Conflict Diamond Update

February 22, 2002

Conflict Diamond Update

New hearings in Congress and the release of several criticisms of the Kimberley Process have placed conflict diamonds back in the spotlight.

When the conflict diamond issue surfaced in 1999, it referred to gems sold to fuel conflict in African nations such as Sierra Leone, Angola and the Democratic Republic of Congo. In late 2001, The Washington Post reported diamonds were also being used to fund the al Qaeda terrorist network.

The potential terrorist link, still under investigation, makes the Kimberley Process and passage of U.S. legislation to ban conflict diamonds critical, say industry leaders. The World Diamond Council and related groups will press for both projects' completion in 2002.

The Kimberley Process
In March, the United Nations will review the initial recommendations of the Kimberley Process, a group working for almost two years to create a secure trading network for legitimate diamonds. The plan involves a certification system. Certificates would accompany sealed rough diamond containers when exported from mining countries. The certificates and sealed containers would be checked again bu the importing nation to ensure no uncertified diamonds had been added.

The 35 nations, industry representatives and human rights groups comprising the Kimberley Process will meet in Ottawa, Ontario, March 18-20 to eliminate weaknesses in the plan. Two recent critiques of the certification program detail these drawbacks. One criticisms was issued by a group of human rights organizations led by Amnesty International and the other by the U.S. General Accounting Office, which reported its findings to Congress in February. The points at issue are:

Administration: The Kimberley Process has not designated an administrator to oversee the worldwide certification program. Human rights groups say many nations, including the U.S. and Russia, have raised concerns over the costs and the authority necessary. The administrator would collect data about the program, review how it was working, identify problems and inflict deterrents on those caught violating the rules, say the groups. The groups say there is no provision for funding this function.

Monitoring Compliance: Existing proposals to monitor compliance with the certification system are weak, say human rights groups and the GAO. Compliance will be toughest to monitor at the beginning and the end of the supply chain. The GAO expressed concern about the period between when diamonds leave a mine or field and when they arrive at the point of export. Safeguards are needed to ensure conflict diamonds aren't mixed in with legitimate stones during this journey, it said. Human rights groups and the GAO also say there must be outside auditing of the proposed system of warranties that will track diamonds after being vetted conflict-free during import into diamond trading and cutting countries. All diamond traders down to the retail level will be required to maintain records and submit them to business auditors, says Cecilia Gardner, executive director and general counsel of the Jewelers' Vigilance Committee. Gardner has worked closely on the Kimberley Process. They could also be asked to open their records to Kimberley Process administrators, Gardner says.

World Trade Organization Concerns: The Kimberley Process hopes for participation by all diamond-trading nations in its certificate-of-origin program. Dissenters will lose the right to trade with other diamond mining and cutting countries. But some countries, including the U.S., say such an exclusion from trade could violate agreements like those of the World Trade Organization. This issue has yet to be resolved.

Sharing Data: The Kimberley Process has not determined how the countries involved in the program will share critical data, say human rights groups and the GAO. Such sharing is central to the success of the system.

Kimberley Process members still hope to start full implementation of the system by the end of 2002, with individual nations beginning to issue Kimberley certificates sooner. The group has asked the U.N. for an international understanding and endorsement to ensure the program is enacted and succeeds.

U.S. Legislation
The U.S. Congress also plays a vital role in the Kimberley Process. To comply with the new international system, the U.S. must pass legislation to bring itself into compliance, says Matthew Runci, executive director of the World Diamond Council and president of Jewelers of America. Last year, congressional leaders, with the support of the industry and human rights groups, passed a Clean Diamond Trade Act in the House of Representatives. The passage followed haggling with the White House about protecting U.S. interests in the war against terrorism and complying with WTO standards. But the Senate balked, saying the bill was too weak and it should have been involved in negotiations with the White House, says Runci. Without the Senate passage, the bill failed to become law.

In February, the Senate kicked off an investigation of the issue with hearings to assess the risks of inaction and the stance of the U.S. on the international certification system. Runci, who is closely involved in the legislative effort, says it's highly unlikely the Senate would be successful in introducing a completely new bill and getting consensus from key players. Much more likely to succeed would be a joint effort between the House and Senate to pass legislation akin to last year's House bill. Senators opposed to the old bill appear to be reconsidering their positions, says Runci.

If the Senate doesn't go along with the White House-approved bill, it's likely the executive branch will introduce its own bill, since the U.S. must have a new law to comply with the Kimberley Process, says Runci. Currently, there is no general mandate to authorize the U.S. Customs Service to bar diamonds not certified by the Kimberley Process.

– by Peggy Jo Donahue

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