The Chechen arms-trafficking brothers Mutaliev, with connections in Romania and the Republic of Moldova lost a plane in Angola in 1997. The aircraft, a Soviet-made AN 72 cargo belonging to the Renan lines in Moldova, but which flew for the Congo-based Pelikan Air, was forced to land and the crew were imprisoned by the Angolan army.
The plane had made a series of suspicious stop-overs in South Africa, Cote d'Ivoire (Abidjan) and Angola (Andula) and was due back to Moldova. According to survivors, the aircraft had carried weapons, five Liberian passengers and a sizeable amount of diamonds, the reason for its arrest. Unofficial data indicated that the diamonds were to be shipped to Romania. Starting from this indirect connection to Romania on the guns-for-diamonds market, we have embarked on a thorough investigation on the Romanian diamond market, which has taken off quite fast in the last ten years. We have found a concealed world, where secrecy surpasses the absurd. We have also found a whole industry, over which authorities have little or no control.The PlantOne of the first diamond polishing plants established in Romania after the Revolution in 1989 lies only a few miles outside Bucharest, in Afumati and is called MCR International. At a first glance it looked like nothing more than the ruins of an old communist-era collective farm, with derelict buildings, surrounded by a rusty fence. No firm or advertisement gives any indication of the diamond plant processing millions of dollars worth of goods. Somewhere at the end of a secondary road we could see the first signs of human activity. A tall metallic fence surrounded the buildings, topped by barbed wire. Several surveillance cameras mounted on poles, in front of the entrance fiercely defended by bodyguards. We managed to gain access into the compound claiming that we sought employment as diamond processors. We were welcomed by the lady in charge with personnel. We were told that a working day began at 7 a.m. and ended at 6 p.m. with a lunch brake. The wage was 1,500,000 lei (50 USD) with bonuses for any stone processed over the fixed quota. We had to sign a contract stating that we would not leave the plant for three years. If we did, the woman told us, we would have to pay $3,000 in damages for the training needed to become a diamond processor.PlantsThis is only one of the 12 diamond processing plants in Romania. Out of them, nine are indeed important. Between them, they employ almost 1,000 processors. Although at the beginning they were all grouped in Bucharest or in its vicinity, they have now started to move to smaller towns, such as Calarasi or Pitesti. Worldwide, the diamond industry is divided between mining, cutting and polishing, mounting and selling. This is only a convention, because as we will see, there are a number of companies in Romania, which developed the entire process from mining the stones to adding the final touches to jewelry. According to specialists, a diamond-cutting plant must employ at least 100 processors to become profitable. Furthermore, it cannot resist on its own. Several more plants cluster around it, creating a market for this highly sensitive commodity. The legal import papers state that diamond plants are involved in "active production". That is, the diamonds do not belong to the processors, they are only polished for an overseas firm and then returned to the owner. Profits are thus concentrated in the origin country, and Romania is left only with wages taxes.Moshe Sinai, one of the most prominent diamond-processing plant owners in Romania has been working in this field since he was only 14 years old. He explains why diamond processors are attracted by Romania. "We will go wherever we can find cheap labor. We will go to Thailand, we will go to India, where there are over 500,000 diamond cutters. Romania is favored given its proximity to Europe, as time is vital in this field. For instance, in India the labor cost amounts to half a dollar per stone while in Romania it reaches one dollar per stone, yet distance is decisive. Furthermore, one tenth of the Israeli citizens speak Romanian, which is also very important," Sinai says. Diamond cutting has become a major business in Romania after 1996. Up to then there were only a few plants. "When I first arrived, in 1994, there were only two diamond-cutting plants: Diarul (Shmuel Dascal) and Menachem who had been in business since 1991. I first started in Baneasa", says Sinai. As a coincidence, starting with 1996, the Licensing Office of the Ministry of Foreign Affairs no longer enforced the SICOMEX code, requiring that, prior to licensing, the declared object of activity of the firm should be correlated with its finite output. We shall see that there are a series of companies dealing with "alcoholic beverages retail sale" and which are in fact processing diamonds. All processing-diamonds companies unfold their activities in utter secrecy. "We need no publicity whatsoever!" sang all the processing-plant owners in unison. Considering that the volume of cut stones is not great, that saftey measures are extremely tight and that the goods are insured, the utter secrecy surrounding the operations is suspicious, to say the least. Acloser look on the shareholders of some of these companies can only increase suspicion. Some of the firms present in Romania have already been involved in international financial scandals. For instance, Galit Diamond Inc. (with operations in Bucharest) had litigation with the Merchants Bank of New York. Galit paid to another firm 58,000 USD in a false cheque. As a consequence, the bank froze all the company's assets without warning.Diamond PhantomsComing back to the plant near Bucharest, MCR International deals with stone cutting and polishing and has been in business since 1992. At that time, the Israel-based Michshur Ltd bought the buildings in Afumati. Michshur Ltd belonged to the present manager of the plant, Menachem Zvik. Since March 2001, the plant was taken over by a Swiss holding – USINVEST AG, based in a P.O. Box somewhere in Switzerland. We have contacted the CEO of the USINVEST, Mr. Alfonse Stoefel who claims that his company has never invested in Romania. This turns the diamond plant into a phantom operation. Pursuing our investigations, we discovered one firm in which the Swiss firm holds a significant stake. JT Euroconstruct, owned by USINVEST, claims 48% of the shares, Business Consulting Group 0.8% and Liviu Beris, born in USSR, another 48%. The manager of the company is Shalom Vaitzman, born in Iraq, in 1944. We have contacted the former owner of Michshur Ltd, who said: "I have bought Michshur in 1997. At that time I did not know that the company had operations in Romania, let alone one concerning diamonds. I cannot understand how Michshur and the Swiss company could have concluded any deal in 2001, since the company was no longer owned by Menachem." Furthermore, we learnt that a little while ago, the owner of Michshur sued Menachem Zvik for a sizeable debt. Menachem Zvik refused to comment on any of these matters. Utter SecrecyWe have tried to contact all diamond processors in Romania. In most cases, after tremendous efforts to get a direct telephone number and to bypass the huge army of secretaries employed, the reaction was one and the same: "We do not need any publicity. We do not want people talking about us," answered every Israeli owner of diamond operations in Romania. Some of them are said to have come for the first time to Romania sent by the Elbit System company in Israel - a company dealing in military equipment. This is an extremely interesting piece of information yet no one cared to issue any comments on that. The Diamonds Market in DeclineIPG is the most interesting company in Romania as it imports diamonds from a disputed area in Africa, where diamonds and rare minerals have been fuelling decades of bloody wars tearing apart a number of African countries. We have contacted the only Romanian national on the firm, Ovidiu Stamatescu who is, at the same time, one of the very few Romanian specialists in the field. "I worked in this field even before the Romanian Revolution in 1989. We had the same partners in Belgium we have now. At the beginning of the '90s we established a firm and we continued to work with them. We process natural diamonds, yet we use them for tools. We do not deal with jewelry, although Leemans also operates in this field". It is also Stamatescu who briefs us on the evolution of the business over the last ten years: "Before 1989 we imported stones in excess of 1,5 million dollars. Now, we barely reach 500,000 dollars. The market is quite bearish at the moment.In the past we were able to barter diamonds. We paid in synthetic diamonds, or even in shoes. The former Romanian state-owned enterprise Dunarea also made a series of more particular barters, before turning over the operation to us, shortly before the Revolution. Among our foreign partners, we worked then as we do now with Gemmata, Premier Diamonds, Indo Diamonds and IDC in UK". DevelopmentsAll companies in Romania process between them around 40 kilos of stones. Their declared overall value stands at $1,7 million. The quantity is not large enough to account for the extremely nervous reactions of the owners. We have come to wonder if Romania is actually turning into a gray market processing stones of dubious origin without any formalities. Until now, no major processor showed any interest in this area. There are only rumors of a very important Indian diamond cutter who is scrutinizing the Romanian market in order to transfer all his operations here. Yet this is what Moshe Sinai states: "Romania cannot yet handle large quantities of legal stones, mainly due to its widespread redtape. An inflow of about 10,000 pieces would require proper equipment. In Romania we cannot cut round diamonds (accounting for roughly 80% of the market)". Concerning the possibility that stones processed in Romania could have dubious origins, Moshe Sinai rush into the conlusion that: "People write all sorts of rubbish about diamonds. Only a fool would smuggle diamonds. We are few in this line of business and we know each other well. We cannot afford to be involved in illegal deals", ends Moshe. Connections to the Organized CrimeChristian Dietrich is a specialist in diamond trade and has published several reports on diamond trafficking in embargoed African countries. He is a member of the IPIS, a foundation studying arms and rare minerals trafficking. We have interviewed him for further details.
- Can the diamond industry be linked to terrorism and organized crime?
- The diamond industry is indeed employed by various organized crime groups for money laundry. Money is transferred extremely rapidly, due to the very nature of the diamond trade, where no one declares their true profit. When it comes to Africa, we have no idea which companies conduct the exports and which is the real turnover.
- How does this market function and what about its illegal side?
- It is very simple, actually. If you buy diamonds in Brazzaville, which have been in fact smuggled out of Angola or Congo-Kinshasa and you import them to Belgium, you can declare that you bought them in Brazzaville. This works for any country free from embargo. It is very easy to manipulate the system and to import illegal stones. All you have to do next is to process them legally. The entire process is shrouded in such deep secrecy that no one can trace the true origin of the stones.
- One of the diamond processing plant owners in Romania stated that only a fool would traffic diamonds. What is the advantage of illegal diamond trade over the legal one?
- This is the catch. While diamonds are being processed, from their mining to their being sold as jewelry, organized crime groups have to go underground. At a certain moment they have to render the stones licit, somewhere in Belgium or in other countries. Furthermore, organized crime networks want to conceal the true value of their trade. In this case they will even avoid declaring what they have imported legally.
By: Stefan Candea, Sorin Ozon  Saturday, August 17th 2002 (Source: http://www.crji.org)