Sue Saarnio: Conflict Diamonds Press Briefing

Conflict Diamonds

Sue Saarnio, Special Advisor for Conflict Diamonds; Cecilia Gardner, General
Counsel, U.S. Kimberley Process Authority
Foreign Press Center Briefing
Washington, DC; New York, New York
December 12, 2006

2:00 P.M. EST

MODERATOR: Well, good afternoon, everyone. Welcome to the Foreign Press Center. Today's briefing will address the issue of conflict diamonds and how the United States and 70 other countries around the world are working via the Kimberley Process to monitor and control trade in rough diamonds.

We are pleased to have two speakers today. In New York, we have Cecilia Gardner, General Counsel for the U.S. Kimberley Process Authority and in Washington, Sue Saarnio, U.S. Department of State Special Advisor for Conflict Diamonds. After Ms. Gardner and Ms. Saarnio have spoken, we'll open it up to your questions both here in New York and Washington. We ask you to please hold your questions until both speakers have given their remarks and then ask you to give your name and affiliation and to whom your question is directed. We'll begin the program here in New York. As I noted, Cecilia Gardner is General Counsel for the U.S. Kimberley Process Authority. In addition, she is President and CEO and General Counsel of the Jewelers Vigilance Committee and General Counsel to the World Diamond Council. We are delighted to welcome here to the Foreign Press Center.

Ms. Gardner, thank you for joining us, and the floor is yours.

MS. GARDNER: Good afternoon. My name is Cecilia Gardner and I am General Counsel from the World Diamond Council. The World Diamond Council is the industry organization that has participated in the Kimberley Process, representing the industry's contribution to the formulation of the Kimberley Process as well as the industry's contribution for resources and expertise in the implementation of the Kimberley Process. I also wear a couple of other hats. Here in the United States, I am the Director of the mechanism that -- in conjunction with the United States Government -- issues the Kimberley Process certificates used here in the United States for the shipment of rough diamonds across international borders.

I think what I should do is start by explaining what the Kimberley Process is. The Kimberley Process is an international trade mechanism to control the movement of rough diamonds across international borders. It was created to restrict and end the trade in conflict diamonds. Conflict diamonds are those diamonds used by rebel forces to support civil wars against legitimately placed governments. The whole process began based on two civil wars: one in Angola and one in Sierra Leone. The diamonds that were being extracted from the alluvial resources in those two countries were being used to fund, through arms sales across the border into Liberia and other places, the horrific violence perpetrated against civilian populations in those two countries.

In view of the attention the world was paying to those horrible events in Angola and in Sierra Leone in the late '90s the diamond producing nations of the world formulated the Kimberley Process and the industry, of course, became very involved in lending our expertise and our experience in how the diamond trade works to the governments who were formulating this mechanism to control the trade in conflict diamonds across international borders.

The process was actually -- the system that we designed was actually formulated, from what I'm told, in foreign trade agreement circles in an enormously rapid manner. We had the full details of the agreement in just two years and we were able to implement it starting in January of 2003. The system we designed at the time, again, controls the movement of rough diamonds across international borders. It requires a provable system of internal controls within countries that control the movement of the diamonds from the mining fields to the point of first export. And then when they are exported they must be packaged in tamper resistance parcel and be accompanied by an individually issued serialized -- meaning a unique serial number -- forgery resistant, Kimberley Process certificate validated by the government, which asserts that the diamonds carried in that parcel are from the country that is exporting them. And then they also assert that they are trading consistent with the requirements of the Kimberley Process and any UN provision.

The Kimberley Process also required the participating governments, and by now there are 72 of them, to pass enforcing legislation within each country. In the United States the enforcing legislation is called the Clean Diamond Trade Act and this provides for all of the requirements at import and export. Import you will -- the Customs Department is required to check for Kimberley Process certificates. And on export the agency that's involved in exports in the United States is required to monitor outgoing rough diamonds that they are accompanied by legitimately issued Kimberley Process certificates.

I know I've confused you all with all of this. It's a lawyer's curse to love to get into the nitty-gritty detail of these things. I should also mention that the industry itself undertook a further system of assurance so that retail sellers could be positioned to assure their consuming end users that the diamonds they're selling were traded consistent with the Kimberley Process. The industry undertook a system of warranties, which means that once the diamond is cut and polished, it would still be covered by a warranty as it moved its way to a retail store to assure the purchaser of the diamond, even in the manufacturer wholesaler relationship that the diamonds were traded consistently with the Kimberley Process. And that warranty would follow the diamonds right down to the retail store. The retail store, of course, would insist that all of their inventory be accompanied by this warranty, this assurance, that the diamonds were covered and were traded with consistent with the Kimberley Process and UN sanctioning provisions and any other regulations pertaining to the international trade of diamonds. And then the retailer would be able to assure a consumer who comes into to shop for diamonds that all of their diamonds have been traded consistently with the Kimberley Process. Got all that? (Laughter.)

Now that I've said all that, I can tell you this. That in the three years that the Kimberley Process has been in effect, peace has broken out in both Angola and in Sierra Leone. They have not solved all of their issues in terms of their own internal governments. That is the responsibility of the governments of Angola and Sierra Leone. However, their revenues from their diamond trade and their official production and export have burgeoned and, of course, it is the responsibility of the governments of both Angola and Sierra Leone to ensure that that economic benefit is used for the good of the populations of both Sierra Leone and Angola. And worldwide, we could say that just about all of the diamonds are covered under the Kimberley Process, the point of which is to make the legitimate stream of commerce very attractive to people who trade diamonds. We are legitimizing the legitimate stream of commerce.

The Kimberley Process is not an anti-smuggling device. We have no policemen and we have no army. We do have laws which govern the movement of rough diamonds across international borders. There are already in place strenuous customs laws in each nationality which address the problem of smuggling and we urge governments to implement those laws very vigorously at their borders. We do believe that the Kimberley Process and the system of warranties have worked. These two systems have worked effectively to control the creation of and the sale of conflict diamonds because we have shown a light on this industry. We have used these mechanisms to make sure that our industry members operate legitimately and within the four corners of the law.

There are always room for improvements in mechanisms and systems like this. We will work -- we have been working hard over the past three years to look at what we invented and to improve it to make sure it works very well. It is in, of course, the interest of the diamond industry to ensure the integrity of our supply. It's the bread and butter of the industry and they are as committed to the end of the trade in conflict diamonds as anyone else on the face of the earth. We will continue to work with our partners and governments and in civil society to ensure that the Kimberley Process will be as good as it can be. And the system already contemplates a system of peer monitoring to make sure that each government is implementing as they promise. These are governments monitoring other governments around the world to make sure that their systems are in place and that they are integral and that they are credible and that they are working to stem the tide of conflict diamonds.

When there are instances of noncompliance with allegations of noncompliance that have been substantiated, the Kimberley Process has a mechanism in place to go and address those instances of noncompliance. Right now we have review mechanisms going on in Ghana and in Venezuela. I think I'll end there. And now it's time for Sue Saarnio who's my colleague in all of this to report the State Department's activities.

MODERATOR: Thanks very much, Ms. Gardner. I'd like to introduce just briefly Sue Saarnio. She is the U.S. Advisor on the issue of Conflict Diamonds which is in the Bureau of Economic and Business Affairs here at the State Department. As such, Ms. Saarnio is the U.S. representative to the Kimberley Process. She's also a career diplomat, having been with the Foreign Service since 1985. And after we have Ms. Saarnio speak, we'll have an opportunity for questions both here and in New York, so without further ado, Ms. Saarnio.

MS. SAARNIO: Thank you. Thanks, Cecilia, for leading that off with such great information. Cecilia and I, as she said, we've worked very hard since the 1990s when the problems arose in Africa and we became aware of the fact that diamonds were fueling conflict. The governments and the civil society and the diamond industry worked very closely to try to set up this process. And we think it has really fundamentally changed the way the diamond industry operates since the era of the 1990s when there were the brutal atrocities committed and there were rebel movements funded by the diamonds.

I think we're proud to say that we've been working very hard on this system. Cecilia's described it, but it's not a stagnant system; it's a dynamic system that changes and we've continued to improve. We met as a body of 71 countries -- 72 countries as Cecilia mentioned -- in Botswana in November and we took some major steps in Botswana to even tighten the controls that we have to make it even stronger. We made some major decisions to open the statistics that we collect to the world's spotlight. We're going to be posting those on the Kimberley Process website to allow people to scrutinize them to make sure that the trade data, the production data, is honest and it's one way we have had in the past to detect anomalies in trade and to look for potential problems. We also have a very vigorous system of peer reviews.

Kimberley Process countries composed of teams go out to each of the countries and review them. The U.S. was reviewed last year. Every country that's a participant is subject to reviews and we go out and we look at how those countries control the diamond trade in their area of responsibility. The Kimberley Process also has a -- has reacted quickly, we think, when problems have been detected. We were the first to draw the world's attention to problems in Cote d'Ivoire in 2005. We detected signs of mining in the rebel controlled territories of Cote d'Ivoire and the Kimberley Process made a major statement. And all the countries involved agreed to a major action plan to deal with the problem of diamonds that are coming from those areas and we continue to work with other countries, in particular, in Ghana and Venezuela as Cecilia mentioned. So we're quite proud of the work that's been done and we're glad that the issue of conflict diamonds is getting some attention again. There have been people sort in governments and the diamond industry have been working away at the system for the last few years and it hasn't gotten a lot of attention so we're glad to see that this a chance to focus the spotlight on it.

So I think at this point we could take questions. Cecilia and I can divide them up.

MODERATOR: Certainly. Very good. Maybe if we have the first question from Washington. We have a microphone right here. If you'd like to just ask the question via this mike and then New York can have an opportunity to ask some of the questions as well. If you could please identify yourself.

QUESTION: Laura Iiyama, I'm with Feature Story News. And I guess this is for Ms. Gardner. I've talked with some advocacy groups that are saying that there's problems with the Kimberley Process, that one of the issues that they would like to see addressed is have perhaps an independent group that would certify that the diamonds, indeed, are coming from a conflict-free area. They're saying that it's sort of self-certification at this point and they're a little skeptical that it's that effective and they're hoping that perhaps there would be some sort of a third party or some independent group that would help monitor the process. Would you be open to that idea or is that too costly?

MS. GARDNER: The cost is not the issue. It's whether such a mechanism is necessary, given what's already being done. The governments themselves are monitoring the certification process and they are cross-checked in terms of Kimberley Process certificates out and Kimberley Process certificates received. And if there are any anomalies, there are several working groups that work all throughout the year to detect any differences in reporting. Reporting is done on a quarterly basis and then, of course, reviewed annually. And of course every participant receives a review visit from another government that monitors their implementation and compliance with the requirements of the minimum standards of the Kimberley Process.

So it is the governments themselves who are monitoring each other. This is not self-serving. This is not in any way influenced other than by one government -- a team of representatives from governments looking at government implementation across a border -- not their own government -- to determine whether or not the minimum standards are working, to raise with other governments areas that they feel could be improved, to raise with governments areas that they think are working very well. And then, of course, there's all this reporting over the course of the year, quarterly and then annually, all of which is analyzed by large groups of committees within the Kimberley Process. So I'm not sure what added-value a third party would bring to this since the monitoring of the implementation of the Kimberley Process is already very independent, very rigorous and is totally transparent. These reports are shared among all of the governments that are participating in the Kimberley Process.

So I think what those advocacy groups may be urging is something that already does exist and they are not aware of the nitty-gritty details of the Kimberley Process. So I don't mean to say that they aren't doing their homework, but they may not be fully aware of the rigorous peer review and monitoring already going on within the Kimberley Process.

QUESTION: Based on what you're saying, are you in the opinion now that the Kimberley Process is perfect?

MS. GARDNER: I've worked as a lawyer for 30 years. I know I look very young and I started when I was 12, but there is no such thing in the human history of endeavors that is perfect, however we can't let the perfect be the enemy of the good. The Kimberley Process is a mechanism that is effectively restricting the trade in conflict diamonds. At the height of the trade in conflict diamonds, we were looking at perhaps 10 percent conflict diamonds getting into the stream of commerce, because you understand that most diamonds are produced in a very different way than they're produced in places like Angola and Sierra Leone from riverbeds.

Most diamonds are produced through mechanized mining by digging holes in the ground and these are places where you can sense around and bring modern technology to bear. In riverbeds you can't and that was where the conflict diamonds were coming from. That number of conflict diamonds has been reduced down to next to nothing. Given the effectiveness of the Kimberley Process, can it be made better? Absolutely. And we will continue as we have for the past five years to make this system work, make it better all the time.

There's lots of information about the history of the Kimberley Process and the history of how diamonds are produced in this world on a website that I would like to recommend to you that the Word Diamond Council has recently -- well, this summer published -- and that is diamondfacts.org. All of the technical information that I seem to be so fond of, as well as the history of the Kimberley Process and the system of warrantees, all of that is explained in great detail on this website diamondfacts.org.

QUESTION: Thank you. I'm Oyiza Adaba with African Independent Television. My question is twofold. First, the trade in arms seems to be linked to the whole issue of conflict diamonds. Are you -- is there a regulatory body such as yours, in that -- you know, as far as that goes and if there is, are you working with them to, you know, control that whole problem in especially in Africa? That's one. And my second question is you've talked of stringent repercussions. What are we talking about here when it comes to the exact punishment for governments that fail to comply with the process?

MS. GARDNER: I'll answer your second question first. The government -- the consequences for governments for noncompliance is that they're no longer able to export or import rough diamonds. That's it. I mean, the fact of being either de-listed or booted out of the Kimberly Process, or even suspending your use of Kimberly Process certificates, essentially ends the trade in conflict diamonds in those countries.

QUESTION: Is it just suspended, or…

MS. GARDNER: It depends on the circumstances. Some countries have been de-listed, like Liberia, and other countries have suspended their trade, such as Ivory Coast. It depends on the circumstances, of course.

Now, your first question had to do with the guns. I must say that tracking guns is a whole lot easier than tracking diamonds because guns have serial numbers on them and you can identify the manufacturer and where they come from. Now, the trade in arms in Africa is not strictly linked to diamonds. I would beg to differ with you there. However, it is clear that Africa is awash with arms. Clearly, getting a gun in Africa is a simple, simple matter. The diamonds don't kill people; the guns do. And I would urge governments to focus on small arms trade in Africa. I'm not aware of any mechanism such as the Kimberly Process which addresses the trade in small arms across international borders. I'm simply not aware of that. Maybe Sue can help us there.

MS. SAARNIO: I'm not aware of that.

MODERATOR: Okay, I think we have another question here from Washington and if you could please identify yourself.

QUESTION: Sure. It's David Coetzee at Southscan. A couple of questions. The first is you mentioned representing the diamond industry. Who exactly is the diamond industry? How far downstream does it go, to the diamond cutting people in India and Antwerp? And does it include any Chinese institutions or organizations? That's the first thing.

The second, I have -- I'm not sure who for -- a question about how far down in the process of the production and the mining of the stones this goes. Artisan mining is quite a -- to put it euphemistically -- a competitive process on the ground in, for instance, Angola and other parts of Africa, and I wonder whether the conditions of artisan miners are being brought on the Kimberly Process table and how this is being approached.

And finally, I have a question about --

MS. GARDNER: I'll forget your question.

QUESTION: Okay.

MS. GARDNER: I'm going to lose track.

QUESTION: That's all right. I'll jump in later then. Thanks.

MS. GARDNER: Sue, do you want to take the intersection between the Kimberly Process and development initiatives in Africa? Do you want to take that question?

MS. SAARNIO: Sure. Yeah, I think -- well, for one thing, we do know that diamonds have been a source of economic development for southern African countries. I'm sure you're aware of southern Africa, Botswana, Namibia have benefited greatly from diamond sales and we'd hate to see any call for, you know, scrutiny of the diamond industry to affect those countries because they really have done a lot to -- diamond revenues have done a lot for their economic development.

When you get into the alluvial producing countries, I think you're right; the Kimberly Process has really determined over the last three years that we need to look specifically at the specific issues of alluvial producing countries. And in Botswana in November, we actually created a full-fledged working group on alluvial diamond production and Angola chairs that group. And we've had a subgroup that's worked for the past couple years with -- and the alluvial countries are quite active working at that, looking at specific issues that affect mining in those areas, how they deal with best practices and how to track the diamonds from the mine to the market, and specific issues that they face that are different from the southern African diamond producers.

So we differentiated in the Kimberly Process between the countries that have the deep-shaft mining and the alluvial production, and we realize that that really does affect -- you know, most of those countries, those miners are working in very poor conditions. They're making very little money. And we have been working and -- particularly in Sierra Leone after the war, the U.S. Government set up a diamond program, Integrated Diamond Management Program, that has been helping the miners there set up marketing cooperatives to help them get more money back to the communities where they're mining. Actually, the USAID is quite proud of that program and I think we've spent something over $7 million in the last six years on that program and it's helped those communities actually work together, form cooperatives and give more strength back to the communities where the mining is occurring.

So there is a link between development and how -- you know, getting the money for the -- the fair market value for the money for these communities. And the Kimberly Process, while it's not designed to address those development issues directly, the people that are working on those issues certainly are concerned about that and we follow those issues sort of in parallel with the trade issues.

MS. GARDNER: As far as the industry sector is concerned, our involvement with development issues in Africa are widespread. As far as improving the economic conditions for the diggers in Sierra Leone, for example, there is the Diamond Development Initiative that the industry is participating in to improve the working conditions and the economic realities on the ground in Sierra Leone for the people in the alluvial minefields.

As an industry as a whole, the jewelry industry has been very proactive in providing better conditions for people living in diamond producing nations. Over the past five years we've raised roughly $15 million through a charity called Jewelers for Children. Not all of the money goes to Africa. There are 22 different diamond producing nations in this world, so we're funding programs in Congo, in South Africa and in India as well as programs here in the United States for children with life-threatening diseases.

Now, your question about the makeup of the World Diamond Council, we have members from every sector of the diamond industry. We have many mining interests who are members. We have traders in rough. We have cutters. We have polishers. We have manufacturers of diamond jewelry. We have members who simply deal in loose polished diamonds. We also have members that are retailers who sell diamond jewelry to the consuming public. So the World Diamond Council is made up of every sector in the diamond trade from top to bottom.

China. Do we have members from China? We have a jewelry association from Hong Kong that is a member. I hope that counts. I think it does.

MODERATOR: We have a question from New York.

QUESTION: Anirudh Bhattacharyya from CNBC-TV18, the Indian channel. I see here that India is, of course, one of the major countries when it comes to cutting and polishing diamonds and I see it's one of the vice chairs of the Kimberly Process in 2007.

MS. GARDNER: Yes.

QUESTION: What exactly do you expect from India and how proactive has the Indian Government been?

MS. GARDNER: We expect miracles from India -- (laughter) -- miracles. We are thrilled that India has taken on the responsibility to be the Vice Chair in 2007, which implies -- and I don't want to prejudge this -- that they will be the chair in 2008. Obviously, the diamond sector in India is significantly important to the jewelry industry and continues to grow as the years go by. We would hope that the diamond industry in India, as well as the retail sector, support the Kimberley Process and become an effective chair of the Kimberley Process and move us along towards perfecting the Kimberley Process to the extent that we can.

QUESTION: Niyi Robin-Coker, Sierra Leone Network Press. Your colleague made reference to the initiative that the USAID fund in Sierra Leone in development. I'm not sure what that number was that she quoted in terms of how much has actually been invested. You also made reference to Diamonds for Development. I'm not sure they're the same initiatives.

MS. GARDNER: No.

QUESTION: Okay. So if you could help us out by elaborating on both initiatives a little bit and giving us some clear indication what the results have actually yielded in terms of the impact of the artisanal miners and also with the first initiative she mentioned, what's happening in terms of continuity? I've had indications that the program is being shut down because it wasn't terribly successful and I'd like a little bit -- some clarity around that.

MS. GARDNER: Sue, I think you ought to take this one.

MS. SAARNIO: Yeah. I think we're actually quite proud of our program in Sierra Leone. I'm sorry that you've heard that. The information -- I would actually refer you to another website. Resourcebeneficiation.org is the website for the Integrated Diamond Management Program. I think at one point, it was also called the Peace Diamond Program.

We've been working in Sierra Leone since 1999 and our efforts there have been to work with the government to help them set up a government diamond office. We have worked in the diamond mining communities. We've had a representative from AID working in the communities, working with the miners, working with the tribal leaders. We actually think that they have done a lot to establish -- help them support their own governance and help them support their own marketing efforts, which is very difficult in those areas.

So we're actually quite proud of that program. I'm sorry to hear you haven't had the same reports. But I think if you look at the results for Sierra Leone, it's quite remarkable. I mean, the country in 1999 recorded virtually no official diamond exports and in 2005, it was over $140 million in diamond exports. And from that, you can assume that the government is getting export taxes, mining taxes, license fees, and so the government is actually able to benefit from that and put that money back into some of the -- into the communities where the diamonds come from.

We think, actually, that Sierra Leone is a good success story. They're very active in the Kimberley Process, they're very vigilant, their officials are quite involved and have helped other alluvial-producing countries. We're trying to get Liberia, for example, back on line and they've been giving advice to the Liberians who are trying to set up their government diamond office. So we actually consider Sierra Leone to be quite a Kimberley Process success story and a success story for our aid program.

MODERATOR: We have a follow-up on that question.

QUESTION: Thank you very much and I appreciate that you're very proud of these results in Sierra Leone. But can I drill down a little bit more and say even as you talk about 140 million, how much of that is actually driven by artisanal production versus mechanized production? And what is the actual impact of the artisanal miners either in terms of access to capital, access to healthcare facilities, the kinds of things that actually improve the conditions under which they work and yield them more income from the diamond-mining process?

MS. SAARNIO: Well, those are all very good questions. I'm not a Sierra Leone expert. I wouldn't purport to be. I haven't actually been out to Sierra Leone to see the program, but I do know that the people I've talked to who've worked on the program, people who have visited have found it quite remarkable to see how these communities have learned to set up the cooperatives and work together cooperatively and to work with the marketing internationally.

And we've brought in -- we actually have some very interesting public-private partnerships there, where some private diamond businessmen have gotten involved in helping them finance the diggers and help them market directly to Antwerp so they don't have to go through the middlemen.

I'm sorry; I'm not the right person to answer all those specific questions about Sierra Leone, but I can -- we can put you in touch with those people if you would like to talk -- learn more about it.

QUESTION: Thank you.

QUESTION: Yeah, my name is Olli Herrala. I'm from Kauppalehti, Helsinki, Finland. I'd like to know who is still outside of the system. Who is a member of this Kimberley Process?

MS. GARDNER: Well, the European Union is a member, so I guess Finland's in. There are some countries who have not been as proactive as one would like and becoming a part of this system, perhaps because their trade in rough diamonds is not particularly active, so we do see that there are some missing countries that we'd love to have in, but perhaps there is no economic incentives for them to come in because they simply don't have a trade in rough diamonds. So we have 72 nations, which includes the EU nations.

There are, I think, about 190 nations in this world. Am I right about that -- so, you do the math. If you would like a list of the countries that are participating, you can go to --

QUESTION: Can you name a country that is not…

MS. GARDNER: Mexico. Now, don't ask me why. I mean, Mexico should be a part of this and they're not and I think that's a mistake. I wish they would come in, but that's one that comes to mind.

MODERATOR: I think we have another question here from Washington.

QUESTION: Yes, may I ask both of you -- my name is Charles Smith, Media24, South Africa. Did you watch the movie, Blood Diamond, and if you did, what did you think of it? And do you think it's going to cause any harm to the industry or to the Kimberley Process?

And just a question relating to that, Leonardo DiCaprio said that nobody that's going to accompany him to, say, the Oscars are going to wear any diamonds. So I think that's quite an issue at this stage. What do you say about that?

MS. GARDNER: Well, I think he actually changed that quote after he was educated a little bit about the nature of the diamond industry and the nature of the problem that is highlighted in the movie and the number of conflict diamonds actually going into the trade today, which is next to nothing.

So the excuse I heard from Warner Brothers on that quote was that, "Well, he's just talking about his shopping habits," and I don't really understand Leonardo DiCaprio. I've never met the man. And maybe you can tell me, if you've seen the movie, whether he's succeeded in getting his South African accent right. I've been told it was a little bit shaky. (Laughter.)

At any rate, I have seen the movie. It was a pretty good movie and it's very violent. And I don't dispute, however, that any of the acts and circumstances that are shown in this film that happened in Sierra Leone back in the '90s happened. I think they did. And, you know, there's a fictional story layered on top. We see the movie as a great opportunity to educate people.

We've been at the process of -- at the task of educating people about the Kimberley Process and about what the industry and -- with their partnerships with the government and the civil society groups, what we've been doing to solve this problem. We've been at the job of educating people about this for five years and we'll be doing it for five more years and five more years after that, long after the interest in our industry has died down because of movies or documentaries or newspaper articles, et cetera.

We see this as an opportunity. We've been at this a really long time and we've been working hard to address the problem of conflict diamonds in partnership with governments and NGOs and we're glad that the attention of the world has focused on their efforts. We really feel that we provide some information to people about the historical context of the events that are depicted in the movie and that something happened since the time depicted in the movie. And you know, we're very proud of the work that we've done.

We'll continue to work to solve the problem of conflict diamonds. We don't feel like this is a flash in the pan effort. I myself have been working on this since I was -- since I started -- we started the World Diamond Council back in 2000. So we're at this, we're working hard, and we're glad to see you're all paying attention, finally.

MODERATOR: We have some questions again from New York.

QUESTION: Philippe Antoine from RTL Radio. Just a question about the image, about the diamond industry. Do you think the movie can have an impact on this image?

MS. GARDNER: Well, the movie depicts a very small segment of the diamond industry. Alluvial production worldwide is a small, small minority of the way the diamonds are brought to market in the world. So if people walk away from that movie thinking this is the way diamonds are produced, then we will have an image problem, but that's why we're out here educating people, why we've been educating people, and we will continue to educate people. We hope very sincerely that when people come out of the movie, they will be sparked to learn more and to learn more about what the World Diamond Council, what governments have done, what NGOs have been doing to solve the problem.

QUESTION: Shingo Egi from Japanese newspaper Asahi Shimbun. [Botswana] President Mohai gave a speech the other day at the United Nations and he also gave a press conference in which he said that just before the process began, the amount of the conflict diamonds is around 4 percent and now, it's less than 1 percent. But he also emphasized that conflict diamonds has not disappeared.

So I, first of all, want to ask -- I see a slight difference of nuance in what you say. You said "next to nothing" and he says, "Well, less than 1 percent," but --

MS. GARDNER: Okay. That's what I meant, less than 1 percent. That's next to nothing in my book.

QUESTION: Yeah. And the follow-up would be --

MS. GARDNER: I'm an American. I speak that way.

QUESTION: So --

MS. GARDNER: But even 1 is unacceptable to us, so --

QUESTION: Okay. So how are these diamonds found? Is it just that the figures don't add up from the reports or do you actually find, in the diamonds in the process, that you can track back to the original country?

MS. GARDNER: From what I understand, the way these figures are drawn, is one looks at official statistical reporting of export of rough diamond-producing countries. One looks at the trade in rough diamonds and one decides that certain numbers of these diamonds are not being reported. Further, there are countries where conflict diamonds are being produced and perhaps smuggled out and those would count towards that less than 1 percent next-to-nothing figure. So, you know, these statistics -- you know, it's very hard to count smuggled diamonds. But there are ways to, you know, based on statistical analysis, to extrapolate from the numbers to determine how many diamonds are being traded that may not have been covered by the Kimberley Process system.

QUESTION: Judy Aita from the Washington File. You mentioned Venezuela and Ghana as being under investigation. Is that --

MS. GARDNER: Well, that's a rough --

QUESTION: Could you give an example of how the process works? I mean, how did they get into this situation that they're being investigated?

MS. GARDNER: Well, we received -- we, meaning the Kimberley Process, and there's a specific working group that addresses this kind of -- this subject matter -- received allegations of substantial evidence of non-compliance in those two countries.

In Ghana, the UN Panel of Experts circumstantially concluded -- they concluded based on circumstantial evidence that Ivory Coast production was finding its way across the very poorest borders between Ghana and Ivory Coast, being intermingled with Ghana production and then being exported as Ghanaian rough diamonds being covered by Kimberley Process certificates. This was brought to our attention by the UN Panel of Experts. So at the November meeting of the Kimberley Process an action plan was finalized for Ghana to establish that this was either happening and then formulate a plan to stop it, or to prove that it wasn't happening. That action plan had specific time references by which they needed to accomplish certain steps along the way.

We also sent a team of diamond experts to Ghana and they would be there three times in the next three months to physically inspect the Ghanaian exports to determine whether or not they are, in fact, of Ghanaian origin.

The same kind of allegations were brought to our attention about Venezuela, substantial evidence of noncompliance, so a review team is being formulated to go to Venezuela and examine their internal controls and their mechanisms and their compliance with the Kimberley Process of minimum standards.

QUESTION: Where was the (inaudible) diamonds come from?

MS. GARDNER: Venezuela.

QUESTION: Indira Kannan from CNN-IBN. There's a lot of apprehension in the Indian diamond industry about the potential impact of this film Blood Diamond. And are those apprehensions justified in your opinion, and what can the Indian diamond industry do to address those concerns?

MS. GARDNER: Well, I'm sorry there are apprehensions. You know, the -- but I am sympathetic, because anytime such horrible events are associated with a product that's about love and you're in this business you can start to worry. I think it's an opportunity, and I've been taking it as an opportunity -- it is an opportunity, you're all here in this room. If I had called this press conference two years ago, I don't know if you would have shown up. Maybe you would have, but I don't think so. Maybe you could take that message back and say, "Use this as an opportunity to tell the very good story of what the industry has been doing with governments and with the NGOs to address the problem of conflict diamonds." The facts are on your side.

Indian has been so proactive in this area for years now, has gone even further by agreeing to take on the responsibilities of running the Kimberley Process, you've got a terrific, terrific story to tell and you should tell it. You should take the opportunity to do so.

MODERATOR: I think we have another question from New York.

QUESTION: You talked about circumstantial evidence in the case of Ghana. Obviously the Kimberley Process is more about trying to certify an origin of the diamond. There is a thought out there, however, that it is very easy for diamonds mined in conflict situations to actually be legitimized by the Kimberley Process itself. In the case of Ghana to stop, the only reason there was the distinction was because of the quality of diamond Ghana typically produces versus the quality of gems that came in from Ivory Coast. So in an instance, for example, you're looking at diamonds mined in Congo versus Angola, certified through Angola, in many respects there's an opportunity to legitimize conflict diamonds. Would you like to comment on that?

MS. GARDNER: The premise of your question I take issue with, respectfully. This is not a process to certify origin. This is a process to certify the movement of rough diamonds across international borders. So for example, when the United States issues a Kimberley Process certificate, it does not certify origin because we don't have any diamonds here. There are no U.S. diamonds unless somebody knows something here that I don't, but there are no U.S. diamonds. So what it says is these rough diamonds have been traded consistent with the Kimberley Process; that's a very important distinction for you to make. Of course a producing nation would, in addition to certify that they've been traded consistent with the Kimberley Process, would also be able to say these diamonds are, for example, of Sierra Leone origin. That would be an added level that they could do if they are a producing nation.

The efforts of criminals to violate smuggling laws should be stopped and it's the responsibility of governments to do so. The Kimberley Process is not an anti-smuggling device. It can't, can't be, those laws are already in place.

Now the diamond experts tell me that they can distinguish between origin of one diamond in terms of one of mine versus another. So for that, for instance, in Ghana they will be able to say that if there are Ivory Coast diamonds entering into Ghanaian production that they will then be declared as Ghanaian origin, they tell me they can do that. I don't know anything about it. I've never bought or sold a diamond in my life so I can't tell you, but they say they can do that. That kind of strict observance of diamonds being traded is, of course, part of what a government should do to ensure that if they're declaring origin of diamonds, because they are a producing nation, that they are sure that the diamonds that they're declaring as being of their origin are, in fact, from their country.

MODERATOR: I think there's a follow-up -- another question here from Washington.

QUESTION: Francois Clemenceau, Europe 1 Radio. Two questions: Do you make any link between the fact that Israel is one huge actor in the diamond industry and the fact that there are so many military experts, or so-called mercenaries, coming from Israel and Africa (inaudible)? Second question: What can you do to deal with the fact that there are so many children involved in the making of diamonds and what can you do to fight against that?

MS. GARDNER: To your first question the answer is no, I make no such connection. And secondly, we abhor and are inalterably opposed to the use of children in any aspect of the diamond trade. We know that there are vigorous laws on this subject in many nations. We think they should be enforced.

MODERATOR: And to a follow-up in Washington we have a question in New York.

MODERATOR: We do have another follow-up question in Washington if there's not one in New York right now.

MODERATOR: Please go ahead Washington.

QUESTION: In light of the U.S. purchasing so many diamonds and being such a major player in that way in the diamond trade, is there a special obligation the U.S. to ensure that diamonds are not coming from conflict areas and is the U.S. contemplating doing better enforcement actions on its side? My understanding is I think there was a recent GAO report which indicated that there's some problems with the Kimberley Process as enforced here.

MS. SAARNIO: I'm so glad you asked that. I've been wanting to answer that question for a while, so I'm -- on the record, I'm glad you asked that. In fact, the U.S. is the largest consumer of diamond jewelry and for that reason we are very involved in the Kimberley Process. We've been a leading country in the involvement we have. We haven't shared it yet but we have been very involved in all the working groups and we've been very active in participating in the peer review missions and all of the different activities.

To answer your question about what the U.S. has done recently, the U.S. General Accountability Office did do a review last year of our internal controls and found that we could tighten them up. And I think that we worked very closely in the State Department, Customs, Census, all of the agencies involved work very closely with GAO. And what's been missed in that story is that the seven recommendations that GAO made to the U.S. agencies, the agencies agreed to accept all of them. And we are in the process right now of taking steps to increase our oversight of the industry. That will mean more trips for me to work with Cecelia in New York and visiting companies and looking at their records and making sure the kinds of things that civil society groups have asked to do, we're going to be doing. The Customs Bureau has been doing intensified checks of the diamond shipments and our Census Bureau is going to be improving the statistics, physical reporting has been improving.

So I think if you actually look at the GAO report and read all the way to the appendices where the agencies responded, you'll see that the agencies have actually taken some major steps in the last few months and that report came out in September and those steps are already being implemented by our colleagues in the U.S. Government agencies. So we're actually quite proud of that report. We took that report to the Kimberley Process plenary in Botswana in November and we showed it to the other countries and we said, look, the U.S. may be the world's superpower but we're not beyond improving our own system. And we said this is -- you know, we're taking steps to improve. And as we learn more about the diamond process and how the Kimberley Process works and how there -- and where there are weak links we can take steps to tighten those up. And we've done that and we think other countries are doing the same.

MS. GARDNER: And if I could add just one comment about the GAO report, despite their suggestions that we could tighten up our internal controls, there's absolutely no evidence cited in the report that any conflict diamonds were entering the United States. So what they were talking about was improving the system just for its own sake, not necessarily stopping any trade in conflict diamonds because there's no evidence that conflict diamonds are entering the United States.

QUESTION: Just a quick question, do you have a presence on the ground? I know you are working with governments here, people on the ground to monitor and give you feedback as opposed to sending experts every three months to countries that don't comply.

MS. GARDNER: Well, we have members in every diamond producing nation and in every trading area, so we have people on the ground, who are reporting back to us and are very involved and engaged in the implementation of the Kimberley Process.

QUESTION: (Off-mike.)

MS. GARDNER: Oh, the governments, no, I'm an industry group. I think you'd have to ask -- well, the representation from each government delegation involving the Kimberley Process are from agencies within the governments that deal with the mining sector or deal with foreign relations, so we have people that come to the Kimberley Process meeting from mining and energy divisions, from foreign relations sections, from licensing bureaus, from all kind of -- you know, however those governments address their mining sector or their trading sector those are the people who come to the plenary sessions and who are involved in the meetings and who are involved in implementing the Kimberley Process within those countries.

MODERATOR: Are there any other follow-up questions.

QUESTION: On your comment, you said that there's no proof whatsoever that contraband is entering the United States. But you do acknowledge that there is contrabands around?

MS. GARDNER: Yeah, maybe not here but elsewhere.

QUESTION: The U.S. is a huge consumer of diamonds --

MS. GARDNER: Yes, yes.

QUESTION: -- which suggests that there are conflict diamonds entering the United States, wouldn't it? I mean, isn't it problematic that there is no proof whatsoever?

MS. GARDNER: Does everybody get that analogy he's making? Will you all make that leap with him; that because there are conflict diamonds in the world -- less than 1 percent and because the U.S. is the largest consuming nation than there must be conflict diamonds coming into the United States? That's your logical progression there? I'm not sure I can go down that path with you, sorry.

I mean, this is all about human beings, you know. I had a reporter ask me the other day what I could do about fights breaking out on the side of the banks of the river in Sierra Leone between two guys who found a diamond. What can I do about that? Preach peace and love to the people of Sierra Leone. I think people ought not to hit one another. I really think fighting over a diamond on the river bank is inappropriate behavior and should stop. I think that's terrible. It shouldn't happen. If people are trading conflict diamonds they are breaking the law and should be arrested. I am not a police officer.

MODERATOR: I think we can take one more question here in New York and then send it back to Washington for any final question there.

QUESTION: Thank you. Just to pick up on the previous question. Diamond experts apparently can only identify origin at the rough stage versus when it's cut and polished? I'm not sure that is true, maybe you can clarify. But going back to -- also to my original question, you mentioned the process is -- Kimberley Process is more about compliance with the process rather than certification of origin. Is that a weakness in the Kimberley Process at all in as far as it still presents an opportunity for diamonds mined in conflict situations to be relabeled, becomes as Kimberley certified diamonds, which would mean or imply that perhaps even the progress that we're seeing with respect to 15 down to 1 percent is really just a function of relabeling rather than actually solving problems?

MS. GARDNER: Well, I believe we've really actually solved problems. Have we ended the trade in conflict diamonds? Because human beings are involved in this trade, we will probably not end criminal behavior. So I don't mean to say that the Kimberley Process does not include in its requirements the certification of origin.

But if you were to say generally that the Kimberley Process is about certifying origin, you would miss a large portion of what the Kimberley Process is about. It's certainly included and if you are a producing nation and you are shipping diamonds out, you have to declare origin as part of the requirements of the Kimberley Process. But if you are not a producing nation, such as the United States or many of the EU nations, and you are shipping diamonds out, you are obliged to either -- if you can -- say these are of, let's say, South African origin, if you can -- or if you can't, then you could say that this is mixed origin.

The point being that what you are doing is controlling the movement of rough diamonds across international borders using government enforcement mechanisms. We feel that is the most efficient way, the most effective way to ensure that smuggled diamonds are not covered by Kimberley Process certificates because it's the governments themselves asserting the certification -- engaged in the certification scheme as opposed to individuals, so that if an individual comes and is unable to say, "This is of -- you know, origin, South Africa," the governments won't certify it. So it's a mechanism to legitimize the legitimate stream of commerce.

QUESTION: So smuggled diamonds are synonymous with conflict diamonds?

MS. GARDNER: No, no, they're very different. They're very different.

QUESTION: I just wanted to be clear on that.

MS. GARDNER: Yeah -- no, smuggled diamonds could be smuggled for any kind of reason. They could be smuggled to evade taxes, to launder money, to -- you know, all kinds of things. Conflict diamonds are diamonds that are traded to fund rebel activities against legitimately placed governments. That's what conflict diamonds are.

MODERATOR: Okay. Let me just interrupt briefly because we are running out of time, so one more question here in Washington and then if we could have -- if there are any final statements by any of our two speakers.

Please.

QUESTION: Sure. Just to keep you on the same thing, you mentioned that the stones -- the unregistered non-Kimberley stones were something like next to nothing, but you're talking about governments in Africa which -- whose statistics are notoriously uncertain, whose export statistics are very uncertain, and it just seems to me that particularly, when we're looking at -- for instance, coming back to China-Africa relations, unless you're very sure about the origin of the stones and the fact that the figures are very precise and very accurate, and I don't think you can be, you simply don't know what stones are -- that are being exported now from African countries, for instance, from Uganda to China. So I am just interested in your certainty that -- you know, you're such a success.

MS. GARDNER: Well, I have said that the Kimberley Process can always be improved and we work very hard to improve it every day. Uganda is not a member -- Sue, am I wrong? Uganda is not a Kimberley Process participant?

MS. SAARNIO: It's not a participant. I don't think it's --

MS. GARDNER: Uganda cannot, cannot officially export rough diamonds, period, full stop. And if they do, they'll be illegitimate, they'll be seized wherever they are sending them because they will be fail -- they will fail to have a Kimberley Process certificate accompanying them.

The mechanisms used to control the movement of rough diamonds are the mechanisms that we feel are the most effective to control the movement of rough diamonds across borders and to ensure that the diamond pipeline is an integral system which can not be -- which is difficult to penetrate through illegal mechanisms. Can it be done? The answer is, of course, it can be done.

People with criminal intent -- you know, I spent a few years in my legal career as a prosecutor, prosecuting people for criminal activity here in the city of New York. And I was not hurting for business. I was very busy. These people knew that what they were doing was criminal, but they did it anyway. These are human beings involved and I've forgotten what the first part of your question was and I don't mean to avoid it, but if you believe that there is a mechanism to end criminal conduct, I'd like to know what that is. I'd like to know what that is.

If you think that there are mechanisms that can disincentivize people from committing crimes in connection with diamonds, there is such a system and it's called the Kimberley Process.

MODERATOR: Very good. I think unless Sue, you have any final comments, I think we're running out of time. So from Washington, I think we're going to have to sign off. Thanks, everyone, for participating and thank you, Ms. Gardner, for participating with us here in Washington.

MS. GARDNER: You're welcome.

Released on December 14, 2006

ENDS

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