The advertising money is well spent. The CSO, which controls more than 80% of all the world’s diamonds, reports that diamond sales increased by 32% in 1988 to $4.1 billion (us). The average price of rough, uncut stones rose 13.5%. World sales of retail diamond jewelry set records for the sixth consecutive year.
The CSO is made up of the Diamond Producers Association (DPA) and the Diamond Trading Company (DTC). The DPA sets production quotas for its members while the DTC sorts, grades and markets the stones to clients at one of the 10 diamond “sights” it holds each year at its London, England, headquarters. The diamonds are sold in packages of varying sizes and grades. By mixing low- and high- quality stones in one package, the CSO can force a buyer to purchase low-quality gems that would otherwise be difficult to sell.
Life can be hard for a diamond producer trying to operate outside the cartel. Zaire tried to defect in 1981 by selling its supply of industrial diamonds on the open market. The CSO retaliated by unleashing a fatal flood of similar quality diamonds on to the market, driving down the price and forcing Zaire back into the fold.
Australia’s Argyle mine posed a more difficult problem for the cartel. With annual production greater than all the companies within the CSO, Argyle had the capacity to devastate the diamond industry. But it didn’t. The Argyle diamonds are of inferior quality to the African stones, and the owners of Argyle perhaps suspected that the CSO could manipulate public opinion against them. And why spoil a good thing? The cartel guaranteed a stable, lucrative, international market so the state government of Western Australia (controller of diamond exports from the mine) made a deal with the CSO to market most of the gem-quality stones through the cartel.
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