Sierra Leone

The Heart of the Matter: Sierra Leone, Diamonds & Human Security

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EXECUTIVE SUMMARY
This study is about how diamonds - small pieces of carbon with no great intrinsic value - have been the cause of widespread death, destruction and misery for almost a decade in the small West African country of Sierra Leone. Through the 1990s, Sierra Leone's rebel war became a tragedy of major humanitarian, political and historic proportions, but the story goes back further - almost 60 years, to the discovery of the diamonds. The diamonds are, to use the title of Graham Greene=92s classic 1948 novel about the Sierra Leone, The Heart of the Matter.

A weak post-independence democracy was subverted in the 1960s and 1970s by corruption and despotism. Economic decline and military rule followed. The rebellion that began in 1991 was characterized by banditry and horrific brutality, wreaked primarily on civilians. Between 1991 and 1999, the war claimed over 75,000 lives, caused half a million Sierra Leoneans to become refugees, and displaced half of the country's 4.5 million people.

There is a view that Sierra Leone's war is a crisis of modernity, caused by the failed patrimonial systems of successive post-colonial governments. Sierra Leonean writers have rejected this analysis on several grounds. While there is no doubt about widespread public disenchantment with the failing state, with corruption and with a lack of opportunity, similar problems elsewhere have not led to years of brutality by forces devoid of ideology, political support and ethnic identity. Only the economic opportunity presented by a breakdown in law and order could sustain violence at the levels that have plagued Sierra Leone since 1991.

This study constitutes a strong critique of prevailing orthodox explanations of conflict, which tend towards state-centric and non-economic explanations. Traditional economics, in fact, as well as traditional political science and military history are of little assistance in explaining Sierra Leone's conflict. The point of the war may not actually have been to win it, but to engage in profitable crime under the cover of warfare. Diamonds, in fact, have fueled Sierra Leone's conflict, destabilizing the country for the better part of three decades, stealing its patrimony and robbing an entire generation of children, putting the country dead last on the UNDP Human Development Index.

Over the years, the informal diamond mining sector, long dominated by what might be called "disorganized crime", became increasingly influenced by organized crime and by the transcontinental smuggling not just of diamonds, but of guns and drugs, and by vast sums of money in search of a laundry. Violence became central to the advancement of those with vested interests. As the mutation of the war in Sierra Leone continued through the 1990s, so did the number and type of predators, each seeking to gain from one side of the conflict or another.

The Diamond Industry and De Beers

In 1998 the diamond industry produced an estimated 115 million carats of rough diamonds with a market value of US $6.7 billion. At the end of the diamond chain, this was converted into 67.1 million pieces of jewelry worth close to US $50 billion.

The De Beers group of companies mines or partners in mining the majority of the world's diamonds. De Beers purchases by far the majority of all diamonds produced, and more or less sets the price of rough diamonds on the global market. Manipulation of both the supply and demand for rough diamonds on world markets is managed through its Central Selling Organization (CSO), headquartered in London.

The CSO sources diamonds from De Beers mines as well as from the "outside market" - diamonds produced by non-De Beers firms. Diamonds purchased by the CSO are in turn sold at ten annual "sights" (sales) to 160 "sightholders". Sightholders are designated by De Beers and are presented with mixed "parcels" of diamonds. The parcels are packages of combined rough gem quality and industrial diamonds, and may include stones from a combination of countries. Parcels are priced by De Beers and are bought by sightholders - ironically enough, sight unseen. Sightholders then take the diamonds to other cities where they are resorted and repackaged for onward sale, or for cutting and polishing.

Until the 1980s, De Beers was directly involved in Sierra Leone, had concessions to mine diamonds offshore, and maintained an office in Freetown. Since then, however, the relationship has been indirect. De Beers maintains a diamond trading company in Liberia and a buying office in Conakry, Guinea. Both countries produce very few diamonds themselves, and Liberia is widely understood to be a "transit" country for smuggled diamonds. Many "Liberian" diamonds are of Sierra Leonean origin, and others reportedly originate as far away as Russia and Angola. De Beers says that it does not purchase Sierra Leonean diamonds. Through its companies in West Africa, however, and in its attempts to mop up supplies everywhere in the world, it is virtually inconceivable that the company is not - in one way or another - purchasing diamonds that have been smuggled out of Sierra Leone.

Belgium and the Diamond High Council

Antwerp is the world centre for rough diamonds. More that half of the CSO sightholders reside in Antwerp. Antwerp is also the principal "outside market" serving as a funnel for more than half of all the diamonds produced in the world. The formal trading of diamonds in Belgium is structured around the Hoge Raad voor Diamant (HRD) - the Diamond High Council. The HRD is a non-profit umbrella organization officially acknowledged as the voice of the entire Belgian diamond industry. The mission of the HRD is to maintain and strengthen the position of Antwerp as the world centre for diamonds. Smuggling in the Belgian context refers to diamonds which enter Belgium without being declared to customs officials, and which are not licensed for import by the Ministry of Economic Affairs and the HRD Diamond Office. Neither the Government of Belgium nor the HRD have estimates of the quantity or source of smuggled diamonds. In addition, there are few active policies aimed at controlling diamond smuggling.

A factor which eases large-scale diamond smuggling and inhibits the tracking of diamond movements is the manner in which the HRD documents diamond purchases. The HRD records the origin of a diamond as the country from which the diamond was last exported. Therefore diamonds produced in Sierra Leone, say, may be officially imported and registered as originating in Liberia, Guinea (Conakry), Israel or the UK, depending on their journey from one trading centre to another.

A major problem with the Belgian environment, as it pertains to Sierra Leone or any other diamond producing country, is the lack of interest and information on the true source of the diamonds entering the country. A comparison of West African diamond export figures with Belgian imports is revealing. For example:

while the Government of Sierra Leone recorded exports of only 8,500 carats in 1998, the HRD records imports of 770,000 carats;

annual Liberian diamond mining capacity is between 100,000 and 150,000 carats, but the HRD records Liberian imports into Belgium of over 31 million carats between 1994 and 1998 - an average of over six million carats a year;

Ivory Coast, where the small diamond industry was closed in the mid 1980s, apparently exported an average of more than 1.5 million carats to Belgium between 1995 and 1997.

Of further interest where transparency and accountability are concerned, is the question of who actually monitors imports and exports on behalf of the Belgian government. Oddly, this role is carried out largely by the HRD itself, the representative and lobbying institution for the Belgian diamond industry. In recent years there have been a number of judicial inquiries which have shown that the overall system violates almost any definition of neutrality, and is an invitation to corruption. Cases of fraud in the Antwerp diamond and banking trade are legendary and Antwerp has become one of the primary world centres for Russian organized crime. Several recent cases of fraud, banking collapse and the involvement of organized crime in the Belgian diamond industry are documented in the report.

The Sierra Leone Diamonds

The first Sierra Leonean diamond was found in 1930, and significant production commenced in 1935. By 1937 Sierra Leone was mining one million carats annually, reaching a peak of 2 million carats in 1960. From 1930 to 1998, approximately 55 million carats were mined (officially) in Sierra Leone. At an average price in 1996 dollars of US $270 per carat, the total value is close to US $15 billion.

In 1935, the colonial authorities concluded an agreement with De Beers' Sierra Leone Selection Trust (SLST), giving the company exclusive mining and prospecting rights over the entire country for 99 years. By 1956, however, there were an estimated 75,000 illicit miners in Kono District - the heart of the diamond area - leading to smuggling on a vast scale, and causing a general breakdown of law and order. The buyers and smugglers at that time were mainly Madingo and Lebanese traders. With the tightening of security between Kono and Freetown in the early 1950s, Lebanese smugglers began moving their goods to Liberia. Antwerp, and then Israeli-based diamond merchants soon noticed the booming diamond trade in Monrovia, and many established offices there. De Beers itself set up a buying office in Monrovia in 1954 to keep as much of the trade under its control as possible.

In 1955, the colonial authorities scrapped SLST's nation-wide monopoly, confining its operations to Yengema and Tongo Field, an area of about 450 square miles. In 1956, they introduced the Alluvial Mining Scheme, under which both mining and buying licenses were granted to indigenous miners. Many of these licenses came to be held by Lebanese traders who had begun to settle in Sierra Leone at the turn of the century.

Siaka Stevens came to power seven years after independence in 1968. A populist, he quickly turned diamonds and the presence of SLST into a political issue, tacitly encouraging illicit mining, and becoming involved himself in criminal or near-criminal activities. In 1971, Stevens created the National Diamond Mining Company (NDMC) which effectively nationalised SLST. All important decisions were now made by the prime minister and his right hand man, a Lebanese businessman named Jamil Mohammed. From a high of over two million carats in 1970, legitimate diamond exports dropped to 595,000 carats in 1980 and then to only 48,000 in 1988. In 1984, SLST sold its remaining shares to the Precious Metals Mining Company (PMMC), a company controlled by Jamil. Stevens retired in 1985, handing over power to Joseph Momoh, who placed even greater responsibility in the hands of Jamil.

From the late 1970s to the early 1990s, aspects of Lebanon's civil war were played out in miniature in Sierra Leone. Various Lebanese militia sought financial assistance from their compatriots in Sierra Leone, and the country's diamonds became an important informal tax base for one faction or the other. This was of great interest to Israel, in part because the leader of the important Amal faction, Nabih Berri, had been born in Sierra Leone and was a boyhood friend of Jamil. Following a failed (and probably phoney) 1987 coup attempt in Sierra Leone, Jamil went into exile, opening the way for a number of Israeli "investors" with close connections to Russian and American crime families, and with ties to the Antwerp diamond trade.

The Revolutionary United Front (RUF) war began in 1991 and soon after, Momoh was replaced by a military government - the National Provisional Ruling Council (NPRC). Despite the change in government, however, RUF attacks continued. From the outset of the war, Liberia acted as banker, trainer and mentor to the RUF, although the Liberian connection was hardly new. With a negligible diamond potential of its own, Liberia's dealings in stolen Sierra Leone diamonds have been a major concern to successive Sierra Leone governments since the great diamond rush of the 1950s.

What was different and more sinister after 1991 was the active involvement of official Liberian interests in Sierra Leone=92s brutal war - for the purpose of pillage rather than politics. By the end of the 1990s, Liberia had become a major centre for massive diamond-related criminal activity, with connections to guns, drugs and money laundering throughout Africa and considerably further afield. In return for weapons, it provided the RUF with an outlet for diamonds, and has done the same for other diamond producing countries, fuelling war and providing a safe haven for organized crime of all sorts.

The "Juniors" and Private Security Firms

Joseph Momoh's search for new investors in the early 1990s was carried forward by the NPRC military government. With De Beers out of the picture, and with the disappointing and short-lived Israeli experience behind it, the government now began to receive overtures from small mining firms, known in the business as "juniors". The report deals primarily with the three juniors most involved in Sierra Leone during the 1990s, some with interests that extended far beyond the mining of diamonds.

All three trade on Canadian stock exchanges, no doubt because of Canada's well-deserved reputation as a source of easy venture capital for small mining and exploration companies. The first, Rex Diamond - with de facto headquarters in Antwerp - has an integrated mining, sorting, cutting and marketing operation, holding Sierra Leonean concessions in Zimmi and Tongo Field. Although Rex claims friends among both government and the RUF, this is denied by the RUF, perhaps understandably. In 1998, Sierra Leone lost its only combat helicopter - a serious problem because the Soviet-built gunship had been the government's most effective weapon against the RUF. Zeev Morgenstern, Rex's Managing Director, and Serge Muller, the company's President, came to the government's aid by making an arrangement to supply engines, parts and ammunition worth US $3.8 million. The deal went sour as a result of defective parts supplied from Russia. According to the Washington Post, Morgenstern and Muller have both said, "..the arms deals were unrelated to Rexs mining activities".

The second firm is Toronto-based AmCan Minerals, which holds various exploration licenses in Sierra Leone. Because of the security situation, AmCan has so far done little diamond mining, although it recently acquired a South African-owned firm, ArmSec International (SL) with connections to both the diamond and the security industries. AmCan's Sierra Leone lawyer is Chairman of the Government Gold and Diamond Office, the body responsible for overseeing the monitoring, valuation and taxation of the diamond industry.

The third "Canadian" firm is DiamondWorks, an outgrowth of Carson Gold and Vengold, companies promoted by Robert and Eric Friedland. In 1995, DiamondWorks acquired Branch Energy Ltd., a private company registered on the Isle of Man. DiamondWorks and Branch Energy have become the subject of widespread interest because of their apparent but much-denied connections with two major international security firms, Executive Outcomes and Sandline. In 1995, The Government of Sierra Leone, backed onto the Freetown peninsula by the RUF and facing certain defeat, engaged the services of Executive Outcomes (EO) to help in its defense. With 200 imported soldiers, air support, and sophisticated communications equipment, EO pushed the RUF back from Freetown within a week, and within another month had cleared the major diamond areas of Kono as well. Shortly after EO took control of the diamond areas, Branch Energy - which had introduced EO to the GOSL - secured a 25 year lease on Sierra Leonean diamond concessions.

In 1997, DiamondWorks' Sierra Leone country manager was seconded - as a "private citizen" - to Sandline, in connection with a controversial arms shipment intended for the briefly exiled government of Tejan Kabbah.

The juniors arrived in Sierra Leone when the formal instruments of the state had all but disappeared, notably law, order, probity and justice. They also arrived in the midst of a war which had at its epicentre the same thing that brought them to the country - diamonds. Lawlessness, however, was not new. The government of Sierra Leone had - from the 1950s - given up pretending that it could police the diamond areas. From the days of the SLST Diamond Protection Force, it had encouraged and even required foreign investors to make their own security arrangements. This goes a long way to explaining why the juniors appear to have such an intimate relationship with private security firms.

There is a distinction to be made, however, between the need to hire a private security firm in order to police a mining operation, and the provision of troops and weapons in support of a faction in a civil war. It can be said that the involvement of Executive Outcomes in Sierra Leone was in a good cause. The company successfully protected the government against a brutal and illegitimate rebel force. EO was certainly cheered in the streets of Freetown for its efforts. It can also be said that the provision of weapons to the democratically elected government of Tejan Kabbah - a UN arms embargo notwithstanding - made sense and was in support of a good cause.

The problem is not the individual episodes, but the bigger picture which they help to form - of a world in which beleaguered and legitimate governments find little formal international protection against internal predators, and are forced into Faustian bargains in order to survive.

Conclusions

In the absence of a governmental capacity for self-protection, and in the absence of effective mechanisms for international protection, private security firms and mercenaries may well be the way of the future. Closely connected to mining interests, the phenomenon, however, is more than just a convenient way to let the international community "off the hook". It begins to look like a protection racket, with the payment for assistance made in future mineral concessions - "concessions for protection".

It is unclear whether junior mining companies have the capacity to undertake serious mining ventures in Sierra Leone. Only time and peace will tell. On the latter point, however, a peace agreement is only one step in a long process that will be required to provide real security in the diamond areas. An important next step will the demobilization of fighters and a return to the rule of law under government authority. Before government authority can be established, however, there may be a lengthy interregnum required for UN peacekeeping forces.

The report concludes with a discussion on the identification of rough diamonds, an issue of great interest to law enforcement agencies. Long thought to be impossible, new diamond "fingerprinting" technology is being developed in consultation with the Royal Canadian Mounted Police. The RCMP stresses that it has yet to clearly identify the limitations and capabilities of the system through actual use. The potential difficulties in applying the technology are reduced, however, by the fact that the bulk of the rough diamond trade is centralized in only two organizations and two locations, the HRD in Antwerp and De Beers' Central Selling Organization in London.

The report ends with a series of recommendations directed to the United Nations, The European Union, the Governments of Sierra Leone and Belgium, the Diamond High Council and others. It also argues that a consumer campaign may be required in order to draw attention to the urgency of the matter and to gain broad public support for change.