Rough Imports and Exports

In spite of Israel’s official active involvement in the Kimberley Process, and its commitment to adhere strictly to UN resolutions in respect to trade in conflict diamonds, the Israeli government is not as forth-coming in the release of trade data as other countries. Assurances by the government that it is in full compliance are undoubtedly correct, and the Kimberley Peer Review gave Israel high scores. However, NGO’s and outside analysts lack the statistics to enable prompt monitoring and verification of trade movements.

The government is particularly reluctant to release the rough diamond import data. In lengthy briefings with the author, the Ministry of Trade and Industry Deputy Director General (and former Controller of Diamonds) Udi Sheintal explained that under international regulations, in those instances where only one or two companies account for about 100 percent of the rough diamond imports from a specific country, there is no requirement to release that data (to protect the commercial interests of the firms involved).

The available Kimberley data (for gross imports) gives the following 2005 rough diamonds trading picture, which clearly shows that imports (in carats) exceed exports. This data is not consistent with the figures released by the Diamond Controller, the Bank of Israel, and which have been published by the Israel Diamond Institute:

The share of imports directly from rough diamond producing countries is gradually declining. Some $932 million imported from Switzerland consists of indirect DTC goods, other European goods, plus diamonds from Dubai - which cannot export directly to Israel for political reasons. Direct imports from producing countries include Angola ($201 million), the DRC ($142 million), Russia ($238 million), South Africa ($194 million), the CAR ($14 million) and Venezuela ($13 million).

On the export side, more than half (57 percent) of the country’s re-exports of rough diamonds go to Belgium and Switzerland, which are transit centers to other destinations. It is of interest that these diamonds represent more than two thirds (68 percent) of the exports by carats - indicating that these are mostly low-value goods. China, Thailand, South Africa, Namibia, Ukraine, Sri Lanka, Romania, Canada, Bulgaria, and Botswana reflect rough diamonds used for manufacturing by Israeli manufacturers (or their contractors) in these countries.

The Role of the DTC and Other Major Rough Suppliers

Industry players have accepted for quite a while that there is a strategic need to decrease the reliance on DTC supplies and, just as in the 1960’s, it is deemed essential to secure additional, or alternative, direct rough supply sources. As Israeli diamantaires have become global players also in terms of their corporate organizational structures the treasured term “direct DTC supplies” to Israel have lost meaning, as many Israeli DTC Sightholders may choose to take their allocation at other locations. This is not just the result of globalization, but also due to the change in DTC policies. In the past, when the DTC was concerned about too great a reliance on specific centers, it secured the maintenance of several competing cutting centers by conditioning rough supplies on processing the goods at the Sightholders geographic location. Not any more. So comparison of the DTC sight allocations with peak years in the past has little meaning. Trading data shows that in 2005, the DTC accounted for 17 percent of the direct rough supplies by value and 10 percent measured in carats of Israel’s total rough imports. The supplies of the DTC, at about $962 million, represented an increase of 3 percent compared to 2004.) In terms of carats, a figure not readily disclosed, there is a consistent declining trend from 3,890,000 carats in 2000 (valued at $1.2 billion) down to 2,050,000 in 2005, almost a halving of volume within a five year span.

Russia’s Alrosa has had a representative office in Israel for many years, but its main activity so far seems to have been limited to the gathering of market information. Angola’s Endiama’s subsidiary Sodiam has an Israeli marketing office, a 50/50 joint venture with the Lev Leviev Group. The MIBA production from the DRC is marketed through the Dan Gertler Group, though most of the low value goods are re-exported to India. Though the Canadian producers have several core clients in Israel, they have no direct representation here - even though Aber Diamonds has announced its intention to set up a marketing and a polished buying office (for its Harry Winston operations) in Israel shortly.