Case Study Blood Free Diamond

Table of Contents

1. Introduction

2. Article Summary

3. Problem Definition

4. Justification of Problem Definition

5. List Alternative Courses of Action

6. Evaluate alternatives

7. Review

8. Conclusion

9. Follow Up and Evaluate

10. Bibliography
1‐ Introduction

In recent years it has been brought to the world’s attention that illicit
diamond trade has helped fueling civil wars and conflicts. The diamond
industry estimate that approximately four percent, so around 270 million US‐
$ of the diamonds traded in the international market belong to the illicit
domain. In contrast non‐governmental organizations guess that the trade of
illegal
diamonds must be close to 20 percent, but the numbers vary from organization to o
rganization.
These kinds of diamonds are called “blood diamonds” or “conflict diamonds” and ar
e used to finance bloody wars. The link between diamonds and armed conflict
is obvious, and has been exposed,
investigated, and deplored by humanitarians, journalists, politicians, and diamond in
dustry leaders. Less obvious are the complex, entrenched relationships
between exploitative systems of financial intermediation and resource
management, poverty, and the spectacular, mysterious wealth of the
diamond trade. Diamonds have facilitated, not caused, and armed conflict.
Pre‐war economic and social injustice, which developed during the war into
the illegal, and finally criminal, behavior
common of the diamond traffic, must be addressed as a complex development prob
lem. To ignore it
is to perpetuate the conditions that gave rise to the war, and invite its resurgence.
We have chosen an already existing case study by Daria Cherepennikova to
analyze the situation of the diamond market. This report contains the results
of a case study we performed to contribute to a better
understanding of the role diamonds play in financing civil wars. We performed the c
ase study with a view to find the direct relation between diamond market
and financing wars and try to obtain an
alternative that enhancing the ability of international organizations to help prevent f
uture conflicts and to provide effective post‐conflict assistance in conflict
environments characterized by the presence of diamonds. Assignement
2 International Marketing Blood Free Diamonds 3
2‐ Article summary

Nowadays, Diamonds are the perfect symbol of beauty, power, wealth and
love. Yet, diamonds and the diamond trade are undergo by a gloomy
reality: the exploitation of people for
diamond extraction and the use of diamond profits to fund terrorist activity and reb
el groups around the world and most of the time in Africa. With a strong
demand, a very profitable business, a facilitated transport and less tracked
than drugs, diamonds are an easy target for money laundering activities by
terrorist and rebel groups. There are two main categories of diamonds: gem
quality for jewelry and industrial grade used in medical field for example.
After being sorted, they are transported to one of the main
diamond trading center. After, they have been purchased, the diamonds are sent off
to be cut and
polished. Finally, they are sold by manufacturers, brokers and dealers to importers
and wholesalers all over the world, who in turn, sell to retailers.
Nevertheless, lots of reports have shown that profits from the diamond trade have fi
nanced
deadly conflicts in Africa such as Angola, Sierra Leone, Congo or Liberia. These diam
onds that have
been obtained in regions of the world plagued by war and violence are called “confli
ct diamonds” or “blood diamonds”. During recent conflicts the use of
diamonds for illicit activities has been
widespread (War of Angola; Al Qaeda). Most of the times during those conflicts, dia
monds are used for purchasing weapons, buying friends and supporters, and
could be a used as a means for
stockpiling wealth. Finally, at least 10% of all diamonds on the market could be conf
lict diamonds. In order to ensure that only legally mined rough diamonds,
untainted by conflicts, reach established markets around the world,
representatives from 52 countries, along with mining executives, diamond
dealers met to sign an agreement that they hoped would eliminate conflict
diamonds from international trade: it was called the “Kimberley Process”.
Yet, several advocacy groups have voiced concerns that the Kimberley Process rem
ains open to abuse, and that it will not be enough to stop the flow of
conflict diamonds. Actually, it appears
that if a person is very determined, she can get around this process. Organization ur
ges governments to implement stricter policies of internal control, for the
diamond industry to publicize names of
individuals in companies found to be involved in the conflict trade.

But recently, a number of new technologies have emerged that, if adopted by the di
amond industry worldwide, could change the way that diamonds are
produced, traded and sold. These
technologies are: the laser engraving, a bar code inside the diamond or an invisible
fingerprint.
However, create such protections requires large investments for equipment to cope
with the volume of diamonds. Such investment will only happen if customers
are willing to pay for such identification.

3‐ Problem definition

Diamonds often keep a cruel secret. In many countries the exploitation of people ex
tracting diamonds or the use of diamond profits for terrorist activities and
for financing wars is the harsh reality. This constitutes the main problem in
our case study which deal with the link between diamond trade and war.
Actually, in those countries (Liberia, Angola, Sierra Leone for example),
diamond’s traffickers use the profit gained by these blood diamonds to
finance wars and conflicts. Unfortunately different terrorist organisations are
involved in the trade of diamonds and use their earnings for terrorist acts.
The second problem is that there are lots of intermediates all along the distribution
channel so it’s very difficult to ensure traceability of diamonds to the final
purchaser. Actually, the total
timeframe from the time of extraction to the time at which the diamond is sold to th
e end consumer
is called the “pipeline”, and it’s usually takes about 2 years. Moreover demand for d
iamonds remains
strong, the image is always a symbol of wealth, but there is still no awareness of co
nsumers about
conflict diamonds, which does not grow to change the market participant.
The third problem is that there is not an International certification. Actually, there ar
e many

certifications from different companies and lots of new technologies but

there is not a certificate
with a global commitment by all the market participant. Moreover, create such prot
ections requires large investments for equipment to cope with the volume of
diamonds. Such investment will only
happen if customers are willing to pay for such identification. In addition this
problem within the diamond industries concerns all market participants,
because almost every country purchases and sells diamonds. The big issue is the dif
ficulty to identify if there are illegal activities included or not and the
question how to solve the problem of “blood
diamonds” traded in the international market.
4‐ Justification of problem definition

The high percentage of blood diamonds up to 20% according to non‐

governmental
organizations, points out a huge ethical problem in this industry. Although these dia
monds seem to
be rather a small percentage of the multibillion dollar diamond industry the trade of
blood diamonds
still produces hundreds of millions of dollars output. This huge amount of profit is av
ailable for the purchase of weapons in the conflict zones.
How can we explain this illicit trade? On the one hand, it’s essential to clarify
that diamonds are traded all over the world. The
main centres for trading are Antwerp in Belgium, New York, Tel Aviv in Israel and Mu
mbai in India.
From mine to consumer sales, this symbol of purity passes a large distribution chan
nel as we
mentioned in the previous question. Thus, it is so difficult to control if the diamonds
are involved in criminal actions insofar as the diamonds are subjected to a
lengthy process of negotiation and of production with several intermediaries.

Moreover, Alex Yearsley from Global Witness, an organization fighting

against “conflict
diamonds” declared that: “The ease with which terrorist organisations can use diam
onds as a source
of funding and money laundering is frightening; they can easily transport them over
borders without detection and convert them back into banknotes whenever
they need the money.” So, we
should state that facilitate the commercialization of diamonds because it’s, currentl
y, impossible to detect them during an importation or an exportation. Indeed,
no technology (metal detectors,…) or dogs
aren’t able to prevent the diamonds’ moving.
In addition to that, for terrorist organizations, diamonds are viewed as an ideal curre
ncy, due
to the traditional closed nature of the diamond industry. Indeed, with the difficulty o
f control and the
ease of transportation, diamonds have proved to be an advantageous trade (mine w
orkers aren’t pay for the stones’ extraction,…) to finance the weapons.
For instance, a rebel movement called UNITA (National Union for the total Independ
ence of Angola) exploited huge diamond fields of their country and put their
profit into the Bush War of
Angola to buy weapons. The UNITA became one of the world’s largest diamond smu
ggling networks.
On the other hand, three other points justify the different problem of the previous q
uestion. First, the diamonds trade can’t be “stopped” insofar as, for some
African countries, the
diamonds are an important resource for their development. Secondly, diamonds’
consumers have to become conscious of the conflicts in the countries
like Liberia, Sierra Leone, etc. And, finally, the big trading companies take
also advantage of these conflict diamonds. For example some years ago De
Beers, which buys about two‐thirds of the world’s diamonds, publicly
acknowledged purchasing most of UNITA’s output in order to prevent glut on the wo
rld market that
would drive prices down. Though De Beers claims to no longer buy conflict diamond
s, an 83 percent increase in profits for 1999 was reported.

5‐ List of course alternatives

Kimberley Process: Generally the diamonds are judged by “Four Cs” or properties: c
ut, carat, color and clarity. But now diamonds have a new C: conflict. This is
one of the reason because in 2002
members from 52 countries decided to signed one new agreement for eliminate con
flict diamonds from international trade. This agreement was called Kimberley
Process and consists in a list of measures and
certification for guarantee that rough diamonds, obtained in conflicts zones, are leg
al. The control start in the producer country where rough diamonds must
be transported in sealed, tamper‐proof containers and must be accompanied
by a government issued certificate guaranteeing the contents and origin.
Countries that break the rules will be suspended and their
diamond trading privileges will be revoked.
World Bank: the World Bank could takes three steps for help. ‐ ‐ ‐
First, could contribute to the resolution of conflict diamond issues.
Second, could prevent the conflict. Third, could help for post‐
conflict reconstruction activities. In regions that contain alluvial diamond
resources and which are vulnerable to violent conflict, the Bank could help
to prevent the emergence of violent conflict by helping governments
and communities to strengthen transparent governance systems for the extraction
and processing of the diamonds and by providing financial assistance to the
strengthing of the civil service and judiciary. Additionally, target micro‐
finance interventions for mining communities could strengthen
their stake in peaceful development.
New technologies: In the last years we can observe how the new technologies do eff
ort for improve the diamond trade situation.
We can find different types of technologies like laser engraving that make possible t
o mark diamonds with a symbol, number or bar code whom function is help
to identify the diamonds
permanently. This new option very is interesting from the point of marketing view e
nabling them to
create brands or logos that identify the company, this is the case of Sirius Diamonds
, one company
that use one microscopically laser for engrave a plar bear logo and an identification
number on each gem it processes).
Another option is the invisible fingerprint. This technology works by electronically pl
acing an invisible information package on each stone. In United States several
companies are using Russian machines for produce gem‐grade diamonds
artificially, and the last technology for control the diamonds trade is now
developing. Called Laser Raman Spectroscope (LRS) consist in to read a
diamond´s internal fingerprint. A world wide database could identify a
diamond´s origin and track its journey from the mine to end consumer.

6 – Evaluate Alternatives

The Kimberley Process aims to eliminate conflict diamonds from international trade.
But this
agreement is based only in rough diamonds and the process is not clear. This is one
of the reasons that several advocacy groups thing that this is not enough
and reclaimed more help. In words of Tom Zoellner, a journalist and the
author of a book on the diamond industry says the Kimberley Process has
not really affected how diamonds are smuggled across national boarders.
“It’s a really superficial process,” he said or in the words of the amnesty
International: "We welcome the
Kimberley Process as an important step to dealing with the problem of conflict diam
onds. But until
the diamond trade is subject to mandatory, impartial monitoring, there is still no eff
ective guarantee that all conflict diamonds will be identified and removed
from the market." However, without a system of expert, independent and
periodic reviews of all countries, the overall process remains open to abuse.
One of the best solutions for the regions that contain alluvial diamond resources an
d which are vulnerable to violent conflict is World Bank help. The Bank
could prevent the emergence of
violent conflict. First, it would help governments and communities to strengthen gov
ernance systems
transparent for extraction, processing of diamonds. Secondly, it would provide finan
cial assistance to the civil service and judiciary. Additionally, target micro‐
finance interventions for mining
communities could strengthen their stake in peaceful development. The problem is
that this help is not enough and is not in action yet. The production of artificial
diamonds is a possible way to improve the situation. Nevertheless, the
image of these diamonds on the mass market is not really positive. It is
not
considered like an object of purity or a natural object. Despite the beauty and shape
almost perfect, these haven’t the same values as natural diamonds.
However, selling more oft these stones would help avoiding blood diamonds.
Companies also have the ethical responsibility to reach their customers. They could
change
their marketing campaigns and inform potential customers about the situation abou
t the extraction, trade and selling process. With this information, the
customer would feel more confident when
thinking about purchasing diamonds and will also accept the higher prices, caused b
y the use of the
new technologies. Indeed, demand for diamonds may decrease if companies invest i
n new expensive
technologies. To avoid a decrease in sales, it is necessary that consumers be inform
ed of reasons for this sudden increase. In the same logic that the artificial
diamonds, consumers don’t agree to submit stones to
interference technology that can destroy these precious objects. Indeed, consumers
are not willing to buy diamonds, which the nature and the value can be
affected or modified. Therefore, a global
promotion of "Free Blood Diamonds" should support the new technical solutions.
Therefore media could play an important role to raise the awareness among
the final
consumers of the diamonds. Like movies, such as we have an example of “Blood Di
amond” sorts a moral dilemma about trading of diamonds.

7‐ Review

According anything ever seen before, now we are a bit more aware of the
problem that
carries the diamond market. This market is fueled by greed and selfishness of the c
onsumer society
of today, which takes no account of the origin of diamonds and thus conflicts and de
aths they have caused. We are facing a political and social problem. Policy
in this environment because some governments are disturbed by the
deception which they suffer themselves to acquire wealth, and
social, because when people buy diamonds wants to ignore the source of the goods,
since only cares
get it and ... 'and the others will solve the problem of blood diamonds. "This argume
nt is well argued
in the movie" Blood Diamond "starring Leonardo Di Caprio, Djimon Hounsou and Jen
nifer Connelly, that put the media spotlight on conflict diamonds and had
the diamond industry worried about negative fallout.

8‐ Conclusion

The Diamonds trade causes violent conflict, within or between countries, which resu
lts in loss of life
and destruction of assets, contributes to social and economic disintegration, and rev
erses the gains of development. Taken in isolation, none of the actions
reviewed above would be sufficient to solve the problem of conflict
diamonds. However, an appropriate combination of actions could help if
these were integrated within a comprehensive framework supported by
governments, the international
community, manufacturers, whoresales, retailers, companies, customers, ect.
For instance, each government have to implement stricter laws including certificatio
n, price,
regulation and finally policies ; the international community have to change a few d
etails about the agreement and more countries have to sign it ; companies
must do marketing campaign (advertisement,
…) to prevent the consumers about blood diamonds and only buy diamonds certifie
d ; customers also should be aware of this problem and may request the certificate
of the diamond.
Although we think this is a joint process of all institutions mentioned above, the conf
lict must
be solved first internally, in each country, the best solution for this property held in
World Bank. Indeed, it could assist countries in formulating an action
program for the diamond sector and in integrating this program into the
country’s overall development strategy, given the importance of
the diamond sector in the political economy of various African conflict countries.

9‐ Follow Up and Evaluate

According to us, the first thing to do is to re‐evaluate the magnitude of the blood dia
mond
trade in order to adapt the solutions we propose. Indeed, it is necessary to quantify
and qualify this
business. After assessing the problem, we can propose the best solution. We
believe that the Kimberley Process had to be apply more stronger and in
cooperation with the UN, Amnesty International (for Human Right), the
different diamond company, and
government around the world. Actually, this certification plan coulb be a real solutio
n to stop conflict
diamond trade if everyone really involved and that all means are given. The
second important point is the new technologies. In fact, this type of
technical solution
may ensure to diamond buyers that they did not finance the war. However, we belie
ve that it would develop a global certification: this would be more effective
than dozens and dozens of different certification. However, establishing
such solutions take a long time, and the trade of conflict diamonds
continue. Moreover, create such protections requires large investments for equipme
nt to cope with
the volume of diamonds. Such investment will only happen if customers are willing t
o pay for such identification. The resolution of blood diamonds trade will not
happen for several years and it is
necessary that there is an awareness of buyers.