierra Leone: Proposal for Implementation of a New Diamond Policy and Operations, 2000). This process starts where land is communally owned in Sierra Leone. Artisan miners apply for “leases,” which are managed and rents collected by traditional paramount chiefs. These diggers obtained permission to dig in areas specified by the chiefs, with a requirement to pay a land use fee to the chiefs. Diggers financed their land use fees by “dealers,” who advanced them food, tools and basic household goods, which are then deducted from the proceeds of the sales of the stones the diggers turned over to the dealers. The USAID report claimed, “over time, poverty has conspired with ignorance to create a system of virtual servitude,” (Diamonds and Armed Conflict in Sierra Leone: Proposal for Implementation of a New Diamond Policy and Operations, 2000). Artisan mining requires very little capital, knowledge or technology, but it is labor-intensive. Moreover, any absence of a state regulatory framework allows for this type of mining to be conducted easily and illegally (Goreux, 2001). The combination of small-scale mining, rudimentary technology, and lack of state controls, provides a powerful incentive for rebel organizations to exploit these alluvial diamond deposits for their own profit.

Once the diamonds are dug up from the ground, they are usually sold to local diamond traders, who combined them with diamond purchases from other regions. These diamonds are then sent directly to major trading centers of Antwerp, Tel Aviv, New York, or Bombay where traders and manufacturers selected diamonds for cutting, polishing and setting into retail jewelry for the consumer market (Conflict Diamonds: Possibilities for the Identification, Certification and Control of Diamonds, 2000). It is in this phase, where the smuggling becomes murky. According to United Nation’s Canadian ambassador Robert Fowler, the Uniao Nacional Para a Independencia Total de Angola (UNITA) obtained it rough diamonds from alluvial mining areas, which it controlled in Angola. UNITA prepared parcels of diamonds (valued at between $4 million to $5 million each), and then seek out arms brokers who would accept the parcels as payment in exchange for weapons or cash. When diamonds are exchanged for weapons, UNITA prepared parcels of diamonds, and then diamond experts, provided by both the arms broker and UNITA, agreed on the value of each parcel, depending on the number and quality of stones presented (Fowler, 2000). The diamonds are then accepted as payment for weapons. If the deal is non-arms related, where cash is needed, the diamonds are carried to a safe destination outside of Angola, a meeting is arranged with buyers, and the diamonds are exchanged for cash (Fowler, 2000). UNITA representatives have been able to smuggle diamonds to Burkina Faso, Namibia, South Africa, Zaire, and Rwanda under the protection of those state’s governments, where the transactions with buyers are made (Fowler, 2000). UNITA’s key success has been its ability to use diamonds as a means to influence friends in other state governments. By paying off officials in its neighboring countries, UNITA maintained an extensive external support network. Fowler cited several examples of UNITA leader Jonas Savimbi using diamonds to buy the friendships of former President of Zaire, Mobutu Sese Seko, President Eyadema of Togo, and President Blaise Compaore of Burkina Faso (Fowler 2000). In one example, Savimbi gave two passport-sized packets of diamonds to Togo’s President Eyadema in exchange for allowing Savimbi’s children to come to Togo for their education (Fowler 2000).

In Sierra Leone, the Revolutionary United Front (RUF) mined alluvial diamonds from the Kono District and Tongo Field. These are two of the most valuable diamond areas in Sierra Leone. Some diamonds from the Tongo Field are traded in Kenema, Sierra Leone, which is located only 28 miles away from Tongo Field (Ayafor, Bodian, Peleman, Sandhu, and Smillie, 2000). These diamonds are exchanged for food and other supplies. It is interesting to note that Ayafor reported, “the continued presence in Kenema of more than 40 separate diamond dealers, many of them Lebanese, even though their main source of supply has officially been out of reach for several years. It is possible that these diamonds could enter the official export system if there is a lack of probity and vigilance in the Government Gold and Diamond Office (GGDO), the Ministry of Mineral Resources and its branches,” (2000). However, the bulk of the RUF diamonds are smuggled out of Sierra Leone through Liberia (Ayafor et al, 2000). The diamonds are carried by RUF commanders and trusted Liberian couriers to Foya-Kama or Voinjama, and then sent to the capitol Monrovia (Ayafor et al, 2000). The RUF organization also used diamonds as a means to buy outside friendships. Yet, RUF has not had the kind of success in buying outside friendships and influence as UNITA has. There are numerous examples of friction in the sales and transfers of RUF diamonds. In 1998, Captain Michael Comber of the RUF Mining Unit brought a parcel of diamonds from Kono to RUF headquarters in Buedu. These diamonds were given to RUF leader Issa Sesay, who was to travel to Liberia to make arrangements to purchase military equipment with the diamonds. “Sesay lost the diamonds somewhere in Liberia, claiming he had accidentally dropped the parcel in the mud,” (Ayafor, et al, 2000). Ayafor (2000) claimed that RUF couriers often traveled in fear of being robbed by rogue Liberian National Patriotic Front of Liberia fighters (NPFL). “At RUF headquarters in Buedu,” Ayafor said, “Concerns have occasionally arisen that diamonds said to be held in safekeeping by (Liberian) President (Charles) Taylor might have actually have been sold. On one occasion in 1998, (RUF Chief of Defence Staff) Sam Bockarie went to Monrovia to see Taylor about this concern, and when he returned, he reported that he had seen the diamonds,” (2000). There were also rumors of diamond embezzlement by several top RUF leaders (Ayafor, et al 2000). In 1999, Sam Bockarie, who in 1997 was then a RUF ‘Battle Group Commander,’ complained to Chairman of RUF Foday Sankoh that in 1997, a RUF ‘Battle Group Commander Dennis Mingo had sold a diamond to a Lebanese businessman. A portion of the proceeds were to have gone to the Armed Forces Revolutionary Council in Sierra Leone, while Le 9 million was to be given to RUF. Bockarie claimed that Mingo embezzled the money (Ayafor, et al, 2000). Not to be outdone, Dennis Mingo wrote to Foday Sankoh from Liberia in October 1999, warning Sankoh that Bockarie could not be trusted and that Sankoh’s life was in danger. Mingo claimed that Bockarie was squandering funds from diamond sales and that Bockarie had bought a house in Liberia and in France, (Ayafor et al, 2000). Finally, there is an interesting connection where “Many prominent exporters from Sierra Leone are also exporters of diamonds from the Gambia, a country that produces no diamonds at all,” (Ayafor et al, 2000). Belgium imports of Gambian rough diamonds average over $100 million per annum between 1996 and 1999 (Ayafor et al, 2000).

Mining and smuggling of the diamonds is only one part of the process in examining conflict diamonds. Once the diamonds have been dug up and smuggled out by rebel organizations, they are used as currency to purchase weapons for continued military operations against the African governments. In other words, diamonds have become an alternative source of currency in rebel financing. Fowler cited that UNITA used diamonds in three unique ways. First is UNITA’s ability to sell rough diamonds for cash or weapons. Second is that diamonds are used by UNITA to buy friendships or maintain external support. Finally, rough diamonds are used as a means of stockpiling wealth for UNITA (Fowler, 2000). Because of their small size, high value, easy marketability, indestructibility and the general availability to UNITA, diamond stocks are preferred for operational needs rather than utilizing cash or bank accounts (Fowler, 2000). The physical demands of storing, transporting, and protecting large sums of cash—perhaps hundreds of millions of dollars worth—is unwieldy to a rebel organization which requires mobility for conducting operations (Fowler, 2000). Fowler also cited that “There is also ample evidence regarding Savimbi’s clear reluctance to deposit UNITA funds in banks, following the imposition of international financial sanctions against UNITA in 1998,” (2000). Over a 6-year period during the 1990s, UNITA was estimated to have generated $3.7 billion in sales of smuggled diamonds (Conflict Diamonds: Possibilities for Identification, Certification, and Control, 2000). The success of UNITA’s smuggling and financing operations has caused other revolutionary movements to institute their own diamond smuggling business. In Sierra Leone, the Revolutionary United Front (RUF) has mined an estimated $25 to $125 million in diamonds per annum (Ayafor, Bodian, Peleman, Sandhu, and Smillie, 2000).

The link between conflict diamonds and weapons begins in 1992, when UNITA leader Jonas Savimbi started to build a vast smuggling network to sell the alluvial diamonds from the territory that UNITA had controlled in its brush war with the Angolan government (Soggott, 2002). The Angolan civil war had started in 1975, when the Popular Movement for the Liberation of Angola (MPLA) had seized power in Angola with strong military backing from the Soviet Union and Cuba (Hawthorne, 2000). MPLA’s main political rival, UNITA, immediately began a guerrilla war against the Luanda government. UNITA received its own military aid from the United States and South Africa (Hawthorne, 2000). In short, Angola became another Cold War conflict between the superpowers in the 1970s and 80s. When the Cold War ended, UNITA’s source of military financing dried up, and Savimbi had to develop a new source of financing for his organization. By 1993, Savimbi was selling diamonds to a South African company De Decker Diamonds, which then turned around and sold the diamonds to De Beers (Soggott, 2002). Robert Fowler had documented the relationship between UNITA and De Decker Diamonds. Fowler learned that from 1993 to 1994, a South African arms dealer named Ronnie De Decker procured much of UNITA’s military equipment. This relationship between Ronnie De Decker and UNITA is based of two components. The first is that Ronnie De Decker could provide weapons to UNITA. The second part is the payment of the weapons with diamonds. While Ronnie De Decker could procure the weapons, his brother Joe De Decker operated De Decker Diamonds in South Africa. More importantly, Joe De Decker was at one time a De Beers site holder, who would purchase supplies rough diamonds for De Beers for cutting and polishing (Fowler, 2000). The weapons that Ronnie De Decker sold to UNITA mainly came from Eastern Europe and included mortar bombs, anti-tank weapons, anti-aircraft weapons, grenades, various types of ammunition, and a number of small arms and light weapons (Fowler, 2000). UNITA also utilized Zaire both as a base for stockpiling weapons, and purchasing weapons with Zairian end-user certificates. End-user certificates provided a legal means by which arms brokers, working for UNITA, could obtain the weapons. Zaire’s President Mobutu “Provided Savimbi with the Zairian end-user certificates, and in exchange, Savimbi gave Mobutu diamonds and cash. Savimbi passed the end-user certificates to Marcelo Moises Dachala (known as “Karrica”) who served as UNITA’s representative in Zaire. Karrica in turn would provide the end-user certificates to (Lebanese arms merchant Imad) Kabir, who then used the certificates to purchase the weapons that UNITA required. Weapons came into Kinshasa or Gbadolite directly from their country of origin, often on aircraft owned by a South African national of Belgian origin named Jacques “Kiki” Lemaire,” (Fowler, 2000). Fowler also cited an arrangement between UNITA and Rwanda where Savimbi provided UNITA anti-aircraft crews (SAM 16) to aid Rwandan backed rebels in the Democratic Republic of Congo. Rwanda responded by allowing UNITA to operate freely in Kigali in arranging diamond sales and meetings with arms dealers, with some dealers also supplying Rwanda with weapons (Fowler, 2000). Another connection included Togo. Savimbi wanted to have Togo play a more active role in supporting UNITA. As a token of appreciation, Savimbi gave Togo’s President Eyadema a “passport sized” packet of diamonds in 1993. A working relationship was developed between UNITA and Togo where Togo would keep about 20% share of arms and military equipment that was imported for UNITA, with Eyadema deciding in each case whether Togo would take its share in the equipment, or in cash (Fowler, 2000). At this moment, there are no accurate statistics on how much UNITA has spent in weapons procurement.

In Sierra Leone, the Revolutionary United Front initiated its war against the state in 1991. RUF diamond mining was done on a sporadic and individual basis until 1995, when RUF took control of the diamond fields in the Kono District. When RUF chairman Foday Sankoh was imprisoned in Nigeria in 1997, the diamond areas of Kono and Tongo fields became a primary military focus for RUF, (Ayafor et al, 2000). The link between diamonds and weapons was not as clearly established with RUF as it was with UNITA. However, there was a connection where RUF smuggled diamonds to Liberia, and in exchange, Liberia purchased weapons abroad, then shipped them by air into the country. The weapons were then either delivered by helicopter, flown from Liberian bases to RUF bases, or they were delivered to RUF via truck (Ayafor et al, 2000). This connection was developed through a personal relationship between Liberian President Charles Taylor and RUF chairman Foday Sankoh. This relationship between Taylor and Sankoh was cemented with three specific events. The first was that both men were involved in training activities in Libya around 1990. The second event was that Taylor and Sankoh combined their efforts to allow Blaise Campaore to seize power in Burkina Faso. Finally Sankoh provided assistance in Taylor’s struggle as head of the National Patriotic Front of Liberia to take power in Liberia in the early 1990s (Ayafor et al, 2000). In fact, President Taylor told the United Nations Panel of Experts on Sierra Leone Diamonds and Arms that he was a close friend of Foday Sankoh. However, Taylor denied that he or his government had provided any “training to RUF, any weapons or related material, any Liberian facilities or territory for staging attacks, or a safe haven,” (Ayafor et al, 2000).

The general link in trading diamonds for weapons between Liberia and RUF are centered on the relationships between President Taylor and and RUF chairman Sankoh. But the details that specify how the weapons were actually traded revolved around the relationships between Taylor and his friends and business associates. Fred Rindel, a retired South African Defense Force officer and a former Defense Attaché to the United States, was contracted as a security consultant by Taylor in September 1998. Rindel’s job was to convert Taylor’s former rebel militia into a professional anti-terrorism unit, comprised of Liberian soldiers, and foreigners from Sierra Leone, Burkina Faso, Niger, and Gambia, (Ayafor et al, 2000). But Rindel was also the owner of Dodson Aviation Maintenance and Spare Parts, which had flown weapons to Robertsfield, Liberia, in September of 1998 (Ayafor et al, 2000). Robertsfield was one of the airports where weapons were flown into Liberia, then shipped to RUF transfer points. When Dodson Aviation was closed down in December 1998, several of its aircraft were then leased and operated by a company named Greater Holdings, located in Liberia. Greater Holdings had gold and diamond concessions in Liberia (Ayafor, et al, 2000). Rindel was also involved in a diamond project with the son of President Taylor, Charles Taylor Jr. Rindel had included references to De Decker Diamonds on his business card (Ayafor et al, 2000). As noted above, De Decker Diamonds was involved in exchanging diamonds for weapons with UNITA. Rindel was also contracted as a consultant for a mineral and geological survey, for which he acquired gold and mineral rights for two concessions in the Mano and Nimba areas of Liberia for a company called Bermuda Holding Corporation, of which President Charles Taylor held some interests in (Ayafor et al, 2000). Another relationship between Taylor and RUF is a wealthy Lebanese businessman named Talal El-Ndine. El-Ndine was Charles Taylor’s paymaster. He personally paid Liberian couriers who brought RUF diamonds out of Sierra Leone. Arms brokers and shippers negotiated their payments to his office in Monrovia. He coordinated with foreign businessmen and investors who wished to cooperate with the Taylor government in legitimate and illegitimate business dealings. Finally, El-Ndine paid the pilots and crews of aircraft used in clandestine shipments in or out of Liberia (Ayafor et al, 2000). Another close confidant to Charles Taylor was an Israeli businessman named Leonid Minin. Minin had a history of involvement in criminal activities, including trafficking stolen works of art, East European organized crime, arms trafficking and money laundering (Ayafor et al, 2000). Minin owned and operated a BAC-111 aircraft, which had been involved in shipping 68 tons of weapons from the Ukraine to Burkina Faso, and then sent to Liberia (Ayafor et al, 2000). Inventories of these weapons included 715 boxes of weapons and cartridges, 408 boxes of cartridge powder, anti-tank weapons, surface-to-air missiles, and rocket-propelled grenades and their launchers (Ayafor et al, 2000). A manager of a hotel where arms trafficking pilots stayed, named Gus Van Kouwenhoven, was responsible for the logistical aspects of the arms deal. Van Kouwenhoven had an interest in a Malaysian timber project in Liberia, which allowed him to organize the transfer of weapons from Monrovia and into Sierra Leone. Roads built for timber extraction were also used for weapons shipment. Van Kouwenhoven was also a close confident to Charles Taylor (Ayafor et al, 2000). Emmanuel Shaw was the former Liberian finance minister, and owned a number of facilities at Robertsfield, including all the hangers (Ayafor et al, 2000). An Israeli businessman named Simon Rosenblum was also close to President Taylor. Rosenblum had logging and road construction interests in Liberia, and his trucks had been used to carry weapons from Robertsfield to the Sierra Leone border (Ayafor et al, 2000).

The link of trading guns and diamonds between Liberia and Sierra Leone started with the personal relationship between Liberian President Charles Taylor and RUF chairman Foday Sankoh. But Taylor did not get personally involved with helping his friend Sankoh. Instead, he looked the other way, while his closest advisors and friends established the logistical connections within the smuggling business. This provided Taylor with the best of both worlds--denying that, as head of the Liberian government, the country is not involved in aiding RUF, while at the same time providing an environment where his close friends could profit in providing military aid to Sankoh and RUF. It is estimated that Liberian President Charles Taylor had made “more than $400 million per year from the war in the years between 1992 and 1996,” (Berdal and Malone, pg. 5). While most of this $400 million may not have been made specifically through diamond smuggling with Sierra Leone, it does show that Charles Taylor may have used Liberia to benefit in his own economic self-interest. And diamond smuggling was certainly within Charles Taylor’s economic self-interest.

One interesting link that had been uncovered was the possibility that Charles Taylor may have hosted Al-Qaida operatives in his country for the purpose of allowing Al-Qaida to sell diamonds for weapons. Farah reported that Charles Taylor received a $1 million payment for hosting Al-Qaida operatives in his country for at least two months after the September 11 attacks on the World Trade Center and the Pentagon, (Farah, 2002). A year long European investigation of Al-Qaida’s financing had uncovered three individuals who may have been conduits to Al-Qaida: Aziz Nassour, a Lebanese diamond merchant, his cousin Samih Osailly, and a Senegalese mercenary Ibrahim Bah, who has also trafficked in guns and diamonds (Farah, 2002). Belgian investigators reported that a small diamond importing company, believed to be owned by Osailly, enjoyed a sudden surge of business and turned over $1 billion a year before Sept. 11, (Farah, 2002). Belgian investigators also noted that $20 million was withdrawn from an ASA Diam account at Artesia bank, which may have been used in purchasing diamonds (Farah, 2002). Investigators believed that Al-Qaida was moving its assets out of the banking system and into commodities. European and U.S. officials had also found evidence that Nassour and Osailly were trying to buy surface-to-air missiles from the Nicaraguan army and a Bulgarian company, (Farah, 2002). Farah reported that Al-Qaida operatives “moved between a protected area in Liberia and the presidential compound in neighboring Burkina Faso,” (2002). Charles Taylor and Burkina Faso President Blaise Campaore both denied the charges, (Farah, 2002).

So why are diamonds so attractive for smuggling? Both Fowler and Goreux noted that diamond’s small size, high value and ease of transport made them attractive to smuggle. The artisanal mining process of alluvial diamonds by UNITA and RUF provided a cheap, easy and steady supply of resources, so as long as the rebels could maintain control of the territory that contained the alluvial deposits. Once government forces took control of the deposits away from UNITA and RUF, the financing for their military operations was also removed. So it was in UNITA’s and RUF’s economic self-interest to exploit the diamonds for as long as they can since they would reap all the benefits in selling the diamonds, while they bore almost no costs associated with the smuggling of diamonds. Michael Ross reported a strong association between civil wars and diamonds—specifically alluvial diamonds (2005). He cited a number of factors to base this association. First is the resources ‘lootability,’ or ease at which the resource can be extracted and transported by individuals or small teams. Conflict diamonds are easily extracted by rebel organizations. Oil, gas, and kimberlite diamonds are not lootable. A resource is ‘obstructable’ if its transportation can be easily blocked by small numbers of individuals or groups with few weapons. Ross said that resources with a high value-to-weight ratio, such as diamonds, can be transported by air and thus are difficult to obstruct. Whereas, resources with a low value-to-weight ratio--such as oil--are easily obstructable (Ross, 2005). Ross also stated that the more lootable a resource is, the more likely the resource will benefit a rebel group. The more unlootable a resource is, the more likely it will benefit the government (2005). He finds it especially notable that Angola has both lootable and unlootable resources, where the government has continuously controlled the unlootable resources of oil while the rebels have gained some control of the lootable resources of diamonds (Ross, 2005). Michael Ross also noted that the more lootable the resource is, the more likely it is to prolong the conflict. He claimed that when the lootable resources flows to the rebels, they are more likely to prolong a conflict since the rebels are typically the weaker party. Without the funding from lootable resources, the rebels would be forced to negotiate a settlement, or be extinguished (Ross, 2005). In the Angolan conflict with UNITA, the civil war at first became a superpower conflict where the government was supported by the Soviet Union, and UNITA was supported by the United States. After the Cold War winded down, the superpower conflict was diminished—as was UNITA’s funding. Conflict diamonds provided a new means to the support for UNITAs operations at the end of the Cold War.

But the issue of conflict diamonds requires more than just the supply of diamonds. It also requires a market demand for those diamonds. As Cook had stated, $7.885 billion of rough diamonds were produced in 2001 (2003). In 2000, a total of $9 billion of rough diamonds had come to the global market, which $5.67 billion were sold by De Beers (Cook, 2003). Goreux reported that in 1999, a total of $7.3 million in rough diamonds were purchased globally, which translated into a worldwide consumption of $56 billion in diamond jewelry (2001). Goreux continues by estimating that 41 percent of the world diamond production valued at the mines, originates from Botswana, South Africa, and Namibia, of which De Beers plays the dominant force (2001). A further 33% of diamond production comes from Russia, Australia, and Canada (Goreux, 2001). These six countries constituted 74 percent of world production (Goreux, 2001). Much of the mining done in these countries utilizes the kimberlitic process (Goreux, 2001). The remaining 26% of world production comes from ten countries in western and central Africa, and a few countries in Asia and Latin America (Goreux). It is these countries that utilize the alluvial mining process (Goreux, 2001). The sheer size and volume of the world diamond market provides an incredible incentive for those individuals and organizations to exploit whatever diamond mining they can in conflicted regions. A second problem with the diamond market is the failure of industry self-regulation. A diamond expert can generally examine a particular stone, and identify its country of origin. The problem arises where diamonds from different geographic regions are mixed together, and then imported into Belgium, classified as mixed goods. This renders the identification of diamonds impossible, since a particular parcel may contain stones from Angola, Namibia, South Africa, Botswana, or even Liberia (Conflict Diamonds: Possibilities for the Identification, Certification, and Control of Diamonds, 2000). Even more confusing is an example where some Russian stones are exported to Liberia, and then classified as Liberian diamonds when sent to Belgium. This is done to avoid a 0.3 percent import tax on Russian diamonds when entering Belgium (Goreux, 2001). Diamonds mixed from various countries have a greater chance of containing conflict diamonds. Diamonds that are extracted specifically from De Beers’s mines, Canada, Russia, or Australia have not had this problem of mixing with conflict diamonds (Goreux, 2001). Another problem is simply the number of people employed in the diamond industry worldwide. In Belgium, there are over 1,500 companies employing approximately 60 De Beers’s sightholders (Conflict Diamonds: Possibilities for the Identification, Certification, and Control of Diamonds, 2000). In 1998, the total workforce in Belgium was estimated to be at 3,000 (Conflict Diamonds: Possibilities for the Identification, 2001). Israel employs around 2,000-4,000 in the diamond industry, exporting more than $4.2 billion to the United States. This equates to approximately 46.5% of U.S. import market (Conflict Diamonds: Possibilities for the Identification, 2000). Thailand employs nearly 5,000 in the diamond industry, with three De Beers’s sightholders, and is ranked as the world’s ninth largest diamond exporter (Conflict Diamonds: Possibilities for the Identification, 2000). The United States employs 1,800 licensed dealers with 25 De Beers’s sightholders, with 100 manufacturers employing about 600 cutters (Conflict Diamonds: Possibilities for the Identification, 2000). Finally, India dominates the polished diamond market with exports worth $6 billion and about 50% by value of the world market share of polished diamonds. Indian diamond industry provides 700,000 jobs—with 95% of all employed in cutting diamonds working in India (Conflict Diamonds: Possibilities for the Identification, Certification and Control of Diamonds, 2000). With this large number of people employed in multiple countries, and each country developing its own trade, import and export regulations, it becomes almost impossible for the industry to track the source of conflict diamonds—especially if the conflict diamonds are mixed together with other stones in Africa. Because of the extensive trading in diamonds by UNITA and RUF, the United Nations imposed sanctions on diamond trading with UNITA in 1998, then later expanded the sanctions to Liberia and RUF-controlled territories in Sierra Leone (Soggot, 2002).

In 2002, South Africa launched the Kimberly Process. This process was to provide an international framework, which would identify and record the origin of the world’s diamonds under the supervision of the diamond industry’s World Diamond Council (Soggot, 2002). In effect, the diamond industry would police itself in trafficking conflict diamonds by issuing certificates of origin to parcels, which would identified where the stones came from. Yet Goreux reported that in Angola, “a certificate of origin could be bought for five dollars and that UNITA soldiers routinely traded stones with government soldiers. A parcel purchased from the Ministry of Mines could, therefore, be contaminated with conflict diamonds,” (2001). Another flaw of the Kimberly Process was that different nations would have different regulations concerning the importation and exportation of diamonds. In Belgium, customs officials and diamond experts open and inspect each parcel of diamonds entering or leaving Belgium under the supervision of an officer of the Ministry of Economic Affairs. However in India, diamonds are imported, duty-free and no certificates of origin are required (Conflict Diamonds: Possibilities for Identification, Certification, and Control of Diamonds, 2000). Israel requires that standard documentation should accompany imports of diamonds, with the exception of Angola where a certificate of origin is required. All imported diamond shipments into Israel are also opened and inspected by diamond evaluators. Yet in the United States, imported diamonds are free of duty, and no special documentation or procedures are required. Diamond imports into the United States are regulated according to basic Customs procedures (Conflict Diamonds: Possibilities for the Identification, Certification, and Control of Diamonds, 2000). Soggot reported that the General Accounting Office criticized the Kimberly Process as being ‘inherently flawed,” (2002). The GAO said that, “The period after rough diamonds enter the first foreign port until the final point of sale is covered by a system of voluntary industry participation and self-regulated monitoring and enforcement,” (Soggot, 2002). With certificates being forged, and countries developing their own import/export regulations on diamonds, problems where conflict diamonds can easily enter the market will still continue to haunt the Kimberly Process.

The civil wars in Angola, Sierra Leone, and Liberia have quickly winded down to an end. On February 22, 2002, government forces killed UNITA leader Jonas Savimbi in a firefight in Angola (An End to Angola’s 27 Years of War, 2002). Savimbi’s death had taken the fight out of UNITA. By March 31, both the Angolan government and UNITA had signed a cease-fire agreement to halt the civil war. By November, 2002, both sides had developed agreements to convert UNITA into a political opposition party in Angolan politics, and to promote reconciliation and reconstruction of the country (Former Angolan Rebel Group Offers to Back Government, 2002). The Angolan civil war has killed an estimated 500,000 people, and has displaced millions of Angolans (An End to Angola’s 27 Years of War, 2002). In Sierra Leone, President Kabbah, who was elected in 1996 and then deposed by a military junta, was reinstated to his post after the intervention of Nigerian ECOMOG forces in 1998 (Polity IV Country Report: Sierra Leone, 2005). In 1999, the United Nations sent 12,000 peacekeepers to the country. Near the end of 2000, RUF had disintegrated after the capture of Foday Sankoh (Polity IV Country Report 2003: Sierra Leone, 2005). The combination of increasing government military successes against the rebels and the UN peacekeeping forces had forced disarmament of RUF-controlled regions. By the end of 2001, much of Sierra Leone was under government control (Polity IV Country Report 2003: Sierra Leone). Foday Sankoh died in prison of natural causes on July 29, 2003 (Foday Sankoh, Sierra Leone Rebel Leader, Dies. 2003). In Liberia, ever since Charles Taylor gained power from his own civil war in 1997, two major opposition groups had been attempting to oust Taylor from power. These two opposition groups were the Liberian United for Reconciliation and Democracy (LURD) and the Movement for Democracy in Liberia (MODEL), (Liberia – Second Civil War – 1997-2003, 2000-2005). LURD and MODEL had controlled from 60-80 percent of the country when they initiated the war against Taylor (Liberia – Second Civil War – 1997-2003, 2000-2005). The situation in Liberia deteriorated until from February 8 to September 14, 2002, Taylor imposed a state of emergency on the country. After continuing to deny Liberia’s involvement in Sierra Leone, Taylor finally admitted that his government had aided and supported RUF in their civil war in Sierra Leone on November 12, 2002, (Gongloe, 2002). By June 2003, LURD and MODEL forces had cut off Liberia’s capital Monrovia. The United Nations indicted Taylor for war crimes and issued an international warrant for his arrest on June 4, 2003. On July 6, 2003, President Charles Taylor stepped down from office and accepted asylum to Nigeria (Gongloe, 2002). In 2002, the United Nations lifted the ban on selling diamonds in Angola (Angola’s Former Rebels Glad to See UN Sanctions Lifted, 2002).

While the civil wars have ended, the smuggling of conflict diamonds still exists. The networking organizations, the knowledge and contacts still remain. UNITA and RUF leaders have transferred their positions of power in a rebel organization to positions of power as political party members, or positions in government. Instead of smuggling diamonds for weapons, former rebel leaders can smuggle diamonds to enrich themselves or to use diamonds to buy friendships and contacts within the government. Within the alluvial mines, the artisan mining process still exists in Angola and the Democratic Republic of Congo where people work for sub-standard wages. The guy with the gun still gets the diamonds. The governments of Angola or DRC must utilize better trained, equipped and better paid soldiers to maintain control of the alluvial mines and stop any forms of corruption. If the governments cannot control the mines, then they must develop a business relationship with the large mining companies to mine the alluvial diamonds. The mining companies have the knowledge, resources, and the economies of scale to secure, control and extract the diamonds in an efficient manner. They can readily hire the artisan miners to mine the diamonds for wages, and perhaps even for a percentage of profit from the diamonds they extract. And the government can also receive a steady income from the diamonds mined from taxes—the current artisan mining does not allow the government to collect revenue from taxation of the miners. In Sierra Leone, the feudalistic process still remains, maintaining power of the mining process with the tribal chiefs, who control the land, and the dealers, who control the supplies. Mining companies contracted to mine the deposits would neutralize the power of the dealers and chiefs, mining the diamonds in an efficient manner while paying the miners wages for their labors. This would also eliminate the continued accumulation of debt of the artisan miners to the dealers, while wages would allow the artisan miners to pay down their debts. If market pricing and knowledge could be brought efficiently into the African countries, then any diamonds the artisan miners could gain from their own labors would be sold to the best possible prices that the artisan miners could seek out, rather than simply giving all the diamonds to the dealers to sell on their behalf. Another problem is that the borders between the African countries are still porous, allowing for the ease of transferring diamonds between countries, and moving the diamonds out to the world market. Even the Kimberly process of controlling conflict diamonds is flawed. Industry self-regulation allows those who operate outside of the industry to profit with impunity. There are no sanctions, or intra-government enforcement in regulating the trade of diamonds or punishing individuals, companies or governments who break the international laws with impunity. Diamond traders in Africa can still mix conflict stones with other stones from South Africa or Botswana, and then sell them to the Indian market where no certificates are required. With today’s advances in desktop publishing and printing, certificates can still easily be forged, allowing the diamonds to move to the different trading centers. Allowing mining companies to mine the alluvial diamonds would provide the control of transferring the diamonds to the market in a legal manner. The diamond industry must also work with governments, law enforcement agencies, and possibly the United Nations to address the flaws of the Kimberly process and develop new regulations to reduce the amount of smuggling, or to channel the smuggling efforts to an improved legal market specifically designed for the conflict diamonds, where traders who wish to specifically buy conflict diamonds may choose to do so in this market. Another alternative may be to scrap the Kimberly process and allow the entire market to decide whether to buy and sell conflict diamonds according to the demands of the market.

For almost 30 years, the civil wars have raged through the African nations, killing and displacing millions of people. The Cold War processes of the United States aiding one faction, and the Soviet Union aiding the other funded much of these wars. It was at the end of the Cold War, where the power and wealth of diamonds became available as the means for financing these wars by rebel organizations. Yet the story of the conflict diamonds simply doesn’t end there. For conflict diamonds also tells the stories of who the leaders were both in the rebel organizations of UNITA’s Jonas Savimbi, and RUF’s Foday Sankoh, and of the governments of Liberia’s Charles Taylor, Togo’s Eyadema, and Burkina Faso’s President Blaise Campaore. It was the personal relationships between these leaders and conflict diamonds were the glue to hold these relationships together. It is ironic that once Savimbi, Sankoh, and Taylor were removed from their positions of power within their organizations that the civil wars and conflict diamonds have died out. Yet positions of power in governments still remain in Africa. Diamonds are still mined in the alluvial plains. It is only a matter of time when the glitter of diamonds wealth and power will cement new relationships with Africa’s new leaders. Hopefully the cement of these new relationships will not be stained red with the “blood diamonds” of conflict.


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