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Justin Arbogast Professor. Fritsch 04/22/2011 Diamonds Are Forever

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For the past century, the biggest scam to ever take place in the world has been overlooked. The idea that was implemented into the global mind was that diamonds are rare precious stones found in only certain parts of the world. This statement however is false. Diamonds are found everywhere in the world, it is just a matter of finding their location. By misinforming the public, diamond companies have been able to control the market by limiting supply and increasing demand with the use of advertisements. To learn about the problems within the diamond empire, we must first look at the history of diamond mining. We will then take a look at the conflicts in African countries connected with the diamond trade. Finally discussing what a conflict diamond is and the measures being taken in order to prevent conflict diamonds from entering the market. After watching the documentary The Diamond Empire, the truth about the diamond trade came to the surface. Since 1888, the diamond market has been dominated by a company called De Beers. De Beers¶ main headquarters are located in Johannesburg, South Africa, the diamonds are sold in London but their mining sites can be found around the world. In the mid 1860s, diamonds were discovered on the farm of Nicolaas and Diederick de Beer, in the town of Kimberley, South Africa. Two diamond mines were built on the farm. Cecil Rhodes, a British businessman decided to buy the diamond mines and consolidate them into one large company. Cecil Rhodes realized that the easiest way to maximize profit was to hire cheap labor. A tax was placed on South Africans forcing them to work in the mines in order to pay the tax. Another man by the name of Ernest Oppenheimer had discovered a large mine in South Africa as well. Oppenheimer was ready to flood the market with diamonds if he was not appointed chairman in the De Beers Company (6). A monopoly was born that day when Ernest Oppenheimer merged his company with De Beers.

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When the diamonds are mined, all uncut stones are sent to the headquarters in London. At the Diamond Trading Company in London, uncut diamonds are sorted by size, shape and quality. Any company interested in buying uncut diamonds must purchase them from De Beers at this location. Buying uncut diamonds is not as easy as it may seem. Sightholders which are buyers of uncut diamonds are given a box containing several bags of uncut diamonds. The deal is take it or leave it. In the article South Africa¶s De Beers: The Most Unethical Corporation in the World, a ³sightholder makes an offer for the bag and the negotiation proceeds on this base. Buyers are afraid of crossing the De Beers operation because if they refuse the bag, or make too little an offer or behave like poor citizens in the diamond trade DeBeers will either not offer them any new bags of diamonds to purchase or will offer them bags with only poor grade diamonds which are difficult to distribute´ (13). De Beers controls the price of the diamonds, how many are being sold, and what diamonds are being sold. With the power to control the level of trading of diamonds, a marketing scheme was then needed to spark an interest with the public for diamonds. De beers joined forces with the powerful advertising company N. W. Ayer & Son. The idea was that if De Beers could advertise diamonds as a gift of love, it would make those who wanted to buy them believe that the bigger and more expensive a diamond is, translates into a larger expression of their love for their significant other. With weddings, birthdays, and anniversaries being bought every day, a massive demand for diamonds emerged. In the 13th chapter of Edward Jay Epstein¶s book The Diamond Mind, the partnership with N. W. Ayer and De Beers expanded its sales of diamonds in the United States from $23 million in 1939 to over $2 billion, at the wholesale level by 1980. Epstein also states that ³the diamond trade today results in over $72 billion annually´ (9). The slogan ³A Diamond Is Forever´ made consumers

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cherish their diamond jewelry and want to keep it forever. This has resulted in a stockpile of diamonds being saved by consumers. Theoretically, if everyone sold their diamond jewelry at the same time, the diamond market would crash. In the 1990¶s conflict erupted in several African countries. The illegal trade of diamonds has fueled devastating conflicts in countries such as: The Ivory Coast, The Democratic Republic of Congo, Angola, Sierra Leone, and Zimbabwe. With diamonds becoming such a valuable commodity, rebel forces started to take interest. According to the author Päivi Lujala, ³natural resources play a central role in armed civil conflicts because of the incentives and opportunities they present for rebel groups´ (12). Rebel armies fighting against the government raided the diamond mines in these countries and attacked anyone in the surrounding area. Neighboring villages were susceptible to mutilations and also being taken to be the rebel¶s work slaves. BBC Africa stated that within these countries children were kidnapped, drugged, and forced to commit atrocities (2). In Sierra Leone, a rebel group known as the Revolutionary United Front (RUF), would take villagers and amputate limbs, leaving their victims with life long memories of the brutality. With the power to control the mines, rebel forces began selling rough diamonds to countries and companies. If you are wondering what a conflict diamond is exactly, this is a basic explanation. A conflict diamond or also referred to as a blood diamond is any diamond that is uncut and sold on the black market. The stone originates from an African country and is smuggled out of the country in return for money to fund the war. All stones are unregistered when they are illegally transported to another country. From that point, the stones are sent to a diamond dealer or company and are mixed in with legal rough diamonds already possessed by the company. Those

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diamonds are then either kept by the company to decrease supply or they are sent off to a cutting company to be sold into the regular mainstream market. Conflict diamonds captured the world's attention during the extremely brutal conflict in Sierra Leone in the late 1990s. In the article Blood Diamonds, it says that in the 1990s, about 15% of the world's diamond production was categorized under conflict diamonds (1). The atrocities occurring were not only in Sierra Leone but also in countries such as the Ivory Coast, Angola, and the Congo. War torn countries dealing with violent rebels also had to face the one thing that could financially stabilize the country be taken away from them; diamonds. In the Harvard International Review, Steven Wu reported that ³one mine in Angola, for example, produced $8 million worth of diamonds a month--enough to buy 160,000 AK-47s or 2,500,000 land mines on the black market´ (14). Money and diamonds being transferred in the black market correlated to the guerrillas being funded with the weapons and money needed to keep fueling the fire in the attempt to take down the government. Another unveiling of the devastation in Sierra Leone was the Edward Zwick movie starring Leonardo Dicaprio; Blood Diamond. The movie depicted Dicaprio as an arms dealer from South Africa smuggling diamonds out of Sierra Leone. The movie showed the brutality of the RUF towards civilians and the reality of how the trading of blood diamonds occurs (15). The issue of conflict diamonds had begun to become a global issue. However, the impact of conflict diamonds into the market was overwhelming. One major flaw within the diamond trade system was the numerical records of imports and exports, of diamonds, from different countries. An article in the editorial section of the Minneapolis Star-Tribune stated: ³The Ivory Coast diamond industry closed down in the 1980s,

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but De Beers in Belgium recorded imports of more than 1.5 million carats in gemstones from the Ivory Coast annually in the '90s. Those stones were most likely smuggled to the Ivory Coast from Angola and Sierra Leone. Liberia produces about 100,000 carats a year. However, between 1994 and 1998, more than 31 million carats were exported to the world diamond center in Antwerp, Belgium. These too were smuggled stones, fueling not only the violence in their countries of origin, but in Liberia. Sierra Leone officially exported only 8,500 carats in 1998, but Belgium recorded 770,000 carats coming from that country´ (3). With so many statistical mistakes, outside forces soon stepped in. The issue that had to be addressed was the trading of illegal diamonds and their entry into the market. At a much lower cost then diamonds coming from the mines, a shifting of diamonds caused a negative correlation to occur. De Beers, losing money due to the rebels decided something must be done to prevent the funding of the guerrilla warfare. Illegal trading of such a valuable asset brought a unanimous decision by the United Nations that action must be taken in order to stop the funding of criminal activities within these countries. ³In July 2000, the global diamond industry made clear to the international community its zero tolerance policy towards conflict diamonds. Dedicated to eradicating the trade in conflict diamonds, it worked closely with the United Nations, governments and non-governmental organizations such as Global Witness and Partnership Africa Canada to create the Kimberley Process Certification System. This system was formally adopted in 2003 and guards against conflict diamonds entering the legitimate diamond supply chain. The diamond industry also adopted a voluntary System of Warranties to assure consumers that their diamonds are from sources free of conflict. Today 74 governments have enshrined into their national law the Kimberley Process Certification System, and now more than 99% of the world's diamonds are

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considered conflict free´ (11). The system in preventing illegal diamonds is a long process but rather successful. Having an established system cut the rebel armies trade supplies off. The Kimberley Process transports rough diamonds by sealing them in tamper-resistant containers and attaching a forgery resistant conflict free certificate. Each certificate has a unique serial numbers that changes each time they cross an international border. On the Kimberley Process website, the certification system of the Kimberley Process requires its members to many conditions allowing them to certify that the sale of rough diamonds is not used to finance armed conflict and to prevent conflict diamonds arriving in the legal market. Under the terms of the certification system of the Kimberley Process, participating States must meet certain "minimum conditions" that they must transpose into their national law and institutions. They are also required to provide export controls, import and domestic trading of rough diamonds and to commit to transparency and exchange of statistical data. The exchange of rough diamonds takes place between members legally meet the minimum requirements of the certification system. Rough diamonds traded must be accompanied by a certificate guaranteeing they are not used to finance armed conflict. In addition, the diamond industry organizations and their members have adopted the following principles of self-regulation: 



To trade only with companies that include warranty declarations on their invoices; To not buy diamonds from suspect sources or unknown suppliers, or which originate in countries that have not implemented the Kimberley Process Certification Scheme; To not buy diamonds from any sources that, after a legally binding due process system, have been found to have violated government regulations restricting the trade in conflict diamonds; To not buy diamonds in or from any region that is subject to an advisory by a governmental authority indicating that conflict diamonds are emanating from or available for sale in such  

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region, unless diamonds have been exported from such region in compliance with the Kimberley Process Certification Scheme; 


To not knowingly buy or sell or assist others to buy or sell conflict diamonds; To ensure that all company employees that buy or sell diamonds within the diamond trade are well informed regarding trade resolutions and government regulations restricting the trade in conflict diamonds

(10). These steps are all preemptive measures that are necessary is keeping the trading of diamonds legal and formal. There are however problems regarding the Kimberley Process. Some issues with the Kimberley Process are that rebels have enough money to bribe officials to give them certificates to legalize their diamonds. Some diamond producing countries are not Kimberley Process compliant, and there are no punishments for a country that is found selling illegal diamonds. In June 2009, Irin News reported the story about Ian Smillie of the Canadian-based NGO, Partnership Africa Canada (PAC), and one of the founder members of the Kimberley Process resigned his position accusing the regulator of failing to regulate and saying he could no longer contribute to the "pretense that failure is success". At the same time, another founder member of the process, UK-based NGO Global Witness said, "Despite having all tools in place, the Scheme was failing effectively to address issues of non-compliance, smuggling, money laundering and human rights abuses in the world's... diamond fields" (4). The struggles with the diamonds have not only helped fund the rebels but have also been used by governments to stay in power. The only country that is currently undergoing fighting is The Ivory Coast. Laurent Gbagbo, who was recently president in the Ivory Coast, refused to step down even though the United Nations, which helped organize the November 2010 election, said he lost to Alassane

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Ouattara. Gbagbo was using diamonds and other resources to fund his military in the attacks against pro-Ouattara supporters. Mark Doyle from BBC News wrote ³It is reported that over 1,500 civilians are dead from the fighting. As of April 10th, 2011, French forces have forcefully entered Gbagbo¶s home in order to arrest him. Laurent Gbagbo is possibly facing charges for war crimes since 2010´ (8). This long struggle to bring a republic to African countries seems to be closing in distance. Every man, woman, and child deserves to live in a place where they can elect their leaders to represent them and know that corruption is not occurring. Even though one might look at these countries and think the problems have ended, the problems are still very real. In fact, America which buys about half of the world¶s diamonds needs to be addressed. Americans tend to look at situations overseas and convince themselves that the problems are due to corrupt leaders and poverty. These may be factors that lead to conflict but the real reason behind the problems is world greed. On De Beer¶s website they list the 9 leading consumers of diamonds among the world:
USA - 41% Japan - 11% Gulf - 8% India - 8% China - 5% Italy - 4% Taiwan - 2% Hong Kong - 2% Rest of World - 19%

y y y y y y y y y

(5). Americans must ask themselves why do they value diamonds to such a degree that they collectively purchase nearly half of the world¶s diamonds every year? Americans who purchase diamonds for their

10 loved ones could be supporting the corruption that has taken place around the world if they are not careful. There are ways to prevent from unknowingly purchasing diamonds that could come from possible ³conflict areas´. Questions that should be asked to the supplier of the diamonds you are: What is their policy on ³conflict diamonds´, and how do they know that their diamonds are not from war-torn areas? Just these simple questions can give the consumer the assurance they need to know that the diamonds are from safe areas. Although there is a massive amount of corruption and agony that the diamond trade has caused, there are still many positives from the gemstones. Listed on diamondfacts.org are some interesting facts about how diamonds have positively impacted countries.

y

An estimated 5 million people have access to appropriate healthcare globally thanks to revenues from diamonds

y

An estimated 10 million people globally are directly or indirectly supported by the diamond industry

y

Approximately $8.5 billion worth of diamonds a year come from African countries

y

An estimated 65% of the world's diamonds come from African countries

(7). The diamond trade has helped countries throughout the world that are connected with the business. These countries have very few large corporations and need something that will give them an economic advantage. Diamonds have been a resource for many countries and even though there are problems with the system, the system is built to help these countries¶ economies.

In conclusion, The De Beers Company has been in business since the 1800¶s and the company does not seem to losing any ground in the economic race. De Beers successfully sold the idea to the public that diamonds were something worth buying. Even though the cartel that

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controls the diamond trade uses illegal tactics to control the market, the overall goal seems to be aiding countries that are rich with diamonds. Fighting may have ended within the African nations, but the war on ³conflict diamonds´ will not be over until every single stone is legally accounted for.

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Bibliography 1. "BLOOD DIAMONDS." Canada & the World Backgrounder 75.5 (2010): 25. Academic Search Complete. EBSCO. Web. 16 Apr. 2011. 2. "Brutal child army grows up." BBC: Africa. BBC NEWS, 10, 05, 2000. Web. 16 Apr 2011. <http://news.bbc.co.uk/2/hi/africa/743684.stm>. 3. "'Conflict Diamonds': Americans Can Stop The Damage They Do." Minneapolis StarTribune 12, 06, 2000, Editorial Print. 4. "Credibility of Kimberley Process on the line, say NGOs." Irin News. Irin Global News, 22, 06, 2009. Web. 16 Apr 2011. <http://www.irinnews.org/Report.aspx?ReportId=84949>. 5. "De Beers FAQs." What is the global diamond demand by country?. De Beers Group, 2008. Web. 16 Apr 2011. <http://www.debeersgroup.com/en/global/FAQs/>. 6. "The Diamond Empire: DeBeers & Oppenheimer Family¶s Cartel ± Artificial Scarcity." Google Video. Web. 16 Apr 2011. <http://video.google.com/videoplay?docid=6186684678299366197&hl=en#>. 7. "Diamond Facts." Diamond Facts. World Diamond Council, 2000. Web. 16 Apr 2011. <http://diamondfacts.org/index.php?option=com_content&view=article&id=143&Itemid =138&lang=en>. 8. Doyle, Mark. "Rough start as Ivory Coast enters Ouattara era." BBC News: Africa. BBC NEWS, 13, 04, 2011. Web. 16 Apr 2011. <http://www.bbc.co.uk/news/world-africa13059757>. 9. Epstein, Edward Jay. "THE DIAMOND MIND." Edward Jay Epstein Books: The diamond Invention. Hutchinson, 14, 06, 1984. Web. 16 Apr 2011. <http://www.edwardjayepstein.com/diamond/chap13.htm>. 10. "How does the Kimberley Process work?." Kimberley Process. Kimberley Process, n.d. Web. 16 Apr 2011. <http://www.kimberleyprocess.com/background/index_en.html>. 11. Javed, Amaan. "Issue of Conflict Diamonds." Scribd. Institute of Professional Education and Research, n.d. Web. 16 Apr 2011. <http://www.scribd.com/doc/51211398/ConflictDiamonds-AMAAN>. 12. Lujala, Päivi. "The spoils of nature: Armed civil conflict and rebel access to natural resources." Journal of Peace Research 47.1 (2010): 15-28. Academic Search Complete. EBSCO. Web. 16 Apr. 2011.

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13. "SOUTH AFRICA'S DE BEERS: THE MOST UNETHICAL CORPORATION IN THE WORLD." Eternal Word Television Network. St. Antoninus Institute, n.d. Web. 16 Apr 2011. <http://www.ewtn.com/library/business/antdebrs.htm>. 14. Wu, Steven. "Dying for Diamonds: Diamonds, Africa, and War." Harvard International Review (2006): 1. Web. 16 Apr 2011. <http://hir.harvard.edu/sovereignty/dying-fordiamonds?page=0,0>. 15. Zwick, Edward, Dir. Blood Diamond. Dir. Edward Zwick." Actor. Dicaprio, Leonardo. Warner Bros.: 2006, Film. <http://www.imdb.com/title/tt0450259/>.

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