NEW YORK, 31 July and 1 August 2000

 

By Mark Van Bockstael, Director International Affairs HRD

 

The role of Antwerp as major diamond trading centre

Antwerp in Belgium remains today the largest diamond trading centre in the world. About 80% of all rough diamonds unearthed every year, will physically transit through Antwerp. Of all the diamonds polished, about 50% will transit through the city.

The reasons for this importance are vested in history. Antwerp has been already a diamond centre for over five centuries. Over the centuries it competed with Amsterdam for the dominance of the diamond trade. The discovery of large diamond deposits in the beginning of the 20^th century in the (then) Belgian Congo and the aftermath of the Second World War decided the outcome in favor of Antwerp.

Factors that influence this dominance include the presence of excellent specialized banking and insurance facilities; four of the world's 23 diamond bourses are located in Antwerp; customs clearance and statistical information gathering are available at a one stop at the Diamond Office; and a very complete ethnical mix in a cosmopolitan environment complete the picture.

Speaking for the Antwerp Diamond High Council, or HRD, after its Dutch acronym, it would be wrong not to mention the important role the HRD plays in the Antwerp diamond trade.

The HRD (Hoge Raad voor Diamant vzw in full) is a private - not for profit - professional organization founded in 1973 by the Antwerp diamond organizations and diamond bourses to represent the diamond trade to the Belgian authorities, and provide services to the trade. Amongst these services figure a full-fledged reputable diamond grading laboratory; an Institute of Gemology providing training as well on diamond grading as sorting; a Public Relations department, and last-but-not-least, the Diamond Office.

The Diamond Office was founded in the aftermath of World War II in 1944 in an effort to control , amongst other things, the exchange from Belgian Francs into US dollars. It provided one stop custom clearance facilities combined with the - compulsory - import- and export diamond licenses. In 1975 the Diamond Office became an integral part of the HRD, and this is the situation today. Although the preparation of the documentation is handled by clerks without a governmental status, the governmental tasks of custom clearance and issuing the import - and export licenses, remain securely in the hands of civil servants. Customs clearance is provided by Belgian Custom Officers that act according to the Communautarian Customs Legislation that is practiced in all member states of the European Union. Belgium remains the one and only country where a compulsory system of import- and export licenses for diamonds guarantees greater transparency of trade. This service is provided by civil servants of the Ministry of Economic Affairs and includes a physical verification by sworn-in diamond experts of all imported and exported diamond parcels. With this information, diamond statistics are produced based on provenance and published monthly. As such Antwerp remains the one and only diamond trading centre providing valuable statistical information to the public, including details such as countries where diamonds have been imported from or exported to, and this on a monthly base.

What trade statistics tell us

In recent literature there has been a lot of speculation about the actual size of the potential diamond output of Sierra Leone, and indeed, of the whole of West Africa. Most of these speculations have been based on the very statistics of imports recorded in Antwerp.

As mentioned earlier the statistics that are recorded and produced by the Belgian Ministry of Economic Affairs, state imports based on country of provenance instead of country of origin. The difference being that provenance refers to the country where the diamonds have been traded from, whereas country of origin refers to the country where the goods have been produced or mined. In most other importing countries, country of origin is not recorded for diamond shipments. Belgium, with its diamond import licensing-system, requires this information to be filled out on all license applications.

Another important reserve that has to be made about the published statistics is that these statistics reflect trade and are purposely built this way. All shipments are included, even if the same diamonds are imported, then exported and later on imported again. This explains why there is such a huge discrepancy between the import figures of rough diamonds and the world annual production figure. This is demonstrated in Table 1.

Table 1: Annual world production of rough diamonds versus import statistics for Belgium, India and Israel

Total annual world production		~ 125 mio cts
Total Imports*	Belgium	India	Israel
	~ 260 mio ct	~ 145 mio ct	~ 15 mio ct

(*: General statistical information of other diamond centres, such as London, New York and Johannesburg is not available)

If statistical information could be made available for all diamond centres such as London, New York and Johannesburg, including the so-called "freeport" operations in Switzerland, Dubai and some other countries, the total amount of trade worldwide in rough diamonds could be more accurately assessed. Notwithstanding the efforts by a few dedicated NGO's to try to solve this commercial enigma, no significant progress has been made on this point.

Based solely on the statistics of Belgian imports of rough diamonds on country of provenance, some of these NGO's come to(o) far-reaching conclusions concerning alleged smuggling of Sierra Leonean diamonds to - amongst others - Liberia.

Without a shadow of a doubt this is exactly what is going on the ground, but to base this conclusion only on Antwerp's trade statistics is, to say the least, bad science.

 

What trade statistics tell us about the Sierra Leone situation

Trade statistics mostly mention the weight of the shipments expressed in carats (1ct=0.2grams) and the value expressed in US $. Although it might be tempting to focus on this latter parameter, it will not provide information that may link provenance to origin.

All major diamond deposits, weather primary kimberlite or secondary alluvial deposits, have characteristics that make it stand out. The amount of diamonds that can be mined from one area is specific and is determined by the amount and nature of the primary deposits and the nature of the secondary alluvial deposits. The parameter that links this quantitative characteristic to the trade statistics is obviously the weight as expressed in carats. Diamonds differ also from one area to another in quality. Although there is no direct mention of quality in statistics, the ratio of the value in dollars to the weight in carats comes close in giving an accurate description of that quality.

Applied to the Sierra Leone and Liberia - situation,
it becomes quite clear that neither Sierra Leone nor indeed Liberia could possibly have produced the staggering amounts of rough diamonds that have been imported in Belgium since 1990. Chart 1 and Chart 2 list the imports into Belgium from Sierra Leone and Liberia for more than 2 decades ( for Sierra Leone starting in 1977; for Liberia starting in 1966).

Whereas the imports of diamonds from Sierra Leone on Chart 1 are a good representation of its production capacity determined by the geological conditions, on the contrary Chart 2 shows imports recorded from Liberia that bear no relationship to local production capacity. It has been suggested by others that part of the explanation for this phenomenon lies in the misrepresentation by importers of imports from Russia to avoid a 0.3% levy that is applied on imports of rough diamonds from non-ACP countries. Other possibilities have been suggested including drug money laundering schemes or simply use of the name "Liberia" as flag of convenience.

When confronted with the weight imported, it becomes evident that only a few countries could be responsible for amounts of the order of several million carats. In 1989, for instance, more than 11 million carats have been declared coming from Liberia. When comparing this with Chart 3 that lists the average price per carat for Sierra Leone and Liberian imports, it is clear that a totally different type of diamond is imported. Only one other African country fits this description: Zaire (now DRC). This is corroborated by an all time low in the Belgian import statistics for this country for this period ( in 1990 only 6.954 cts have been imported from Zaire !). Zaire - or now the DR Congo- can produce around 20 million cts per year of low quality diamonds (average price/ct ~ 35US $).

The Diamond High Council (HRD) welcomes UNSC Resolution 1306 on Sierra Leone

The (HRD welcomes the UNSC Resolution 1306 putting an effective embargo on the imports of Sierra Leonean diamonds without a Certificate of Origin issued by the Sierra Leone government. Our organization will ensure strict compliance with the Resolution. The HRD supports the embargo that at the same time provides structural solutions for the future so that the revenues generated from the diamond industry can be invested by the Government of Sierra Leone in benefaction of the local population.

This has been stated already at a Press Conference in Brussels even before the announcement of the Resolution by the UNSC, and the firm commitment by our organization that any violators and dealers in "conflict diamonds" would be expelled from the trade. This point of view has been shared by the world diamond organizations - the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) - at their World Diamond Congress that was hosted in Antwerp from 16 to 19 July 2000.

As yet no Certificate of Origin- regime has been put in place, the HRD has offered as early as April 2000, to assist the Government of Sierra Leone with drafting an effective Certificate of Origin-regime based on the positive experience on doing the same together with the Government of Angola. Last June a HRD delegation went on a fact-finding trip to Freetown where we had the opportunity to share our views with H.E. President Kabbah and senior members of the Government.

Invited to assist the Government of Sierra Leone in putting an effective Certificate of Origin- regime in place in Resolution 1306, the HRD immediately complied and was integrated in a trilateral mission to Sierra Leone, consisting of members of the UK, US and Belgian governments.

As a result of this mission, an effective Certificate of Origin- regime for the Government of Sierra Leone can now be proposed. It consists - besides the introduction of a tamper-free state-of-the-art security print - of a set of measures aimed at creating a complete and immediate transparency between the exporting and importing country.

The HRD reiterates its willingness to extent its expertise to enlarge the system of certificates of origin to other African countries in conflict regions. This offer for technical assistance has already been extended for a good number of months.

To conclude, the HRD would like to express its concern that if no Certificate of Origin- regime will be put in place within a foreseeable future, only the well-tested smuggling routes of the RUF and some rogue diamond transit countries will benefice from this well-intentioned embargo.