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The Institute for Domestic and International Affairs

Social, Humanitarian and Cultural Civil Rights and Diamond Trading in Western Africa Rutgers Model United Nations 16-19 November 2006

Director: Matt Korostoff


Š 2006 Institute for Domestic & International Affairs, Inc. (IDIA) This document is solely for use in preparation for Rutgers Model United Nations 2006. Use for other purposes is not permitted without the express written consent of IDIA. For more information, please write us at idiainfo@idia.net


Introduction _________________________________________________________________ 1 Background _________________________________________________________________ 2 Diamond Industry_________________________________________________________________ 3 The De Beers Group _______________________________________________________________ 5 History_________________________________________________________________________________5 Reform ________________________________________________________________________________7

The Diamond Wars _______________________________________________________________ 8 Angola __________________________________________________________________________ 9 Democratic Republic of Congo (DRC) _______________________________________________ 10 Sierra Leone ____________________________________________________________________ 10 International Terrorism___________________________________________________________ 13

Current Status ______________________________________________________________ 14 The Kimberly Process ____________________________________________________________ 15 The World Diamond Council ______________________________________________________ 17 Unresolved Issues ________________________________________________________________ 19

Key Positions _______________________________________________________________ 21 World Governments ______________________________________________________________ 21 Non-Governmental Organizations (NGOs) ___________________________________________ 22 Industry ________________________________________________________________________ 23

Summary___________________________________________________________________ 24 Discussion Questions _________________________________________________________ 25 Works Cited ________________________________________________________________ 26


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Introduction The United Nations defines conflict diamonds as “rough diamonds which are used by rebel movements to finance their military activities, including attempts to undermine or overthrow legitimate Governments.”1 Since 1991, diamonds have become a major source of funding for rebel groups in Africa, and the inability of the international community to identify and weed out diamonds sold by rebel movements has meant that the Western world, particularly the United States, which accounts for 48 per cent of the retail diamond jewelry market,2 has funded, often unknowingly, many of the worst wars in history. Funding from diamond sales has exacerbated and prolonged conflicts in some areas, while in other areas, the struggle for control of diamond mines has caused conflicts where previously there were none. Some of the worst atrocities of the past fifty years have been committed with weapons and soldiers paid for by these diamonds. The 1990s saw diamond wars on an unprecedented scale and in unprecedented number. The increasing availability of professional grade weapons has made war a somewhat egalitarian enterprise, and the ability to initiate wars has been extended to entire new social classes. As long as rebel groups have access to money, they can wage a technologically advanced and coordinated war. In West Africa, diamonds provide the ideal source of funding. If the markets for conflict diamonds can be eliminated, it will be a major blow to warring factions in the region. There has been a flurry of activity in both the diamond industry and the world community since the mid-1990s, largely because the end of the Cold War has allowed the United Nations and individual Member States to focus on other areas of the world, instead of the impending nuclear conflict between the United States and the Soviet Union. Major reforms have been instituted that have drastically reshaped the diamond trade at every level, however, many facets of the diamond trade remain untouched. Recent events show that the best way to eliminate conflict diamonds is to 1

United Nations General Assembly Resolution 55/56, December 1, 2000 (A/Res/55/56). Nicholas Cook, “Diamonds and Conflict: Policy Proposals and Background,” in Diamonds and Conflict: Problems and Solutions, ed. Arthur V. Levy (New York: Novinka Books, 2003), 3

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eliminate the conflicts surrounding them through negotiations and through peacekeeping operations. Moreover, it is necessary to find a viable means by which the legitimate diamond industry may flourish, without allowing conflict diamonds onto the market. Doing this will require cooperation from both the international community and industry. Because conflicts arise from so many different circumstances, conflict resolution and peacekeeping are done on an ad hoc basis. Rarely, if ever, is any one solution applicable twice. This is not true of world trade, where often a uniform system can bring about positive results to a variety of problems.

Background In 1893, an army of mercenaries in the employ of Cecil Rhodes, founder of the international diamond conglomerate De Beers Group, De Beers Group: The De Beers Group is a Johannesburgand London-based diamond mining and trading corporation. It has historically held a near-total monopoly in the diamond trade, although recent Israeli interests have captured 20% of the market. Source: en.wikipedia.org/wiki/Debeers

marched through uncharted jungle into what is now Zimbabwe. There, they easily defeated the Matabele warriors and exiled their chief.

The conquered

territory was to be named Rhodesia, in honor of Rhodes, and added to the British Empire.3 Rhodes died less than nine years later, having totally

solidified his empire and controlling more than 90 per cent of world diamond production.4 From its very inception, the nature of the diamond industry has lent itself to a steady stream of violence, as some of the world’s most valued treasures have been procured through murder and mutilation. State governments, the United Nations, nongovernmental organizations (NGOs), and the diamond industry have all agreed they need to develop strategies to bring this unintended consequence to an end. The difficulty is that it is not practically feasible to distinguish which diamonds are legitimate and which diamonds come from conflict.

In order to understand how diamonds have lent

themselves to causing and prolonging wars, it is first necessary to understand the basic 3

Brian Roberts, The Diamond Magnates (New York: Scribner’s, 1972), 255-260.


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structure of the diamond industry.

Diamond Industry Diamonds are a commodity unlike any other.

The usual supply chain of

production, refinement, wholesale, retail, familiar to other industries is far less common in the diamond trade, as diamonds may pass through dozens—indeed hundreds—of hands before ever coming to retail.5 A majority of diamonds are mined legitimately. As of 2002, even the most liberal estimates held that conflict diamonds occupied no more than 15 per cent of market share. The diamond industry has tended to down play the prevalence of conflict diamonds in the world market. The De Beers Group, for instance, once estimated that conflict diamonds were responsible for 3.7 per cent of the world market.6 It is the unique nature of the diamond market, however, that has made this 15 per cent problematic. Diamonds require no complex machinery to mine, making them easily accessible and very low cost to transport. A smuggler can transport an enormous wealth of diamonds on their person in complete secrecy, a feat that would be impossible to replicate with commodities such as oil, iron ore, or gold.

The high demand and

relatively steady price of diamonds on the world market has meant that diamond trafficking is a very low financial risk. That is to say, a bartered diamond can always be turned into cash later on.

In Freetown,

Sierra Leone, rough diamonds have come to represent a sort of de facto currency, often 4

Illicit Diamonds: Refers to any diamonds mined or sold in contravention local or international laws. Conflict diamonds comprise a subset of illicit diamonds, specifically those mined by rebel African groups. The two terms are in no way interchangeable, but the two products often seem to be. As the very nature of illicit diamonds prevents knowledge of their origins, for practical purposes, all illicit diamonds must be assumed to be conflict diamonds. By some estimates, illicit diamonds may comprise as much as 20 per cent of the world market. Source: UNSC Panel of Experts, [S/2000/1195], 28.

Greg Campbell, Blood Diamonds: Tracing the Deadly path of the World’s Most Precious Stones (Westview Press, 2002), 108 5 Ingrid J. Tamm, “Diamonds in Peace and War: Severing the Conflict Diamond Connection,” World Peace Foundation Reports 30 (2002): 4. A thorough and concise treatment of the issue, this document has also now been made available on the world wide web at: http://www.ksg.harvard.edu/cchrp/Web%20Working%20Papers/WPFTamm%20Diamond%20Report.pdf 6 Cook, 4


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favored over their domestic currency. The use of diamonds in this manner virtually guarantees that the origins of illicit diamonds will be erased once they enter the open market. The diamond pipeline that ends at retail jewelry counters across the globe often begins in West Africa where the industry is largely run by wealthy Lebanese diamond merchants. As of 2001 there were an estimated 120,000 Lebanese living in West Africa, most of whom worked in the import-export business.7 It is often the case that these merchants knowingly buy diamonds from rebel forces, and even those who choose not to deal in conflict diamonds will do so accidentally. Given the frequency with which diamonds are bartered before ever reaching the retail pipeline, it is impossible for these merchants to say with any certainty where their diamonds come from. From here the diamonds are sold through a series of brokers, usually in Europe, until being acquired by a major diamond buyer, which until recently almost always meant De Beers. The diamonds are then sold to major diamond brokers, at which point they are cut into traditional designs in order to prepare them for the retail market. Once a diamond has been cut, any hope of ever identifying its source is completely lost. While, in theory, chemical analysis of rough diamonds might lead to the original source, in practice this practice is unworkable and largely impractical. The potential illicit activity in the diamond market does not end with the cutting process. Cut diamonds themselves are put through an often undocumented and intricate series of business deals that erase any trace of their origin. While everything described to this point represents the fate of a minority of diamonds, as most diamonds are mined by professional mining corporations and will never touch the hand of a Lebanese merchant, what follows represents the fate of a majority of diamonds. Cut diamonds are traded most extensively in London, Tel Aviv, New York, and Antwerp, and there is no telling how many hands a cut diamond may pass through before finally making its way to a jeweler. At this stage, diamonds represent a marketable commodity, available for sale 7

Douglas Farah, “Al-Qaeda Cash Tied to Diamond Trade.� Washington Post, November 2, 2001, p. A1.


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within a fairly small network of diamond buyers. By tradition, these markets are almost entirely undocumented, as deals are made through a handshake and a promise to pay at a later date. The International Federation of Diamond Bourses, a legally incorporated organization with chapters all around the world, functions essentially as a multibillion dollar street bazaar through which an unknown amount of wealth flows every year.8 The bylaws of the New York chapter, known as the Diamond Dealers Club, state “Any oral offer is binding among dealers, when agreement is expressed by the accepted words ‘Mazel and Broche’ or any other words expressing the words of accord.”9 As the New York Times noted in 2001, “In one day, a diamond can move from one end of the [main diamond district] street to the other, doubling in value after passing through seven or eight hands.10 And as they repeatedly change hands, no accounting records are kept. Intentionally or not, the diamond industry has managed to make conflict diamonds indistinguishable from illicit diamonds which are in turn, indistinguishable from diamonds that have entered the pipeline legally.

The De Beers Group For nearly a century, the De Beers Group had a virtual monopoly over the diamond market. Due to their domination of the market, De Beers has until recently been able to unilaterally set prices and policy for the entire diamond industry.

History In point of fact, diamonds are not worth nearly what consumers are willing to pay for them. Until 1866, it was thought that the only sources of diamonds in the world were Brazil and India, when significant diamond reserves were discovered in South Africa and the entire diamond industry paradigm began to shift. The discovery of African reserves could have meant great wealth split between thousands of prospectors, but because of the work of one crafty businessman, a majority of the world’s diamond wealth has been 8

Shield, Renee Rose, Diamond Stories (Ithaca, New York: Colombia University Press, 2002), 88-94. Quoted Ibid 10 Lauren Weber, “The Diamond Game, Shedding Its Mystery.” New York Times, April 8, 2001, Money and Business/Financial Desk, p. 1. 9


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consolidated into the empire of a few individuals. In 1888 Cecil Rhodes, founder of the conglomerate De Beers Group, managed to obtain a virtual monopoly on world diamond production, eventually acquiring 90 per cent of world diamond production. Soon after, Rhodes faced a major problem: the value of diamonds was predicated on their rareness. With the discovery of such extensive African deposits, the value of diamonds was sure to plummet. If Rhodes could find a way to prevent this, the value of his monopoly would appreciate considerably.11 Rhodes’s near complete control of the market allowed him to develop an operation that would have been unthinkable in nearly any other industry. Through a tightly knit, carefully controlled group of diamond buyers and sellers, Rhodes allowed exactly enough diamonds onto the market as was necessary to meet demand. Unsold diamonds were to be stored in a vault in London, and were not a part of supply. Thus, although diamonds had become fairly common relative to other precious gems, Rhodes was able to preserve the perception of rarity and keep the price of diamonds artificially high. By 1999, after a century of careful market control, De Beers had amassed a stockpile of more than USD $4 billion worth of diamonds.12 Maintaining market control as new diamond sources have emerged has required that De Beers buy all the rough diamonds available, whatever their source, meaning that at times, the company has needed to buy diamonds mined or possessed by rebel groups. This type of monopoly pricing has made De Beers a force in the diamond industry, resulting in limited ability for other firms to enter the market. In 1945, when the United States Department of Justice initiated anti-trust proceedings against De Beers, the company quickly disappeared from the U.S. market. The Group quickly established a network of resellers in London to provide for the American market, while not being subject to the jurisdiction of American courts. When diamond mining in South Africa reached a fever pitch in the 1870s, local tribesmen were confounded by thousands of foreigners digging for what they considered 11 12

Campbell, 102-108. Ibid, 108-114.


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to be worthless rocks. A century later, the value of these same stones has grown so apparent that entire nations have been laid waste by violent rebels seeking to possess them. Like most precious gems, there is little inherent value to the diamond itself. The value is instead derived from scarcity, or a perceived scarcity on the open market.

Reform By mid 2000, a number of elements had aligned to pressure the De Beers Group into voluntary reform. The growing strength of the European Union13 and continued non grata status in the United States threatened to bring the nagging anti-trust issue to the forefront. Their market share had slipped to 65 per cent and controlling world prices was beginning to prove impossible.14 Perhaps most importantly, though, was the growing public awareness of the link between diamonds and conflict.15 Whatever the reason, the reforms announced in July 2000 were some of the most radical in the history of the diamond industry. De Beers would abandon its policy of acting as a market custodian, and rely upon the market to set a fair price for diamonds, and their London stockpile was reduced by a quarter.16 The practice of buying up the entire supply made available on the open market was suspended, and De Beers would only deal in diamonds from its own mines and those contracted from Russia and Canada, thus shutting down the single largest potential marketplace for conflict diamonds.17 Perhaps most interestingly, however, was the decision to enter the retail market for the first time in its history, selling cut diamonds, as opposed to the rough diamonds with which it had operated to that point. This “Supplier of Choice” program represents full vertical integration for De Beers. Entering the retail sector necessarily meant ending their 13

Carolyn Batt, “EC smooths rough diamond supplies,” The Daily Telegraph (London), January 17, 2003, p. 36. Tamm, 4. 15 This is, along with “synthetic diamonds” and “treatments and stimulants,” is one of three things De Beers speculates may be affecting consumer confidence on their website. See: “Supplier of Choice: What Needs to be Done?” http://www.debeersgroup.com/debeersweb/About+De+Beers/De+Beers+World+Wide/Diamond+Trading+Compan y+%28Dtc%29/What+needs+to+be+done.htm (accessed February 6, 2006). 16 Campbell, 134 17 Bloomberg News, “World Business Briefing: Africa; De Beers Changes its Policy,” New York Times, May 31, 2000, p. C-4. 14


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legal dispute with the United States, the worlds single largest market for cut diamonds. In 2005, De Beers agreed to a $250 million settlement in a class action law suit by U.S. diamond buyers. As part of the agreement, De Beers also agreed to an injunction that required the company to abide by all American anti-trust laws, at which time it paid an additional $10 million fine from the United States Department of Justice. It is reasonable to assume that a significant portion of De Beers’ stockpile remains, and that some fraction of that stockpile is comprised of illicit diamonds. Eventually, these will be sold off, but there is no way of knowing when this process will be complete, as the company is no longer a publicly traded company after a USD $17.6 billion buyout. 18

As a result they are no longer required to make detailed financial disclosures. When

the De Beers stockpile has been depleted, however, the conglomerate will finally know the source of every diamond that passes through its hands. Thus, within the industry De Beers built and inadvertently turned into a source of funding for rebel groups, they and only they will be capable of guaranteeing conflict free diamonds.

The Diamond Wars Armed with an understanding of the unusual inner workings of the diamond industry, it is easy to see how diamonds might come to be a source of funding for some of the worlds most unsavory characters. Some of the worst fighting of our time has been due to or facilitated by diamonds.

18

Alan Cowell and Rachel L. Swarns, “$17.6 Billion Deal to Make De Beers Private Company,� New York Times, February 15, 2001, Business/Financial Desk p. 1.


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Angola When Angola gained independence in 1975, political power was effectively split between three groups. Of these groups, it was a group known as the Popular Movement for the Liberation of Angola (MPLA) which—with financial and political backing the Soviet Union— gained power. They were opposed by a group known as the National Union for the Total Independence of Angola (UNITA), which was funded by the United States and South Africa. The United States officially ended support for UNITA in 1989, and a peace was brokered in 1991. When UNITA lost subsequent elections, the war reignited. By the end of 1992, UNITA controlled 70 per cent of the diamond production of Angola, the fourth largest diamond producer on earth. The primary source of funding for this group was the diamond trade, and it is estimated that at its peak between 1994 and 1997 UNITA earned as much as USD $600 million per year from diamond sales.19

In 1998, the United

Nations Security Council enacted sanctions against UNITA, cutting off trade and freezing assets worldwide. While this cut off seemingly legitimate sales, diamonds continued to flow out of Angola illegally and funding for UNITA continued to flow in. The international community took no decisive action and the war continued until 2002 when MPLA forces killed UNITA leader Jonas Savimbi. The conflict cost 500,000 lives, displaced 3.8 million people, and maimed 100,000 more, mostly through land mines. As of 2002, there were an estimated eight to ten 19

Tamm, 8.


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million landmines remaining in Angola and life expectancy was just forty-four years.20

Democratic Republic of Congo (DRC) In 1998, amid a brutal Congolese civil war, Uganda and Rwanda invaded the DRC. Although many reasons were given for the invasion, it now appears clear that diamonds were at least a major factor. The Rwandan and Ugandan governments hoped to wrest control of the DRC’s diamond fields from their weakened government. In April of 2001, the UN issued a report stating that illegal mineral exploitation was taking place in eastern Congo at “an alarming rate.”21 In December 2005, the International Court of Justice ruled that Uganda had violated DRC’s sovereignty and looted billions of dollars worth of resources. The DRC requested ten billion dollars in reparations, none of which has been paid by Uganda. Today, although the official “war” in DRC has ended, fighting continues in the eastern diamond rich portion.

Sierra Leone Sierra Leone has endured almost perpetual conflict since 1991 when the Revolutionary United Front (RUF) launched its first attack. In 2005, the United Nations Development Program’s annual Human Development Report ranked Sierra Leone 176 out of 177. This was the first time that Sierra Leone had ranked any higher than last since 1995, when it also ranked

Foday Sankoh

second to last.22 Sierra Leone is unique in that diamonds played a far more central role than is typical even in West African civil wars. Whereas diamonds can serve exclusively as a source of funding for rebel groups seeking a definite political end, in Sierra Leone, ownership and control of diamond production seems to have been an end in itself. Due to the exaggerated role diamonds played in this conflict, Sierra Leone provides an 20

Ibid. Ibid, 16. 22 The Human Development Report focuses on the Human Development Index, a figure which includes economic, social, and political factors. See: United Nations Development Program, “Human Development Reports,” 2006, http://hdr.undp.org/reports/ (accessed February 7, 2006). 21


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important case study on how diamonds prolong and exacerbate conflicts. Sierra Leone’s long story of atrocities began in 1991.

Years of one-party

dictatorial rule had left the economy in shambles and 95 per cent of the country had not benefited from the modernization that had occurred in the capital of Freetown, and outside of major cities, electricity was non-existent.23 Revolution of a sort came from former Sierra Leone Army (SLA) corporal Foday Sankoh, where just across the southern border in Liberia, with the aid of Libyan leader Muammar Qaddafi, he trained around 100 troops in the camps of Liberian warlord and later president Charles Taylor. These troops formed the RUF and soon crossed the Leonean border and seized the province of Kailahun, where they were greeted as freedom fighters who would bring multiparty rule and economic reforms. The next obvious step was to seize diamond producing areas such as Kono, the only thing of monetary value to the Leonean government.24 Sankoh’s poorly trained, undisciplined, and underpaid troops did not liberate the locals, but rather, killed and maimed them. Over the next ten years, the RUF embarked on a campaign of terror that seems to have had little goal other than possession of the diamond mines. The RUF routinely used terror tactics that included, according to The Daily Telegraph, “amputations of arms, legs, buttocks, genitals, ears and lips; the gouging out of eyes; indiscriminate rape; injections with acid; burnings alive and beatings. There were also well-attested stories of ritual cannibalism.”25 According to news reports, a favorite pastime of RUF soldiers was betting on the sex of unborn children, for which the winner would be determined through live cesarean.

The

intimidation technique for which the RUF is best known, though, is amputation by axe. Following president Kabbah’s 1996 plea that citizens “join hands for the future of Sierra Leone,” bags of human hands became a daily sight on the steps of the presidential mansion.26 23

Campbell, 70. Ibid. 25 “Foday Sankoh Guerrilla leader whose followers raped, tortured, amputated and murdered their way through Sierra Leone,” The Daily Telegraph (London), July 31, 2003, p. 25. 26 Campbell, 78. 24


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The response of the world community to these atrocities was disheartening, as Western states and the UN took no action. In 1995, then President Strasser, unable pay for a sufficient SLA force to combat the RUF, resorted to hiring the private security firm Executive Outcomes (EO), who supplied a mercenary army in exchange for diamond mining rights, which at that point was the only asset still available to the government. Despite the fact that EO managed to push the RUF out of Kono, the partnership met with general disapproval from the world community, with the International Monetary Fund threatening to end all dealings with Sierra Leone should they continue there relationship with EO, resulting in an end to that agreement later that year.27 As a result, the RUF overran Freetown on 25 May 1997 with overwhelming force, only to be pushed out again the following year by the Ceasefire Monitoring Group of the Economic Community of West African States (ECOMOG). Operation No Living Thing in 1999 was an RUF offensive whose brutality lived up to its title. Such atrocities finally caught the attention of the world, and the UN intervened for the first time to broker the Lomé Peace Accords, which were entirely ineffective. By their explicit terms, the Lomé Accords granted the RUF legal status as a political party and its members were granted amnesty for crimes committed during the fighting. Foday Sankoh, who had been captured the previous year, would be released from death row and installed as vice president. Most importantly, the RUF was to be given control of the nation’s diamonds. In return, the RUF had to demobilize and disarm, all under the supervision of the newly formed United Nations Mission in Sierra Leone (UNAMSIL), the largest and most costly peace keeping force ever deployed by the UN. For a number of reasons, not the least of which was the fact that UNAMSIL was comprised largely of Nigerian forces left over from ECOMOG, the RUF failed to meet its end of the agreement, and Lomé fell apart. Fighting resumed, and continued for two more years, until a cease fire could be negotiated in May 2001. Although this ceasefire was virtually identical to over a dozen previous failed efforts, it managed to hold together 27

Ibid.


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and in January 2002, UNAMSIL declared that the conflict was over and the RUF had ceased to exist. Ultimately, the human toll of the conflict is difficult to estimate. So much of the killings happened in seemingly invisible jungle villages that numbers are questionable and often misleading. Estimates of the dead range from 20,000 to 75,000.28 Another 20,000 were mutilated and the number of refugees is estimated to be in the millions. Between 50 and 80 per cent of the population was driven from their homes.29 It should be noted that what makes the case of Sierra Leone particularly relevant is the manner in which the facts demonstrate 1) how diamonds serve to both fund and exacerbate conflicts and 2) the repeated failure of the world community to adequately respond to such conflicts.

International Terrorism In November 2001, the Washington Post ran an article entitled “Al-Qaeda Cash Tied to Diamond Trade,” uncovering a direct connection between the Sierra Leone RUF and the Al-Qaeda terrorist network. Beginning in 1998 and through the assistance of the Liberian government, Osama bin Laden’s terrorist network had set about turning their liquid assets into highly mobile diamonds.

This strategy seems to have been in

preparation for the terrorist attacks of 11 September 2001in the United States, or, more specifically, the American retaliation for it. Indeed, following the attacks, the United States and the United Nations froze more than USD $100 million of Bin Laden’s international assets in the matter of just three weeks. Three years of diamond sales, however, left Al-Qaeda with millions—perhaps tens of million—of dollars worth of easily traded rough diamonds.30

Al-Qaeda likely intends to use these diamonds to

finance their future operations. This fact should served to disabuse the west of any notion that conflict diamonds are just a third-world problem. 28

Nicholas Cook and Jessica Merrow, “Diamond-Related African Conflicts: A Fact Sheet,” in Diamonds and Conflict: Problems and Solutions, ed. Arthur V. Levy (New York: Novinka Books, 2003), p 60. See also: Campbell, 31. 29 Ibid. 30 Farah. See also: Campbell, 183-202.


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Current Status The major hurdle to curtailing the sale of conflict diamonds worldwide is the simple fact that no one knows which diamonds are conflict diamonds. The only logical solution to this problem has been to cut off diamond trade with areas where rebel groups mine diamonds. diamonds.

Indeed, this has impacted the availability of markets for conflict

In 1998, United Nations Security Council resolutions 1173 and 1176

sanctioned the sale of diamonds mined by UNITA and the RUF respectively. That same year, De Beers announced that it would voluntarily stop buying any diamonds from Angola, excepting a single De Beers owned and operated Angolan mine. On 5 July 2000, United Nations Security Council Resolution 1306 banned the direct or indirect importation of all diamonds from Sierra Leone, which it was believed were being bought and sold in order to fund RUF efforts. The diamonds still made it to market, however. As a Security Council panel of experts noted in December of that year: “33.6 million carats said to be of Liberian origin that were imported into Belgium in the five years between 1995 and 1999. This volume is far beyond Liberian production capacity, and exceeds official Liberian exports by so much, that investigation was clearly warranted.”31 The report went on to note that the most liberal estimates of Liberian diamond production capacity was 150,000 carats per year—an average discrepancy of 6.5 million carats per year. The panel of experts determined that the excess came from Leonean diamonds smuggled across the border and exported under false papers. Resolution 1306 could do nothing to curb this sort of sale. The Security Council would move to ban importation of all Liberian diamonds in May of the following year, but this incident reveals a critical flaw in international diamond control.32 Diamonds were far too easily smuggled for conventional sanctions to be of any use. To make matters worse, as of 2000, most nations required certificates of trade to list only the nation of last export. This is to say, a diamond mined in Angola, bought in 31

UNSC Panel of Experts, [S/2000/1195], 22 http://www.nisat.org/sanctions%20reports/Sierra%20Leone/UN%202000-12-20%20Sierra%20Leone.pdf 32 Daniel Cooney, “UN Imposes Sanctions on Liberia Over Its Rebel Links,” The Scotsman, May 5, 2001, p. 10.


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London, and shipped to Antwerp for cutting was British as far as the Belgian government was concerned. While those responsible for smuggling diamonds between Sierra Leone and Liberia were in violation of resolution 1306, Liberia had not violated any international agreements by laundering the diamonds. The conclusion that the system was infirm was inescapable. Since 2000, the world community has been inclined to favor internationalization as a solution to the conflict diamond issue. What has emerged is the most significant change to the diamond trade in the past hundred years. Reforms of equal importance have come from world governments and the industry itself.

The Kimberly Process On 1 December 2000, the UN General Assembly unanimously adopted resolution 55/56 calling for a detailed system of “rough controls” as they relate to rough diamonds. The Kimberley Process, as it is known, is an international certification scheme aimed at identifying and filtering conflict diamonds from legitimate exports. Although endorsed by the UN, the Kimberley Process is completely independent of the United Nations. Drafted over a series of international meetings involving world governments, the World Diamond Council, and various NGOs, most notably the human rights group Global Witness, the Kimberley Process represents the most important of the many recent diamond trade reforms. Involvement in the Kimberley Process Certification Scheme (KPCS) is voluntary, and so far 69 nations have chosen to participate.33 By the estimation of the KPCS Secretariat, these nations account for 99.8 per cent of world diamond production and, perhaps more importantly, all major diamond trading centers as well as the three largest

33

These nations are as follows: Angola, Armenia, Australia, Belarus, Botswana, Brazil, Bulgaria, Canada, Central African Republic, China, People's Republic of, Congo, Democratic Republic of, Cote D' Ivoire, Croatia, European Community, Ghana, Guinea, Guyana, India, Indonesia, Israel, Japan, Korea, Republic of, Lao, Democratic Republic of, Lebanon, Lesotho, Malaysia, Mauritius, Namibia, Norway, Romania, Russian Federation, Sierra Leone, Singapore, South Africa, Sri Lanka, Switzerland, Tanzania, Thailand, Togo, Ukraine, United Arab Emirates, United States of America, Venezuela, Vietnam, Zimbabwe. Source: “Kimberley Process,” http://www.kimberleyprocess.com:8080/site/?name=participants (accessed February 8, 2006).


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diamond markets: Europe, the United States, and Japan.34 Many of the provisions of the KPCS are intentionally vague in order to allow maximum flexibility on behalf of participating nations.35 The diamond industry, which participated in the negotiations as an equal partner, has been given a high degree of freedom in return for a promise to establish a rigid system of self regulation. By its explicit terms, the KPCS requires that all participants export diamonds in tamper proof containers accompanied by the Kimberley Process Certificate, which bears the nation of origin, the nation of last export, the weight and value of the diamonds. The certificate must also be made “tamper and forgery resistant.” Participants must also “establish a system of internal controls designed to eliminate the presence of conflict diamonds from shipments of rough diamonds imported into and exported from its territory.”36 They must also share information about their nation’s diamond production so that export records can be matched with production capacity to avoid situations such as that which occurred between Liberia and Sierra Leone. Most importantly though, is the provision of section III (c), that no participating nation may trade diamonds with any nation that does not participate in the certification scheme. It is this provision that has made the KPCS effective. The results of the process have been somewhat better than expected. Sierra Leone, Angola, and the Democratic Republic of the Congo have all been permitted to rejoin the diamond selling world.37 In October 2003, members of the KPCS rejected independent monitoring citing cost and sovereignty concerns. As a compromise, they agreed to a system of voluntary inspection, whereby international pressure is the only mechanism through which these nations may be compelled to open their borders to KPCS

34

Rio Tinto Diamonds, Rio Tinto Diamonds Review 2004 (1980), 23. The full text of the KPCS working document can be found here: “Kimberley Process Certification Scheme,” http://www.kimberleyprocess.com:8080/site/content/KPCS.pdf. 36 Ibid, Section IV (a). 37 Nicol Delgi Innocenti, “Africa rulings weaken diamond clampdown,” Financial Times (London), June 30, 2003, p. 1. 35


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investigators.38 In May 2004, as a result of data released to the KPCS, it came to light that Congo-Brazzaville had exported 5.2 million carrots of rough diamonds the preceding year, compared to an estimated capacity of 55,000 carrots per year—a discrepancy of almost 100 fold.

Facing overwhelming international pressure, Congo-Brazzaville

submitted to an inspection and was found to be in non-compliance with the KPCS. The consequence was their expulsion KPCS.39 Indeed, international pressure and the threat of expulsion has proven incentive enough for participants to submit to inspection. As of June of 2005, thirty out of sixty-seven nations had submitted to voluntary reviews, and seventeen more had volunteered to do so. All African participants have been subject to a voluntary review.40 The KPCS is now facing its strongest challenge yet. In 2002, the Ivory Coast lost control of its diamond fields to a rebel movement. The government has prohibited the export of any diamonds, but is unable to enforce this legislation. It is clear that diamonds are crossing borders into neighboring countries, but it is not clear their source. In order to stem the tide, the KPCS has put all West African diamonds under surveillance, in which diamonds coming from West Africa must undergo a process called “profiling,” in which detailed data is collected on every shipment of diamonds and compared with expected realities on both ends. “This is the ultimate test case for the KP,” said Alex Yearsley of Global Witness, “if they get this conflict diamond situation right, they will be able to get everything right.”41

The World Diamond Council In 2000, the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) met in Antwerp, Belgium to discuss the prospects of curbing trade in conflict diamonds. 38

There, they passed a resolution

Nicol Delgi Innocenti, “Inspection debate threatens conflict diamond scheme Johannesburg,” Financial Times (London), October 30, 2003, p. 12. 39 Michael Dynes, “Congo no longer welcome in diamond club,” Ottawa Citizen, July 10, 2004, p. D12. 40 Nicol Delgi Innocenti, “Accord on conflict diamond smuggling Kimberley Process,” Financial Times (London), November 16, 2005, p. 11. 41 Quoted Ibid.


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establishing the World Diamond Council (WDC), an organization that would be responsible for regulating international trade in diamonds, with the sole mission of preventing trade in conflict diamonds. The document they produced is known as “A System for International Rough Diamond Export and Import Controls,” and details the protocol that members must use to trade diamonds.42 The restrictions are more stringent than any international governmental regulations currently in place and apply not only to private industry, but also to world governments. Members of the WDC, which include industry giants such as De Beers and Tiffany & Co. as well markets from New York to Hong Kong, are permitted to deal only with businesses and national governments that comply with the terms of the system. Those who fail to comply with the system are to be expelled from the WFDB or the IDMA. Although this expulsion would not necessarily make it impossible for a diamond dealer or manufacturer to continue his trade, the resulting financial losses could exceed any profit made by ignoring regulations. In return for freedom from governmental regulation, the WDC made three promises to the KPCS: 1) the implementation of a “code of conduct” to deter trafficking in conflict diamonds, 2) a system of warranties guaranteeing diamonds as conflict-free even at the retail sale level and 3) the training of employees in methods of conflict diamond trade prevention.43 Efforts to enforce WDC regulation have been lackluster at best and disingenuous at worst. Often, major diamond buyers require no more than a written statement from suppliers regarding the origins of diamond they are purchasing.44 In a recent study of thirty-five diamond trading outfits, Global Witness was unable to verify that these processes are being faithfully executed in more than 85 per cent of cases. The report concluded that “the US diamond jewellery [sic] retail sector has failed to take even basic measures to implement self-regulation and ... the World Diamond Council...is failing to 42

The full text of this document can be found here: “A System for International Rough Diamond Export and Import Controls,” http://www.worlddiamondcouncil.com/proposed.shtml (accessed February 8, 2006). 43 Global Witness report “Broken Vows,” March 2004, p. 3. 44 Partnership Africa Canada and Global Witness Report “Implementing the Kimberley Process,” June 2005, p. 5. Like all Global witness reports, available free at http://www.globalwitness.org/reports/index.php?section=diamonds.


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adequately deliver.”45

Unresolved Issues The recent reforms efforts taken by the diamond industry have been revolutionary, but remain incomplete. By estimate of the WDC, conflict diamonds have fallen from four per cent of the market to less than one per cent.46 This number reflects the cessation of fighting in Sierra Leone and Angola more than it does the effectiveness of any certification scheme. Moreover, WDC figures are yet to be considered wholly accurate. Still, a reduction of this sort is impressive. This, however, should not be taken as a sign that the diamond industry has adequately addressed this ongoing problem. Conflict diamonds continue to flow out of Liberia, the Ivory Coast, and, almost certainly the Democratic Republic of Congo. It is also difficult to regard the expulsion of Congo-Brazzaville from the KPCS as a major victory; it did not take great investigative resources to discover an illegal diamond market 100 times larger than that which is physically possible to achieve legally. Moreover, while the KPCS can argue that it cut the conflict diamond market by some 75 per cent, it remains to be seen what lasting effect it will have should any of these regional conflicts return. A serious shortcoming of the KPCS is the fact that it only deals with diamonds beginning at the export stage. By the time an illegally mined diamond reaches export, it is likely to have been traded so many times that its original source is unknowable. As the Ivory Coast, Democratic Republic of Congo, and Liberia have shown, beginning the certification process this late in the pipeline may be too late to ensure that they are free from involvement in illicit trade. It is unsettlingly easy for illicit diamonds emanating from Liberia and Côte D'Ivoire to enter the legitimate diamond pipeline. Diamonds leaving Sierra Leone for sale on the world market must first be certified for compliance with the KPCS by the 45

“Broken Vows,” p. 6. Clive Wright, “Tackling Conflict Diamonds: The Kimberley Process Certification Scheme,” International Peacekeeping 11, no. 4 (2004): 702.

46


Rutgers Model United Nations 2006 Gold and Diamond Department (GDD).

20 Diamond traders must produce receipts

certifying that their diamonds were mined in Sierra Leone under legitimate circumstances.

Such receipts are easily falsified and the GDD does little if any

investigation into their legitimacy. The result of these internal checks has resulted in illegal Liberian diamonds traveling across the boarder where they can enter easily enter the global marketplace. An estimated ten to thirty per cent of Sierra Leonean diamond exports were not mined in Sierra Leone.47 Annex II of the KPCS working document makes a number of optional recommendations for intrastate diamond controls, none of which are required for participation in the scheme, including requiring a national license to mine, transport, or deal in diamonds. The fact that this is listed as a recommendation highlights the most significant flaw in the KCPS, that it is not binding. While the threat of expulsion may be sufficient to compel cooperation by nations such as the Central African Republic, which was briefly suspended for non-compliance in 2003, this threat is less compelling to traders in the Côte D'Ivoire, who already operate illegally.48 While it is true that the principle of voluntary cooperation has been responsible for much of Kimberley’s success, there may be some issues too deeply rooted to deal with through mutual consent. The Kimberley Process may have doomed itself by going out of its way to be conciliatory to the diamond industry and world governments, as it can impose no penalty on its member other than suspension. Naturally, the Secretariat is reluctant to impose such an extreme measure.

The result has been mild to moderate non-compliance.

According to Global Witness, “a significant number of Participants have been consistently late in reporting data.”49 To date, Tanzania has submitted no data, and ten other nations have submitted incomplete data. Although all these nations are in noncompliance with one of the few explicit requirements of the KPCS, there have been no sanctions handed down from the organization. 47

Global Witness report “Making it Work,” November 2005, p. 22. Ibid, 704 49 “Implementing the Kimberley Process,” p. 3. 48


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Some data, even when submitted in a timely manner, is useless to the Kimberley Process. The United States and Canada, for instance, do not record information of the Kimberley Process Certificate because of pre-existing procedures for collecting trade data. For this reason, the diamond data of these nations cannot be easily compared to that of the rest of the world. Even the relevant data that Kimberley manages to collect often goes to waste. Statistical analysis is only conducted prior to a review visit, which only occurs on a voluntary and announced basis. Global Witness has called for an annual independent audit of Kimberley data.

Key Positions The world community has been unanimous in its condemnation of trade in conflict diamonds, but as the industry has been quick to point out, the need to weed out conflict diamonds must also be balanced with the needs of the legitimate diamond industry, which employs millions of people worldwide, and represents the principle industry of multiple countries. In the Kimberley Process negotiations of 2000 and 2001, representatives of government, industry, and civil society worked as equal partners. Their differing views comprise the major divisions within the Kimberley process.

World Governments United Nations General Assembly Resolution 55/56 calling for the creation of the Kimberley Process passed unanimously.

Within the accepted premise that conflict

diamonds should be eliminated, there are serious divisions on the question of how that task is to be achieved. For a variety of reasons, many nations have failed to gain admission to or have abstained from participation in the Kimberley Process. Mali, for instance, has grown into a center for illicit diamonds, due to its proximity to C么te D'Ivoire, and their application to the Kimberley Process has been delayed because they cannot guarantee compliance. Undoubtedly, help from the international community in dealing with their conflict


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diamond problem would be welcomed by the government of Mali. The same is true of the government of the Côte D'Ivoire which continues to have no control over its own diamond trade. Some nations have come to see the Kimberley process as ineffective, and have begun implementing their own system of diamond controls. Belgium, for instance, has contemplated importation regulations wholly independent of the Kimberley process and the requirements of the European Union. The question of independent and mandatory reviews remains a pressing one. At the 2003 Kimberley Process plenary in South Africa, the European Union, United States, Canada, and Israel put forward a resolution calling for independent monitoring of Kimberley participants every three years. The resolution was strongly opposed by India, which is a diamond cutting and polishing center, China, which consumes a disproportionately small number of diamonds, Australia, and Japan.

The resolution

failed.50

Non-Governmental Organizations (NGOs) NGOs, especially the human rights group Global Witness, have been the single strongest force for change in the diamond world, and not surprisingly, their views are the most radical of those represented in the mainstream conflict diamond debate. Global Witness has made repeated calls for reform to the Kimberley process, especially demanding independent and regular audits of data.51 They argue for stiff penalties for any nation that fails to submit accurate data in timely manner, with an automatic and standardized procedure for doing so. Global Witness has also called for mandatory review visits with follow-up visits every six months for nations whose systems of internal control display weakness. They have also called for foreign aid to nations who are struggling in their good faith efforts to eradicate conflict diamonds. Finally, they have called for a governmental system of control on cut and polished

50 51

Innocenti, “Inspection debate threatens conflict diamond scheme Johannesburg” “Implementing the Kimberley Process,” p. 7.


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diamonds.52

Industry The diamond industry has fully recognized that conflict diamonds pose a threat to their business. Recent attention in the press has shown conflict diamonds to be a liability to their market, as the potential for a customer to own a tainted diamond is a growing disincentive from owning one. The WDC was among the original sponsors of the 2003 resolution calling for mandatory national inspections every three years. It is important to note, however, the industry is fearful of the prospect that legitimate diamonds will be mistaken for conflict diamonds. For this reason, they have advocated a system of selfregulation.

52

“Making it Work,� p. 24.


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Summary Diamonds have the distinction of being the world’s most compact form of wealth, naturally meaning that people from all walks of life have exploited diamonds for a number of different purposes. Diamonds do not, however, need to be accompanied by violence. If the world community can effectively identify conflict diamonds and shut down these markets, a significant source of funding for terrorist groups will have been eliminated. As conflicts have engulfed the diamond-producing states in Africa, the United Nations Security Council and even members of the diamond industry have called on boycotts of diamonds from certain states. Believing that the sale of these gems generates the money necessary to rearm, the international community has sought to limit the impact that these diamonds have on such violent situations. Perhaps less altruistic, the diamondbuying public has made clear that it does not want to buy diamonds that may be fueling ongoing conflict. Despite efforts made by the UN, conflict and other illicit diamonds are still traded on the open market, with the tacit approval of the world community. Many of the economic conditions that made diamond wars so common have disappeared, as the worst diamond wars in history have either ended or severely diminished in magnitude. If ever in history there were a time to sever the link between conflict and diamonds, it is now. The world community and the diamond industry have shown unprecedented vision and cooperation in addressing the issues in a meaningful way. It remains the task of the United Nations to show leadership and finish the job begun by Kimberley.


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Discussion Questions • Is the Kimberley Process an effective means of curbing trade in conflict diamonds? Could it be improved? • Why did the Lomé Accords fail? What was it about the root problem in Sierra Leone that they failed to address? • What long-term impact has De Beers “market custodian” policy had? Does the position of De Beers in the marketplace pose a problem today? • How can KPCS participants maintain their sovereignty without damaging the mission of the process? • Do Western nations have any responsibility to African nations? • What might the implications of a monitoring group be for the KPCS? mandatory inspection decrease Kimberley participation?

Would

• Should there be penalties within Kimberley other than decertification? Does making such an extreme punishment the only punishment decrease the likelihood of reprisals for minor violations? • What should be done about cut diamonds? Should there be a system similar to Kimberley? Are cut diamonds a threat?


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Works Cited “A System for International Rough Diamond Export and Import Controls,” http://www.worlddiamondcouncil.com/proposed.shtml (accessed February 8, 2006). “Foday Sankoh Guerrilla leader whose followers raped, tortured, amputated and murdered their way through Sierra Leone,” The Daily Telegraph (London), July 31, 2003, p. 25. “Kimberley Process,” http://www.kimberleyprocess.com:8080/site/?name=participants (accessed February 8, 2006). “Supplier of Choice: What Needs to be Done?” http://www.debeersgroup.com/debeersweb/About+De+Beers/De+Beers+World+ Wide/Diamond+Trading+Company+%28Dtc%29/What+needs+to+be+done.htm (accessed February 6, 2006). Alan Cowell and Rachel L. Swarns, “$17.6 Billion Deal to Make De Beers Private Company,” New York Times, February 15, 2001, Business/Financial Desk p. 1. Bloomberg News, “World Business Briefing: Africa; De Beers Changes its Policy,” New York Times, May 31, 2000, p. C-4. Brian Roberts. The Diamond Magnates. New York: Scribner’s, 1972. Carolyn Batt, “EC smooths rough diamond supplies,” The Daily Telegraph (London), January 17, 2003, p. 36. Clive Wright, “Tackling Conflict Diamonds: The Kimberley Process Certification Scheme,” International Peacekeeping 11, no. 4 (2004): 702. Daniel Cooney, “UN Imposes Sanctions on Liberia Over Its Rebel Links,” The Scotsman, May 5, 2001, p. 10. Douglas Farah, “Al-Qaeda Cash Tied to Diamond Trade.” Washington Post, November 2, 2001, p. A1. Douglass Farah, “Al Qaeda Cash Tied to Diamond Trade; Sale of Gems From Sierra Leone Rebels Raised Millions, Sources Say,” The Washington Post, November 7, 2001, p. A01.


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Emma Muller, “Gareth Penny takes diamond group's sales tiller: The architect of De Beers' controversial Supplier of Choice plan is determined to press ahead, despite disapproval,” Financial Times (London), July 26, 2001, p. 28. Global Witness report “Broken Vows,” March 2004. Global Witness report “Making it Work,” November 2005. Greg Campbell. Blood Diamonds: Tracing the Deadly path of the World’s Most Precious Stones. Westview Press, 2002. Ingrid J. Tamm, “Diamonds in Peace and War: Severing the Conflict Diamond Connection,” World Peace Foundation Reports 30 (2002): 4. Lauren Weber, “The Diamond Game, Shedding Its Mystery.” New York Times, April 8, 2001, Money and Business/Financial Desk, p. 1. Michael Dynes, “Congo no longer welcome in diamond club,” Ottawa Citizen, July 10, 2004, p. D12. Nicholas Cook, “Diamonds and Conflict: Policy Proposals and Background,” in Diamonds and Conflict: Problems and Solutions, ed. Arthur V. Levy (New York: Novinka Books, 2003), 3 Nicol Delgi Innocenti, “Africa rulings weaken diamond clampdown,” Financial Times (London), June 30, 2003, p. 1. Nicol Delgi Innocenti, “Inspection debate threatens conflict diamond scheme Johannesburg,” Financial Times (London), October 30, 2003, p. 12. Partnership Africa Canada and Global Witness Report “Implementing the Kimberley Process,” June 2005.

Rio Tinto Diamonds, Rio Tinto Diamonds Review 2004 (1980), 23. Shield, Renee Rose, Diamond Stories (Ithaca, New York: Colombia University Press, 2002), 88-94. United Nations Development Program, “Human Development Reports,” 2006, http://hdr.undp.org/reports/ (accessed February 7, 2006). United Nations General Assembly Resolution 55/56, December 1, 2000 (A/Res/55/56).

1CivilRightsandConflictDiamonds  

Civil Rights and Diamond Trading in Western Africa Director: Matt Korostoff Rutgers Model United Nations 16-19 November 2006 The Institute f...