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Diamonds from New Sources
The Oppenheimers using all colonial connections of the
British Empire, succeeded in weaving all the later
discoveries in Africa, the colonial administrators in
Angola, the Congo, Sierra Leone and with Dr. Williamson
in Tanganyika. It was fully backed the Belgian and
French governments, and it was recognized by every other
government concerned as the official channel for the
diamond trade. New diamonds mines in Russia, Australia
and new flood of smuggled diamonds from African
countries is threatening De Beers' century-old grip on
the world diamond trade.
Russia
A flood from new sources like Russia is threatening to
finally crack the De Beers cartel. Thousands of
kilometers from Moscow in the new autonomous republic of
Sakha (formerly known as Yakutia) lies a huge open pit
in the Siberian permafrost, called Mirny (peaceful).
With Russia's large output of high quality diamonds that
is second to the South African company's. De Beers is
struggling to control the world diamond market by making
payments to the Russian mining industry. It has lent
billions of dollars against a collateral held in London
(Read - International: South
Africa's De Beers To Open Moscow Office, Wall Street
Journal, January 23, 1992). Russian mines at
least 20 million carats of diamonds each year in Yakutia
on the kola peninsula. A few years ago, it would have
been unthinkable that the Russians and South Africans -
the two largest producers of gold and diamonds would be
openly doing business together. In July 1990, De Beers
announced $5 billion agreement to sell the former Soviet
diamonds over the next 5 year period. Since the collapse
of Moscow's central control, rumors tell that smuggled
diamonds from Russia are leaking into the open market.
The disarray engulfing the Russian diamond industry
poses a long term threat to the flow of gems that the
cartel ultimately wants to protect. Russian officials
both inside and outside the Kremlin harbor suspicions
that the country's current contract with De Beers favors
the South Africans. Though De Beers claimed that it
charges only 10% markup as its sales fee for other
nations diamonds, many Russians suspect that its fee is
30% or higher. The Russian government is sure to demand
a bigger piece of the action next year when it is
expected to begin negotiations on a new contract.
Moscow's dominance over the its diamonds is also being
boldly challenged by the newly assertive republics.
Local leaders in Sakha have tussled with Moscow over
control of the region's mines since the 1991 Kremlin
putsch. Some Russians are talking about creating their
own cartel to better enforce terms upon outside buyers (Read
- Precious No More, A Global Diamond Glut Rattles the De
Beers Cartel - Newsweek, November 9, 1992).
Throughout its history, the company has been committed
to keeping diamond prices as stratospheric levels. More
than anything, it feared that if prices began to fall,
diamond owners around the world would start unloading
tons of gems and the market would not be able t bear the
price fall and would collapse. So De Beers made sure
that gems remained secure. It could do this because of
the tremendous leverage it had over the world's diamond
miners, who had a very few other outlets. As Ernest
Oppenheimer established it, one of the cardinal
principles behind the diamond inventories was that the
demand for diamonds was fixed each year and waived only
with the number of engagements (Read
- Can De Beers its Hammerlock? by Richard A. Mechler and
Deborah Stead, Business Week, September 21, 1992).
Any sudden increases in the production of diamonds would
therefore be added to De Beers stockpile rather than its
profit...
Australia
De Beers did brilliant efforts to bring African and Russian sources
under its control. However, it did not end their nightmare. In the late
1970s, vast diamond deposits were discovered in the Argyle region of
Western Australia near the town of Kimberly (coincidently had been named
after Kimberly, South Africa). Test drillings in 1981 showed that a
staggering quantity could be produced surpassing the entire production
of De Beers in 1981 and it was enough to change the world geography of
diamonds. De Beers moved rapidly to get a stranglehold on these new
Australian diamonds. It began acquiring mining interests in CRA, the
Australia company which controlled most of the mining rights to its
venture and started to cut a secret deal with CRA. However, Northern
Mines, the majority shareholder did not accept the deal and charged De
Beers and charged De Beers of cheating Australians causing a public
furor and a government action to stop De Beers. De Beers had to stop
there realizing it could no longer control the world supply.
Angola A
surge in illicit mining (as De Beers calls activities outside its
control) in Angola has unleashed a flood of uncut stones onto the world
market forcing De Beers to sop up hundreds of millions of dollar' worth
of rough diamonds it has no hope of selling anytime soon. In Angola,
thousands of diamond prospectors have poured into Luanda province in a
frenzy recalling the California gold rush which require vast, expensive
mining operations. Angolan alluvial diamond deposits are relatively easy
to exploit. The rush caught De Beers normally on-their-toes executives
flat-footed. The smuggling chains in Angola connect at least three
clandestine trading houses in Luanda to the open air gravel pitts where
shirtless prospectors dig for rocks on the bands of the Kwango river.
From the Angolan capital, the gems will find their way to Belgium where
De Beers representatives will spend millions of dollars each year just
to keep them off the market.
De Beers is pressuring the Angolan government to do something about the
prospectors. At one time, the head of De Beers publicly blasted what he
termed officials' "total passivity". In De Beers 1991 annual report, the
then chairman Julian Ogilvie Thompson expressed cautious optimism that
the central government in Luanda would curb illegal mining more
effectively following the presidential elections. But those hope were
again dashed by the rigged elections and the failure of the U.N.'s peace
process.
Smuggling from other
African Mines The
smuggling routes lead from the diamond mines and
diggings in Southern and Western Africa to entry
spots such as Monroevia, Brazzaville, Burundi and
Beirut. The Belgian and other European markets are
often flooded with smuggled diamonds. The native
sorters at....
Read more..
The Long Arm of De Beers
De Beers mainly mines gem quality and industrial
diamonds, markets diamonds produced by itself and
also others, makes and sells synthetic diamond and
related international investments in mining,
industrial and finance companies. In its worldwide
operations, it has assumed many....
Read more...
Monopoly Through Financial Strength and Government
Support
De Beers could teach OPEC a thing or two about how to
maintain a cartel. It controls 80% of the world's diamond supply
through only 20% of De Beers gems come from its own mines. It
controls the world's diamond trade through indirect levers. Some
nations, such as Botswana...
Read more...
Read about Diamond History, Diamond Trade, Buying Tips and more...
The Romans believed that diamonds brought
courage and bravery during battle. Jewish high priests used diamonds to
decide the innocence or guilt of the accused: A stone held before a
guilty person dulled and darkened; a stone held before an innocent
person glowed with increased brilliance. The Hindus believed that this
brilliant gem was created when....
Learn about Diamonds....
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Diamond from New Sources
