SAR, Vol 15 No 1, December 1999
DIAMONDS ARE A WAR'S BEST FRIEND
BY PATRICK ALLEY WITH ALEX YEARSLEY
Patrick Alley and Alex Yearsley work for Global Witness, an NGO focussing on the link between environment and human rights. Their web page is at www.oneworld.org/globalwitness.
Since the end of the Cold War, the conflict in Angola has developed into a bloody political and ethnic war funded by diamonds and oil, resulting in over half a million deaths. The fourth richest country in the world in terms of mineral resources, Angola is also the fourth poorest in terms of standard of living. Angola's natural resources, which should bring it relative prosperity, have been at the centre of the country's devastation. This article examines the role of diamonds in the Angolan conflict in the 1990s. It focuses on UNITA's involvement in the diamond trade and the activities of transnational diamond companies, particularly in light of UN sanctions.
Between 1992 and 1998, UNITA generated up to $3.7 billion from diamonds mined in areas under their control. These diamonds were an integral part of the peace process which began with the signing of the Lusaka Protocol in 1994. In return for the handover of territory, UNITA demanded guaranteed revenue from diamonds. Probably with justification, UNITA perceived that losing control of diamond bearing territory would leave them vulnerable to an MPLA double cross. Indeed, in 1997 when UNITA was negotiating the handover of territory to the government, Maurice Templesman, boss of diamond trader Lazare Kaplan, and a close confidante of several US Presidents and National Security Advisors, tried to broker a deal between UNITA and the government which would, in effect, have seen UNITA converted into a diamond mining and marketing company. Jonas Savimbi's distrust of the government was probably one of many factors that prevented the Templesman deal going through. However, UNITA was offered control of some mines and entered into joint ventures with De Beers amongst others. UNITA undoubtedly used this period to rearm in preparation for renewed conflict.
When one examines the wealth of Angola's diamond resources it is not hard to understand their pivotal role in the conflict. Only 5% to 10% of the world's diamonds are gem quality whilst 70% to 80% of Angola's production fall into this category. On the nine colour scale used to grade diamond values Angola's diamonds usually fall within the top three. The diamonds are found both in easily exploitable alluvial deposits and in volcanic kimberlite pipes, which require highly mechanised extraction techniques and substantial investment. The Angolan government attempts to administer the industry through its parastatal, Endiama, which is responsible for awarding diamond concessions (and is actively involved in diamond mining). It also issues licenses to buyers permitting them to buy "unofficial" production in the capital, Luanda, and in the provinces. Unofficial production is that which is outside of government control. It comprises UNITA's total production as well as that which is in the hands of a variety of freelance operators, including several key generals in the Angolan Army (FAA). Four key companies operate in Angola with licences from Endiama: Codiam (a joint venture between De Beers and Steinmetz), Oderbrecht from Brazil and the Russian Alrosa.
At the time the Lusaka Protocol was signed, UNITA controlled over 70% of Angolan territory including virtually all the diamond producing areas, and 60 to 70% of diamond production. Between 1992-1994, they controlled 90% of Angolan diamond exports. Thus, Angola's unofficial diamond production comprised the vast bulk of the trade. It is the purchase of this unofficial production by the diamond centres in Belgium, Israel and London on the "outside market" that provides the core funding of UNITA's war effort.
UNITA's diamonds are mined from alluvial deposits which do not require such a high degree of mechanisation as mining kimberlite pipes, relying more on the labour of vast quantities of illegal peasant miners, the garimpeiros. In early 1994 25,000 to 30,000 ZaÔrian garimpeiros worked under harsh UNITA control in Cafunfo alone. It is thought that over 100,000 such miners were operating throughout Angola.
UNITA's export routes
Prior to 1997, the majority of UNITA's diamond exports were routed through ZaÔre whose then ruler, President Mobutu, was one of UNITA's prime supporters and sometime arms supplier. The fall of Mobutu saw that country, renamed the Democratic Republic of Congo (DRC), ally itself with the MPLA's Dos Santos - a major setback for UNITA as it lost both its prime supply and export routes.
UNITA was now forced to explore new channels and forge new alliances. It is thought that Rwanda and Uganda, both opposed to President Kabila of the DRC, have become export routes for UNITA gems, and a small quantity certainly pass through Zambia, picking up false Zambian certificates of origin on the way. Given that UNITA possesses significant quantities of recently acquired high power hi-tech weaponry, only discovered when they decisively rebuffed government attacks in late 1998/early 1999, it is apparent that they are still finding a market for substantial quantities of diamonds. However, published export figures from the above countries indicate that the major diamond flows into Antwerp, the world's greatest diamond trading centre, go by other routes, possibly via London and Tel Aviv.
One company and one city are pivotal in the world diamond trade, and actions by these two entities are the key to reducing sales of UNITA gems. Seventy to eighty per cent of the annual world trade in rough diamonds is handled by the British-South African company De Beers and its Central Selling Organisation (CSO), which has a turnover of around 3 billion pounds per year. Because, contrary to popular myth, diamonds are an intrinsically worthless and relatively common commodity, there was a need for the trade to operate within a cartel, and thus the CSO has become one of the most effective and least challenged cartels in the world.
The CSO attempts to buy up as much of the world annual diamond production as possible and regulates how many diamonds are released on the open market, thereby artificially setting and maintaining the prices. The diamond trade relies on the CSO to maintain the value of these "worthless" rocks, even though around 20% of traders exist outside the cartel. The CSO's gems are sold in periodic sales, or "sights" in London, to the less than 200 registered sight-holders, who comprise some of the leading diamond traders. These and other traders depend on De Beers for their livelihoods and, accordingly, ensure that they will only publicise facts that will not compromise De Beers or others within the industry.
During the 1990s, trading in Angola's and, by default, UNITA's diamonds, was not illegal. Despite the fact that this war caused untold suffering within Angola and destabilised the entire region, neither governments nor the diamond industry sought to close down the trade in UNITA's diamonds. Between 1992 and 1998 over 500,000 Angolans died: the country was strewn with over ten million land mines, raising it, with Cambodia, to the top of the league of most mined countries.
Not only did the diamond industry not attempt to close down the trade but it boasted of its success in mopping up Angola's "unofficial" production - a euphemism for UNITA's gems. De Beers' 1992 Chairman's Statement in their annual report stated, "That we have been able to buy some two thirds of the increased supply from Angola is testimony not only to our financial strength but to the infrastructure and experienced personnel we have in place." In 1993 De Beer's report stated that "Demand for rough diamonds from the CSO was extremely strong. ... This followed the measures taken by the CSO in the second half of 1992 to restrict sales while at the same time making substantial purchases of diamonds (mainly Angolan) on the open market." Though the CSO's purchases of Angolan diamonds declined in 1993 and 1994 because of the war, they were on the rise by 1996.
Over half of the world's rough, polished and industrial diamonds pass through the approximately 1600 diamond companies based in Antwerp, where the industry employs over 40,000 people. Over half the world's CSO sight-holders (those who are permitted to buy diamonds from the CSO) are based in Antwerp. The majority of these companies trade in the four diamond bourses (markets) with deals sealed by a handshake. The workings of this business are shrouded in secrecy.
Thus, the European diamond market has been the major market for UNITA's gems and, by default, UNITA's major funder. Unlike De Beers, which has consistently claimed that its business benefits the countries and communities where it operates, individual diamond dealers do not even attempt to excuse their activities. In April 1999, an Antwerp dealer told Global Witness that it was tragic that hundreds of thousands of Angolans had died but that "... we are only trying to make a dollar." He said that individual traders did not bear any responsibility for the problem as, if they did not trade, someone else would. This argument has become the stock answer of virtually every business questioned about dubious practices, the arms trade being a prime example.
Europe is not alone as a market for Angolan gems. Tel Aviv is of increasing importance. The Ukraine has become a relatively recent UNITA supplier, selling its Cold War military hardware to the rebels. How UNITA is paying for these weapons is uncertain, but what is certain is that Ukrainian mercenaries and tanks are operating in Angola on the UNITA side.
On 29th October 1997, the UN Security Council, through resolutions 1127 and 1155, imposed sanctions on UNITA for their failure to adhere to the demands of the Lusaka Protocol. These sanctions restricted the travel of UNITA officials and their families, prohibited supplies to UNITA and closed their worldwide offices. The sanctions did not apply to the trade in UNITA's diamonds because, many believe, the industry effectively lobbied against this possibility. Despite the fact that what was an ethical issue was now endorsed by UN sanctions, the diamond industry, of course operating legally, carried on business as usual; money, UNITA's ultimate lifeline, continued to roll in.
Not until 12th June 1998 did the UN wake up to the fact that without revenue UNITA would not be able to purchase its military and other supplies. Resolution 1173, paragraph (b) stated that "... all States shall take necessary measures: to prohibit the direct or indirect import from Angola to their territory of all diamonds that are not controlled through the Certificate of Origin regime of the [Government of National Unity and Reconciliation,] GURN."
The diamond industry was now mandated to cease its purchase of UNITA diamonds. De Beers have repeatedly stated that they have abided by Resolution 1173, most recently in a letter from their Chairman Nicky Oppenheimer to Global Witness on 21st April 1999: "As you know, De Beers has fully committed itself to support UN resolution 1173." In the same letter he states that "The role that diamonds may be playing in prolonging the civil war and suffering in Angola is indeed a matter of grave concern to De Beers." This concern however was not apparent during the bulk of the 1990s when De Beers' annual reports documented their success in buying up Angolan rough diamonds. As De Beers Managing Director Gary Ralfe said in an interview on the Official Kremlin International News Broadcast dated 21st October 1997, "You are absolutely right to say that in fact it is UNITA that has over the recent few years been responsible for most of the production in Angola ... there is no doubt that we buy many of those diamonds that emanate from the UNITA-held areas in Angola, second hand on the markets of Antwerp and Tel Aviv."
There is undoubtedly a real problem trying to enforce such sanctions, especially in an industry that keeps paperwork to a minimum and regards silence as a norm. However, there is undoubtedly a lot that can be done that is not being done. Global Witness has been told by various Antwerp traders that around four Antwerp based companies specialise in the purchase of UNITA gems - but will not name them. So the knowledge is there but not the will to expose a brother trader. Many regard the problem as an African one, i.e. if the diamonds do not leave Angola then they cannot be purchased in Antwerp; this neatly avoids responsibility and ignores the main economic principle of supply and demand. This view was confirmed by the Managing Director of Antwerp's Higher Diamond Council, Jan De Kesel who said on 11th March 1999 that "I don't think the true problem lies in Antwerp. It lies in Angola and in neighbouring countries."
A key part of the enforcement of the UN sanctions relies on whether diamonds can be positively identified as of Angolan origin. Officially this relies on GURN issued Certificates of Origin (COs) - a system which is far from perfect as GURN paperwork is confused by the use of different stamps, and the CO system does not apply to non Angolan diamonds. Thus, as long as a smuggler can slip diamond parcels into a neighbouring country and pay for a false CO, which are certainly available in Zambia and probably elsewhere, the UN sanctions can no longer be applied.
Furthermore, there is a great debate as to whether the origin of diamonds can be discerned by visual inspection. There is no doubt within the diamond trade, as evidenced by various traders, geologists and personnel within the Harry Oppenheimer Diamond Training School in Johannesburg, amongst others, that a parcel of rough diamonds (anything from ten to thousands of carats) from the same source can absolutely be identified, by colour and size. Only when mixed with diamonds from other areas or after cutting does visual identification become impossible. The majority of diamonds entering Belgium arrive in identifiable (relatively) unmixed parcels. The fact is that there is little incentive to mix them in Africa as this would necessitate taking diamonds legally or illegally across borders: either process costs money in official taxes or under the table payments. Thus, what Antwerp claims is an African problem is in fact a Belgian problem but this is an inconvenient truth. It appears possible that it is those for whom identification would be embarrassing and/or bad for business who declare that such identification is not possible; De Beers is amongst them.
It is clear that the diamond industry and some of the countries who are home to it have a long way to go to address the fact that diamonds fund conflict, and that they have a moral duty to do all they can to prevent the purchase of any gems that fund combatants.
It is disturbing that, presuming their claims are true, the CSO and De Beers only ceased purchasing UNITA diamonds when obliged to by the UN, indicative of the fact that although operating within the law, their often stated concern for the countries in which they work did not prevent them from purchasing "unofficial" gems from Angola during the height of the conflict. Furthermore, presuming that the CSO has ceased purchasing UNITA sourced diamonds, either UNITA is now unable to sell its production or these diamonds are being purchased outside the cartel. If the latter scenario is correct then a downturn in the price of diamonds is to be expected; it will be interesting to see if this actually happens.
Now that sanctions are in place, illustrative of widespread international concern about diamonds' role in the Angolan wars, the diamond industry in London, Antwerp and Tel Aviv either divest themselves of any responsibility for purchasing Angolan gems, stating that it's an African problem, or they put up smoke-screens as to why they cannot identify UNITA sourced diamonds, whilst many privately admit they know exactly who is involved.
It is good that the UN is involved; it is good that many press articles are informing the public that diamonds from Angola and Sierra Leone, amongst others, could be equipping armed factions leading to untold suffering and thousands of deaths, but the problem will only be solved in this or in similar situations when the diamond industry follows the lead of some other industries and undertakes to adopt corporate and socially responsible standards in the conduct of their business. Botswana and Namibia are examples of the positive benefits of a healthy diamond industry, which proves that an ethical approach is possible and profitable. The diamond industry should take the ethical lead and cease purchasing, directly or indirectly, diamonds from combatants, and not wait until the UN or other bodies force them into a corner.
Since this article was written a consumer campaign called Fatal Transactions was launched on October 3rd by four leading European human rights organisations. The campaign is calling on consumers to find out where their diamonds have been mined from. If the retailer cannot provide satisfactory proof, then they should go to someone that can. Failing that they should ask companies such as De Beers to help them with their question. This is not an embargo on diamonds, which would be grossly irresponsible owing to the legitimate economic diamond interests of Botswana, Namibia and South Africa where diamonds are crucial to the country's economies.
Initial reaction has been literally staggering with an announcement by De Beers on the 5th of October that they would embargo the purchase of all Angolan diamonds, not just the UN and EU embargoed diamonds. It remains to be seen how meaningful they are in regards to this statement. It appears that De Beers are finally feeling the heat of consistent and concerted pressure and, as ever, what gets them moving is consumer action. The diamond world is set to enter some very interesting times in the next few months with the national governments of Canada, the United Kingdom and the USA introducing groundbreaking legislation and controls on the diamond industry to ensure that these "conflict diamonds" do not enter the market place and thus fund rebel armies.
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