The Israeli economy is dangerously over-reliant on the diamond industry. The industry is a major source of funding for the Israeli military which is guilty of gross human rights violations. Israeli diamonds should, therefore, be regarded as blood diamonds (not "conflict diamonds" as described by the Kimberley Process). When a fraud investigation threatened the industry authorities agreed to drop the investigation.

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A year ago, as a result of a major fraud investigation, the Israeli diamond industry teetered on the brink of collapse and threatened to plunge the Israeli economy into a disastrous tail-spin.

In a clear example of the dangerous over-reliance of the Israeli economy on diamonds and the power of the Israeli diamond industry, an investigation by police and tax authorities into an illegal bank operating in the Israeli Diamond Exchange, involving fraudulent trading worth billions of shekels, was shut down, covered up and silenced to protect the diamond industry - one of the " cornerstones of the Israeli economy". 

Israeli Diamond Exchange, Ramat Gan by Sean Clinton

The orchestration of the media silence which facilitated this cover-up of a criminal scandal has only recently been divulged by Yair Sahar, president of the Israeli Diamond Exchange, in a remarkably open interview with Michelle Moshelian of the Israeli Diamond Institute.

The story first broke on 8^th January 2012 when Israeli media reported (1, 2,) that police and tax authority investigators arrested 16 people and raided their homes and offices in the Israeli Diamond Exchange . The reports indicated that police had secretly monitored the activities of the group for over a year and discovered the operation of an illegal bank that offered loans, money transfers and currency exchanges which were not reported to tax authorities in Israel or abroad.

Apart from reports on an Azerbaijani news website "World's largest illegal bank unmasked" and the website of an Indian jewellery magazine which refers to a Globes report (which may have been deleted), very few, if any, other English-language media reported this major crime story that ensnared the Israeli diamond industry and threatened the Israeli economy.

The silence was broken on February 9^th 2012 when a report in Haaretz detailed the devastating impact the police investigation was having on the Israeli diamond industry. According to the report, the industry suffered a 70% drop in business in January and the entire sector had been thrown into turmoil resulting in a number of diamond firms going bankrupt leaving $30 million in unpaid debts.

Moti Ganz, the former president of the Israeli Diamond Manufacturers Association,   is quoted as saying:   "the investigation has ruined the industry. The import of raw material has collapsed, and if there is no raw material now then in another three or four months there will also not be any exports of polished diamonds."

The media silence resumed again until February 23^rd 2012 when Rappaport reported that Israeli authorities had agreed to suspend the investigation for one month.   A member of the Israeli Diamond Exchange, who requested anonymity, stated that a professional team would be established to "negotiate a suitable solution to the affair."  

But at that stage the damage was done and confidence in the Israeli diamond industry was severely eroded.   As a result, Israel's polished diamond exports dropped 81 percent year on year in February 2012.

Instead of following procedures normally adhered to in a criminal investigation where evidence is collated and presented before a judge and jury and, if found guilty, the perpetrators of a crime are punished in open court, the Israeli authorities agreed to suspend the investigation and negotiate a deal with representatives from the Israeli Diamond Exchange.

In the interview for the Israeli Diamond Institute Yair Sahar describes the fraud investigation as " an earthquake that threatened to topple everything that has been built here over decades".    

Recognising the seriousness of the situation and the vulnerability of the Israeli diamond industry, leaders of the sector met in an emergency meeting and immediately set up a steering committee to control and manage the crisis.

In order to avoid adverse publicity "of events that we could not control" Sahar said the steering committee decided "not to address the press" and, without giving details of how the Israeli media was gagged, they "managed to achieve "media silence" which meant no media outlet publicising the police actions, and very little publication of the events'.

In an unprecedented move, the steering committee sent a delegation to meet directly with the commanders of the investigation to explain "the massive effect the investigation was having on the entire industry."

The delegation outlined "the centrality of the diamond industry to the Israeli economy". Quoting a   turnover of $28 billion,   exports of $11 billion, employing 20,000 people and responsible for supporting 100,000 men, women and children as well as employing 35,000 people abroad and other impressive statistics the delegation outlined the status of the diamond industry in the State of Israel and in the world of diamonds.

Seemingly oblivious to the discrimination of the diamond industry against non-Jewish citizens of the State of Israel, who, according to statistics from the Israeli Central Statistics Office, are grossly underrepresented in employment by the diamond industry, Sahar told the police commanders that their industry "has never caused harm to even the smallest person in the State of Israel".

Describing it as an "outstanding accomplishment" Sahar said the police told them they had never before "agreed to listen to the point of view of an industry while that very industry was being investigated". He said he felt their words had "penetrated the hearts of the police officers" who were surprised by the industry's "high level of vulnerability".   As a result, the police authority agreed to suspend the investigation for a month.   

Following the meeting with police commanders a delegation from the diamond industry, headed by Yair Sahar, met with the head of the investigation Unit of the Tax Authority and made the same case, outlining the importance of the diamond industry to the Israeli economy and its vulnerability. Sahar said " The Tax Authority were convinced of the might and the importance of the industry, and they told us that they have no interest in harming the Israeli diamond industry." Consequently, the Tax Authority "promised there would be no more investigations and raids on the diamond offices".

In Western countries blighted by financial scandals the term "too big to fail" has been applied to banks that have been bailed out and saved from bankruptcy by governments. In Israel, the diamond industry is of such critical importance to the Israeli economy, and arguably to the entire Zionist project in Palestine, that authorities believe it is too important to allow a criminal investigation to undermine its status and confidence in industry.

Israel's Top 30 Exports 2008 by Sean Clinton

The Israeli diamond industry accounts for about 30% of Israel's manufacturing exports, worth $21 billion in 2011, adding $11 billion NET to the Israeli economy. If confidence in the Israeli diamond industry is damaged the economic, social and political fallout would be significant as would be the impact on Israel's ability to fund the illegal occupations of Palestinian and Syrian territories.

As a result of the fraud investigation Israel's diamond exports declined by 23% in 2012. In January this year it was reported that Israel would have to cut defense spending in order to stay within a targeted budget deficit of 3% of economic output. When Israel's diamond exports are damaged the financial burden of the occupation is increased proportionately.  

Leaders of the Israeli diamond industry are clearly able to wield significant influence with the police and taxation authorities in Israel. They persuaded the authorities to suspend the fraud investigation and manage the situation in a way that would minimise impact on their industry.   They did so without having to use what Yair Sahar described as "the direct close contacts that the industry management has with the most highly-ranked politicians."  

While the leaders of the Israeli diamond industry wield considerable influence in Israel they do not have the same power to influence consumer confidence in the ethical provenance of the Israeli diamonds. The fact that revenue from their industry provides about $1 billion annually for the Israeli military and security industry - a military which stands accused of war crimes by the UN Human Rights Council, Amnesty International and Human Rights Watch - means their diamonds are funding war crimes and should, therefore, be regarded as blood diamonds. 

These facts have largely been concealed from the diamond-buying public. Israel's influence in the global diamond industry, alluded to by Sahar, ensured that cut and polished diamonds which fund human rights violations by government forces evade the human rights standards applied to rough diamonds by the Kimberley Process (KP). The KP is supposed to prevent the trade in blood diamonds, but, despite the spin from the diamond industry and vested governments, including the EU, it has spectacularly failed to do so. Instead, the KP is a major marketing tool for cut and polished blood diamonds which jewellers deceitfully claim are conflict-free.

The Israeli diamond industry is clearly a very important component of the Israeli economy. The industry has demonstrated that it has significant influence in the upper echelons of Israeli society - with decision makers and with leading politicians.

If they can use that influence to curtail a major fraud investigation they can also use their influence with Israel's political elite and speak out against Israeli government policy which supports the illegal occupations and facilitates gross human rights violations by the Israeli military.

In this respect the global diamond industry and jewellers worldwide also have a role to play in persuading the Israeli diamond industry to impress upon political leaders in Israel the potentially devastating impact of a consumer backlash against diamonds that fund the Israeli military regime.

In the last year leading diamond companies, including De Beers and Sotheby's, have been targeted by human rights activists who have exposed links between their diamonds and Israeli war crimes in Gaza.

In recent months, over 50 Palestinian organisations, representing a cross-section of Palestinian civil society, including women's groups and trade unions, and international organisations in solidarity with the Palestinian struggle for equality, justice and an end to the Israeli occupation of Palestine, have issued an appeal to women and men of conscience and jewellers worldwide to reject diamonds processed in Israel.

With South Africa chairing the Kimberley Process in 2013 and the African National Congress having given their support for the international BDS (boycott, divestment and sanctions) campaign against Israel until it respects Palestinian rights and international laws, there is considerable scope for South African to use it's influence to increase pressure on Israel.

By supporting calls for cut and polished blood diamonds to be banned by the KP and by ending the export of South African rough diamonds to Israel, South Africa can play an important role in helping to rid the world of an apartheid regime which many prominent South Africans have described as worse than anything they endured during the apartheid era in South Africa.

The group with the most influence are diamond-purchasers. They can send a message to jewellers and the global diamond industry by refusing to purchase diamonds until the industry ends the trade in diamonds that fund rogue regimes guilty of gross human rights violations.

Authors Bio:
A human rights activists from Ireland with a particular interest in the Israeli/Palestinian conflict and the global trade in diamonds which are a major source of funding for the Israeli military regime.