Human rights groups have praised De Beers' promise to embargo the conflict diamonds as the only ray of hope on a very bleak landscape, but the embargo still fails to address the simple truth that one of the diamond's historic virtues and liabilities is that it packs a lot of value into a very small package. This is highly transportable wealth. Millions of dollars can be walked across a border to a nonconflict zone in a sock and multimillions can be carried in a small suitcase. Because of the extremely high quality and large size of the diamonds being mined in Angola and Sierra Leone, allowing such a profitable and abundant supply onto the open market would undermine De Beers' control of its cartel.

Unfortunately for the world's policing agencies, the good stones and the bad have been mixed together for so long that it is virtually impossible for all but highly skilled gemologists to tell them apart. Global Witness holds that it is not as difficult as generally believed to distinguish the origin of the raw stones, but even it concedes that once the diamonds are polished, the traces of their geographic origins are erased. Conflict diamonds account for 15 percent of the world's supply, an estimated 50 percent of which ends up in the United States.

De Beers' use of the branding process to guarantee access to guilt-free diamonds comes at a time when the European Union and the U.K. are trying to implement antitrust regulations modeled on those in the U.S. -- where De Beers has already been repeatedly investigated and indicted for its trade in industrial diamonds. In part due to the Department of Justice's inability to win a conviction against De Beers because of the inaccessibility of evidence, Congress passed the 1994 International Antitrust Enforcement Assistance Act -- aimed at opening doors for the sharing of information on antitrust cases with foreign governments. Citing De Beers' anti-competitive practices, the Department of Justice continues to block the company from directly conducting business in the U.S.

De Beers appears to have realized that the writing is on the wall for its cartel, in any case. This July, with the help of American management agency Bain & Company, De Beers announced a radical new business plan that attempts to deal with all of De Beers' problems at once. In addition to the certificates of origin, De Beers announced that the company intends to end the system of stockpiling diamond supplies to control prices. By reducing the assets it has tied up in the stockpile from $3.9 billion to $2.5 billion, it hopes to increase profitability and free up extra cash to spend on the advertising of diamonds as a branded luxury item.

De Beers will use the innocuous sounding Diamond Trading Company as its brand name, identified by its "forevermark" logo. Evidenced by its recent request to meet in Europe with Assistant Attorney General Joel I. Klein of the antitrust division, De Beers may realize the desirability of resolving the antitrust impediments to becoming the Coca-Cola of diamonds, despite the cost. Klein has so far turned down the invitation.

De Beers' competitors have been emboldened by this weakness in De Beers' fagade. In 1999 Tiffany & Co., a sightholder and one of the world's largest buyers of diamonds, made a side deal with Canadian miners for an independent supply of diamonds, betting that the Tiffany & Co. brand name, with its signature pale blue boxes and white ribbons, would be just as sparkling as a De Beers logo. To make matters worse, Australia, which has discovered enormous diamond reserves in its Argyle mines, has begun to sell its stones directly on the world market, bypassing De Beers entirely. Certain Russian mines have also allowed their distribution contracts with De Beers to lapse in an attempt to take their goods straight to market.

In the meantime, De Beers is carrying on the Harry Oppenheimer tradition of mentoring the diamond buyer through major life decisions. Using its Web site, it answers all the objective questions about cut, clarity, color and carats, while paternalistically educating the consumer about the symbolic meaning of diamonds, an appropriate salary-to-expenditure ratio and how to glean the maximum psychological impact from the presentation of the gift. It offers 12 original "Ways to Surprise Her," ranging from having "a cake on display in the window of her favorite bakery with your personal message and topped with the diamond" to the unimaginably ironic: making "the diamond a game piece during a game of Monopoly."

Try it. It worked for Harry Oppenheimer.

Recent Stories