[Senate Hearing 107-384]
[From the U.S. Government Publishing Office]
S. Hrg. 107-384
ILLICIT DIAMONDS, CONFLICT AND TERRORISM: THE ROLE OF U.S. AGENCIES IN
FIGHTING THE CONFLICT DIAMOND TRADE
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HEARING
before the
OVERSIGHT OF GOVERNMENT MANAGEMENT,
RESTRUCTURING, AND THE DISTRICT OF COLUMBIA
SUBCOMMITTEE
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 13, 2002
__________
Printed for the use of the Committee on Governmental Affairs
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78-621 WASHINGTON : 2002
___________________________________________________________________________
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COMMITTEE ON GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia PETE V. DOMENICI, New Mexico
THOMAS R. CARPER, Delaware THAD COCHRAN, Mississippi
JEAN CARNAHAN, Missouri ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota JIM BUNNING, Kentucky
Joyce A. Rechtschaffen, Staff Director and Counsel
Hannah S. Sistare, Minority Staff Director and Counsel
Darla D. Cassell, Chief Clerk
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SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND
THE DISTRICT OF COLUMBIA
RICHARD J. DURBIN, Illinois, Chairman
DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio
ROBERT G. TORRICELLI, New Jersey TED STEVENS, Alaska
THOMAS R. CARPER, Delaware SUSAN M. COLLINS, Maine
JEAN CARNAHAN, Missouri PETE V. DOMENICI, New Mexico
MARK DAYTON, Minnesota THAD COCHRAN, Mississippi
Marianne Clifford Upton, Staff Director and Chief Counsel
Susan S. Hardesty, Professional Staff Member
Andrew Richardson, Minority Staff Director
John Salamone, Minority Professional Staff Member
Julie L. Vincent, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Durbin............................................... 1
Senator Collins.............................................. 3
Prepared statement:
Senator Voinovich............................................ 2
WITNESSES
Wednesday, February 13, 2002
Hon. Russell Feingold, a U.S. Senator from the State of Wisconsin 4
Hon. Mike DeWine, a U.S. Senator from the State of Ohio.......... 6
Hon. Judd Gregg, a U.S. Senator from the State of New Hampshire.. 8
Hon. John E. Leigh, Ambassador of Sierra Leone to the United
States......................................................... 10
Hon. Joseph Melrose, former U.S. Ambassador to Sierra Leone...... 12
Loren Yager, Director, International Affairs and Trade, U.S.
General Accounting Office...................................... 20
Alan Eastham, Special Negotiator for Conflict Diamonds, U.S.
Department of State............................................ 21
Timothy Skud, Acting Deputy Assistant Secretary for Regulation,
Tariff, and Trade Enforcement, U.S. Department of the Treasury. 23
James Mendenhall, Deputy General Counsel, U.S. Trade
Representative................................................. 24
Alphabetical List of Witnesses
DeWine, Hon. Mike:
Testimony.................................................... 6
Prepared statement........................................... 36
Eastham, Alan:
Testimony.................................................... 21
Prepared statement........................................... 66
Feinbold, Hon. Russell:
Testimony.................................................... 4
Prepared statement........................................... 33
Gregg, Hon. Judd:
Testimony.................................................... 8
Prepared statement........................................... 39
Leigh, Hon. John E.:
Testimony.................................................... 10
Prepared statement........................................... 41
Melrose, Hon. Joseph:
Testimony.................................................... 12
Prepared statement........................................... 45
Mendenhall, James:
Testimony.................................................... 24
Prepared statement........................................... 75
Skud, Timothy:
Testimony.................................................... 23
Prepared statement........................................... 71
Yager, Loren:
Testimony.................................................... 20
Prepared statement........................................... 48
Appendix
Hon. Tony P. Hall, Ohio, and Hon. Frank R. Wolf, Virginia,
Representatives in Congress, prepared statement............ 78
ILLICIT DIAMONDS, CONFLICT AND TERRORISM: THE ROLE OF U.S. AGENCIES IN
FIGHTING THE CONFLICT DIAMOND TRADE
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WEDNESDAY, FEBRUARY 13, 2002
U.S. Senate,
Oversight of Government Management, Restructuring,
and the District of Columbia Subcommittee,
of the Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 9:30 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Richard J.
Durbin, Chairman of the Subcommittee, presiding.
Present: Senators Durbin and Collins.
OPENING STATEMENT OF SENATOR DURBIN
Senator Durbin. Good morning. I am pleased to welcome you
to today's hearing before the Subcommittee on Oversight of
Government Management focusing on ``Illicit Diamonds, Conflict
and Terrorism: The Role of U.S. Agencies in Fighting the
Conflict Diamond Trade.''
In today's hearing, I hope we will learn more about the
connection between illicit diamonds, conflict, terrorism, and
crime, and what U.S. agencies are doing to stop this trade in
conflict diamonds, both here and overseas. I want to learn more
about how an international system to control the conflict
diamond trade can be effective, monitored, and enforced.
We have learned a lot about the horror that has resulted
when illicit diamonds fueled conflicts in Africa. Rebels from
the Revolutionary United Front, funded by illegal diamonds and
supported by Liberia, terrorized the people of Sierra Leone,
raping, murdering, and mutilating civilians, including
children. If the fragile peace in Sierra Leone is to be
maintained, profits from that country's diamonds must not fall
into the hands of such brutal rebels again. Anti-government
rebels in Angola and the Democratic Republic of the Congo
continue to fight and are also supported by the sale of illicit
diamonds.
We have learned that members of al Qaeda network may have
bought large quantities of these illegal conflict diamonds from
rebels in Sierra Leone in advance of September 11 last year,
anticipating the United States would seek to cut off its
sources of funds. An article in the Washington Post by Douglas
Farah on November 2 outlined the al Qaeda connection and showed
that al Qaeda terrorists on the FBI's ``most wanted'' list
bought conflict diamonds at below-market prices and sold them
in Europe.
We have learned that the Lebanese terrorist group Hezbollah
has participated in the conflict diamond trade and that it has
been a source of funding and a way to launder funds for drug
dealers and other criminals.
It is now clear that ending the trade in conflict diamonds
is not only the just, right, and moral thing to do, it is also
in our immediate national interest in our fight against terror.
If the crisis in Afghanistan has taught us anything, it must be
that we ignore failed, lawless states at our peril.
American consumers who purchase diamonds for happy
milestones in their lives, like an engagement, wedding,
anniversary, or even Valentine's Day, must be assured they are
buying a diamond from a legitimate, legal, and responsible
source. Setting up a system that would allow American consumers
to have confidence that they are buying clean diamonds would
also serve our local jewelers and diamond retailers. The
jewelers in our local malls and downtown shops do not want to
support rebels and terrorists in the world any more than their
consumers do.
This hearing is not about a particular piece of
legislation. Our first panel is made up of a bipartisan group
of Senators who have supported legislation to end the trade in
conflict diamonds. There are not many issues that bring
together Senators and Congressmen from across the spectrum,
that can bring together the human rights community and the
diamond industry and can unite leaders of every religious
denomination.
The horror of what has happened to the people of Sierra
Leone, and especially to its children, has brought us together
to fight this evil by cutting off the rebels' source of
support, the illicit diamond trade. Now it brings us together
to fight the terrorists who have murdered our own citizens in
our own country.
At this point, without objection, I will enter a statement
from Senator Voinovich in the record.
[The prepared statement of Senator Voinovich follows:]
PREPARED STATEMENT OF SENATOR VOINOVICH
Thank you, Mr. Chairman.
I would like to thank you for holding this hearing to examine the
sale of ``conflict diamonds,'' and the role the U.S. Government might
play in combating this illicit trade. I would also like to welcome our
three panels of distinguished witnesses, including the senior Senator
from the State of Ohio, who has played an important leadership role on
this issue in the Senate. Thank you all for taking the time to be here
today.
It is clear that the sale of conflict diamonds--mined by rebel
factions in the countries of Sierra Leone, the Democratic Republic of
Congo (DRC) and Angola--has had a devastating impact on political
stability in West Africa. The struggle to control these rich resources
continues to contribute to instability, death and destruction
throughout the region. There have been untold consequences for
thousands of innocent men, women and children.
In Sierra Leone alone, the U.S. Government has documented chilling
reports of atrocities committed by the rebel group Revolutionary United
Front (RUF). The State Department's 2000 Human Rights Report attributes
killings, abductions, deliberate mutilations and rape to RUF
insurgents.
The destabilizing influence of the illicit trade in conflict
diamonds has become even more pronounced in the aftermath of the
terrorist attacks against the United States on September 11. As press
reports have indicated, it is believed that conflict diamonds are used
as a source of funding for al Qaeda, Hezbollah and other terrorist
groups.
Diamonds are easy to transport, difficult to detect and relatively
simple to sell. It is reported that conflict diamonds from Sierra
Leone, the Democratic Republic of Congo and Angola are bought on the
cheap in Liberia by al Qaeda operatives, and then sold for high profits
in Europe. It can be difficult to predict exactly where these profits
go; but as events of September 11 have shown us, the consequences can
be monumental.
Presently, the U.S. Government is working with the international
community, through the Kimberley Process, to find a way to govern
international trade in rough diamonds in order to end the trade in
conflict diamonds. I support these efforts, as well as those initiated
by Congress to examine ways to curb this illicit trade.
I look forward to learning your thoughts on how the United States
might effectively enforce a regulatory system to prohibit the sale of
conflict diamonds. We must bring an end to the bloodshed tied to the
diamond trade.
Senator Durbin. I would just like to say before recognizing
Senator Collins that Senator Feingold and Senator DeWine have
joined us. We have worked closely with Congressman Tony Hall,
who has been a leader on this subject. We are happy with the
recent announcement of his appointment as an ambassador
representing the United States for the United Nations in Rome.
We are going to miss him on Capitol Hill. He has been a great
leader in the time that he has served here in so many different
areas involving hunger and international justice and he was the
inspiration for almost all of the legislation that is before us
on the diamond issue. We cannot let Congressman Hall's
departure in any way lessen our resolve to pass this
legislation as quickly as possible.
We can set up metal detectors in every doorway in the world
and diamonds will still pass through them. We can talk about
tracing every financial transaction of every group, and still
someone with a handful of diamonds in their pocket is walking
around with the resources of terrorism if that is their goal.
So this is an important responsibility and an important
challenge. I am glad this hearing will address it.
Senator Collins.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Thank you very much, Mr. Chairman. Let me
first begin by thanking you for your longstanding leadership in
combating the trade in illicit diamonds, and I thank you for
convening this hearing.
The subject, the control of trade in illicit diamonds, is
both tragic and timely, timely not only because tomorrow is
Valentine's Day, a day long associated with diamonds and the
values and commitments they represent, but also timely because
news articles have linked illicit diamonds to Osama bin Laden
and his terrorist network. Even without the link to Osama bin
Laden, however, the trade of illicit diamonds is often tragic,
for it has fueled conflicts that have raged, often out of
control, across large parts of Africa, killing, maiming, and
devastating thousands of innocent victims.
I understand that Senator DeWine this morning will tell us
about one of the horrific effects the illicit diamond trade has
had on children, who have been murdered, mutilated, raped, even
burned alive, and of children who have been turned into
perpetrators of these heinous crimes. In addition to Senator
DeWine and our Chairman, Senator Feingold, who is here with us
this morning, and Senator Gregg have also been strong leaders
in trying to end the trade in conflict diamonds.
Let me take just a moment to highlight a few statistics
that I believe paint a chilling portrait of the extent of this
problem. A Congressional Research Service fact sheet provided
the following estimates on some of the consequences of diamond-
related African conflicts in just three countries, Sierra
Leone, Angola, and the Democratic Republic of the Congo. There
have been more than 870,000 deaths. It has created 992,000
refugees, displaced more than five million citizens internally,
resulted in 20,000 child soldiers. These numbers are, of
course, imprecise and are just estimates. The frightening
reality, however, is that the actual numbers are probably much
higher.
In light of this devastation, it is encouraging to note
that some developments are occurring. In the international
arena, the Kimberley Process is underway, and although it is
not perfect, it does appear to be a step in the right
direction.
In Congress, there is also forward movement. The House
recently passed the Clean Diamond Trade Act and the bill
introduced by our Chairman and cosponsored by Senator DeWine
and Senator Feingold, as well as another bill introduced by
Senator Gregg, are also in committees and I hope that this
hearing will prompt action on these important bills.
I look forward to learning from all of you this morning
about the tragic, deadly trade in conflict diamonds, and again,
Senator Durbin, I want to thank you for giving us the
opportunity to do our part to reduce the trade in illicit
diamonds.
Senator Durbin. Thank you, Senator Collins.
I am sorry that Congressman Hall will not be here for the
reason I mentioned earlier, and also Congressman Frank Wolf,
who has been a leader in the House. I have spoken to him. He
will not be able to join us today, but they will submit
statements for the hearing record.\1\
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\1\ The prepared statement of Congressmen Hall and Wolf appears in
the Appendix on page 78.
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Senator Russ Feingold is here, as well as Senator DeWine.
Senator Feingold is chairman of the African Affairs
Subcommittee on the Foreign Relations Committee. We are happy
to have you both here, and Senator Feingold and Senator DeWine,
if you would like to make your statements.
TESTIMONY OF HON. RUSSELL FEINGOLD,\1\ A U.S. SENATOR FROM THE
STATE OF WISCONSIN
Senator Feingold. Thank you very much, Mr. Chairman and
Senator Collins. I want to thank you for inviting me to testify
before the Subcommittee today and especially to thank you for
all your efforts to push for serious, viable mechanisms to
disrupt the global trade in conflict diamonds. It has truly
been a pleasure to work with you, Mr. Chairman, and you,
Senator DeWine, on this issue over the past year. I admire your
leadership on the issue and I very much hope that we can
continue to work together, as the Chairman said, to pass the
best possible bill in the months ahead.
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\1\ The prepared statement of Senator Feingold appears in the
Appendix on page 33.
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I also want to echo what the Chairman said about the
leadership of Congressmen Tony Hall and Frank Wolf. This issue
would probably have languished in obscurity for far too long
had we not had their leadership on this issue.
Mr. Chairman, the first time that you, Senator DeWine, and
I came together to discuss this issue was last June, when we
joined to introduce a bill that had the support of both the
advocacy community and the diamond industry. As I noted then as
Chairman of the Senate Foreign Relations Committee's
Subcommittee on African Affairs, I have actually had the
opportunity to travel to Angola, to the Democratic Republic of
the Congo, and to Sierra Leone. In each of these cases, I have
personally witnessed the devastation brought by conflicts
fueled in large part by a desire for profit, and I have heard
from people who believe their country's resources to actually
be a curse.
But at the same time, over the years that I have served on
the African Affairs Subcommittee, I have also worked on issues
relating to countries like South Africa and Botswana. These
states depend upon legitimate diamond industries to fuel
economic growth and development and their interests also
deserve protection.
I believed then as I believe now that our national values
and national interest demand that the United States
disassociate itself from the trade in conflict diamonds. The
United States must work with the rest of the international
community to regulate the diamond trade and create a clean
stream for the legitimate diamond industry and consumers to
rely upon.
In the months since that press conference, my sense of
urgency about this has only grown. As you have both indicated,
press reports have raised serious questions about the
connections between international terrorists and the illicit
diamond trade, and this should come as no surprise.
In the Foreign Relations Committee, the Subcommittee on
African Affairs has just embarked on a series of hearings to be
conducted over the course of this year, prompted by the current
campaign against terrorism. In the wake of the attacks of
September 11, the President was right to make clear that the
United States will not distinguish between the terrorists
behind the attacks and those who harbor them.
But state sponsors are only part of the problem. The
absence of a functioning state is another. So the
subcommittee's hearings will examine the characteristics of
some of Africa's weakest states--manifestations of lawlessness,
such as piracy, illicit air transport networks, and trafficking
in arms, drugs, diamonds and other gemstones, and even people--
that can make the region attractive to terrorists and other
international criminals.
Our subcommittee is trying to identify long-term policy
options for changing the context in these states so that they
are no longer appealing to criminal opportunists. Somalia is
the first case the subcommittee took up, but I have no doubt
that later hearings will focus on Liberia and the Democratic
Republic of the Congo, countries involved in the conflict
diamond trade. The right policy response to these complex
crises will be distinct, nuanced, and multi-faceted, but it
will also entail efforts to address some of the trans-national
criminal networks that operate in weak states. The illicit
diamond trade is a perfect example, and that is why I am so
glad you are holding this hearing today.
I am particularly glad that you will be hearing from the
administration, because Congress needs to understand the
position that U.S. negotiators are taking at the Kimberley
Process negotiations, which Senator Collins referred to. And
the administration needs to understand the will of Congress and
the depth of our concern. I know that Worldvision, one of the
NGOs working on the conflict diamonds issue, recently issued a
report card on progress toward eliminating conflict diamonds.
It gives process participants high marks in some areas, but
fails them in others, particularly noting that the United
States is fighting a diamond certification system that might be
viewed as a so-called restriction on trade. This concern
appears to have led to an abandonment of the clean stream
approach, which leaves me wondering how the industry and U.S.
consumers would be protected.
Mr. Chairman, I know that many had hoped to see this
legislation passed by Congress and signed by the President last
year. That was my hope, as well, and I think yours, as well.
But this issue is an important one and we must take the time to
make our beset efforts. That said, I want to be very clear. I
will certainly not let the perfect be the enemy of the good in
this area of conflict diamonds legislation.
I look forward to reading the hearing transcript and
consulting with the Subcommittee, my colleagues on the Senate
Foreign Relations Committee, and, of course, with Senators
Gregg and DeWine after the hearing is over. Thank you very
much, Mr. Chairman.
Senator Durbin. Thank you, Senator Feingold. I know you
have another meeting and if you have to leave, that is
understood.
I would like to now recognize Senator DeWine.
TESTIMONY OF HON. MIKE DeWINE,\1\ A U.S. SENATOR FROM THE STATE
OF OHIO
Senator DeWine. Mr. Chairman, thank you very much, thank
you and Senator Collins for holding this hearing and for your
dedication to this issue. Let me also congratulate Senator
Feingold and thank him, as well as Senator Gregg.
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\1\ The prepared statement of Senator DeWine appears in the
Appendix on page 36.
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As you pointed out, Congressmen Tony Hall and Frank Wolf in
the House have been real champions of this issue and very
visionary and I would ask unanimous consent that their
statements, which I have here, be made a part of the record.
Senator Durbin. Without objection.
Senator DeWine. The diamond trade, Mr. Chairman, is one of
the world's most lucrative industries. With its extreme
profitability, it is not surprising that a black market trade
has emerged alongside the legitimate industry. It is also not
surprising that diamond trading has become an attractive and
sustainable income source for violent rebel groups and
terrorist networks around the world. The sale of illicit
diamonds has yielded disturbing reports in the media, linking
even Osama bin Laden to this trade. The February 22, 2001, U.S.
District Court trial, United States v. Osama bin Laden, attests
to this. Additionally, there is an established link between
Sierra Leone's diamond trade and well-known Lebanese
terrorists.
Currently in Africa, where the majority of the world's
diamonds are found, there is ongoing strife and struggle
resulting from the fight for control of this precious gem.
While violence has erupted in several countries, including
Sierra Leone, Angola, the Congo, and Liberia, Sierra Leone in
particular has one of the worst records of violence.
In this nation, rebel groups, most notably the
Revolutionary United Front, have seized control of many of the
country's diamond fields. Once in control of a diamond field,
the rebels confiscate the diamonds. Then they launder them into
the legitimate market through other nearby countries, such as
Liberia, and ultimately, then, finance their own terrorist
regimes and their continued efforts to overthrow the
government. Over the past decade, the rebels reaped the
benefits of, it is estimated, at least $10 billion in smuggled
diamonds, and that is billions.
Since the start of the rebel's quest for control of Sierra
Leone's diamond supply, the children of this small nation have
borne the brunt of the insurgency. For over 8 years, the RUF
has conscripted children, children often as young as 7 or 8
years old, to be soldiers in their makeshift army. They have
ripped an estimated 12,000 children from their families. After
the RUF invaded the capital of Freetown in January 1999, at
least 3,000 children were reported missing.
Mr. Chairman, as a result of deliberate and systematic
brutalization, child soldiers have become some of the most
vicious, even the most effective, fighters within the rebel
factions. The rebel army, child soldiers included, has
terrorized Sierra Leone's population, killing, abducting,
raping, and hacking off the limbs of victims with their
machetes. This chopping off of limbs is the RUF's trademark
strategy.
Now, we can do something about this. We can make a
difference. We have the power to help put an end to
indiscriminate suffering and violence in Sierra Leone and
elsewhere in Africa. As the world's biggest diamond customer,
purchasing the majority of the world's diamonds, the United
States has tremendous clout. With that clout, we have the power
to remove the lucrative financial incentives that drive the
rebel groups to trade in diamonds in the first place. Simply
put, if there is no market for their diamonds, there is little
reason for the rebels to engage in their brutal campaigns to
secure and protect these diamonds.
That is why I will continue to work with you, with the
other Members of this Committee, the other Members who are
involved in this battle. Senator Gregg and Senator Feingold
have been working along with us on strong legislation which
would remove the rebel's market incentives. We need to work
together with the international community to facilitate the
implementation of a system of controls on the export and import
of diamonds so that buyers can be certain that their purchases
are not fueling the rebel campaign.
Mr. Chairman, before I conclude my remarks, I want to again
thank my colleague from Ohio, Congressman Tony Hall, and
Congressman Frank Wolf from Virginia for the tireless efforts
that they have made to fight the conflict diamond trade. They
both wanted to be here today, although their schedules would
not permit it. In their absence, I would, again, as I said,
like to submit their statements for the record.
Let me just say, also, that Congressman Hall announced
yesterday that he has agreed to be our next ambassador to the
U.N.'s Food and Agriculture Agency. We are going to miss him
certainly in the U.S. Congress, but I am confident that he will
continue his unbelievable commitment to humanitarian
initiatives and helping those suffering from hunger and human
abuses around the world.
Again, Mr. Chairman, thank you for holding this hearing. We
have an obligation, I believe a moral obligation and
responsibility, to help eliminate the financial incentives for
the illicit traders. We owe it to those who unwittingly buy
conflict diamonds. But more importantly, we owe it to the
children who have suffered far too long.
Senator Durbin. Thank you, Senator DeWine, and we
understand you also have a conflict and will have to leave us,
but you have been a great friend and ally in this fight.
Senator Gregg, I am glad you could be here because I think
that you showed an interest in this issue and initiative early
on and I am glad that you are still maintaining that interest
and contributing to this conversation. We welcome your
testimony.
TESTIMONY OF HON. JUDD GREGG,\1\ A U.S. SENATOR FROM THE STATE
OF NEW HAMPSHIRE
Senator Gregg. Thank you, Mr. Chairman and Senator Collins.
It is a pleasure to be here. I want to begin by congratulating
you, Mr. Chairman, on your legislation in this area, which I
was happy to join you in, and talk a little bit about the
necessity of passing this legislation, getting it through the
Senate and getting it joined up with the House language so that
we can have laws which control illegal diamonds and conflict,
or blood diamonds, which are essentially the same.
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\1\ The prepared statement of Senator Gregg appears in the Appendix
on page 39.
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I got into this issue about 2\1/2\ or 3 years ago as a
result of my chairmanship of the Commerce, State, and Justice
Appropriations Subcommittee. At that time, the war in Sierra
Leone was going forward and the United Nations was pursuing a
policy which was, in my opinion, misguided, it essentially
empowered the RUF and Foday Sankoh, allowing them into the
government and allowing them to dominate that country. As a
result, at that time, I put a freeze on the peacekeeping funds
in that region. The result of this was that we reached an
agreement between the Congress and then-U.N. Ambassador
Holbrook which essentially changed the policy towards the RUF
in Sierra Leone, which I thought was an extremely positive
step.
The purpose of the new policy was to put in place a
democratic government that was not influenced by the RUF, an
organization which has been described by Senator DeWine in the
harsh details that it should be described in, an organization
which is a terrorist organization and which treats its people
and treats especially the women and children of Sierra Leone in
the harshest way.
But the new policy, which was really driven in large part
by the British Government, which I want to congratulate
publicly for their role in this, has put in place a much more
responsible approach to Sierra Leone. As a result, the United
Nations' new policy is seeing significant progress, although I
am not as sure it is as significant as maybe the press releases
would promote it. But at least it is significant progress in
the right direction.
However, there remains one major issue in this whole
complex question which has not been adequately resolved and
that is the issue of the RUF's control over the diamond fields
and the fact that the resources that are being generated from
those. The revenues from selling those diamonds are clearly
flowing into terrorist hands which are then being used to
attack us in the United States.
I think if the American people understood that when they
buy a diamond in the United States that happens to be a blood
diamond or a conflict diamond, that they are actually
underwriting the type of people who attacked the World Trade
Center, Americans would be much more responsive to the need to
do something in this area. Certainly you, Mr. Chairman and
Senator Collins, understand the importance of this.
Thus, the attempt by the legitimate diamond trade, which is
trying to address this through the Kimberley Accords, to find a
way of managing these diamonds, is something we must encourage.
We as a country must have our own laws that encourage it. As
Senator DeWine mentioned, we are the largest importer of
diamonds in the world and, therefore, we have the market and if
we make it clear that our market is not going to tolerate
conflict and blood diamonds, then we will have an impact on the
flow of those diamonds.
The problems, however, are not easily resolved. Diamonds
are not easily traced. There is no system in place yet which
can mark a diamond effectively that would allow it to be easily
traced. Thus we must, to some degree, rely on the good
intentions and will of the diamond marketers, especially the
European diamond marketers. But in any event, we should clearly
have a law that makes the point that we, as a Nation, are only
going to tolerate the importation of non-conflict diamonds.
In addressing this issue, we also have to be sensitive and
aware of the fact that it is not just the Sierra Leone diamond
fields that are the issue here. There are other diamond fields,
but there are also other governments involved here that are
having a negative effect and that is clearly the government of
Liberia. We as a country need to address that problem. Charles
Taylor and his government have denied supporting the RUF, but
they clearly are involved with the RUF and they are also
clearly profiting from RUF activities in the diamond fields and
are today profiting from their own exploitation of their timber
products. We, as a Nation, need to address that issue as part
of a coherent and comprehensive policy towards the conflict in
Sierra Leone, diamond production, and conflict diamonds.
So I do not believe we can effectively resolve the question
of conflict diamonds and the flow of the resources and the
revenues from conflict diamonds to terrorists unless we also
address the issue of what is happening in Liberia and its being
an umbrella organization which protects the RUF's control over
the diamond fields in Sierra Leone.
I appreciate this Subcommittee drawing attention to this
issue. It is a very important issue, in my opinion. It goes to
our national security, but more importantly, it goes to having
the people of Sierra Leone have an opportunity to have a decent
life and a free society.
Senator Durbin. Thank you very much, Senator Gregg. We
appreciate your testimony and your commitment to this issue.
The beep that you heard earlier is an indication that we
are on a roll call vote, which is usually not too unsettling
but for the fact that we have four roll calls. This means that
we are going to have to stand in recess here for an
indeterminate period of time, probably in the range of 30 to 45
minutes. I apologize. It was unexpected. We will return.
Someone said that before--General MacArthur. [Laughter.]
We will return and I hope that each of you can stay with us
for this important hearing. The Subcommittee will stand in
recess.
[Recess.]
Senator Durbin. Thank you for your patience. There is still
another roll call vote coming, but I decided to come back and
try to get started with our second panel. I again apologize for
this inconvenience and I ask your indulgence.
I would like to now welcome our second panel, the Hon. John
Leigh, Ambassador of Sierra Leone to the United States, and the
Hon. Joseph Melrose, former U.S. Ambassador to Sierra Leone,
who both have firsthand understanding of the scourge conflict
diamonds helped fuel in Sierra Leone. I want to thank you very
much, both of you, for coming.
It is customary in this Subcommittee to swear in all
witnesses and I ask you to please stand and raise your right
hand. Do you swear the testimony you are about to give before
this Subcommittee is the truth, the whole truth, and nothing
but the truth, so help you, God?
Ambassador Leigh. I do.
Ambassador Melrose. I do.
Senator Durbin. Let the record reflect that the witnesses
have answered in the affirmative.
I would ask you if you could try to limit your oral
statements and then questions will follow. Ambassador Leigh,
would you please proceed.
TESTIMONY OF HON. JOHN E. LEIGH,\1\ AMBASSADOR OF SIERRA LEONE
TO THE UNITED STATES
Ambassador Leigh. Thank you, Senator Durbin. Members of the
Committee, ladies and gentlemen, we the people of Sierra Leone
and the people of African countries really appreciate the work
of this Senate Subcommittee in focusing attention on the
continued devastation caused by conflict diamonds in Africa.
---------------------------------------------------------------------------
\1\ The prepared statement of Ambassador Leigh appears in the
Appendix on page 41.
---------------------------------------------------------------------------
The international diamond trade is big business. The
worldwide retail trade in diamond jewelry was estimated at
approximately $60 billion in 1999. Conflict diamonds account
for anywhere from 4 to 15 percent. That is about from $2.4
billion to $9 billion at the retail level. The total portion
that is accounted for by illicit or contraband diamonds from
all sources, including conflict diamonds, is estimated at 20
percent, or nearly $24 billion annually.
Seventy percent of the world trade in diamonds is created
in the United States. It is my view that the large role which
contraband diamonds occupy in the diamond trade is behind the
stiff resistance to the effective reform of the international
diamond trade. Contraband diamonds have been a prominent
feature of the diamond trade for many years, many decades, and
it is the real precursor of conflict diamonds. So for us to
address the issue of conflict diamonds, we must address also
the issue of contraband diamonds. It is the freedom which the
contraband diamonds enjoyed that ultimately led to the
situation of conflict diamonds.
In my view, it is the illicit diamond trade that was behind
the collapse of state power in Sierra Leone. Beginning in 1965,
diamond exports from Sierra Leone officially declined from 1.3
million carats annually to genuine gemstones--to only 20,000
carats of industrial diamonds by 1997. Gemstone production was
unaccounted for, for many years. All those stones were
accounted for, depriving the government of Sierra Leone of the
revenues it needed to fund social and economic development.
With a weak government in place, people began to use the
situation to fake a civil war. For nearly a decade, beginning
in March 1991, a ragtag rebel group calling itself the
Revolutionary United Front purported to wage a civil war for
the purpose of bringing democracy, economic and social
development in my homeland. What we know is that at some point
the rebels gained control of an area in Eastern Sierra Leone
where alluvial diamonds are present. Things have never been the
same in Sierra Leone since that time.
With their easy access to diamonds, it did not take too
long for the rebels of the area to become a well-equipped army
of several thousand trained troops unleashing a reign of terror
against the people and government of Sierra Leone. Their
objective was to gain access to even more diamond deposits, and
eventually to overthrow the elected government and establish an
outlaw state. Had the RUF succeeded, Sierra Leone would today
be another sanctuary for terrorists and elements of the
international Mafioso in West Africa and populated by people
with no rights and by violated people.
The calling card of the RUF was the kidnapping of women and
girls for sex and domestic servitude and the capture of young
boys to serve as child soldiers. In Sierra Leone, the RUF put
child soldiers in front of the attacking troops. Those kids
were the ones who took the brunt of the casualties in the war
in Sierra Leone. The RUF sent children to face government and
ECOMOG troops. The consequent devastation to the youths of
Sierra Leone is beyond words.
Contraband diamonds come from many countries, but conflict
diamonds come from only a few countries, supposedly blessed
with easily accessible diamonds in alluvial plains. Alluvial
diamonds are deposits of diamonds occurring in lowland areas,
in old river beds, in the beds of streams and rivers and in
wide swaths of forested lands. We believe that about 8,000
square miles of Sierra Leone territory have alluvial diamond
deposits and this makes illicit mining almost impossible to
control.
The government of Sierra Leone supports the Senate in
enacting legislation that would protect the people of Africa
from terrorists, but at the same time protect the legitimate
trade in diamonds. Diamonds are very valuable to many African
countries and Sierra Leone wants nothing to do that will affect
that.
We believe that conflict diamonds cannot be addressed by
itself without addressing the issue of contraband diamonds.
Although there have been Presidential orders in favor of
prohibiting importation of conflict diamonds into the United
States, Liberia has taken action to bypass those prohibitions
by starting to cut and polish diamonds looted in Sierra Leone.
So, unless legislation addresses all illicit diamonds, whether
processed or not, criminals will find some way to defeat the
system.
We should also be aware that narco-dollars are what are
being used to pay for diamonds obtained from rebels in Sierra
Leone. Therefore, addressing the issue of conflict diamonds
will also make it more difficult to launder narco-dollars with
diamonds.
Please let me summarize by saying that for a law to be
effective against the illicit diamond trade in Sierra Leone,
there should be a time limit on negotiations. The Kimberley
Process has been going on for far to long and it is now time
for this process to come to an end. To be effective, the
Kimberley Process should provide for sanctions, including
criminal penalties and the forfeiture of contraband diamonds.
And entities participating in the 70 percent of the
international trade in diamonds that is conducted in the United
States must be compelled to obey United States laws. Diamonds
illicitly exported from Sierra Leone and forfeited in the
United States should be set aside to fund appropriate
activities in Sierra Leone to benefit the people. Victims of
the illicit diamond trade should be allowed to sue for damages
in United States courts.
Once again, I thank the Subcommittee for allowing me to
testify and for focusing attention on this issue critical to
peace in Africa. I want to thank Congressman Tony Hall,
Congressman Frank Wolf, and their staffs for their leadership
in this issue. I also want to thank this Subcommittee, Senator
DeWine, Senator Feingold, and Senator Gregg for their support
for the people of Africa. Thank you, Mr. Chairman.
Senator Durbin. Thank you very much, Ambassador Leigh.
Ambassador Melrose.
TESTIMONY OF HON. JOSEPH MELROSE,\1\ FORMER U.S. AMBASSADOR TO
SIERRA LEONE
Ambassador Melrose. Chairman Durbin, Members of the
Subcommittee, thank you for inviting me to testify today on
this important issue.
---------------------------------------------------------------------------
\1\ The prepared statement of Ambassador Melrose appears in the
Appendix on page 45.
---------------------------------------------------------------------------
The fact that diamonds as well as other resources have been
used to both fuel and fund conflicts in Africa is now generally
accepted as fact. In addition, natural resources from Africa
have provided funds for terrorist activities outside of Africa.
In the case of diamonds, their high value, small size, and low
weight, combined with the ease in which they can be converted
into money and the difficulty of detection by mechanical means
makes them an excellent medium for moving, hoarding, or
laundering money.
In the case of Sierra Leone and, indeed, some of the other
countries of Africa, the presence of alluvial diamonds provides
a particularly conducive situation. These diamonds are not
mined in the traditional way but rather by panning for them in
much the same way Forty-Niners panned for gold in our own
country. Digging for diamonds takes place over a wide
geographical area, making it particularly difficult to control.
Virtually anybody can dig for diamonds or hire someone else to
do it for them. No expensive mining equipment is needed, and as
noted previously, diamonds are easily hidden and transported.
The diggers are among the most exploited people in the world.
Those that hire them get rich while the diggers remain in a
state of abject poverty and virtual servitude. But this is only
part of the problem.
The conflicts that have engulfed Sierra Leone and other
African countries have meant a lack of government control of
these stones from the field to the market. The environment has
provided purveyors of violence with a friendly playing field
from which to operate. Nation states in either a state of
collapse or near collapse provide both native citizens and
unscrupulous outsiders an even more suitable operating
environment.
For example, the Lebanese have long been involved in the
Sierra Leone diamond trade. Funds from the sale of illicit
diamonds have been used to purchase weapons for use in
revolutions, crimes, and terror. In addition, as Washington
Post reporter Doug Farah reported several months ago, illicit
diamonds have been used as a means of transfer money from one
location to another.
The motivations for most of the individuals that engage in
the illicit diamond trade are simply greed and power. Farah's
assertion that the rebels of the Revolutionary United Front
(RUF) of Sierra Leone sold diamonds to individuals identified
by the U.S. Government as al Qaeda representatives is not
surprising. Even the RUF itself, following its internal
investigation into Farah's story, while denying that it had a
relationship with al Qaeda, acknowledged that it was not
impossible that some of their number did, in fact, sell stones
to representatives of al Qaeda.
In my opinion, this admission is tantamount to accepting
the possibility that their stones went to al Qaeda, with or
without the formal backing of the organization. While it is
still in question whether this was a deliberate effort on the
part of the RUF to assist al Qaeda, or not the impact is the
same.
Too often, the sellers of diamonds are interested in one
thing, the best price and who has the money. Whether deliberate
or not, it makes little difference in the end. In addition,
similar sales have almost certainly taken place with other
designated terrorist organizations, such as Hezbollah. In the
case of Hezbollah, a connection has existed for years to
various Lebanese groups.
The need to establish a clean, transparent system for
preventing such illicit commodities from entering the
legitimate market is clear. The customer should be able to know
that the diamond he or she purchased did not get to the retail
counter by increasing the suffering of fellow human beings and
that the benefits of the country's natural resources should
benefit the citizenry of the country they come from. The
Kimberley Process, while far from perfect, is a step in the
right direction.
Information I have received in the past week indicates that
a large amount of diamonds that were at least in part mined by
the RUF during the conflict have made their way to Guinea for
sale to raise funds to support the RUF in the upcoming Sierra
Leone election. As Ambassador Leigh said, diamond traders in
Antwerp tell me that they are seeing stones coming out of
Liberia and reaching the European markets at this time.
The Kimberley Agreement, although no panacea, would be a
step in reducing this trade, the unintended consequences
throughout the world, and the particularly devastating ones in
Africa. Despite its flaws, it is a start and should be
supported. By declaring that trading in conflict diamonds is
not acceptable, the world may see the advent of a new corporate
and social responsibility in a sector that has heretofore
relied almost totally on self-policing.
By taking this step, the diverse group of interested
parties that negotiated the Kimberley Agreement, including
states, the private sector, nongovernmental organizations, and
even representatives of civil society, may have begun a process
that could impact other sectors where the improper or illicit
trade in commodities, such as gemstones, occur without the
necessity of another Kimberley-type agreement. Individuals and
organizations must not have the tools by which they can take
power or hold nations hostage to their demands. If reducing the
trade in conflict diamonds can even partially be achieved, it
would have a significant benefit in the area of human rights
and the true source of regional conflicts, which all too often
is money.
Our goals should be two. First, we must end these practices
by various organizations and cut off their funding sources.
Second, we must make every effort to ensure that new techniques
to circumvent proper channels do not simply take the place of
old ones. To do so will require not only coordination among
states, industry, civil society, but the international security
and law enforcement apparatus, as well. While we have seen that
various organizations have been able to successfully benefit
from this situation, we must also recognize that it is certain
that others who seek to harm innocent members of society have
used this situation for their benefit, as well.
The United States, as the biggest market for gem-quality
stones, must take a leading role in ending the conditions that
permit these violations of our moral and ethical standards by
supporting Kimberley and clean diamond legislation. We must not
abdicate our role, but should continue to press for a tangible,
meaningful solution to this problem in consultation with the
legitimate diamond industry, as well as the other Kimberley
participants. I thank you for your attention.
Senator Durbin. Thank you very much, Mr. Ambassador. Let me
ask you this. I know you cannot discuss any classified
information relative to the al Qaeda connection that you may
have learned during your service to our country, but I wonder,
did you observe any activities in diamond trading when you were
U.S. Ambassador to Sierra Leone that led you to conclude that
the press reports about the al Qaeda connection are likely to
be true?
Ambassador Melrose. Toward the end of my tour in Sierra
Leone, we noticed some aberrations in the diamond market which,
although I was not able to investigate them to the extent that
I would have liked, led me to believe there was a laundering or
hoarding of stones taking place. This was prior to September
11, but there clearly were some changes which were taking place
which were not subject to normal economic factors.
Senator Durbin. What kind of changes?
Ambassador Melrose. Prices were being manipulated.
Quantities were being manipulated. Certain kinds of stones were
not available on the market.
Senator Durbin. Do you have any reason to believe that
members of al Qaeda were in the region prior to September 11?
Ambassador Melrose. Mr. Farah has gotten some, I believe,
eyewitness statements that they were. The relationship between
a gentleman that I believe is currently in Burkina Faso by the
name of Ibrahim Bah with certain dissidents, both Lebanese and
other Arab groups is pretty clearly established.
Senator Durbin. Did you observe, or were you aware of his
presence in the region before September 11?
Ambassador Melrose. He was in Liberia and also in Burkina.
I have met Bah several times and talked to him before that. The
last time I spoke to him was probably about a year ago and he
was at that time in Burkina Faso.
Senator Durbin. And at least there are allegations of his
connection with al Qaeda leadership?
Ambassador Melrose. There are certainly questions that
would lead one to believe that there could be a relationship,
yes.
Senator Durbin. Have you spoken to officials from any other
countries that might have evidence of al Qaeda operatives
purchasing conflict diamonds?
Ambassador Melrose. I have spoken to members of the diamond
trade and also Belgian officials who initially were doubtful of
some of these connections, whether al Qaeda or other terrorist
organizations, but have certainly changed or modified their
view since September 11.
Senator Durbin. All right. Let me ask you about the
Hezbollah situation, because both Ambassador Leigh and yourself
have alluded to the involvement of Hezbollah. This seems to be
accepted. There is no controversy involved, that they have been
involved in conflict diamonds for some period of time, is that
correct?
Ambassador Melrose. I would say at least 5 to 10 years,
yes.
Senator Durbin. Well, I think it is worth noting for the
record what this is all about, to try to connect the dots for
just a minute, if we could. When people in the United States
learn of child labor or slave labor making products for sale in
the United States, we find that absolutely repulsive and many
companies have suffered because of accusations and some have
suffered even more when it has been proven that products are
being sold to Americans that could have been the product of
those types of outrageous labor practices.
This raises an important point in relation to Hezbollah.
Hezbollah is a terrorist organization, named by President Bush
in his State of the Union Address and notorious throughout the
world, that was responsible for bombing two American embassies
in Beirut, killing 48 people, responsible also for the Marine
Corps barracks bombing in Beirut. They also kidnapped an
American diplomat and killed him and they have been involved in
hijacking of airplanes, a TWA flight, and have taken credit for
the loss of innocent life.
Now, having said that, I hope to bring this full circle.
They are using, or at least it is believed that they are using,
these conflict diamonds to finance at least some part of their
operations, and from your testimony, have been doing so for 5
or 10 years. The reason why this comes close to home is if I
find it repugnant to find a soccer ball made by a tiny child in
some third world country to give to my grandson, imagine if
Americans came to believe that the diamonds that they were
buying for engagement presents and wedding presents were really
financing the kind of terrorist activity of Hezbollah which I
have just described.
That, I hope, is what comes from this hearing, that
Americans will connect the dots and say, as long as, the
ambassador has said, we are consuming 70 percent of the world's
diamonds in the United States, we have a moral obligation to
ask the question, where are they coming from? How do they get
here? And if they come through the bloody hands of terrorists,
whether it is the RUF or Hezbollah, I think that that is a red
flag to all Americans that we need to do something to police
this situation.
I would like to ask you, if I might, Ambassador Leigh, what
is your knowledge of the involvement of al Qaeda members in the
conflict diamond trade?
Ambassador Leigh. I do not have any specific knowledge of
al Qaeda in Sierra Leone, but I can tell you one thing. There
is a large Middle Eastern population in Sierra Leone. There are
Shiites in Sierra Leone, Sunis, Christians in Sierra Leone from
the Middle East. There is a large Lebanese population and they
have been involved in the contraband diamond trade going back
to 1960. And, in fact, the decline in Sierra Leone's official
diamond exports coincided with the Lebanese civil war. The
present speaker of the Lebanese parliament is a Sierra Leone
born Lebanese, Nabih Berri. He was the head of Amal militia,
and Amal was funded partly from the sale of Sierra Leone
diamonds. And it is well known that the Lebanese in Sierra
Leone have been supporting various factions in Lebanon civil
war going back to the early 1980's.
So I can say that if al Qaeda wishes to trade in Sierra
Leone diamonds, it would be an easy thing for them to do to
accomplish. There is certainly a strong and powerful Middle
Eastern presence in Sierra Leone going back about a hundred
years.
Senator Durbin. Can you tell us anything more specifically
about Hezbollah in the conflict diamond trade?
Ambassador Leigh. Just like you have al Qaeda there, there
will be factions in Sierra Leone supporting various militia
groups. Hezbollah would be one of those. Hamas would be another
one. Various Middle Eastern groups in Sierra Leone have always
served as financial support bases for the parent groups in the
Middle East. I do not have any specific knowledge of any
specific Hezbollah operative in Sierra Leone, but Hezbollah's
presence in Sierra Leone would not be out of the ordinary at
all.
Senator Durbin. Ambassador Melrose made mention of the
Revolutionary United Front selling diamonds in Guinea to raise
funds for the upcoming election in Sierra Leone. That is very
disturbing and I would like to ask you, have you received any
information about this activity?
Ambassador Leigh. I first heard of that when I was in
Sierra Leone last month, but again, these fellows, they always
hide behind the scene, behind closed doors. It is very
secretive. They do not publicize their financial authorities,
but there is general knowledge that the RUF is still exporting
Sierra Leone diamonds illegally through Guinea and Liberia.
Senator Durbin. Ambassador Melrose, could you follow up on
that? Do you believe the RUF intends to manipulate the
elections to take power in Sierra Leone?
Ambassador Melrose. I tend to believe that they will make
an effort. I do not think they will be successful. I think one
of the ways they will use, according to reports coming from
certain U.N. and other NGO observers, is that they have tried
to manipulate the registration process by registering under-age
voters that were members of their organization.
Senator Durbin. Since September 11, Mr. Ambassador, do you
believe there has been an improvement in U.S. intelligence
activities in West Africa concerning the flow of conflict
diamonds?
Ambassador Melrose. To some extent, but not significant.
Senator Durbin. What is holding it back? Why do you believe
it has not been significant?
Ambassador Melrose. I think largely, Mr. Chairman, it is a
function of resources. Moving resources in, even if you wanted
to, cannot be done overnight and you cannot develop the
contacts overnight. This takes time, even if everybody is
desirous of doing it. It is just the way the intelligence
function works.
Senator Durbin. You know, it strikes me that early on,
President Bush and members of our coalition made it clear that
they were going to go after the financial support of terrorism
around the world and I think that is not only appropriate, it
is necessary. But it strikes me, based on what I have read and
heard at this hearing, that unless we also address the conflict
diamond financing of terrorism, we are leaving a gaping hole in
this war against terrorism. Do you agree?
Ambassador Melrose. Yes, I do. I think the diamonds, not
just for financing, but the transportability of resources, the
convertability make diamonds a commodity that must be
addressed.
Senator Durbin. All right. What are your views on the
success of the certification scheme and peacekeeping efforts
that currently exist in Sierra Leone?
Ambassador Melrose. The certification system was designed
as a result of the U.N. resolution banning the export of
diamonds. The certification system is relatively good, but it
only addresses one portion of the path from the field to the
market.
I like to divide the path from the field to market into
three sectors: From the field to Freetown, place of export;
from the place of export to the place of import, which is what
the certification system deals with; and from the place of
import to the market. More work needs to be done on the other
two parts for the certification system to be more effective.
Senator Durbin. So from the field to Freetown----
Ambassador Melrose. Yes.
Senator Durbin [continuing]. And from the final disposition
of the diamonds.
Ambassador Melrose. And then you are also hearing, as
Ambassador Leigh mentioned, stones that go out of the country
through Guinea, through Liberia, through the Gambia, through
Mauritius. These circumvent the certification process and that
is one of the things the Kimberley Agreement attempts to deal
with.
Senator Durbin. Ambassador Leigh, you did make that point
in your testimony. Would you address that again in terms of
where you think the gaps are in the current certification
system and perhaps bring to our attention some things that we
should address with legislation?
Ambassador Leigh. Ambassador Melrose is quite correct. The
difficulty is from the mines to the government offices, to the
export offices in Freetown. The difficulty is that the prices
for Sierra Leone diamonds are higher in Morovia than in Sierra
Leone and they are higher in Morovia because they use narco-
dollars in Morovia and they use legal currency in Sierra Leone.
So people who want to clean the money are willing to pay a
premium for Sierra Leone diamonds to clean their money. So some
diamonds are going to Morovia, to Liberia, and Liberia is now
beginning to process those diamonds to defeat the certification
scheme.
Diamonds are going through Guinea. Guinea has their own
diamond mines, but the bulk of the diamonds in that part of
West Africa, 90 percent are in Sierra Leone. So Guinea has a
collateral claim to say they had the diamonds. So it is a
difficult problem. It is very difficult.
Senator Durbin. We have learned in this war against
terrorism the linkage between narcotics and terrorism and now
we are learning that we need to bring diamonds into this
conversation, as well, that, unfortunately, diamonds are part
of this whole flow of terrorist activity and narcotics in many
parts of the world, and I think you have given us some good
illustrations of how countries that are not enforcing their
laws or do not have any laws or do not have any ways of
investigating are being exploited, and I think even more
importantly, the people of the country are being terrorized and
exploited in that same process.
Speak to me about the Kimberley Process and whether you
believe it is moving apace and coming to a conclusion that we
can subscribe to. I think there was some reference to how long
it has taken and how we still have to do much more before we
wait for that conclusion. Ambassador Leigh.
Ambassador Leigh. I believe the Kimberley Process is
proceeding at a leisurely pace.
Senator Durbin. Leisurely?
Ambassador Leigh. Very leisurely. They have meetings in a
number of exotic places, having really nice meetings, but
nothing really effective is coming out within a time frame that
is acceptable to the people of Sierra Leone. We are sitting on
top of violated children, violated women, damage of
infrastructure across the land and we understand the urgency of
addressing this issue.
The Kimberley Process is meeting now for, what is it, 18
months or more, and what they have done that I like is they are
really putting emphasis on warranties, actually maintaining a
chain of warranties from the mines through to the final
importer. Now, every single country in the world should join
that system. Otherwise, it is no good. If the countries that
have that system in place enforce it, then the diamond
smugglers will go to some other country that does not have that
system. So any Nation that wants to partake of the 70 percent
of the diamonds in the United States should be in a system
where there is international certification and the chain of
warranty of diamonds from the mines are supported by that
system or else it is not going to work.
But I would like to see an end to the meetings, the
debates, and something concrete comes out of it in forms of
legislation in all those 30 countries taking part in the
process.
Senator Durbin. Ambassador Melrose, your opinion of the
Kimberley Process?
Ambassador Melrose. I think it is a step in the right
direction. I do not think it is a panacea. I do not think it
will cure the whole problem. There will always be leakage, but
clearly, we have to take the first step.
I agree with Ambassador Leigh that it has been a bit more
drawn out than I would have liked to have seen. I am hopeful
now that it is going to come to some fruition. But once it is
complete, then you have to get into the issue of the other
actions that are needed to make it operational and that is
going to take more time.
Senator Durbin. I thank you both for your testimony and I
thank you for your patience because of the interruption. It is
very important. I am glad it is on the record here, and we are
going to follow through with a third panel and after that, I
hope, work with you to develop some effective legislation.
Thank you very much, both of you, for being here.
Senator Durbin. I would like to welcome our next panel,
which will address U.S. efforts to stop the trade in conflict
diamonds. Loren Yager is Director of International Affairs and
Trade for the U.S. General Accounting Office. Alan Eastham is
the Special Negotiator for Conflict Diamonds with the U.S.
Department of State. Timothy Skud is Acting Deputy Assistant
Secretary for Regulation, Tariff, and Trade Enforcement with
the U.S. Department of the Treasury. The Hon. James Mendenhall
is Deputy General Counsel, of the U.S. Trade Representative.
As is the custom of the Subcommittee, I would like to ask
you to please stand so that I might administer the oath. Would
you raise your right hand. Do you swear the testimony you are
about to give before this Subcommittee is the truth, the whole
truth, and nothing but the truth, so help you, God?
Mr. Yager. I do.
Mr. Eastham. I do.
Mr. Skud. I do.
Mr. Mendenhall. I do.
Senator Durbin. Thank you. Let the record reflect that all
witnesses answered in the affirmative.
Mr. Yager, if you would be kind enough, your written
remarks will be included in their entirety and if you would
like to summarize at this point, I would appreciate it.
TESTIMONY OF LOREN YAGER,\1\ DIRECTOR, INTERNATIONAL AFFAIRS
AND TRADE, U.S. GENERAL ACCOUNTING OFFICE
Mr. Yager. Thank you, Mr. Chairman. I am pleased to be here
today to discuss our observations on the U.S. and international
efforts to deter trade in conflict diamonds. We have been
performing this work for Senator Judd Gregg and Representatives
Tony Hall, Cynthia McKinney, and Frank Wolf.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Yager appears in the Appendix on
page 48.
---------------------------------------------------------------------------
Conflicts linked to diamonds have created severe
humanitarian crises in countries such as Sierra Leone, Angola,
and the Democratic Republic of Congo. The principal
international effort to address this issue, known as the
Kimberley Process, aims to develop and implement an
international diamond certification scheme that will prevent
conflict diamonds from entering the legitimate market. As we
heard from the first panel, the Congress is also considering
legislation to ensure the consistency of the U.S. system with
this process.
The primary message of my testimony this morning is that
the nature of the diamond industry makes it extremely difficult
for the U.S. Government and for the international community to
deter trade in conflict diamonds. Specifically, I will discuss
three issues: First, how the nature of diamonds and industry
operations are conducive to illicit trade; second, the
inability of U.S. import controls to deter trade in conflict
diamonds; and finally, the extent to which the Kimberley
Process has the necessary elements to deter trade in conflict
diamonds.
On the first point, I note in my written statement how the
nature of diamonds and the operations of the international
diamond industry create opportunities for illicit trade,
including trade in conflict diamonds. Diamonds are mined in
remote areas around the world and are virtually untraceable
back to their original source, two factors that make monitoring
diamond flows difficult. Diamonds are also a high-value
commodity that is easily concealed and transported. Because of
these characteristics, not only can diamonds enter the
legitimate trade, they can also be used in lieu of currency in
arms deals, money laundering, and other crime. Lack of
transparency in industry operations also facilitates this
illegal activity. The lack of industry information is
exacerbated by poor data reporting at the country level, where
import, export, and production statistics often contain glaring
inconsistencies.
The second major point is a consequence of these industry
characteristics, that U.S. import controls cannot prevent
conflict diamonds from entering the United States. The general
U.S. import control system requires documentation listing the
country of last export, which U.S. import requirements consider
the country of origin. However, without an effective
international system that can trace the true original source of
rough diamonds, the United States could be importing conflict
diamonds that have passed through a number of other countries
before entering the United States.
My final point is that these same industry characteristics
create significant challenges for international efforts to
control trade in conflict diamonds. The Kimberley Process
incorporates some elements of accountability, such as requiring
Kimberley Process certificates designating country of origin
for unmixed shipments. But some elements are lacking and others
are listed only as optional or recommended.
For example, the scheme is not based on a risk assessment,
which is an essential element of an effective control system.
As a result, some activities that would be deemed high risk by
industry experts or by Kimberley Process participants, such as
the flow of diamonds from the mine or the field to the first
export, are subject only to recommended rather than required
controls. In addition, the period after rough diamonds enter a
foreign port to the final point of sale will be covered by an
industry system in which participation is voluntary and
monitoring and enforcement are self-regulated.
In conclusion, I want to acknowledge that the Kimberley
efforts to date have served to focus attention on a very
serious humanitarian crisis and have facilitated cooperation
among industry, government, and nongovernmental organizations.
However, our work suggests that the Kimberley Process
participants have important issues to resolve to make the
scheme effective in deterring trade in conflict diamonds.
Mr. Chairman, this concludes my testimony. I would be happy
to answer any questions that you have.
Senator Durbin. Thank you for being here, and we will have
some questions. Mr. Eastham.
TESTIMONY OF ALAN EASTHAM,\1\ SPECIAL NEGOTIATOR FOR CONFLICT
DIAMONDS, U.S. DEPARTMENT OF STATE
Mr. Eastham. Thank you very much, Mr. Chairman, for
inviting the State Department to come and testify today. I have
submitted a rather lengthy written statement, which I will
summarize rather brutally with your permission.
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\1\ The prepared statement of Mr. Eastham appears in the Appendix
on page 66.
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You asked that we look at developments in the potential
effectiveness of the Kimberley Process certification system as
well as whether the proposed regime in that process would be
useful to prevent terrorists from financing their operations
through diamond trading. These are both important questions.
With respect to the first, I believe that the Kimberley
Process as presently outlined and in which there are
significant issues to be settled in our next series of meetings
will be effective both in deterring conflict diamonds and in
affecting the ability of terrorists to use diamonds to finance
their operations. I will explain that in a little more detail
in a moment and I am sure we will have some discussion about it
in the question period.
We have been working on this problem for some years, both
through the U.N. Security Council, as well as more recently
through the Kimberley Process. The United States has fully
implemented the Security Council resolutions applicable to
Angola, Sierra Leone, and Liberia which affect conflict
diamonds and were active participants in the consideration in
New York of resource issues affecting the Democratic Republic
of Congo.
I would like to acknowledge the role of the government of
Angola and the government of Sierra Leone, in particular, in
implementing certification systems which are designed to attack
the problem of conflict diamonds.
In the Kimberley Process, what we are doing in that
discussion is trying to establish principles for a system of
certification on the trade in rough diamonds in order to
eliminate conflict diamonds from international trade. Under the
system as outlined by the Kimberley Process up to the present
point, every country that trades in rough diamonds, including
the United States of America, would validate an export document
called a Kimberley Process certificate. What this document
would do would be to attest to the fact that the diamonds being
exported were handled in compliance with a national system of
internal controls designed to eliminate the presence of
conflict diamonds from our trade. It is our expectation this
system will eventually cover the entire global trade in
legitimate rough diamonds.
The point is not to identify the origin of every diamond
but to set up a system of legitimate trade in which the trade
will be recognized as legitimate, to strengthen it, and to
enable that trade to flourish in a way which excludes the bad
diamonds. This will, thus, give the industry the ability to
continue to function. It will enable consumers to have
confidence that what they are buying does not contribute to
human misery in another part of the world. And it will enable
us to focus our enforcement resources on the black market, on
conflict diamonds and the use of diamonds for other evil
purposes.
We are now working on several remaining issues within the
Kimberley Process, getting ready for the next meeting in March
in Canada. We are also considering interagency what changes in
U.S. law and procedure might be necessary to implement the
proposed scheme. This is a matter of some urgency, since the
last meeting of the Kimberley Process in November recommended
the system should be implemented as soon as possible with the
issuance of certificates beginning immediately by those
countries in a position to do so. Of course, Angola, Sierra
Leone, and Guinea are already issuing certificates to accompany
rough diamond shipments, so that is a start. We would hope that
others would begin doing so in the very near future.
With the strong support of the Congress and active efforts
by the administration, we hope that this can be in place--a
simple, effective, cost effective, and global system will be in
place by the end of this year.
Let me conclude briefly with a discussion of the role of
diamonds in terrorist finance, which is of great concern to us
as it is to you, based on your comments earlier. We in the
State Department and our law enforcement agencies are
consulting together to look at the diamond business to identify
vulnerabilities in this area, and I have been talking to our
enforcement agencies as well as to other countries,
participants in the diamond trade, in the past few weeks on
this very issue.
We do not believe that the major participants in the legal
diamond business would knowingly countenance the trade in
diamonds which are used for terrorist finance. However, there
is the risk that diamonds are being used to hoard wealth and
avoid legitimate banking circles by terrorists and this is an
area where we are concentrating our efforts.
Regrettably, there are some on the fringes of the diamond
trade who are willing to overlook warning signs when an
opportunity to buy rough diamonds at a good price comes along.
It is important for the industry to avoid being implicated in
this evil, and particularly important for the diamond trade in
this country to heed the best practice of know your supplier.
This is an essential first step in taking effective action
against both conflict diamonds and the use of rough diamonds as
a terrorist financing tool. Thank you very much.
Senator Durbin. Thank you very much. Mr. Skud.
TESTIMONY OF TIMOTHY SKUD,\1\ ACTING DEPUTY ASSISTANT SECRETARY
FOR REGULATION, TARIFF, AND TRADE ENFORCEMENT, U.S. DEPARTMENT
OF THE TREASURY
Mr. Skud. Mr. Chairman, thank you for inviting me to speak
about the role of the Treasury and the Customs Service in
interdicting conflict diamonds.
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\1\ The prepared statement of Mr. Skud appears in the Appendix on
page 71.
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The role of diamonds in conflicts in Angola and Sierra
Leone has been well documented. More broadly, diamonds are
often used in criminal networks running parallel to legitimate
trade channels. They offer opportunities to conceal financial
and organizational relationships. They can be used in money
laundering, arms trafficking, and international terrorism.
Customs recently initiated Operation Green Quest, which
aims to investigate such crimes, including those which may
utilize diamonds. In addition, Customs currently enforces
specific prohibitions on importation of the diamonds from three
countries, Angola, Sierra Leone, and Liberia. These
prohibitions are in place pursuant to Executive Orders that are
consistent with U.N. Security Council resolutions. These orders
prohibit imports of all diamonds exported from Liberia and only
allow diamond imports from Sierra Leone and Angola that are
accompanied by certifying documentation.
Importers must present appropriate documentation to Customs
on demand and have the responsibility to keep certificates on
file for 5 years after importation to be available for further
review and investigation. Customs uses targeted examinations
and risk analysis techniques to identify those imports that
represent the greatest risk and to focus resources in those
areas. This may include post-importation audits to review
importers' overall trade, to identify anomalies, and to verify
claims made at entry. This verification can include contact
with exporting authorities. If any information on suspect
diamonds is obtained, Customs will seize shipments or initiate
formal investigations.
There have been two recent local interdictions of diamond
imports based on failure to present proper export certificates.
In December, Customs inspectors at BWI airport seized diamonds
from a passenger who had arrived from Sierra Leone. The
passenger had no accompanying certificate for those diamonds.
In February, an arriving international passenger declared
diamonds to Customs officers at BWI, but Customs inspectors
believed that certificate to be fraudulent. The stones and the
accompanying documents have been detained.
In January 2001, the U.N. General Assembly encouraged
member states to devise effective and pragmatic measures to
address the problems of conflict diamonds. Over 30 countries
have engaged in the resulting discussions, known as the
Kimberley Process. The objective of the Kimberley certification
scheme is to assist in tracking legitimate diamond trade in
order to isolate illegal shipments and identify persons
involved in the trade of illicit conflict diamonds. Treasury
and Customs have participated in these discussions and have
shared information with participating countries on what we
believe are the most modern and effective Customs analysis and
interdiction techniques.
The Customs Service would enforce any import regulations
concerning Kimberley certificates as it does the existing
sanctions with respect to shipments from Sierra Leone, Angola,
and Liberia.
The United States is a significant consumer of polished
diamonds, but rough diamonds are primarily processed elsewhere.
An effective global regime for excluding conflict diamonds will
need to rely on effective monitoring mechanisms in countries of
first extraction, in primary importing countries, and on
international cooperation.
The Kimberley Process involves traders and tries to strike
a balance between trader vigilance and government involvement.
A system that relies strictly on government enforcement and
excludes the industry would be far less effective.
In summary, we support the objectives of the Kimberley
Process. In addition, Treasury and Customs have actively
participated in the administration's dialogue with the Congress
concerning H.R. 2722. We believe this bill complements the
efforts of the administration to combat trade in conflict
diamonds under the Executive Orders and through the Kimberley
Process.
Thank you, Mr. Chairman, for the opportunity to present
Treasury's views. I would be happy to answer any questions.
Senator Durbin. Thank you very much. Mr. Mendenhall.
TESTIMONY OF JAMES MENDENHALL,\1\ DEPUTY GENERAL COUNSEL, U.S.
TRADE REPRESENTATIVE
Mr. Mendenhall. Thank you, Mr. Chairman, for inviting me to
testify before you today. I appreciate this opportunity to
discuss the efforts that are being made both nationally and
internationally to deal with the tragic problem of conflict
diamonds.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Mendenhall appears in the
Appendix on page 75.
---------------------------------------------------------------------------
As we all know, rebel groups in certain African countries,
such as Angola and Sierra Leone, have for many years funded
their activities through the sale of conflict diamonds. These
groups have engaged in atrocities that shock the conscience.
The international community is taking action to stop the trade
in conflict diamonds and we are now approaching the point where
an effective and comprehensive regime can be put in place. U.S.
Trade Representative (USTR) wholly supports this effort.
Last November, the House of Representatives passed H.R.
2722, the Clean Diamond Trade Act, by the overwhelming margin
of 408 to 6. USTR supported the bill and is pleased that the
House passed it so resoundingly. We applaud the leadership of
Ways and Means Committee Chairman Thomas, as well as that of
Representatives Hall, Wolf, and Houghton, in taking this
positive and constructive step toward severing the tie between
diamonds and conflict.
I also applaud you, Mr. Chairman, along with Senators
Gregg, DeWine, and Feingold, for being actively engaged in
formulating legislation to deal with this problem and for
giving this issue the serious attention and consideration that
it deserves.
USTR and other agencies in the administration have
discussed conflict diamonds legislation with your staffs and we
look forward to continuing this dialogue. As we have made clear
in those discussions, we fully support expeditious Senate
approval of H.R. 2722.
H.R. 2722 was the result of long and hard work by Members
of Congress, their staffs, the administration, and the NGO and
business communities. USTR participated fully in this process
and sought a bill that would be effective, would not undermine
the Kimberley Process negotiations or other multilateral
efforts to prevent trade in conflict diamonds, and would comply
with U.S. international obligations. H.R. 2722 achieves each of
these objectives.
First, the bill enumerates specific measures that countries
could adopt to help ensure that conflict diamonds do not enter
the international stream of commerce.
Second, the bill is designed to complement multilateral
efforts to prevent trade in conflict diamonds. The bill stakes
out a clear U.S. position on the elements of an effective
international regime and encourages countries to adhere to the
framework arrangement that will emerge from the Kimberley
Process.
Finally, the bill is designed to comply with international
law.
H.R. 2722 is landmark legislation. It places the United
States squarely at the forefront of the effort to stop trade in
conflict diamonds. However, as I think we all recognize, the
effort to prevent such trade will be vastly strengthened if all
actors in the global diamond trade, including producers,
distributors, and governments, as well as the NGO community,
join together in a comprehensive regime.
Multinational efforts to deal with the problem of conflict
diamonds have focused on two fronts, United Nations sanctions
and the negotiation of an international certification regime in
the Kimberley Process. The United Nations Security Council has
been very active in taking steps to prevent trade in conflict
diamonds and has issued three resolutions regulating trade in
diamonds exported from Sierra Leone, Angola, and Liberia. H.R.
2722 is meant to work within the framework created by these
sanctions and to encourage other countries to comply with their
U.N. obligations.
The Kimberley Process is a much broader initiative. Since
its first meeting in May 2000 in Kimberley, South Africa, it
has grown into a sophisticated international negotiation with a
growing number of participants. Throughout the Kimberley
Process, over 30 members of the international community,
including the United States, have come together to negotiate an
international regime to eliminate trade in conflict diamonds.
This effort is truly extraordinary in that the NGO community
and the diamond industry participate directly in the
discussions and will be key to the operation of the regime once
it is implemented.
The United Nations has played a central role in urging
completion of the process and garnering international support.
In December 2000, the U.N. General Assembly endorsed the work
of the Kimberley Process when it unanimously passed Resolution
55/56. Last December in Botswana, the Kimberley participants
issued a working document which sets out the elements of an
international certification scheme for trade in rough diamonds.
The document has been sent to the U.N. General Assembly, where
it will be discussed in March.
The State Department has been the lead in the Kimberley
Process negotiations and they have done an admirable job in
filling that role and the USTR has participated, as well. Over
the coming year, participants in the Kimberley Process should
begin to implement the elements of the certification scheme.
However, there are several key issues that remain to be
resolved. These issues include ensuring that the certification
system is consistent with international trade rules.
The participants agreed in Botswana to create a working
group to discuss this issue and report back to the other
participants at the next plenary meeting in Canada in March.
Nine countries are participating in the working group on trade
issues, including the United States. USTR and the State
Department are representing the United States in these
discussions. Since December, we have been actively engaged in
discussions with other members of the working group. The first
meeting of the working group will be held in Geneva this
weekend, and by the time the plenary meets in Canada, we hope
to have resolved most or all of the concerns related to
compliance with international trade rules.
Thank you again for the invitation to testify here today. I
look forward to working closely with you and your staffs in the
future to address this difficult and complex problem.
Senator Durbin. Thank you very much, Mr. Mendenhall.
Let me say at the outset that we made a decision in the
Senate once we received the House bill not to pass it and to
have this hearing and to see if we could do a better job, and I
do not want to gainsay any of the efforts made in the House,
but I think the bill originally conceived by Congressman Hall
and passed by the Senate was a much better bill, a much
stronger bill. Let me give you four specific areas of concern,
and I want to address those during the course of this
conversation.
The bill that came out of the House does not give the
President any authority he does not already have under the
Emergency Economic Powers Act, No. 1.
No. 2, the definition of conflict diamonds is so narrow
that the bill would only cover the conflict areas of Sierra
Leone, Angola, and the country of Liberia and only those areas
where there have been Security Council resolutions. It would
not cover rebel areas in the Democratic Republic of the Congo
or other areas where conflict diamonds are a problem.
No. 3, the bill addresses rough diamonds, of which the
United States imports very few. It does not close the polished
diamond and diamond jewelry loophole.
And No. 4, and I want to get into this in some detail,
there seems to be, after all of the unanimity about our concern
over conflict diamonds, a lingering concern over the WTO and
the impact it has on this entire conversation. In other words,
if we are all of one mind in stopping conflict diamonds from
financing terrorism and stopping their importation into the
United States, there are some who are reluctant to address it
because they think it violates trade agreements. I want to talk
about that.
For WTO reasons, this House bill includes a safe harbor
provision that allows countries to export diamonds into the
United States if they are not part of the Kimberley Process.
Now that, to me, is a loophole that is unacceptable. If this is
truly the coin of the realm in the world of terrorism, you
cannot take these provisions of the House bill as an effective
way of dealing with these conflict diamonds. Let us go at them,
if we can, one by one, and I will allow you to respond if you
would like to.
First, let us talk about WTO. Mr. Eastham and Mr.
Mendenhall, do you believe that the Kimberley Agreement would
be sufficient to establish a national security exception to
WTO?
Mr. Mendenhall. I am not sure I understand. Would the
Kimberley Process, the working document itself, establish a
security exception?
Senator Durbin. Here is what I am driving at. If we are in
WTO and we are supposed to have free trade and we decide that
we are not going to allow the export of diamonds unless they
meet certain requirements to the United States, can we take the
position that that is consistent with WTO for national security
reasons? Is there some reluctance here to suggest that we are
violating a free trade agreement under WTO by imposing these
restrictions on the export of diamonds to the United States?
Mr. Mendenhall. I think to the extent that the diamond
trade, the conflict diamonds represent a threat to national
security, there are steps that we could take to regulate that
trade. I think that is correct.
I think the Kimberley Process, large parts of it, anyway,
could be--I guess one could argue they might fit within that
exception. There are parts of the Kimberley Process, however,
that I think would be hard to justify under that exception. For
example, there is a ban on exports to non-participants. It is
not clear to me yet what the national security reason or
justification would be for that. I am not saying there is not
one. I am just saying these are issues that are still being
debated, and I am not sure why banning export of trade from the
United States to a non-participant of diamonds which are, by
definition, legitimate is a national security issue.
But I want to emphasize that one of the reasons that the
working group was formed and is going to be meeting in Geneva
over the weekend is to discuss precisely these types of issues.
So I think all of the arguments concerning whether or not the
Kimberley Process fits within an exception or does not fit
within an exception or whether it can be justified or handled
through other channels, everything is on the table for
discussion.
Senator Durbin. And do I take it, if you can see a national
security exception emanating from the Kimberley Process, that
the same argument could be made based on legislation that we
would enact here?
Mr. Mendenhall. Are you talking about legislation to
implement Kimberley?
Senator Durbin. If we were to pass legislation with or
without Kimberley in the United States, based on our national
security concerns about conflict diamonds----
Mr. Mendenhall. Right.
Senator Durbin [continuing]. You do not believe that is
inconsistent with WTO?
Mr. Mendenhall. I think we would need to make sure that the
legislation was effective and tailored to achieve that goal.
Senator Durbin. Well, I would agree with that.
Mr. Eastham, what are your thoughts on WTO and this
conversation?
Mr. Eastham. Mr. Chairman, with respect to the specific
reference to the national security exception which you made in
your question, I think the issue at hand is an interaction
between the definition of national security and what the
Kimberley Process is trying to do.
At bottom, the Kimberley Process is a regulatory system
which will, if it comes into being in its present form, will
regulate the entire global trade in rough diamonds. Estimates
of the conflict portion of the rough trade are in the
neighborhood of 5 percent. No one really knows. This is an area
where there are a lot of different possibilities for
interpretation.
The question would be whether such an expansive regulatory
scheme could be brought squarely under an exception which is
clearly intended to refer to specifics. In other words, I could
think of a dozen different hypotheticals where an import or an
export might be regulated in the interest of national security.
Weapons come to mind--guns and ammunition, military equipment,
that sort of thing would squarely fall into the national
security exception. The question is the interaction between
this very broad set of restrictions intended to regulate what
is a very small part of the trade.
I do not think there is any question that you could make a
national security justification for restricting the imports of
conflict diamonds to this country. I think that is clear. The
problem, though, as others have identified, is that you cannot
target that restriction because of the nature of the diamond
trade. You cannot say, on Tuesday, let us stop all shipments
from this place because those are conflict diamonds. It is just
a question of scope.
Senator Durbin. Let me ask you about scope. The House bill
limits this to rough diamonds. Do you think that that is a
legitimate way to stop the trade in conflict diamonds and
address the problem?
Mr. Eastham. I think it is the closest to the problem. In
terms of conflict diamonds, although the definition is tied to
the Security Council decisions, we all know that conflict
diamonds are those which are used to fuel rebel activities and
wars. The rough diamonds are the problem. The problem of
conflict diamonds derives from the fact that it is easy to dig
up diamonds from the ground in certain parts of the world and
there are wars fought over contesting those areas.
Because of the nature of the trade again, once a diamond
moves a step or two or three or four, it is no longer clearly
identifiable as a conflict diamond and the place to attack the
problem, I genuinely believe, is at the source. It is where the
money goes to the rebels and that is at the stage when the
diamonds are rough.
Senator Durbin. Of course, remember the three steps that
they described earlier, taking them from the field to Freetown,
an example given by the Ambassador, and then off to Antwerp or
some other place where they are polished, finished, and then
exported in that form perhaps to the United States. If that
original diamond was mined by mutilating a child and raping a
woman in a village, the fact that it comes into the United
States ultimately as a rough diamond is of little consequence,
or whether it is a finished diamond. The origin of it is really
what we are after, is it not?
Mr. Eastham. Yes, sir, and the problem that you have
identified arises because of the nature of the trade and the
nature of the commodity. It would--the Kimberley Process is a
collaborative effort that has had industry involved from the
first day----
Senator Durbin. May I add----
Mr. Eastham [continuing]. And the idea is--yes, sir?
Senator Durbin. I just want to add for the record, at our
press conference on this issue, the diamond industry and the
jewelry industry were there in support. They understand that
public confidence in their product is at stake here. They have
not been antagonistic. So when the House bill came back just
dealing with rough diamonds, I could not understand what
happened here. We had, I thought, an approach that really dealt
with this comprehensively and said, however this diamond ends
up in the United States, whether it is polished or rough, we
are concerned about how it was mined and who made the money
when it was mined. That really is the conflict part of conflict
diamonds. And just to limit the House bill to rough diamonds, I
am troubled why you would want to narrow that into this one
category of diamonds.
Mr. Eastham. I believe the House bill does have language
which acknowledges the possibility of blocking shipments of
polished diamonds or diamonds containing jewelry to the United
States if we have information indicating that that specific
diamond shipment is composed of conflict diamonds. Where we
fall afoul of the way the trade works, Mr. Chairman, is in
trying to answer the question, how would you regulate that?
If you have a shipment of 1,000 polished diamonds coming
from a particular overseas source, the reality of the trade is
such that those diamonds could be from any diamond source in
the world, and without a fundamental transformation of the
diamond trade, which the industry has so far been unwilling for
cost reasons to consider, it would be impossible to administer,
in my view, an import system which controlled polished. Far
better to attack it at the source. You attack it at the source
through sanctions, the Security Council resolutions that I
mentioned. You attack it at the source by the Kimberley Process
system of internal controls, intended to ensure that what comes
out of the source is conflict-free.
Senator Durbin. What I heard from the Ambassadors earlier
is that is wishful thinking, to believe that we are going to
have sufficient law enforcement on the ground in these
countries to make sure that every diamond is mined in a
responsible way. What I thought we were after here was a
certification process which said to the Revolutionary United
Front in Sierra Leone and other countries, we are going to dry
up your market, and if you do not have a market for these blood
diamonds, then, frankly, this may not be the way you want to
finance your operations.
But if our goal here instead is to root out the atrocities
of the Revolutionary United Front, that is a much different
approach than I think most of us conceived at the outset.
Mr. Eastham. Well, I think we are doing both. It is not one
or the other, if I understand your comment just now. This is
about drying up the market, but it is also about encouraging
the legitimate diamond trade to continue. In the balance that
has been struck in the Kimberley Process, people can differ.
I know that there are different points of view about the
possible effectiveness of this, but my experience in the last
three meetings of the Kimberley Process leads me to conclude
that we should get on with it, get the certification system in
place, and if we find that there are holes on the ground
between the mine and the export system, or if we find that an
export system in a particular country, in any country, is not
working or it is suborned by smugglers or that enforcement is
lacking, then we will deal with it once we get a certification
system in place.
Senator Durbin. Let me be specific in a question on that.
What kind of verification for compliance and monitoring do you
expect from the Kimberley Agreement that will be effective in
drying up this market, preventing this trade in conflict
diamonds?
Mr. Eastham. Well, in the first instance, Senator, I think
that the market is going to be a very important factor in that.
Senator Durbin. Is this conversation just limited to rough
diamonds, incidentally?
Mr. Eastham. Yes. The Kimberley Process is about rough
diamonds. It is about conflict diamonds.
Senator Durbin. So your focus through Kimberley and your
focus through this legislation, rough diamonds only?
Mr. Eastham. Yes, not because we do not recognize that, as
some of my colleagues have said, the purpose of the diamond is
to be sold to a consumer. We are not ignoring polished diamonds
because we do not care about the ultimate revenues that flow
back up the chain. The problem is one of focusing the attention
on the source of the problem and not taking measures in the
middle of the trade which would either raise the cost of
diamonds or drive firms out of the diamond business.
Senator Durbin. I would just tell you, Mr. Eastham, I do
not think this is going to work. I do not believe that the
average consumer in America is going to have confidence that we
have done all we can do to make certain that one of the most
important purchases of their life is not funding terrorism by
just focusing on rough diamonds. I thought from the outset that
the conversation with the industry went far beyond that. They
understood that for confidence of the consumers to be
established, we really could not limit it to rough diamonds.
I just think you have created a situation where we are
going to be so focused on such a small part of the problem, we
are ignoring how people can easily overcome this by finishing
and polishing diamonds that are just as dirty as anything that
has been mined in these countries. It is just a terrific gap
that you have left wide open here.
Mr. Eastham. We have not been able to devise a way to
ensure, with respect to what we can control, which is imports
of this commodity into the United States, that a polished
diamond is not a conflict diamond. That is a very, very
difficult proposition.
Far better to begin at the beginning, and I am confident,
Senator, that if we get a certification system into place and
we see people using polishing as a way to get around it, if you
see polishing centers developing in countries that never had
polishing centers before, if you see large flows of diamonds
that are unaccountable in the statistics and in the cooperative
mechanism that the Kimberley Process is going to set up, that
we will be able to deal with subversion, circumvention of the
Kimberley system through polishing. I think we will find a way
to do that.
Senator Durbin. Why would we not start there? You know that
is where they are going to head to. If we allow that loophole
to exist in our enforcement, clearly, a terrorist is not going
to say, ``Oh, if I cannot do rough diamonds, I am doing
nothing.'' I do not believe that. I think they are going to
turn around and take these rough diamonds and find a way to
polish and finish them and then we will meet again in a few
years and say, is it not a shame that the terrorist network is
still making billions off of diamonds they are selling into the
United States. Now let us address phase two. What about
polished and finished diamonds? Why are you not starting with
that, as challenging as it may be?
Mr. Eastham. I can answer that. The fundamental reason is
because the diamond proceeds that fuel conflict come from the
rough diamonds which are sold by the rebel movements in order
to buy arms, to finance armies, to commit these horrible
atrocities which are the reason for our concern. We are focused
on the fundamentals, and because of the relationship between
the diamond trade in areas of conflict and the global diamond
trade, we are trying to zero in on the problem where it creates
the concerns that have motivated us to take action. That is my
only answer for you, Senator.
Senator Durbin. Mr. Yager, you considered the so-called
chain of warranties, where the industry would step in after
rough diamonds are being regulated. What is your opinion as to
how this is going to work?
Mr. Yager. We have a couple of comments on that aspect of
the Kimberley system. The chain of warranties, I think, has a
couple of weaknesses from our standpoint. One, as we and others
have discussed, the diamond trade is actually quite a complex
trade and many diamonds are traded around the world numerous
times before they actually get to the point where they are cut
and polished, whether that is in India or in some other
location. So this chain of warranties could, in fact, become
quite a long chain and the required paperwork would be quite
extensive.
A second issue is that the World Diamond Council has
strongly recommended to its members, both institutional and
individual members, that they keep up and take part in this
chain of warranties. However, they cannot require their members
to do this. And so, in a sense, this chain of warranties is a
voluntary system.
Finally, I think there is a question about the monitoring
and auditing of the chain of warranties. At this point, it
appears that the process allows for the company's auditors to
review the chain of warranties, and in essence, the warranty
itself is a statement on the invoice that the diamond that is
purchased or sold is conflict-free. But these are going to be
audited by company auditors who are not necessarily experts in
the diamond industry, nor are they able to look at the entire
chain. In a sense, they are looking at just one link in this
chain of warranties. So we see some issues with the chain of
warranties that we think could be weaknesses.
Senator Durbin. Mr. Skud, last question. When Customs
receives documentation when diamonds are brought into the
United States, what is at your disposal to verify that that
documentation is accurate and legal?
Mr. Skud. Well, the documentation can be examined by the
Customs officer and compared with examples of what a valid
certificate is like. If Customs has questions, they have an
opportunity to contact the exporting authorities.
Senator Durbin. So you can go back to the source? Is that
what you do?
Mr. Skud. We can contact the exporting authorities, yes.
Senator Durbin. In a practical case, the examples you have
given us, passengers coming through the airport, one, if I am
not mistaken, declared that he was carrying $12,000 worth of
diamonds but another was discovered to be carrying them.
Mr. Skud. Yes.
Senator Durbin. When they produce documentation, what is
the custom? You hold the diamonds until the documents have been
verified to your satisfaction?
Mr. Skud. Well, in one case, the trader, the passenger did
not have proper documentation, clearly. I believe he had a
different certificate that clearly was not for that shipment.
In the second case, it was a certificate that, frankly,
appeared fraudulent on its face to the Customs officer. So in
both cases, the stones were seized.
Senator Durbin. Thank you very much. I want to thank this
panel. This is clearly a challenging issue but one that just
has to be addressed. I think once we have established this
connection between terrorism and diamonds as a source of
funding, that if we are serious about stopping terrorism, we
have to address this issue effectively.
I hope this hearing has opened that conversation and
dialogue and I hope that we can soon come up with legislation
we can work with the administration in putting together. I
thank you all for your testimony. Thanks, everyone.
The Subcommittee stands adjourned.
[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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