Diamonds give isolated Zimbabwe newfound diplomatic leverage

Jun 16, 2011

Zimbabwe has been prominently in world headlines for many controversial reasons these past ten years. Some of the controversy continues, but some is receding as more focus shifts to its rich mineral pickings, including the newest one, diamonds.

The Mugabe government continues to be treated with disapproval by the West but seems more confident of its hold on power than any time in the last several years. A coalition between Mugabe's ZANU-PF and the MDC party may be fraught with tension, but it has brought the country a much-needed economic stabilisation, and has also removed a lot of the Western diplomatic pressure on Mugabe, allowing him and his still in-effective-control party to breathe easier. The discovery of diamonds has also been a significant contributor to the renewed sense of cocky, Western-defiant confidence of Mugabe's government.

Diamonds are different from the country's many other minerals in several significant respects. One important one is that the recent diamond finds are fairly accessible. This has not only meant there is a lot of illicit mining and smuggling of them, but it also has meant that approved operators could set up and start mining much faster and at a fraction of the setup costs of mining for other kinds of mineral ores. As a result, in less than five years Zimbabwe has gone from knowing little about diamonds to being a significant new player in the international market.

The Western members of the Kimberly Process of which Zimbabwe is a member have strenuously sought to  lay down the terms of its mining and exports of diamonds over human rights concerns in the new diamond fields. But years of Western isolation and demonisation have made the Mugabe government experts at defiance and finding alternative solutions to the internationally conventional.

 "With sanctions or no sanctions," Zimbabwe was going to sell its diamonds, Mugabe has said, causing jitters in the world diamond cartels that have always been able to pressure producers to cooperate to keep control over supply and marketing, and therefore to keep prices high. A major new producer like Zimbabwe flooding the global marketing system outside the Kimberly Process would be a threat to prices, but for an economically struggling country largely still cut off from international finance, low prices would be preferable to the near-bankruptcy it faced a couple of years ago.              

So the global diamond industry watches Zimbabwe with both keen interest because of the reported size of its diamond potential, but also with worry because of the quirky unpredictability of the Mugabe government; its penchant for going its own way rather than necessarily bowing to international consensus.

Zimbabwe's sudden role as a major producer in a small but important, influential niche market has given the Mugabe government unexpected new international leverage in its on-going battle of wits with hostile Western governments. But it has also increased its profile even in some friendlier quarters that may have previously considered being too close to a government so demonised by Western powers as not worth the trouble.  

A couple of years ago, at arguably Zimbabwe's lowest point economically and diplomatically, there were reports of even China having second thoughts about its closeness to the Mugabe government. That could have been just wishful thinking or propaganda, of which there have been plenty of both in regards to Mugabe's staying power in many circles at home and abroad.

Whatever the truth of that sort of speculation, the reality is that rather than being widely shunned, Zimbabwe as an economy and the Mugabe government are also slowly beginning to be courted again. Even formerly bitterly hostile governments like those of Britain and the US have tempered down their condemnations and appear to be seeking ways to re-engage with Zimbabwe despite continuing differences.

Diamonds may not be the reason for this, but their discovery has helped immeasurably. In addition to important diamond-marketing countries wanting to try to prevent the Mugabe government from upsetting the global market by feeling it has to sell its diamonds outside internationally-accepted norms, the new revenue has given the latter much-needed breathing space from the pressures of a generally still under-performing overall economy.

The under-regulation and poor monitoring of the sector has reportedly allowed a lot of under-the-table diamond revenue to flow to ZANU-PF. Among other things this would be put it in a strong position for the new election that it is agitating for, but which the MDC insists the country is not yet ready for.    

Foreigners looking for diamond concessions are now frequent visitors to Zimbabwe, when just a couple of years ago the name 'Zimbabwe' widely meant 'stay away from that country' for many.

On a recent visit by Mugabe to the Chiadzwa diamond fields, an official of a joint China-Zimbabwe mining enterprise pleaded with him to facilitate the allocation of a concession more diamond-rich than that which his company had been exploring. Mugabe and his mining minister reportedly replied that the area the company official had his eye on had already been taken up for exploration by another company. One had the real sense of a scramble amongst prospectors, a position Zimbabwe has not been in for several years in regards to any sector of economic activity.   

Where you are in control of a limited resource for which there is great demand you have power and influence. This is the position in which the Mugabe government finds itself in relation to the mining of diamonds. While many individuals in and close to government gain opportunities to line their pockets, Mugabe's government also finds itself with an unexpected new bargaining chip in its diplomatic arsenal.

Western companies that would like to have a fair shot at competing for diamond concessions and other economic opportunities find themselves at a distinct disadvantage because of the chilly relations between their governments and Mugabe's. A Mugabe minister has openly declared that British companies bidding for investment opportunities against those from elsewhere would be 'put last' because of their government's hostility to his.

Rather than Mugabe being able to talk in this ballsy way, it was the expectation of sanction-imposing Western countries that at this stage of the game his government would have been either out of power from their combined pressure, or at last on its knees begging to be re-admitted into the West's good books. The discovery of diamonds has played an important role in the subtle shift in diplomatic power dynamics between the Mugabe government and some of its harshest international critics.           

The Chinese have been happy beneficiaries of the poor relations of the Mugabe government and the West. Even if those relations thaw and normalise, as there are indications both sides are exploring ways to do, the Chinese would be in a position of distinct advantage in an economy in which British and other Western companies had until recently had unchallenged hegemony. This new reality will no doubt influence the terms of re-engagement between Western countries and Zimbabwe.

Zimbabwe may still be economically such weaker than it was in its best days, but it will not be negotiating from a point of destitution. Its clear and in-demand assets like diamonds and its relations with rising powers like China and India will mean Mugabe's government will come to the negotiating table not on its knees, but with potential and alternatives as bargaining chips for the terms of re-engagement with the West.

Diamonds are an isolated but crafty regime's best friends.  


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