A few weeks ago, I was interviewed on an Israeli television news program as someone “who would know something about Dubai.” The interviewers must have chosen me by default, as I assume that other more conversant souls approached before me had declined the honor - probably rightfully so.

In the wake of alleged Israeli wholesale fabrication of foreign passports, and statements made by a Dubai police officer that “henceforth no Israelis would be allowed in Dubai, even if they come on a foreign passport,” there were questions about future business ties between the two countries. I assured the viewers that the “Dubai leadership is exceedingly pragmatic. It knows how to differentiate between its best economic and commercial interests and the United Arab Emirate’s (UAE) best political interests. Invariably, the latter gets most of the headlines but the former prevails. Storms erupt easily; but stormy weather has a tendency to pass quickly as well.”

It is in the best interest of the diamond business to keep politics out of our international trading fraternity – though that is often easier said than done. In a recent meeting of the Executive Committee of the World Federation of Diamond Bourses (WFDB), some participants wondered whether the Presidents Meeting, scheduled to take place in Dubai next year, should be rescheduled. There are even some voices calling for the Dubai bourse’s membership in the WFDB to be reviewed at the forthcoming World Diamond Congress in Moscow in July.

As far as I know, the issue has not yet been put on the agenda; I hope it will not be. So what exactly is the “issue” that the WFDB is contemplating to discuss? It has to do with organizational by-laws and the obligations of WFDB members.

Any individual member of a diamond club must be allowed to enter any of the affiliated bourses. Any visiting member thus enjoys the umbrella of secure and honest arbitration in the case of business disputes. There is really no other genuine justification for maintaining this umbrella body.

It was only a few years ago, at the 2004 World Diamond Congress in New York, where the Dubai Diamond Exchange’s application to become a member of the WFDB was considered and accepted. The representatives of the Dubai bourse declared that they would follow an “open door policy” and guarantee the reciprocity enjoyed by all bourse members worldwide.

In the last few years, however, there have been a number of instances in which certain diamantaires (or their accompanying spouses) were denied entry into Dubai. It is not that the local bourse did not want to extend the courtesy. Rather, denials of entry were the result of certain political considerations that weighed more at that specific moment than commercial interests. It should not have happened, but it did and will probably happen again in the future. Must the diamond business live with these uncertainties?

With all due respect to the tremendous influence the DMCC’s Ahmed Bin Sulayem and his family may enjoy, they are businessmen who have made huge commitments and investments in establishing a diamond business in Dubai. There is, however, a limit to their ability to influence the foreign policy agenda of the UAE.

Proliferation of Bourses

In the past, the WFDB was a most selective, rather exclusive, fraternity. Laws and by-laws of prospective clubs were scrutinized, and applying bourses needed to have a proven record. It wasn’t easy to become a member of the WFDB.

Then the tide changed. It was, if I am not mistaken, under Eli Izhakoff’s presidency that diamond-trading regions were encouraged – and actually assisted – to form a diamond bourse. The haste and “immediacy” of their acceptance in the WFDB astounded many old-timers.

The erstwhile exclusive WFDB now counts 28 members, and more are in the making.

The proliferation is a good thing – it brings more diamond merchants into an organized environment; it brings greater unity and uniformity in ethics and grading standards. However, it also brings about a greater diversity in political and legal systems in which the bourses operate.

Many contemporary diamantaires may have forgotten the history of India. For decades, India was denied membership into the WFDB due to its lack of diplomatic relations with all of the WFDB-member counties; there was no reciprocity under which to conduct arbitrations. At the end of the day, the exclusion of India did not impede that country’s diamond industry to grow from strength to strength. Its exclusion became an impediment to other diamond countries, which, at some point, asked India to please apply once more – giving assurances of its acceptance.

The Dubai Question

In quite a few countries today, bourse members are having difficulties getting entry visas to visit other WFDB-affiliated member countries. Dubai was accepted as a member country at a time when it didn’t enjoy diplomatic relations with some other WFDB-affiliated countries – that was known when Dubai’s membership was approved.

Today, billions of dollars worth of rough diamonds transit through Dubai. No action by the WFDB will change that. Indeed, the Dubai bourse has not been able to enforce some of the specific undertakings it made at the time of acceptance into the WFDB. That’s regrettable and certainly annoying to some.

The diamond industry must ask itself, however, whether these deficiencies are significant cause for sanctions against the Dubai bourse – such as suspension or a rescheduling of next year’s Presidents Meeting. Good people may have different opinions, and I respect them all.

Getting Assurances from Dubai

In Dubai, government policies are not set by ambitious police officers in press conferences. For example, last month, the government press office published official clarifications regarding entry permits of foreign visitors. Unfortunately, these clarifications were ignored by most foreign media.

The Director of the Consular Affairs Department of the UAE Ministry of Foreign Affairs, Ambassador Sultan Al Qortasi, said in a statement that “special entry permits” are issued to those participating in international events, “in line with the UAE's commitment to a policy of permitting any individual to take part in international sports, cultural and economic events or activities being held in the country, without any limitation being placed on participation by citizens of any member country of the United Nations."

The statement concluded: "This is a well-established policy and has no political implications. Nor does this decision indicate any form of normalization of relations with countries with whom the United Arab Emirates does not have diplomatic relations.”

These assurances fall short from satisfying individual bourse members attempting to visit Dubai simply to conduct some business transactions. Even if specific problems are solved on an ad-hoc basis, the absence of certainty remains problematic. Should a diamond firm purchase local offices, maintain inventories or hire local personnel if it has no certainty on gaining access to them? There are no simple answers to these questions.

The Relevancy of the Organized Trading Community

It is hard to put an exact, concrete figure on the size of the worldwide diamond-trading community. There is some overlap where members have membership in more than one bourse. Many companies employ staff that do not have their own bourse membership – but, through the affiliation of the employer, adhere to the trading rules. Most of the world’s diamond manufacturers are also members of a bourse, recognizing the benefits of this unique trading umbrella. It is probably not an exaggeration to estimate that, worldwide, some 50,000 professionals are directly participating in the diamond trade – and that excludes the local market of India, where an enormous domestic trading network moves with amazing efficiency well over one billion polished diamonds a year.

It seems apparent that traders’ skills and organizations play a pivotal role in the stabilization of the diamond value chain, especially in periods of crisis. It is important for the trade, led by the WFDB, to move in accordance with – or even move ahead of – the shifts in global demand. Maybe India and China should follow the U.S. and European models, and have a number of bourses in its jurisdictions.

The proliferation of bourses allows better service to far-away regions, provides added security to all members, and will assist the opening of new markets. This requires the WFDB to adjust its policies and “mind-set.” It isn’t easy to optimize inclusiveness – which is a prerequisite to an effective trade – and reconcile such policy with the increasing polarization of the global political scene. The latter will get worse – not better.

Dubai is not the issue. Tomorrow uncertainty can arise in another country. What is relevant here are the policies of the WFDB. The organization will be stronger and better if it continues its policy of maximum inclusiveness.

It doesn’t make sense to undermine such policy because of political considerations outside the spheres of control of the relevant bourse members.

Business is difficult enough without creating extraneous obstacles – any cost/benefit analysis of various policy options should be guided by long-term commercial interests. To unite and expand the trade is the task of the organized trading community. Politics are better left to the politicians.