Measuring the True Price of Diamonds

St. Valentine’s Day, in many places, is a day for the enamored, or simply lustful, to communicate their affections, often anonymously, to the object of their yearnings. It is a day, too, of sometimes costly gifts — diamonds being the gem du jour ever since a smart advertising writer in 1947 forged an undying compact between protestations of eternal love and super-compressed carbon purity in the slogan “A diamond is forever.”

But, 65 years on, how clean are they?

For almost a decade, the multibillion-dollar industry that mines, polishes, markets and deals in diamonds has relied on a system of cross-border certification called the Kimberley Process to assure its customers that the stones are worthy of the slogan — untainted as the light they refract and free of the dark stain of conflict that spawned the term “blood diamonds” to denote gems that fueled civil war against legitimate governments.

Yet, according to many experts familiar with its workings, the Kimberley Process is, in the words of James D. Bindenagel, the former U.S. negotiator on conflict diamonds, “under siege.”

And the reason is, primarily, that the criteria for certification have not moved beyond civil conflicts to embrace more recent allegations of human rights abuses in the diamond business, provoking fears that sales of Zimbabwean stones in particular will be used to buttress the coterie of generals around President Robert G. Mugabe and finance a brutal campaign to extend his three decades in power.

Under the current rules, in other words, diamonds that are associated with even the most parlous abuses do not fall under the rubric of conflict diamonds.

The issue moved into sharper focus in November, when the Kimberley Process itself endorsed the export of diamonds from the Marange fields of eastern Zimbabwe, taken over by the military in 2008 amid widespread reports of violence and killings.

The decision upset the delicate, triangular balance of more than 70 governments, diamond industry representatives and advocacy groups that united to form the Kimberley Process in 2003 after campaigners exposed the links between so-called blood diamonds and African civil conflicts as a scandal that seemed to threaten the world’s diamond trade.

Global Witness, a British advocacy group that helped to establish the certification program, pulled out in protest in December, saying the body had failed to deal with situations in which “diamonds have been fueling violence and human rights violations.”

Since then, as my colleague John Eligon reported from Johannesburg, monitoring groups, diplomats, lawmakers and analysts have concluded that tens of millions of dollars are being “secretly extracted from state-owned mines” in the Marange fields, “bypassing the nation’s treasury” to enrich Mr. Mugabe and his entourage.

The existing regulatory system, a diamond industry executive acknowledged, “is not a perfect construct. It is not a silver bullet. It is not an answer to all the challenges.”

Since the United States took over the formal leadership of the Kimberley Process on Jan. 1, a further question is whether Washington’s reforming zeal will have real impact on a body that has shown itself reluctant to face challenges head-on.

Gillian A. Milovanovic, the American career diplomat who became the chairwoman of the Kimberley Process, told an audience in Cape Town last week: “We strongly believe that change must come.”

“Today,” she said, “we see diamonds emerging from conflicts that do not involve the same kind of rebel movements, but from broader contexts of conflict and we believe the Kimberley Process should carefully consider how best to address this.”

Yet, said Mr. Bindenagel, the former U.S. negotiator, “governments are not willing to broach the issue of redefining conflict diamonds,” suggesting that new proscriptions should now be invoked to scrutinize the proceeds of technically lawful diamond sales and establish whether they fuel corrupt practices punishable under U.S. law.

“The real issue is: What happens to the proceeds?” he said.

For all the upheaval in the industry’s regulatory system, though, artful marketing and the creation of the Kimberley Process itself have helped ensure that the lure of diamonds has prevailed, just as the slogan coined in 1947 forecast that it would.

Despite the global financial crisis and the doldrums of austerity in some traditional Western markets, De Beers, the colossus based in South Africa that controls about 36 percent of the global supply of rough diamonds, recorded a huge increase in sales in 2011, which increased more than 25 percent, to $7.38 billion, according to its annual report last week. As production slipped back, prices soared in “an exceptional year” with “record levels of consumer demand growth.”

While the United States is still the world’s biggest market for polished stones, De Beers noted that Asian buyers are not too far behind. “The China opportunity is a priority” for its glittery retail outlets selling polished stones, the company said, announcing plans to open more of its high-end jewelry stores in booming Chinese cities to sell diamonds, which it says are “certified conflict-free.”

In the emergence of this new and lucrative market, though, cynics might see a kind of symbiosis.

A prime beneficiary of the Kimberley Process’s decision on Zimbabwe was Anjin, a joint Chinese-Zimbabwean mining company that boasted recently that it had invested about $400 million to exploit the contentious Marange fields, where De Beers itself relinquished prospecting rights in 2006.

When the sales from Zimbabwe were approved, Anjin had about two million carats of diamonds stockpiled and ready to go to auction, according to local news reports, perhaps seeking to close the circle between the growing purchasing power of the wealthy Chinese elite and Beijing’s scramble for African resources — and, in the process, reinvent the 1947 promise for a newer generation of buyers.