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State Dept. Press Briefing on Conflict Diamonds


Press Briefing on Conflict Diamonds

Paul Simons, Deputy Assistant Secretary for Energy, Sanctions and Commodities;
Sue Saarnio, Special Advisor for Conflict Diamonds for Bureau of Economic, Energy and Business Affairs

Washington, DC
December 5, 2006


DEPUTY ASSISTANT SECRETARY SIMONS: Maybe we can just do a quick round of introductions. My name is Paul Simons. I'm Deputy Assistant Secretary here in the Economics Bureau. I'm responsible for energy and sanctions as well as the Kimberley Process diamonds portfolio.

MS. SAARNIO: And I'm Sue Saarnio. I'm the Special Advisor for Conflict Diamonds. Paul and I were in the U.S. delegation that attended the Kimberley Process meeting in Botswana in November. So we led a group of eight people from the U.S. agencies including USAID and U.S. Geological Service.

DEPUTY ASSISTANT SECRETARY SIMONS: We thought this was a good opportunity to update the press on some of the activities that the U.S. Government is undertaking on the conflict diamonds issue. As you all know the “Blood Diamond” movie will be released this Friday and it gives us a good opportunity to bring you up to speed on what's been happening on the government side. We feel the film provides a good historical snapshot of the diamond industry particularly back in 1999. We do think we've come a long way since the bloody atrocities committed in Sierra Leone depicted in that movie. We thought this would be a little bit of an opportunity to bring some of you up to speed on what we've been up to.

The main achievement over the past seven years has been that 71 countries, together with the diamond industry and prominent civil society groups, have worked together to form the Kimberley Process Certification Scheme. I'll talk a little bit more about what we do under Kimberley. Kimberley has fundamentally reformed the rules of the game for trade in rough diamonds. We really have a totally different system by which rough diamonds are exchanged and traded around the world and this has come about as a result of the Kimberley Process.. The Kimberley Process covers the vast majority of the world's rough diamond trade today. We think it represents a good success story for multilateral diplomacy. It really demonstrates what the international community can do to prevent the financing of regional conflicts.

I'll say a few words about what the Kimberley toolbox consists of, what we do with Kimberley. The Kimberley Process is basically a dynamic international trade regime established in 2003 to control and monitor the trade in rough diamonds. It creates an exclusive trading zone of committed countries that have agreed to play by new rules of the game in terms of trade in rough diamonds. All the world's major diamond producers, polishers and consumers are part of this Kimberley club. The members of the club agree only to trade with other members of the club.

In order to put Kimberley into place the U.S. passed the Clean Diamond Trade Act in April of 2003. That basically set the rules of the road for the U.S. Government in terms of how we administer our part of the bargain, our part of the Kimberley Process bargain. The Kimberley Process itself -- its toolkit is fairly robust -- it includes mechanisms to monitor country performance to make sure that individual participating countries are meeting their obligations under Kimberley. It also includes provisions to report diamond trade and production statistics. We have a statistics committee that compiles these and publishes them on our website. And most importantly it contains a process to take action if there are any irregularities in diamond dealings around the world through either warnings or expulsion processes, so we have a disciplinary component to Kimberley as well.

The Kimberley Process statistical database is monitored for anomalies in trade. We take a close look at that. So for example in 2004, when it was discovered that the Republic of Congo was exporting more diamonds than it was producing, we went through a process to discover what the grounds of that were. And, in fact, the Republic of Congo was expelled from the Kimberley Process as a result of that effort.

QUESTION:CWhen was that again?

DEPUTY ASSISTANT SECRETARY SIMONS: 2004. The State Department leads the interagency process for Kimberley. We have two basic functions: One, we make sure that the range of U.S. domestic agencies implement the U.S. responsibilities properly. So our interagency working group includes the Commerce Department, Bureau of the Census, Customs and Border Protection under Homeland Security, the Treasury Department which issues the basic regulations, as well as State Department, U.S. Geological Survey which is involved in some technical assistance activities and the Agency for International Development also is involved in technical assistance.

The U.S. has played a leading role in Kimberley Process efforts to monitor country performance. We participated in a number of peer reviews. Each of the members of Kimberley has undergone a detailed peer review inspection to make sure that they are meeting their basic commitments under Kimberley. The U.S. also has taken the lead on technical assistance coordination efforts. Sue manages that process internationally so we try to line up assistance, donors with needy countries. One of the interesting aspects of Kimberley Process is that we have a tripartite arrangement whereby governments, NGOs and private industry are all part of the process. As a result of that we've been able to get industry to contribute technical assistance and to provide advisors in addition to governments. We've used that tripartite structure in a way to bolster the technical assistance effort.

On the domestic side, we ensure that all rough diamond shipments in and out of the U.S. are shipped in secure containers, accompanied by a certificate of origin issued by a participating Kimberley country. And as I mentioned, we have led the effort in technical assistance and, in fact, the U.S. has been the leader in providing technical assistance to alluvial diamond producers in Africa. We have spent more than $7 million in Sierra Leone and Liberia since 1999 to improve their implementation and their efforts to bring up their standards in their diamond sector. And we also have new programs aimed at Guinea, Central African Republic and Mali.

So I think I'll stop there and Sue if you want to have any opening comments or we'll open it up to your questions.

QUESTION: Knowing very little about the diamond business, it is said that you can carry, you know, a million -- millions of dollars worth of diamonds in your pocket. How are you -- what gives you grounds for assurance that this process is not being fairly massively circumvented by, you know, people with ill intentions, I guess you might say?

DEPUTY ASSISTANT SECRETARY SIMONS: Well, I think the important thing is when we set up Kimberley all three components -- governments, NGOs and the industry -- committed to a new transparent effort to monitor trade in rough diamonds. And basically we're all in this together. The reputation of the industry, the reputation of the governments and the reputation of the NGO stands on the integrity of the Kimberley Process, so the incentives to accept smuggled diamonds are, I think, substantially reduced because by introducing smuggled diamonds into this regime you're undermining the reputation of the diamond industry worldwide and you're undercutting your own interests. So everyone shares an interest in keeping that open, transparent process going and in channeling all of the diamond trade through this certification process scheme. Once you start to degrade that scheme, you know, you open the whole industry up to question. So the producing governments suffer, the industry suffers and government reputation suffers, so I think you have a mutuality of interest here.

That's not to say that no smuggling occurs. But, you know, you had a situation in the late 1990s where there were severe challenges to the reputation of the industry and to the whole diamond process worldwide. Everybody would have lost if we did not band together to create Kimberley, so now everybody has a stake in universalizing Kimberley.

So for example, when we hear at our Kimberley Process plenaries that there may be a resurgence of the conflict diamonds from Ivory Coast or there may be some smuggling of diamonds across -- into the Congo as I mentioned before, we tend to have a banding together of interests so that the integrity and the credibility of the process is maintained. We're able to put those disciplinary measures into place; otherwise, people are going to make exactly the kind of comments that you're making -- say, hey, you know, this scheme's got a lot of holes in it.

QUESTION: How are you able to control the diamond industry out of Antwerp, for example, and that's the world's biggest diamond center? Do you have people on the ground checking to see where the conflict diamonds are managing to make their way into the market? Have you closed that loophole?

DEPUTY ASSISTANT SECRETARY SIMONS: Well, obviously, each country -- I think the Europeans have to explain how they handle the importation process and the management process. But each country is responsible for ensuring that at the port of entry that the -- each diamond import is accompanied by an appropriate Kimberley Process Certificate and that the diamond importers are only accepting shipments that flow into their trade that are accompanied by this certificate. So it is the responsibility of each country to do that. That's part of the process that these peer reviews examine. So they visit each country and find out what procedures they have in place to ensure that importers are requiring these certificates, that custom authorities are not allowing any shipments in that do not have certificates and that importers are insisting on the presence of a Kimberley certificate before they allow that diamond to go into the production process.

QUESTION: I can't remember the exact statistics, but I think it's like 80 percent or something of all diamonds go through Antwerp. It's probably -- maybe the industry has changed since I last read a story about a decade ago. But what are the Dutch authorities telling you in terms of --

DEPUTY ASSISTANT SECRETARY SIMONS: That's the Belgium, I think -- it's the Dutch part of Belgium but --

QUESTION: Sorry, what are the Belgium authorities telling you? Also, Amsterdam is a huge diamond --

DEPUTY ASSISTANT SECRETARY SIMONS: Well, actually, again I don't want to speak for the Europeans. But my understanding is that they have a pretty strict control system. They actually open and inspect every diamond shipment that comes in. But again, this is for the Europeans to explain. But they have a lot resting -- again, the credibility of their industry, of their polishing center absolutely depends on their having zero tolerance for non-Kimberley diamonds entering the process. You know, if there were press reports that non-Kimberley diamonds started to find their way into the Antwerp polishing shops, this would undermine the entire industry and basically everybody would start suffering. My sense has been -- and I've been three years with this process -- that whenever you get one of these reports out there, you know, people rally around to try to investigate and to make sure that it's not happening. If it is happening, then we find a way to either suspend shipments, look further into the problem, or take some credible action so that the industry, as a whole, doesn't go back to the kind of situation that existed in 1999, which is portrayed in the movie.

QUESTION: Can you give us some figures on the size of the annual legitimate diamond trade and how big you think the smuggled diamond trade is and how that would compare to 1999, for example?

DEPUTY ASSISTANT SECRETARY SIMONS: There's several ways to measure the trade, both the legitimate size of the trade as well as what you call the illicit trade. It's a little hard to measure the trade because most diamonds change hands quite a few times, even as rough diamonds. So, I mean, one way to look at it is what is the production of rough diamonds. And I believe the production of rough diamonds is about $11 billion a year.

The actual trade in rough diamonds, as we recorded in Kimberley, is somewhere around $37 billion a year. That means that each diamond gets traded two or three times a year, but that's not -- that's in the rough stage, but that's not unexpected because rough diamonds are very high in value and they can stand a fair amount of transportation and movement around, so you could have a diamond that starts in Botswana, goes up to London, then goes to Israel and then goes to India for polishing, so it might have moved three times before it even enters the polished state. That’s not unusual.

So you have a lot of trade, you have a lot of diamonds. In the U.S., you have diamonds that are imported in a rough stage, they go to someone in New York who sorts through them, decides which ones he wants, and then he sends the rest of them back to where he got them from, say, in Israel. So you could have the same diamond that goes backwards and forth between the same countries several times.

So the trade in rough diamonds -- there's not necessarily a lot of value added in that trade. You know, a lot of it just comes -- goes for inspection. They look at it, they ship it around, or it's moving along in the value chain. It goes from one buyer to another dealer, he sends it out to get polished. At the time it gets polished, it gets shifted out of becoming a rough diamond from a polished diamond and then it enters in what's called the chain of warranties.

It's no longer part of Kimberley, but from that point forward, each subsequent purchaser needs to attach a separate attestation that that diamond was processed from other diamonds that were originally part of the Kimberley Process. So you do also have shifts in the trade from rough to polished diamonds.

QUESTION: I've got two questions. On the monitoring of country performance, is that monitoring of all of the 71 nations that are signatories to the thing or just nations in conflict areas?

DEPUTY ASSISTANT SECRETARY SIMONS: No, no. The U.S. had a peer review in 2005. The Indians had a peer review. They're a polishing country. So the monitoring is of both the countries that are producers of diamonds as well as those that are consumers.

QUESTION: My second question, touching on the War on Terror, the Washington Post reporter Doug Farah has written quite convincingly on al-Qaida's use of illicit diamond trade in West Africa from '96 on, in the late 90s. As part of this new process, can you -- has it been verified that al-Qaida or terrorists are no longer involved in the diamond trade or --

DEPUTY ASSISTANT SECRETARY SIMONS: We have not been able to verify those reports that connect al-Qaida with the diamond trade.

QUESTION: Are you still looking into it?

DEPUTY ASSISTANT SECRETARY SIMONS: Yes, we are looking into it. It's a subject -- the intelligence agencies are always keeping an eye on that issue and we track it very closely, but we have not been able to substantiate that -- those particular allegations.

QUESTION: You mentioned (the Republic of ) Congo as being expelled. Have there been other cases of expulsion?

DEPUTY ASSISTANT SECRETARY SIMONS: There have not been other cases of formal expulsion, but some countries, when they have been faced with difficult situations, have chosen to temporarily suspend their issuance of Kimberley licenses and have basically taken themselves out of the running for a while.

So for example, Brazil, for several months (February to September 2006), withdrew its issuances of Kimberley Certificates until it could get its internal processes reestablished in a proper way. Similarly, Ivory Coast ceased the issuance of Kimberley Certificates when the conflict started in that country. So we've had a case -- we have some cases where countries have voluntarily bowed out temporarily of Kimberley until they could fix the problems that were identified.

QUESTION: How has this process affected the people at the very lowest level of this chain, the ones who are -- we see, you know, digging in muddy pits in Africa? Has this affected them in any way, positive or negative?

DEPUTY ASSISTANT SECRETARY SIMONS: Well, certainly. At the height of the problem, Sierra Leone and Liberia were both under UN sanctions and were prohibited by UN Security Council resolutions from exporting any rough diamonds. So they were basically cut completely out of the world market and that obviously had implications. That had to be done because of the conflict nature of the diamonds that were fueling the insurgencies.

But since order has been restored to Sierra Leone and the government has gotten back in control there and has built up its diamond -- its ability to monitor and control the diamond activity in that country, the legitimate exports of Sierra Leone have gone from virtually zero up to more than $140 million last year, so -- and a lot of that money is filtering back into local communities.

So in the case of Sierra Leone, you had a situation where they had gone from virtually no official trade to a substantial restoration of their export potential. Then you have other countries. Liberia is still not allowed to export diamonds because it's under UN sanctions. We are working with the Liberians. We have a U.S. Geological Survey consultant there who's trying to build up the capacity of the Liberian Ministry of Mines so that there would be enough confidence in their ability to run a diamond registration system that they would be taken off UN sanction and be allowed into the Kimberley Process. So we're working to build up the Liberians' capacity.

We've also done this through looking at other capacity-building programs in other countries. But more broadly, you have countries like Namibia and Botswana, where diamonds are produced by large mines and it's similar to the type of benefit that is produced by other extractive industries like oil. It's basically a large industrial capital-intensive mining effort that provides a fair amount of employment, five to 10,000 jobs, but also provides a blanket of government revenue which has allowed Botswana, for instance, to provide primary education to all its citizens and to provide good levels of health care.

So you've had spillover developmental impact in Botswana, Namibia, and South Africa that's been quite significant, but really, the set of challenges are quite different between those countries in southern Africa that have this industrial-type diamond mining capability, very capital-intensive, and then the rural, kind of alluvial mining situations in Sierra Leone, Liberia and the Democratic Republic of Congo which are more difficult in terms of the regulation, the monitoring, the ability to monitor what happens with the diamonds.

And those are where the real challenges are and I think the future of Kimberley Process lies. A lot of what we're doing now focuses on alluvial diamond production. A working group now in Kimberley that's specifically looking -- what can we do inside the Kimberley Process so that Kimberley doesn't have an explicit mandate for development, but what can we do to try to bring more of those development benefits down -- you know, to the grassroots level. So we're working on that issue in Kimberley as well.

QUESTION: The section that you have here in this handout on Ghana from the last plenary meeting you had in November is really quite interesting, about diamonds coming from Cote d’Ivoire into Ghana. Did you discover that because of the statistics? I mean, in other words, Ghana was exporting more diamonds than it was producing or what's --

DEPUTY ASSISTANT SECRETARY SIMONS: We discovered that, in part, because we had gotten reports from the Ivory Coast that some of the diamonds mined in the rebel-controlled areas of the Ivory Coast were making their way out through neighboring countries. We then sent several review missions to the region. We sent a review mission to Ivory Coast through the UN and we sent a Kimberley review mission to Ghana.

And again, this is a good example of where the industry and the governments were concerned that there may be an actual -- a real conflict situation in which some conflict diamonds are passing out through neighboring countries. So we conducted reviews in each of these countries and we brought the results of those reviews to our Gaborone plenary last month. And basically, we spent four days in Gaborone working out an action plan to put pressure on the Government of Ghana to improve its internal control process to ensure that Ivorian diamonds were not passing through Ghana.

And we've given Ghana a 90-day trial period when they are going to be working on this and then we're going to take a look at it and see what the next steps are. But we're very sensitive to inside Kimberley, all the countries are very sensitive to this, you know, even when you've got a very small indication that there may be migration of conflict diamonds, we want to make sure that that gets snuffed out.

QUESTION: So Kufuor's government follow-up was very accommodating when you brought this to their attention?

DEPUTY ASSISTANT SECRETARY SIMONS: The Ghanaian Government? The Ghanaian Government was participating and yes, they agreed to the action plan. We had extensive negotiations there with the Ghanaian Government.

QUESTION: You mentioned Congo, Liberia, and Ivory Coast as sources of conflict diamonds if I'm understanding correctly. Are there other black spots, I mean --

DEPUTY ASSISTANT SECRETARY SIMONS: Well, they're not sources of conflict diamonds now. I think the only -- right now, the one possible area that we detected in Gaborone was Ivory Coast. A lot of those other countries, though -- as I mentioned, there's a distinction between conflict diamonds and illicit diamonds. There could be diamonds that don't originate in conflict areas, but they originate, say, on the border of some African countries and they do cross over into a neighboring country and then they find their way into world trade illicitly.

We're very concerned about those situations too. They don't necessarily involve conflicts per se, but they involve abrogation of the Kimberley rules because a diamond may find its way into legitimate world trade when it's not actually been produced in the country that issues a certificate, so that's a problem. So we need to take a look at some of those.

So we have some illicit diamond situations that are different from a conflict diamond. So for instance, the Congo situation was an illicit diamond situation. It wasn't a conflict situation. It was diamonds passing over from the Democratic Republic of Congo over to the Republic of Congo-Brazzaville and being labeled as Congo-Brazzaville diamonds when, in fact, they were not. So that was the reason that Congo-Brazzaville was expelled from Kimberley. It wasn't because they were involved in conflict diamonds, it was because they were involved in illicit diamond shipments that were in contravention of the Kimberley Process commitments.

QUESTION: And a follow-up to that. Diamonds going from Eastern Congo into Uganda or Rwanda, anything like that?

MS. SAARNIO: No, we haven't had any reports on that, but if you hear of anything let us know.

QUESTION: Are you at all concerned that this new film which will probably have a bigger impact on the public perception about diamonds than any other single source might cause a lot of misperception?

DEPUTY ASSISTANT SECRETARY SIMONS: I think that's the reason that we've gathered you here today. I think that the film was very good, but it does present a picture of what was going on in 1999. So we do think that it's useful to bring the public up to speed on what we've been doing since then. And a lot of hard work has gone on.– There has been, you know, a wholesale reform in the whole way that rough diamonds are traded internationally. And also an extreme consciousness level on the part of the industry and governments to make sure that any report of conflict diamonds is very carefully tracked down and remediation plans put in right away so that this -- so that the image of the diamond industry remains good.

QUESTION: How did this affect the -- how De Beers does business? And just interested, the Kimberley Process, did it affect what they're doing and are they being cooperative?

DEPUTY ASSISTANT SECRETARY SIMONS: I think you need to direct that attention to the De Beers representatives. I wouldn't really want to speak for --

QUESTION: Yes. But you're involved in the Kimberley Process which I imagine -- I mean, De Beers --

DEPUTY ASSISTANT SECRETARY SIMONS: De Beers, along with other --

QUESTION: -- has for many years had direct contact --

MS. SIMONS: -- right. De Beers along with other industry participants are very active, so are the NGOs. So I would say De Beers has been active in the Kimberley Process, but so have other companies, other importers, other producing companies have been very active. Industrial producers have been active. And the NGOs, civil society organizations have been extremely active, too.

QUESTION: But has De Beers done enough? I mean, De Beers, I can't remember the percent of this was like 80 -- it's a huge percentage of the world's -- it's lower now.

DEPUTY ASSISTANT SECRETARY SIMONS: It's reduced. I think De Beers is one of the players along with a number of other players, so -- and you know, we've worked well with, I think all of the players including civil society. I mean, you see sometimes at these Kimberley meetings that sometimes certain members of the civil society will agree with the governments. The industry might be in another camp or at other times the industry may be in the same camp with the civil society and some governments may disagree. So you have different partnerships that develop, depending on the issue. We've had, for example, the civil society get very involved in the statistical issues. We've had the industry getting very involved in some of the classification issues, some of the more technical issues. So I think each group has kind of drawn on their strengths.

QUESTION: I'm sorry, I have to go back to kind of the numbers thing, but I mean, you're talking about, like the purpose here is to show the difference of having us together is to kind of highlight the difference between the situation today and the situation in the late '90s. But is there no way to quantify? Do you know, for example, in the '90s is there some estimates on the amount of conflict diamonds that were being traded?

DEPUTY ASSISTANT SECRETARY SIMONS: Well, there were. There's a range of estimates. And the estimates back then suggested that, depending on whose numbers you agree to, between 4 and 15 percent of the diamonds, rough diamonds worldwide, at the peak might have been conflict diamonds.

QUESTION: And which was?

QUESTION: Like when was this? Late '90s?

DEPUTY ASSISTANT SECRETARY SIMONS: That was in the late '90s. And now we believe that substantially less than 1 percent of the diamonds traded are conflict diamonds.

QUESTION: So how do you quantify that -- where you get your statistics on?

DEPUTY ASSISTANT SECRETARY SIMONS: The countries that are in the Kimberley Process -- which are basically all the major diamond producers and consumers -- provide production and trade data to Kimberley. As a result of the Gaborone plenary those will now be made available on the public website, so you’ll be able to go to the Kimberley Process public website and get those statistics. So we can take a look at who's in Kimberley and, you know, who's out of Kimberley. There are still a few countries that are not members of Kimberley, so they can't can't officially trade diamonds with any Kimberley participants. Some of their diamonds conceivably may be making their way onto the world market and we don't think that that's a significant number and that's why we suggest that it's less than 1 percent.

QUESTION: So what are there problems now then?

DEPUTY ASSISTANT SECRETARY SIMONS: Well, I think the -- we call them challenges. Ghana certainly was -- the Ghana-Ivory Coast issue was the main focus of the Gaborone plenary but again, we think we have an action plan there. I think everyone is hoping that Liberia will be able to demonstrate to the UN that it has the capability of managing its diamond sector and that at some point we'll see them move towards the lifting of UN sanctions and eventual membership in Kimberley. And beyond that we're keeping a vigilant eye around the world and looking again to upgrade through the technical assistance the capabilities particularly of these African countries and alluvial countries -- alluvial mining African producers so that they become less vulnerable to illicit diamond trade. Right now we don't have too many conflicts going on in Africa in the diamond region.

QUESTION: The diamond region.

DEPUTY ASSISTANT SECRETARY SIMONS: But even if you don't have conflicts going on, you could still start with this alluvial -- you could still start with illicit diamond flows. And so we want to make sure that those illicit diamond flows also are reduced to the amount possible.

QUESTION: And -- well, what sort of timeline are you looking at for Liberia and the UN looking at lifting sanctions against them?

MS. SAARNIO: They'll be reviewed again this month. And we'll be looking at that again. The UN will be looking at that in the Sanctions Committee later this month.

QUESTION: Is Russia signatory to the --

DEPUTY ASSISTANT SECRETARY SIMONS: Yes. Russia is very active. They were the chairmen in 2005. They're one of the largest rough diamond producers in the world. They're also involved in polishing and they're very active. I should mention the African countries have had a real leadership role in Kimberley. Botswana was the chair last year. South Africa was the chair for the first two years. The process was initiated in Kimberley, South Africa.

QUESTION: What year, sorry, was that? What year?

DEPUTY ASSISTANT SECRETARY SIMONS: 2002, but it actually went into place in 2003, but I mean, it was signed in 2002. And so the African countries, the alluvial African countries are also very active, Sierra Leone, the Democratic Republic Congo, as well as the industrial diamond producing African countries are active. So it's a good example of multilateral diplomacy. You have European countries, you have Israel, India. It's you know, the big players, Canada, the European Union which still is the big importer. So we have a good international group.

QUESTION: Just one last one. There was a vote on, I think, on Monday. What was that about, the vote at the UN?

MS. SAARNIO: It was a new UN resolution on conflict diamonds.

QUESTION: And in laymen's terms.

MS. SAARNIO: It's the General Assembly reaffirming the importance of controlling conflict diamonds and noting the advances of the Kimberley Process in the past year.

QUESTION: If it's been so successful why was that necessary?

DEPUTY ASSISTANT SECRETARY SIMONS: It's a reaffirmation. But the President of Botswana was present. It shows that for countries like Botswana and some of the major African producers that the health of the diamond industry is very important to their overall economic health. So I think that that shows this is a very, very, very important issue to Africa.

QUESTION: But the diamond industry has always been really secretive. Do you think you're overcoming that, I mean, with the --

DEPUTY ASSISTANT SECRETARY SIMONS: Oh, I think that's been a big change since Kimberley started. I mean, that was a single fundamental change. Kimberley is fundamentally a transparency exercise -- the simple publishing of the statistics.

QUESTION: Which De Beers never did or they -- it was very loosey-goosey.

DEPUTY ASSISTANT SECRETARY SIMONS: I don't know that they did, but we didn't -- we never collected the statistics as a group and were able to basically use statistics as a device to detect irregularities in trade flows. We do that now. So basically we're using the spotlight of the statistics to check out whether or not the system is working. And so that's a real transparency benefit to Kimberley. And certainly you wouldn't have had that kind of a -- you know, you wouldn't have been able to get agreement for that, you know, in the 1990s. People just wouldn't have gone along. So I think it's a -- was part of the major reform effort in the trading of rough diamonds.

QUESTION: But there must have been the existence of all those traders who are running around with, you know, mucky old bags, picking up diamonds and skipping across borders. I can't believe that's all disappeared. And they're nipping into Antwerp or Amsterdam.

DEPUTY ASSISTANT SECRETARY SIMONS: Well, again, I think somebody asked a question at the beginning. There are major costs associated now with participating in that kind of activity. Number one, illegal costs. It's against the law in every country that is a member of Kimberley, so you will suffer legal penalties. And number two, you will make your fellow industry participants as well as NGOs and governments extremely unhappy with you. The downsides are much greater than they were.

QUESTION: I'm sorry. Just one more, what are the penalties if you're caught with naughty diamonds?

DEPUTY ASSISTANT SECRETARY SIMONS: The U.S. --

MS. SAARNIO: It's different in different countries.

DEPUTY ASSISTANT SECRETARY SIMONS: Yeah, each country has a different set.

QUESTION: There isn't one standard?

DEPUTY ASSISTANT SECRETARY SIMONS: No, no.

MS. SAARNIO: It's different in different countries.

DEPUTY ASSISTANT SECRETARY SIMONS: Thank you very much.

Released on December 11, 2006

ENDS


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