India's diamond trade under fire

By M H Ahssan

A passage through India is giving Africa's blood diamonds a respectable polish. According to reports, blood diamonds are being smuggled into the city of Surat, where they are cut and polished, then sold to respectable firms which go on to easing these illegal stones into the legitimate diamond supply chain.

Surat is the center of the world's diamond cutting and polishing industry. Ninety-two percent of the world's diamonds are crafted here. Located 250 kilometers north of Mumbai, the city earned India US$11 billion in exports last year. According to media reports, a sizeable number of rough diamonds entering Surat for cutting and polishing might in fact be blood diamonds.

Blood diamonds or conflict diamonds are those mined in war-torn African countries such as Liberia, the Ivory Coast, Sierra Leone and the Republic of Congo by warlords and rebels to finance arms purchases and other illegal activities.

Blood diamonds account for a small fraction of the diamond trade. At the height of the problem in the mid-1990s, about 4% of the global diamond trade was blood diamonds, according to the diamond industry. Global Witness, an international non-governmental organization that has drawn attention to human-rights abuse in resource-linked conflicts, puts the figure at 15%.

The role of blood diamonds in funding and prolonging wars and in devastating communities in west and southwest Africa has been immense. An international campaign highlighting this prompted the United Nations to pass a resolution calling for the creation of an international certification scheme to break the link between the illicit trade in rough diamonds and mass human-rights abuses associated with armed conflict.

This put pressure on the international community and the diamond industry to act. The Kimberly Process Certification Scheme was put in place in 2003 to regulate the trade in rough diamonds, that is, to prevent trade in blood diamonds while protecting the legitimate trade in diamonds. It is aimed at assuring buyers of diamonds that their stones have not contributed to bloodshed. It involves monitoring of diamonds at every point of the diamond pipeline, from mining through to retail, to ensure that diamonds from areas that the UN calls "conflict zones" do not slip into the legitimate supply chain.

The diamond industry maintains that the Kimberley process has solved the problem and that less than 1% of the diamonds in the market today are from conflict zones. However, a 2006 UN report drew attention to blood diamonds from rebel-held areas in the Ivory Coast skirting a UN diamond embargo and being smuggled out through neighboring Ghana and Mali.

According to investigative media reports, blood diamonds are smuggled into Surat in fishing boats. These are cut and polished in the diamond bazaars of this town, sold to reputed firms who then export the stones with a certification that they were not imported from conflict areas.

Officials of the Surat Diamond Association, an industry organization which has about 3,000 diamond establishments in Surat as its members, insist that the industry is scrupulously observing international norms and respects the ban on dealing with blood diamonds.

"We are aware of the implications [of dealing in blood diamonds] internationally and we are very careful," insists Umesh Shah of the Mumbai-based Shrenuj and Company, a leading diamond and jewelry manufacturer and exporter.

"Our customers in the US and Europe compel us to follow the processes, and we in turn ensure that the rough diamonds that we get are 100% conflict-free," points out Sohil Kothari, director, Fine Jewelry (India) Pvt Ltd, a leading exporter of diamond studded jewelry.

But a diamond exporter from Surat who spoke on condition of anonymity told Asia Times Online that there might be a handful of diamond merchants who are dealing in conflict diamonds. These are mainly owners of smaller diamond establishments. "The larger establishments are wary of tarnishing their reputation and reliability," he pointed out.

Indian intelligence officials say that blood diamonds will have to be identified before they enter Surat as once a rough diamond is polished it is impossible to trace its place of origin. "If we have to catch blood diamonds it has to be at the very point of their entry, that is, at the airports and seaports," says an official of the Department of Revenue Intelligence (DRI).

DRI officials say that the diamond cutting establishments are under their scanner and that they are keeping an eye on them. But they are wary of acting without adequate evidence, given the impact it will have on the industry. Diamond polishing is a major foreign exchange earner. It consists of about 6,000 small and large diamond cutting and polishing units and employs over 700,000 people.

The officials insist that if evidence is found, they will act because the stain of dealing with blood diamonds will damage the industry's reputation.

A diamond exporter from Mumbai described the allegations against Surat's diamond dealings as "a motivated campaign" by competitors in the international arena. The growth of India's diamond industry has been "phenomenal", he said, and has triggered envy among communities that have traditionally dominated the business, and this might be behind their "disinformation campaign", he said.

Indians account for about 65% of the $26 billion in diamond trade revenues, up from about 25% two decades ago. The share of Jewish businessmen has apparently fallen from 70% to 25% in the same period as Indian businessmen make inroads into the traditional Jewish-dominated hub of Antwerp in Belgium and Tel Aviv.

Indian merchants say that given the fierce competition overseas they are anxious to ensure that their credibility and image remain good; hence they are keen that the "government cracks down on those dealing in blood diamonds, if there are any".