Diamonds Are Forever

URL:        	http://is.gd/NObvhE
SOURCE:     	Covert Action Quarterly, no. 69
DATE:       	Spring/Summer 2000
TITLE:      	Diamonds Are Forever
AUTHOR:     	Ellen Ray
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Until Mobutu's greed had sucked the life out of Congo, foreign investors in Zaire raked in profits. When Mobutu kept too much for himself—and became an embarrassment—the U.S. was ready to see him overthrown. And if the only likely means were the Rwandans and the Ugandans, via Kabila, that was okay too. Indeed, as the rebels moved west, taking over the Katangese capital, Lubumbashi, the mining companies based in the province simply stopped making payments to Kinshasa and made them to the rebels in Lubumbashi.[1]

Even before Kabila reached Kinshasa, in April 1997, reports surfaced that a small mining company had signed a major deal with him. America Mineral Fields, set up two years before by the former De Beers manager in Zaire, Jean-Raymond Boulle, signed contracts with the rebels totaling approximately $1 billion.[2] In a futile gesture, the Zairean government purported to revoke the deal,[3] but, a month later, Mobutu's government no longer existed.

Shortly after the Kabila government was installed, the Bechtel Company issued a detailed "master plan" outlining its vision of the development path Congo should take, "An Approach to National Development, Democratic Republic of Congo." While the report was somewhat rambling in its all-encompassing nature, the introduction made clear (not surprising for Bechtel) it looked to "a market economy," assurances "to the international financial community," and motivation for "private foreign investors." The first principle on which Bechtel's strategy rested was "the exploitation of natural resources."[4]

But some time after Kabila entered Kinshasa, doubts about his pliability surfaced. Both the Rwandan and the Ugandan regimes were seen by many commercial interests as far more reliable business partners. But neither country has much in the way of valuable mineral resources. To their immediate east, however, lies one of the greatest mineral fortunes in the world.[5]

It is not difficult to understand, then, why the international mining companies, who had, under Mobutu, governed the area like individual protectorates, were more than willing for the invasion of 1998 to pass through the eastern Congo and clear the region of such DRC troops and officials as were there. Commerce, free of DRC taxes, was to resume its flow, not through Mobutu's hands, as in the old days, but through Rwanda and Uganda. "The eastern part of the country is treated by Uganda, and even more by Rwanda, as a hinterland with mining resources there for the taking."[6]

An examination of the scope of operations, and the corporate interests held not just by western multinationals, but by Rwandan, Ugandan, and other African politicians as well, is revealing.

Both Rwandan strongman Paul Kagame and his surrogate in eastern Congo, James Kabarebe, the Rwandan who was dismissed by Kabila as army chief of staff and then, a few days later, led the invasion against him, have interests in at least three or four of the companies doing business in the area.[7] A number of companies in the east have been accused of "funding military operations in exchange for lucrative contracts," including the Australian company Russell Resources, headed by a former Israeli general; Krall, an Austrian firm; the Canadian Banro American Resources; and American Barrick Gold Corporation, of which former President George Bush is a shareholder.[8]

The rebel groups are hardly subtle. Jean-Pierre Bemba's MLC "is reportedly levying a 20 percent tax on all deals...."[9] And the deals are not limited to minerals. Bemba, who was, along with his father, a wealthy businessman under Mobutu, is selling coffee to the Geneva-based InterCafCo, which has no qualms about the arrangement. "We are absolutely sure that the government army will never come back to the north. We have done our research and we are certain that Kabila is finished. That's why we are dealing with Mr. Bemba."[10] Investors from Belgium, Israel, Lebanon, and South Africa, among others, move in and out of Bemba's headquarters, "unperturbed about doing business with a rebel group." A Belgian pharmaceutical company is trading medicines for diamonds.[11]

The syndrome is a natural one: "As struggles over political succession proliferate, corporations face the choice of sitting passively by as war consumes investment, or quietly backing one of the factions. The natural symbiosis between warring factions eager for financial support and corporations eager to protect their investments will inevitably lead to cooperation between the two...."[12]

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The Diamond Wars
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The most critical commodity, for numerous and convoluted reasons, are diamonds, a major resource of Congo, Angola, Namibia, and South Africa. For one thing, the market has long been dominated by De Beers, which had a monopoly agreement with Mobutu, and still controls 70 percent of the world diamond market.[13] All of these countries have dreamed of breaking the grip of De Beers on the world market. They have been helped by the adverse publicity De Beers received for a long history of buying diamonds from UNITA, providing the group with some of the funding necessary to wage its 25-year war against the Angolan government. The U.N. estimated that, from 1992 to 1998, UNITA had earned up to $4 billion from its illegal diamond sales. In 1998, the U.N. added diamonds to its list of sanctions on UNITA, but the origin of raw diamonds pouring into the European cutting centers is extremely difficult to prove. In February 2000, De Beers announced that it would no longer sell gems from rebel-held territories, but within days was charged with failure to live up to its promise.[14]

Because "South African officials have substantial business ties with UNITA,"[15] and because of De Beers's preeminent role in the South African economy, Pretoria's public support for Luanda has been lukewarm at best, and it is widely reported to give "quiet support" to UNITA.[16] Still, South Africa wants more income from De Beers and has raised relevant duties and fees; De Beers's announcement was seen by some as a ploy to put pressure on South Africa to back off. Congo, on the other hand, wants to break De Beers's monopoly, a difficult task.[17]

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The Profit Motive
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The role played by the sale of natural resources in the region—its only real "cash crop"—is a function of the overriding influence of the profit motive on western, particularly U.S., policy.

The political program of President Laurent Kabila's government states, "The Congo for the Congolese, the wealth of the Congo for the Congolese; all decisions relating to the Congo to be taken by the Congolese."[18] (This is encouraging, if true.) In the West, however, such sentiments don't compute. "The American government is prepared to engage Africa as a serious partner which has a lot of commercial potential from which U.S. businesses can profit."[19] "U.S. investors see Africa as a promising frontier, one where returns on investments have so far averaged, as President Clinton noted on his trip, an impressive 35 percent."[20] The Clinton administration definitively supports "commercial diplomacy," often called "trade, not aid."[21]

The final outcome of the battle over the profits of Congo's natural resources remains problematic. It is likely to be some time, if ever, before the Congo government and people receive any gain from the minerals now under rebel-held ground.


Notes:
1. Deirdre Griswold, "Foreign Investors Welcome Zaire Rebels," Workers World (New York), Apr. 24, 1997.

2. The company reportedly had a capitalization of about $37 million, "but has promised to raise the $1 billion necessary to begin development of its two Zaire mines." Christopher Ruddy, "Arkansas Link to Zaire Rebel," Pittsburgh Tribune Review, May 20, 1997. The company, traded on the Toronto Stock Exchange, but headquartered in President Clinton's home town, Hope, Arkansas, where its chief executive, Mike McMurrough, is based. Several other companies, including De Beers, announced at the same time they were also considering deals with Kabila. Peter Alan Harper, "Soldiers of Fortune: Multinationals Say It's Time to Invest in Zaire," AP, Apr. 19, 1997. And see, "David Takes on Goliath of Diamonds," Business Day (Johannesburg), July 4, 1997.

3. John Cavill, "Huge Fortunes at Stake in Zaire," Business Times (Rosebank, South Africa), April 20, 1997.

4. See Colette Braeckman, "Pragmatic Rule in Congo-Kinshasa," Le Monde Diplomatique, Dec. 1997. Robert S. Stewart, who was chairman of the board of American Mineral Fields, was also a consultant to Bechtel and participated in developing the "master plan." Marek Enterprise, Inc., Corporate Profile, Herndon, Va. Stewart is on the board of Marek Enterprise, a business analysis service run by Edward S. Marek, a former Air Force intelligence officer who worked for NSA, DIA, and the German Ministry of Defense. Marek publishes extensive analyses of Africa, with the Southern African Center for American Studies.

5. The eastern provinces of Congo contain 80% of the world's reserves of cobalt, essential to defense and other high-tech production. They also contain huge reserves of gold, diamonds, and copper. Raymond Bonner, "`All Money,' Mining Firms Say of Congo," International Herald Tribune, June 18, 1997. As a western mining executive said to Bonner, sweeping his hand over a geological map of Congo, "This is all money."

6. Colette Braeckman, "Carve-Up in the Congo," Le Monde Diplomatique, Oct. 1999.

7. Littlerock Mining Limited, Tenfields Holdings Ltd., Collier Ventures Ltd., and Sapora Mining Ltd., as well as an export-import company, Intermarket. Ibid.

8. Ibid.

9. "Bemba, Wamba, Rwanda Are All Setting Up Shop in the Congo as the Concrete of Partition Continues to Set," Africa Network News, Dec. 15, 1999.

10. Ibid.

11. Rosalind Russell, "Congo Rebels Woo Foreigners With Diamonds and Coffee," Reuters, Dec. 14, 1999.

12. "Africa: More of the Same, and Worse," Global Intelligence Update, Stratfor, Dec. 31, 1999.

13. "Africa's Diamond War," Stratfor Special Report, Nov. 13, 1999.

14. Ben Hirschler, "De Beers to Guarantee ‘Rebel-free' Diamonds," Reuters, Feb. 29, 2000; Bill Rosato, "UNITA Ignoring Sanctions to Finance War—U.K. Group," Reuters, Mar. 8, 2000.

15. "Angolan Rebels May Target U.S. Interests in New Offensive," Global Intelligence Update 2000, Stratfor.

16. Op. cit., n. 13.

17. Op. cit., n. 5.

18. "Hands Off the Democratic Republic of Congo," Lalkar (U.K.), Sep.-Oct. 1998. The statement was made after visits to China, Libya, and Cuba, where, Kabila said, he was very impressed by their economic independence.

19. "United States-African Relations: Between ‘Free' Trade and Hope," South Center paper, 1999.

20. Frank Smyth, "A New Game: The Clinton Administration on Africa," World Policy Journal, Summer 1998.

21. Philippe Leymarie, "Washington Sets Out to Conquer ‘Virgin Territory,' " Le Monde Diplomatique, Mar. 1998.