PriceScope

The Kimberley Process and the Chinese

One of the many presentations, education sessions and panel discussions that were held preceding and during the 2011 JCK show at the Mandalay Bay Convention Center in Las Vegas was a panel presentation organized by the World Diamond Council, called "Diamond Dialogue: The Challenges of a Robust Kimberly Process." Discussions covered a wide range of issues and included an update of the state of the Kimberley Process, and in particular about the negotiations to resolve the issue of exports of rough diamonds from Zimbabwe's Marange region.

A string of diamond and jewellery industries industry leaders as well as representatives of civil society and government emphasized "the importance of maintaining a sturdy Kimberley Process, and stressed that the system remains relevant to the diamond industry despite the challenges that it faces."

However, when the Australian gemologist Gary Holloway asked some questions, none of the panel's participants had any meaningful answers.

"Why are there no Chinese representatives on this panel, or Indians?' Holloway asked. "The Chinese are the elephant in the room, but why is no one mentioning them? The Chinese are reportedly flying helicopter loads of diamonds out of ZIM on a regular basis, how does that work with China as a KP signatory?" he continued.

The answer from the US State Department representative was something like “If you have any evidence of Chinese illegally exporting diamonds please give it to us."

To be fair, there were some Indians were in the room. Dilip Mehta, President and CEO of Rosy Blue, who resides in Belgium and is a WDC member, was in the audience, but did not intervene in the discussion. Vasant Mehta, immediate past president of India's Gem and Jewelry Export and Promotion Council (GJEPC) and vice president of International Diamond Manufacturers Association (IDMA) was not present, but has missed few of the numerous WDC meetings and events in the past. His successor, GJEPC President Rajiv Jain, has yet to make his mark.

WDC members Lawrence Ma, Chairman of the Diamond Federation of Hong Kong, and Frank Lin, President of Shanghai Diamond Exchange, both familiar faces at WDC and other industry meetings, were not in the room either, but with his question Holloway was clearly not alluding to Chinese diamond industry representatives but to the absence of Chinese governmental representatives to meetings such as these and to KP meetings.

Of course, Holloway's remarks and questions regarding the Chinese were right on target. The Chinese are mostly keeping mum on the KP and on Zimbabwe but at the same time are not sitting on their hands as they are, more or less, under the legal cover of much needed contracts, ransacking the country for its mineral resources. They do this by employing tens of thousands of Chinese workers, again legally "imported" under the terms of the contracts signed by the ZIM government with Chinese firms. Beneficiation? It is doubtful that the word exists in Chinese.

Obviously, Holloway only put the finger on a sore spot, one that is no secret but at the same time highly disturbing. A few months ago, the outgoing German ambassador to Zimbabwe Albrecht Conze told a news conference that Chinese firms were trucking minerals out of the country, without offering any value addition of extracted minerals in Zimbabwe itself. He said that if his country would be given a chance it would be "looking at improving the value gaining process here which means with our mining technology we have -- we don’t have big mining companies in Germany anymore -- but we have all the machinery and the equipment…what we can offer is to have more added value being produced in the country…." And about diamonds he said that "one of the drama in the realm of diamonds is that big trucks of earth are being taken out of the country and what is important is to really make sure that the added value is produced in country which gives you more revenue…" A thorough Google search will turn up numerous articles that identify the relationship and contracts between ZIM and Chinese firms as highly problematic and as absolutely detrimental to the future of sustainable development in Zimbabwe.

So what does all this mean, in particular after the KP meeting crashed (again) in Kinshasha? It means that in order to level the playing field in the diamond business, Zimbabwe must be allowed to export its rough diamonds. If not, China, which already owns diamond mines in ZIM, will most probably turn its back on the KP, take it all and bugger the consequences.

The Indians are fearful of this scenario. Last April, Vasant Mehta gave an uncharacteristically fiery speech at one of the working sessions of the 2011 Presidents Meeting of the World Federation of Diamond Bourses. Lamenting the KP's members' lack of resolve, he suggested that he could not gauge how long eager Indian buyers could be kept at bay….

Do the KP members take these scenarios in account when presenting the pros and cons in their deliberations? One may sincerely hope so. If not, they may unwittingly be contributing to developments that will lead Zimbabwe from one disaster to another.


Click here to discuss on the Forum