How do blood diamonds and artificial diamonds not cancel eachother out?

March 21, 2007 6:51 AM

How do blood diamonds and artificial diamonds not cancel eachother out?

Sorry, I've googled this, but every hit either describes blood diamonds or artificial diamonds, and not the relationship between them.

My understanding, which may be wrong, is:

• Artificial diamonds are cheap to make, and relatively easy.
• To keep the prices of diamonds up, the diamond industry has invested heavily in convincing people that artificial diamonds are no good, and only natural diamonds, coming from the industry and properly certified, et al, are worth anything.
• Blood diamonds are natural diamonds which haven't passed through industry channels, which are valuable, and used to finance wars.

What I don't understand is: if the blood diamonds don't get certified / pass through the industry, then they would be the equivalent of artificial diamonds, in terms of value. If that's the case, why are they so profitable? And why would a country use diamonds they had mined in order to finance a war, instead of just artificially creating those diamonds?

posted by Bugbread to Grab Bag (21 answers total)

Best answer: Artificial diamonds are cheap to make, and relatively easy.

I'm not sure this is true, at least relative to the cost of tossing kids into diamond mines at slave labor wages. And it is a rather technical process that I don't think many of these countries have the infrastructure for.

The distinction is that artificial diamonds are not considered "real" diamonds. In other words, the consumer hear "artificial" or "synthetic" and they immediately think "fake".

The thing to understand is that diamonds have no inherent value. They aren't like gold, nor are they scarce, like some other gemstones. They also have no resale value. The reason diamonds are expensive is because deBeers almost exclusively controls mining and distribution - they limit the amount of diamonds on the market to create a scarcity where none naturally exists.

Thus they can charge monopoly prices. The blood diamonds come in under the monopoly price, but well above the "market" price, which would be very low.
posted by Pastabagel at 6:58 AM on March 21, 2007

When I said, "no resale value", I meant very low resale value.

There is not proper secondary market for diamonds. There's ebay, etc, given that diamonds can't be scratched and are VERY difficult to damage, you would think a ten year old diamond of certain characteristics would command the same price as a new diamond with the same characteristics. A ten yr olf gold brick is the same price as a new gold brick and that price is established on the commodity market.

But that is not the case with diamonds. There is no well-established market price for a diamond of a given size, color, cut, and clarity. If there were, the volume of diamonds out there flooding onto the market along with the 100 million carats worth of newly mined diamonds would collapse the price.
posted by Pastabagel at 7:11 AM on March 21, 2007

There is no well-established market price for a diamond of a given size, color, cut, and clarity. If there were, the volume of diamonds out there flooding onto the market along with the 100 million carats worth of newly mined diamonds would collapse the price.

Of course there is a well-established market. It might not be as tight as gold or silver, but it's there. You don't think people comparison shop for diamonds? Ever seen a Rapp sheet? The issue is that no one wants to buy some old croaker's used diamond. They want a new one.

In addition to the secondary market (which is not as big in America as elsewhere), blood diamonds sometimes do go through "official" channels (get certified, et al.) via the deceit of diamond traffickers.
posted by deadfather at 7:22 AM on March 21, 2007

Best answer: Artificial diamonds are cheap to make, and relatively easy.

Wrong, artificial diamonds are more expensive then real diamonds currently, which is why the only Artifical diamonds on sale today are "Fancy" (technical term) colored diamonds which are very rare in nature.
posted by delmoi at 7:27 AM on March 21, 2007

Oh, but there are people selling things they call "synthetic diamonds" or "lab diamonds" but those things are not actually diamonds. They're moissanite or cubic zirconia crystals.

Since blood diamonds are real diamonds, the actual "fake diamond" market doesn't impact them. But like I said, real artificial diamonds are more expensive then standard diamonds right now, that's likely to change in the future, but it hasn't yet.
posted by delmoi at 7:32 AM on March 21, 2007

This is on topic from a recent Economist article about diamonds:

"Marketing is ... vital in persuading people to buy the real thing. Synthetic diamonds have captured 90% of the industrial market, but have made few inroads into jewellery, at least so far."

Two off-topic points that stood out for me regarding the DeBeers monopoly (Economist says no longer) and blood diamonds (Economist and others say virtually no longer exist as such, although diamonds are still being mined in deplorable conditions):

- "[I]n reality, the shape of the industry—which produces an estimated $13 billion of rough stones and over $62 [1990s, Sierra Leone & Liberia].... Most of this transformation is due to the fact that De Beers, the company that once controlled much of the supply of rough diamonds, has loosened its grip, and a host of smaller producers are emerging. Regulators in Europe and America and governments in Africa have also promoted change, and “blood” diamonds have almost disappeared. As a result, the diamond trade is starting to look more like any other ordinary industry."
-"The shift, says Gareth Penny, De Beers' managing director, has been “from a supply-controlled business to a demand-driven one.” In the early 1990s the diamond giant was producing 45% of the world's rough diamonds, but selling about 80% of the total supply from its London marketing outfit, regulating the market through the careful management of a large stockpile. But sitting on a big inventory was not good for financial returns. At the same time regulators in America and Europe were calling for more competition and stories abounded about atrocities committed by diamond-financed rebels in Africa. After new management arrived in the late 1990s, De Beers changed tack. Its main trading outfit stopped buying diamonds on the open market. The company delisted in 2001 and is now owned by Anglo American, the Oppenheimer family and the government of Botswana. It has settled its long-standing antitrust dispute with American regulators. And it has promised the European Union that it will stop buying diamonds from ALROSA, the state-owned Russian firm that extracts 20% or so of global production, by 2009 in order to promote competition. Today, De Beers sells about 45% of all rough diamonds, and its share of production is about 40%."

More along those lines in the article. I'm not sure how much of this is B.S.

Also, I can't remember where I read it, but Botswana has a big share of the diamond mining, and apparently every citizen in Botswana gets part of the profits, so an argument can be made that buying Botswanan diamonds is investing in Botswana herself. I'm sure it's loads more complicated than that, but that is the argument I've heard recently.
posted by n'muakolo at 7:55 AM on March 21, 2007

To keep the prices of diamonds up, the diamond industry has invested heavily in convincing people that artificial diamonds are no good, and only natural diamonds, coming from the industry and properly certified, et al, are worth anything.

I'm not sure this is a correct assessment. There is a tremendous push within the created gemstone market led by companies like Chatham to educate customers on the benefits of gemstones grown in labs, and I'm not aware of any ad campaigns from DeBeers or elsewhere trying to undermine this.

The reason is that the vast majority of people simply don't like created gemstones.

I sold jewelry for about a decade, and I come from a very, very long line of jewelers. I tried very hard to sell created stones over natural, especially those who didn't have a lot of cash to spend. But for every ten customers I dealt with, maybe one went for the created stone. Reason was simply that they don't perceive them as real, as Pastabagel points out, no matter how much time you spend telling them that they are indeed real. Usually the only way I could make a sale was to underscore just what an environmental disaster gemstone mining usually is. Conscience had to trump desire.

See, jewelers don't sell gemstones. They sell romance. Something forged under the earth by a million-year process is romantic. Crystals formed in a vat are not.

As to conflict/blood diamonds, jewelers don't want to touch them, but all it takes is one unscrupulous sightholder or other middleman to take them on and pass them to other jewelers. There's a lot of money to be made for these evil motherfuckers.
posted by middleclasstool at 7:58 AM on March 21, 2007 [4 favorites]

Actually, the reason that most synthetic diamonds are colored is that the process makes it easier to produce colored ones than clear ones.
posted by adamrice at 8:01 AM on March 21, 2007

Best answer: Wired had an interesting article about synthetic diamonds recently. If you page through they say some things about the problems of current synthetic diamonds (too small, usually have a lot of flaws, basically not-good-for-jewelry). It's also possible (especially according to the article) that synthetic diamonds will start winning--but this is only if the companies mentioned can get a solid, reliable production of gem-quality diamonds, which is something that hasn't been possible previously.
posted by anaelith at 8:10 AM on March 21, 2007

Best answer: Is that also true for industrial diamond? I had thought that industrial diamond was fairly cheap to produce, if not very attractive.

My understanding is that high quality artificial gems require a high investment in physical technology and technical labor. In contrast, if you are sitting on a gem mine, most of your labor force can be relatively cheap and untrained. With much of the natural gem production coming out of countries with staggering poverty and unemployment, It's not hard to find a willing workforce. And there are rumors floating around that slave labor is used in some mines.

Both blood diamonds and DeBeers diamonds make money on the same principle. People in Europe and North America are willing to pay much more for the diamonds than it costs to extract them.

I broadened this out to talk about gem mining in general, because it's my understanding that rubies and emeralds have similar economics on a smaller scale.
posted by KirkJobSluder at 8:15 AM on March 21, 2007

Response by poster: I understand the whole market effect of "real" versus "artificial" diamonds. However, when selling blood diamonds, one doesn't announce "these are blood diamonds", so, likewise, if a government decided to sell artificial diamonds instead of mined diamonds (and when I say "artificial diamond", I'm not referring to cubic zirconia, etc., but artificially made true diamonds), there would be no need to announce "these were made in a lab, not dug up". So I don't see how that would factor into this.

So far, what I'm getting as the primary causes of my not understanding the relationship between the two is that:

• I was wrong in assuming that artificially producing diamonds is cheaper than digging them up (thanks, delmoi)
• Perhaps I thought so because when people have talked about artificial diamonds being cheaper to produce than digging up real diamonds, they were saying "labour standard adherent diamond digging is more expensive than lab creation", but when slave labour is used instead, digging becomes cheaper than creating (thanks, Pastabagel)
• The "artificial is cheaper" argument may also be based on the assumption of an existing technical infrastructure (i.e. "If you've already got a lab and the right equipment, actual production is cheap"), while the countries involved in conflict diamonds don't have the technical infrastructure (thanks, Pastabagel).

So, can anyone corroborate that (it's not that I don't trust y'all, delmoi and Pastabagel, but I easily fall into the trap of assuming that an argument which makes sense must be right, and sometimes they aren't). And am I making any other mistaken assumptions?
posted by Bugbread at 8:25 AM on March 21, 2007

Response by poster: So many good answers posted when I was writing my response above!

So, the ability to make good quality cheap diamonds is relatively recent (thanks, anaelith), and I've got corroboration on the "digging may be more expensive with properly paid diggers, but slave labour is cheaper than artificial" (thanks, KirkJobSluder). I guess that about wraps this up. Thanks for y'all's help, this apparent paradox has been subconsciously bugging me for about a year now.
posted by Bugbread at 8:29 AM on March 21, 2007

I think another issue is the matter of quality. Artificial industrial diamonds have been around since the '50s, and according to the USGS 90% of industrial diamonds are artificial. The difficulty has been developing a mass-production process that can create large stones with few flaws.
posted by KirkJobSluder at 8:37 AM on March 21, 2007

I suspect that "well paid" gem miners in Africa and Asia probably make quite a bit less than coal miners in the U.S. and Europe.
posted by KirkJobSluder at 8:41 AM on March 21, 2007

Best answer: Wired had an interesting article about synthetic diamonds recently.

That article was from 2003. Wired did a brief update last month (02/2007)
posted by gwint at 9:11 AM on March 21, 2007

Thanks, gwint. It was new-to-me recently, and I remembered getting it by RSS, didn't remember that it was through an update to an old article. :)

So there's your answer, the latest synthetics are thriving and expanding.

Although you also want to note in the article (page 3)... Using a lab you CAN tell recent-old synthetics apart (pre-2000, roughly), so not labeling them doesn't work and there isn't a way to "launder" them like blood diamonds, since they have verifiable differences.
posted by anaelith at 9:17 AM on March 21, 2007

Industrial diamonds are cheap to make, but they aren't jewelry quality. Search for the term Bort. The new artificial diamonds are good because they are jewelry quality.

Also, I think it's naive to assume Blood Diamonds don't make it into the legitimate industry.
posted by chunking express at 9:18 AM on March 21, 2007

Within about 5 years nobody will be able to tell a jewelry-quality artificial from a mined diamond.

Quite simply, just don't buy diamonds. There are prettier rocks (emeralds, sapphires anyone?), and it's the Amsterdam DeBeers folks who make all the money. Diamonds aren't really all that rare, and the folks who produce them barely stay alive.

3 months of salary my ass, more like 3 lifetimes in purgatory for the nasty diamond perveyors.
posted by TomMelee at 9:22 AM on March 21, 2007 [2 favorites]

The issue is that no one wants to buy some old croaker's used diamond.
They want a new one.

You mean an even 3.3 billion years old, vs. 3.3 billion and eighty?
posted by weapons-grade pandemonium at 10:48 AM on March 21, 2007

You mean an even 3.3 billion years old, vs. 3.3 billion and eighty?

Yup. That's what I mean.
posted by deadfather at 10:50 AM on March 21, 2007

Diamond grading is a bit of a wash - who cares about the top 6 clarity grades when most humans can't distinguish among them with the naked eye? - but people do care about it. And you're not getting gem-clarity, near-colorless, carat-sized jewelry diamonds out of your artificial processes right now with any kind of regularity. Sure, they're "right around the corner." People - and corporations that own large furnaces - have been saying that since the '50s.

So, suppose you're a local African despot. What you have in abundance: a lot of young men and a few other men with guns to order them around. You have those guys go dig on a hillside, or reroute a river and dig in the alluvial plain. You get a bunch of gem quality diamonds.

What's the reason to go investing in giant furnaces which eat up megawatts of oil, and a bunch of white-coated scientists who have a 50 year track record of making diamond promises they can't keep?

Industrial diamonds look like black grit, and they are used to make a very expensive form of sandpaper. They have as much relation to the diamonds you're talking about as dirt does.

You might look at Gemesis' web page. They've been claiming they'll be growing blue-white carat-sized gemstones Real Soon Now™ for at least the last 5 years.
posted by ikkyu2 at 11:34 AM on March 21, 2007