Blood Money

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By Martin Rapaport

I first heard this phrase from my father. He was talking about the war — about his experience in German concentration camps. Blood money was bad money — the worst kind of money. Money you didn’t want anything to do with. Money with the stench of death.

Hassidic Rabbis, Zen Masters and quite a few people in between believe that money has its own energy or karma. Good, honestly earned money, preferably tithed, tends to multiply and bring its owners good things. Bad money may look good, but doesn’t last and ultimately harms its owners. While the philosophy of money is complex and debatable, the bottom line is simple and obvious. People have to take responsibility for how they earn and spend their money.

In this article we analyze a most difficult and horrifying topic — war in Africa and the role that diamonds play in fueling these wars. This is not a comfortable subject. The stories are shocking and the human tragedy undeniable. For the sake of humanity and our own morality, we must take a hard look at the facts and develop an understanding of the role that our industry must play to help alleviate the intolerable suffering in Africa.

In many ways Africa is the last frontier — the last continent to come of age politically, socially and economically. We can blame the colonists who drew arbitrary maps playing off ethnic tribal groups, or the corrupt black leaders who steal their citizens’ daily bread. We can blame the white man, the black man, or no man. It really doesn’t matter. The fact is Africans are killing each other. They are butchering their own innocent women and children. There is no right or wrong in Africa anymore. These are not the wars of politicians. These are the wars of madmen. Africa is out of control. The only way to stop the madness is by stopping the means of war — stopping the weapons and the flow of money that buys weapons.

While there is nothing new about Africans brutally killing each other, there is a developing consensus that the killing season must come to an end. Whether it is because they are well meaning or self-serving, powerful and often naïve governments and human rights organizations are taking it upon themselves to make serious efforts to stop the carnage. Even though the situation in Africa has been hopeless for decades, one gets the sense that the time is ripe for change.

Global Witness

The role of diamonds in all of this has been highlighted by a feisty little troublemaker human rights organization called Global Witness. As the name implies, Global Witness (GW) runs around the world witnessing and documenting very bad things. Not content to merely witness the bad stuff, it then packages and markets guilt trips to powerful governments and organizations that are in a position to do something to stop the bad stuff. Since GW is a non-profit, non-political, non-governmental organization (NGO) it has the support of other NGO’s that have millions of socially responsible members who happen to be consumers.

GW has a track record. They took on Cambodia’s Khmer Rouge, documented the illicit timber trade, got Washington to get Thailand to shut down its border to Cambodian timber and thereby shut off the Khmer Rouge’s source of income. The GW people risked their lives to document the illicit timber trade. They are extremely focused, uncompromising idealists who have the ear of government.

GW’s basic premise is that money from diamond sales is being used to finance war in Africa. It wants the diamond industry to stop buying diamonds from warring factions in Africa. Its simplistic approach is, no diamond sales, no money for guns, no war. GW believes the burden of not buying ‘war diamonds’ is on the diamond industry. Supposedly, the diamond industry is expected to be able to differentiate good diamonds that support economic development in good countries like Botswana from bad diamonds that fuel war in Angola, Sierra Leone, Liberia and the Congo.

GW and three other human rights NGO’s (Medico, Netherlands Institute for Southern Africa, Novib) have launched an international diamond campaign to educate consumers about the role diamonds play in African conflicts. The “Fatal Transactions” campaign “calls on the public and other interested organizations to ask the diamond trade to implement effective controls to ensure that diamonds do not fund rebel armies in Africa.”

While citing the enormous economic benefit of diamonds to Botswana, Namibia and South Africa and stating that “this campaign is not anti-diamond, but anti-war” the press release also includes statements like: “Most people would be horrified to learn that their diamond jewelry had financed the purchase of landmines or guns in one of Africa’s brutal conflicts. These conflicts have resulted in the deaths of hundreds of thousands of civilians, the maiming of thousands of women and children by landmines and the displacement of millions of refugees.”

The Politicians

GW is not operating in a political vacuum. Robert Fowler, Canada’s UN ambassador and Security Council representative, has taken responsibility for applying UN resolution 1173, which makes it illegal to buy diamonds from Unita, Angola’s rebel movement (diamonds certified by the Angolan government are not subject to the resolution). Fowler insists that the diamond industry implement controls that stop Unita’s diamonds from entering the diamond pipeline.

British Foreign Secretary Robin Cook has also proposed international controls on the sale of rough diamonds to stop illegal sales that fuel war in Sierre Leone and Angola. “The places you can sell uncut diamonds are pretty limited. It should not be beyond our wit to devise an international regime in cooperation with the diamond trade that cuts off the flow of diamonds from those who use them to buy arms and fuel conflicts,” said Cook.

On a visit to Sierra Leone two weeks ago, U.S. Secretary of State Madeleine Albright promised $55 million in aid and offered to forgive $65 million in debt, if a peace pact was implemented. Albright described her visit with hundreds of children whose arms and legs had been cut off by rebels as “heart-wrenching and stomach churning.” Recognizing the role that diamonds have played in the conflict, she earmarked $1 million of the aid for devising a technique to mark diamonds that are being exported officially.

On November 1, U.S. Congressman Tony Hall (D-Ohio), introduced legislation (the CARAT Act) that would require importers of rough and polished gem diamonds and diamond jewelry to provide written certification stating the country in which the diamonds were mined. The proposed law requires enforcement within one year of enactment, and cites consumer desire to “avoid purchases from countries in which war or human rights abuses are funded through the sale of diamonds.” Accorditg to Hall, the act does not block the import of diamonds from any conflict zone, but it would force changes in industry practices. That in turn will encourage countries and companies to use leverage to end atrocities committed against civilians by armies built with diamond revenues — atrocities that threaten to tarnish diamonds in the eyes of consumers. “The CARAT Act aims to support efforts underway by U.S. and other policymakers, and to protect democratic countries that depend on diamond revenue from any collateral damage of a consumer backlash.”

Real Politik

At face value, the positions of the political establishment vis-à-vis the diamond industry appear simple and direct. The politicians want the diamond industry to stop buying diamonds from those who use their diamond income to purchase arms. Simply put, don’t buy diamonds from people who buy guns. Furthermore, the political establishment wants the diamond industry to implement a system of auditable controls that will trace the flow of rough diamonds into the cutting centers so as to ensure that illicit “war diamonds” are not allowed to enter the legitimate diamond distribution channel.

The politicians are not shy about declaring their altruistic humanitarian motivations. They are also displaying a willingness to take their case directly to the consumer so as to force the diamond industry to boycott war diamonds.

Clearly the diamond industry is obligated to abide by UN resolution 1173, and it is in our interest to cooperate with the government to restrict the flow of money to areas of conflict. At the same time we should be aware that there is a real danger that the diamond industry, this writer included, may be manipulated by politicians whose real self-interest motivations extend well beyond, and might even conflict, with humanitarian considerations.

Consider the following questions. The UN takes the position that sales of diamonds by the Angolan government are legitimate even though the funds are used to buy arms and fuel the conflict in Angola. Is the UN manipulating the diamond industry to take sides in the bloody wars of Africa? Is there a humanitarian justification for this position?

Given the history of armed conflict in Africa and the role that the U.S. and other governments have played in supporting these conflicts in the past, shouldn’t we question the true motivations of governments? If the governments wish to stop the fighting, why aren’t they controlling the flow of arms? After all, it’s much easier to control the movements of tanks, ammunition and fuel than small easily transportable diamonds. Why are arms merchants allowed to ply their trade in Africa? Why are oil companies allowed to do business and fund wars?

Is the diamond industry being used as a scapegoat, as an easy target for manipulation by the political establishment because we sell a high profile product that they think can easily be damaged by negative publicity? Should we allow ourselves to be blackmailed to support the FAA (Angolan Armed Forces) against Unita? Are the motivations of the politicians humanitarian? Are they economic? Do they have anything to do with Angola’s huge oil reserves?

Is the diamond industry being used by the political establishment as a shill, a fake target, a way to show the world that the politicians are supposedly doing something to end the war but in reality they are supporting the war through oil purchases and arms sales?

Frankly, the whole situation stinks. I don’t know the answers to these questions. I don’t know if there are any answers, if there is any way to stop the wars. What I do know is given the historic role of foreign governments in Africa, it is a good idea for the diamond industry to tread with great caution and to suspect the intentions of all parties involved in this issue. We must be very careful about how we allow ourselves to be manipulated. As the saying goes, the road to hell is paved with good intentions.

Moral Issues

Frankly, I don’t buy the idea that war in Africa is the fault of the diamond industry. Simply put, since the problems in Africa were created by foreign governments, it is their guilt trip not ours. At the same time I firmly believe that from a humanitarian and moral perspective, our industry must do everything it reasonably can to ensure that diamond money is not used to fuel conflict.

A few moral guidelines. No one has the right to dictate morality to the diamond industry. As an industry we must take responsibility for our actions and develop trade-wide practices that we believe are correct and moral. We should not allow political organizations to establish our moral positioning. We must not allow political organizations to use our industry to pick sides in wars. Regardless of short-term economic or political implications, we must always do what we think is correct. The ethics of our industry are more important than our diamonds, or our money.

Given the fact that people are dying, the diamond industry must define the moral obligations we have to help limit the wars. Clearly we must comply with the law of the land in the form of government regulations and UN resolution 1173. Do we however, need to go out of our way to develop auditing and control systems for the flow of rough diamonds in our industry? How should we define “war diamonds” within the industry? Should our bourses take an active interest enforcing “war diamond” regulations?

If governments and NGO’s are appealing to, and publicizing, the moral obligations of the diamond industries, then that is exactly what we should give them — a clear statement from our industry organizations detailing our moral position regarding war diamonds. We should seize the initiative and tell the world who we are and what we stand for.

Some argue that it is dangerous for our industry to take any moral position. After all where do we draw the line? Today it’s Africa, tomorrow some NGO may demand we embargo Russia because of Chechnya or India because of a nuclear explosion. Frankly, we shouldn’t be listening to NGO’s; we should be listening to ourselves, to our own sense of right and wrong. Our industry is strong enough, honest enough and smart enough to take the correct positions and enforce them through our trade organizations.

We should promote a moral code that says diamonds should not be used to fund war. Any war. Let us be honest and consistent. De Beers’ position embargoing all Angolan diamonds makes more sense than the UN’s. Such embargoes should be extended to all countries that use diamonds to fuel war. If our industry supports the notion that the diamond is a symbol of love, shouldn’t we also support the diamond as a symbol of peace?

Economic Issues

The positioning of the diamond industry regarding war diamonds has important supply and demand implications. On the supply side, a boycott of war diamonds will force legitimate firms out of conflict areas and increase the supply of illicit diamonds in the world markets. Black market diamonds are going to get very black and they will attract the worst people with the worst kind of money. It can be argued that the situation in Angola and other conflict areas will get worse if boycotts are enforced.

From an economic perspective, the driving force behind a global boycott of war diamonds is the combined threat of adverse NGO publicity coupled with government regulations that have the potential to inhibit global diamond demand and restrict sales. While some firms are very concerned about this, others shrug off the threat.

There are two models to consider. Several years ago the U.S. government legislated sanctions against diamonds from South Africa due to apartheid. The sanctions did not stop the flow of diamonds into the U.S. as there was no way to isolate or identify a diamond’s country of origin. Furthermore, there was very little consumer response. Consumers kept on buying diamonds even though no one could prove that the diamonds being purchased were not from South Africa.

Another model is the fur industry. Animal rights groups waged war against the fur industry with mixed results. Sales in the U.S. economy increased as economic growth spurred luxury products. In Europe, there was a significant decline in demand as the wealthy sought to avoid controversary.

It is reasonable to assume that damage to the diamond industry from negative publicity would be limited due to a number of factors. First of all the NGO’s cannot justify an all-out campaign against diamonds because this would severely damage the diamond industries in non-conflict areas. Furthermore, since 95 percent of diamonds are non-conflict, the best a campaign could do would be to educate the consumer to demand a non-war diamond. This kind of campaign could hurt diamond demand if it got out of control, but it would do more to promote sales of non-conflict diamonds than limit sales of regular diamonds.

Of greater concern to the industry is the potential impact of government legislation designed to enforce the certification and documentation of diamond origin. While there are serious doubts if such legislation could be effectively created, governments are actively trying to find ways to restrict imports of war diamonds and enforce UN 1173. There is a possibility that governments will use import regulations to try and force the diamond industry to establish documentation that insures the segregation of war diamonds from other diamonds.

Congressman Hall’s proposed legislation is symptomatic of the role that government is seeking to play. Hall wants to force the diamond industry to alter trade practice and document the source of all diamonds. From a practical perspective this is impossible. How does one document a tennis bracelet from India with 10 pointers? What about your grandmother’s diamond ring? Hall’s real intention and accomplishment is to raise the issue of war diamonds in Congress and to put the industry on notice that government can make things difficult for the diamond industry if we do not seriously relate to the war diamond issue.

The bottom line is that the diamond industry does not need or want conflict with government or NGO’s. It is in our economic interest to cooperate and find reasonable and responsible ways to deal with war diamonds. As the CSO’s Gary Ralfe explained in Antwerp last week, 2 percent of global diamond production should not be allowed to threaten the economic viability of the other 98 percent.

Practical Considerations

The industry must relate to two issues in the near future. First, we need a definition of war diamonds. The definition should be based on a consistent moral principle and it should detail specific areas of conflict to be embargoed. Second, the industry must take a position on the viability of differentiating war diamonds from non-war diamonds. Can the importing, manufacturing, and exporting of diamonds to and from the cutting centers be handled in such a way as to ensure that war diamonds are excluded from the regular diamond distribution pipeline?

How can this be accomplished?

The proper forums for these discussions and decisions are the International Diamond and Manufacturers Association (IDMA) and the World Federation of Diamond Bourses (WFDB) in consultation with the UN, governments, NGO’s and the trade.


The diamond industry is facing one of its most difficult and important challenges. We are confronting a humanitarian problem of the highest order as it involves the lives of innocent people. This is a problem that has no easy solution and requires the highest level of moral consideration.

We call on the diamond industry to discuss, debate and resolve this critical issue. Let us call our best people together. Let us use our hearts and minds to come up with the best solution. Let us have the courage to do what is right.

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