The New Diamond Con

August 3, 2000

by Edward Jay Epstein

De Beers announced with great fanfare in July that it was abandoning its policy of buying diamonds in African conflict zones, occasioning both applause and predictions of De Beers' demise. But the diamond cartel, while modifying its tactics, has not changed its basic strategy. Almost since its inception at the end of the 19th century, the diamond cartel has had a singular strategy: stifling, by any means necessary, the flow of gem diamonds from sources not under its ownership or control.

The problem with diamonds isn't their scarcity, but their abundance. They are found not only in geological formations like volcanic pipes that can be fenced off and mined, but also in vast alluvial areas like river beds or beaches, places that can't be restricted. When Europe ruled Africa, the cartel had little problem making arrangements with colonial administrators to police or close down freelance diamond gathering. After African colonies got their independence, the cartel came to terms with dictators like Mobutu Sese Seko, whose police kept out -- and occasionally massacred -- suspected smugglers. Where governments were less cooperative or capable, the cartel commissioned mercenaries to suppress, often by maiming or killing, prospective diamond hunters. At one point in the 1960s, the cartel gave bounties to remnants of the Katanga gendarmerie to hunt down "smugglers" in Angola. It also paid a Lebanese mercenary named Fred Kamil in Sierra Leone to arrange ambushes that would persuade Mandago tribesman to quit the diamond trade. Since these measures didn't fully eliminate the "leakage" to diamond-cutting centers in Belgium, Israel and India, it also acted as a buyer of last resort to keep prices from falling.

But that is history. The cartel now has found an ingenious new mechanism for achieving its ends: the United Nations. After spending months laying the conceptual groundwork in the media, as well as working through the Clinton administration and human-rights communities, it has convinced the U.N. Security Council to impose a global ban on "undocumented" gem diamonds from "conflict zones." Undocumented diamonds are, of course, just those diamonds picked out of river beds that De Beers wants eliminated. The "conflict zones," Angola and Sierra Leone, are the alluvial areas in which De Beers previously depended on paid guns.

Instead of using colonial administrations, dictators or mercenary gangs to stop Africans from gathering and selling stones, the U.N. will use its resources (backed, no doubt, by the cartel's own contingent of lawyers and detectives) to accomplish that task. The cartel managed this favorable outcome by playing on the guilt of the West. The idea that "blood diamonds" were responsible for ferocious civil wars in Africa was too much for altruists and activists in developed nations. Mr. Clinton, meanwhile, saw diamonds as an opportunity to enhance his own standing among these groups. On July 21, he called for "an international conference to consider practical approaches to breaking the link between the illicit trade in diamonds and armed conflict . . ." Mr. Clinton's press release made no secret of the liaison with the diamond cartel, noting that at a May conference in South Africa, the U.S., Britain and Belgium, among others, had agreed with De Beers upon the importance of establishing a global certification scheme for diamonds. Like all persuasive ideas, the concept of blood diamonds is not without a basis in reality. Diamonds, like any resource, can be converted to money. Money can be used to buy arms and ammunition. What the concept neglects, however, is that governments are the principal means by which warriors get funded and armed. Countries such as the Sudan, Ethiopia, Somalia, Rwanda, Burundi and Liberia have managed to sustain ferocious civil wars for years without having or selling diamonds. Even countries rich in diamonds have found alternative ways to finance their warfare: In Angola, Unita rebels were armed by the Central Intelligence Agency, South Africa's intelligence service and Zaire. In the Congo, at least seven African governments are presently intervening in the civil war with arms and troops. A regime backed by the U.N. and U.S. that inhibits the sale of uncertified diamonds, diamonds that in practice come from fields the cartel doesn't control, probably won't stop civil wars, then. It will, however, make it far less costly for De Beers to control the diamond market. Another brilliant coup for the cartel.