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Cablegate: A Burmese Rock Becomes a Thai Ruby

VZCZCXRO7489
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #6239/01 3550913
ZNR UUUUU ZZH
P 210913Z DEC 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 1183
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHAN/AMEMBASSY ANTANANARIVO PRIORITY 0038
RUEHBJ/AMEMBASSY BEIJING PRIORITY 5344
RUEHRL/AMEMBASSY BERLIN PRIORITY 0926
RUEHBY/AMEMBASSY CANBERRA PRIORITY 8119
RUEHLM/AMEMBASSY COLOMBO PRIORITY 3518
RUEHCP/AMEMBASSY COPENHAGEN PRIORITY 2152
RUEHDR/AMEMBASSY DAR ES SALAAM PRIORITY 0301
RUEHLI/AMEMBASSY LISBON PRIORITY 0171
RUEHLO/AMEMBASSY LONDON PRIORITY 1550
RUEHMD/AMEMBASSY MADRID PRIORITY 0939
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 4928
RUEHNY/AMEMBASSY OSLO PRIORITY 0964
RUEHFR/AMEMBASSY PARIS PRIORITY 0819
RUEHRO/AMEMBASSY ROME PRIORITY 0971
RUEHUL/AMEMBASSY SEOUL PRIORITY 4077
RUEHSM/AMEMBASSY STOCKHOLM PRIORITY 0830
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1037
RUEHKO/AMEMBASSY TOKYO PRIORITY 0211
RUEHWL/AMEMBASSY WELLINGTON PRIORITY 2066
RUEHCN/AMCONSUL CHENGDU PRIORITY 0496
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 4585
RUEHHK/AMCONSUL HONG KONG PRIORITY 4280
RUEHCI/AMCONSUL KOLKATA PRIORITY 0138
RUEHBS/USEU BRUSSELS PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1936
RUCNDT/USMISSION USUN NEW YORK PRIORITY 5267

UNCLAS SECTION 01 OF 05 BANGKOK 006239

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EB,
STATE PASS TO USTR,
TREASURY FOR OASIA,
COMMERCE FOR EAP/MAC/OKSA

E.O. 12958: N/A
TAGS: EMIN ETRD PHUM PREL BM TH
SUBJECT: A BURMESE ROCK BECOMES A THAI RUBY

REF: BANGKOK 5927

BANGKOK 00006239 001.2 OF 005


SUMMARY
--------
1. (SBU) Visits to the major gem trading and polishing
centers in Thailand reveal that most of the value of finished
Burmese gems is added outside of Burma. The Chantaburi Gem
and Jewelry Traders Association says its members get most of
their raw stones from private smugglers in Thai border towns,
not from the Burmese government controlled auctions in
Rangoon. Raw stones at the border sell for as little as 35
cents per carat, while high quality finished rubies can sell
for more than diamonds. There would be major technical
challenges to determining the origin of finished gems.
International gem trader associations have called for members
to stop buying gems from the Burmese government, though there
is no accompanying enforcement mechanism. Sanctions on
Burmese rubies could have a dramatic effect on Thai gem
traders and craftsmen. End summary.

2. (SBU) On December 12, econoff traveled to Chantaburi, a
city in southeastern Thailand that is a world-renowned center
for cutting and polishing colored gemstones. While in
Chantaburi, econoff met with Adisak Thawornviriyanan,
President of the Chantaburi Gem and Jewelry Traders
Association (CGJTA), Phuket Khunprapakorn, Secretary General
of CGJTA, Somwang Kanyapreedakul, Secretary of the CGJTA, and
several additional members of the board of directors of
CGJTA. The CGJTA's perspective was largely similar to that
of Bangkok-based Thai Gem and Jewelry Traders Association,
reported reftel.

3. (U) Econoff later traveled to Mae Sai, the Thai border
town that is a major source of Burmese rubies for the
Chantaburi traders and separated from Burma by a shallow
river that even shortly after the rainy season is only about
20 feet wide.

FROM MOGOK TO CHANTABURI VIA MAE SAI
------------------------------------
4. (SBU) According to CGJTA, rubies enter Thailand from Burma
via three means:

--Thai dealers purchasing from Myanmar Gem Enterprises (MGE)
directly at the auction in Rangoon that is usually held at
least twice a year. (Note. The GOB recently announced that
they plan to hold another auction in January 2008. End
note.)

--Thai dealers purchasing directly from individuals in Burma
in places like Mandalay. These transactions are taxed by the
GOB but, CGJTA says, traders usually lowball the declared
value to avoid paying much tax.

--Small Burmese traders coming to Thailand to sell rough
rubies to Thai dealers via the border towns of Mae Sai and

BANGKOK 00006239 002.2 OF 005


Mae Sot. Rubies entering by this means are essentially
smuggled, evading GOB taxes. The border town dealers in turn
sell the rough rubies to Chantaburi traders, who then arrange
for cutting and polishing before selling them onward to the
large Bangkok dealers who market them overseas. According to
CGJTA, Mae Sai is a much bigger source than Mae Sot.

5. (SBU) CGJTA estimates that the first and second means
account for about 20 percent each. The third means makes up
the remaining 60 percent. According to CGJTA, the declared
value of rubies at the recent auction in Rangoon was
approximately THB 100 million (about USD 3 million).
Therefore, with the 10 percent tax assessed by the GOB, the
ruby portion of the auction generated approximately USD
300,000 in direct revenue for the GOB. The CGJTA also said
that the real money for the GOB at the auction comes from
jade sold to China.

6. (SBU) In the past, according to CGJTA, up to 90 percent of
the rubies in Chantaburi came from Burma. Over the past four
or five years, the volume of rubies from Africa has increased
and now accounts for 20-30 percent of the volume in
Chantaburi. World-wide, CGJTA estimates, Burmese rubies
account for about 40 percent of the volume of the ruby trade
but, as they are generally of higher quality, perhaps 70
percent of the value.

7. (SBU) CGJTA said it is difficult to determine the origin
of a ruby, especially after it is a finished product. Rubies
from Vietnam and Burma, for example, look very similar.
According to CGJTA, the cost of an accurate test of origin
can be greater than the cost of the ruby itself. CGTJA
explained that this would not entail a chemical test but
rather a trained gemologist examining the stone under a
microscope and comparing it with an extensive gem lab
database. This is not something that is feasible to do at a
border crossing, unless customs agents were trained
gemologists with the right equipment and database to work
from. If laws are passed against Burmese rubies, CGJTA
officials said they would not be surprised if the number of
"Vietnamese" rubies increases in world markets.

8. (U) Along Mae Sai's Soi Ploi (gemstone alley) there were
several simple wooden tables set up on the street with huge
piles of rough rubies available for sale. Dealers said they
sell most of their rubies to Chantaburi traders and estimate
that every day THB 10 million (about USD 300,000) changes
hands on Soi Ploi.

9. (SBU) One streetside dealer said he believes the auction
in Rangoon accounts for a much higher volume than the border
trade, contradicting the view of the CGJTA. He said the
Chantaburi traders go to the Rangoon auction, where rubies
are sold in big lots. Only big players can afford to buy big
lots, which are sold for millions of baht. The auction
separates high, medium, and low quality gems and then

BANGKOK 00006239 003.2 OF 005


assembles them into lots. He also implied that the Burmese
military skims off the higher quality rubies for the auction,
leaving the smaller ones to make their way across the border.


10. (SBU) Soi Ploi dealers said that Burmese come to sell in
Mae Sai every day, but the Soi Ploi dealers do not generally
buy direct from the Burmese, implying another layer of
middlemen.

11. (SBU) The visit to Mae Sai also shed some light on why
gems, rather than jade, are smuggled by small traders. At a
jewelry store econoff visited in Mae Sai there was a small
cutting and polishing operation upstairs. The store manager,
a Burmese who commutes every day from Tachilek across the
border, showed econoff rough jade, which looks like an
ordinary dull brown boulder. When asked how one can
distinguish the jade from an ordinary rock, the manager
explained that jade is much heavier and when chiseled down to
the smooth green, the stone is cool to the touch, even in
sweltering Thailand. Upon attempting to lift a small, about
18-inch long, rough jade stone, it was clear why it would be
so difficult to smuggle across the river in your pocket.

EFFECTS OF A BAN ON THE RUBY TRADE
----------------------------------

12. (SBU) The CGJTA is following closely the U.S. legislation
banning the importation of Burmese gemstones and believes
that if passed it would especially affect two groups:
Burmese ruby mine workers and Thai gem craftsmen. CGJTA
estimates there are 3000-4000 Thai working in Chantaburi
whose livelihood is directly related to Burmese rubies.

13. (SBU) CGJTA said that if the U.S. and the EU ban
importation of Burmese rubies, China and India will step in
to buy. However, they added, the Chinese and Indians tend to
buy the cheaper, lower quality rubies. The high value, high
margin business is with the U.S. and the EU.

14. (SBU) Contrary to what we had been told elsewhere, one
Mae Sai dealer said that African gemstones are higher quality
than Vietnamese, primarily because the Vietnamese rubies are
softer and can break during the heating process.

THE VALUE-ADDED CHAIN: A BURMESE ROCK BECOMES A THAI RUBY
--------------------------------------------- -----

15. (SBU) CGJTA emphasized that most of the value of
Burma-origin rubies is added by Thai craftsmen who cook, cut,
and polish the stones. CGJTA showed econoff piles of rubies
at different stages of production to demonstrate the value
added in Chantaburi. The rubies come into Chantaburi as
rough stones that look like a pile of dark purple-brown
pebbles that the average person would never guess has any
value. Once cleaned and cooked, the rubies take on a

BANGKOK 00006239 004.2 OF 005


brighter red hue. The rubies are then polished, cut, and
polished again until they take on the dazzling "pigeon's
blood" red for which they are famous. A 3 carat rough stone
would generally end up as a 0.5 carat finished product due to
the cutting and polishing process.

16. (SBU) Econoff observed polishing machines owned and
operated by small producers. The machines were small and
simple, indicating that the value-added in Burmese rubies by
Thai craftsmen is skilled labor, not capital, intensive.

17. (SBU) On Soi Ploi in Mae Sai, econoff witnessed a large
plastic bag of rough Burmese rubies trade hands for only THB
12 (35 cents) per carat. Soi Ploi dealers said the price can
range from as little as THB 2 (6 cents) to THB 50 (USD 1.49)
per carat, depending on size and quality, with the occasional
sack of large high quality rubies going for as much as THB
5000 (USD 150) per carat. After cutting and polishing and
with wholesale and retail mark-ups, high-quality finished
rubies often sell for a price per carat equal to or greater
than diamonds.

ASSOCIATION BOYCOTT OF GEMS FROM OFFICIAL BURMESE SOURCES
--------------------------------------------- -----

18. (U) CGJTA gave econoff copy of the statement from CIBJO
(World Jewelry Confederation), of which they are a member.
Begin text of statement.

CIBJO Statement on Burma and trading in Burmese gemstones.

CIBJO deplores the violent repression of individuals, human
rights and democracy in Burma and fully supports the UN Human
Rights Council Resolution S-5/1: "Situation of Human Rights
in Myanmar" of October 2nd 2007. CIBJO also fully supports
the UN Security Council statement of October 11th 2007.

CIBJO reminds its members of their commitments to abiding
with the CIBJO Code of Ethics, with current particular regard
to the situation in Burma.

CIBJO advises its member associations to urge their members
to seek information from their suppliers as to whether
gemstones have originated from Burma and to consider
seriously refraining from purchasing any Burmese gemstones
until such time as the United Nations indicate that the
process of democratic reform has started in Burma.

CIBJO further advises its member associations to urge their
members not to purchase gemstones directly from the Myanmar
Junta Government.

CIBJO President's Council
October 17th 2007
Toronto, Canada. End text of statement.


BANGKOK 00006239 005.2 OF 005


The CIBJO has no mechanism to enforce compliance with this
"advice" however.

19. (SBU) CGJTA officials also made the point that a
Kimberley Process for "blood rubies" may not be practical
because unlike diamonds, ruby mines are very small and
dispersed, so it is difficult to certify that the rubies are
not from a government source.

COMMENT
-------

20. (SBU) Thai gem associations have a clear self-interest in
their description of how the industry operates. Moreover,
similar information from street peddlers in Mae Sai is
anecdotal at best. Nevertheless, estimates that over 90
percent of the retail value of Burmese rubies is added
outside of Burma seem credible based on our observations.
Therefore it seems likely that the greatest financial impact
of sanctions on the ruby trade would be on private Thai gem
craftsmen and traders in Thailand.
BOYCE

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