Merchant of Death
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Blood from Stones

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What's Up With Venezuela's Diamonds?
One of the signs of the internal decomposition of the Chávez government is the growing corruption and internal rot. Given my past experience in Africa, one of the most intriguing things that has gone missing over the past three years are Venezuela´s diamonds.

The latest report from Partnership Africa Canada, a leading group in combating the use of blood diamonds and monitoring the Kimberley Process (KP), documents how the relatively small but still lucrative trade in Venezuelan diamonds has gone rogue.

The KP was designed to monitor the path of diamond from mining to sale, to insure that only licit diamonds make it to the world market.

The report, which reviews the compliance of many nations, blasts Venezuela particularly harshly. Given the documented support of Chávez and senior members of his intelligence apparatus for both the FARC in Colombia and Hezbollah (and the close ties to Iran), the disappearance of 200,000 carats of diamonds of years is a risk.

This untraceable revenue stream could become even more important as oil prices continue to plummet, leaving the Chávez government with rapidly shrinking revenues. This, in turn means that the social expectations generated by his revolution will remain unmet.

Perhaps more importantly, Venezuela's ability to heavily subsidize oil to its allies in Cuba, Nicaragua and elsewhere, and the billions of money thrown around to spread Chávez's brand of revolution, is now sharply curtailed. My sources say Venezuela needs the price of oil to remain above $90 a barrel to pay of its current policies.

Maybe that is why the diamonds are no longer traceable, as the report notes. It could also explain the high volume of cocaine moving through Venezuela, a volume that has climbed dramatically in recent months. It is interesting to note that the two biggest busts of recent times in West Africa (Guinea Bissau and Sierra Leone in recent months) came on Venezuela aircraft, with Colombian pilots.

For all intents and purposes, Venezuela has for the past three years been operating as a diamond outlaw state. Unfortunately, in the 18 months after PAC brought the issue of Venezuela’s non-compliance to the attention of the Kimberley Process, the KP was unable to bring about any meaningful change in the situation.

What in fact appears to be happening is that the government has driven out the small-time miners who traditionally exploited the mines. Once under government control, the mines simply stop reporting their production, so it goes off the books, meaning it could go anywhere.

PAC, I should note, has done groundbreaking work over many years on the use of diamonds to pay for the wars in Africa, and has been hammering on this theme for several years, as Venezuela has continuously failed to report its diamond earnings.

As the report notes:

Little of this production has been making it into Venezuela’s legitimate diamond export channels. Only 642 carats were legally declared in southern Bolivar state in March 2008, an amount a local Ministry of Mines and Basic Industry (Miban) official said
represented perhaps 10% of local production. What happened even to those diamonds remains a mystery, as Venezuela has not issued any Kimberley Certificates since January, 2005.

With no legal exit, Venezuela’s diamonds – perhaps some 200,000 carats per year – flow out of the country as contraband, most traversing the border of Brazil on their way to Guyana’s capital of Georgetown, where exporters mix them with Guyanese diamonds, passing the mixed parcels off as legitimate domestic production. To facilitate this contraband trade, several Georgetown exporters employ mid-level buyers in Venezuela,
most of whom operate openly out of a dozen street-front diamond buying offices in the border town of Santa Elena.

Commodities are an important part of any the financial architecture of criminal and terrorist organizations. Allowing the diamond industry to go rogue is a strong indication that these groups are at work.

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