DEMARCHE DELIVERY: ILLICIT DIAMOND ACTIVITY IN

C O N F I D E N T I A L PRETORIA 002714


DEPT FOR AF/S - WALCH AND MARBURG

E.O. 12958: DECL: 12/14/2018
TAGS: PREL ETRD ECON EFIN ASEC EMIN ZI SF
SUBJECT: DEMARCHE DELIVERY: ILLICIT DIAMOND ACTIVITY IN
ZIMBABWE

REF: STATE 126054


Classified By: Acting Political Counselor Madeline Q. Seidenstricker.
Reasons 1.5 (b) and (d).


1. (C) Summary: Poloff and econoff delivered demarche
(reftel) to Department of Foreign Affairs (DFA) officials and
diamond industry leaders on illicit diamond activity in
Zimbabwe. Although this activity threatens the local diamond
industry, it appears the South African Government (SAG) has
taken no action to combat the trafficking of illicit diamonds
from Zimbabwe to or through South Africa. The demarche
pushed industry and Kimberley Process (KP) related groups to
call for greater awareness and action against the problem.
End summary.


2. (C) On December 9, 2008 poloff met with Deputy Director
for Zambia and Zimbabwe John Vilakazi and Assistant Director
Eden Reid, who emphasized that illegal mining in Zimbabwe was
not a new issue. They recalled 2004 discussions about this
subject. They said the South African mining industry was
taking steps to limit illegal mining in Zimbabwe, but with
difficulty as the diamonds easily crossed the border into
South Africa through a sophisticated network of syndicates.
They mentioned no steps taken by the SAG against illegal
mining in Zimbabwe, but said their embassy in Harare was
following the issue. Reid said the problem was more of a
concern in the Democratic Republic of the Congo and West
Africa because of the greater volume and value of mined
products in those areas. He said he would pass the points we
provided to the Department of Minerals and Energy.


3. (C) Reid added that more gold was smuggled out than sold
legally in Zimbabwe. He blamed this on Zimbabwe government
policy that forced the sale of gold to parastatals at lower
than market prices. Reid described the gold mining industry
in Zimbabwe as highly centralized and unregulated. (Comment:
Post understands that the Government of Zimbabwe has also
failed to pay the mining companies for the sale of gold to
the Zimbabwe Reserve Bank, leading many of the same mining
companies to cease operations. End comment.)


4. (C) Econoff shared demarche points with the Corporate
Executive Officer of South Africa Diamond and Precious Metals
Regulator and representative for the KP Louis Selekane, World
Federation of Diamond Bourses President and World Diamond
Council (WDC) Vice Chairman Ernest Blom, and DeBeers Managing
Director Faried Sallie. Blom alerted diamond industry
leaders to the issue through a WDC press release entitled,
"WDC Calls for Concerted International Action to Halt Theft
of Natural Resources in Zimbabwe." In addition, Blom shared
recent press releases highlighting KP efforts to combat and
penalize illicit diamond trade from Zimbabwe via the KP
Working Group on Diamond Experts and the KP Civil Society
Coalition.


BOST