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Angola: Diamond Trade and War
Angola: Diamond Trade and War
Date distributed (ymd): 981215
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Southern Africa
Issue Areas: +economy/development+ +security/peace+ Summary Contents:
This posting contains a press release and excerpts from "A Rough Trade
-- The Role of Companies and Governments in the Angolan Conflict."
The report by Global Witness documents how funds from diamond exports have
enabled UNITA to continue the war despite a 1994 peace agreement and UN
sanctions, details the involvement of De Beers and the Central Selling
Organization, and provides case studies of the sanctions violations through
Belgium and Zambia. It calls for accountability and transparency in the
international diamond industry in order to permit peace in Angola.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
APIC Announcement:
Holiday Special at APIC's Africa Web Bookshop.
Books (www.africapolicy.org/books/gifts.htm)
plus music and more (www.africapolicy.org/books/cdvid.htm)!
Note: The 27 November issue of the Angola Peace Monitor, published by
ACTSA on behalf of the Angola Emergency Campaign, with additional updates
on the current situation in Angola, is available on the web (http://www.anc.org.za/angola).
It is also available from ACTSA, 28 Penton Street, London N1 9SA e-mail:
[email protected];
fax: +44 171 837 3001 telephone: +44 171 833 3133.
Press Release
Global Witness
Global Witness Ltd. is a UK investigative human rights and environment
not-for-profit oganisation which has built up a reputation for its investigations
and lobby work on the illegal trade in timber in Cambodia and the way in
which that has funded the conflict. It is non-partisan.
For more information, including the full report in English and a summary
in Portuguese, see
http://www.oneworld.org/globalwitness/
Contact: Tel +44 (0)171 272; 6731, Fax +44 (0)171 272 9425,
email: [email protected]
The full report includes, among other sections, "Angola: A Brief
Outline," "The Diamond Industry, De Beers and the CSO,"
case studies on the roles of Belgium and Zambia, an overview of the Angolan
diamond trade, and a "Do-It-Yourself Diamond Trading Guide."
December 14, 1998
Is the price of diamonds too high?
How Angola's return to war has been funded by the international diamond
trade.
Global Witness report, "A Rough Trade - The Role of Companies and
Governments in the Angolan Conflict," published today, uncovers the
role of diamonds in funding the continuing civil war. "As Angola once
again slides into full-scale war the United Nations and the international
diamond business must examine their role in the conflict." Charmian
Gooch, Global Witness.
Diamonds have been UNITA's major source of revenue during the 1990's
- gaining an estimated US$3.7 billion between 1992 and 1998 [Diamonds have
also funded conflict in Sierra Leone and Liberia.] - which has enabled
them to re-arm and maintain supplies despite the UN sponsored peace process.
UNITA has sold its diamonds on the unofficial, "outside"' market
and has found willing buyers within the diamond industry.
The diamond business is dominated by De Beers and its Central Selling
Organisation (CSO), set up 60 years ago to control the international diamond
trade and maintain steady prices. De Beers and the CSO sell about 80% of
the world market. Angola, as a major producer of high quality unworked
diamonds [Angola's diamonds are some of the best in the world, and are
in demand within the diamond business.], the majority originating from
UNITA held territory, has been a threat to market stability, and De Beers
are clearly involved in this trade. The report includes a detailed analysis
of their involvement.
With the tragic return to war, which between 1992 and 1994 cost the
lives of an estimated 300,000 Angolans, "There is an urgent need for
the diamond business to fundamentally change the way in which it works,
because it is clearly unacceptable for diamonds to be used as a major source
of revenue in conflict." Charmian Gooch, Global Witness, "How
many people, when buying a diamond for their loved one have any idea of
the horrific price that Angolans have had to pay?"
Furthermore the UN has failed to ensure that member states are rigorously
implementing the embargo on unofficial diamond exports from Angola, which
came into force on 1 July 1998 (UN Security Council Resolution 11734) as
part of a series of measures. The EU has also adopted the UNSC embargo,
and this too has been a dismal failure. Belgium, one of the key diamond
centres, bears a particular responsibility to strive to meet the embargo,
yet Global Witness investigations have revealed serious failings, and it
is business as usual in Belgium's diamond capital Antwerp. The failure
of the UN member states and the diamond industry to fully implement the
embargo has meant that UNITA have been able to restock munitions and supplies
and this has fatally undermined the peace process.
SUMMARY
Diamonds and Angola's Recent History
It is well documented that the decline into renewed civil war, following
the failure of the 1992 elections, was financed for the major part by natural
resources - oil and diamonds. The war cost the lives of at least 500,000
Angolans, with thousands more maimed due to land mines - a continuing blight
for the population. Economic chaos suffered by the majority of the population
has resulted in the country's steep decline as defined by all internationally
accepted social indicators.
Since 1992, UNITA have consistently controlled 60-70% of Angola's diamond
production, generating US$ 3.7 billion in revenue, enabling them to maintain
their war effort.
UNITA's diamonds reach the major international markets through a worldwide
diamond industry that operates with little transparency or scrutiny from
the international community.
De Beers, the CSO and the Diamond Industry
The De Beers company and its Central Selling Beers and the Organisation
(CSO) have dominated the international diamond industry for the last 60
years; sorting, valuing and selling around 80% of the world's diamond production.
Company literature boasts that the cartel structure provided by the CSO
is of benefit to all involved in the international diamond trade.
De Beers annual reports during the 1990's clearly state the company's
heavy involvement in embargo buying Angolan rough diamonds, at the height
of resumed fighting and a time when UNITA controlled the majority of Angola's
diamond production. Given that De Beers were, according to their own reports,
buying a substantial proportion of Angolan rough diamonds, at a time when
a large section of the country's diamond mines were under Unita's control,
one could conclude that the drive to keep the lucrative outside market
buoyant was a primary concern - despite the consequences this might have
for the people of Angola during this period.
The UN Security Council Embargo
In response to the lack of progress over UNITA's implementation of the
Lusaka protocol, the UN Security Council passed Resolution 1173 and 1176,
which prohibit the direct, or indirect export of unofficial Angolan diamonds
- those defined as not accompanied by a Certificate of Origin (CO) issued
by the Government of Unity and National Reconciliation (GURN) in Luanda.
Whilst resulting in some reduction of revenue for UNITA, the implementation
of UNSC Res. 1176 appears token at best. Investigations reveal that significant
diamond exports still take place, mainly by air and in smaller quantities,
through countries such as Zambia. Most of the diamonds are sold on the
open market in Antwerp and in other countries. Belgium, as home to the
world's premier diamond market, bears significant responsibility for this
situation.
This illegal trade is made possible through a combination of inadequate
control and verification of CO's from the GURN, and the fact that diamonds
imported from neighbouring countries do not require any effective verification
of source. The latter situation, especially given the involvement of corrupt
officials, provides a perfect loophole for the laundering of UNITA sourced
diamonds through Angola's neighbouring countries, and on to the international
market.
Publicly, the diamond industry declares that it is not possible to identify
the source of diamonds. In fact, notable international diamond experts
are clear that diamonds are readily identifiable by source - often to the
level of the mine they were extracted from. It is clear that the professional
capacity of the international diamond industry is such that Angolan sourced
rough diamonds are clearly identifiable.
Recommendations
- All member states of the UN should fulfil their reporting obligations
under UNSC Res. 1173.
- The UNSC should immediately amend UNSC Res. 1173 to require that all
diamonds in trade carry a Certificate of Origin (CO) and be subject to
independent scrutiny by internationally recognised diamond experts.
- The UN Secretary General, in his report to the UNSC, which is due by
15th January 1999, should identify those countries not fully implementing
the embargo, and specify actions to be taken to improve implementation.
- De Beers and the CSO should publicly clarify what changes to their
internal structures they have made to ensure full compliance with UNSC
Res. 1173.
- De Beers and the CSO, as the most powerful and expert monitor of the
diamond industry, should notify the UN and relevant governments and enforcement
agencies of any company or trader that offers them Angolan diamonds, so
that all documentation can be subject to official scrutiny.
- De Beers should revoke sight holder status from any trader found to
be dealing in UNITA sourced diamonds.
- De Beers and the CSO, as the original shaping force behind the current
way in which the industry operates, should lead the necessary process of
reform within the industry to address current issues of transparency and
business ethics.
- Traders that deal in UNITA sourced diamonds should be penalized with
confiscation of diamonds, heavy fines and, in Belgium for example, loss
of tax concessions. Resulting revenue should be put towards reconstruction
in Angola.
- Any diamonds originating from Angola's neighbour states should be subject
to especially rigorous inspection, as it is known that they are recipients
of UNITA sourced diamonds and that forged documentation is rife.
- The governments of Angola's neighbours and major diamond trading nations
(including Belgium, Israel, South Africa and the UK) should exercise the
precautionary principle and prohibit the import of diamonds unless it can
be proven that they do not originate from combatants.
- The Belgian Government needs to take immediate action to improve the
ability of the diamond experts who work with Customs, to identify Angolan
diamond imports.
- The government of Angola should ensure that official diamond exports
are accompanied by internationally recognised COs, stamps and are signed
by named authorised officials.
- An independent review of the issues surrounding the identification
of the country of origin of rough diamonds urgently needs to be carried
out.
Business is Business
As Global Witness investigations into the trade in rough diamonds from
Angola show, the lack of transparency and corporate responsibility in the
diamond industry has been central to the continued financing of UNITA,
and hence the fuelling of civil war in Angola. If transparent and responsible
business practices had been in place, as claimed in corporate statements,
this situation would not have arisen. Bilateral and Multilateral institutions
such as the International Monetary Fund (IMF), World Bank, Organisation
for Economic Community and Development (OECD) and the World Trade Organisation
(WTO) now consider transparency and corporate responsibility to be essential
to all areas of business.
However the International Chamber of Commerce - ICC, WTO and OECD all
refuse to accept a need for legally binding codes of conduct for multinationals.
As this document details, it is the inability of the diamond industry to
adhere to its own corporate codes of conduct that has contributed to the
continuation of the conflict in Angola. It is internationally accepted
that the sale of rough diamonds by Unita has been an integral factor in
the continuation of the conflict. Yet the diamond industry has done nothing
to ensure that they are transparent or accountable. The diamond industry
does not have to deal with public scrutiny in the way that many multinationals
now have to.
"Accountability imposes discipline on management; firms that have
to justify their actions publicly are less likely to take actions of which
their shareholders and creditors might disapprove." -- Source: IMF
Manual of Transparency, 1998.
"There is no one concerned with diamonds, whether as producer,
dealer, cutter, jeweller or customer who does not benefit from it. It benefits
not only the shareholders of diamond companies, but also the miners they
employ and the communities that are dependent on their operations. We are
very conscious of our responsibilities not only to our shareholders, to
the industry as a whole and to the consuming public, but also to the governments
of the countries in which we operate." -- Harry Oppenheimer, De Beers
1995 Annual Report.
"The Corporation (Anglo American) and the companies with which
it is associated strive to create wealth and to contribute to sustainable
development by operating their businesses with due regard for economic,
social, cultural and environmental concerns." -- Environmental Policy
Document of Anglo American Corporation February 1998.
The diamond industry must include themselves in the debate on transparency
and accountability if they are to be taken seriously. There are numerous
examples of companies that have done too little too late and are now spending
millions of dollars in order to preserve their corporate reputation. John
Browne, CEO of BP, (member of the Corporate Advisory council of the US
- Angola Chamber of Commerce), is clear that responsibility in business
is key:
"So business has a key role to play. But it must do it responsibly.
With economic development must come environmental stewardship and social
responsibility and there must be a new acceptance of this responsibility."
-- John Browne Ceo BP at Amnesty International Dublin 26th September 1997.
Nicky Oppenheimer recently stated, "I do hope people will think
that we are open and prepared to answer real questions and tell them what
we are up to as far as we are able." It remains to be seen how serious
about 'openness' Nicky Oppenheimer will be.
THE ROLE OF DIAMONDS IN ANGOLA IN THE 1990'S
"In the mining areas of Lunda Norte, historically the most exploited
of the country's range of reserves, diamonds have played an important role
in sustaining the conflict since the 1992 elections. UNITA is thought to
have reaped about US$1.5 bn from sales of diamonds mined in areas it has
controlled during much of this phase of the civil war. In 1995 Angola's
total diamond output raised about US$700 m, according to industry sources,
of which only US$147 m was accounted for by legal sales by minor producers
and the parastatal company Endiama. most of the rest was mined by UNITA
and smuggled out unofficially." Economist Intelligence Unit (Eiu)
Country Report, 4th Quarter 1996.
"Oil and diamonds, in particular, have been used to pay for the
wars that have plagued the country since the 1960's... Much of Angola's
wealth is unaccountably taken up by UNITA and government elites, with little
reaching the grassroots." CIIR Peace Postponed: Angola since the Lusaka
Protocol, 1998.
"They have occupied the most productive areas than the government
and the same thing (occupation of the diamond rich areas) is being used
to buy the arms which they are using on innocent people." Paulo Mafundama,
Angolan Consul General in Mongu, Zambia
The importance of diamonds in funding UNITA'S war effort over the last
decade is well known and fairly well understood. Diamond revenue became
increasingly important for a number of reasons including the political
changes in the post-Cold War era. Diamonds have provided the majority of
UNITA's funding although gold, coffee and particularly in the late 1980's
wildlife products and timber were all sources of funds. Between 1992 and
1998 UNITA obtained an estimated minimum revenue of US$3.72 billion from
diamond sales. This does not include revenue from other sources, nor interest
generated in overseas bank accounts.
The international trade in diamonds has become a major obstacle to any
possible progress towards peace; and has played the major role in enabling
UNITA to restock its munitions and maintain a flow of supplies which in
turn has enabled it to disregard the 1992 election results and to avoid
meeting its obligations under the Lusaka Protocol. The workings of the
international diamond trade are opaque and difficult to penetrate. However,
it is clear that 80 per cent of the trade is controlled by De Beers through
the CSO. It is also clear that the key role of the outside (unofficial)
market in controlling the world price of diamonds needs to be re-examined.
To the millions of Angolans who have survived the repeated years of
conflict and the estimated 300,000 that died violently between late 1992
and 1995, the workings of the international diamond trade may seem an abstraction,
but the revenue that UNITA has been able to generate from diamonds and
the direct and indirect impacts of this revenue are real enough.
The income generated from of UNITA's diamond sales, as with much of
the diamond business as it currently operates, is impossible to record
with absolute precision but it can be approximated as follows: 1998 US$200
m, 1997 US$700 m, 1996 US$700 m, 1995 US$320 m, 1994 US$600 m, 1993 US$600
m, 1992 US$600 m.
This material is being reposted for wider distribution by the Africa
Policy Information Center (APIC). APIC's primary objective is to widen
the policy debate in the United States around African issues and the U.S.
role in Africa, by concentrating on providing accessible policy-relevant
information and analysis usable by a wide range of groups and individuals.
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