Global Policy Forum

Mineral Riches Fuel War, Not the Poor


By Jamie Doward

The Observer
June 18, 2000

A FEW MILES outside the Angolan capital of Luanda lie a motley collection of rusting Russian T54 and T72 tanks. The tanks were junk even before the Angolan government bought them. Their transmission systems were so jammed that they had to be hauled off the container ships using chains. The corroded machines are immovable testimonies to the connections between scarce, natural resources and some of the world's most violent conflicts.

Most of Angola's diamond mining industry has been under the control of Unita rebels for much of the past decade, giving them an income of Dollars 3.7 billion. Between 1992 and 1998, the country's government has in return used the income it receives from the world's oil companies each year, estimated to be between Dollars 1.8bn and Dollars 3bn, to buy weapons and pay its army. More than 90 per cent of the Angolan government's income comes from oil.

The amount of money being spent by both sides represents a colossal and tragic waste of money, almost impossible to comprehend. Despite the country's wealth of natural resources, it ranks 160th out of 172 nations in the human development index.

What wealth there is goes to various elites while the population starves. More than 80 per cent of Angolans live in poverty. The country's president, Eduardo Dos Santos, was forced to admit as much in 1997 when he said: 'Two thirds of the Angolan population live on less than a dollar a day.'

The UN has slapped an embargo on Angolan diamonds, and the big-name mining companies, such as De Beers, have severed their ties.

However the precious gems are still finding their way out of the country. Angolan diamonds are now being sold through one company - a company which is partly owned by a man who has for the best part of a decade kept the country's government in arms.

Diamonds are big at the moment. The conflict in Sierra Leone was initially sparked by a desire of Charles Taylor, the ruler of Liberia, to control his neighbouring country's diamond reserves.

And now the focus has shifted to the Democratic Republic of Congo (DRC). Last week The Observer revealed how the Foreign Office had stepped into the row surrounding mining firm Oryx, which was looking to float on London's Alternative Investment Market. The firm, which has a concession to mine in the Mbuji Mayi area of the DRC, has attracted attention because of its close links with the Zimbabwean and Congolese governments, which have profit-sharing agreements with Oryx.

Oryx disputes that it is mining in a conflict zone; Foreign Office Minister Peter Hain disagrees. Oryx feels hard done by. It is a relatively small company operating in an area which is also being mined by a Belgian firm partly owned by diamond giant De Beers. Nevertheless the spotlight on Oryx is understandable given the attention already being paid to the actions of Robert Mugabe's government and the bitter fighting in Kisangani in the east of the DRC.

But it also diverts attention from the wider picture. Everywhere you look, the DRC is being plundered of its natural resources. The Rwandan army seized many of the region's tantalite mines. Tantalite is used in the production of gun barrels. Likewise, the gold mines are coming under control of both Ugandan and Rwandan forces. Meanwhile, a railway line connects several copper mines to Zambia. The copper is taken from the DRC to Zambia where, according to pressure group Global Witness, it is picked up by Zimbabwean troops.

Global Witness, set up in 1993, highlights the links between conflict and natural resources, points out that what is happening in parts of the DRC is nothing new.

Throughout the early Nineties the Khmer Rouge made up to Dollars 20 million a year to keep itself in arms by selling timber to Thai government and military officials. The Khmer Rouge also did very well offloading sapphires and rubies mined near its stronghold in Pailin.

The Cambodian government, during the latter half of the last decade, signed secret illegal deals to allow Vietnamese loggers to fell Cambodian timber, much of which was subsequently made into garden furniture and sold across Europe under bogus 'environment-friendly' labels. The money found its way into the pockets of key military officials who were instrumental in establishing a coup d'etat in 1997.

According to Global Witness, in 1996 the Cambodian government was making around Dollars 100m a year from selling timber-felling concessions. Today, because of extensive deforestation, that government is lucky if it makes around a fifth of what it was earning four years ago. Gleaning such figures is no easy task. One of the main problems analysts face when trying to work out to what extent the trade in a particular natural resource is helping fuel a conflict is that, for obvious reasons, no one is sure exactly where the money is going.

Take the acquisition of oil drilling rights in Angola for example. In July last year, the Angolan government awarded the rights to three deep-water oil blocks to consortia led by BP-Amoco, Elf Aquitaine and Exxon respectively. Global Witness believes a high proportion of the Dollars 900m 'signature bonus' (the money paid upfront) went straight into the pockets of the Angolan presidency. Unfortunately none of the oil companies gives detailed breakdowns of how much it spends on acquiring concessions on a country-by-country basis, so working out where the money flows is almost impossible.

Last year the Foreign Office's Hain acknowledged this when he stated in a speech at the School of Oriental and African Studies that: 'The oil companies who work in Angola, like BP-Amoco, Elf, Total and Exxon - and the diamond traders like De Beers - should be open with the international community and the international financial institutions so that it is clear these revenues are not siphoned off but are invested in the country.'

An admirable sentiment, but one which so far looks impossible to achieve. None of the oil companies is prepared to give detailed breakdowns in its accounts - unless its competitors do the same. 'It would take little more than a change in accounting practices,' said Simon Taylor, a director of Global Witness. 'You could apply it to all the other extractive industries.'

But if the companies themselves are reluctant to take the initiative, there are at least tentative signs that the world's governments are becoming more serious about clamping down on the trade between weapons and scarce natural resources.

Last week the EU blocked a pounds 35m aid package to Liberia because of its government's involvement in supplying rebel forces in Sierra Leone with arms in return for diamonds. And France, which currently holds the presidency of the UN Security Council, has started to express an interest in how Laurent Kabila, President of the DRC, funds his army's fight against rebel forces.

There is now also a real chance that a global certification system to register the provenance of each diamond is set to become a reality. But diamonds, as even the most cursory glance around the globe's hotspots reveals, are only part of the story.

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