Diamond Leaks: U.S. Cables Dish Dirt, Role of Diamonds in Global Policies

When I first started to collect the data, I was sure that the leaked diplomatic cables are providing only some anecdotes that range from near gossip, through peripheral involvement of diamonds in Iran's nuclear program to U.S. policy in Zimbabwe. But then three more cables were published that were all about diamonds. One of them details the entire line from policy through mining, how diamonds are smuggled out of Zimbabwe, who is allegedly involved, how much was paid and who profits from this.

In a confidential cable from November 2008 to Secretary of State Condoleezza Rice and the CIA titled Elites Looting Deadly Diamond Field, former Ambassador to Harare James D. McGee provides details he gathered from the CEO of African Consolidated Resources (ACR) Andrew Cranswick. According to Cranswick and an unnamed economic specialist, Vice President Joyce Mujuru, Mines and Mining Development Minister Amos Midzi, Reserve Bank of Zimbabwe Governor Gideon Gono as well as President Robert Mugabe's wife and sister Grace and Sabina and many others have been profiting from trading in Chiadzwa diamonds. Some of them even organized groups of diggers to mine diamonds for them.

It's important to remember that Cranswick's ACR held the rights to mine in the area and once it was clear that there is a major diamond deposit on his claim, the government of Zimbabwe drove him out. Since that time he is fighting a bitter battle to restore his claim and gain control of diamonds extracted from it.

According to Cranswick, about 15 percent of the Chiadzwa goods are sold to regime members and elites and some 85 percent of the diamonds are sold directly to foreign buyers, mostly Lebanese. Cranswick estimates that people like Mujuru and Gono were each making several hundred thousand dollars a month. ZANU-PF Central Committee member and Manicaland resident Manatsawani Mutasa names a buyer named Gonyeti, Tendai Makurumidze and Takunda Nyaguze as Gono representatives in these transactions.

The majority of the goods, according to the reports, are shipped to Dubai and sold at the DMCC, but the better quality goods are shipped to Belgium, Israel or South Africa.

Here Cranswick mentions a surprising name: "He [Cranswick] implicated Ernie Blom, president of South Africa's Diamond Merchants Association in the illicit trade of Chiadzwa diamonds, and said that Blom had been known to boast of his involvement in illegal Zimbabwean diamonds," Ambassador McGee reports in the leaked cable. Blom, a distinguished member of the diamond industry and Vice President of the World Federation of Diamond Bourses, flatly denied to us the accusation. "It is a pack of lies," he told me, adding that "If I were to do anything illegal I certainly wouldn't boast about it." Blom said he met Cranswick only once. "I think he is an opportunist, he is trying to recover his losses."

When Cranswick was asked by the Ambassador why purportedly reputable diamond dealers would involve themselves in Chiadzwa, Cranswick said that the site was "massive" with tremendous profit potential that was attracting numerous buyers. One such group consisted of Russians who had recently bought $500,000 worth of diamonds at an MMCZ auction, paying $29/carat. They bought eight to ten carat rough diamonds, five to ten percent of which were gem quality.

This morning Cranswick told Mail & Guardian Online that "'I didn’t know they published names in these things,' that he had been misquoted, that he had not named those named and that he had 'never met any US officials'."

Zimbabwe is on our minds because of reports of extreme violence. According to McGee, "The diamond frenzy in Chiadzwa has led to hundreds and possibly thousands of homicides." Passmore Nyakureba, a lawyer with the Zimbabwe Lawyers for Human Rights said, "This has become an everyday scenario. Up to five people die every week as a result of being shot at by police or after being bitten by dogs." Cranswick added that that at the peak of the "frenzy," up to a hundred panners were shot in a week. In a later cable it's revealed that the military called this Operation Hakudzokwi, Shona for "you won't come back"… According to a tribal chief "Over 200 bodies turned up" at local hospitals and mortuaries, later to be tagged "BID Marange" meaning Brought In Dead from Marange.

Diggers did not remain passive and started to arm themselves, sometimes joined by deserting cops and killings were carried out by all sides.

Corrupt cops would charge $10 for a day's digging in Chiadzwa, Cranswick claimed.

Cranswick told the Americans that he was confidentially shown a report prepared for De Beers by geologist John Ward that estimated that Chiadzwa had a carat per hundred tons (CPHT) of over 1,000. Clearly, this is a very rich claim with a very low cost of production because the goods are so close to the surface.

"In a country filled with corrupt schemes, the diamond business in Zimbabwe is one of the dirtiest," McGee writes in his closing comments. Two months later, in January 2009, in another cable to Secretary Rice and the CIA, and just days before Hillary Clinton was sworn in, Ambassador McGee reports from a source on how the military is pushing out the police and keeping the goods for themselves instead of passing them to the Reserve Bank of Zimbabwe. "This has not deterred the continued brisk diamond trade involving foreign buyers, including most prominently the Lebanese."

At this point, the political involvement seems to hit new highs. McGee speculates that Gono is being "pushed out of the deal." As IDEX Online has previously reported, this is also when Grace Mugabe traveled to Hong Kong to make a multi-million-dollar investment in a diamond polishing plant in Qingdao, China and just months after Australian air traffic controllers guided Air Zimbabwe Boeing 767-200 flights transporting illicit goods, including ivory, gold and diamonds to China. According to RTTNews report, one of the flights carried 15 tons of unidentified “palace cargo” to Beijing to be exchanged for weapons and luxury items.

China may have not been the sole destination of illicit goods held by high ranking Zimbabwean officials. Based on embassy sources, McGee reports on a meeting with Alrosa and plans by Mugabe to visit Russia to discuss mining investment opportunities and maybe discuss a Chiadzwa diamond deal between Zimbabwe and Russia.

There are more cables with additional reports, including of village relocation plans to make room for additional mining, recommendations that "the international community take a 'tough and quiet' approach to Mugabe and ZANU-PF, sanctioning and obstructing their personal freedoms but without commenting publicly," as well as details about a Chinese $4 billion credit line to Angola and the subsequent policies and involvement in Angola's diamond sector.

But most telling is a farewell cable by Ambassador Christopher W. Dell from July 2007. He erroneously predicts that Mugabe's end is near (the subject of the cable is The End is Nigh). More importantly, he gives us a glimpse into what may have set the stage for U.S. policy in terms of the Kimberley Process. "I believe that the firm U.S. stance, the willingness to speak out and stand up, have contributed to the accelerating pace of change," Dell writes.

"The howls of protest over critical statements from Washington or negative coverage on CNN are the clearest proof of how this hurts them. Ditto the squeals over 'illegal sanctions'," he adds. "We need to keep the pressure on in order to keep Mugabe off his game and on his back foot, relying on his own shortcomings to do him in. Equally important is an active U.S. leadership role in the international community. (…) Rock solid partners like Australia don't pack enough punch to step out front and the UN is a non-player. Thus it falls to the U.S., once again, to take the lead, to say and do the hard things and to set the agenda."

There is no need for much commentary here. Anyone that saw how the U.S. acted at recent KP meetings can see that this policy was adopted and is being carried out.

The diamond industry, currently at the height of the retail season, is faced once again with the need to re-examine itself and decide on how to act. It's common around this time of the year to contemplate New Year resolutions. Let's decide that we do our best to resolve the issue of Zimbabwe and make sure that our good moral stand, as exemplified by the formation of KP, is well protected with firm and decisive actions that are realistic yet acted upon while taking the high ground.