WORLD PRODUCTION AND TRADE IN INDUSTRIAL DIAMONDS WITH PARTICULAR REFERENCE TO THE US AND THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000200010001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: November 9, 2016
• Document Release Date: August 27, 1998
• Sequence Number: 1
• Publication Date: June 15, 1951
• Content Type: IM

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CENTRAL INTELLIGENCE AGENCY
INTELLIGENCE MEMORANDUM NO. 354
(CIA/RR IM-354)
WORLD PRODUCTION AND TRADE IN INDUSTRIAL DIAMONDS
WITH PARTICULAR REFERENCE TO
THE US AND THE USSR
15 June 1951
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CENTRAL INTELLIGENCE AGENCY
INTELLIGENCE MEMORANDUM NO. 354
(CIA/RR IM-354)
WORLD PRODUCTION AND TRADE IN INDUSTRIAL DIAMONDS
WITH PARTICULAR REFERENCE TO
THE US AND THE USSR
15 June 1951
Notes This report has not been coordinated with the intelligence
organizations of the Departments of State, the Army, the Navy,
and the Air Force. It contains information available to CIA as of
15 May 1951.
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TABLE OF CONTENTS
Summary .................... .... ..................
1. Introduction .................................. . ...... . .......... . . . ....... 2
a. Varieties ........... . ........,.... ............................... 2
b. Principal Applications .
c. Substitutes ............................................................ 3
2. World Production and Reserves .....................................
a. Production of All. Types
b. Reserves of All Types ............................................. 4
c. Production and Reserves of Industrial Diamonds .......... 5
3. Marketing ................................................................... 7
a. Cartel Control ....................................................... 7
b. Processing and Distribution ..................................... 7
4. World Consumption by Countries ................................... 8
5. Possibilities of Control for Strategic Purposes ................ 10
a. Controls during World War II ................................... 10
b. Stockpiling ............................................................ 11
c. Preclusive Buying ......................................... ...... 11
d. Probable Effects on the Soviet Bloc ........................... 11
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Appendix. Tables ......................................................... 13
Table 1. World Production of Rough Diamonds
(Gem and Industrial), 1937 and
1942-50 .......................................... 13
Table 2. Estimated World Production of Industrial
Diamonds, 1937 and 1942-50 .............. 14
Table 3. Declared Exports of Industrial
Diamonds from Belgium and the
Netherlands to the Soviet Bloc,
1947-50 ......................................... 15
Table 4. Declared Exports of Industrial Diamonds
to Switzerland from Belgium and the
Netherlands, 1947-50 ....................... 16
Table 5. Total Estimated Exports of Industrial
Diamonds to the Soviet Bloc, 1949-50 .. 16
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WORLD PRODUCTION AND TRADE IN INDUSTRIAL DIAMONDS
WITH PARTICULAR REFERENCE TO
THE US AND THE USSR
Summary
Industrial diamonds have become increasingly essential to mass
production in modern industry. The small size and light weight of
diamonds are out of all proportion to their importance but also make
it very difficult to control their shipment. The greatest demand for
diamonds began during World War II in the manufacture of war
material and has continued unabated, Since the principal source is
limited largely to areas in Africa, far removed from the US and the
USSR, industrial diamonds are of particular strategic importance to
both countries. Annual US requirements are between 41 and 5 million
carats,' or about one-half of the total world output. The UK and
Canada are the next largest consumers. The needs of the Soviet Bloc
are relatively small -- between 225,000 and 3009000 carats-9 of which
the USSR consumes about two-thirds. Only a small part of the US
stockpile objectives had been secured as of 1 January 1951. The
present Soviet stockpile would probably last a year.
The US, because of its highly mechanized industry, would be par-
ticularly affected by any interruption in the.supply of industrial
diamonds. Although there is some hope of reducing the need for
diamond crushing bort by a substitute process, the industrial diamond
requirements of modern industry are expected to continue essentially
the same.
The production and sale of industrial diamonds are largely controlled
by the West, but the location of most of the African diamond-producing
areas makes them strategically vulnerable in case of war.
1. The carat is the unit by which most gems are weighed. The inter-
national metric carat (CM) is equivalent to 0.2 gram, or 3.086 grains
(155.54 carats being equivalent to a troy ounce).
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1. Introduction.
Diamonds, because of their hardness, which is greater than that
of any other natural or artificial substance, are the most important
germ stones used in modern industry, and they have become essential
in the development of precision machinery. Without diamond abra-
sive wheels and other diamond tools, the mass production of machine
tools and precision instruments would be impossible.
The small size and light weight of diamonds are out of all pro-
portion to their importance but also make it very difficult to control
their shipment. For example, the total world output of all types of
diamonds in 1950 weighed only slightly more than 3 short tons. A
quarter of a million carats of industrial stones thus weigh about 125
pounds. The weight limit in the diplomatic pouch is usually about
100 pounds, and therefore the quantity of diamonds that could be
shipped by diplomatic pouch assumes considerable importance.
a. Varieties.
All types of diamonds, including gem-grade, may be classified
as industrial. However, there are three general kinds of industrial
diamonds: bort, industrial stones, and waste from the cutting and
polishing of gem stones. Bort is a trade name for flawed, off-color,
or broken fragments of diamonds unsuitable for gems. This material
is fragmented to specific grain sizes and is marketed as crushing
bo:rt. Industrial stones include off-color, colorless, and some imper-
fect stones unsuitable for gems; carbonadoes, or black diamonds, a
very hard and extremely tough aggregate of very small diamond
crystals; and ballas, a very hard and tough globular mass of diamond
crystals radiating from a common, center.
b. Principal Applications.
Industrial diamonds are classified by use as tool stones, die
stones, crushing bort, and diamond powder. Tool stones include
industrial diamonds used in drill bits utilized by the mining, petroleum,
and heavy construction industries; in boring and turning tools, where
the diamond is mounted on a suitable tool and used to produce finishes
of one-thousandth-of-an-inch tolerance; and in dressing and truing
tools, in which the diamond is used to true other types of abrasive
wheels and to give a high finish to automotive and aircraft: parts. Die
stones, or diamond wire-drawing dies, are pierced sound stones of
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1/4 to 3/4 carat which are used to draw wire uniformly to extremely
fine sizes. Crushing bort, which is graded to size and embedded or
bonded with metal or resins, is utilized in making diamond drill. bits
and diamond abrasive wheels. The latter are used to sharpen drilling
tools and to true other types of abrasive wheels. Diamond powder is
fragmented bort crushed to micron sizes and is used to finish carbide
dies, jewel bearings, glass lenses, and other glass products and to
provide a high and rapid finish on many mechanical products.
c. Substitutes.
Much time and work have been spent in efforts to make diamonds
synthetically or to find a satisfactory substitute for industrial diamonds.
Until recently, however, little hope of success has been obtained. Boron
carbide and silicon carbide powder have been substituted for diamond
powder in some uses, and boron carbide molded into dies has been
utilized inwire-drawing where tolerance requirements are not too
rigid. Tests by the US Bureau of Mines on the substitution of tungsten
carbide drill bits for diamond bits have shown that, without resharpen-
ing, four tungsten carbide bits are required to drill the same footage
obtained with one diamond drill bit. Recently, however, the Soviets have
discovered an electro-mechanical method for sharpening cutting tools
which does not require the use of diamond abrasive wheels or diamond
powder. Experimental work in the US with the Soviet process' has
confirmed its feasibility and has resulted in some advancements and
technical improvements in the method.
The utilization of this electro-mechanical method of tool
sharpening should reduce both the cost of sharpening tools and the
quantity of industrial diamonds required by industry. This last factor
is of particular importance to the US, as it is entirely dependent on
imports for its supplies of industrial diamonds. Crushing bort, the
is The Soviet process employs direct current and a special electrolyte.
The tool to be ground and the grinding wheel, a copper disk, are con-
nected in a direct-current circuit so that the tool forms the anode and
the grinding wheel the cathode. By the action of the direct current in
the electrolyte, a film of insoluble compounds is formed on the anode
(the tool), protecting it from further electrolytic action. Removal of
this film by the cathode (the rotating grinding wheel) exposes a fresh
surface of the metal to the action of the electrolyte and thus assures
the continuous removal of metal from the anode. The equipment re-
quired to set up this process is relatively cheap, and a high degree of
skill is not required to operate it.
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bulk of which is used in the manufacture of abrasive wheels now
employed to sharpen tools, makes up 81 percent of the US stockpile
objective of industrial diamonds. If the major use for bort could be
eliminated or drastically reduced, large sums of money could be
saved and US dependence on an overseas source could be avoided.
2. World Production and Reserves.
With a few minor exceptions, reasonably accurate statistics are
now available for total world production of diamonds of all. types.
Accurate figures for world reserves of diamonds, however, are not
available.
a. Production of All Types.
Diamonds have been found in all continents, but commercial
production at present is confined largely to Africa, with South
America and Asia providing the remainder. Africa accounts for
about 97 percent of the annual world output; South America, 2 to 2Z
percent; and Asia, a to 1 percent. South American and Indian mines
have not been explored and developed on the same scale as in Africa,
and production comes entirely from placer deposits. Various diamond
fields produce stones of different quality, and the percentage of fine
stones per mine also varies. Only a small part of the annual world
production is suitable for cutting into fine gems of 1 carat or more
(about 200,000 cut stones out of a total of 14 million carats produced).
About one-quarter of the total is off-color gem material, and the
remainder, or 60 to 75 percent, is suitable only for industrial purposes.
(The annual output of all types of diamonds by countries in 1937 and
in the 1942-50 period is given in Table 1, Appendix.) Definite informa-
tion on the production of diamonds in the USSR is negligible, but the
annual output is very small. The only known deposits are in the gold
and platinum mining areas west of the Urals in the Chkalov district
and in the Kama Valley near Cherdin, which contain a few diamonds,
and in the placer mines on the east slope of the Middle Urals near
Neoganskoi, Sverdlovsk, and Troitsk.
b. Reserves of All Types.
The known reserves of all types of diamonds are not very large
and at the present rate of consumption are believed to be sufficient for
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about 30 to, 40 years , '.. The African fields contain the major known
reserves of diamonds. India is.the oldest known diamond field but,
like Borneo, ,is largely worked out. Brazil, British Guiana, and.
Venezuela produce from. placer deposits alone and are regarded as,
minor sources..
The underground mines in South Africa (known as pipe mines)
normally have reserves plotted from 3 to 5 years ahead, and the
large mines undoubtedly have reserves for several years, but, as
they get deeper, the pipes decrease in size, as does the average
diamond content. :Many. of the South African alluvial fields have been
exhausted. The fields in South-West Africa, the Congo, and the
Gold Coast have reserves blocked out for about 10 to 12 years in the
future and are believed to have reserves for 20 years' additional
operations. In Tanganyika, only one diamond pipe has been discovered,
and operations to date have.been limited to the area surrounding the
pipe. However, . estimates of the quantity of diamonds both in the
surrounding area and in the pipe itself are not available. Mining in.
French Equatorial Africa until recently has been on a small scale
and only now is being mechanized.
c. Production and Reserves of Industrial Diamonds.
Before 19.37 the quantity of diamonds used industrially was
relatively small., and interest in the annual output was comparatively
slight. Therefore, no breakdown of the world production of diamonds
showing the quantity of industrial diamonds mined was published. At
the beginning of World War II, large supplies of bort had been accumu-
lated because of lack of a market. The war brought on industrial demands
for mineral raw materials, machine tools, and precision instruments
that provided an outlet for the surplus bort and for larger quantities,
of diamond tools and die stones. This wartime demand has continued
unabated. (For an estimate of.the annual production of industrial
diamonds, see Table 2, Appendix.)
1. So-called from the pipelike form of the vertical cylindrical masses
of igneous rock in which diamonds are found.
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Industrial diamonds make up about 60 to 85 percent of the total
annual production of diamonds by weight and account for about 25
percent of the total value. Total figures for the production of diamonds
in the Belgian Congo are broken down to show the quantities of gem
and industrial stones recovered. However, figures for other producing
countries show only the total quantity of diamonds produced and a
rough percentage estimate of the part of the total output that may be
industrial.
(1) Production Trends.
The annual world production of industrial diamonds for
the 1942-50 period averaged about 8,470,000 carats (see Table 2,
Appendix). Output reached a peak of 11,181,800 carats in 1945 and
then declined to a low of 6,774,800 carats in 1947. Since 1948 the
trend has been upward, showing a sharp increase in 1949. The out-
put in 1951, it is believed, will be slightly higher than in 1950. The
increased output is expected to come largely from the mines in the
Belgian Congo, with smaller contributions from French Equatorial
Africa and the Gold Coast. The mines in the Belgian Congo, which
account for about 86 percent of the total annual output of industrial
diamonds, are being mechanized, and a systematic program for
development and mechanization is also being introduced at the
diamond fields in French Equatorial Africa.
(2) Reserves.
Bort is a by-product of all diamond mining except in the
Belgian Congo, where industrial diamonds make up more than 90
percent of the output. Reserves of industrial diamonds, therefore,
are included in the total diamond reserves. Exact figures on
industrial diamonds, most of which come from the la:' ge gravel
deposits of the Belgian Congo, the Gold Coast, Sierra Leone, and
Angola, are not available, but it is believed that reserves of this
type in the known diamond deposits will be adequate for about 40
years at the 1950 rate of consumption.
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3. Marketing.
As already stated, the principal diamond deposits, both gem and,
industrial, are found in Africa. The production and sale of the African
output of gem and industrial diamonds, with the exception of French
Equatorial Africa, is controlled by a cartel.
a. Cartel Control.
The diamond cartel, which is variously referred to as the
"Diamond Corporation" or "The Syndicate," has its headquarters
in London and is made up of the following companies, all of which
.are British: The De Beers Consolidated Mines, Limited; its sub-
sidiary, the Consolidated Diamond Mines of South-West Africa,
Limited, and its wholly-owned subsidiary, the South-West Finance
Corporation, Limited. These organizations own all the shares of
the Diamond Corporation, Limited, which has contracts for the
purchase of the diamond production from the Belgian Congo, Sierra
Leone, Angola, the Gold Coast, and Tanganyika, all of which, with
the exception of the Belgian Congo, are under British control. The
cartel .also controls the sale of rough diamonds of gem and industrial.
grade. The Diamond Trading Company, Limited, is the sales agent
for gem stones, and Industrial Distributors (1946), Limited, is the
sales agent for industrial diamonds.
French Equatorial Africa is the only potentially large source
of diamonds in Africa which is outside the control of the cartel. The
diamond mining industry in this area is controlled by the International.
Mining Company, the East Ubangi Mining Company, and the. Diamond
Prospecting and Exploitation Company, an affiliate of the East Ubangi
Mining Company. The International Mining Company also controls
the Ogooni-Lobaze Mining Company, which engages in both gold and
diamond mining.
b. Processing and Distribution.
The run-of-mine diamond production controlled by the Diamond
Corporation is shipped from Africa to London for classification into
industrial- or gem-grade material. Then all material classified as
bort is shipped back from London to Johannesburg, South Africa, for
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fragmentation. This step, a comparatively recent one, was started in
1946. During World War II, some dealers purchased bort, sorted the
material, "peeled" some of the larger stones to obtain gem-grade
diamonds, and sold them at a much higher price. In order to stop this
leak of gem-grade material, the Diamond Corporation instituted the
practice of fragmenting the bort before sale. The fragmented bort
(crushing bort) is then returned to London for marketing.
Industrial diamonds, like gem-grade material, are sold by
series and purchased by lot number from samples shown by Industrial
Distributors (1946), Limited. The opportunity to purchase industrial
diamonds is made available only a few times each year, and the
quantity that may be purchased by one country during a calendar year
is limited. There are no direct sales of gem or industrial diamonds'
by the Diamond Corporation to the Soviet Bloc.
4., World Consumption by Countries.
Diamonds are one of several mineral commodities of which the
major consuming countries are not the producers. By far the largest
consumer is the US, followed by the UK and Canada. Statistics on the
annual consumption, however, are not available.
US industry requires 42 to 5 million carats of industrial diamonds
annually, or about half the total world output. These requirements,
however, are not filled, and consumption is about 3 to 32 million carats,
about 75 to 80 percent of which is crushing bort. About 70 to 80 per-
cent of the crushing bort consumed is utilized in the manufacture of
abrasive wheels. Annual consumption by the UK is believed to be about
1 to 12 million carats, and that by Canada about i to 1 million carats.
Information on the postwar consumption of industrial diamonds by
the USSR can be expressed only in terms of the available supply of
imported stones. This supply is obtained largely from Belgium, the
Netherlands, and Switzerland and through black-market and smuggling
activities. (Declared exports by Belgium and the Netherlands to Soviet
Bloc countries for the 1947-50 period are shown in Table 3, Appendix.)
Swiss imports of industrial diamonds from Belgium in 1949 increased
through each quarter and for the year amounted to 15 percent of the
total exports from Belgium, as compared with 0.09 percent in 1948,
and 1.3 percent in 1947. In 1950, however, Swiss imports of industrial
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diamonds from Belgium decreased to 9.6 percent of the total exports
from that country. It has been reported that up
to 95 percent of the Swiss imports were for transshipment to the
Soviet Bloc. (Declared exports from Belgium and the Netherlands
to Switzerland for the 1947-50 period are shown in Table 4, Appendix.)
The reduction in direct exports of industrial diamonds from Belgium
and the Netherlands to Switzerland in 1950 is attributed to the with-
drawal of open licenses for export of this material to Switzerland.
An exporter of industrial diamonds to Switzerland must now apply
for an individual license.
. The USSR also purchases industrial diamonds directly through
the Soviet Legations in many of the diamond-producing or processing
countries. Purchases by a Legation are regarded as local transac-
tions, and export licenses are not required. Thus these sales do not
appear in export statistics.
It is reported that Czechoslovakia purchased 2,800 carats of
industrial diamonds from Brazil in May 1950 and 53,485 carats of
diamonds of all types from French Equatorial Africa in the first 5
months of that year. Although a breakdown showing the type of
diamonds received in the latter shipment is not available, it seems
probable, in view of their relatively low dollar value, that most were
of industrial grade.
Most of the industrial diamonds imported by Germany are from
Belgium and totaled 40 carats in 1948, 2,389.18 carats in 1949, and
71,389.18 carats in 1950. Although Belgian export statistics do not
differentiate between East Germany and West Germany, the major
portion probably was utilized in the Soviet Zone, as there are few
industries in West Germany that use industrial diamonds. It is
assumed that the Zeiss wire-drawing plant at Jena, reported to
require 6,000 carats of die stones per month, has been the principal
ultimate consumer of imports from Belgium.
It is estimated that about 422,400 carats of industrial diamonds
were exported to the Soviet Bloc in 1949 and about 242,000 carats in
1950 (see Table 5, Appendix). The apparent reduction in imports by
the Soviet Bloc in 1950, however, is not real and reflects rather the
increased amount of black-marketing, smuggling, and direct shipments
by diplomatic pouch. The total annual supply of industrial diamonds
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available to the Soviet Bloc is estimated to be from 400,000 to
450,000 carats. Annual consumption by the USSR is estimated to be
from 150,000 to 200,000 carats, and by the European Satellites from
75,000 to 100,000 carats, or a total of from 225,000 to 300,000 carats
for the Soviet Bloc. The remainder of the supply, about 100,000 to
150,000 carats, is believed to be stockpiled.
5. Possibilities of Control for Strategic Purposes.
In the event of war the output and marketing of industrial diamonds
would obviously rest with the West, as the UK, Belgium, and France
control the production of diamonds in Africa, and the Diamond Corpora-
tion, with headquarters in London, controls the sale of the majority of
them. However, because of the location of most of the African diamond-
producing areas, they would be strategically vulnerable. At present,
the, greatest danger is labor unrest resulting from Communist infiltra-
tion of labor organizations in the Gold Coast, French West: Africa, and
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b. Stockpiling.
Stockpiling of industrial diamonds is feasible and relatively
simple. Diamonds do not deteriorate, and the only requirement is
a safe place for storage. The difficulty so far in building up a stock-
pile is, for the most part, a shortage of mined stones. As of
1 January 1951, only 37 percent (4,070,047 carats) of the US stockpile
objective for industrial stones and 19 percent (9,481,415 carats) for
crushing bort had been obtained.
c. Preclusive Buying.
Cartel control of the industrial diamond industry should
present an ideal means to prevent the sale of diamonds to a poten-
tial aggressor nation. However, any attempt to set up a preclusive
buying contract under which the present cartel, the Diamond Corpora-
tion, would restrict its sales to countries not trading with the Soviet
Bloc is believed to have little chance of success. Through the cartel
program, the mining companies are guaranteed a fixed gross income
per year which in turn is reflected in the well-being of the people
and the stability of the local governments. Diamonds in European
and African countries represent not only a profitable industry but
also, at least in some of them, a hedge against inflation.
d. Probable Effects on the Soviet Bloc.
A drastic reduction in shipments of industrial diamonds to the
Soviet Bloc would reduce greatly the efficiency of the fabricated metal
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industry in that area, because the Bloc countries are almost entirely
dependent on imports for their supply of industrial diamonds. The
USSR is developing a large metal-production and machine.-manufacturing
program as a part of its long-range plan to increase industrial capacity
for peacetime as well as for armament requirements. Thus Soviet
demands for metal-cutting tools, wire-drawing dies, and other precision
instruments are large. The supplies now available are believed to be
adequate for peacetime operations, but in case of war the USSR would
be faced with the difficult problem of maintaining even the present
level of imports. At the present rate of consumption the Soviet stocks,
estimated at 100,000 to 150,000 carats, would last only a year. The
USSR would therefore probably be required -- at least in the initial
stages of a war -- to ration the available supply, which would result in
an immediate shortage in that country and the rest of the Soviet Bloc.
Although the electro- mechanical method of sharpening tools pioneered
by the USSR should reduce somewhat the quantities of industrial
diamonds required, no reduction in efforts to obtain them is apparent,
and requirements are expected to continue essentially the same.
Without sufficient industrial diamonds, mass production methods in
the industries of the Bloc countries would be severely hampered.
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Approved For Release 1999/09/21 : CIA-RDP79T00935A000200010001-1
 Approved For Release 1999/09/21 : CIA-RDP79T00935A000200010001-1
SECRET
Table 4
Declared Exports, of Industrial Diamonds: to,Switz
from Belgium arid`, the Netherlands
1947-50 a/
Country,_ .
1947
Belgium
`;7,358.71
Netherlands'
614.00
Total
7,972.71
a/ Partly e'stimated._
1948
958.00
'.1552697.06
108,775.00
3,276.00
10,000.OOa/ `
3,000.0 a/
4,234.80
165,697.06
111,775.00
Table 5
Total Estimated Exports of Industri .1 Diamonds to the Soviet Bloc
1949-5U
Metric' Carats
1 949 _~
Exports from Belgium and the Netherlands
to the USSR
286,948.13'
89420.00
80 Percent of Imports by;Switzerland
131?837.;64
87,019.00
`
Imports by Hungary
1,465.00;
1,500.00
90 Percent 61-Imports from Belgium by
Germany
2,150.26
64,199.35
Total
422,401.03:
242,138.35
a/ Belgian export figures do not differentiate between East Germany
and West Germany, but 'it is estim4.ted that 90 percent of Belgian exports
to Germany go eventually. to East Germany.
16
SECRET
Approved For Release 1999/09/21 : CIA-RDP79T00935A000200010001-1