Discussions over the Syrian problem at G20 Summit held in Saint-Petersburg were looking meaningfully fruitless (especially the attempts to determine who used the chemical weapons on 21 August), meanwhile the above were useful in the context of crystallization of each party's position. The situation looks quite clear and, as opposed to the previous stages of the “Arab Spring”, the real grounds of the participants do not need ideological disguise.
We have been lately saying that the original sense of both the “Arab Spring” and the current powered conflicts (with some new expected in the near future) occurring in the African countries lies in, firstly, sterilization of excessive liquidity injected to the global economy (primarily by the Federal Reserve) in the course of counter-recession measures, and secondly, - suppression of investment activity of China in the above regions. Taking into consideration the current upsurge of oil prices as well as China's losses incurred due to freezing projects in Libya already exceeding $20 billion, one shall admit that the latter thesis has proved its viability. Accordingly, the positions of the parties concerned are evident: USA will support and take efforts to intensify the current conflicts as well as promote new conflicts in a number of African countries which have meaningful positions at the commodities markets and where China's influence is relatively high. China, in its turn, will make every possible effort to block such initiatives. Meanwhile, the Russian eloquence might be menacing to any extent, but while the hydrocarbon prices are the determining factor in the country's budget it is inevitably forced to follow the wake of American policy: $150 per barrel allows solving any internal problems in Russia.
Armed conflicts and/or threats of such conflicts in the Middle East and Africa regions are the necessary condition for positive dynamics of stock prices for commodities. But they shall be accompanies with development and implementation of various sanctions mechanisms aimed at protection of civilized markets and consumers from “conflict,” or “blood,” or “dirty” resources produced in the countries for some reason or other plumped into the turbulence zone. Due to the fact that with China's position, it is practically impossible to pursue such moves within the system of UN Security Council and its derivative structures, the makeup of protective mechanisms takes place in USA which have their own markets so large and crucial that “protection” of merely those markets will allow the desired results. Then we can see the Act of Conflict Minerals and numerous subsequent law-making initiatives of American industry and civil organizations.
Extrapolation of this story to the diamond market allows clarification of the true sense of the current tensions which have been developing between the market players. The first pole is represented with traditional operators of American diamond and jewellery markets, the corresponding industry organizations in the USA, influential non-governmental organizations involved in issues related to conflict minerals, and, finally WDC which generally shares the position of its American colleagues. Obviously, the concepts offering extension of definition of “conflict diamonds” and improving mechanisms of control and blocking diamond supplies from African countries gain massive support among representatives of US political departments.
At the other pole we can see concentration of representatives of African diamond mining states, which can reasonably expect being included to the projected political turbulence zone, as well as dealers and diamond cutters from India and China, rather sensitive to supplies of African rough stocks, and finally – the medium between African miners and Asian consumers, primarily Dubai Diamond Exchange. This league, as distinguished from the American counterpart and their allies, will hardly reach unity. This is generally resulting from the fact that the likelihood of diving into an armed conflict in the nearest future significantly varies for each African diamond mining country: should it be quite low for Botswana, it is much higher for DRC or Zimbabwe and almost equal to 1. Meanwhile it is evident that India, China and Dubai will suffer losses by all means, irrespective of which of the parts of diamond pipeline are subject to sanctions. Then, the issue is severity of loss.
As we know, the recent attempt to reorganize the Kimberley Process to broaden the interpretation of “conflict diamonds” and, accordingly, towards required modernization of sanctions mechanism, has failed. Initiators of the idea were left to enjoy the corresponding novations at the American market, and they fairly deem this solution as sufficient. And here it is quite simple to see the analogy with the Syrian issue (blockade of coercive intervention at the UN Security Council and pressing through such decision in the US Congress), which is not so remarkable as both situations have the similar nature. And then, we may assume with high probability that position of Russia will be identical in respect of both issues. Should the potential loss of relevantly small arms market in Syria can be easily reimbursed by the growth of oil prices, blocking of any part of African diamond stream can be offset by inevitable growth of prices for Russian diamonds.
The principal failure of the Kimberley Process to settle the conflict between the emerged industrial poles has already invoked a so-called substitute under the aegis of OECD, obviously, piloted by American interests. Is an analogous response from the counterpart viable? Taking into consideration the fact that China, being not so sensitive to human rights issue, has become a large consumer of both rough and polished diamonds and is predicted to grow in this sector (with some reasonable doubts for the latter), there is speculative chance of creating independent distribution channels by potential diamond-mining “outlaws” in Africa, and maybe it will be formalized as an entity alternative to KP. Strictly speaking the case is legalizing of already existing “gray schemes” - as it is not so difficult to obtain a KP certificate for not very legitimate diamond consignment in Dubai or some African countries. But the authors of such initiative should be ready to developments, as mass media (and not only mass media) will soon recall where the center of hawala is located, which weird organizations are financed through this system and which role diamonds do play in hawala.
