Wild Rush For Diamonds -- Smugglers Strip Angola's Treasure

LUCAPA, Angola - Like most towns deep in the Angolan wilds, this squalid sprawl of earthen-walled huts and tin-topped shanties sits along muddy tracks and open sewers. Naked children play amid heaps of rotting garbage.

Unlike in most poor villages, however, huge satellite dishes scour the sky. And the latest Sony televisions and videocassette recorders are hawked in the open-air market.

Life is even more surreal in Dundo. In that remote northern town, insists a recent visitor, only one form of currency is accepted: the $100 bill.

And in Saurimo, another boomtown in the bush, a furtive man appears on the runway moments after a reporter climbs off a U.N. plane. Without further ado, the man sticks out his tongue. Something sparkles on it.

"Diamond!" he hisses. Then he scribbles the asking price: $500.

As Angola enters its 16th month of an uneasy cease-fire after Africa's longest-running civil war, what may be the world's richest - and wildest - diamond rush is roaring in the country's northeast frontier.

Experts estimate that amateur diggers scoop and scrape more than $600 million worth of alluvial diamonds from the muddy riverbeds each year. And that treasure is slim pickings compared to what's still untapped underground.

"Angola has the finest reserve of two-carat, gem-quality diamonds in the world," said an economist at a Western embassy in Luanda, the capital. "Nothing else compares."

That's obvious. Unlike miners of major diamond deposits in Australia, Botswana, Russia and South Africa, freelance fortune hunters here routinely suffer crocodile bites, cerebral malaria, deadly land mines and predatory police and soldiers.

Especially soldiers. This is the last battleground in the still-simmering conflict between the elected government of President Jose Eduardo dos Santos and the rebel movement led by Jonas Savimbi.

"They're fighting for the wealth in the area," said Indian Capt. Ravi Murugan at U.N. offices in battle-scarred Saurimo. "They're fighting for the diamonds."

The result is a Klondike with a difference. Although government generals have profited, diamond smuggling keeps Savimbi's National Union for the Total Independence of Angola (UNITA) alive as a fighting force, paying for food, oil and weapons. That means diamonds may be impeding efforts to bring lasting peace to Angola after more than 20 years of war.

Struggle to enforce accord

Glittering gems are not mentioned in the pact the two sides signed in Lusaka, Zambia, in November 1994. The United Nations' largest peacekeeping operation, costing $1 million a day, has struggled for more than a year to enforce the accord, which calls for disarming UNITA and power-sharing in government.

But the rivals may prefer to share the spoils. When Savimbi and Dos Santos met in private last year, "they talked about diamonds and how the revenues will be divided," the Western envoy said.

The secret plan collapsed when the government sent troops to chase out thousands of amateur diggers and armed smugglers. Many were working for UNITA. And there was another problem. "The soldiers doing the cleanup operations began to dig for diamonds," Col. Roque Gallego, the Uruguayan commander of U.N. forces in the region, said with a laugh.

Local officials then tried a novel approach to frighten outsiders: They announced an outbreak of Ebola, the dreaded, incurable virus that killed about 250 people last year in neighboring Zaire.

Wealth and poverty

Although mineral-rich Angola is potentially one of Africa's wealthiest nations, its people are among the poorest. The economy is such a shambles that inflation topped 3,500 percent last year.

Oil should be the country's life blood. Each year, the government exports about $3.5 billion worth of crude oil. Most goes to the United States. But the money is unaccounted for.

Even less is known about the diamond trade. Unlike oil, gems are easy to hide. The government reported only $60 million in legal diamond exports last year, a fraction of the illicit trade. Most of the rest apparently is smuggled across the border to Zaire, long the source of UNITA's weapons and supplies, en route to world diamond bourses in Antwerp, Belgium.

Diamonds may be a symbol of love and luxury elsewhere. Here they are clawed out of the rough by barefoot boys and haggard men using picks and shovels in tiny holes under the baking sun. A few strike it rich.

But many more have died. During the war, relief teams reached cutoff mining camps to find men dead of starvation but with "thick wads of $100 bills in their pockets," said an American aid worker.

For now, Lunda Norte and Lunda Sul provinces, the main mining region, are a no man's land. Land mines litter most roads and hundreds of bridges have been bombed. Drunken soldiers use checkpoints to rob passers-by. Bandits are common. Most diggers are armed. "If you stop them, they kill you," said Saveliev, the U.N. military observer.

The diamonds are along three main river systems. UNITA holds the Cuango, to the west. Government forces nominally control rivers near Lucapa and farther east around N'zaji. But in some areas, the two armies are side by side.

The only formal mining is near Lucapa, where Endiama, the state diamond company, has a small operation .

The rest is a free-for-all.

Secretive dealers and middlemen from Belgium, Portugal, Zaire, Lebanon, Mali and elsewhere pay top dollar - and ask no questions - for uncut stones. So does De Beers, the South African consortium that controls 75 percent of the world diamond trade.

In 1992, after UNITA took advantage of a temporary truce to expand diamond production and smuggling, De Beers reportedly spent $500 million on the open market to buy Angolan diamonds before they could flood the market and undermine the cartel's prices.

And De Beers officials complain that they've waited six years in vain for permission to prospect in Angola.

Diamond fever isn't new here. Top-quality gems were first discovered early in the century. By 1971, Angola was mining 2.4 million carats and was among the world's most profitable producers. But the industry collapsed when Portugal quit its former colony in 1975 and all-out war erupted.

Companies eye development

So none of Angola's kimberlites, as underground tubes of diamond-studded lava are called, has been developed. That may change. Endiama last year signed an agreement with Brazil's Odebrecht and Almazi Rossii-Sakha, a Russian company, to sample the Catoca pipe near Lucapa.

If it comes on-stream, Catoca is expected to produce up to 5 million carats a year for 30 years, making it potentially one of the world's richest mines.

But for now, Lucapa is a Wild West town. At night, the air echoes with gunfire. And U.N. soldiers found the bullet-riddled corpses of 14 miners in a gully recently. Local police said the killers were probably bandits.

Capt. Jorge Judice, a U.N. military policeman from Brazil, isn't convinced. "They could have been working for the police or the military," he said. "We never can tell. Because everyone works for diamonds here."