Mmegi, Botswana
Aug 6 2004
Who’s afraid of Lev Leviev?
QUESTION TIME
PATRICK VAN RENSBURG
8/6/2004 1:58:23 AM (GMT +2)
FIRST of all, who – except for the diamond insiders – knows who Lev
Leviev is? The Daily News recently told us that he wants to open a
diamond-polishing factory in Botswana, without telling us much about
him. According to The Economist of London, `De Beer’s days of market
dominance may well be drawing to a close. Yet consumers should not
get excited just yet. Whether a duopoly or oligopoly emerges, diamond
prices are not going to plunge. Leviev will be among those putting a
stop to that’.
Could it be because of Leviev that De Beers settled its price fixing
case with the US Government by paying a US$10 million fine? Now,
because of that payment, and a guilty plea to charges of price fixing
of raw diamonds, it can – as it could not till then – sell its
diamonds directly on Fifth Avenue, New York, indeed anywhere in
America.
Lev Leviev, The Economist tells us, `threatens to break up entirely
how De Beers organises the diamond industry’, which of course
substantially affects Botswana, not only because the country has a
15% stake in the company.
Leviev, an Israeli citizen, born in Uzbekistan (a former Soviet Union
Republic), has considerable interest in diamonds, as well as in
transport and property. For a long time, at a time that De Beers
still controlled, though did not themselves mine, 80% of the world’s
diamonds, Leviev worked as a De Beers sight holder, buying unseen
parcels of stones at non-negotiable prices. That was how De Beers
operated then, given its almost total control of the industry.
Leviev, reportedly, so much resented having to take or leave the
stones available from De Beers, that he apparently decided to get
back at the cartel.
His first major break came in Russia, where he became a close
personal associate of Vladimir Putin’s, before Putin became
President. Leviev was already known as a diamond cutter and polisher
in the 1980s, and the Soviet state-owned diamond corporation asked
him to help set up local factories there fifteen years ago. He formed
a joint venture with the state firm, and insisted that only rough
diamonds from Russian mines be supplied for cutting and polishing to
the joint enterprise. None were to be diverted through De Beers. De
Beers were reportedly very angry at losing its supply. When, after
the fall of the Soviet Union, the factories were privatised, Leviev
`somehow emerged as the sole owner’, it was reported.
Leviev didn’t stop there. He was helping create jobs and adding value
to the diamonds exported, and offered to do the same in Angola. He
reportedly invested US$60 million there. Although he did not get all
he wanted out of the deal – Angola later cancelled three quarters of
the supply of diamonds that it initially made available to him – he
had ousted De Beers.
Leviev then built a diamond factory in Windhoek to add value to the
country’s diamond exports. With 550 workers, it is apparently
Africa’s largest. On June 28, Leviev took Sam Nujoma around his new
factory. Despite Namibia’s deal with De Beers in NAMDEB, the
country’s mining laws prevent a monopoly control of diamond supplies,
and Leviev has access to its diamonds, if the President agrees. And
what did Nujoma reportedly say on June 28, when he went round the
factory? `To our brothers and sisters of neighbouring states, Angola,
Botswana, South Africa, I hope this gives you inspiration to do what
we have done here’ – which is to establish a diamond cutting and
polishing factory using locally-mined stones.
Leviev has a fleet of mining ships, apparently, operating off
Namibia’s coast, `sucking up diamonds from the sea’. He boasts that
it is the world’s second largest fleet. The biggest is apparently
that of De Beers. Leviev claims he is the only diamond tycoon with
interests in all stages of production, from mining to processing as
well as to selling.
He has factories in Armenia, India, Ukraine, Israel and elsewhere.
`These give him the power to challenge De Beers’ central clearing
house and seek instead to channel raw stones directly and at a lower
price, to his own polishers’.
He is building another factory in Angola. Besides what The Daily News
told us, he has apparently said that his factory here could be far
larger than that in Angola, `employing tens of thousands’.
The historical success of De Beers, with its near-monopoly as a
trader of rough stones was based on maintaining and increasing the
prices of diamonds by controlling supply. It had persuaded
governments to make it illegal for unlicensed individuals to buy and
sell diamonds in all the producing countries. It had never done much
over the earlier years of its control of the diamond trade to create
jobs or develop skills in diamond-producing countries, but it
`delivered big and stable revenues to its governments’, The Economist
concludes.
The big question for us now, is how to deal with both Leviev and De
Beers. There is no doubt that there is a need for us to beneficiate
more of our raw materials, and although we now have cutters and
polishers, albeit not yet with shining successes, the more finished
products we can account for, the more jobs are created and the more
the country earns from its minerals.
Some years ago, Bristol University in the UK discovered how to make
diamond fibre, which could become very valuable for spacecraft
manufacture and other uses. Could Leviev be interested in that
possibility, too?
From: Emil Lazarian | Ararat NewsPress