Rough Cut: Nearly all the world’s diamonds-legal or not-pass through this one Indian city – by Jason Miklian (Foreign Policy Magazine – January 2, 2013)

SURAT, India — The Gujarat Mail is just another red-eye train. Twelve powder-blue passenger cars crisscrossing, like so many hundreds of others, India’s northwestern breadbasket through the dark of night. At five minutes past two, the Mail begins its four-hour journey, lumbering south from Surat to Mumbai. Inside, the third-class cabins are equal parts scurrying roaches and dangling unwashed feet; fading monsoon rains that bleed through the iron-barred windows grant only fleeting mercies.

A few hundred unwilling insomniacs are sandwiched together, helplessly sweating on filthy vinyl benches as the shrieking of the rails splinters dreams along every gentle bend. In this part of the world, it’s an utterly unexceptional journey.

Aside from the $25 million or so in freshly polished diamonds on board, that is. The grungy wagons are filled with dozens of diamond mules, each man secretly carrying tens of thousands of dollars of stones inside custom-made tank tops with hidden stomach pouches.

Everyone sleeps with one eye open. Despite their attempts at traveling incognito, the nervous paces of the conductor — and the fact that the doors are bolted from the outside for the entirety of the trip — belie the false sense of ease. Altogether, the mules on this sweltering, tense train trip shuttle almost every single diamond sold in the world today.

The diamonds come to Surat, the world’s fourth fastest-growing city, to get cut and polished inside the microfactories within countless rows of crumbling, whitewashed concrete office buildings. Of Surat’s 5 million residents, an estimated 500,000 deal, polish, or move stones. The gems are flown, freighted, and trucked in from Africa, Central Asia, and other mining hot spots to take advantage of India’s cheap labor and no-questions-asked atmosphere.

In Antwerp, Belgium, which for 500 years served as the world’s diamond headquarters, old money, rigorous documentation, and high security epitomized the business. But nearly 6,000 miles away in Surat, I discovered legitimate merchandise mingling openly with undocumented diamonds in a trading free-for-all. Indeed, so-called conflict diamonds — illicitly mined stones that fund conflicts in the world’s war zones — are for sale by everyone from small-time street hustlers to the Indian government itself. And the entire system is protected by an intricate familial society of brokers and middlemen that operates almost exclusively on the black market.

Here in Surat, dirt-cheap wages and loose regulations have created a dream environment for the global diamond industry. It has turned a sleepy provincial town into a new megacity within a single generation, a business center where more than 90 percent of the world’s unpolished diamonds are now processed and polished. Individual stones can change hands up to a dozen times over a matter of weeks in polishing houses that grab from piles of legal and illegal stones like mix-‘n’-match candy bins.

Deciphering clean from dirty becomes nearly impossible. Once the Gujarat Mail reaches the end of the line in Mumbai, the stones have had their damning histories washed away, and buyers ship more than $40 billion of certified merchandise annually out of a country that international authorities say is clean. But if you own a diamond bought in the 21st century, odds are it took an overnight journey on the Mail. Odds are too, you’ll have no idea where it really came from.

DIAMONDS CARRY a stately image that is as much carefully crafted corporate mythmaking as treacherous intrigue. They conjure glamour and promises of love, or perhaps shady backroom dealings by faceless financiers handcuffed to their briefcases. For years De Beers, the diamond trade’s dominant company and public face, sold the allure of the glittering stones while it ran the industry as a cartel, using its extensive reserves throughout Africa to create a near monopoly on the mining and trade of rough stones. To some, the firm seemed the pinnacle of luxury and success; to others, it was a cautionary tale of how Western greed funded conflict across the continent.

The diamond world has changed, however, and cheats have found new ways to game the system. The De Beers empire has been parceled out and sold to even bigger conglomerates; marketplaces in Hong Kong and Dubai are replacing the old guard; and the world’s largest diamond bourse now sits in Mumbai.

Meanwhile, efforts have been made to clean up the business, most notably the Kimberley Process — named for a diamond-producing region in South Africa and started in 2000 after human rights organizations and some industry players saw how the trade in illicit diamonds was fueling wars and warlords (and eroding the business). The Kimberley Process attempts to ensure conflict-free provenance by functioning like a passport for shipments of rough stones.

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