Behind the scenes with DMCC chief at Caracas diamond talks
CARACAS // The UAE has been handed a 24-carat challenge: how to get the disparate voices and conflicting interests of the international diamond business acting in unison for the good of an industry that is facing serious issues.
Last week, Ahmed bin Sulayem, best known as the force behind the Dubai Multi Commodities Centre – the DMCC, where the emirate’s diamond industry has flourished over the past decade – took the first steps towards meeting that challenge in crisis-torn Venezuela.
The 38-year-old DMCC chairman was the person chosen by the UAE Ministry of Economy to take up the chairmanship of the Kimberley Process (KP), which was set up in 2003 to stem the flow of “blood diamonds” on to the world’s markets. It has proved to be a controversial organisation.
Blood diamonds are by their nature sensitive: the images of savage butchery and exploitation made famous by the Hollywood film starring Leonardo DiCaprio linger in the public mind, clouding the glamour and glitter of “a girl’s best friend”.
In the KP organisation, diamond-producing countries and the big mining corporates sit with “civil society” – non-governmental organisations and human rights groups – that regard themselves as the conscience of the trade, and which allege KP has not done enough to crack down on the trade in illegal gems.
This has not always sat easily, and one of the biggest causes of friction has been Venezuela. Although it has not been classed as a “war zone” (part of the definition of blood diamonds), the country has been outside the KP since 2008, when it withdrew following allegations it was not adhering to the KP rules.
Without KP certification of its stones, Venezuela cannot be part of the multibillion global trade. The socialist government of the country, especially under the late president Hugo Chavez, for a long time appeared unconcerned about this. Some analysts believe it did not want to be seen to be dancing to the tune of the capitalist countries that dominate KP. For their own reasons, these countries – the US, Canada and others – were happy to let Venezuela sit on the sidelines.
So when Mr bin Sulayem landed at Caracas airport for his first official duties in the KP chair, his immediate task was clear: he had to break the logjam and begin the process of getting Venezuela back in. But first he had to find out whether the country – under the new president Nicolas Maduro, but still wedded to Chavismo socialism despite a severe financial crisis brought about by the fall in the price of oil – wanted to be part of KP.
“I have to find out if there is a desire to come back and set some dates for the process of return, if that is their wish,” he told The National.
There was also another motive for his visit. Some countries and some parts of “civil society” had opposed the UAE’s chairmanship, citing humanitarian concerns. Mr bin Sulayem’s reaction was that he wanted “open doors” within KP and to reconcile conflicting parties, but not at any price. The UAE had to act in the best interests of KP as a whole, and also had to protect the interests of its own increasingly important diamond industry.
And all this came against the background of an uncertain outlook for the diamond industry, with global economic worries threatening to depress demand for diamond jewellery.
So the scene was set for two days of top-level meetings with Venezuelan officials. The first took place in the offices of Eulogio Del Pino, head of the oil and minerals ministry and considered one of the most powerful men in the country, amid mementoes of Mr Chavez and Simon Bolivar, the 19th-century “liberator” of the country from Spanish rule.
Also in attendance was the president of the central bank, Nelson Merentes, who has a direct interest in resuming the diamond trade for the cash-strapped bank, and two other important players in the Venezuelan power nexus: Jose Khan, the central bank director with responsibility for mineral resources; and Richard Lozada, the minister in charge of mines.
In the course of a full and candid discussion, it became quickly apparent that Venezuela badly wanted to get back in KP as quickly as possible. The only note of tension in the meeting came when it emerged it might take quite a long time to go through the procedures to get trade resumed.
“KP moves like a mountain – slowly,” Mr bin Sulayem said later.
But there was a consensus from the meeting that both sides would work towards a resumption of KP status for Venezuela this year, under UAE chairmanship. The reason for Venezuela’s sudden enthusiasm for KP emerged at a press conference held immediately after the private meeting. Mr Khan told officials and media representative that diamond reserves had already been included in the country’s hard-pressed financial reserves at the central bank.
Moreover, the quantity of Venezuelan diamonds appears to be considerable. Mr Lozado told the meeting that the potential diamond reserve could amount to 3 billion carats in the “arco mineiro” (mineral arc) in the south, on the border with Colombia, Brazil and Guyana.
This amount could make Venezuela one of the big players in the global diamonds league. Quantity, however, is not the determining factor in the diamond business, but quality. Until Venezuela diamonds actually begin trading on global markets, it is virtually impossible to value them, experts said.
The following day a meeting at the Central Bank underlined the financial and strategic importance of diamonds reserves for Venezuela. Mr Merentes said that diamond mining and minerals in general would be included in an imminent restructuring of the country’s economy, to be announced next week. “It will be a great event, at which the president will show to the world the great strength of diamonds in Venezuela, as part of a bigger diversification plan.”
Mr Khan underlined the importance of that plan and the ideological imperative still very much in evidence in the country. He revealed that, although diamond reserves had already been added to the central bank foreign reserves, their value had not yet been decided.
“We have a single aim – to reincorporate Venezuela within KP, and that is our strategic objective,” he said. He said that Mr bin Sulayem’s visit to Caracas was a “transcendent” moment for the country and that the KP chairman was “like a brother” to Venezuela.
As the DMCC chief boarded his plane at Caracas, he appeared content with his first outing as chairman of KP. The way is clear to a formal KP review process beginning in March and possible readmission later this year.
“There is still some way to go but my meetings here have convinced me that Venezuela is serious about rejoining the process. I hope they will go further and play a leadership role in helping resolve other outstanding issues in the diamond business,” he said.
Now Mr bin Sulayem will have to turn his attention to the other pressing issues in the diamond world. Diamonds may be forever, but the KP chairmanship only lasts a year.
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Published: February 16, 2016 04:00 AM