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The Trade of Conflict Diamonds De Beers & ABN Amro

By Tharunya R Roll no -KH.BU.P2.9063 MBA , Amrita School of Business Kochi

Tharunya Raveendran using secondary data collected from online portals and journals and the appropriate referencing to the sources have been indicated.Declaration This is to formally certify that the Project ´Trade of conflict Diamonds : De beers& ABN Amro ´ is an original work compiled by Ms. ASB Kochi 18-09-2010 .

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Most of the diamonds around the world are sourced from Africa where many countries like Angola. political and ethical issues that have arose from this which this case intends to study.e. ABN Amro is an international banks that facilitate the trade of diamonds the most. Thus there has been certain legal. Diamonds and other precious stones are almost said to be having a supernatural power revered by the elite. Diamonds have had legends surrounding them and even today they are regarded as a symbol of status and affluence. .If not for adorning beauty it has also largely grown as an option for future investments.Democratic Republic of Congo that are stricken in the mires of civil war.Executive Summary Among the various luxury products that have been prevalent in history nothing has been more controversial than the story of the trade of diamonds. Sierra Leone . There has been an increased awareness about this issue and it has also started playing significantly on the endconsumer perceptions. And what truly makes it rare is its limited supply. available in very few mines located in South Africa. And certain militant groups in these areas fund their coupe weaponry by trading those diamonds from the mines they have forcibly taken control of. Major players Like De Beers and ABN Amro are under the fire of controversy because of trading those conflict diamonds. India and others and its marginal utility. i. The international diamond Industry has largely been monopolistic in nature dominated by De Beers trading firm.

They trade diamonds with companies world over and finance their weapons and civil wars unleashed upon the governments and people at large. In fact the condition is so horrendous that even children are being recruited and trained to unleash terror attacks. Sierra Leone. However this study presents a contradiction to the said view .Thus systematically violating human rights. a gift of it to one·s love is an expression of deep emotional attachment and an investment in it is a strong reliable asset. Two thirds of the diamonds world over are sourced from countries like Liberia . Ivory Coast. And so there is a greater awareness of this issue world over and is now being strongly condemned by end consumers. .INTRODUCTION Often it is observed that businesses mitigate war and are supposed to fuel a country·s economy by providing employment. The media has responded to this issue with the release of the movie called ´Blood Diamondµ directed by Ed Zwick. bringing in foreign investments and thus an overall economical wealth and prosperity. The republic of Congo and recently Zimbabwe that are politically unstable. Many of the world histories and legends surround diamonds for instance the story of the Kohinoor Diamond brought from the Indian Golconda mine in the colonial era adorns the crown of Queen Elizabeth. and there are militant groups that have a stronghold over the diamond mines. Thus the issue of conflict diamonds becomes more relevant . Often the origin of diamonds is a primal issue with the consumers. The governments of these regions are inefficient and still in the initial turbulent years of establishment and consolidation. Diamonds are essentially revered world -over as a luxury product. Thus trading in tainted diamonds have become a contentious ethical-political issue and compaies like De beers and AMR Amro sre struggling to deal with it. Since it is a question of whose responsibility it is to curb the trade of illicit diamonds. Though certain international organizations like UN and WDC(World Diamond Congress) have framed certain strict regulations and policies to deal with it the key players are still the local unstable governments.It explores the issue of Conflict diamonds or the blood diamonds that has recently mired the international diamond industry as a whole in particular big fishes like De Beers associates and ABN Amro. Angola. The Democratic Republic of Congo. The ownership of a diamond ornament is a declaration of once hard-earned status. Thus the companies are under pressure to self-regulate.

. An attempt is being made at understanding the conflict of interests in the international diamond industry. It looks at what is essentially a controversial humanities issue from a business perspective. The research essentially explores the issue of conflict diamonds and studies the international business aspects of it focusing on De Beers group of Companies and AMR Amro. Secondary data has been sourced from online sites of reputed newspapers . Research Methodology An exploratory secondary data analysis is the methodology chosen.Research Questions Certain questions this research proposes to explore: 1) What are the ethical and political issues related with the trade of conflict diamonds? 2) What are the industry ²level measures taken to curb the business of conflict diamonds? 3) How are the key players in the Diamond business like De Beers and ABN Amro dealing with their alleged involvement in the trade of conflict diamonds? Research Scope This study is made in an attempt to explore the issues in international business and is based on secondary data analysis. Wikipedia and other research sites details of which are clearly stated in the bibliography.

Diamond jewellery competes with other discretionary services and products for the share of consumers wallet Because of their aspirational and discretionary nature. diamonds have both emotional and physical attributes which influence purchase behavior. Its contributes more to jewelry than to other sectors like Industry. Investment and autocatalyst. . Diamonds are more vulnerable to reputation threats than other raw materials. as distinct from more fungible commodities. From a consumer perspective.Background of the study A brief on the Diamond Industry World over Diamonds are a luxury product with unique attributes which are very distinct from the commodities Whilst also a natural resource. diamonds are the main feature of an end consumer product.

Key Players and Their Market Share Conflict diamonds In relation to diamond trading. in the value of US$3. Countries where the Conflict Diamonds are sourced And their political situation Angola Angola. 1975. or a warlord's activity. or a war diamond) refers to a diamond mined in a war zone and sold to finance an insurgency. and 19% were specifically conflict in nature. UNITA sold diamonds. Reports estimated that as much as 20% of the total production in the 1980s were being sold for illegal purposes. to finance its war with the government. Between 1992 and 1998. and the National Liberation Front of Angola (FNLA) fought in a civil war from 1974 to 2001. Although independent. conflict diamond. a colony of Portugal. By 1999.06% of the world's diamond . the National Union for the Total Independence of Angola (UNITA). banning the purchase of conflict diamonds from Angola Resolution 1173 was the first resolution of the UN which specifically mentioned diamonds in the context of funding a war. hot diamond. usually in Africa]where around two-thirds of the world's diamonds are produced. The UN recognized the role that diamonds played in funding the UNITA rebels and in 1998 passed United Nations Security Council Resolution 1173 and United Nations Security Council Resolution 1176. gained independence on November 11.72 billion. blood diamond (also called a converted diamond. the Popular Movement for the Liberation of Angola (MPLA). invading army's war efforts. the illegal diamond trade was estimated by the World Diamond Council to have been reduced to 3.

Rough diamonds are exported out of the country to neighboring states and international trading centers through the northern. now faces trial in The Hague. despite UN sanctions the illicit diamond trade still exists in Côte d'Ivoire. The country became a route for exporting diamonds from Liberia and war-torn Sierra Leone. Forces Nouvelles controlled section of the country. The Democratic Republic of the Congo The Democratic Republic of the Congo (formerly Zaire) has suffered numerous civil wars in the 1990s. the flawless D-colour 200 carats (40 g) Millennium Star was discovered in the . Liberia is attempting to construct a legitimate diamond mining industry. A coup overthrew the government in 1999. Ivory Coast Ivory Coast (also known as the Côte d'Ivoire) began to develop a diamond mining industry in the early 1990s.production. The UN set out to find how this remaining illicit trade was being conducted. UNITA was able to continue to sell or barter some diamonds in order to finance its war effort. and the UN Security Council banned all exports of diamonds from Côte d'Ivoire in December 2005. However. starting a civil war. a group which is reported to be using these funds to re-arm. In 2001 the UN applied sanctions on the Liberian diamond trade. Around the time of the 1998 United States embassy bombings. Foreign investment began to withdraw from the Ivory Coast. To curtail the illegal trade.The World Diamond Council reported that by 2004 this percentage had fallen to approximately 1%. Taylor of supporting the Revolutionary United Front (RUF) insurgency in neighboring Sierra Leone with weapons and training in exchange for diamonds.]One of De Beers' most celebrated and priceless diamonds. Despite the UN Resolution. Having regained peace. The UN has lifted sanctions and Liberia is now a member of the Kimberley Process. the UN accused Liberian president Charles G. al-Qaeda allegedly bought gems from Liberia as some of its other financial assets were frozen. Liberia and Sierra Leone From 1989 to 2001 Liberia was engaged in a civil war. In 2000. but has become a member of the Kimberley Process and now exports about 8% of the world's diamonds. and appointed Canadian ambassador Robert Fowler to investigate. the nation stopped all diamond mining. and after being exiled to Nigeria. In August 2003 Taylor stepped down as president.

and in May 2000.. It was also accused of falsifying certificates of origin. led directly to the passing of United Nations Security Council Resolution 1295 and the diamond producing countries of southern Africa meeting in Kimberley. 2002. the United Nations too identified the conflict diamond issue as a funding for war. South Africa to plan a method by which the trade in conflict diamonds could be halted. The Republic of Congo was readmitted in 2007. Conflict Diamond campaign Global witness was one of the first organizations to pick up on the link between diamonds and conflicts in Africa in its 1998 report entitled "A Rough Trade". Zimbabwe Zimbabwean diamonds are not considered blood diamonds by the Kimberley Process Certification Scheme. the origin of which it could not detail. after two years of negotiation between governments. The KPCS was given approval by the UN on March 13. and instituted a ban on any individual found trading in conflict diamonds from the diamond bourses of the World Federation of Diamond Bourses. the country was exporting large quantities of diamonds. With the passing of United Nations Security Council Resolution 1173 in 1998. and in November. 2000.DRC and sold to De Beers during the height of the Civil War that took place in the early to mid-nineties. for countries to impose criminal charges on anyone trafficking in conflict diamonds. legislation in all countries to accept only officially sealed packages of diamonds. the World Diamond Congress adopted at Antwerp a resolution for an international certification system on the export and import of diamonds. and buyers of diamonds could be assured that their diamonds have not contributed to violence Kimberley Process Certification Scheme (KPCS) July 19. In the past the chaotic production at Marange and smuggling resulted in monitoring by the World Diamond Council. The Fowler Report in 2000 detailed in depth how UNITA was financing its war activities. and Non- . The Republic of Congo The Republic of Congo (Congo-Brazzaville) was expelled from the Kimberley Process in 2004 because despite having no official diamond mining industry.]The Kimberly Process was led by the diamond-producing African countries themselves. diamond producers.

Liberia and Sierra Leone. . South Africa and Canada. the Democratic Republic of Congo(DRC). including Amnesty International. De Beers is active in every category of industrial diamond mining: open-pit. it holds third place. diamond mining. The International Diamond Division of ABN Amro in Antwerp is an international division which advises and supports ABN Amro diamond desks worldwide. De Beers has been highly successful in increasing consumer demand for diamonds. Mining takes place in Botswana. Over the last century. a number of European societal organisations. the Kimberley Process Certification Scheme (KPCS) was created. ABN Amro occupies a strong position particularly in the Netherlands and United States.µ NIZA Since October 1999. ABN Amro is a large. have been campaigning alongside the Netherlands institute for Southern Africa (NIZA) against the illicit trade in diamonds from countries such as Angola. ABN Amro is listed on the Euronext and is one of the funds of the AEX Index. diamond trading and industrial diamond manufacturing sectors. underground. It is by far the largest company in all these categories. ABN Amro is one of the largest links in the diamond trade. large-scale alluvial. internationally-oriented bank. Namibia. coastal and deep sea. ABN Amro With its headquarters in Amsterdam. the bank holds sixth place and in Europe. De Beers De Beers and the various companies within the De Beers Family of Companies are in the diamond.Government organizations. One of the most effective marketing strategies has been the marketing of diamonds as a symbol of love and commitment with its immortal slogan µa Diamond is forever. Worldwide.

Indicators of reputational damage for Amro .Main issue details & Analysis Issue of ABN Amro On 25 May 2001. have large diamond desks. Moscow. ABN Amro did report that it received e-mails from concerned private customers who requested more information about the bank·s involvement in the matter. Deceased Zairean President Mobutu(now the Democratic Republic of Congo. the NIZA published the findings of a research study ¶ABN Amro and the diamond trade·.7 billion dollars.Effect on Labour market: For ABN Amro·s attractiveness as employer declined in the course of the years. No private or institutional customer relinquished relations with the bank as a result of the issue. There are special diamond banks and banks with special diamond divisions. . Hongkong. The changing perception of potential employees became manifest in 2002 when the bank slid to fifth position. ABN Amro had to do more to acknowledge and meet its social responsibilities in this sector. In 1998. only to slide back to third place in 2001. 2001).This bank is the only one which focuses exclusively on the diamond trade. which was carried out by SOMO on behalf of the NIZA (SOMO.displayed a similar decline in the course of 2001. In addition to the affair surrounding conflict diamonds. A significant player in the network of diamond traders is the Antwerp Diamond Bank (ADB). falling behind companies like Ahold and Shell .ABN Amro took in second place and it maintained this position for two years running. and in providing storage. so long a sound international certification and monitoring system lacked. In the study it emerged that total bank debt of the global diamond industry at the end of 1999 amounted to 5.6 A diamond trader cannot approach just any bank.In the first three years since the issue first presented itself. such as ABN Amro. Bangkok. DRC) financed his regime largely with diamonds. . transport and customs services. ² earnings per share and return on capital employed .4 The prominent role that ABN Amro fulfilled in the diamond industry raised questions about the extent of the bank·s involvement in financing the ¶conflict trade· and which measures it took to prevent involvement. ABN Amro was alsoconfronted with allegations of financing deforestatation practices on palm oil plantations and questionable mining practices. New York. The NIZA and SOMO argued that. Mumbai. It was reported that vested interests in the industry had stood in the way of reporting blood diamond traders and that the enormous incomes that were generated enabled presidents to remain in power and rebel leaders to finance their wars. Singapore and Tokyo in particular. Banks can therefore play a role in financing the trade and processing of diamonds. no contracts were severed with suppliers suspected of being linked to the illicit trade in diamonds. ABN Amro branches in Antwerp. ABN Amro financed a third of this amount.

De Beers decided to stop all outside buying of diamonds in order to guarantee categorically the conflict-free status of De Beers diamond. De beers & conflict diamonds Prior to action being taken by the United Nations Security Council in 2000. . thereby allowing the civil war to continue in 1998 despite international economic and diplomatic sanctions being in effect through United Nations Security Council Resolution 1173. the Kimberley Process Certification Scheme[and its own Diamond Best Practice Principles. In 1999. The initial focus of the UN's investigation was on UNITA movement in Angola. De Beers states that 100% of the diamonds it now sells are conflict-free and that all De Beers diamonds are purchased in compliance with national law. De Beers was buying conflict diamonds from guerilla movements in three African countries. which was found to have bartered uncut diamonds for weaponry. thereby financing regional conflicts.. under pressure from the United Nations. effective from 26 March 2000. as well as eliminating sources of excess supply. The Kimberley process has helped restore the reputation of the industry.

Sierra Leone). De beers Action On 2 June 2000. ‡ Active participation in the ¶Kimberley Process· whereby certification and monitoring systems were developed to prevent trade in conflict diamonds. Amro Intiatives -ABN Amro occupied a prominent position in the World Diamond Council (WDC). at a conference on the diamond trade. as guideline for ethical and social issues. The WBCSD is a coalition of approximately 130 companies in 20 countries.16 The principles form the point of departure for dialogue with stakeholders.15 Since November 2001. broader social business principles complement the corporate values. including ABN Amro. . the organisation by means of which the diamond industry intended combat the trade in conflict diamonds and promote legal trade. namely the integration of economic growth. The resolution was approved bythe delegations. and supplier to ABN Amro. Strict regulations should be in place and business relations are maintained only with reputable companies. which include human rights. It proposed that rough diamonds be sealed in the countries of origin before being exported to the trade and/or cutting centres. A more detailed code of conduct is being developed. announced their commitment to refrain from financing any activities related to the illicit trade in diamonds from conflict areas (such as Liberia. The four values are: integrity. The bank will also be assess middle management on their compliance with the code of conduct. the South African diamond firm De Beers. respect and professionalism. As from 2003.ABN Amro could pay more attention to its social responsibility in the internal diamond trade by playing a much more active role in regulating the diamond trade it finances. ‡ On 14 July 2000. ‡ ABN Amro now endorses all UN resolutions to end the trade in conflict diamonds andillicit diamonds. the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) jointly submitted a resolution on conflict diamonds. ABN Amro joined the World Business Council for Sustainable Development (WBCSD). such as De Beers and Ascorp .14 ‡ On 20 July 2000. The creation of long-term shareholder value rests on two mutually reinforcing pillars: performance and reputation. These companies are committed to sustainable development. ‡ In July 2000. environmental protection and social advancement. teamwork. ‡ ABN Amro has had corporate values since 1997.Conclusions & Initiatives taken Self-regulation -self regulation in the diamond sector is most effective. Angola. including ABN Amro. This resolution called for an international certification and monitoring systems to regulate the import and export of rough diamonds. The company regards these principles. part of their income will be determined by it. four diamond banks in Antwerp.

One of the initiatives was to assist in the ¶Kimberley Process·10 during which the diamond industry set up a certification and monitoring system to combat the illicit trade in conflict diamonds.8 Buyers to whom De Beers supplied rough diamonds were presented with a contract which included sanctions on trading in diamonds from conflict areas. De Beers also decided to close all buying offices in Africa and to stop purchasing African diamonds on the open market. the Board of De Beers introduced a universally applicable code of conduct. .11 On 1 January 2003. the Central Selling Organisation (CSO). .9 De Beers changed its rough diamond purchasing policy to prevent ¶conflict diamonds· turning up at the sales branch of De Beers in London. ABN Amro also launched initiatives so as to preserve the trust of its stakeholders and fulfil its role as socially responsible bank. In 2001. It concerned only a small quantity of diamonds. the system was launched which only permits trade in certified diamonds.took far-reaching steps to prevent diamonds from African war zones entering the market. De Beers and ABN Amro wanted to avoid embarrassing the whole diamond industry and themselves. Thelargest diamond firm in the world decided to withdraw completely from Angola. 1) 2) 3) 4) http://www.pdf http://en.pdf .wikipedia.ib-sm.