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The Diamond Mystique  |   Conflict Diamonds  |   Diamond Trading  |   The Democratic Diamond

PART III of With This Ring from American RadioWorks
On the Web at: http://www.americanradioworks.org/features/diamonds/antwerpprint.html

Diamond Trading in Belgium
by Stephen Smith and Sasha Aslanian

Almost all the stones found in Africa's mines and rivers are packed into parcels and shipped thousands of miles north. Uncut, they are known in the business as "rough diamonds." The capital of the rough diamond trade is the port city of Antwerp in Northern Belgium. There, diamond dealers from around the world throng its diamond district to buy and sell.

A vast river of diamonds flows through Antwerp—25 billion dollars worth annually. It's the equivalent of the gross domestic product of Alaska, or enough stones to fill three stretch limos. Some are from legitimate sources, some not so legitimate. Belgian police acknowledge as much as fifty percent of the trade may be on the parallel market. The city is now at the center of the human rights campaign over "conflict diamonds" from Africa.

Walking onto the trading floor in one of Antwerp's rough diamond exchanges is like entering the prism of a diamond. A slanted wall of floor-to-ceiling glass captures north-facing light — the best for viewing gemstones. Traders in dark suits sit at long, narrow tables. Most are men…who look determined, even grim, as they sift through handfuls of stones, inspecting each one with magnifying glasses and punching figures into calculators.

Michael Vaughn, is a British-born diamond broker. He wears a yarmulke and a well-tailored black suit. Standing at respectful distance, he gives a play-by-play of a buyer contemplating a deal:

"Here on the trading floor, you have the client being shown a parcel of diamonds. The first thing he has to decide is whether he needs the item", says Vaughn. "Then the question is 'How much?' Then begins the negotiation. If at a certain stage the prospective dealer or broker feels that he can accept the offer, he will take that parcel, put it in the envelope, seal the envelope, on the seal put his initials, and inside the envelope will be the terms of payment. That is called a cachette. It is the bit in our industry that is holy."

The cachette is holy because the diamond business is traditionally a gentleman's game—a discreet, honor-bound profession. A handshake can secure a deal worth a fortune.

A Portable, Easily Convertible Form of Wealth

Brum Fischler is part of this old school of diamond trading. He's spent six decades in the business and now presides over Antwerp's polished diamond exchange. These trading centers are private clubs, which share membership lists. It's a powerful way to control behavior in the industry, Fischler says. "We have force on people who are members. Expel them. At same moment he is expelled, all the bourses around the world know. The business for these people is out."

For those who play by the rules, the diamond industry is like family. Fischler grew up in the business after losing all his own family in the Holocaust. As a young boy, he migrated to Cuba, started a diamond business there, then fled when the communists took over.

Fischler says the diamond business is different from any other because it was built by refugees. He notes, "With a building you can't go away. With the diamonds you can go away. All my life my parents, my grandparents had to fly away because of pogroms. The diamonds have always saved us. With diamonds you can go away."

Diamonds offered Jewish refugees like Fischler a new life. The stones were a portable, easily convertible form of wealth. But these attributes also make diamonds ideal contraband. They can cross borders undetected and don't have serial numbers. They're perfect for smuggling and money laundering.

In March of 2000, a United Nations' report charged that Antwerp's extremely lax import controls make it easy to smuggle diamonds here…especially conflict diamonds. In the wake of September 11, American investigators are studying the possibility that the terrorist group Al Qaeda bought diamonds from rebels in Sierra Leone and sold them in Belgium to finance their operations. The potential to make and conceal enormous sums of money draws criminals from all over the world into the industry.

How Conflict Diamonds Taint the Market

In a street café in the gangster-filled Yugoslav city of Podgorica, we meet a young diamond smuggler who doesn't want his real name used. Instead, we'll call him Dragan. He has a soft, boyish face, wears a black Versace t-shirt and sips a Coke as he explains how he smuggles diamonds from Sierra Leone into Antwerp:

"When I travel I use a Belgian passport. I fly to Istanbul and from there go to Freetown. In Freetown I go to a hotel that was arranged and meet with the manager who is my contact. He brings the diamonds to me in a room and I inspect them.." Dragan continues, "Then I pack up the diamonds in a soda can with a false bottom or in sandwiches, or in toys that I bring or in false-bottomed suitcases. Then I fly back to Turkey and from there to Belgium. It's all arranged so I can easily pass through customs."

Dragan says he works for a large, well-known, seemingly legitimate diamond firm in Antwerp. He wouldn't say which one. He estimates he that he's made about thirty smuggling runs from Sierra Leone to Antwerp in the past five years. He says he smuggles the stones into Belgium two ways: smaller hauls by airplane, larger quantities by boat:

"These are the large shipments of 200-500 stones. Sometimes we hide the stones in with a cargo of cotton thread. The boxes aren't opened at customs. We bribe the officials."

Once Dragan gets the diamonds to Antwerp, the money flows back to Sierra Leone…. along with guns and grenades.

Dragan explains, "Here's how it works: We pay an arms dealer who then ships weapons to Sierra Leone. I was there two times when we delivered money to a Bulgarian arms dealer. Sometimes we just deposit money into their bank accounts."

In Antwerp's diamond cutting shops, rough diamonds are sliced and burnished into finished gems. If Dragan's blood diamonds are sold to a dealer who mixes them with legitimate diamonds, they vanish into the legal trade. So this is how conflict diamonds—an estimated 4 percent of the business—taint the entire stream.

An International Effort to Block Conflict Diamonds

Leaders at Antwerp's diamond council—basically the diamond chamber of commerce that's known by it's Flemish abbreviation HRD—fear that the controversy over conflict diamonds might spark a consumer boycott of all diamonds. As a result, Belgium has decided to show the world that it recognizes the problem and is responding.

Mark Van Bockstael, Director of International Affairs of the HRD, is trying to prevent conflict diamonds from entering the market in Antwerp and around the world.

Van Bockstael says Belgium has changed its practices and stepped up enforcement since the UN report came out. Diamonds from Sierra Leone and Angola now must have certificates showing they don't come from a war zone. Belgium also publishes data showing where its diamonds come from—something other trading centers in the secretive diamond trade don't do. But Van Bockstael says Belgium can only do so much. So it's backing something called the Kimberley process, an international effort by diamond mining and trading countries to block traffic in conflict diamonds:

"Can we stop conflict diamonds today? The answer is a clear no. We cannot." says Van Bockstael. "The reason that we are working with the Kimberley process is to have the legislation in place to do so."

Their aim is to create an international certification system—a paper trail for all the stones. It's been a slow and complicated process to get more than thirty countries to agree on a plan.

Charmian Gooch is co-director of Global Witness, a humanitarian watchdog group in London. She says the diamond industry—in Antwerp and elsewhere—has been stalling on conflict diamonds:

"The reason that everybody is at Kimberley trying to deal with this problem is because the diamond industry refused to do this. …The point here is that the industry has played a game of saying it welcomes government regulation and is waiting for governments to tell it what to do. Well, that's patently ridiculous," continues Gooch. "The industry should be really moving forward, embracing independent audit to prove to consumers that it is no longer involved in funding conflict."

While the diamonds may allow warring factions to purchase arms, food and supplies, Van Bockstael argues that blaming diamonds for the civil wars in Africa is too simplistic. He notes, "I hope people understand what we are trying to stop with the Kimberley process; this is not necessarily a guarantee that conflicts will be stopped. Diamonds have been unduly identified as the sole part of conflict."

Diamond traders say much the same thing. It's not diamonds that have hacked off children's limbs in Africa. Diamonds, they say, have only brought joy to people.

Antwerp's diamond industry is on the defensive. It can't compete against the cheap labor in Asia's cutting centers…. The luxury goods market is depressed… Americans aren't buying diamonds like they used to. The Japanese market has shriveled. And the issue of blood diamonds threatens to explode again if the international certification system fails.