Zimbabwe, the Kimberley Process and the China factor

The daggers are drawn. Zimbabwe is once again the talking point. The topic:  its diamonds, especially those from Marange. The question: should the country’s diamonds be certified by the Kimberley Process to trade openly or not? Those against: human rights abuses are still rife and it is Mugabe’s military that is benefitting from illegal trade in diamonds and not the country. Those for: the country should be certified so that its diamonds can be traded transparently because the country is going to sell its diamonds anyway, with or without KP approval. Besides, the country is now such a major force in the diamond industry that it cannot be ignored. Who will win?  That is the question that will be decided this week when the Kimberley Process, the organisation tasked with ensuring the trade of conflict free diamonds, meets in Israel from Monday, November 1.

Zimbabwe’s diamonds, like everything else about the country, have been so controversial that they have been labelled “blood diamonds” even though they do not fall under the definition of blood diamonds of the KP certification system itself. The controversy has also been surrounded by distortions including false assumptions that the diamonds at Marange were discovered by African Consolidated Resources in 2006 when they were in fact discovered by Kimberlite Searches, a De Beers subsidiary, in 2002. But as one diamond expert said, Zimbabwe is such a sensation that anything gets published. Sadly, false information that has been published is now being taken as fact.

Diamond industry experts are worried about the decisions by the KP because the KP is made up of governments and non-governmental organisations and their interests are not necessarily those of the industry.

The United States and its Western partners, for example, are interested in “regime change” and do not like to see Zimbabwe’s diamonds being sold before that change because they argue the proceeds will be used to reinforce Robert Mugabe’s brutal regime.

But industry says Zimbabwe is now too important to ignore.  A confidential report on winners and losers in Zimbabwe’s diamonds game says: “Let’s not kid ourselves. The emerging Zimbabwe (Marange) mining development will trigger a structural transformation of the global diamond industry. Most industry participants are focussed on the short-term and are kind of in denial about unpleasant, long term repercussions of decisions made today. India, China and Belgium will never be the same again.”

The report says Belgium, currently the centre of the diamond trade, will be the biggest loser while China, which has had long relations with Zimbabwe, will be the biggest winner. India is faced with a stark choice of either creating 250 000 jobs or letting that slip to China.

A Chinese-owned mine Anjin is already in Chiadzwa and should come on stream in December.

The report says China is not interested in rough diamonds but in manufacturing as this will create thousands of jobs in China itself.  Currently Surat in India processes 80 percent of the world’s rough diamonds. Indian experts have said that diamonds from Marange could create 250 000 jobs, or more,  in Surat.

This has not gone unnoticed in China which can undercut India in all respects to provide jobs to millions of its rural peasants and thus provide stability to this bustling country. China is now the world’s second biggest economy but it still has very high unemployment which it considers a threat to its stability.

“Neither economic sanctions nor KP certification or non-certification will stop diamonds from leaving the country. The tighter the official export channels are being locked, the faster the alternative channels seem to develop…. Ultimately, when the official export channels are closed, tens or hundreds of millions of carats of diamonds will somehow be flown into China and will, for the first time ever, create a new Surat outside of India. This is what the Chinese want,” the report says.

It argues that even attempts to regulate polished diamonds will not work.

“Attempts to regulate polished diamonds in a similar fashion to rough diamonds will intensify. But at the end of the day, polished diamonds will find their way to the consumers one way or the other. They always have and they always will. NGos may be able to build some resistance against diamonds in North America but, actually nowhere else. At Least not in a meaningful manner…. Like it or not. Zimbabwe is everybody’s business,” the report says.

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