Glasnost for the gem industry

To fight smuggling of nuclear materials and other weapons, there's a global pact for strict safeguards. But a smaller item may soon get the same scrutiny and special handling: "conflict diamonds."

Working under a United Nations mandate, a coalition of diamond-industry experts and envoys from 34 nations agreed last week in Moscow on the basics of a far-reaching certification scheme to control this illicit trade in gems that fuel war in Africa.

The gathering, part of the so-called Kimberley Process, brought participants within range of their fall deadline to present a plan to the UN. If successful, they will produce the first comprehensive international safeguard system to fight the conflict-diamond trade. While it is seen as good for business, the plan will also require an unaccustomed openness to outside scrutiny.

The aim is to convince consumers "that the diamonds they buy for their loved ones continue to be symbols of purity, symbols of love," says Nchakha Moloi, special adviser to South Africa's mine and energy ministry, who chaired the meeting.

Smuggling is a common problem in the diamond industry - a small fortune can be tucked into a shirt pocket - but the Kimberley Process is specifically concerned with diamonds that are sold to fund weapons purchases.

The industry estimates that these "blood diamonds" make up just 4 percent of the rough stones that feed a $7 billion annual market. Independent groups say the figure is as high as 15 percent. Either way, these gems - and the negative publicity surrounding their role in fueling the slow-burn wars in Angola, Sierra Leone, and the Democratic Republic of Congo - have sparked industry fears of a consumer boycott.

Rebel groups in those countries mine their own gems in territory they control, financing their rebellions by selling the uncut stones. For diamond merchants, these gems often come cheaper than those on the legal market.

Current rules only require that diamonds have a certificate showing their last country of export, not their source. This warps statistics, such that some 92 percent of the rough diamonds imported to Israel are shown as coming from England, Belgium, and Switzerland, none of which produce diamonds.

New "certificates of legitimacy" will prove the legal source of stones and convince buyers that conflict diamonds aren't "mixed in," says Ian Smillie, an Ottawa-based diamond expert who co-wrote a UN report on Sierra Leone conflict diamonds last year.

"We got a basic agreement ... that you must have good control from the mine to first export, and then afterwards," he says of the Moscow meeting. "There is a lot of pressure for something to happen, particularly from the industry in the US, where the bulk of the consumers are." But, he adds: "What [diamond players] really want is not a system, but to get the critics ... off their backs."

Those critics charge that Kimberley measures still won't be enough, citing corruption, the frequent abuse of certificates used in the legal-weapons trade, and the simple lure of profits.

"The diamond people know the current system will have no effect on conflict diamonds, but it's such a good publicity deal," says Chris Dietrich, a diamond industry analyst at International Peace Information Services, an Antwerp-based research group. "If they were serious, they'd offer transparency in their business practices. Where do they buy their diamonds? Every importing and exporting country should really break it down by company name. Then we can also see whose name comes up on the Interpol list.... That's the only way."

The mounting public pressure poses a dilemma for the diamond industry. It wants to protect itself from conflict diamonds, which undermine prices and tarnish the business. But the Kimberley Process proposals require an unprecedented level of transparency that runs counter to the traditionally secretive diamond business.

At the Moscow talks, "references were made all the time to money laundering and weapons-control schemes, and to looking for ways to close loopholes," says Alex Yearsley, who monitors the diamond industry for the London-based group Global Witness. Delegates were told the proposals are "tougher than that for nuclear material." "[These nations] are 100 percent committed," Mr. Yearsley says.

The Kimberley Process began last year to weed all conflict diamonds out of the market by creating an airtight control mechanism.

"When we talk of monitoring, we used experience compiled with arms and nuclear material," says Ivan Ivanov, Russia's deputy foreign minister and co-chair of the talks. Though details have not been made public, Mr. Ivanov describes a two-part control system. Obligatory and uniform documents will follow diamond parcels - like a passport - from the mine to the cutting table. A diamond parcel will have its own certificate, along with a guarantee coupon "that is dispatched together with the diamonds, just like with arms," Mr. Ivanov says. "When the goods are received, the guarantee coupon is sent back. It means that the deal was legal and that the diamonds have been received."

The key to success may be universal acceptance. "If each country has a closed system to itself, it will be no good," says Zvi Shur, general manager of the Israel Diamond Manufacturer's Association in Ramat Gan. "We need to have one system that will be transparent to everybody."

Ironically, the driving force for industry chiefs in the Kimberley Process is the same one that drives illicit dealers themselves: profit. "If prices drop significantly even once, the faith in this product will be dented forever," says Sergei Oulin, vice president of Alrosa, Russia's state diamond company, and vice chair of the World Diamond Council.

"Yes, we are worried about the noise around blood diamonds, because it creates a negative image and brings into question the purity of diamonds," Mr. Oulin says. "It's a serious threat."

(c) Copyright 2001. The Christian Science Monitor