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Jewels of the Junta: Bloodstained Rubies Fund Burmese Regime

By Beat Balzli

Most of the world's finished rubies originate in Burma, where the junta earns millions by mining them. Jewelers in Europe and Asia rake in handsome profits from the stones and believe they're helping rebels -- as long as the stones come through middlemen. They are probably wrong.

Rubies command tens of thousands of euros per carat on world markets. This 18.28 carat ruby and diamond ring was auctioned by Sotheby's in Geneva in 2006.
REUTERS

Rubies command tens of thousands of euros per carat on world markets. This 18.28 carat ruby and diamond ring was auctioned by Sotheby's in Geneva in 2006.

Everyone was in the mood for a party a week ago Saturday at the Kristall mountain lodge and restaurant in Idar-Oberstein, a picturesque small town known as Germany's "Gemstone City." After an elaborate laser show, hotel guests attending the Intergem trade convention danced late into the night. At two in the morning, the insiders of this discreet industry were still celebrating "extremely good business deals," according to one participant.

Buyers for Europe's top jewelers come to Idar-Oberstein to purchase precious stones, gems and diamonds -- and they hit pay dirt again this year, with rare merchandise from Southeast Asia. Large, deep red rubies from Burma command prices of tens of thousands of euros per carat, making them the most exclusive stones a gemstone dealer can offer.

"We sold various Burmese rubies at the show," confirms Konrad Henn from gemstone trading company Karl Faller. He says the rubies his company buys and sells come almost exclusively from the regions of Mogok and Mong Hsu. But Henn has never ventured to visit the mines there. "The risk would be too great, and the prices we could get directly on location wouldn't be any better than what we pay our longstanding Thai suppliers," he says.

In fact, the gem dealers might risk losing their appetite for rubies if they visited restricted areas in Burma. In addition to cracking down on uprisings led by defiant monks and the opposition, the Burmese military regime forces workers to extract the precious stones under brutal conditions in its heavily guarded mines.

Roughly 90 percent of the global supply of rubies comes from Burma. According to eyewitness accounts, mining bosses mix amphetamines into the workers' drinking water to boost productivity. Sometimes children also work in the muddy mines. "Alongside teak, gas and oil, gems are the fourth financial mainstay of the junta," says Ulrich Delius from the German-based Society for Threatened Peoples.

There are no exact figures for the junta's gem trade. Estimates of the amount of income generated by the business range as high as hundreds of millions of dollars per year. At the state-organized gem auction in Yangon, where only middling quality stones come under the hammer, the regime has taken in some $300 million so far in 2007.

Chinese, Thais and Indians are the main customers of the Burmese generals. These big buyers also control the trade with Europe and the US. They don't ask awkward questions.

And their German customers are not about to rock the boat. According to customs statistics, which only reflect part of the trade, rubies and sapphires worth up to €1 million are annually imported from Burma straight to Germany. The state-owned Myanmar Gem Enterprise also exports tons of jade every year, and a large number of Buddha statues in German living rooms originate from the area controlled by the Burmese military regime.

'Fiery Gems' From a Fairytale World

As for indirect trade, a far greater number of Burmese stones are smuggled by dealers via Bangkok to vaults in Germany -- and virtually no one involved seems to have a guilty conscience. In contrast to unregistered blood diamonds from African regions ravaged by civil war, which have been internationally banned from sale under the Kimberly Process Certification Scheme, Burma's gems are highly presentable and respectable, even among the finest jewelers in Germany. The management of the renowned Hamburg-based jeweler Wempe, for example, has no ethical qualms whatsoever. The German jeweler praises the "pigeon-blood red rubies" from Burma in its catalog as "fiery gems" from a fairytale world.

A man grinds jade stones at a market in Mandalay, Burma.
Getty Images

A man grinds jade stones at a market in Mandalay, Burma.

Every year, the upscale international retailer sells five to eight expensive pieces of jewelry "with top-quality rubies from Myanmar." The gems are supplied by German dealers like Karl Faller or competitors in Switzerland. "According to our dealers," the company explains in a statement, "the gems are brought by prospectors across the border to Thailand, where they are purchased by our dealers."

Michael Hahn is a Düsseldorf gem dealer and president of the German gemstone importers association. He goes one step further, saying the high-quality gems are smuggled by Burmese rebels from oppressed minorities across the jungle border into Thailand. Hahn is one of the dealers who then buy the gems in Bangkok. He feels a boycott would only have negative consequences for the people, not for the regime. He says this opinion is shared by leading figures in the German gem industry.

Could buying rubies be a charitable act? Ulrich Delius, from the Society for Threatened Peoples, doesn't think so. "It is cynical," he says, "to maintain that opposition forces and minorities finance their operations with rubies."

The American jeweler Brian Leber is quite familiar with the Robin Hood theory as a justification in the gem trade -- and as a myth. He's urged a boycott of Burmese rubies for years.

Leber says the Karen people, an oppressed ethnic minority in Burma, were "involved to a certain extent in the smuggling 20 years ago." But after an ethnic-cleansing offensive by the government and the expulsion of over a million people, it would be "absurd to maintain that (the Karen) control the gem trade." He adds that the Burmese regime has dramatically stepped up patrols along the country's borders. Corrupt members of the government cash in on profits from smuggling, according to Leber.

His fight has just begun. Although the US has banned direct imports of Burmese gemstones, America has allowed the trade to continue via Bangkok, following an intervention by the powerful jewelers' lobby. Politicians in Brussels have just started to consider a similar tightening of current EU sanctions.

Meanwhile, Burma was decidedly not an issue at the gem trade show or at the party in the mountain lodge in Idar-Oberstein, according to one dealer who still raves about a terrific set there by a jazz trio called "The Crooks."

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© SPIEGEL ONLINE 2007
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