Analysis: Loophole in blood diamond monitoring scheme exposed

Reuters News
Posted: Dec 09, 2011 10:59 AM
Analysis: Loophole in blood diamond monitoring scheme exposed

By Ed Stoddard and Clara Ferreira-Marques

JOHANNESBURG/LONDON (Reuters) - It was hailed as a way to make it possible to buy a diamond ring for your sweetheart free from worry that you were funding civil wars and rights abuses.

But the efficacy of the Kimberley Process (KP) has been thrown into doubt by a diamond field operating under a recognized government, not a rebel army, that is widely criticized for abuses of its own.

The scheme signed in January 2003 was aimed at cutting off "blood diamond" financing for rebel groups fighting a U.N.-recognized government. But allowing exports from Zimbabwe's Marange mine has exposed a loophole: it has no mechanism to hold either the industry or producer countries to account.

Campaign group Global Witness, nominated for the Nobel Peace Prize in 2003 for its work on conflict diamonds, said the process it helped found had failed several tests.

"The Kimberley Process is essentially giving its stamp of approval to blood diamonds," said Annie Dunnebacke, a senior campaigner at Global Witness.

"Marange was the catalyst. Zimbabwe is the most blatant case of conflict diamonds getting on the international market."

Human rights groups estimate at least 200 artisanal, or small-scale, miners were killed in 2008 when Zimbabwe's security forces seized the fields at Marange - one of the largest diamond finds of recent decades - adding to years of human rights abuses attributed to President Robert Mugabe and his ZANU-PF party.

All diamond exports from the country were suspended in 2009 but resumed last month after the United States and other leading Kimberley members dropped their opposition.

The dispute over Marange had brought the Kimberley Process which aims to regulate the $30 billion rough diamond industry to a virtual halt. But now that exports have resumed business is thriving: Chinese-owned Anjin, one of three companies mining diamonds in Marange, this week started to sell 2 million carats of diamonds stockpiled during the export ban.

Experts, campaigners and the industry say the evaluation of Kimberley's success or failure will come down to whether misbehaving countries - not just rebel groups - can and should be held to account.

"The problem lies with KP's definition. It outlaws diamonds where rebel groups are fighting legitimate governments. Zimbabwe's human rights record notwithstanding, under KP rules, Mugabe's is the legitimate government," said Salil Tripathi, policy director at the Institute for Human Rights and Business.

"There is no option within KP but to permit Zimbabwe to export - unless you change the definition of conflict diamonds. But to keep the definition narrow was the original compromise ... without which an agreement wouldn't have been possible," Tripathi said.

Eli Izhakoff, president of the World Diamond Council, which speaks for the industry, said that under the current definition of conflict diamonds, virtually all rough diamonds are now from conflict-free sources. That compares to the 1990s when "blood diamonds" accounted for up to 15 percent of rough diamonds, according to the Kimberley Process.

"If you widen the terms of reference to say conflict diamonds include all governments who misbehave, that is a different process," said Izhakoff.

"It is up to governments. If they want to change the terms of reference and agreement, let it be, but that is not the agreement in 2003. Of course we can add to it, and retune it, and that is helpful."

It is likely to be an uphill battle to review a process that has been lucrative for many governments.

In Sierra Leone, official exports rose more than 80 percent in 2003 thanks to the end of the civil war which gave the government control over the mines and forced the trade through the Kimberley Process - even if a large amount of gems are still widely thought to leave the country outside official channels.

"Most people decided to go through the right channels, instead of taking the goods out or smuggling them out," said Jinnah Mohamed Ibrahim, acting director of the Government Gold and Diamond Office in Freetown, which values and certifies precious minerals for export.


Many pressure groups hope the United States will press for a widening of KP's remit when it take its turn as chair of the Kimberley Process from the Democratic Republic of Congo next month.

"We understand that Global Witness does not find the process to be a credible stamp of approval for human rights, and we view this decision as another in a series of challenges to the Kimberley Process - to demonstrate the capacity to implement reforms and restore its credibility," a U.S. State Department spokesman said this week.

"We intend to work with all stakeholders to address these challenges."

Canada, home to some of the largest recent diamond finds, said it was "disappointed" with Global Witness's departure but a foreign ministry spokesman said Ottawa would continue to press for "adaptability in the face of evolving global circumstances".

Dunnebacke said the scheme also needed to be re-tooled to focus on the industry.

"One of the reasons we think it's not working is because there is no requirement within the Kimberley Process for industry to take responsibility for their supply chain ... We would like to refocus the debate to what industry can and should be doing to clean up the trade," she said.

Apart from Zimbabwe, campaigners say other areas of potential concern include Angola, where state-sponsored violence has been documented on artisanal diamond mining areas.

Illicit diamonds helped sustain the rebel UNITA movement in Angola's long-running civil war, which ended a decade ago. Conflict there and in other countries such as Liberia were the focus of the initial blood diamond campaigns by groups such as Global Witness.

An opportunity for KP to show its mettle will next come with Venezuela, which is currently suspended at its own request and has until December 20 to provide required documents and data or face expulsion. Venezuela is a small producer in the global context, but its illegal sales had long proved an irritant for KP.

The former head of Venezuelan state gold miner Minerven said earlier this week he thought expulsion was inevitable.

Dunnebacke said the Kimberley Process had allowed a sense of complacency to set in over the issue, dramatized in the movie "Blood Diamond", starring Leonardo DiCaprio.

"It has almost acted like a shield for industry, especially in recent years. The message from industry has been the problem of blood diamonds is solved," she said.

The industry says the system is working overall but even there, there are critics.

Simon Rainer, chief executive of the British Jewellers' Association (BJA), said the process is doing what it was originally set up to do - prevent the sale of rough diamonds used by rebel groups to finance conflict.

But he urged governments to take firmer action against Zimbabwe to prevent any unauthorized Marange diamonds from entering the global supply chain.

"What is needed is an additional process that stops elected governments from using diamonds in conflict against their own people," Rainer told Reuters.

(Additional reporting by David Brough in London, Marianna Parraga in Caracas, David Ljunggren in Ottawa and Simon Akam in Freetown; Editing by Sonya Hepinstall)