The Legal Regulation of Conflict Diamonds Jeffrey S. Morton Florida Atlantic University

The destructive role that the illicit trade in rough diamondsplrrys in intra- state and inter-state conjlict emerged as a prominent issue during the 1990s as a result ofcontinuedconjlicts in Angola, the Democratic Republic of the Congo, and Sierra Leone. In response to the need to regulate the international trade in diamonds used by rebelforces tohe1conflict, nation- states, international organizations, and the diamond industry cooperated in the establishment of a certlfication scheme to differentiate legitimate diamonds >om conflict diamonds. The Kimberley Process Certijication Scheme, which went into effect in January 2003, was the culmination of that multilateral eflort. This article examines the issue of conflict diamonds and the role that the trade in illicit diamonds plays infueling conflict. The Kimberley Process is analyzed and critiqued as a modelfor the regulation of “lootable”commodities that undermine internationalpeace andsecuriQ

On May 2 1,200 I, President George W. Bush submitted notification to the U.S. House of Representatives of his decision to issue an Executive Order prohibiting the importation of all rough diamonds originating in Liberia into the United States (U.S. House 2001). Two months previously, the United Nations Security Council passed Resolution 1343, mandating such prohibitions of imports and imposing sanctions on Liberia for its role in the illicit trade of diamonds that facilitated the activities of the Revolutionary United Front (RUF) of Sierra Leone. In an early attempt to promote the regulation of international trade in rough diamonds, two important diamond industry groups, the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers’ Association (IDMA), declared in a joint statement in 2000 a “zero tolerance” policy towards the trade in conflict diamonds. These initiatives by states, international organizations,and industry groups were part of a concerted international effort to curb the illicit trade in rough diamonds the profits of which were used to fuel internal conflict. The Kimberley Process Certification Scheme, the formal system designed to regulate international trade in rough diamonds, was initiated in 2000 by southern African diamond producing countries. Three years later, on January 1,2003, the Certification Scheme went into effect.’

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Legal regulation was required in response to the realization that the trade in conflict diamonds provided funds that were used to support and prolong destructive civil wars in places such as Sierra Leone, Angola, and the Democratic Republic of the Congo. According to Tamm (2002), “Diamonds embargoes are the most recent manifestation of a growing trend toward sanctions as coercive action to bring an end to internal conflicts and gross violations of human rights” (I 6).

Conflict Diamonds

According to the Kimberley Process Certification Scheme, conflict diamonds are defined as “...rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimategovernments.. . .’Q In Angola it is estimated that the conflict diamond trade generated $I 50 million in 1999. Illicit diamond sales in Sierra Leone are thought to be worth at least $70 million ann~ally.~Table 1 provides estimated rough diamond production levels for rebels operating in three select civil wars: Angola, Democratic Republic of the Congo, and Sierra Leone. The sale of illicit diamonds can generate income not only to arm combatants involved in internal wars, but the profits may be so substantial as to create a new incentive to wage civil wars in the first place. Klare (2002) makes this argument when he states that “[olnce a rebellion has erupted, the fighting often evolves into resource conflict” ( 193).

Table 1. Rough Diamond Production (US.S million) Rebel Group 1999 2000

UNlTA 150 75 RUF 70 70 DRC rebels 35 35

Source: Shaxson (200 1 )

Conflict diamonds make up a very small percentage of diamonds mined annually. In 1999, it is estimated that conflict diamonds accounted for less than four percent of the world’s annual rough diamond production. The fact, however, that large amounts of diamonds are kept off the market in order to inflate prices, a practice reflected in De Beers’ “supply management” model, Conflict Diamonds 391 means that conflict diamonds make up a substantial portion, as much as 20 percent, of the international trade in diamonds (Tamm 2002). The mining, manufacture, and sale of legitimate diamonds, however, provide valuable sources of employment and economic development for developing countries. Botswana, the world’s leading diamond producer, generates more than $800 million annually from the exploitation of its diamonds. Diamonds account for approximately 79 percent of Botswana’s total export earnings, just over 40 percent of its gross domestic product, and more than half of its government rever~ues.~In 200 1, world-wide diamond mine production of rough diamonds was estimated to be worth $7.885 billion (Cook 2003, 1 I). The international diamond industry employs more than two million workers, the majority of which are located in developing countries. As such, any regulation of the diamond trade must be precise enough to identify and limit trade in conflict diamonds without diminishing trade in legitimate diamonds. Isolating illicit gem production can only occur when governments disclose information about those involved in diamond production activity. Accurate information reveals irregularities and helps to prevent conflict diamonds from entering the international diamond market. The key is to identify and label legitimate, non-conflict diamonds at the point of mining and to verify that status at every point thereafter. Failure to identify legitimate diamonds properly at the source renders all subsequent regulatory action unworkable.

The Role of Conflict Diamonds in Internal Wars

While natural resources in general are believed to fuel internal conflict in a number of countries, three conflicts in particular-in Angola, Sierra Leone, and the Democratic Republic of the Congo-have been widely recognized case studies relating to conflict diamonds.

Angola Angola’s civil war dates to its independence from Portugal in 1975. When pro-Soviet forces gained control of the country’s capital and South Africa and the United States supported rebels which challenged centralized authority, the country was effectively separated into two. As a result, Angola’s natural resources were divided, with the government benefiting from its control over oil fields and UNITA rebels realizing great profits from the diamond fields under its control. The war has resulted in large-scale human suffering, including 1.5 million deaths, nearly four million displaced persons, and approximately 100,000 victims of landmines, weapons used to protect the perimeter of 392 Politics Or Policy Vol. 33 No. 3 diamond-rich areas.5 The war in Angola was made more complex by the intrusion of outside powers. By supporting Jonas Savimbi’s UNlTA rebels, the United States both challenged a leftist Angolan government and supported South African claims to neighboring Namibia. In response, the Luanda government turned for support to Havana, which responded by transporting 1 8,000 Cuban troops to Angola. While the civil war in Angola initially may have been a struggle over ideology and power, due in large part to its Cold War inception, Klare (2002, I 9 I) contends that since the 1990s the conflict between the government forces and the UNITA rebels has been for control over the country’s valuable oil and diamond supplies. In 1998, the United Nations Security Council extended its 1993 arms and fuel embargo on Angola to include diamonds, marking the first international effort to restrict the illicit trade of conflict diamonds (UN Security Council 1998). As the world’s fourth largest producer of diamonds, Angola’s diamond fields possess sufficient financial wealth to fuel the country’s internal struggle unless regulation efforts are undertaken. In an effort to regulate Angolan diamonds more efficiently and thus reduce the illegal export of conflict diamonds, the government divided diamonds into three sectors: formal, informal, and illicit. The formal market consists of diamonds from officially licensed mines; informal diamonds are mined by unlicensed miners and sold to licensed buyers; and illicit diamonds are mined and traded by unlicensed parties. Without a more elaborate system of certification, and coupled with more intense international commitment to the suppression of trade in conflict diamonds, however, Angola’s internal struggles over resources continued unabated during the post-cold war era.

Sierra Leone Before the Second World War, diamond mining in Sierra Leone was dominated by the Sierra Leone Selection Trust (SLST), a corporation owned and operated by De Beers Consolidated Mines, Ltd. De Beers enjoyed an exclusive mining right granted by London to the Sierra Leone diamond fields. In the post-WWII era, independent operators, estimated at more than 30,000 people, illegally mined diamonds and smuggled them to the international market via Liberia (Campbell 2002.18- 19). The fact that Liberia pegged its currency to the US. dollar made it the West African region’s most ideal transit point for rough diamonds. By the time that Sierra Leone gained its independence, more diamonds were smuggled out ofthe country than were officially exported. undermining an important source of income for the new government. Years Conflict Diamonds 393

of economic stagnation and government corruption set the stage for the country’s violent civil war of the 1990s. In 1991, civil war between the government of Sierra Leone and the Revolutionary United Front (RUF) broke out, with Liberian involvement serving to inflame the conflict further. Despite vast diamond, bauxite, and titanium ore, Liberia’s per capital gross national product (GNP) in I995 was $180, reflecting the extent to which private companies and government officials siphoned off profits from resource mining (Reno 1998, 1 15-28; World Bank Annual Report 1996).Asmall insurgent force, the RLJF gained financial strength to purchase arms by controlling Sierra Leone’s Kono diamond fields and selling rough diamonds through neighboring Liberia. With the diamond fields under the control of the RUF, official exports of Sierra Leone diamonds dropped from more than two million carats per year in the mid-1960s to approximately 9,000 carats per year in the 1990s (Campbell 2002,2 I). Despite intense international pressure and the presence of regional and United Nations peacekeeping forces, the diamond-fueled RUF continued its insurgent campaign, plunging the West African country further into civil strife and humanitarian catastrophe. After several failed diplomatic initiatives, a November 2000 cease-fire held, allowing for the extension of a United Nations peacekeeping operation and, ironically, a respite for RUF rebels to mine the diamond fields without the interference of an ongoing civil war. By war’s end, 75,000 Sierra Leone citizens were killed, 20,000 were mutilated, and approximately 80 percent of the country’s five million citizens were either refugees or were internally displaced due to the conflict (Tamm 2002, 1 I; Campbell 2002,3 I).

Democratic Republic of the Congo The role of resources as a source of conflict in the Congo dates to its colonization by Belgium in the late 1800s if not before. Independence not only did not end the struggle for the country’s valuable resources, it provided the opportunity for a secessionist bid in mineral-rich Katanga. After three decades ofcorrupt, yet static rule by Mobuto Sese Seko, whose position of power was strengthened by U.S. support in its struggle against the USSR, Zaire plunged into an internationalizedcivil war that resulted in leadership changes, a change in the official name of the state to the Democratic Republic of the Congo (DRC), massive refugee flows, and a multi-sided struggle to control the country’s diamond fields. Seven countries directly intervened in the war in the DRC and, according to Tamm (2002), refuse to leave due to their interest in, among other things, the country’s diamonds. A United Nations report, 394 Politice @ Policy Vol. 33 No. 3 requested by the Secretary-General in 2000, confirmed that “...illegal exploitation of minerals and forest resources of the Democratic Republic of the Congo is taking place at an alarming rate” and linked the continued presence of foreign troops to diamond mining (UN Security Council 2001b, 3). Illicit rough diamonds mined in the DRC are exported eastward through Uganda, Rwanda, and Burundi. Diamond trade statistics provide evidence that these non-diamond producing countries participate in the illegal transport of DRC conflict diamonds (Tamm 2002, 14). Conflict in the Democratic Republic of the Congo continues unabated, in part due to the scramble for control over the country’s diamonds, and the humanitarian catastrophe continues to deepen. An estimated 3.8 million people have died in the DRC, with another two million internally displaced by the violence (Stratfor 2004).

Terror Link Beyond country and regional disturbances, a growing concern relates to the possibility that terrorist organizations, including al Qaeda, may be the benefactors ofthe illicit trade in conflict diamonds. Farah (2004) details how al Qaeda operatives entered the illicit African diamond market in 2001 with the assistance of Liberian president Charles Taylor. During the trial of four defendants who were later convicted of the bombings of US. embassies in East Africa in 1998, witnesses testified that business associates of Usama bin Laden traded in diamonds, tanzanite, rubies, and sapphires during the mid- 1990s (United States of America v. Usarna Bin Laden, et al. 1998). In a series of reports from the Washington Posr and reports filed by the BBC News Online, allegations of a conflict diamond-terrorist link were publicized! The reports revealed that during the 1998 bombings of U.S. embassies in Kenya and Tanzania, al Qaeda forces transferred cash into high-value commodities, including diamonds. Several members of a1 Qaeda’s inner circle, the reports continued, bought gems in Liberia and from RUF rebels in Sierra Leone. The move into diamonds came as al Qaeda’s assets were frozen. Mark Van Bockstael ofthe Diamond High Council in Antwerp estimates that a1 Qaeda was able to launder as much as $20 million through purchasing diamonds. The active participation of a1 Qaeda in the illicit diamond trade in West Africa is further asserted by David Crane, prosecutor for the UN- backed Special Court of Sierra Leone. In addition to al Qaeda’s alleged use of conflict diamonds both to generate funds and to launder cash reserves, it is suspected that other groups have used African conflict diamonds to fund their operations. Hezbollah, an anti- Israeli Muslim force that operates in Lebanon and the Palestinian territories, ~~ ~~ Conflict Diamonds 395 has been accused of exploiting the Lebanese Diaspora in Western and Central Africa to raise funds for its activities. Campbell (2002) notes that during the civil war in Sierra Leone, “. . .for the terrorists, [conflict diamonds] presented a picture-perfect opportunity to launder vast amounts of money undetected” (23). The relationship between conflict diamonds and terrorist organizations provides further impetus for their international legal regulation.

United Nations Attention to Conflict Diamonds

United Nations attention to conflict diamonds, recognition of their threat to regional peace and security, and the regulation of their trade began in the 1990s in response to unfolding events in Sierra Leone, Angola, and the DRC. Through a series of Security Council resolutions, reports by panels ofexperts and monitoring mechanisms, and General Assembly resolutions, the United Nations has sought to promote the regulation of the illicit trade in rough diamonds that fueled internal conflicts. The Security Council’s action towards the conflict diamonds issue has been highly focused, paying particular attention to the conflicts that involve the illicit trade in diamonds. In 1998, as previously mentioned, the Security Council extended its 1993 sanctions against Angola to include diamonds, and in April 2000, the Council adopted Resolution 1295 in response to the continued bloodshed and civil strife in that country (UN Security Council 2000a). Section D of the resolution devoted four operative clauses to diamond trade. The Council expressed its concern that illicit trade in diamonds constitutes a principal source of funding for UNITA, the rebel force engaged in Angola’s long civil war. The resolution encouraged states to impose significant penalties for the possession of rough diamonds imported in contravention of established conflict diamond regulations. In June 2000, the Security Council requested the Secretary-General to establish an expert panel on the illegal exploitation of natural resources, including conflict diamonds, in the DRC (“Security Council Requests.. .” 2000). Also in 2000, the Council adopted a resolution prohibiting the direct or indirect import of rough diamonds from Sierra Leone and one imposing sanctions on Liberia for its role in the transit of conflict diamonds from RUF forces to the international market (UN Security Council 2000b and 2000~). The General Assembly passed its first resolution on the role ofdiamonds in fuelling conflict at its 55th session in 2000 (UN General Assembly 2000). Sponsored by 47 member-states, the resolution expressed its concern for the problem of conflict diamonds fuelling violence in a number ofcountries and 396 Politics 43 Policy Vol. 33 No.3 the devastating impact ofthese wars on peace, safety, and security for people in affected areas. The resoiution provided a list of elements that the Assembly encouraged be included in measures to address the problem of conflict diamonds, including the creation and implementationof a simple and workable international certification scheme for rough diamonds that was based primarily on national certification schemes. The General Assembly urged the implementation of the certification scheme developed by the participants in the Kimberley Process at its 56th session’ and also at its 57th session in 2003-in a resolution introduced by South Africa (UN General Assembly 2003). Demonstrating its continued interest in the regulation of conflict diamonds, the General Assembly requested the chair of the Kimberley Process to present to the Assembly at its 58th session a report on the implementation of the process. The prohibition on the importation of Sierra Leone rough diamonds was extended in 2002 with the Security Council acting under Chapter VII authorization from the United Nations Charter (UN Security Council 2001 c). In response to the January 1,2003 implementation of the Kimberley Process Certification Scheme, the Security Council unanimously adopted Resolution 1459, stressing the widest possible participation in the regulation process. The Council endorsed the voluntary system of industry self-regulation as a means of facilitating the full traceability of rough diamond transactions (UN Security Council 2003).

The Kimberley Process

The principal aim of the Kimberley Process is to establish an effective distinction between legitimate diamond trade and illegitimate trade in conflict diamonds.*Initiated as a consultative process between interested states, the Kimberley Process gained momentum and sophistication as it evolved into a negotiating process that culminated in the adoption ofthe Kimberley Process Certification Scheme (KPCS) in 2002, which went into effect the following year.

Initiation of the Kimberley Process In 1998, Global Witness, a non-governmental organization based in the United Kingdom, brought to public attention the fact that Angolan rebel force UNITA was funding its war against Angola’s government through the control and subsequent sale of rough diamonds. In the same year, comprehensive economic and political sanctions were applied by the United Nations Security Conflict Diamonds 397

Council on Angolan rebels mining diamonds in central Angola (UN Security Council 1998). The diamond industry began cooperating with the international community in the implementation of the sanctionsprogram, and an international engagement of interested actors commenced in order to strengthen efforts to curb the flow of illicit diamonds from conflict zones. In 2000, a second non- governmental organization, Canadian-based PartnershipAfrica Canada, joined Global Witness in publicizing the role of conflict diamonds not only in Angola but also in Sierra Leone. In that same year, South Africa hosted the Technical Forum on Diamonds in Kimberley for all interested parties to meet and discuss a strategy for moving forward. At the meeting, government officials, industry leaders, and non-governmental organizations(NGOs) discussed the regulation of conflict diamonds. On July 5,2001, Kimberley Process delegates from nearly 40 states met in Russia to adopt minimum acceptable standards for a certification system to stem the flow of conflict diamonds. Additional participants included the World Diamond Council, the European Commission, and several NGOs with expertise or interest in conflict diamond trade. The Moscow details were finalized in November 2001 at the Kimberley Process Botswana meeting. A meeting in Ottawa in March 2002 set the stage for the final meeting in Interlaken, Switzerland, which was to endorse the final certification scheme. The adoption of the Interlaken Declaration on November 5,2002 formalized the Kimberley Process’s Certification Scheme and established January 1, 2003 as its date of implementation. States that endorsed the Kimberley Process Certification Scheme account for 98 percent of global trade and production of diamonds.

Participants As a consultative process that evolved into a more formal negotiation process, the effort to regulate conflict diamonds includes a wide array of participants. While states constitute the primary participants, NGOs and diamond industry representativesare also included. Issued as an open invitation, participation in the Kimberley Process required an application that stated the government’s interest in supporting the Certification Scheme and the intended date of implementation. Sixty states are participants in the Kimberley Process? NGOs which have played and continue to play a role in the Kimberley Process include, among others, World Vision, Partnership Africa Canada, Oxfm International, Global Witness, Amnesty International, and ActionAid. Critically important to the success of the conflict diamond regulation effort is the enlistment and support of the diamond industry. While NGOs can 398 Politics 6 Policy Vol. 33 No. 3 publicize and national governments can legislate, the private and public firms that trade in the international diamond market are central to the successful regulation of conflict diamonds. Because the diamond industry historically has attempted to manipulate the supply of rough diamonds to the international market in order to inflate commodity prices, the illicit trade in diamonds by rebel forces beyond the control of governments represented a significant challenge to the diamond industry as a whole. At the 29th World Diamond Conference in July 2000, the World Diamond Council (WDC) was established to represent the entire diamond industry, from mining to retail, at meetings of the Kimberley Process. The inaugural meeting of the WDC was held in September 2000, in Israel.

Certification Scheme The basic idea behind the certification of rough diamonds is to provide purchasers of rough diamonds with assurances that the commodity they are acquiring is certified to be a non-conflict diamond. Each shipment of diamonds must be transported in tamper-proof containers with the following Kimberley Process Certification printed on them: “The rough diamonds in this shipment have been handled in accordance with the provisions ofthe Kimberley Process Certification Scheme for rough diamonds.”Additionally, each invoice of every transaction is required to include the following System ofwarranty declaration:

The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.

Certificates for each diamond cost approximately $3. There is no independent, external verification of the certification and warranty process. In 2003, Kimberley participants unanimously approved a voluntary peer review mechanism, essentially leaving certification to national administration.

The Diamond Pipeline: Application of the Kimberley Process at all Levels The international trade in diamonds involves a complex process that includes a wide array of actors, institutions, and states. In fact, the greatest challenge in the attempt to regulate conflict diamonds is to regulate Conflict Diamonds 399 simultaneously all aspects of the trade in such a way that conflict diamonds are suppressed without hampering the vibrant trade in non-conflict diamonds. In that pursuit, the Kimberley Process establishes regulations that are applicable on seven levels ofthe diamond trade. Mining Companies and Rough Diamond Buyers at the Source. The regulation ofconflict diamonds begins at the source, namely with the mining companies and the diamond purchasers who acquire their stock directly from mining companies. The Kimberley Process mandates that rough diamonds may not be exported to a Kimberley Process participant unless the export country is a Kimberley Process participant as well. Mining companies and rough diamond buyers operating in countries where the diamonds are first recovered must verify through documentation prior to export that the shipment’s origin is a Kimberley Process participant. Recipients of Imported Rough Diamonds. The next stage of the verification process is the entry of a diamonds shipment in a foreign country. Identification and verification ofthe Kimberley Process Certificate is required prior to importation of diamonds to a participating country to ensure that the exporter is also a Kimberly Process participant. The recipient is then free to trade, divide, or mix the diamonds at its discretion, provided that it issues warranty invoices for each transaction. Rough Diamond Dealers Trading within a Country’s Borders. Regulations applied to rough diamond dealers trading within a country’s borders are subject to similar imperatives as international traders, except for the necessity of Kimberley Process Certificates used in cross-border trade. As such, rough diamond purchases within a country must be verified by the System of Warranties declaration. Under the same industry regulations, they will be required to keep records of the warranties accompanying both purchases and sales and are required to instruct their independent auditors to verify annually the creation and maintenance of these records. Rough Diamond Dealers Who Wish to Re-Export. Due to their fungible nature, diamonds are often exported and then re-exported to second and third markets. The traditional ease with which diamonds may be re-exported makes them valuable assets and vehicles for money laundering. The Kimberley Process addresses the issue of re-exportation of diamonds by requiring rough diamond dealers who wish to re-export their stocks to apply for a Kimberley Process re-export certificate. When presenting a shipment for re-export, the dealer must assert that the diamonds contained in the parcel have been traded and purchased in accordance with the Kimberley Process requirements. It must be verified that the diamonds were originally imported under the 400 Politics 6 Policy Vol. 33 No.3

Kimberley Process Certification Scheme and each subsequent transaction was accompanied by a System of Warranties declaration.An invoice covering the shipment with the required industry warranty is required in order to re- export the diamonds. Diamond Polishers and Manufacturers. The transformation of rough diamonds into polished stones is a critically important juncture in the diamond production chain. Once polished, diamonds take on a new appearance and become more difficult to trace to their points of origin. Diamond polishers and manufacturers, when dealing with rough diamonds, are subject to the same guidelines as rough diamond dealers. Additionally, all sales of polished diamonds fall under the voluntary Industry System of Warranties. Therefore, each sale of polished diamonds requires a warranty invoice verifying its status as a non-conflict diamond. Polished Diamond Dealers and Jewelry Manufacturers. Polished diamond dealers and jewelry manufacturers are required to verify the Industry System of Warranties and to maintain records of all transactions. The exportation of polished diamonds at this stage does not require a Kimberley Process Certificate. Diamond Jewelry Retailers. The retailers of polished diamonds, as the final stage prior to public acquisition of finished stones, play a vital role in the regulation of diamonds. Retailers are required to insist that their suppliers provide warranties for all diamonds polished after January 1, 2003. The Kimberley Process regulations recommend that retailers inform their suppliers in writing ofthe warranty requirement and to retain all warranties for a period of five years.

Challenges in the Legal Regulation of Conflict Diamonds

The international effort to curb the illicit trade of conflict diamonds is premised upon the contention that such diamonds represent a threat to international peace and security. Cook (2003)notes that “[all1 ofthe conflicts in which diamonds have played a role have been characterized by severe human rights abuses, massive internal population displacements, and the destabilization of internationally-recognized governments” (2). Experiences in Sierra Leone, Angola, and the Democratic Republic of the Congo verify this contention. Additionally, speculation that terrorist organizations, including a1 Qaeda, have profited from the illicit trade in conflict diamonds reinforces the case that such diamonds qualify as a threat to international peace and security. The importance attached to stemming the flow of conflict diamonds Conjlicf Diamonds 401

has resulted in a series of steps taken to enhance and strengthen the Kimberley Process.

Statistics In order to support the global regulation ofconflict diamonds, participating states at the 2002 Ottawa meeting agreed to a set of principles relating to

, statistics. States agreed to provide quarterly trade statistics and semi-annual production statistics. States will collect their own statistical arrangements, but will submit them to be collated centrally. No decisions were made, however, regarding the establishment of a secretariat for the purpose of collating the statistics received by states or the search for an existing intergovernmental body to serve that purpose.

Support from the World Trade Organization The relationship between the measures endorsed by the Kimberley Process and trade regulation embodied in the World Trade Organization is critically important to the success of the certification scheme. U.S. representatives at several Kimberley Process meetings warned that restrictions on trade in rough diamonds could be deemed to impede the free flow of commodities across international boundaries, particularly in relation to diamond exchanges between Kimberley Process participant states and non-participant states. In order to avoid challenges from the World Trade Organization that might undermine the effectiveness ofthe Kimberley Process, it was suggested that an exemption be sought from the WTO for the certification scheme. On November 22, 2002, two weeks after the lnterlaken meeting, Canada put forth a proposed WTO waiver for the Kimberley Process. Specially, the proposal sought to institute a waiver from the provisions related to the subjects contained in articles I, 1 I, and 13-most favored nation treatment, elimination ofquantitative restrictions, and non-discriminatory administration of quantitative restrictions, respectively (WTO 2002). Several participating states joined Canada in the proposed waiver and in 2003 the WTO approved the request.'O The waiver allows Kimberley Process participants to take the necessary measures to prohibit the import and export of rough diamonds to non-participants in the process from January I, 2003, until December 3 I, 2006 (WTO 2003).

Linking International Sanctions to National-Level Regulation Regulation of diamond trade rests ultimately on the national level. Participating states are required to certify all imported diamonds at the 402 Politics 65 Policy Vol. 33 No.3 wholesale level, where rough diamonds are purchased. Section IV of the certification scheme requires participants to “establish a system of internal controls designed to eliminate the presence of conflict diamonds from shipments of rough diamonds imported into and exported from its territory.”

Monitoring Process In order to implement the provisions of the Kimberley Process, participants established in November 2003 the Working Group on Monitoring, which is composed of Canada, the Central African Republic, Russia, the United States. the World Diamond Council, Global Witness, and Partnership Africa Canada. The European Community chairs the Working Group. The committee assesses annual reports submitted by participating states, prepares a schedule of review visits, and provides advice and recommendationson an ad hoc basis on specific cases of possible violation. In 2004, 13 review visits took place. In 2005, 15 review visits have been scheduled.

Essential Elements of the Regulation of Conflict Diamonds

The implementation of the Kimberley Process Certification Scheme represents a watershed in the global effort to regulate the illicit trade of rough diamonds. In general, the ability ofthe international community to reach accord on the limitation of a specific commodity is by no means assured. The regulation is particularly challenging when the commodity in question is not by its composition illegal. The international regulation of ivory, for example, posed a much more straightforward challenge as all ivory, by virtue of the fact that its harvesting was deemed to threaten an endangered species, could be considered illegal. The international ban on ivory did not, for instance, attempt to differentiate between ivory harvested from elephants killed by poachers and ivory harvested from elephants that died naturally. The sale of ivory was prohibited worldwide in 1989 after the African elephant population fell from 1.2 million to 600,000 in less than adecade.” A comprehensive ban on diamonds, however, is not feasible or advisable. Rough diamonds are conflict diamonds only if they are mined and/or sold by a certain group which uses profits for specific purposes. Therefore, a much more precise regulation effort was necessary. Without a certification scheme identifying the status of diamond shipments, conflict diamonds on the open market would be indistinguishable from legitimate diamonds.I2 Given the challenges of reaching an international agreement on the regulation of conflict diamonds, the successful conclusion and implementation of the Kimberley Conflict Diamonds 403

Process stands out. This section reviews the most important variables that made the certification scheme possible.

Consensus among Nations Critically important to the conclusion of an international agreement is a general consensus among participating states as to the need to regulate a particular international behavior. A broad consensus formed early in the Kimberley Process negotiations that conflict diamonds constituted a threat to international peace and security and that a comprehensive monitoring system linked to a certification scheme was essential. The consensus, however, did not extend to the establishment of an institution which would be solely responsible for the regulation of conflict diamonds, or to the imposition of mandatory sanctions for violators. The recognition by the participants of the need to limit the Kimberley Process to the terms of the consensus resulted in a pragmatic approach that established a workable modest regulation instead of an unworkable robust regulatory system.

Leadership among Affected Nations The Kimberley Process Certification Scheme was initiated by southern African diamond-producing states. South Africa’s Minister of Minerals and Energy initiated the Kimberley Process, which started with a group of government officials from countries that produce, process, and import diamonds. As reflected in Table 2, a small number of states account for the $7 billion global output in diamonds. Importantly, all six countries listed in the table as leading producers of diamonds are participants in the Kimberley Process.

Table 2. Rough Diamond Production (2000)

State Output in Millions US.$

Botswana 290 Russia 1,600 Angola 900 Namibia 500 Canada 400 Australia 300

Source: Shaxson (2001) ~ ~~~ 404 Politics 6 Policy Vol. 33 No. 3

U.S. leadership As a major consumer of diamonds and a leading state, the extent to which the United States participates in and supports the implementation of the Kimberley Process greatly influences the international community’s ability to regulate conflict diamonds. U.S. support for the legal regulation of conflict diamonds was strong and consistent. As a permanent member of the United Nations Security Council, the United States was in a position of authority on Council efforts to regulate the flow ofconflict diamonds from wars in Angola, Sierra Leone, and the Democratic Republic of the Congo. Its wilhgness to authorize mandatory prohibitions on illicit trade in conflict diamonds in those countries reflected its support ofthe evolving Kimberley Process. In addition, the United States implemented domestic legislation in accord with the certification scheme. In this regard, the Clean Diamond Trade Act (CDTA) became US. law in July 2003. The CDTA prohibits the importation to or exportation from the United States ofany rough diamond not controlled through the Kimberley Process Certification Scheme as well as any transaction by a US. citizen anywhere that violates the Kimberley Process. Such a strong position of support by the world’s leading state is of utmost importance to the successful implementation of regulation efforts.

Inclusion of Non-Governmental Organizations The role of NGOs in international diplomacy is a twentieth century phenomenon. Active participation by NGOs in the drafting of international agreements, however, is a more contemporary trend and is the result of increasingly specific treaty construction on transnational issues. The role of NGOs in drafting highly specialized agreements is critical because technical expertise and on-the-ground experience are vital to the successful articulation and implementation of legal accords. NGOs participated directly in the Kimberley Process Certification Scheme, with more than 150 human rights, humanitarian, and faith organizations forming a coalition called the Campaign to Eliminate Conflict Diamonds. Tamm (2002) notes that human rights and humanitarian organizations are responsible for first drawing world attention to the problem of conflict diamonds. NGOs not only encouraged a public debate on the issue of conflict diamonds, but throughout the Kimberley Process they pressured, through generating reports, state action and the constructive engagement of the diamond industry. Smillie (2003) states

...for those NGOs in search of an issue, diamonds are almost heaven-sent. Their connection to three brutal wars is clear. The Conflict Diamonds 405

industry, dominated by one big company, is not regulated in any meaningful way. It epitomizes the globalization problem that has so exercised young people on the streets of Seattle, Prague, and Genoa. It is a much clearer issue than seals and the fur trade.(4)

The constructive role that NGOs played in the establishment ofthe Kimberley Process provides a basis for continued NGO participation in the further development of the Certification Scheme and its implementation.

Cooperation from Private Industry The regulation of the international trade in diamonds is a special case in that one company, De Beers, dominates the market. De Beers produces about halfofthe world’s total annual global diamond production from mines it owns or co-owns and the De Beers Group’s Diamond Trading Company (DTC) sorts, values, and sells 65 percent of the world’s annual supply of rough diamonds (Tarnm 2002, 24). As such, enlistment efforts aimed at the private corporate world are concentrated on that company. De Beers’ response to mounting pressure to cooperate in the Kimberley Process has been constructive and supportive. De Beers announced its intention to embargo the purchase ofall diamonds from Angola by its buying offices, committed to a review of its buying operations in the Democratic Republic of the Congo and Guinea, and as evidence of the role of conflict diamonds in war-torn regions mounted, announced that it would no longer buy diamonds from the outside market. Secondary, but important, industry elites in the diamond trade have followed De Beers’ lead. The World Diamond Council (WDC) proposed steps to curb the trade in conflict diamonds that became the basis for the certification scheme negotiated in the Kimberley Process. WDC recommendations were presented to the U.S. House of Representatives and the WDC encouraged governments of countries involved in the diamond trade to enact legislation and pledge a constructive role in the monitoring of the diamond industry through achain of warranties (Runci 2000). Finally, Belgium’s Diamond High Council in Antwerp, through which 70-80 percent ofall rough diamonds on the world market pass, undertook initiatives to stop conflict diamonds from entering Antwerp’s legitimate trade.’) The cooperative role played by the diamond industry in promoting the effective establishment of a certification scheme, however, was not simply a response to mounting public pressure and concern over conflict in Africa. The industry as a whole was directly challenged by the emergence of a new 406 Politica 6 Poky Vol. 33 No. 3 source ofdiamond supply which lay beyond the industry’s reach and influence. The greater the volume of diamonds flowing from rebel-controlled regions, the more diamonds De Beers and the other industry elites were forced to keep off the public market in order to maintain targeted diamond prices. Thus, while diamond industry officials spoke strongly about the need to curb the trade in diamonds that fueled internal conflicts, their motivation to support the Kimberly Process Certification Scheme was also driven by profit incentives.

The Future of the Kimberley Process: Suggestions for Development

The successful implementation of the Kimberley Process Certification Scheme is a remarkable political and legal accomplishment. Nation-states, NGOs and members of the international diamond industry have cooperated in historic fashion in order to set up a system that, if applied with great skill, may serve as a model for future efforts to stem the flow of illegal commodities that undermine peace and security. In order to further strengthen the process of regulating trade in rough diamonds, however, a series of steps could be taken by participants.

Defining Conflict Diamonds The most basic and fundamental aspect of the international attempt to regulate trade in illegal diamonds is the legal definition of “conflict diamond.” The Kimberley Process definition is exceeding limited, and in a legal sense difficult to apply in a judicial setting. Only diamonds used by rebel forces qualify, meaning that repressive regimes that use proceeds from the sale of diamonds to fuel their destructive policies are exempt. Terrorist groups, as well, involved in the illicit trade in rough diamonds are not covered by the Kimberley Process definition. Second, the sale of diamonds must be used to finance conflict aimed at undermining a legitimate government. This leaves in question situations involving failed states, where no legitimate government is under assault, as well as situations in which the aim ofthe rebel force is not to undermine a government but rather to lay claim to a diamond field that may be beyond the control of the government. Finally, the Kimberley Process limits exclusively trade in “rough” diamonds. When two or more rough diamonds are’fixed together, however, they may qualify as “jewelry,” and thus avoid Kimberley Process regulation. Therefore, an alternative definition that would solve many ofthe problems experienced with the current definition of rough diamonds may be stated as follows: A conflict diamond is any diamond Conflict Diamonds 407 the sale of which creates profits used in pursuit of activities that constitute a threat to international peace and security or in any manner inconsistent with the purposes of the United Nations Charter. Broader in its approach, this definition addresses the inherent limitations in the Kimberley Process definition. Its application, however, requires an institutional setting, such as the Security Council, wherein “activities that constitute a threat to international peace and security or in any manner inconsistent with the purposes ofthe United Nations Charter” can be determined.An effective role played by the Security Council in this regard would be contingent upon the willingness of its permanent members to prioritize the regulation of conflict diamonds over their own vested interests when allied with parties to the conflict.

Production Statistics, Monitoring and Reporting Additional controls can be implemented that would serve to improve the international community’s ability to identify and stem the flow of conflict diamonds. These measures relate principally to production statistics and a monitoring system. Production Sfutistics. Compiling accurate statistics of global diamond production is a difficult task, with aggregate diamond trade statistics reflecting approximations based on assumptions about mining, methods, rates of extraction, trade volume trends, and other market factors. Production statistics should, however, be carefully recorded and monitored as a means of identifying countries that export diamonds mined elsewhere. The establishmentof a central data collection bureau which could make available critically important data that might be used to identify the flow of illicit rough diamonds would greatly enhance the Kimberley Process. As Tamm (2002,34) suggests, astandardized and transparent database on global production and trade in rough diamonds is crucial to an effective certification system. The issue of bureaucratic regulation of the Kimberley Process Certification Scheme was raised repeatedly during the multi-year negotiating process. For reasons relating to cost, bureaucracy, and the potential for a secretariat to gain power over the Plenary, where power is currently vested, major powers such as the United States and Russia resisted the establishment of a secretariat. At future Kimberley Process meetings, the issue of a permanent secretariat will be raised and may lead to its implementation. Monitoring System. A significant area of weakness in the currently Kimberley Process Certification Scheme is the lack of an independent, impartial, and regular monitoring system. As presently established, the certification scheme allows participating states to form their own monitoring 408 Politics 63 Policy Vol. 33 No. 3 system and in effect regulate themselves. There is no room for external monitoring or even the inclusion of a small number of external experts on the internal monitoring system established by the state. Throughout the negotiating process, the need for a more effective and intrusive monitoring system was proposed and defeated by Kimberley Process participants. The establishment of an independent monitoring system should remain a priority in future negotiations of the Kimberley Process.

Penalties for Violations Perhaps the greatest potential weakness of the Kimberley Process Certification Scheme is the role played by corporations that make up the global diamond industry. In response to the 2002 Interlaken ministerial meeting that finalized the Kimberley Process, the organized diamond industry announced a voluntary system of self-regulation, which would provide a system of warranties underpinned through verification by independent auditors of individual companies and supported by internal penalties set by the industry. While in conformity with the Kimberley Process Certification Scheme, the self-regulation ofthe diamond industry raises serious questions about conflicts of interest. Can private corporations, with a vested interest and financial stake in the international trade of rough diamonds be relied upon to regulate themselves?At a minimum, greater scrutiny and oversight of industry standards and practices should be incorporated into the Kimberley Process. A step in the right direction'was taken in 2004, when the Democratic Republic of the Congo was stripped of its membership in the Kimberley Process due to reported diamond smuggling abuses. The decision to penalize the DRC was made after statistics indicated that the country was exporting far more diamonds than it was capable of producing. Importantly, the report that led to the sanctions was provided by an outside party, South Africa, which may reflect the recognized need to move beyond the self-monitoring provisions originally endorsed by the Kimberley Process.

Conclusion

The January 1,2003 implementation ofthe Kimberley Process Certification Scheme represents a major accomplishment in the effort to regulate the international trade in conflict diamonds. Commenced as a meeting of interested parties, the Kimberley Process evolved into a formal negotiating process that involved nation-states, international organizations, and industry elites. While the certification scheme has weaknesses that can be exploited, it is important Conflict Diamonds 409 to stress that it is an on-going process that will likely be strengthened in subsequent meetings. Further, the procedural success in establishing the certification scheme may serve as a model for international efforts to regulate the international trade in other “lootable” commodities that jeopardize international peace and security, as reflected in a World Bank report which concluded that competition for diamonds, coffee, and other valuable primary commodities is a principal cause for civil war in developing countries (Collier 2000). 410 Politics 6 Policy Vol. 33 No. 3

Acknowledgement:A version ofthis paper was presented at the annual meeting ofthe International Studies Association, March 17-2 1,2004, Montreal, Canada. The Author would like to thank Sanford Silverburg and the reviewers at Politics & Policy for their helpful suggestions as well as Elizabeth Deeley for her editorial assistance. I remain liable for all errors.

Notes

I See United Nations General Assembly Resolution A/5/L.76 and United Nations General Assembly Resolution, A/57/489, 57Ih Session, Agenda Item 27, “Final Report of the Kimberley Process Certification Scheme for Rough Diamonds.

* Kimberley Process Working Document nr10/2001. Also see United Nations General Assembly Resolution 55/56, 791hPlenary Session, Agenda Item 175.

For further reading on Angola, see Global Witness (1 998); for Sierra Leone, see Farah (2000).

See the World Development Indicators Database and World Bank at the following web site: http://www.diamondsfordevelopment.com.

’ For more details, see the CIA World Fact Book at the following web site: hap ://www. c i a. gov/ci a/pub 1 i cat ionslfactbook/geos/ao.

See, for example, “A1 Qaeda Traded in Blood Diamonds,” published by BBC News Online on February 21, 2002 and available online at www.globalwitness.org/campaigns/diamonds.

’ For further reading, see the Kimberley Process Working Document 9/200 1 titled Report of the Kimberley Process to the United Nations General Assembly.

A secondary objective of the Process is to help governments of diamond- producing countries to more effectively channel diamond-related revenue into national socio-economic development efforts by improving their ability to regulate diamond production and commerce and to collect taxes related to these activities (Cook 2003, 18). Conflict Diamonds 41 1

Those states are Angola, Armenia, Australia, Belarus, Botswana, Brazil, Bulgaria, Canada, Central African Republic, China, Congo, Cote D’Ivoire, Croatia, Democratic Republic of Congo, European Community, Ghana, Guinea, Guyana, Hungary, India, Israel, Japan, Laos, Lebanon, Lesotho, Malaysia, Mauritius, Namibia, Poland, Republic of Koreq Romania, Russian Federation, Sierra Leone, Slovenia, South Africa, Sri Lanka, Switzerland, Tanzania, Thailand, Togo, Ukraine, United Arab Emirates, United States of America, Venezuela, Vietnam, Zimbabwe. The fifteen members of the European Union are listed above as a single member (European Community). In addition, Chinese Taipei is recognized by the Kimberley Process as having met the minimum requirements of the Kimberley Process. As a non-state entity, Chinese Taipei is not included in the 60 participating states.

‘OThe request was jointly proposed by Australia, Brazil, Canada, Israel, Japan, Korea, Philippines, Sierra Leone, Thailand, United Arab Emirates, and the United States.

‘I The authoritative treaty on the legal prohibition on ivory trade is the Convention on International Trade in Endangered Species of Wild Fauna and Flora, signed at Washington, DC on 3 March 1973.

‘I Geo-chemical identification methods that rely upon spectral refraction methods or optical x-ray can be employed to correlate surface, crystalline and other structure-related features of diamonds in order to determine the gems origins. Such procedures, however, remain prohibitively expensive. l3 For further reading, see the Diamond High Council’s “Progress Report,” published November 1,2000, available online at www.conflictdiamonds.com. 412 Politics 6 Policy Vol. 33 No. 3

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