By Michelle Nichols
UNITED NATIONS (Reuters) - An eight-year-old U.N. embargo has failed to stop the illicit production and trafficking of Ivory Coast rough diamonds that are continuously being smuggled out of the West African country and could be funding illegal arms purchases, U.N. experts say.
In an interim report to the Security Council, the so-called U.N. Group of Experts - which monitors compliance with the Ivory Coast sanctions regime - also said they plan to investigate a possible network based in South Africa that is involved in the trade of diamonds between Africa and Asia.
The Security Council began imposing sanctions on Ivory Coast, including an arms embargo, travel bans and asset freezes, and sent peacekeepers there in 2004 after a 2002-2003 civil war. There was then a second civil war in 2001.
"The fact that rough diamond smuggling has continued unhindered since the entry into force of the diamond embargo in 2005 suggests the activity of well-established and organized networks rather than individuals," the U.N. report said.
"First-step operators in turn sell rough diamonds to buyers who smuggle them outside of Ivory Coast, through neighboring countries (mainly Guinea, Ghana, Mali, Liberia, Burkina Faso and Sierra Leone)," the experts said.
The experts said information gathered over the past couple of years, including email exchanges among people connected to the administration of Ivory Coast's former President Laurent Gbagbo, suggests the existence of a network centered in South Africa involved in the trade of diamonds between Africa and Asia.
"The group intends to continue its investigation in this framework in order to provide a comprehensive analysis in its final report in April 2014," they said.
Gbagbo, who refused to give up power after losing a runoff election in 2010, has been in the International Criminal Court's custody since November 2011, accused of responsibility for rapes, murders, persecution and inhuman acts committed during the post-election fighting that killed around 3,000 people
The U.N. experts said Ivorian authorities are "consistently failing to address the issue of diamond smuggling in violation of the sanctions regime." They pointed out that since 2005, the authorities had not identified any cases of diamond smuggling.
Ivory Coast leaders - including the prime minister, defense, interior and industry and mines ministers - believe the diamond embargo is blocking a significant amount of revenue, the experts said. The report estimated the annual value of illicit diamond trade to be between $12 million and $23 million.
"These figures suggest that the economic role of the diamond sector has not had, to date, any significant impact on national revenues," the report said.
"However, funds generated by the diamond sector could indeed allow for the purchase of a significant quantity of arms and related materiel, a possibility that Ivorian authorities themselves have not excluded," it said.
(Editing by Philip Barbara)