'Change strategy on conflict diamonds'

The Kimberley Process method of screening so-called conflict diamonds comes under harsh criticism for impairing competition.

By SHARON WROBEL
May 10, 2007 22:01
2 minute read.
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The current methodology, implementation and efficiency of the Kimberley Process method of screening so-called conflict diamonds came under harsh criticism for impairing competition on Thursday at the fifth annual meeting of the World Diamond Council in Jerusalem. "The Kimberley Process is far from being perfect in terms of methodology and implementation," said Sergey Vybornov, the recently appointed president of Alrosa, Russia's largest diamond company. "The Kimberley Process imposed sanctions on a number of African countries, which resulted in a significant reduction of inflow of diamonds from these countries. Objectively, it can be viewed as killing competition using methods that have nothing to do with the market economy." Over the past year, the diamond industry has invested millions into education and implementation of Kimberley Process, ahead of the Oscar-nominated film "Blood Diamond," which refers to conflict diamonds, stones that are mined in war zones and sold to finance these conflicts. In four years, the Kimberley Process has helped to reduce the amount of conflict diamonds to a fraction of world trade. "The flow of blood diamonds is down from 4% to less than 1% of annual world diamond sales. However, no one has ever revealed the calculation used to obtain these numbers and we do not know how many diamonds end up in the gray market and are used by criminal or terrorist organizations," said Vybornov. In response, Eli Izhakoff, chairman of the WDC said the statistics and the percentage of conflict diamonds, which today account for 0.2% of global diamond production were not questionable. "The figures are backed by the United Nations and other organizations. The only problem of conflict diamonds is the Ivory Coast with annual production estimated between $9 million and $23m.," he said. Furthermore, Vybornov said the levels of corruption in a number of Kimberley Process countries called the efficiency of the bureaucratic certification procedures into question as the effectiveness of these mechanisms was not clear. As such, Vybornov suggested that to attain proper transparency, the Kimberley Process should be supplemented by a set of minimum compliance requirements for diamond-mining companies, such as mining history track, sales volume, and market capitalization. Also speaking at the conference, Gareth Penny, managing director of De Beers, said it was clear the diamond jewellery industry competed in an increasingly hostile environment where the consumer was becoming better informed and more demanding, particularly on issues that impacted its reputation. Therefore, he said the WDC must seek to expand its mandate beyond conflict and that the resource capability of the WDC should be reviewed and where possible increased. "It has to be in a position to address issues arising from the governance of our industry, its business ethics such as child labor and money laundering, environmental concerns and be able to demonstrate awareness of the issues facing the communities in which the industry operates - anywhere in the world," said Penny. Opening the second day of the conference, Minister of Industry Trade and Labor Eli Yishai said he would act to extend the country's money laundering legislation to encompass diamond trade revenues. "I have already instructed the Diamond Comptroller, Shmuel Mordechai to prepare the necessary proposal so that Israel would be among the first in the world to prevent the laundering and [illegal] transfer of money via the diamond trade," said Yishai. In a separate meeting, Yishai repeated his request to Vybornov to enable direct mass marketing of diamonds in Israel this year. Alrosa has promised in the past to sell rough diamonds from an office in Israel but, to date, sales have been lower than the hoped for level of more than $100m.

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