India's diamond trade reveals flawed
side By Indrajit Basu
KOLKATA
- The murder of an Indian diamond trader in Angola last
week and the disappearance of the US$1 million worth of
diamonds in his possession has rekindled a
three-year-old debate on India's probable link with
conflict, or "blood", diamonds.
Officially,
Ashwani Puri, a top diamond trader from India, was in
Angola to seek out prospects for starting a beverage
business. But what adds a twist to the tale is his
killing, and the theft of the cache of diamonds - widely
suspected to be conflict diamonds - that he had
reportedly purchased in Angola.
Although
Mumbai's diamond merchants are backing Puri's company,
Mohan Exports', statement that Puri's death is not
linked with conflict diamonds, many are not so sure.
Sources say that it would be naive to rule out a
possible Indian link to conflict diamonds, since the
country is the largest importer of the gemstone, as well
as a dominant force in the cutting and polishing of
rough diamonds.
"Whoever controls the particular
area where the [conflict] diamonds are mined gets hold
of the diamonds and would like to get rid of them to
make some money. As a result, there would be local
people who trade in the diamonds. These people would
want to ultimately bring it to India," said Arun Goyal,
director of the Academy of Business Studies in India.
Conflict diamonds originate primarily from
Angola, Liberia, Sierra Leone and the Democratic
Republic of Congo, countries in which rebels or factions
- like the National Union for the Total Independence of
Angola and the Revolutionary United Front - opposed to
internationally recognized governments in those
countries illegally mine and trade diamonds for billions
of dollars, which fund military action against these
legitimate governments. Conflict diamonds are also
called "blood diamonds", a suitable name given that over
the past decade an estimated 3 million people have died
in these wars; women and children have been deliberately
mutilated; millions more have been made homeless.
Being the world's largest processor and exporter
of precious stones, there are good reasons to believe
that some of these conflict diamonds, estimated to form
about 4 percent of the global diamond trade, may well be
sieving into the India. Nine out of every ten diamonds
are imported, cut and polished in the country, which
altogether account for 80 percent of the carat weight
and 60 percent by value of all of the world's diamonds.
Diamonds are one of India's largest exported commodities
that fetched the country over $9 billion in revenues for
fiscal year ended March 2003. "So," said Goyal,
"somewhere along the line the Indian link will have to
come in."
There had been much debate as to what
constitutes conflict diamonds and the involvement of
diamond processing and consuming nations with this
controversial gemstone. India, along with a few other
countries like Australia, Brazil, Israel, Japan, Korea,
the Philippines, Sierra Leone, Thailand, the United Arab
Emirates, the United States and Canada - all closely
associated with the global diamond trade either as
processors or consumers - has been in the middle of this
controversy since the United Nations (UN) General
Assembly recognized back in November 2000 that conflict
diamonds are a crucial factor in the ongoing wars in
parts of Africa.
In January 2003, 54 countries
including India endorsed a UN initiative called the
Kimberley Certification Process. The Kimberley
Certification is essentially a certificate from the
exporter certifying that all diamonds imported into a
country do not come from what the UN calls "conflict
areas" - ie, Angola, Liberia, Sierra Leone and the
Congo.
But although most Indian diamond traders
claim that India strictly enforces the Kimberly
Certification against conflict diamonds, and "anyone
dealing in such diamonds is ostracized by the diamond
trading community", as trading in conflict diamonds
flourishes, suspicion of India's links with it, refuses
to die.
Much of this suspicion, though, stems
from the fact that it is indeed difficult to exercise
strict monitoring of the flow of the shunned diamonds.
"We don't have much control over the rough supplies,"
said Sanjay Kothari of the Gem and Jewelry Export
Promotion Council. And the Indian embassy in Brussels
said, "Once diamonds are brought to the [Indian] market,
their origin is difficult to trace, and once polished,
they can no longer be recognized."
Meanwhile,
Puri's death has revealed a darker side of the country's
diamond trade that has of late started to lose much of
its shine. Some of the country's diamond traders, who
refuse to acknowledge Puri's link with any sort of
illegitimate dealings, say that international business
rivalries could have brought Puri his ultimate end.
"Indian diamond traders have displaced Jews [as] the
diamond crown of the world," said a source from one of
the industry lobbies, Surat Diamond Manufacturers'
Association. "And this [killing] could be a result of a
vendetta."
Indeed, Indian diamond traders are
progressively displacing the Jewish community that
dominated this trade in Belgium's diamond city - Antwerp
- and are now calling for better representation on
Antwerp's High Diamond Council, the powerful regulatory
body in the trade. This, Indian traders say, has raised
the ire of some of the other global diamond trading
communities.
In fact, in a provocative report,
the Wall Street Journal said recently that, "Indians are
among the world's most successful newcomers. They have
reinvigorated the jewelry districts in New York and Hong
Kong and revived the US motel industry; they are among
the programmers of choice in Silicon Valley and Berlin.
In the global diamond world, Indians have been so
successful that they are challenging Jewish dealers,
even in Tel Aviv. About 80 percent of all polished
diamonds sold worldwide pass through Indian hands."
There are other problems too. A section of the
country's diamond trade is emerging to be a conduit for
slush money laundering. Recently, India's Directorate of
Revenue Intelligence, the income-tax department, and the
Research and Analysis Wing started investigations over
allegations of the over-invoicing of diamonds, suspected
to be masterminded by a Dubai-based syndicate, for
laundering nearly $20 million abroad. Allegedly,
unscrupulous Indian traders exported rough diamonds to
Dubai and Hong Kong and re-directed these to India at
inflated prices. Revenue Intelligence said that they had
arrested representatives from three diamond-importing
firms operating from Mumbai - a hub for diamond trading
- that were indulging in over-invoicing.
But
Indian diamond processors blame the industry's current
ailments on a number of causes. The country's
once-thriving industry, they say, is now a victim of
delayed payments, falling export orders and rising rough
diamond prices, all of which are forcing some to adopt
newer methods to stay afloat.
The slain Puri,
for example, is said to have adopted a practice of
selling polished diamonds at a huge discount in order to
aggressively gain market shares. Said one industry
source: "Times are a-changing with globalization, and
the industry may soon no longer have the strength of a
monopoly to carry on their former arrogance."
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Feb 19, 2004
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