Ian Smillie, Lansana Gberie and Ralph Hazleton
The Ploughshares Monitor March 2000 Volume 21 Issue 1
This article is excerpted from a report that is available at www.web.net/pac, in both English and French.
Ian Smillie, an Ottawa-based consultant, has 30 years of international development experience, as manager, programmer, evaluator, and writer. His most recent publications include The Alms Bazaar: Altruism Under Fire; Non Profit Organizations and International Development (IT Publications, London, 1995) and Stakeholders: Government-NGO Partnerships for International Development (ed. With Henny Helmich, Earthscan, London, 1999). Since 1997 he has worked as an associate with the Thomas J. Watson Jr. Institute at Brown University on issues relating to humanitarianism and war.
Lansana Gberie is a doctoral student at the University of Toronto and a research associate at the Laurier Centre for Military, Strategic and Disarmament Studies.
Ralph Hazleton holds a PhD in economics. He has 25 years of experience divided equally between Canadian academia, where he has worked as a political economist, and Africa, where he has worked as a senior manager of development and emergency efforts in Zaire, Zambia, Tanzania, Rwanda, and more recently, in Liberia and Sierra Leone.
Diamonds have been the cause of widespread death, destruction and misery for almost a decade in the small West African country of Sierra Leone. Through the 1990s, Sierra Leone’s rebel war became a tragedy of major humanitarian, political and historic proportions, but the story goes back further.
In the 1960s and 1970s, a weak post-independence democracy was subverted by despotism and state-sponsored corruption. Economic decline and military rule followed. The rebellion that began in 1991 was characterized by banditry and horrific brutality, wreaked primarily on civilians. Between 1991 and 1999, the war claimed over 75,000 lives, caused half a million Sierra Leoneans to become refugees, and displaced half of the country’s 4.5 million people. While there is no doubt about widespread public disenchantment with the failing state, with corruption and with a lack of opportunity, similar problems elsewhere have not led to years of brutality by forces devoid of ideology, political support, and ethnic identity. Only the economic opportunity presented by a breakdown in law and order could sustain violence at the levels that have plagued Sierra Leone since 1991. The point of the war may not actually have been to win it, but to engage in profitable crime under the cover of warfare. Diamonds, in fact, have fueled Sierra Leone’s conflict, destabilizing the country for the better part of three decades.
The diamond industry and De Beers
The De Beers group of companies mines, or partners in mining, the majority of the world’s diamonds. De Beers purchases by far the majority of all diamonds produced, and more or less sets the price of rough diamonds on the global market. Manipulation of both the supply and demand for rough diamonds on world markets is managed through its Central Selling Organization (CSO), headquartered in London. The CSO sources diamonds from De Beers mines as well as from the ‘outside market’ – diamonds produced by non-De Beers firms.
Until the 1980s, De Beers was directly involved in Sierra Leone, had concessions to mine diamonds offshore, and maintained an office in Freetown. Since then, however, the relationship has been indirect. De Beers maintains a diamond trading company in Liberia and a buying office in Conakry, Guinea. Both countries produce very few diamonds themselves, and Liberia is widely understood to be a ‘transit’ country for smuggled diamonds. Many ‘Liberian’ diamonds are of Sierra Leonean origin, and others reportedly originate as far away as Russia and Angola. De Beers says that it does not purchase Sierra Leonean diamonds..
Belgium and the Diamond High Council
Antwerp is the world centre for rough diamonds. The formal trading of diamonds in Belgium is structured around the Hoge Raad voor Diamant (HRD) – the Diamond High Council. The HRD records the origin of a diamond as the country from which the diamond was last exported. Therefore diamonds produced in Sierra Leone, say, may be officially imported and registered as originating in Liberia, Guinea, Israel, or the UK. Of further interest where transparency and accountability are concerned is the question of who actually monitors imports and exports on behalf of the Belgian government. Oddly, this role is carried out largely by the HRD itself.
The Sierra Leone diamonds
From 1930 to 1998, approximately 55 million carats were mined (officially) in Sierra Leone. At an average price in 1996 dollars of US $270 per carat, the total value is close to US $15-billion.
In 1935, the colonial authorities concluded an agreement with De Beers’ Sierra Leone Selection Trust (SLST), giving the company exclusive mining and prospecting rights over the entire country for 99 years. By 1956, however, there were an estimated 75,000 illicit miners in Kono District – the heart of the diamond area – leading to smuggling on a vast scale, and causing a general breakdown of law and order. The buyers and smugglers at that time were mainly Madingo and Lebanese traders. With the tightening of security between Kono and Freetown in the early 1950s, Lebanese smugglers began moving their goods to Liberia.
In 1955, the colonial authorities scrapped SLST’s nation-wide monopoly, confining its operations to Yengema and Tongo Field, an area of about 450 square miles. In 1956, they introduced the Alluvial Mining Scheme, under which both mining and buying licenses were granted to indigenous miners. Many of these licenses came to be held by Lebanese traders who had begun to settle in Sierra Leone at the turn of the century.
Siaka Stevens became Prime Minister seven years after independence in 1968. A populist, he quickly turned diamonds and the presence of SLST into a political issue, tacitly encouraging illicit mining, and becoming involved himself in criminal or near-criminal activities. In 1971, Stevens created the National Diamond Mining Company (NDMC) which effectively nationalized
SLST. All important decisions were now made by the prime minister and a Lebanese businessman named Jamil Mohammed. From a high of over two million carats in 1970, legitimate diamond exports dropped to 595,000 carats in 1980 and then to only 48,000 in 1988. In 1984, SLST sold its remaining shares to the Precious Metals Mining Company (PMMC), a company controlled by Jamil. Stevens retired in 1985, handing over power to Joseph Momoh, who placed even greater responsibility in the hands of Jamil.
From the late 1970s to the early 1990s, aspects of Lebanon’s civil war were played out in miniature in Sierra Leone. Various Lebanese militia sought financial assistance from their compatriots in Sierra Leone, and the country’s diamonds became an important informal tax base for one faction or the other. This was of great interest to Israel, in part because the leader of the important Amal faction, Nabih Berri, had been born in Sierra Leone and was a boyhood friend of Jamil. Following a failed (and probably phoney) 1987 coup attempt in Sierra Leone, Jamil went into exile, opening the way for a number of Israeli ‘investors’ with close connections to Russian and American crime families, and with ties to the Antwerp diamond trade.
The Revolutionary United Front (RUF) rebel war began in 1991 and soon after, Momoh was replaced by a military government – the National Provisional Ruling Council (NPRC). Despite the change in government, however, RUF attacks continued. From the outset of the war, Liberia acted as banker, trainer, and mentor to the RUF.
What was different and more sinister after 1991 was the active involvement of official Liberian interests in Sierra Leone’s brutal war – for the purpose of pillage rather than politics. By the end of the 1990s, Liberia had become a major centre for massive diamond-related criminal activity, with connections to guns, drugs, and money laundering throughout Africa and considerably further afield. In return for weapons, it provided the RUF with an outlet for diamonds, and has done the same for other diamond-producing countries, fueling war and providing a safe haven for organized crime of all sorts.
The ‘juniors’ and private security firms
President Momoh’s search for new investors in the early 1990s was carried forward by the NPRC military government. The government began to receive overtures from small mining firms, known in the business as ‘juniors’. Three of these juniors became heavily involved in Sierra Leone during the 1990s, some with interests that extended far beyond the mining of diamonds.
All three companies trade on Canadian stock exchanges, no doubt because of Canada’s reputation as a source of easy venture capital for small mining and exploration companies. The first, Rex Diamond – with de facto headquarters in Antwerp – has an integrated mining, sorting, cutting, and marketing operation, holding Sierra Leonean concessions in Zimmi and Tongo Field. Although Rex claims friends among both government and the RUF, this is denied by the RUF, perhaps understandably. In 1998, Sierra Leone lost its only combat helicopter – a serious problem because the Soviet-built gunship had been the government’s most effective weapon against the RUF. Zeev Morgenstern, Rex’s Managing Director, and Serge Muller, the company’s President, came to the government’s aid by making an arrangement to supply engines, parts and ammunition worth US $3.8-million. The deal went sour as a result of defective parts supplied from Russia. According to the Washington Post, Morgenstern and Muller have both said, “the arms deals were unrelated to Rex’s mining activities.”
The second firm is Toronto-based AmCan Minerals, which holds various exploration licenses in Sierra Leone. Because of the security situation, AmCan has so far done little diamond mining, although it recently acquired a South African-owned firm, ArmSec International (SL) with connections to both the diamond and the security industries. AmCan’s Sierra Leone lawyer is Chairman of the Government Gold and Diamond Office, the body responsible for
overseeing the monitoring, valuation and taxation of the diamond industry.
The third ‘Canadian’ firm is the London-headquartered DiamondWorks, an outgrowth of Carson Gold and Vengold, companies promoted by Robert and Eric Friedland. In 1995, DiamondWorks acquired Branch Energy Ltd., a private company registered on the Isle of Man. DiamondWorks and Branch Energy have become the subject of widespread interest because of their apparent but
much-denied connections with two major international security firms, Executive Outcomes and Sandline. In 1995, The Government of Sierra Leone (GOSL), backed militarily onto the Freetown peninsula by the RUF and facing certain defeat, engaged the services of Executive Outcomes (EO) to help in its defense. With 200 imported soldiers, air support, and sophisticated communications equipment, EO pushed the RUF back from Freetown within a week, and within another month had cleared the major diamond areas of Kono as well. Shortly after EO took control of the diamond areas, Branch Energy – which had introduced EO to the GOSL – secured a 25-year lease on Sierra Leonean diamond concessions.
In 1997, DiamondWorks’ Sierra Leone country manager was seconded – as a ‘private citizen’ – to Sandline, in connection with a controversial arms shipment intended for the briefly exiled government of Tejan Kabbah.
The juniors arrived in Sierra Leone after the formal instruments of the state had all but disappeared. They also arrived in the midst of a war which had at its epicentre the same thing that brought them to the country – diamonds.
There is a distinction to be made, however, between the need to hire a private security firm in order to police a mining operation, and the provision of troops and weapons in support of a faction in a civil war. Some would argue that regardless of Executive Outcome’s own purpose, its involvement in Sierra Leone was in a good cause. EO successfully protected a democratically elected government against a brutal and illegitimate rebel force.
The problem is not the individual episodes, but the bigger picture which they help to form – of a world in which beleaguered and legitimate governments find little formal international protection against internal predators, and are forced into Faustian bargains in order to survive.
Framework for the recommendations
A Permanent Independent International Diamond Standards Commission should be created under United Nations auspices in order to establish and monitor codes of conduct on governmental and corporate responsibility in the global diamond industry. It should draw members from intergovernmental institutions such as the Commonwealth and the Organization of African Unity (OAU), from the diamond industry, from international law enforcement agencies, and from international civil society organizations
In addition to the diamond-specific recommendations in this report, the development of sustainable peace in Sierra Leone will require major investment by the government of Sierra Leone and by donors in long-term basic human development and the creation of democratic institutions. Diamond-specific initiatives must be integrated into wider programs aimed at building fundamental human security and democracy, involving parliamentarians, journalists, teachers, and a broad cross-section of civil society.
Recommendations for action in Sierra Leone
Establishment of the rule of law and human security throughout the country is of primary and urgent importance for a return to peace, and for appropriate exploitation of the country’s mineral resources. In the short- and medium-term, donor agencies, friendly governments, the UN Peacekeeping Force, and the West African intervention force, ECOMOG, must facilitate the disarmament and demobilization of extra-governmental forces. Force must be used in a timely fashion to halt a resurgence of conflict.
Special long-term UN security forces must be deployed in all major diamond areas.
Attention should also be given by the UN Peacekeeping force to blocking or destabilizing major smuggling routes from Sierra Leone into neighbouring countries.
Donors should actively support current British government efforts to rebuild Sierra Leone’s army and police force. A professional diamond unit should be created with the ability to anticipate and counteract criminal activities. This reform should place training in human rights law and
international humanitarian law at the centre of its efforts to create a credible, non-partisan army.
The Government of Sierra Leone must ensure full transparency, high standards, and rigorous probity in the implementation of its diamond purchasing, valuation, and oversight activities. Corruption and conflicts of interest must be dealt with quickly and decisively. There is an important role to be played in this effort by Sierra Leonean civil society. Assistance in reviewing current systems and developing an enforceable code of conduct should be sought from appropriate donor agencies.
Systems must be developed in Sierra Leone for the payment of fair prices to legitimate small miners. The banking system must be able to provide adequate and timely funding to finance such purchases. Schemes which actively promote participation in small-scale artisanal mining by Sierra Leoneans, and which actively discourage the participation of non-citizens should be given top priority.
Effective and honest monitoring and inspection systems must be established throughout the mining and trading system. External assistance should be sought in developing these. Competent UN inspectors should be posted at different points in the system.
In creating incentives for foreign investment in larger-scale mining operations, the Government of Sierra Leone should raise its standards for investors, insisting on a minimum per annum exploration budget and/or minimum levels of market capitalization and/or assets. Full corporate transparency must also be provided. Assistance in developing such standards should be sought from international securities commissions.
While it is reasonable to expect mining firms to provide security within their immediate areas of operation, under no circumstances should they be provided with concessions in return for larger security or military operations, or in return for the supply of weapons.
De Beers is part of the problem. In its efforts to control as much of the international diamond market as possible, it is no doubt purchasing diamonds from a wide variety of dubious sources, either wittingly or unwittingly. The breadth of its control, however, is also its major strength, and is part of the solution to the problem. If De Beers were to take a greater interest in countries like Sierra Leone, and if it were to stop purchasing large amounts of diamonds from countries with a negligible production base, much could be done to end the current high levels of theft and smuggling.
As a matter or urgency, more rigorous oversight on the issue of origin must be instituted by the CSO.
Strong efforts should be made by the Government of Sierra Leone, international bodies such as the United Nations and the World Bank, and concerned governments to persuade De Beers to return to Sierra Leone. At a minimum, De Beers should be persuaded to open a purchasing office in Freetown and should be given every incentive to do so.
Strong efforts should be made by the same international community to persuade De Beers to halt the purchase of all diamonds originating in Liberia and Ivory Coast until clear international guidelines have been developed for proving that any diamonds sold in these countries are genuinely of local origin. De Beers and all other foreign firms should be encouraged to close their purchasing offices in these two countries.
The structure of the Belgian diamond industry may have served useful purposes when the industry was smaller. Today, however, it looks irresponsible, secretive, and seriously under-regulated. It has a demonstrated attraction for new forms of organized crime, and is complicit in fueling African wars. The following recommendations are made to the Diamond High Council and the Government of Belgium, but they are also made to the European Union, and to other governments and institutions in Europe and Belgium with the potential to influence the outcome of events.
The Government of Belgium must take full and direct responsibility for oversight of the Belgian diamond industry. This includes taking direct responsibility for customs, valuation, and statistical procedures.
The conflict of interest posed by the government’s current customs-related arrangements with the HRD should be terminated.
A high-level commission of enquiry should be instituted into the Belgian diamond industry as a whole, with particular reference to its lack of transparency and questionable paper work, and its possible infiltration by organized criminal elements. Such an enquiry, while of primary interest to Belgian authorities, has implications that extend far beyond Belgium. The Belgian Government should invite representatives of international bodies and/or other governments to participate in the enquiry.
The HRD and/or the Government of Belgium should immediately prohibit the processing of all diamonds that are said to be of Liberian and Ivory Coast origin.
As a matter or urgency, more rigorous oversight on the issue of origin must be instituted by the HRD and the Government of Belgium.
The Government of Belgium and the HRD should, as a matter of urgency, investigate the diamond ‘fingerprinting’ technology being developed by the Royal Canadian Mounted Police. The sooner this technology is in widespread use, the easier questions of identification will become.
Liberia and Ivory Coast
The United Nations Security Council should place a full embargo on the purchase of any diamonds originating in, or said to originate in Liberia until a full and objective international review can be carried out of the country’s legitimate resource base, and until exports fall into line with that resource base.
The United Nations Security Council should place a full embargo on the purchase of any diamonds said to originate in Ivory Coast until a full review can be carried out of the country’s legitimate resource base, and until exports fall into line with that resource base. Consideration should be given to imposing the same restrictions on Guinean diamonds.
All Canadian securities commissions should initiate discussion among their members about issues relating to corporate conduct in war zones, with special reference to direct or arm’s length trade in weapons and materiel, involvement with individuals and companies recruited abroad to engage in hostilities in a third country, or the arrangement of mining concessions in return for protection of any sort. Guidelines dealing with such issues should be created or added to existing codes.
The Royal Canadian Mounted Police should be encouraged and supported in its development of diamond ‘fingerprinting’. Efforts should be made to develop systems for adopting the technology as a matter of course in diamond-producing countries and in major trading centres around the world, including the CSO and Antwerp.
A consumer campaign
One way of drawing greater attention to the urgency of the matter and of gaining broader support for change, would be a consumer campaign. One has already been started in Europe and it would not be difficult to expand it. Sixty million individual pieces of diamond jewelry are sold every year, indicating a sizeable target audience.
An effective consumer campaign could inflict damage on an industry which is important to developing economies and to poor people working in the diamond industries of other countries such as Namibia, South Africa, India, and Botswana. Those considering the possibility of initiating or joining a campaign, therefore, would have to consider how many lives in countries
like Sierra Leone, Angola, and the Congo these jobs are worth. Speaking in November 1999, De Beers Chairman Nicky Oppenheimer said, “Damage to the diamond market will not on its own deprive the warlords of their treasuries, but it will kill prosperity and encourage poverty in other
well regulated African countries and in the cutting centres of India and around the world. … Indeed, damage the market and you undermine orderly mining regimes and ensure instead that there will be more Angolas, more Congos, more Sierra Leones. It could ensure that there will be no more Botswanas, South Africas or Namibias.”
Diamond analyst Martin Rapaport says, “The bottom line is that the diamond industry does not need or want conflict with government or NGOs. It is in our economic interest to cooperate and find reasonable and responsible ways to deal with war diamonds.” He says 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. … As an industry we must take responsibility for our actions and develop trade-wide practices that we believe are correct and moral.” Nelson Mandela has said the same thing: “We would be concerned that an international campaign… does not damage this vital industry. Rather than boycotts being instituted, it is preferable that through our own initiatives the industry takes a progressive stance on human rights issues.”
Certainly a boycott could damage the industry. But the idea of a campaign is different: it is about transparency, change, and urgency. The point of a campaign would be to help the industry ‘take responsibility for its actions’ – not damaging it, but improving it.