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Airstrip One
by Emmanuel Goldstein

June 19, 2000

Mr. Blair's Rough Diamonds


There is an odd similarity between the British intervention in Zimbabwe and that in Sierra Leone, as well as the American action against her former ally in Angola, UNITA. And it's all down to carbon. Compact carbon, or diamonds, are mined in both Angola and Sierra Leone, surprisingly enough in the rebel zones. Zimbabwe too is a producer of diamonds, in a way, through its occupation of the diamond producing area in the Congo. That we should be so concerned about Sierra Leone, Zimbabwe and Angola, and not (for the moment) about, say, Eritrea or Sudan is odd. Why go to some parts of Africa and not others? But that it is something to do with diamonds, I am convinced.


The key player in the world diamond market is the shadowy South African mining house of De Beers, which is the central player in the diamond selling cartel, the Central Selling Organization, a sort of OPEC for engagement rings. Diamonds are remarkably reliant on sentiment; the natural value of diamonds is well below the real price, with the value being driven up by aggressive advertising. You thought "Diamonds are Forever" was a commonplace – wrong, it was concocted by De Beers in 1947. There is another unnatural sentiment that drives up market prices – straightforward price fixing. The Central Selling Organization controls roughly two thirds of diamond sales, which naturally gives it a strong influence on the price. However two thirds of the market may give a strong influence, but it does not give control – and therein lies a story.


The fact is that De Beers is suffering what any classical economist would say would happen to a cartel – overstretch. As De Beers has held up the price, so new suppliers have come in. There are simply too many diamonds in the world and De Beers is suffering. As part of De Beers' policy is to buy up excess diamonds and hold down production it has been suffering while "rogue" producers flood the marked. Not surprisingly, De Beers has been at the forefront of efforts to choke off these "blood diamonds," for entirely commercial reasons. In the last few months, De Beers has even talked about giving up the cartel. Now De Beers' fortunes in this area have improved dramatically.


A quick word should go on just who De Beers are. They are a diamond mining operation, who through their selling arm control two thirds of the diamond market. They have been indicted by the US commerce department for fixing the price of industrial diamonds, although the case collapsed, no board member will go to the US. They have a large cross shareholding with Anglo-American, which is listed on the London Stock Exchange and has several of the British great and good on the stock exchange. De Beers is run by the anglophile (and Anglican) Oppenheimer family, the present head of the family is Nicky Oppenheimer a cricket fanatic who went to Harrow, the second most prestigious British public school. Anglo-American has an honorable reputation for funding the liberal Federal Progressive Party, the main white opponents of Apartheid in South Africa (and the predecessor of the Democratic Party – the main opposition to the ANC). They were also one of the first large South African firms to recognize black unions, and they owned and subsidized the Liberal press in South Africa.


Due to their economic power, and their presence in an obscure part of the world, they will naturally attract conspiracy theories. Well you can just see them as the villains in a Bond film. Add the liberal politics, the Jewish antecedents of many of the founders of Anglo-American (not to mention the Oppenheimers), the role of the overgrown adolescent Cecil Rhodes in founding Anglo-American, and you get a potent brew for any conspiracist. I was highly reluctant to write about De Beers, for the very reason that they attract criticism from some of the less balanced denizens of the fringe. I do not believe in any of this mystical gumph, and I do not particularly want to be seen believing it (although I have a rather thick skin). Nevertheless, there is a massive advantage accruing to De Beers, and we must find out what it is.


Although Zimbabwe herself is not a producer of diamonds, her neighbour, the Congo, is. By total coincidence, the Congo is in war, and Zimbabwe has intervened in the Congo to prop up the government of Laurent Kabilla. This war is very unpopular in Zimbabwe, unpopularity noted by the opposition who vehemently opposes the war. However, the Zimbabwean army controls diamond producing districts. At the same time the United Kingdom is determined to topple Mugabe, by democratic means if possible, by other means if the "good guys" lose the election in less than a weeks time. Now isn't there a coincidence?


The story took a bizarre turn in the last week with the "reverse takeover" (a quick version of an IPO) of Petra by Oryx, a diamond mining company operating. The problem was that Oryx was mining diamonds in the Congo, in an area under Zimbabwe’s control. This would be out of the rocket range of any rebels, let alone their control. In short, they are a legitimate business, working in Congolese government territory. However, the British government did not see it this way. Peter Hain, the naturalised South African who is Blair's minister for Africa, has claimed that these diamonds are conflict diamonds, although any knowledge of the civil war in the Congo would show that this is precisely what they are not. Even by the standards of incompetence that the Blair government can manage this is spectacular, one would have thought that some civil servant or diplomat would have pointed it out to them.


Therefore, it must have been a deliberate lie. But a lie that worked. Coupled with the story (supplied by whom?) that a middle level Commonwealth functionary, with some responsibility for overseeing the Zimbabwean elections, had a stake in Oryx, this sunk the Oryx float. Petra diamond’s advisor, Grant Thornton, resigned without giving a reason. This would have meant that Petra would have to de-list, and so Oryx would not be listed. The floatation was called off. Why did Grant Thornton behave in such obviously unprofessional way? They still won’t say, but it sure hasn’t hurt any prospects for future government contracts.


Another area, which has an interesting connection with diamonds, is Sierra Leone. This is a market completely out of De Beers' control. The ground on this area has been far better covered in an excellent article by Christine Stone, which broadly puts the advantages for De Beer in having the British troops restricting diamond output from Sierra Leone. The only news that I can add here is that there has been the non-withdrawal of British forces with a stay behind force of – officially – 300 training the Sierra Leone forces; just as US troops advised Vietnam. Similarly, the spotlight has been turned on the President of Liberia, Charles Taylor, a friend of the RUF rebels, who has been labeled, in apparent seriousness, as the next Milosovic.


The Civil War in Angola may have dropped out of the headlines, but it is still ferocious. The government is being funded by coastal oil reserves (much like the Congolese government is funded by the diamond mines), while the UNITA rebels are being funded by diamonds from the interior. Surely, the West has nothing to do with this war, though? Well you would be wrong. UNITA, the former allies of America are being put under an immense amount of pressure. Executive Order 13098, signed in August 1998 by President Clinton has frozen the assets of this former ally.


There are three conflicts, and the West seems to take entirely different sides. We side with the corrupt but legitimate regimes of Sierra Leone and Angola, while destabilizing the corrupt but legitimate regime in the Congo and Zimbabwe. Even more bizarrely, in the central war in the Congo the West takes both sides at once, destabilizing the UNITA forces who side with the rebels and the Zimbabwean government while fundamentally weakening the government of the Congo? In a geopolitical sense, or even one that was looking for stability or democracy in the continent, the whole thrust of this policy is a mess. It is a total contradiction. However, all three sets of opponents have one thing in common; they are busting the diamond cartel.


The real menace is Russia, the world's second largest diamond producer and its hunger for foreign currency. For the moment Putin has stabilized Russia's cartel breaking, but for how much longer. Although it is relatively safe to invade parts of Africa, what about Russia? Will the same concern to keep up the price of engagement rings play fair for Russia in the future (even if it stops far short of war)?


The official help in strengthening the diamond cartel was given a more systematic turn in the last couple of weeks with the hysteria over blood diamonds. Diamonds, we are told, fuel civil wars. Rather than take the logical step and let the price find its own level, destroying De Beers' cartel and therefore destroying the lucrative nature of diamonds, we put on import bans. If illicit diamonds are the cause rather than the result of civil wars, and I think that this claim is rubbish (go to Botswana), then the best way to deal with them is to let the price fall. An embargo on "conflict diamonds", which as the episode in the Congo shows means precisely what the government takes it to mean, would increase the price of diamonds, thereby making them more lucrative, thereby funding more wars. Yet the world, led it seems by the British government, is intent on killing this illicit trade, as they have done so successfully with drugs. De Beers has promised to follow meekly along, helping to enforce the embargo. You bet they will.


This theory, although lovingly elaborated, does have a fatal weakness, what do the British governing class get from this. I have found little evidence that De Beers interferes in politics outside Africa. They have sponsored a zone in New Labour's pet disaster, the millennium dome. The board of Anglo-American is stuffed with figures from the British establishment. However, apart from that, nothing. There is no smoking gun. No jobs to Labour politicians, no large political donations (no political donations) to party funds, nothing. However it is odd that on a continent that is suffering as Africa is the intervention is concentrated, intentionally or otherwise, where it will stop the diamond cartel breaking rather than, say, the Horn of Africa. For the moment, all I have found is a large number of loose ends.

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