Diamond Wars | Monopolies Aren’t Forever | 6

[MUSIC] Listener note, this episode contains disturbing descriptions of violence. Please take care while listening. It's October 1996, and in the Oberoi Hotel in Mumbai, more than 100 Indian gem manufacturers are in a conference suite overlooking the Arabian Sea. Onstage is Gordon Gilchrist, boss of the Australian Diamond Mine, Argyle. A man in the audience takes a handheld microphone and speaks directly to Gilchrist. I feel I am caught in a firefight. Debeers is punishing us for Argyle's actions. Audience members nod in agreement. My diamond inventory is worth less than when I bought it. And now my bank is threatening to cut off my credit. He's right to be worried. Four months ago, Argyle divorced Debeers. The Australian mine had a plan to thrive on its own, to pair its low-grade gemstones with India's cheap labor to make value-price diamond jewelry for big American retailers like Hamart. But now, Argyle hopes merely to survive. Debeers is gunning for it. To inflict maximum pain, Debeers dumped $200 million worth of Argyle-grade rough diamonds on the Indian market. Then, it watched with satisfaction as prices crashed by 25%. But Debeers wasn't done. It warned banks that falling diamond prices would bankrupt many Indian manufacturers. Now, the banks that fund India's diamond trade are panicking, calling in their loans, squeezing manufacturers even more. Today, Gilchrist must convince Indians to keep buying Argyle diamonds. He grips the lectern and looks out at the audience. Debeers can't keep dumping stones like ours on the market endlessly. They don't have another Argyle. Will still be producing diamonds when their stockpile runs out. Gilchrist notices a few reassured faces and keeps going. India is so competitive, you can make it without debeers. Only India's gem cutters can put 56 facets on a diamond the size of a grain of salt and still make a profit. Together, we can come out of this better all. Gilchrist sees several heads nodding. After all, 30 years ago, the Belgian city of Antwerp was the world's diamond manufacturing hub. It's still an important trading center. But now, Indian manufacturers cut and polish 90% of the world's diamonds. The audience applause, although they're still worried about what Debeers will throw at them next. But behind the scenes, Debeers is losing the fight. For over a century, it's sought to control every diamond mine on earth. But its grip is slipping. And soon, the company will be asking itself whether it's crumbling monopoly is worth saving. The world's diamond is growing. The price of the diamond is 30% of the world's diamonds. And the price of the diamond is 20% of the world's diamonds. [Music] On the last episode, Debeers struggled to control the global market as Australia's Argyle mine quit its cartel and diamonds leaked out of Angola amid a bloody civil war. Now, Debeers is stretching its finances to the max in order to keep buying the output of the remaining mines in its cartel. But a bigger problem will soon erupt. After years of turning a blind eye, the world's waking up to the horrors enabled by so-called blood diamonds, gemstones used by armed rebels to fund their wars. This is episode 6. Monopolys aren't forever. It's 1997 and above the town of Andulu Angola, a lear jet descends toward the airport. Below are abandoned farms and bombed roads, the legacy of 21 years of civil war. Officially, this plane is flying from Johannesburg to Zambia, but it's missed Zambia by 700 miles. The plane lands on the yellow dirt runway in Texas to the hangar. Above the hangar flies a red and green flag. On the flag is a black rooster, the symbol of Unita. A white South African man steps out of the plane, a pair of sunglasses hangs from his beige bush shirt. He's an arms dealer. In his dealings with Unita, he goes by Adrien. A colonel in green camo emerges from the hangar followed by soldiers with Kalashnikovs. Adrien approaches the colonel in bare hugs him as the soldiers haul crates out of the plane. Colonel, last I heard you were guarding diamond fields. I needed a change. Was your shopping trip successful? Adrien smiles and starts opening the crates he's delivering. We got boots, socks, antibiotics. Over here ammunition, grenades, landmines. In this one, light rifles, and oh, you'll love this. Adrien opens a long crate. Inside is a rocket launcher and several thin white missiles. Soviet surface to air missiles from my Ukrainian friends. They've got infrared homing. You should be able to swat some government jets out of the sky with ease. After checking the weapons, the colonel takes Adrien to the hangar. On a table are five clear grip seal plastic packets of rough diamonds. Each packet's about the size of a seven ounce bag of skittles and worth between three and five million dollars. After agreeing on the value of the stones, Adrien leaves with the diamonds and Unita's latest wish list of lethal weapons. A week later, Adrien's train from Zurich, Switzerland, arrives in Antwerp. He gets off the train and walks across the marble station concourse. In his briefcase is a thermos filled with some of the diamonds he got from Unita. Five minutes later, he's an Antwerp's diamond district. Every year, five billion dollars of rough diamonds pass through here on their weighted jewelry stores. He scans the windows of the diamond traders. In one, he spots a picture of a black rooster. Unita's symbol. It's a welcome sign for those wanting to offload Angolan diamonds. Inside, the trader uses his magnifying loop to assess Adrien's diamonds. You have the paperwork? Here. Adrien hands over an import certificate. He got it yesterday from the Swiss authorities. It says the diamonds came from Switzerland. This isn't unusual. Officially, diamonds only ever come from the last country they pass through. The trader finishes examining the stones and looks up. I give you $900,000. One million. Done. The trader opens his safe and feeds handfuls of $100 bills through a counting machine. As the machine spits out $10,000 bundles, Adrien fills his briefcase. Then, he shakes the trader's hand and leaves. There's no contract, no paper trail. The Antwerp trader will now mix these untraceable blood diamonds with legitimately sourced stones. The assorted gems will then be sold to an Indian manufacturer to be turned into jewelry. Soon, that jewelry will be under glass in stores, and Unita's diamonds will reach their final destination. The finger, ear, or neck of an unsuspecting customer. By then, it will be impossible to prove that those diamonds were extracted at gunpoint to fund a war that's killed more than half a million people and forced at least a million to flee their homes. But soon, the public will know about the diamond trades, dirty secret. It's 1999, and over central London, a helicopter swoops down toward the Hatton Garden Jewelry District. The helipad on top of Devere's offices comes into view. The pilot positions the chopper over the pad in lands. After powering down, the bearded middle-aged pilot emerges. A woman in a black suit and Chris White shirt greets him. Welcome back, Mr. Oppenheimer, the team from Bain & Company are in the conference room. Nicky Oppenheimer is the latest Oppenheimer to take the reins at Devere's. He's the 53-year-old son of Harry Oppenheimer and today, he's meeting with Bain & Company, the American management consultancy he's hired to review Devere's operations. Oppenheimer enters the building and heads to the office of Devere's managing director, Gary Ralph. Gary, it's time. Ralph, a man in his 50s, with a signet ring on his left pinky, grabs his papers. As they march toward the conference room, Oppenheimer turns to Ralph. I'm excited about this meeting, Gary. The time feels right. New millennium, new management team, new beginning. Ralph raises his unruly grey eyebrows. We might not like their recommendations, Nicky. Ralph and Oppenheimer enter the bright airy conference room. Around the table, Devere's executives and the team from Bain & Company are waiting. Oppenheimer takes his seat. Sorry to have kept you waiting. The traffic was murder. Please, start. Bain's senior consultant clears his throat and begins. Our message is, stop trying to control the supply of diamonds. The Devere's executives look shocked. Controlling the diamond supply is their business. Within these walls, that idea is heresy. The consultant continues. Right now, investors value Devere's stock at $2 billion, even though the business is worth $9 billion. They're undervaluing the stock because Devere's has such a bad reputation with investors. You're so busy trying to dominate the diamond's trade that you've missed the big picture. Oppenheimer leans forward. Which is? That you're not in the diamond business. You're in the luxury goods business. Your rivals aren't Argyle and other mines. They're expensive perfume. Vacations in St. Lucia. Louis Vuitton handbags. You should focus on becoming the diamond supplier of choice. Ralph's bushy eyebrows narrow. What does that mean? It means creating demand for Devere's diamonds. Devere's is a global brand with unquestionable cache. A diamond is forever. It's one of the all-time greatest ad slogans. You should promote Devere's diamonds, not diamonds generically. The consultant sips his water. And you need to stop buying diamonds just to lock them away. You can't afford it. And it's forcing you to defer purchases from the mines that supply you. And without guaranteed sales, the mines have no reason to stick with you. Eventually, they will follow Argyle's example and start selling their diamonds on the open market. Give the mines reasons to stay that go beyond fear of retaliation. Offer them market intelligence, training and promotional support. One worried Devere's executive jumps in. But if we don't control supply, diamond prices might fall. So what? So what? It would be chaos. Answer me this. When you buy your wife expensive perfume, are you paying top dollar for the ingredients used to make it? Or are you paying for who made it? Well, I guess perfume ingredients don't cost much, so I'm paying for who made it. Exactly. Prices may fall, but it won't matter if people are willing to pay more for Devere's diamonds. Oppenheimer folds his arms. Your plan has a flaw. America's antitrust laws stop us from operating on U.S. soil. If we promote our brand there, we violate American law. Okay. But if you surrender your monopoly as we advise, you won't be breaching antitrust rules anymore. A smile slowly spreads across Oppenheimer's face. I see. A bigger threat is blood diamonds. We've dealt with that. After the UN passed its resolution last year, we shut our buying offices in Angola. That's not enough. Diamonds are bankrolling wars in Angola, Sierra Leone and the Congo, and campaigners are slowly raising public awareness. This problem won't go away. You and the entire industry must get ahead of this. If you don't, diamonds will go the way of fur coats. It's a sobering finale to banning companies smack down of Devere's business model. But Oppenheimer's feeling great. He's just heard Devere's future. And he's ready to embrace it. In October 1999, Devere's further restricts its buying of Angolan diamonds. But by then, Sierra Leone's civil war has taken a horrific turn. Now one of the world's poorest nations, Sierra Leone is rich in tragedy. In refugee camps, the victims of a civil war that's driven them from their villages. Their limbs hacked off by the rebel Revolutionary United Front as a warning to others. As TV news beams footage of maimed civilians into homes worldwide, campaigners step up their fight against the blood diamonds being smuggled out of Sierra Leone by the Revolutionary United Front. The day before Valentine's Day 2000, protesters descend on a Tiffany store in Manhattan waving signs that read, "Diamonds kill." Amnesty International releases a parody of Devere's silhouette ads. In the spoof ad, a woman is offered and accepts a blood-spattered diamond ring. In March 2000, the United Nations report exposes how lacks regulation of Antwerp's diamond merchants helps you need to trade diamonds for guns. As awareness rises in the threat of boycotts, hang in the air. The industry realizes it must act before sales get hit. So South Africa's minerals minister Fumzele Imlambu Ingukha acts. It's May 2000, and in the 19th century church in Kimberly, South Africa, Imlambu Ingukha heads to the pulpit. She's got a short afro haircut and is wearing a purple and white dress. She looks out of the people she invited here, diamond industry bigwigs, human rights activists, and government officials. The world's attention is on the grim conflicts in some African nations. This bad publicity threatens legitimate livelihoods in South Africa and beyond. It's in all our interests to find a way to remove blood diamonds from the market. At various tables, different parties try to find common ground. But discussions heat up quickly. Officials from the UN and Belgium clash over how to regulate Antwerp's diamond traders. A campaigner from the anti-corruption non-profit global witness listens unmoved to a debeer's executive. Some perspective is needed. Blood diamonds represent less than 4% of all diamond production. That's still $200 million a year going to rebels who kill, rape, main, and enslaved thousands. But day two brings hope. Delegates agree to create a global certification system to track the origin of every diamond. Under the plan, governments in diamond producing countries will certify legitimately mine diamonds. The industry and diamond-consuming nations agree not to buy diamonds that lack certification. They call it the Kimberly process and arrange further talks to explore how to put the system in place. And with the Kimberly process promising an answer to blood diamonds, debeers can continue its reinvention. But the company is about to hit a roadblock. The European Union. Here we have Sato Laan-Tapana-Sanoa. When we have a couple of women, we have a couple of women in the world. When we have a couple of women, we have a couple of women in the world in the world. Makra Huoleton-Koti. Sato, Pisteffi. It's December 2002, and in London, debeers is making its retail debut. And the Glitterati are here in force. Actors Jude Law and Rosanna Arquette rubbed shoulders with fashion model Sophie Dahl, amid African rugs and exquisitely lit displays of diamond necklaces. In one corner, white-haired debeers executive Andrew Coxon holds court. At Khan, I had to ensure the Millennium Stars safe return, quite the responsibility looking after a hundred million dollar diamond. So Iman, David Bowie's wife? Yes, the supermodel. She comes down the Khan catwalk wearing this star and it sparkles marvellously. But then she turns and her heel goes over the catwalk's edge. Oh, the photographers have to catch Iman, but I'm terrified that she'll come back up without the diamond. But thankfully, all was well. An assistant whispers in Coxon's ear. Oh, sorry, duty calls. Coxon leads the assistant to a quiet spot. Surely Bassie's not coming? She's supposed to be hissing diamonds up forever within the hour. She doesn't want to walk past the protesters. Coxon glances at the protesters outside the store, waving placards about but swan and bushman being forced off their traditional lands. I wouldn't mind the protests, but it's but swan and government policy. It's nothing to do with us. The evening is a bumpy start for the Dabier's LV jewelry chain. Dabier's LV is a four hundred million dollar joint venture between the diamond monopoly and LV MH, the French luxury goods giant behind the fashion house Louis Vuitton and Moëe Champagne. It's a cornerstone of Dabier's reinvention. Dabier's is changing fast. It's shaking off its monopolistic instincts, steadily selling off its stockpile and abandoning its battle with Argyle. And contrary to Dabier's fears, diamond prices are holding up. It's about to settle with the U.S. Justice Department over accusations of price fixing. And it now guarantees that its diamonds are conflict free. In fact, the whole blood diamond threat seems under control. The civil wars in Angola and Sierra Leone are over and the Kimberly process will start soon. But the blood stains on the diamond trade won't go away. It's 2006 and movie theaters are showing Blood Diamond, an action thriller starring Leonardo DiCaprio set during Sierra Leone's Civil War. America's bling bling, but out here it's bling bang. But the fear that the blood diamond movie would shatter diamond sales doesn't materialize. The following year, sales of diamonds actually increase. But as 2006 begins, Dabier's faces are reckoning all the same. February 2006, the European Commission's headquarters, Brussels. In a plain meeting room with views over the Belgian capital, Europe's competition commissioner Nellie Crows is about to make Dabier's kneel. Crows is a Dutch politician with Auburn Hare and a taste for expensive jewelry. For years, she's headed the EU's fight to pry apart Dabier's and Russia's state-owned diamond company Al-Rosa. With Al-Rosa in its cartel, Dabier's controlled 70% of the world's rough diamonds. With Al-Rosa gone, Dabier's market share drops to 40%. Dabier's offered to buy fewer Russian diamonds, but Crows rejected the compromise. So now, Dabier's lawyers are waving the white flag. We will phase out cooperation with Al-Rosa so that by 2009, we will no longer buy its diamonds. Crows eyeballs the Dabier's lawyer. And you accept that failing to do that will incur a fine of up to 10% of your annual global revenue? Yes, provided your antitrust investigation ends. Then we have an agreement. Crows rises and extends a hand across the table. That handshake ends an era. After 118 years, the Dabier's monopoly is gone. Now, the company must face genuine competition and not just from its former Russian ally, because in laboratories worldwide, a new threat is growing. Synthetic diamonds. On the next episode, Zimbabwe puts blood diamonds back in the spotlight. Synthetic stones make their debut, and natural diamonds lose their luster. From wondering, this is episode 6 of Diamond Wars. A quick note about recreations you've been hearing in most cases we can't know exactly what was said those scenes are dramatizations, but they're based on historical research. I'm your host David Brown, Tristan Donovan wrote this story. Karen Lowe is our senior producer and editor, edited and produced by Emily Frost, sound designed by Kyle Randall. Our executive producers are Jenny Lauer Beckman and Marsha Louis, created by Ernon Lovhez. Or wondering.