Dangerous Diamonds

Scandals Behind the Sparkle of the World's Most Desirable Gems

Diamonds are forever - the ultimate luxury good in the status stakes. They also grind out the tools and precisions parts on which our advanced civilization depends. Diamonds can add glamour to the most beautiful woman; they also finance the cruellest of civil wars. Ever since Cecil Rhodes imperial adventures in the late 19th century, a single company has stealthily extended its influence on the global market for diamonds until it achieved almost total control.

After World War II that company even set up its own intelligence service. It also controlled the supply of diamonds from most of the other major producers through its Central Selling Organisation (CSO). The firm is De Beers. It was supported both by the White government of South Africa and the Soviet Union, yet it survived the ending of Apartheid and the collapse of Communism. At the start of the new millennium it faces its gravest challenges yet and has radically changed tactics to ensure its continued success and to prevent diamonds from financing civil wars.

  "It is a brilliant operation. Over the past 60 years the CSO has done for diamonds something that eluded the oil producers of OPEC and even the cocaine barons of the Medellin cartel. It had the muscle and the nerve to impose its own order on the market, and it built a syndicate not for weeks or months but for decades."

Wilderness of Mirrors
by Linda Davies.


Cecil Rhodes, Ernest Oppenheimer and the Birth of the Diamond Cartel

Until the beginning of the eighteenth century all known diamonds came from the Golconda region near Hyderabad in India. Pliny wrote an incredible account of how diamonds were found in an inaccessible valley. The locals threw meat into the valley and the diamonds stuck to it. Eagles carried off the meat to their nests from which the diamonds were recovered. At their peak the Golconda diamond fields probably supported many thousands of workers but were practically exhausted by the late seventeenth century.

In 1844 diamonds were discovered in Brazil and for a while the Chapada Diamantina, or Diamond Highlands, in the state of Bahia, became the diamond capital of the world attracting prospectors and adventurers in the same way that the California Gold Rush did. A series of major diamond finds in South Africa from 1867 onwards, coinciding with a decline in production in Brazil, soon made it by far the biggest source of diamonds. As in Brazil and Indian the first finds were alluvial but by 1869 diamonds were being mined in South Africa.

Their value depended on their rarity and Cecil Rhodes realised that if suppliers competed against each other that would be threatened. By the end of his short life Rhodes had gained control of the diamond mines and extended British rule over much of southern Africa. Mark Twain said of him that when he stands upon the Cape of Good Hope, his shadow falls to the Zambesi (Twain, 1904). One area that was not under British rule was South-West Africa (now Namibia), a German colony, and the discovery of diamonds there in 1908 threatened the monopoly of Rhodes' old company, De Beers.

However, South African forces occupied the colony in the First World War, cutting off Germany's main supply of industrial diamonds, and it remained under South African administration until Namibia became independent in 1990. Ernest Oppenheimer, a German Jew with British citizenship resident in South Africa, acquired the German diamond interests which he formed into the Consolidated Diamond Mines which he then offered to De Beers in exchange for that company's stock. He was also given a place on the board and soon emerged as the most dominant figure in industry since Rhodes, whose policy of building and safeguarding a monopoly Oppenheimer continued.

Diamonds in World War II

When the Second World War broke out control of sources of vital materials, including industrial diamonds, was of the utmost importance. Even though the world's biggest sources of diamonds, South Africa and South-West Africa (Namibia), were part of the Commonwealth and Empire, industrial diamonds were in short supply in the British aircraft industry and also in the Canadian mining industry during the early years of the war. Germany had been stockpiling diamonds in preparation for war since 1936. After the commencement of hostilities Germany continued to import diamonds from producers over which Britain had no control, namely Brazil and Venezuela. Neutral countries such as Belgium, Holland, Switzerland and the United States that imported diamonds from the British Empire resold some of them to Germany and large stocks in Antwerp, one of the of world's main diamond cutting centres, fell into German hands after the conquest of the Low Countries in May 1940.

Relations between the British government and the diamond suppliers were not always easy. From intercepted telegrams it was discovered that De Beers had deferred diamond sales to spread the company's turnover into 1941 in order to avoid excess profits tax, leading an official in the Ministry of Supply to ask what state the country would be in if the manufacturers of Spitfires and Hurricanes acted in a similar manner. In fairness to De Beers there were enough diamonds in Britain at that time and Sir Ernest Oppenheimer's letters to his son Harry, who was on active service in the 4th South African Armoured Car Regiment in the Eighth Army in North Africa, showed that he felt De Beers had received no credit for their policy of selling diamonds at pre-war prices (Gregory, 1961, p. 324). Nevertheless tax avoidance during war time is an obviously unpatriotic act.

Diamonds were also a source of friction between Britain and the United States. The British government had placed restrictions on diamond exports to neutral countries until assurances were given that they would not be resold to Germany. The Swiss proved cooperative but the Americans were much less so, and the United States government informed Britain that it would take no steps to stop re-export of diamonds by surface mail or airmail. (Newbury, 1989, p. 336). Even though it refused to crack down on diamond exports to Germany the American government was worried about the possibility of British stocks falling into German hands if Britain were conquered or surrendered, and therefore it tried to persuade Britain to sell a large part of her own strategic stockpile to the US! Sir Ernest Oppenheimer actually agreed to this request on a visit to the United States and also agreed to sell the Americans £2.5 million worth of industrial diamonds but he had exceeded his authority and the British government vetoed both proposals. (Newbury, 1989, p. 338)

Negotiations about the bulk sale of diamonds to the United States dragged on until well into 1941. Following the Japanese attack on Pearl Harbor and Germany's declaration of war on the US four days later, the British and American governments worked more closely together to control diamond supplies. Even though Oppenheimer had previously been in favour of transferring British stocks to the US he opposed American plans for stockpiling because the existence of such a source outside the control of De Beers would threaten its monopoly after the war and also reduce its chance of directly entering the US market (Newbury, 1989, p. 346). However, by the end of 1942 a compromise agreement was reached whereby a stockpile, that both the United States and Britain could draw on if necessary, was established in Canada.

This scheme worked reasonably well but was not totally free of problems. The British suspected that the Americans were overdrawing on the Canadian stockpile in order to build up their own stocks and circumvent the single channel monopoly once the war was over (Newbury, 1989, p. 349-350). Oppenheimer too was alarmed by the extent of the build-up of American stocks of diamonds and thought that the quantity could not possibly be used for military purposes (Gregory, 1961, p. 325).

Although the Germans did not control any diamond producing areas they were still obtaining supplies through various channels. A diamond-cutting industry had been developed by Jewish refugees in Palestine which the Belgian government in exile regarded as a threat to the eventual rehabilitation of Antwerp as the principal centre for diamond cutting. A more pressing concern to Britain was the fact that the existence of such an industry in Palestine encouraged a clandestine trade with Syria and Turkey in diamonds that were re-sold to Germany and consequently controls on the supply of diamonds to Palestine were imposed by the British authorities (Newbury, 1989, p. 345).

Sir Ernest Oppenheimer was worried about the security of diamond stocks in the Congo and warned the dangers of them being seized in a German commando raid by air (presumably from territory controlled by the Vichy regime in France) but the British government suspected that Oppenheimer's motive was to centralise stocks in South Africa and ultimately gain control of the distribution end of the business, which had traditionally been controlled from London (Newbury, 1989, p. 342). In fact the Germans did not need to mount a commando raid. Although the mines in the Congo were nominally under the control of the Belgian government in exile and were supervised by De Beers, investigations by the American Office of Strategic Services (OSS) showed that Congolese diamonds were reaching Germany via Tangier and Cairo.

An OSS agent code-named Teton believed that the Belgian police chief in Leopoldville was responsible for the smuggling operation, but Teton was expelled by the governor general of the Congo and subsequently British Intelligence took over the task of interdicting the supply. However some sections of the OSS suspected that the British avoided a full investigation of whether or not De Beers could have done more to prevent the leakage of diamonds because of fears that officials in the Ministry of Economic Warfare, which had strong links with De Beers, might be implicated (Epstein, chapter 9).


De Beers' Conspiracies ...?

In January 1945 the US assistant attorney general filed a suit against De Beers and other diamond companies for "conspiring to restrain and monopolise commerce." One of the specific complaints was that the companies had prevented stockpiling in the United States. Given that the Americans had been stockpiling diamonds on a considerable scale since 1943 that complaint was manifestly unfair (Newbury, 1989, p351). Other allegations remain controversial to this day. It was claimed that De Beers had prevented competition before the war by buying out potential diamond producing operations in other countries and then preventing their development.

One such case involved a mine in Arkansas were diamonds had been discovered in 1906. Since then several attempts have been made to develop a commercial mine but all have failed. The Crater of Diamonds is now a state park. At her husband's inauguration as president in 1993, Hillary Clinton wore a ring containing Arkansas diamonds. In 1997 the Canadian company Ashton Mining examined a 10,000 ton sample of material from the Crater of diamonds and came to the conclusion that mining in the area would not be commercially viable. No doubt their report came as a disappointment to conspiracy theorists who can always point out that it does not prove that De Beers had not wanted Arkansas to become a significant producer.

Or Geology and Economics?

"There are about two thousand five hundred kimberlitic pipes in the world and they are extremely difficult to find. Only one in ten contains diamonds, and only one in a hundred has enough diamonds to make mining economic. The odds have meant that only about thirty pipes throughout the world have been mined, and only around eight are now in operation. "

"To reach the point of production needs an investment of around three hundred million pounds, but that's when the pay-off comes. A single economic diamond pipe, even at the average yield of about fifty carats, that's eight grams, of diamond for every hundred tons of rock and earth extracted, will be worth two billion pounds over fifteen to twenty years."

Wilderness of Mirrors

The quotation above comes from page 91 of the UK paperback edition.


The South African government was worried about the anti-trust case and tried to persuade the British government to intervene. However the British were much more sanguine and dismissed the affair as just another episode of the periodic "cartel bashing" to which the Americans were prone, inspired in this particular case by an over-zealous assistant attorney general (Newbury, 1989, p.351-352). Eventually the case was dropped because the court was not satisfied that it could be shown that any diamond company had exercised a monopoly over sales in the United States.

The International Diamond Security Organisation

Germany's success in obtaining diamonds during the war showed just how difficult it was to prevent diamond smuggling. That was true in peacetime too. There was a huge unsatisfied demand for diamonds as a hedge against world-wide inflation and the Cold War led to industrial diamonds were being stockpiled by the United States, the Soviet Union and China. Thus, by the early 1950s diamonds to the value of ten million pounds were being smuggled out of Africa every year. That would be equivalent to over £160 million (or over US$230 million) in terms of monetary values in the year 2000. The Million Carat Network, the name given to the illegal trade, is another indication of its size of the traffic and as national police services seemed incapable of ending it, in November 1953 Ernest Oppenheimer turned to Sir Percy Sillitoe, the former head of MI5. During the war MI5's record in capturing and turning German spies had been outstanding. In effect, through its double-agent system it actively ran and controlled the German espionage system in Britain (Masterman, p. xii).

Some accounts of the breaking of the diamond smuggling network in the 1950s give Sir Percy Sillitoe the credit for MI5's success. The double-cross system had actually been run by John Masterman, an Oxford don who had been Harry Openheimer's tutor in politics at Oxford. According to the Dictionary of National Biography, Sillitoe was in overall charge of the police forces in Kent during the war. Peter Wright, a former British agent who created great controversy by publishing his memoirs, Spycatcher, in 1987, claimed that Sillitoe was made boss of MI5 by the prime minister Clement Atlee in 1946 as a snub to the intelligence services which Atlee blamed for the Zinoviev letter in 1929. That letter, purporting to be from the Russians, called on the British Communist Party to prepare for revolution and was blamed by the Labour Party for the defeat of Britain's first Labour government in the general election of 1924.

In 1953, not long after Sillitoe had retired, he was approached by Sir Ernest Oppenheimer for assistance in combatting illicit traffic in diamonds. Sir Percy agreed and in March 1954 undertook a 6-week tour of diamond mines all over Africa at the end of which he set up the International Diamond Security Organization which had the twin aims of increasing security at the mines and discovering the major channels of smuggling to Europe, the Middle East, and the Iron Curtain. Because London was the main international centre for diamond sales the trade was a huge dollar earner for Britain and hence IDSO had no difficulty in getting support from the highest in the land. By means of undercover buying in Liberia and Rhodesia the IDSO was able to penetrate the smuggling rings, but suffered some setbacks along the way. A former airline steward who infiltrated the smuggling network died when his plane crashed on Kilimanjaro before he could pass on to the IDSO important information that he claimed to have discovered.

The story of IDSO was told by Ian Fleming, the author of the James Bond novels and himself a former officer in British naval intelligence. Fleming was approached by one of Sillitoe's agents, who used the alias "John Blaize" without, according to Fleming the blessing of De Beers, in April 1957. That was the year following the publication of the novel Diamonds are Forever - (the title was inspired by the famous advertising slogan, of which it is the plural form) - in which Bond took on diamond smugglers. What Fleming learnt from "Blaize" became the basis of a series of articles in the Sunday Times during September and October 1957, and the Diamond Smugglers a book about the IDSO.

The main source of smuggled diamonds was Sierra Leone, where the stones are found along the courses of rivers and streams over a large area of the country, which made it hard to police diamond production. Furthermore, according to Fleming, "there was a general idea among the illicit miners that the soil of Sierra Leone belongs to the Sierra Leoneans" and they saw no reason why they should not be allowed to look for diamonds. One leading American illicit diamond buyer, whom IDSO was unable to trap, encouraged this idea and claimed to be acting in the best interest of the Africans. Actually the main beneficiaries were foreign buyers and Sierra Leone lost a great deal of revenue owing to smuggling of diamonds into Liberia from where they were sent to Antwerp or Beirut.

One of the Lebanese businessman involved in this trade, Fred Kamil, had a grudge against the smugglers after being cheated by one of them and recruited a gang of thugs and started ambushing smugglers along the Liberian-Sierra Leonean border. Sillitoe reached a deal with Kamil whereby IDSO agents supplied Kamil with information about the movements of smugglers and in return he handed over recovered diamonds to De Beers who would give one third of their value in cash. Action of a more constructive nature to discourage smuggling was taken by the British authorities who decided to legalize the illegal diggers by giving them mining and prospecting licences while the Diamond Corporation (i.e. De Beers) set up buying posts for purchasing the stones extracted by the miners. The tax on diamond exports was also reduced.

By the spring of 1957 these attempts to encourage sales through official channels and the efforts of Sillitoe's agents in targetting some of the brains behind the smuggling rings had proved so successful that the IDSO was disbanded, its mission having been accomplished. Some of its men went back to intelligence or security work and others took jobs with De Beers and the Anglo-American Corporation. (Smillie, Gberie & Hazleton, 2000)

Sillitoe and the IDSO had not totally eliminated diamond smuggling. By the 1960s it was again becoming a problem and, Fred Kamil, who had led the ambushes of smugglers in Sierra Leone, was among the agents hired by De Beers to combat it. Kamil started working for the firm in 1965 and he tried to emulate Sillitoe in establishing a network of investigators and informers to discover who was involved in smuggling. However in 1968 he was fired. Kamil claimed that was because he was about to expose some senior De Beers executives in Namibia.

As the west African smugglers had discovered more than 10 years earlier it was unwise to cross Kamil who maintained he had not received full payment for work he had already done and he hijacked a South African airliner on which Harry Oppenheimer's son-in-law was supposed to be travelling, intending to hold him for ransom. Actually the intended victim was not the plane and after landing in Malawi Kamil surrendered and was imprisoned. Nevertheless, after a short interval he was pardoned and De Beers paid him about about $100,000. Subsequently Kamil wrote a largely autobiographical book entitled the Diamond underworld, (Kamil, 1979).

The Diamond Wars in Africa


Diamond smuggling took a more sinister turn in the 1970s. In 1975 the Portuguese government gave up its attempt to hang on by force to its colonies in Africa, but independence did not bring peace. In Angola a civil war developed between the MPLA, supported by Cuba, and UNITA, supported by South Africa. Both sides were financed by mineral wealth. The MPLA controlled Angola's off-shore oil fields while most of the diamond producing areas were under the control of UNITA. With the ending of the Cold War and apartheid, pressure on the warring factions to end the fighting increased and a peace deal was agreed in 1994. Among the legacies of the conflict, in which half a million people died, are at least 10 million landmines (some estimates put the figure twice as high), or one for every man, woman and child in the country. The visit to Angola of Princess Diana in 1997 helped to attract widespread international support for the Ottawa Treaty prohibiting the use of antipersonnel mines, despite the opposition of the American government. However Angolans will be suffering from landmines for many years to come.

By 1998 the peace agreement had collapsed and consequently the United Nations placed an embargo on UNITA's diamond trade which it estimated had been worth up to $4 billion in the previous six years (Hawthorne, 2000). In the year the diamond embargo was imposed Angolan government forces were also involved in fighting outside their country when they intervened in the Congolese civil war. By 2000 it was apparent that the effect of the embargo was limited and in March that year the United Nations released a report accusing the presidents of Burkina Faso and Togo of supplying UNITA with arms and fuel in exchange for diamonds. However in February 2002 Jonas Savimbi, the leader of UNITA, was killed by the ruling MPLA's army, giving rise to hopes that were subsequently realised, that the long conflict would finally be brought to an end.

The Congo (Zaire)

Not long after gaining independence from Belgium in 1960, the mineral-rich province of Katanga attempted to secede from the rest of the country. That rebellion was eventually crushed but not until after the prime minister Patrice Lumumba, had been killed by troops loyal to the army chief Joseph Mobutu who seized power, allegedly with Belgian and US encouragement. Mobotu, who renamed the country Zaire, proved spectacularly corrupt but because of his pro-western policies he was supported by the US until after the end of the Cold War. In 1997 Rwanda invaded the eastern part of Zaire in order to crush Hutu militias who had been using it as a base. Tutsi and other anti-Mobutu rebels, took advantage of the Rwandan invasion to capture the capital Kinshasha and install Laurent-Desire Kabila as president of the country which they renamed the Democratic Republic of Congo.

Unfortunately a rift soon opened between Kabila and some of his former allies and in 1998 the country was plunged into a civil war in which the anti-Kabila rebels, supported by Rwandan and Ugandan troops, were prevented from capturing Kinshasha by the intervention of Angola, Namibia and Zimbabwe which took Kabila's side. Their intervention proved expensive but has been partly financed by Congolese gold and diamonds. A peace agreement signed in July 1999 by the governments of the six countries involved failed to put a complete end to the war in which, according to some estimates, over 2 million people died, many as a result of hunger and disease. In January 2001 Laurent Kabila was assassinated by one of his body guards and succeeded by his son Joseph Kabila as president.

Experts from the United Nations have stated that the conflict has been deliberately prolonged by factions wanting to plunder gold, diamonds and other resources. Among those implicated, if allegations made by an American diamond dealer in March 2002 are to be believed, are Zimbabwean generals, government ministers and close relatives of president Robert Mugabe. All of those, according to John Marsischky, the boss of Flashes of Color, are involved in offering for sale, gems looted by government forces during the Congolese civil war. His company had attempted to set up a diamond cutting operation in the Congo the previous year, but were unsuccessful owing to the opposition of those with a vested interest in the existing situation.

In October 2002 a United Nations panel of experts issued a report on the illegal exploitation of Congolese resources (report no. S/2002/1146). A few weeks later President Joseph Kabila sacked the top managers from the Congo's state diamond company but denied that the action had anything to do with the report. Some of the companies criticised in the report have also responded vigorously, most notably Oryx Natural Resources who were hoping to be exonerated in a later report by the UN. However in October 2003 the UN described the situation as "unresolved".

The Congo is not only a diamond producer but a channel by which diamonds from other countries reach the world markets. UN inspectors concluded in July 2004 that the Republic of Congo was exporting diamonds at a rate "approximately 100 times greater than its estimated production" and therefore most of these had been smuggled into the country illegally. These findings led to the Republic of the Congo being suspended from the Kimberley Process, thus barring its gems from legitimate markets.

Sierra Leone

Lebanese traders began to settle in Sierra Leone at the beginning of the 20th century and were prominent among the people who acquired mining and buying licences when the colonial government introduced a new licensing system in 1956. As a result of this the Lebanese civil war which started in the late 1970s had an impact on Sierra Leone as various Lebanese militia sought financial assistance from their diamond trading compatriots in that country. One of the best known militia leaders, Nabih Berri, had been born in Sierra Leone. After a failed coup in 1987 the leading Lebanese businessman in Sierra Leone went into exile, creating an opening for Israeli businessmen who were reputed to have close connections not only to the Antwerp diamond trade but also with organised crime in the United States and Russia.

After civil war broke out in 1991 smuggling of diamonds across the border into Liberia to pay for arms increased. Drug traffickers were also attracted to Liberia since they were able to launder money by purchasing diamonds which could easily be sold abroad. Despite the savagery of the conflict, with mutilation of civilians including women and children, it has been said that the main objective of the various rebel factions was not to win the war but simply to engage in profitable crime under the cover of warfare (Smillie, Gberie & Hazleton, 2000, p. 2).

By 1995 the government controlled only the capital and the surrounding area and therefore it turned to the international security firm Executive Outcomes for assistance and the rebels were driven back from the capital of Sierra Leone, Freetown and from some of the main diamond producing areas. Two years later President Kabbah was deposed by a military coup but Kabbah's supporters fought on with the help of weapons supplied by Sandline International, a private military company run by a former British army officer, despite a UN arms embargo. In a subsequent enquiry Sandline International claimed it had the support of the Foreign Office even though the British government officially supported the arms embargo. President Kabba returned to Freetown in March 1998 after a Nigerian-led West African intervention force, captured the capital but in January 1999 rebels attacked Freetown again.

Later in 1999 talks led to a peace agreement and UN peacekeepers were dispatched. However, the following year, rebels prevented the UN troops from being deployed in some parts of the country and fighting broke out again in many areas. The situation was transformed by the intervention of British troops in support of the UN mission and by January 2002 the conflict was over. American and European intelligence agencies trying to unravel the finances of Osama bin Laden's Al-Qaeda network believe that Al-Qaeda had been buying diamonds from Revolutionary United Front rebels and selling them in Europe for a profit.

The organisation Global Witness, which estimated in 2002 that Al-Qaeda had laundered $20 million using conflict diamonds, produced a much more detailed report in April 2003 entitled for a few dollars more, exposing the way in way in which Al-Qaeda had moved into the diamond trade over a ten year period. Therefore the restoration of stability is important not just for the long-suffering people of Sierra Leone but also for people of many other nations.

In April 2002 border guards were put on alert to prevent a massive diamond from being smuggled out of the country following rumours that massive 1,000 carat diamond had been found on the 22nd of that month. If true it would be the second largest diamond ever discovered. Later reports claimed the diamond was even bigger than previously estimated, 1,400 carats, and had arrived in Belgium.

Diamonds and the Fate of the Bushmen and other Tribal Communities

Botswana is one of the more peaceful and prosperous African nations. In contrast to many other African countries it has long had a democratic, multi-party system, has enjoyed peace, and its human rights record is generally regarded as good. However, according to Survival International, a worldwide organisation supporting tribal peoples, there is one significant blot on that record. The original inhabitants of southern Africa were the Bushmen. When Bantu cattle herders moved south about 1,500 years ago the area occupied by the Bushmen was gradually reduced and the arrival of Europeans moving north from the Cape about 200 years ago led to the Bushmen being forced into arid areas that neither the whites nor the Bantu wanted.

Today their numbers total fewer than 100,000 about half of whom live in Botswana. In February 2002 Survival International accused the Botswanan government of cutting off all water supplies in the Central Kalahari Game Reserve in order to drive the Gana and Gwi Bushmen off their ancestral homeland. The European Union offered to meet the cost of supplying water but its offer was ignored. It has been suggested that the Botswanan authorities want to remove the Bushmen in order to exploit the reserve's diamond resources. (Survival International, 2002).

In November 2002 the Mail on Sunday claimed that the supermodel Iman pulled out of a marketing campaign in which she was the "face" of De Beers. The newspaper said that company had specifically wanted an African woman for the campaign but Iman, who is the wife of the popstar David Bowie, decided not to do any further promotional work for them unless De Beers abandoned its plan to mine diamonds in the Bushmen's territory.However other newspapers claimed that the reports were untrue and that Iman was not only unconvinced that diamonds are the reason for the resettlement but she also thought it has nothing to do with De Beers. The firm have strongly denied that they want the Bushmen moved and have threatened to sue campaigners for defamation. In December 2006, to the surprise of many, the Botswanan High Court upheld the right of the Bushmen to return to their land. However the government was considering an appeal against the decision.

Botswana is not the only country where there have been disputes over the eviction of people from their ancestral lands. In October 2003 a South African court ruled that the Nama community in Richtersveld had a legitimate claim to the mineral rights at Alexander Bay on the north-west coast where there are lucrative diamond mines. Such disputes are not confined to Africa either.

Leonardo DiCaprio and The Blood Diamond

De Beers was forced to brace itself to receive more bad publicity in the autumn of 2006 owing to a Hollywood film set in Sierra Leone in the 1990s starring Leonardo DiCaprio who plays the part of Danny Archer, a South African mercenary. Even before the release of the film a group of Kalahari Bushmen sent DiCaprio a letter appealing to him to help their campaign to be allowed to return to their lands in Botswana. Owing to worries about negative publicity De Beers launced a new website DIAMONDFACTS.ORG to publicise the benefits the diamond industry brings to the countries in which it operates and to outline measures to eliminate conflict diamonds.

The Amazonian Indians and Diamond Prospecting in Brazil

Brazil's Mines and Energy Ministry estimated in 2004 that since 1999 some $2 billion worth of diamonds have been taken off Roosevelt Indian Reservation reservation - making it South America's largest diamond mine even though mining is illegal on the reservations. There have been a number of deaths in clashes between Indians and prospectors.


The End of the Cartel?

Oppenheimer's Summersault

In Cape Town in October 1999 Nicky Oppenheimer addressed a group of students from Harvard and unashamedly described De Beers as "the world's longest running monopoly", adding that it deliberately set out "to manage the diamond market, to control supply, to manage prices and to act collusively with our partners in the rural parts of Africa. business." This, he asserted, helped to maintain prices in times of economic recession and preserved jobs in poor, rural parts of Africa. (The Times, 8/1/2002).

Within a year of Oppenheimer's defiant speech De Beers completely reversed its policy. It would no longer be the buyer and seller of last resort but would rely on aggressive marketing to ensure that it was the industry's "preferred supplier." Not long afterwards De Beers received the sort of publicity its chairman Nicky Oppenheimer could only have dreamt of.

"If only we could do this once every six months. We could do away with the advertising department altogether" he said. (Cockburn, 2002, p. 12).

Are Diamond Prices Scandalous?

"... there are lots of interested parties who don't want lower prices. Anyone who owns a diamond engagement ring, or any diamond jewellrey... Diamonds are forever. Apart from their romantic connotations, they are supposed to be an investment for life, the value of which might rise but never fall. Banks who finance diamond mines want to be sure that their loans will be repaid. Jewellers with large stocks want to be sure they hold their value."

"Everyone who owns diamonds would suffer and there are enough hidden hoarders of diamonds from the cartel to everyone who want to have a secret and mobile source of wealth and security. The hoard of secret diamonds is vast, worth billions of dollars. A fall in the value of diamonds would be catasatrophic."

Wilderness of Mirrors

The quotation above is from pages 18-19 of the UK edition.



The event to which Oppenheimer was referring occurred on November 2000 when what would have been the biggest burglary in history was attempted in London. Police intercepted a gang who were about to attempt to smash their way into the Millennium Dome and steal the diamonds worth £200 million that De Beers had put on display there, including the 203-carat Millennium Star. The gang had intended to escape in a speedboat on the Thames, causing the press to compare their plot with scenes from the James Bond film, the World Is Not Enough. (It was, of course, also great publicity for the Dome which had notably failed to fulfil the hopes that Tony Blair and the Labour government had for it).

Despite that failure, diamond thefts became more common in the following years. In May 2002, less than two years after the Dome attempt, £23 million worth of diamonds were stolen from a London jeweller. In February 2003, a huge theft took place in the diamond cutting capital of the world when thieves emptied 123 of the 160 vaults in the Antwerp Diamond Centre, and in September 2004 thieves stole diamonds worth $14 million from a display case at a Paris antique show near the Louvre Museum.

De Beers' change of strategy was the result of the position the firm found itself in at the start of the third millennium. Techniques of producing synthetic diamonds were also improving and if it became feasible to mass produce diamonds of gem stone quality then that would be a new threat to the stability of the cartel. Much more importantly, the Central Selling Organisation was weakened in the 1990s by a flood of illicit diamonds on to the market in the wake of the break-up of the Soviet Union, by doubts about the future of the agreement between De Beers and Russian producers, the defection of the owners of the Argyle diamond mine in Australia and even some African suppliers, and by new diamond discoveries in Canada.

The cartel had survived similar threats in the past but this time there were complicating factors. The hostility of US anti-trust authorities was nothing new but the European Union had also begun to adopt stricter anti-cartel policies and in April 2001 launched an enquiry into an agreement between De Beers and French luxury goods group LVMH. By July 2003 the situation had changed. The EU had approved the arrangement with LVMH and its new marketing strategy. Almost exactly a year later, in July 2004 the American anti-trust case was finally settled when De Beers agreed to plead guilty to price-fixing charges leaving it free, after payment of a fine, to return to the US market.

However, the most important threat to the future of the industry was the issue of conflict diamonds. Diamonds from Canada's Ekati mine were marketed as coming from a land as pure as the driven snow - in unspoken contrast to those coming from the war-torn jungles of Africa (Cockburn, 2002, p. 28). If De Beers had been successful in inducing Canadian and other suppliers to join the cartel there would be a risk that the whole diamond industry would be tarred with the same brush - with disastrous consequences for the economy of several African countries. By redirecting its efforts into marketing only diamonds which came from its own mines De Beers could avoid this danger and at the same time assuage the consciences of individual purchasers, as could developments in tracing the origins of diamonds.

In July 2003 it was reported that Belgium scientists had developed a technique capable of identifying origins. In the same month a list of countries participating in the the Kimberley Process Certification Scheme (KPCS) for rough diamonds was published.

Production of synthetic diamonds has grown enormously since the first successful experiments by researchers at ASEA in Sweden in February 1953 and at General Electric in the United States in December 1954. (Hazen, 1999). Up until now synthetic diamonds been small and only useful for industrial purposes but in 2003 two firms - Gemesis a Florida-based firm using Russian technology, and Apollo, a firm based in Boston, claimed that they could produce diamonds of gem-stone quality. If they can produce them at a competitive price then De Beers' monopoly would obviously be seriously threatened.

Diamonds are a Girl's Best Friend

Individuals buying jewelry are unlikely to regard the fact that the market for gemstones has been dominated by a cartel as scandalous. (Industrial diamonds are a different matter). After all, nobody buying a diamond engagement ring would want to be regarded as a cheapskate. Diamonds are appreciated precisely because they are expensive as shown by the song Diamonds are a girl's best friend, written by J. Styne and made famous by Marilyn Monroe in Gentlemen Prefer Blonds, and more recently by Nicole Kidman in Moulin Rouge.

Marie Antoinette and the Diamond Necklace Affair

The belief that diamonds were the key to a woman's heart helped to cause the French Revolution. Louis René Édouard de Rohan, a French nobleman and cardinal, sought to ingratiate himself with Marie Antoinette. A woman calling herself the Comtesse de La Motte, who became Cardinal Rohan's mistress, convinced him that the queen wanted him to purchase secretly on her behalf a fabulous diamond necklace worth the enormous sum of 1,800,000 livres, (the price of a battleship) that had been made by the jeweller Charles Bohmer for Madame du Barry who had been banished from the French court after the death of Louis XV. Cardinal Rohan obtained the necklace from the jeweller and gave it to Mme La Motte, expecting to be repaid by Marie Antoinette. Instead Countess de La Motte gave the necklace to her husband who took the diamonds to London and sold them.

When Charles Bohmer demanded payment the whole affair became public, including letters concerning the diamond that apparently came from the Queen but had actually been forged by Mme de La Motte. The furious King and Queen had de La Motte and the cardinal put on trial. Cardinal Rohan protested his innocence and was acquitted but the countess was found guilty, flogged, branded and imprisoned. Later she escaped to London where she spread rumours about Marie Antoinette. Although the Queen was innocent many of the public believed La Motte accused and thought that Marie Antoinette really had led Cardinal Rohan on and persuaded him to obtain the necklace. Consequently the affair of the necklace increased her unpopularity with damaging consequences for the short-lived future of the French monarchy.

The affair of the diamond necklace inspired a novel by Alexandre Dumas, Le Collier de la reine or the Queen's Necklace, and Thomas Carlyle also wrote a book about it.

Diamonds and Stars

Despite the fate of Marie Antoinette and the cynical sentiments of Diamonds are a girl's best friend, diamonds have become a symbol of eternal love. The tradition of giving them as tokens of love dates back to 1477 when Archduke Maximilian of Austria gave a diamond ring to Mary of Burgundy. However the typical diamond in an engagement ring is probably about 3 billion years old or two thirds of the age of the Earth itself, and was formed deep within the Earth and brought to the surface by a volcano over 70 million years ago.

Diamonds are also formed in stars and are scattered into space by stellar explosions. Astronomers have claimed that most diamonds formed from primordial carbon initially present during the accretion of Earth. Diamonds are abundant, in microscopic specks, in some meteorites, and it is quite possible that the stone in a ring was seeded by one such speck from outer space (Hart, 2002). In June 2004, G. Parthasarathy of the National Geophysical Research Institute in India, claimed that he and his colleagues had obtained evidence that black diamonds, known as carbonados and found only in Brazil and the Central African Republic, were part of extra-terrestrial objects that fell on the earth several million years ago. Therefore it could be claimed that the old belief of the Romans that diamonds were splinters of stars that had fallen to Earth was not without a grain of truth.

In February 2004 astronomers announced that they had found the largest known diamond in the universe. It is actually a white dwarf star about 50 light-years from the Earth in the constellation Centaurus. Technically known as BPM 37093 but more popularly called Lucy (after the Beatles' song Lucy in the Sky with Diamonds) it has a 3000-kilometre-wide core of crystallised carbon, or diamond, with a mass of 2.27 thousand trillion trillion tonnes - that's 10 billion trillion trillion carats. In contrast the biggest earthly jewel is the 530-carat Star of Africa in the British Crown Jewels.

A Diamond is Forever

The manner in which diamonds were formed and the values they symbolise are summed up concisely in what Advertising Age magazine called the greatest advertising slogan of the 20th century. Late one night in 1947 Frances Gerety, a young copywriter at the N. W. Ayer advertising agency, was working on a presentation for De Beers but, feeling tired and completely stumped she prayed, "please God, send me a line." Then, she suddenly scribbled the famous words:

A diamond is forever.


References and Other Sources

The BBC Website.
It contains extensive archives making it an excellent source of information on past events as well as current news, e.g. Al-Qaeda 'traded blood diamonds'.
Carlyle, Thomas, 1795-1881 The diamond necklace. Boston, Mass. : Houghton Mifflin, 1913. (First published in 1837 in 3 consecutive issues of Fraser's Magazine).
An account by the great Victorian historian and essayist of the affair of Marie Antoinette and the diamond necklace. A number of other historical accounts of the necklace affair have been written. See also the book by Frances Mossiker in this list and the novel by Alexandre Dumas.
Cockburn, Andrew. Diamonds: the real story. National Geographic, vol. 201, no.3, March 2002, p. 2-35.
"The story of how diamonds get to us is just as complicated as the love they have come to symbolize."
Wilderness of Mirrors is a financial thriller by Linda Davies. The plot involves diamond mines, drug trafficking and arms dealing, with action taking place in London, Hong Kong, the Vancouver Stock Exchange and the jungles of Vietnam.
Davies, Linda. Wilderness of mirrors. London: Orion, 1996.
A novel about the links between the banking system, the intelligence services, and the diamond industry, set mainly in London and Vietnam, but also involving Hong Kong and the Vancouver Stock Exchange.
24Hour Diamond News.com
All the latest news from the diamond industry.
Dumas, Alexandre, 1802-1870. The queen's necklace Lightning Source UK Ltd 2004 ISBN: 1417909234.
First published in French as Le collier de la reine, in 1849.
Epstein, Edward J. The diamond invention. London: Hutchinson, 1982.
Epstein has generously made the full text of his well-written and fascinating book available on the web. However in the main chapter on World War II, chapter 9, which is very critical of British policy, he relies heavily on official US sources which he treats as gospel. He ignores the US government's rejection of the British request to stop supplying diamonds to Germany. Furthermore in chapter 16 he states that Rommel was sent to North Africa before the German invasion of the Low Countries and that therefore the Jews would have been in more danger from the Germans in British-controlled Palestine than in "neutral" Belgium! That is utterly absurd. The Germans conquered Belgium in May 1940, a month before fighting broke out between the British and the Italians in North Africa, and Rommel and the Germans did not take part in the conflict in the Western Desert until February 1941.
Farrell-Roberts, Janine Blood stained diamonds: a worldwide diamond investigation. Bristol: Impact Media, 2001.
Very much a case for the prosecution. Farrell-Roberts' book is available on CD-ROM or can be downloaded from her website.
Fleming, Ian. Diamonds are forever. London: Jonathan Cape, 1956.
A novel about diamond smuggling written before Fleming's non-fictional work on the subject.
Fleming, Ian. The diamond smugglers. London: Jonathan Cape, 1957.
The story of how the former head of MI5 set up a security service for De Beers and smashed an international smuggling network.
Gregory, Theodore. Ernest Oppenheimer and the economic development of Southern Africa. Oxford University Press, 1961.
A biography of the man who more than anyone determined the shape of the diamond industry in the 20th century.
Hart, Matthew. Diamond: the history of a cold-blooded love affair. London: Fourth Estate, 2002.
A fascinating account by the editor of the New York trade magazine, Rapaport Diamond Report.The book is rather selective in its geographical coverage of diamond producing areas, having little on Russia and Australia, but does have a lot of information about the search for diamonds in Canada where important new discoveries have been made.
Hawthorne, Peter. Striking at the Root of Civil War. Time, vol. 155 no. 12, 27 March, 2000.
An article about a U.N. report exposing the illicit diamond trade fuelling Angola's conflict.
Hazen, Robert M. The diamond makers. Cambridge: Cambridge University Press, 1991.
The history of the quest to make synthetic diamonds.
Kamil, Fred. The diamond underworld. London: Allen Lane, 1979.
The autobiography of one of the most colourful and controversial figures in the history of attempts to prevent diamond smuggling.
Krajick, Kevin. Barren Lands: an epic search for diamonds in the North American Arctic. New York: Times Books,2001.
Surveys the history of diamond mining in general but concentrates in particular on the successful search for diamonds by Charles Fipke and Stewart Blusson in Canada's Northwest Territories.
Masterman, J.C. The double-cross system in the war of 1939-1945. New Haven: Yale U.P., 1972.
An account of how Britain used captured German spies to feed false information back to the Germans.
Mossiker, Frances. The Queen's Necklace: Marie Antoinette and the scandal that shocked and mystified France. Weidenfeld & Nicholson, 2004. ISBN: 1842126148
Newbury, C.W. The diamond ring : business, politics and precious stones in South Africa, 1867-1947. Oxford : Clarendon, 1989.
A thorough treatment of the industry up until just after World War II.
The Great Diamond Hoax of 1872.
Taken from Chapter XXIV of George D. Lyman's book Ralston's Ring - California Plundders the Comstock Lode, published by Charles Scribner's Sons, New York, 1937. A somewhat romanticised account of a notorious scam.
Tolansky, S. Diamond. Part 1. Contemporary physics vol. 1, no. 2, 1960, p. 96-111. Part 2 of the article was in vol. 1 no. 4, 1960, p. 276-286.
Includes an interesting account of the history of diamond production.
Wilson, Robert. The Great Diamond Hoax of 1872. Smithsonian, vol 35, no. 3, p. 70-79, June 2004.
In a spectacular scam, two Kentucky men duped bankers, businessmen and lawyers into investing in "the most gigantic and barefaced swindle of the age".
Sillitoe, Sir Percy. Cloak without dagger. London: Cassell & Co., 1955.
The autobiography of the former head of MI5 and boss of the International Diamond Security Organization.
Smillie, Ian; Gberie, Lansana, and Hazleton, Ralph. The Heart of the Matter: Sierra Leone, Diamonds and Human Security. Ottawa: Partnership Canada Africa, 2000.
A very detailed report on the history of the diamond industry in Sierra Leone and the human cost in warfare.
Survival International Botswana Bushmen - historical tragedy or crime against humanity?
The eviction of Bushmen from the Central Kalahari Game Reserve is the biggest news story in Botswana's history. Survival International is an organisation that campaigns on behalf of tribal people all over the world.
The Times, 8 January 2002, p.18. Diamonds lose a little sparkle for the Oppenheimers.
An article outlining the problems that were facing De Beers.
Twain, Mark. Following the equator: a journey around the world. New York and London: Harper and Brothers, 1904.
The quotation is from vol. 2, chapter XXXIII, p. 402. The same chapter describes how the diamond industry in South Africa started and how the mines seemed to Twain when he visited the area in 1896.
Wright, Peter. Spycatcher. Victoria : William Heinemann Australia, 1987.
The controversial memoirs of a former British spy.

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Last updated 19 November 2007.