Burmese Gem Sanctions: Doing Good or Just Feeling Good?

Mizzima News

The place of the Burmese gem trade in the overall economy of Burma is an issue under little dispute. Burma is acknowledged to have huge stocks of jade and colored gemstones which are in great demand in China, Hong Kong and other parts of Asia. In turn, Asian traders supply other parts of the world, responding to demand in Europe and the United States. But the vast majority of jade is sold in Asia to Asians. Rubies are a distant second, most of which are sold in the United States and European Union.

The Burmese military government maintains control of much of the extraction, either through state operations or through concessions to private contractors who pay the government royalties. Private traders are authorized by the government to sell gems as long as they pay ridiculously high taxes on their earnings.


A percentage of the jade makes its way to Hong Kong and China on an ad hoc basis, while most of the rubies and other gemstones mined in the northern states find their way to Thailand where they are refined before sale. The majority of the gem stock is sold directly to large trading concerns at state-sponsored auctions.

Since the primary buyers of Burmese jade are Chinese, a Western boycott may have little effect on the overall trading volume. While some jade undoubtedly finds its way to retailers around the world, a few large and well known chains in the jewelry business – Cartier, Tiffany's & Bulgari, as well as the entire European Union – have agreed to boycott Burmese gems. Cartier even does random laboratory testing to verify the origin of its gems and to document its compliance with the embargo.

It is not entirely clear whether the recent delay in government auctions and the reduced volume of gems traded was a reflection of external market factors or whether it was due to internal production delays. There may indeed be turmoil and production problems due to internal politics, but it's very difficult to determine the effect of any such problems. Nevertheless, private gem concessions must continue production in order to generate the income necessary to service their debt and maintain their capital. It is difficult to predict whether reduced demand for rubies in the West will reduce prices or whether internal production problems will reduce inventories of jade in the East and cause prices to rise.

Jewelers of America, a voluntary retail association that supports a ban on Burmese rubies, advised its more than 11,000 members in October of 2007 "to source their gemstones in a manner that respects human rights." But the association has no enforcement arm and can apply no penalties to any retailer wishing to sell rubies.

While the Association advises its members to ask for documentation of the source of the gems they purchase, there is no American law preventing them from purchasing gems of any source. In fact, since most rubies undergo significant transformative processing in Thailand before export and sale, it becomes almost impossible to identify the origin of any particular stone except by detailed laboratory analysis.

Therefore, even though the 2003 Burmese Freedom and Democracy Act signed into law by President Bush prohibited direct importation of Burmese gems, pressure from key members of the jewelry industry convinced the United States Customs service to issue a ruling a year later that made an exception for items of Burmese origin that had been "substantially transformed" in a third country.

"The U.S. embargo has almost nothing to do with the Myanmar side of smuggling. Gems are smuggled by individual miners, private companies that partner with the government, army officials, drug dealers, and rebels.

Gem smuggling from Myanmar to Thailand is even more dangerous than from Afghanistan to Pakistan, but it is also one of the only ways many Myanmar citizens have to break out of extreme poverty. The two primary starting points for colored stones are Mogok and Mong Hsu. "Mules" move a few gems at a time by hiding them on themselves. They then take a two-day trip by foot, motor scooter, or horse to deliver the gems to a dealer in a Thai border town. During the trip, the "mule" — usually a woman — will have to cross several official border crossings, where lackadaisical government officials will conduct a cursory inspection. The smuggler pays a bribe to the official and is waved through; whether an individual is carrying contraband or not is irrelevant.

Once in Thailand, Myanmar smugglers, Thai brokers, and international buyers meet to sell gems. Most gems then go to Bangkok, where they are cut, treated, and sold to international purchasers.

Although Myanmar gems are embargoed by the United States, the reality is that it is impossible to spot a Myanmar gem or for customs agents to take any action to stem the flow. Even in Thai border areas, Myanmar stones are mingled with gems from Africa, India, Cambodia, Australia, Thailand, and elsewhere. There is no certificate of origin at this stage. Once the stones have moved to Bangkok, they are further mingled. This is where the certificate of origin or authenticity often appears. By that time, only a practiced gemologist can offer an opinion on where the gemstone originated."1

If the above reflects reality, it is impossible for a United States Customs agent to determine the origin of a gem that is declared, let alone stop the flow of gems that are not declared. This effectively means that any seller could easily disguise the origin of any gem with virtual impunity.

Since the raw stones go through several hands before becoming suitable for export to the United States or the European Union, it is false to say that sanctions will only hurt independent artisans. As long as there is a demand for the stone and as long as the origin of the stones is disguised in the present manner, there will always be a demand. Only the most scrupulous of buyers, willing to meticulously track the origin of these stones could possibly differentiate a stock that might be free of the taint of human rights abuse. Such an effort would require dealing with traders willing to comply with a standard of documentation that is very unlikely to be met.

Peggy Jo Donahue, from Jewelers of America, believes there is strong support for changing the 2003 Burmese Freedom and Democracy Act to close the loophole established by the Customs Service. This is what House Resolution 3890, passed by the House Foreign Policy Committee, chaired by the late Tom Lantos, was supposed to do.

She claims not to know of any opposition strong enough to stall this bill. But the fact is that there was opposition to the 2003 Act that was strong enough to influence the Customs Service and clarify the loophole. I doubt the Customs Service acted on its own in making its ruling.

If the Burmese Democracy Promotion Act of 2007 which recently passed the United States Senate were to become law, it could very well have the effect of limiting the flow of rubies into the United States because the Customs Service is well aware that they all undergo processing before export, therefore all rubies would become suspect. However, it would be unfair to embargo all rubies regardless of origin, since many may come from areas other than Burma. The logical consequence of closing the current loophole would be a demand for and scrutiny of more specific documentation of gemstone origin, which could easily become a serious headache for that department. In fact, it's not out of the realm of possibility that the Customs Service itself might lobby against passage of this legislation.

If higher scrutiny was to become the case, then the large traders who normally buy at Burmese government auctions might become reluctant to purchase stones they know they will have difficulty selling. Considering the creative lawlessness for which the Burmese junta is known, I can only speculate that a more aggressive worldwide embargo on Burmese rubies would only spur the army to transition from being the auctioneer to becoming the smuggler, leading to the widespread false documentation of origin.

Different versions of the Burmese Democracy Promotion Act of 2007 have been passed by the House and Senate. The Senate version blocks rubies and timber. The House version also terminates tax deductions for Chevron investments in Burma. So these differences must be resolved before the legislation can be signed by Bush. It's possible that no substantial action will occur before the presidential election in November, which would mean that this legislation may not be signed before a new Congress is seated in 2009.

Jewelers of America is not the only trade association that has rendered an opinion on the issue. The American Gem Trade Association, with over 1,000 members in the United States and Canada, issued a press release on November 6, 2007, supporting a stronger embargo of "materials originating in Burma."

The International Colored Gemstone Association (ICA), with 500 members in 46 countries worldwide, qualified its statement of support for the embargo saying it "exhorts its members to desist buying Burmese gemstones from any government sources and marketing organizations," while simultaneously strongly recommending "that all parties cautiously consider the negative impact and collateral damage that indiscriminate measures could inflict upon independent and poor populations engaged in mining, processing and trading activities in Myanmar."

Attempting to target specific entities that might be deliberately circumventing any sanctions is problematic, since obtaining evidence of such behavior would be next to impossible for someone outside the industry. Targeting small concerns would be a waste of time, while making inquiries with large jewelry chains is likely to be met by smokescreens and secrecy. Meanwhile, the Burmese government has recently made public comments to the effect that the European Union embargo is having no effect.

What, then, is to be done? Practically speaking, a sanction against Burmese gems may only have a negligible or at best a mixed effect. Its main value may be political in that it remains an appealing and effective organizing issue to maintain an awareness of Burma in the public consciousness. Yet no true political leverage exists until a sanction becomes law, which has not yet occurred. So, for now, we must await the resolution of legal motions before determining the path forward.