Global Policy Forum

By Ellen Knickmeyer

Congo said Saturday it had revoked an Israeli-based company's exclusive monopoly over diamond exports, undoing one of the most controversial deals struck under late Congo President Laurent Kabila. The firm, International Diamond Industries, was welcome to join other bidders as contracts for the diamond exports are now offered on the free market, said Congo's vice minister of mining, Mbaka Kawaya.

Congo is the world's third-largest exporter of diamonds. Exports of mostly industrial-quality diamonds accounted for about 70 percent of the Central African nation's total export revenues in 1999.

The Israeli-based firm reportedly agreed to pay Laurent Kabila's cash-strapped government $20 million in July for a flow of diamonds worth up to $600 million a year. A U.N. report this week called the deal a ``nightmare'' for Congo's government and a ``disaster'' for Congo's diamond trade. IDI ultimately paid Congo only $3 million for the monopoly, instead of $20 million, the U.N. panel said, citing sources it did not identify. The U.N. inquiry concluded the deal had the unwanted effect of driving much of Congo's diamond trade underground — depriving the government of its revenue. To circumvent the government-granted monopoly, black-market traders smuggled many diamonds out through the neighboring Republic of Congo.

A spokesman for IDI insisted on Saturday that the firm had paid the full amount it promised in the contract, although he wouldn't say how much that was. ``IDI fully complied with the agreement between IDI and the Congolese government,'' the spokesman, Lior May, said by telephone from Tel Aviv. ``We don't understand why the Congolese government is wanting to change it.''

May claimed Congo had been under pressure from IDI's competitors and the International Monetary Fund to annul the deal. IDI and government officials had been in talks to amend the terms of the contract when Congo announced it was canceling it, he said. IDI's 18-month deal also reportedly included an agreement for Israeli military experts to train the Congolese anti-smuggling force, according to the investments adviser of the late Congo president. Congo quickly denied that part of the deal, and took the adviser into custody soon after he made the allegation in September.

IDI's head, Dan Gertler, told The Associated Press in Tel Aviv this year he had only provided Congo with names of Israeli military specialists.

Laurent Kabila mortgaged much of his country's mineral wealth to pay for his side of Congo's now 2 1/2 -year-old civil war, launched when Rwanda, Uganda and their Congo rebel allies opened a military campaign to oust him. Angola, Zimbabwe and Namibia joined the war on Congo's side. The late president granted them lucrative mining concessions to keep their loyalty.

Often, he abruptly took the contracts from their previous holders to do so. That kind of unreliability has scared away many foreign investors. Joseph Kabila, who succeeded his father in the presidency after Laurent Kabila's assassination in January, had made clear from the start his dislike of deals such as the Israeli firm's monopoly. Joseph Kabila has worked since assuming the presidency on getting foreign aid and investment moving back into Congo.