Keeping blood off the red carpet

The bejewelled leading ladies of Hollywood are in a state of nervous agitation, making sure that the diamonds they adorn at next month’s Academy Awards have no connection with controversial gems that have fuelled war in Africa.

With the movie Blood Diamond (starring Leon-ardo DiCaprio and focusing on the stones that fuelled the war in Sierra Leone) expected to scoop a few Oscars it is understandable that the movie industry’s big names would be concerned.

Back in Brussels, the European Commission has also been quietly preparing for a leading role in the fight against ‘blood diamonds’.

On 1 January the EU assumed the chair of the Kimberley Process Certification Scheme, a system which aims to ensure that exported diamonds have not been mined to fund wars.

Signatories to the process (there are 45 so far, of which one, the EU, represents 27 states) must ensure that the diamonds they export have a certificate verifying that they have not financed rebel groups seeking to overthrow a UN-recognised government. Signatories also must not import diamonds from non-member countries.

It is on this latter point that the EU could have the first fight on its hands during its chairmanship. A UN report last year stated that diamonds were being exported from Ivory Coast, in violation of an embargo put in place following the 2002-03 civil war. The diamonds were turning up in neighbouring Ghana as Kimberley Process-certified gems and now Ghana faces expulsion from the system if it cannot prove by early March that the practice has stopped.

"If Ghana fails to do so it may face the sanction of being expelled from the Kimberley Process which means it can’t sell any diamonds legally," says Karel Kovanda, deputy director-general of the Commission’s external relations department.

The trade from Ivory Coast forms the bulk of the 0.2% of diamonds thought to originate in conflict zones today - this is down from 3% in the 1990s, when the trade helped fund brutal wars in Angola, Sierra Leone, the Republic of Congo and Liberia, though some non-governmental organisations put the figure from this period at 15%.

Many point to these figures as indicating the success of the process, which began in 2003, in stopping the trade in blood diamonds. Diamonds must be exported in tamper-proof boxers with their accompanying certificates which when they reach customs officials abroad must match a certificate from the importing dealer. "The whole chain of requirements is cumbersome and it’s a hard system to get around," says André Gumuchdjian, a diamond dealer in Antwerp and member of the Belgian Polished Diamond Dealers Association.

But many agree the system is not perfect. Last November a meeting held in Botswana of parties to the Kimberley Process drafted a list of recommendations, one of which was to encourage the industry to produce statistics which are more transparent. "The diamond world has always been cagey and we would like them to make more available trade statistics and make them public on websites," says Kovanda.

But others say a more fundamental reform to the process is needed. "The number of conflicts in diamond-producing countries has gone down dramatically but there is nothing to say that there wouldn’t be a return to trade in conflict diamonds tomorrow if these conflicts resumed," says Nick Dearden, campaigns manager with Amnesty International.

Amnesty says a properly-funded secretariat should be set up to ensure independent monitoring of the system and to investigate industry’s compliance. "Exchange houses say they expel dealers who break their rules but nobody has been held to account on this," says Dearden.

Hollywood could well help the EU force through last November’s recommendations.

"In the meeting in Botswana the film cast a huge shadow over the whole process…it was released in America in December and Europe in January so it’s coming out during two big diamond-buying times of the year - Christmas and St Valentine’s Day," says Dearden.

Industry agrees that with such a high-value product, image is everything. "We are all too aware that it’s a sensitive product and a beautiful product that people give to symbolise love and relationships. We don’t want it to be tainted by anything," says Gumuchdjian.

Kroes lets De Beers off the hook

• A four-year old investigation by the European Commission into the allegedly anti-competitive practices of diamonds giant De Beers was officially closed on 31 January.

The investigation was sparked in the first place by complaints made to antitrust regulators in 2003 about De Beers’s restrictive Supplier of Choice (SoC) system for downstream distribution. Diamond dealers complained that the rough diamond trade had become concentrated in fewer hands as a result of De Beers’s lock on the market.

The Commission decided to close its investigation despite questions about De Beers’s market dominance being raised by UK Socialist MEP Richard Corbett in November. In a letter to Corbett written last month (3 January), Kroes said her department’s delays in reaching a conclusion on De Beers were justified.

The decision to close the investigation came as a surprise to the UK MEP. "I’m astonished," said Corbett. "I will read her reasons with interest to see how on earth the investigation could have come to an end."

Corbett and Belgian Green MEP Bart Staes took an interest in the case following Kroes’s silence over a joint-venture exploration deal signed in September by De Beers, the world’s largest supplier of rough diamonds, and Russian firm Alrosa.

Diamond dealers, who had complained in the past about the anti-competitive behaviour of De Beers, claimed the joint venture with Alrosa was tantamount to a merger that would further consolidate De Beers’s dominant market position.

The joint-venture deal was largely seen as a defiant response to Kroes’s ruling in February 2006 that Alrosa should gradually wind down supplies to De Beers by 2009.

September’s deal has, it appears, extended the two companies’ alliance from purely commercial relations to more complex co-operation in the fields of geological survey and production. Dealers suspect that the deal was a way of circumventing Kroes’s distribution ruling.

"[They] will find any way they can to continue buying [the same quantities] from Alrosa," said Antwerp diamond dealer André Gumuchdjian. "Who is going to check? Is Neelie Kroes going to check? Even if you sent me, I would find it difficult to know what’s coming out of their mines."

The fact that Kroes had hailed February’s distribution ruling as a development that would foster "genuine competition" makes the new joint-venture deal all the more unpalatable to dealers, who claim it is in contravention of Article 82 of the EC Treaty, which prohibits abuse of a dominant market position.

Now that the European Commission’s investigation into SoC has been closed, it seems unlikely Kroes will tackle the continued collaboration between De Beers and Alrosa.

Lorraine Mallinder

The bejewelled leading ladies of Hollywood are in a state of nervous agitation, making sure that the diamonds they adorn at next month’s Academy Awards have no connection with controversial gems that have fuelled war in Africa.