Blood Diamonds (17 page)

“The tale is told of Joseph Asscher, the greatest cleaver of his day,” wrote Michael Hart in his book
Diamond: A Journey to the Heart of an Obsession,
“that when he prepared to cleave the largest diamond ever known, the 3,160-carat Cullinan, he had a doctor and nurse standing by and when he finally struck the diamond and it broke perfectly in two, he fainted dead away.”

Cutters may take weeks to decide on a strategy for cutting diamonds, and the largest ones can take years to polish. Their internal flaws and fractures often determine not only their eventual weight, but their design as well. In general, it's up to the diamond whether or not it will eventually be emerald-, brilliant-, or heart-cut. Cutters aren't just producing a pretty geometric shape; they're also manipulating it so that light will enter where the cutter wants it to, bounce around inside properly, and emerge from the top, creating brilliance. Also, cutting diamonds isn't like sawing wood; only diamonds can cut diamonds and it can take hours for a saw to create a fissure in a stone. Diamonds can lose a lot of weight during the process and it's not unusual for a cutter to grind off up to 50 percent of a diamond's weight to achieve a higher degree of brilliance.

The skill, hard work, and stress of the cutting and polishing side of the industry reveal clearly enough why diamonds shoot up in price as they travel from being rough to finished. It's demanding
and exacting work and it's not cheap. The diamonds are eventually sold to customers at up to ten times the price paid for them from De Beers, which, of course, can be up to a hundred times the price paid for them at the source.

Like practically every other facet of the industry, the cutters and those who employ them rely on De Beers to ensure that diamonds keep their value, and De Beers has more than kept up its end of the bargain.

One of the most successful advertising campaigns in history can be recounted in four words: “A diamond is forever.” Generations of future diamond buyers have grown up believing that love equals diamonds; this simple declaration is drilled into our heads thanks to De Beers's relentless marketing and advertising campaigns. Much less expensive cubic zirconias don't have the same chemical properties as diamonds, but they can be just as beautiful—but try giving one to your girlfriend when you ask for her hand in marriage. When shopping for a ring for future brides, grooms throughout the United States—who, along with male spouses preparing for an anniversary, buy 80 percent of all diamonds sold in the world—are told very gravely that the standard price to pay for a diamond engagement ring is two months' salary. Anyone who stops to think about it for even a minute realizes the peculiarity of such a thing—after all, who could have started that “tradition” other than people selling diamonds? But we're a nation built on traditions and giving your bride a diamond ring has become one of them. Another De Beers's slogan helps fuel this need: “Show her that you'll love her for another thousand years.” This ad illustrates the market perfectly: Men buy diamonds for women. Period. Little do those future grooms know that they're falling into a trap laid more than 100 years ago. De Beers's founder Cecil Rhodes said that the future
of his fledgling empire was guaranteed as long as “men and women continued to fall in love.”
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If every diamond ever found had been sold on the open market instead of hoarded in London, they'd probably be less expensive than emeralds, rubies, and sapphires. And the fact that some of the world's best diamonds come from killing fields and hellholes unbeknownst to anyone outside the hallowed halls of the diamond world for so long, well . . . so much the better in the thinking of the De Beers's marketers. There's nothing that can ruin a carefully crafted mystique better than the stink of reality.

And the reality is that if the century-old price controls and policies were to be honored for the sake of keeping diamonds valuable and avoiding a glut on the market, they would be bought from whomever was selling them. That included the RUF, UNITA, and any one of the dozens of factions fighting in the Democratic Republic of Congo, another war-torn diamond-rich African country. Those in the international diamond industry—revered throughout the world as merchants of love, honor, and faith—did not want it known that they actively and knowingly funded some of the world's most vicious wars simply for the sake of ensuring that jewelry stayed expensive. A close-knit, cloistered business, the diamond world felt so insulated from criticism that De Beers even boasted of its buying practices in its 1996 annual report, the year in which the RUF began its amputation campaign.

“The CSO [De Beers's Central Selling Organization] buys diamonds in substantial volumes on the open market, both in Africa and in the diamond centres, through its extensive network of buying offices, staffed by young diamond buyers often working in difficult conditions,” the report reads, in a statement penned by then chairman Julian Thompson. “Purchases in 1996 reached record levels
largely owing to the increased Angolan production. Angolan diamonds tend to be in the categories that are in demand, although in the main these buying activities are a mechanism to support the market.”
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Those record levels were achieved during the height of rebel/government fighting in Angola, when UNITA controlled 70 percent of the country's diamond production.

 

AT THE SAME TIME that Al Qaeda–piloted airplanes were crashing into the Twin Towers of the World Trade Center—and I was being told of the huge economic impact that bad publicity about conflict diamonds could have on sales—representatives from thirty-five countries were meeting privately about 45 miles outside of London, in the suburb of Twickenham. It was their fourth meeting that year, held September 11 in a rugby stadium to figure out the best way to handle the same blooming public relations nightmare that Bone described.

They were an odd mix, representing the United States, Russia, Canada, England, South Africa, Botswana, Egypt, Australia, and Bangladesh, among others, and diamond industry leaders, all members of the so-called Kimberley Process. I intended to go there later in the week to witness the rare and historic public discussion by diamond countries and industry representatives about rebel groups in Africa and the unwanted publicity that had been generated by buying diamonds from them. But the events of the day threw everyone's schedule into turmoil. I missed the opportunity to see the dirty laundry of the diamond world publicly aired. The practice of selling rough stones outside the boundaries of established taxing and exporting structures for the sake of funding insurgencies against legitimate African governments was well established and accepted by the diamond-producing and -importing
countries of the world, but it was never, ever discussed in public. It was tolerated for one simple, economic reason: Taking the moral high ground was bad business. After more than a century in the making, the industry had its price controls, and in the diamond business price is everything, more important and valuable even than the life and death of entire countries.

But suddenly, within the last two years, diamonds were becoming synonymous in some circles with death and mayhem, the precise opposite of the stones' carefully marketed image as symbols of love, peace, and devotion. Most consumers have no idea where diamonds come from, either physically or geologically, and for the most part that was fine with the people who sold and marketed their jewelry to them. But now the lines between the rebel groups in Sierra Leone, Angola, and the Democratic Republic of Congo; their barbarous tactics; and how they manage to fund their long-running insurgencies were being drawn with a good deal of precision. Without quick action and a skillful public-relations response, diamonds would be facing the same consumer backlash that fur suffered in the 1980s.

Civil wars are nothing new in Africa, but in Sierra Leone in particular the carnage was numbing and the direct involvement of diamonds was a serious threat to the business of romance. Images of civilians whose arms have been crudely hacked off with rusty blades didn't mesh well with television commercials featuring hand-shadows proudly displaying expensive jewelry. One diamond industry leader is said to have had nightmares in which the tag line at the end of such commercials reads: “Amputation is forever.”

Therefore, the international representatives embarked on a roundtable discussion that floated from country to country throughout the year, discussing how they could certify that diamonds offered to retailers and consumers come from “clean”
sources. The procedure was dubbed the Kimberley Process, after the famous De Beers mine in South Africa, and was designed to hammer out a united front, a game plan for cutting off the flow from the rebel groups that, even if most of them knew it was practically impossible, would at least give the impression of a positive, pro-active response to the mounting criticism of the industry.

Bone himself had left the meeting to talk with me about conflict diamonds and summarize the concerns of its participants. As he noted, the potential financial impacts were “enormous” and therefore everyone involved was sincere about ending the trade.

As cold as the company's response to publicity about conflict diamonds sounds—the potential commercial loss is “enormous,” but the moral dimension is merely “big,” as if it were an afterthought—De Beers is at least consistent in its thinking. Very little, if anything, has been done in the company's lifetime that didn't further its commercial potential, even if it meant funding warfare to do it. Before the conflict-diamond issue gathered steam, it made economic sense to continue to trade with killers since no one was paying attention and it didn't threaten the demand for the goods; after the issue began attracting the attention of human-rights organizations and people started whispering the dreaded “B” word (boycott), it made economic sense for the industry to condemn the trade and to wash its hands for good. Since De Beers is the world's largest dealer in rough diamonds, not only was a great deal of responsibility placed at its feet in early 2000, but so were many expectations that the company would act swiftly to end the practice.

The De Beers reaction to the mounting crisis could have come from a handbook on corporate disaster management, but to understand the reaction, it's first necessary to understand the structure of what some diamond insiders still call “the syndicate.”

If the name evokes images of the Mafia, it's not surprising. The world of diamond brokers, traders, smugglers, and sellers is unique unto itself, operating by rules that it sets and accountable to very few but its shareholders. There are rarely any lawyers involved, no contracts, and multimillion-dollar deals hinge on a handshake. De Beers itself is treated almost as an organized crime operation in the United States; it's barred from doing any business in America because it's considered to be in violation of U.S. antitrust laws, which seek to prevent price-fixing. In fact, the U.S. Department of Justice leveled charges against De Beers of conspiring to set prices in 1994, but the company didn't respond to them, leaving the charges in limbo until executives can be subpoenaed. As a result, De Beers executives usually don't travel to the United States, the diamond industry's largest market, because they may face a subpoena if they're tracked down. It's actually illegal for the company to have more than three executives in the United States at a time.

Because of a loophole in U.S. antitrust laws, De Beers executives can only be detained in the United States if they're in the country on “ongoing business,” which is defined in the statutes as requiring three or more officers to conduct. Therefore, De Beers bosses wishing to take a vacation to Aspen, for example, must phone Johannesburg for clearance and a head count is taken of employees in the States at the time.

Most diamond houses are family-run or concentrated in the hands of a few tightly knit business associates who pass the firm down through the generations. Vast amounts of wealth flow through the 2,600 small diamond shops on 47th Street in New York, Charterhouse Street in London, and the claustrophobic cutting and polishing bazaar on Antwerp's Hoveniersstraat. Rough sales averaged $6 billion per year, and in 1999 the world's retailers sold it back to the public for $11 billion.
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In New York City, casually
dressed Russian and Hasidic men stand their posts near garbage cans keeping an eye out for window shoppers. What are you looking for? they ask quietly. Gold, diamonds? Right this way. And you're hustled into a turn-of-the-century stairwell and escorted into the narrow veins of a merchant's office, plunked in a vinyl chair and told to wait for the boss, who's either a slickly dressed Russian, a Jew with half-moon glasses, or a Lebanese chomping the stub of a cigar like he's trying to open a beer bottle with his teeth.

Like the Mafia, once you're inside the diamond syndicate, you're part of a family, one that values its privacy and jealously—even insidiously—protects the family business. De Beers has used agents to spy on competitors in Canada and in the 1950s hired a man named Sir Percy Sillitoe to run antismuggling interdiction in Sierra Leone. Sillitoe was the former head of MI-5, the British intelligence agency.

As the world's largest diamond buyer and seller, De Beers also enjoys the monopolistic perk of both buying a commodity and placing a value on it, a fact of business life that members of the cartel simply have to accept. That doesn't mean that there haven't been dissenters, however. One famous tale involves Sierra Leone and the miner who ran Selection Trust's West African operations for De Beers. In the 1950s, Edward Wharton-Tigar had his suspicions that De Beers could fairly value the diamonds he was shipping to the Central Selling Organization in London since it was the stones' sole buyer. As a test, he had 1,000 carats of his best Sierra Leone products valued by the CSO and then sent the same package to the Accra, Ghana, market for valuation. As he suspected, in Accra the parcel was valued at twice what De Beers offered.