The Belgian city, the world's capital of diamonds, has applied more regulations, sanctions and scrutiny on the industry, but still there are some bad practices
▲ The diamond industry has its main world centre in the Belgian city of Antwerp
ANALYSIS / Jokin de Carlos Sola
The diamond trade moves hundreds of millions of euros every year around the globe. Most of them come from third world countries where the diamonds are extracted by very hard means. Even today, diamonds coming from conflict zones and used to finance conflicts and violence are a significant part of the market. Nowadays the production is mainly sold in cities of the United States and Europe and most of those diamonds in some way or another end up passing through the city of Antwerp in Belgium, showing that the Dutch and Belgians still have certain control over the industry.
This text will explore the origins of the city of Antwerp as a centre in the diamond market and of the control by Dutch and Belgians of this particular business; then it will analyse this industry in the new globalised era, and finally explain the relation of the city of Antwerp and the trade of blood diamonds.
Low Lands, a land of diamonds
Until the 19th century most diamonds came to Europe from India through the ports of Bruges, Antwerp and Amsterdam. The origins of the Low Countries as a centre of diamond craft and trade comes from the 15th century. In 1475 a Flemish jeweller, named Lodewyck van Bercken, invented the scaif, a polishing wheel infused with diamond dust and olive oil. This made easier the cutting of a diamond and revolutionised the industry. Bercken was a protégée of Duke Charles de Bold and his techniques were spread all around the Low Countries. For the next years Antwerp and Amsterdam became big competitors in the diamond trade.
In the 17th century Amsterdam was the most important city in Europe concerning diamonds. Because of the religious tolerance of the Netherlands, many Sephardic Jews established themselves in the city moving from Antwerp. There they had acquired knowledge working with diamond due to the guild-system, for the only industry that they were allowed to work in was the diamond industry.
In 1725 diamonds were discovered in Brazil and most of them went through Amsterdam. During the 19th century over 90% of rough diamonds sold in Europe passed through the Dutch city. Due to the colonial power of the Netherlands, the Dutch diamond trade extended over the world, especially to New Amsterdam (New York) and Cape Town, which would become vital instructions of the international diamond trade in the 20th and the 21st century. However, after the mines in Brazil started to dry up and the power of the Netherlands began to fade Amsterdam started to lose importance in favour of Antwerp, its biggest rival on the diamond industry, also a culturally Dutch city that would become the diamond's capital of the world. During its golden age Amsterdam developed a high-quality craft industry, but Antwerp managed to be as effective and cheaper as well as more permissive regarding taxes.
In 1866 diamonds were discovered in South Africa, in the Transvaal region, an area mainly populated by Dutch settlers. At the same time the British magnate Cecil Rhodes created the diamond company De Beers, based in Johannesburg. Massive amounts of rough diamonds started then to arrive to Europe, through Cape Town and Antwerp.
By the beginning of the 20th century De Beers controlled over 90% of the diamond industry in the world. In 1927 the company passed from the hands of Cecil Rhodes to the ones of Ernst Oppenheimer, a white South African entrepreneur, whose family still controls the diamond trade around the world.
During the Second World War most Jews from both Amsterdam and Antwerp were either forced to flee or were sent to extermination camps. This had hard consequences on an industry that was mainly controlled by the Jewish community. After the war, Antwerp quickly rebuilt its diamond business.
In 1948, De Beers established a new marketing strategy: it presented diamonds as a symbol of love and marriage, with the motto "a diamond is forever". A ring with a diamond became the perfect wedding present and it was advertised extensively. This new strategy increased the demand of diamonds, especially in the United States, where not just the economic elite was buying them, but it was also the aspiration of the high-middle class and even of the middle class. As a result, De Beers experienced it biggest growth in history turning Antwerp the indisputable capital of the diamond industry.
In 1973 the Antwerp Diamond World Centre (ADWC) was established. It is a public/private corporation, founded by the Belgian government and the most important diamond companies in the city. The Diamond Office, an ADWC's subsidiary, facilitates the import and export of diamonds in and out of Antwerp.
Antwerp's diamond industry
The Antwerp's diamond industry is concentrated in a part of the city called the diamond district or Diamantkwartier, which covers a complete square mile. According to the ADWC, 84% of the rough diamonds and 50% of the polished ones pass through Antwerp. In 2012 the turnover of the Diamantkwartier was 54 billion euros. Over 16 billion dollars in polished diamonds pass through the district's exchanges each year. There are 380 workshops that serve 1,500 companies. There are also 3,500 brokers, merchants and diamond cutters. The main actions taken in Antwerp are both the trade of rough and cut diamonds and the cut of rough diamonds with modern machinery. They also perform other jobs like applying colour and crafting jewellery. There is even a bank consecrated to the diamond industry, the Antwerp Diamond Bank, which is owned by the KBC Bank.
Traditionally the Jewish community had almost complete control over the diamond business in Antwerp. More than 80% of Antwerp's Jewish population works in the diamond trade. In fact for many years the Yiddish was considered the main language of the diamond exchange. No business is conducted on Saturdays. However, since the late 20th century many Indian, Arminian and Lebanese dealers have increased importance in Antwerp's diamond trade.
For Belgium, the importance of Antwerp as the diamond capital of the world has been a source of economic incomes and great prestige. The diamond trade counts for 5% of Belgium's exports to the EU and 15% of its exports outside the EU; it is the 5th largest industry in the country. It also has been the reason for a lot of foreign investment.
During the last decade several other cities outside Western Europe have invested on their diamond industry, like Tel Aviv, Tokyo, Hong Kong, Chicago and several cities in South Africa. However, Antwerp still is the most important trade centre in Europe, being Amsterdam its biggest competitor.
In 2017 Antwerp traded 46 billion dollars in diamonds, with a total of 233.6 million of carats. This figures meant a slight improvement, aided by the approval of the Diamond Regime by the Belgian Parliament. This law changed the way of taxation and ended up benefiting the diamond companies of Belgium.
Diamonds and political corruption
Because of its size and the profits it generates, the diamond industry has a lot of influence in Belgian politics, especially in Flanders. It acts as a lobby in favour of specific bills and policies and tries to avoid an increase of regulations. An example of this is when in 1986 an investigation was opened on the business of Abraham Kirschen, who reportedly sold diamonds in the black market to avoid taxation. According to the average, some conservative politicians were linked to the scheme and some 170 diamond traders were investigated for evading a billion dollars in taxes through a bank account in Geneva. The case ended up implicating the second largest diamond company after De Beers, Omega Diamond, and most of the Belgian political establishment. The AWDC rapidly distanced itself from the scandal at the beginning of the controversy, which was to closed without having much negative impact in the industry.
Following this and other scandals, the Belgian government managed to impose more regulations, in order to rule a business that traditionally has shown a lack of transparency and has been prone to tax evasion. But the diamond lobby has been very active and through its political influence has scored some victories. In 2011 it achieved its main goal: the change of the Belgian criminal law.
In 2008 the biggest fraud of a diamond company was discovered by Belgian authorities. The company was Omega Diamonds, established only in 1994 by the Belgian Sylvian Goldberg. The company became the second biggest diamond company after De Beers and had for many years the monopoly of the diamond exports from Angola. An investigation started in 2006 concluded that the company had created a tax fraud scheme. Omega Diamonds imported diamonds from Angola and the Democratic Republic of Congo through Dubai into Antwerp. During the transfer, documents were manipulated allowing the company to conceal the origin of the diamonds. It ordered the shipment of diamonds purchased in Angola and the DRC to be delivered to entities located in Dubai. Upon arrival in Dubai the diamonds were repacked and exported to Antwerp. The new shipment, marked "diamonds of mixed origin", was issued with an invoice addressed to Omega Diamonds wherein the value of the diamonds was artificially increased. In so doing, the company was able to hide its additional profit from Belgian tax authorities.
In October 2008, Belgian federal police raided the premises of Antwerp-based Omega Diamonds. The raids resulted in a record seizure of 150 million dollars worth diamonds. Companies in Antwerp started to fear similar scrutiny from Belgian courts and the federal police. Because of this, the AWDC asked for political support, and it got help from some politicians, who accused law enforcement of "damaging the reputation" of the diamond industry. A bill meant to block law enforcement from confiscating illegal diamonds, written by AWDC's lawyers, was introduced by members of the most important political parties of the Belgian establishment.
In December 2010, the sponsors of the 2008 bill became members of a secretive group, "The Diamond Club", in order to push this legislation, which passed in 2011. According to the law, diamond companies investigated by fraud could avoid prison by paying a sum of money to the public prosecutor, as well as fight back the judicial backlog, and prevent, in many cases, a deeper investigation.
In application of the law, Omega Diamonds agreed in 2013 to pay a settlement of 160 million euros to avoid being prosecuted for tax evasion and money laundering, all that for a fraud that is calculated to have been of over 2 billion euros. The settlement cleared Omega Diamonds of all charges.
The law was controversial, to say the least, and it became very unpopular in Belgium, mainly because almost all parties were involved in it. In 2016 the Federal Constitutional Court of Belgium declared unconstitutional most parts of it. In 2017, the Belgian Parliament set up an inquiry commission to investigate the relation between the law of 2011 and the diamond industry. The commission stated that the blueprint of the law was written by lawyers for the AWDC, but at the moment it hasn't investigated the relations of various politicians with the diamond industry.
A blood diamond is the one that is extracted from conflict zones and used for financing wars or violent actions. They have been a very common threat to the image of the diamond industry and nowadays there is a big effort by various diamond companies of tracking the origin of the stones, in order to avoid scandals. However, during the 1980s and 1990s blood diamonds worth millions of dollars flooded from Angola and Sierra Leone to Antwerp, something that still happens today.
Diamonds have a very big value, that's common knowledge, but in fact a big reason for this value comes from a strategy started by De Beers and followed by other diamond companies. This strategy consists of acquiring the monopoly of diamonds in a certain region and putting them in the market in a way that prices will always remain high. This was firstly done by Cecil Rhodes, and the diamonds in South Africa. If all the diamonds were put in the market at the same time their price will decrease. With this the company always got a big revenue.
Before the Angolan Civil War (1975-2002) there was not much concern on what was the origin of the stones. However, during this war the UNITA group started to use the diamonds extracted in their territory to fund its war against the government. This made diamonds a reason for instability and provided violent groups with weaponry. Because of this there was a big international pressure for the ending of the trading of the Angolan diamonds in 1998, by the UN Security Council resolution 1173.
A similar situation happened in Sierra Leone with RUF group and its war against government (1991-2002). It is calculated that the RUF extracted yearly a total of 125 million dollars every year. This money was used to fund a war were the RUF committed a series of crimes such as rape, mass killings or mutilations. In the year 2000 the UN Security Council imposed sanctions on diamonds from Sierra Leone.
Even though these sanctions were harmful for both rebel movements a report written by Robert Fowler, chairman of the Security Council committee investigating violations of sanctions on Angola, informed the UN that blood diamonds were still being exported from these countries, most of them arriving to Antwerp, where they were sold in the international market.
The 2017 African Diamond Conference organised by the Antwerp Diamond World Centre [ADWC].
The Fowler Report
The Fowler report was very critical with the role of Antwerp as the end stage of all blood diamonds. "The unwillingness or inability of the diamond industry, particularly in Antwerp, to police its own ranks is a matter of special concern to the panel,'" said the report.
The report also stated that the willingness to traffic the diamonds provided by UNITA or RUF "results from the often-expressed fear that stricter regulation would simply cause traders to take their business elsewhere". It also said that he Belgian authorities had failed to establish a credible system for identifying rough diamonds coming from conflict zones, while making "no serious effort" to keep track of diamond traders known to deal with the rebels. A prominent Antwerp diamond trader trained the diamond experts who work for UNITA, the report said.
The system for concealing the bad practices consisted on transporting the diamonds to third countries that were willing to act as a bridge between the diamond exporter and Antwerp. Two examples of this are Liberia for the Sierra Leone diamonds and Rwanda for the stones from Angola. In fact, Rwanda had a key role in the war in Angola: UNITA transported diamonds to Rwanda which were bought by Antwerp diamond traders and then the money was used to buy guns from Eastern Europe that were transported to Rwanda.
The Fowler report, together with another research made by the international NGO Global Witness, also pointed De Beers to have bought Angolan blood diamonds to maintain its monopoly on diamond sells. De Beers admitted to have done this before the sanctions of the UN, but Global Witness still accuse De Beers of trading with blood diamonds even after the sanctions. According to this report the company bought blood diamonds through its huge network of buying offices in Africa and the company's cartel-like Central Selling Organization, which sets world diamond prices (although it is based in London, many of its diamond traders work in Antwerp).
This severely harmed De Beers' name. Because of this Anthony Oppenheimer, CEO of the company, stopped buying Angolan diamonds except the ones provided directly by the Angolan government. Due to the fall of prestige of diamond industry after the scandals involving blood diamonds De Beers and other diamond companies started to establish more transparent roots of diamond trading to avoid new scandals.
The Kimberly Process
After the effects of the Fowler report the Kimberly Process of Certification Scheme was established to guarantee a fair and clean trade of diamonds. Established in 2003 following a meeting in Kimberly, South Africa, and by the UN General Assembly Resolution 55/56. Belgium took an active role in the establishment of the process. The first step of these process was the system of warranties created by World Diamond Council, all these warranties were incorporated in the Kimberly Process and all its members must follow them:
-Trade only with companies that include warranty declarations on their invoices.
-Do not buy diamonds from suspect sources or unknown suppliers, or which originate in countries that have not implemented the Kimberley Process Certification Scheme.
-Not buy diamonds from any sources that, after a legally binding due process system, have been found to have violated government regulations restricting the trade in conflict diamonds.
-Do not buy diamonds in or from any region that is subject to an advisory by a governmental authority indicating that conflict diamonds are emanating from or available for sale in such region, unless diamonds have been exported from such region in compliance with the Kimberley Process Certification Scheme.
-Not knowingly buy or sell or assist others to buy or sell conflict diamonds.
-Ensure that all company employees that buy or sell diamonds within the diamond trade are well informed regarding trade resolutions and government regulations restricting the trade in conflict diamonds.
Members like the Democratic Republic of Congo have been expelled after being unable to ensure the origins of the stones. Organizations such as Global Witness have criticized the ineffectiveness of the process and its inability to end with the continuing trade of blood diamonds: "Rough and uncut diamonds can easily be smuggled over porous borders from places like the Ivory Coast and can obtain a Kimberley Process certificate from another country before being shipped to Europe". Other critics accuse the Kimberly process of making the diamond trade too complicated and too bureaucratized and therefore harming developing countries which heavily depend on the diamond trade such as Botswana or South Africa. They underscore that only 0.2% of diamonds in the industry are considered conflict diamonds and during both Angola and Sierra Leone civil war the number never increased over 15%, as it was addressed by the publication Foreign Policy.
The Belgian connection
Despite the efforts of the Kimberly Process and the Belgian government blood diamond still pass through Antwerp, mainly using companies and bank accounts in Switzerland. An example of this was when in March of 2017 Belgian authorities seized 14 million euros worth of diamonds believed to be from the Ivory Coast from a major diamond smuggling ring based in Antwerp. The investigation also led to several Geneva-based firms that used fake certificates to import raw diamonds worth 370 million euros from countries outside the Kimberley Process before selling them to Belgian traders.
Antwerp dealers routinely settle multi-million-dollar transactions in cash and rarely offer receipts, according to a study on diamonds and conflict in Sierra Leone by the NGO Partnership Africa Canada. While illegal operations have a hand in keeping the trade alive in Europe, even legitimate enterprises could be unwittingly involved.
Another case was when in 2015 the Belgian businessman Michael Desaedeleer was arrested in Spain, accused of enslavement and pillaging blood diamonds during Sierra Leone's civil war. His arrest was a "landmark" because it was the first time an individual resulted detained on international charges related to the exploitation of the war in Sierra Leone to market blood diamonds.
Recently, Zimbabwe has gained recognition as an exporter of blood diamonds and a 2017 report by Global Witness relates these diamonds with the Antwerp diamond industry. Like most of its neighbours, Zimbabwe has diamond mines in its territory. However, in 2006 in the area of Marenga the richest diamond deposits were found -the so called Marenga diamond field. Since its discovery, the extraction of these diamonds has been done either by the government or by companies related to the regime. According to Global Witness these stones are being used to strength the regime and keep the political repression. Because of that most countries and organizations consider it blood diamonds. Since its discovery, there has been an embargo of these diamonds, but the Antwerp industry has tried to make the trade flow between Zimbabwe and the city, sometimes violating the EU sanctions.
The report mentions confidential government papers that talk about deals between Belgian diamond traders with the Zimbabwean Consolidation Diamond Company (ZCDC), as well as with two other companies in Marenga: Anjin and Jinan, both related to the state-owned military company Zimbabwean Defence Industries (ZDI). Since 2008, the EU imposed sanctions on ZCDC as well as on Anjin and Jinan. However, in 2013 the EU decided to withdrew all sanctions against ZMDC following increasing pressure from state members, especially from Belgium (pressed by the AWDC). The decision was very criticised by human rights groups, and finally the sanctions against the ZDI were kept.
Since 2010 Zimbabwe has officially exported over 2.5 billion dollars in diamonds according to official figures from the Kimberley Process. According to the limited available government reporting, only around 300 million dollars can clearly been identified in public accounts.
The diamond trade is definitely part of the Belgian trade tradition and part of the Belgian economy. As a part of a country with very few natural resources, Antwerp has done around history a big effort to maintain its position as a diamond centre. Bringing money, jobs and prestige to the city. However, it has also brought corruption to the political system and has served as a place for money laundry, tax evasion and financing of violent groups in Africa. With corruption, with money, with prestige and by work and schemes, without question Antwerp is the diamond of Belgian crown.