Antwerp, Belgium--"This," Abraham Fischler, the diminutive, octogenarian president of Antwerp's polished-diamond stock exchange is saying, "is a business of trust. To be a member of the diamond business is like a credit card. It means this man is O.K."

A sullen light falls from the tall windows of the bourse's common room as Fischler--dapper in a brown suit and coifed gray hair--offers a proud account of the city's 500-year-old trade. Nearby, dealers wearing the trademark bowler hats of Hassidic Jews sit at long, wooden tables, wrapping up the week's business before Sabbath. The Friday morning scene offers a surrealistic snapshot of days when this raucous portside city was the world's undisputed diamond capital. But today Antwerp's diamond industry--turning over 80 percent of the world's rough diamonds at $23 billion a year--is no longer monopolized by courtly Flemish Jews like Fischler.

The three narrow streets of Antwerp's diamond sector are now packed with Lebanese, Israelis and Indians, who also do business in New York, Bombay and Tel Aviv. And the industry's credit-card reputation has been tarnished by accusations it is mining the spoils of African wars. Stung two years ago by a United Nations report criticizing lax Belgian diamond regulations, the government tightened up, imposing some of the world's strictest import rules. But new allegations suggest rough diamonds from conflict-torn countries are still being traded illegally in Antwerp, enriching not only rebel warlords, but Middle Eastern terrorists as well.

Reports by The Washington Post late last year claimed Hezbollah and al-Qaida terrorist networks reaped millions of dollars from illicit diamonds mined by rebels in Sierra Leone and Congo, with the best stones smuggled into Antwerp. Not only did two Antwerp diamond dealers facilitate the trade, the newspaper reported, citing intelligence sources, but the city was transforming into a "financial headquarters" for radical Islamic groups.

If true, the accounts not only pose new challenges for Europe's fight against terrorism, but clash with Belgium's own efforts to rectify its brutal colonial legacy in central Africa. "How are you going to work for peace in Africa if you're being accused of being involved in the arms trade, or conflict diamonds, or whatever?" asked one Belgian official, who expressed skepticism about the Post reports.

The two Antwerp dealers in question--Lebanese cousins Samih Osailly and Aziz Nassour--deny any links to terrorist groups. And in interviews, government officials and diamond dealers said they were stunned by the allegations, and argued the amount of illicit diamonds entering Antwerp has dropped significantly in the past two years.

Nonetheless, the newspaper's accounts recently prompted an Antwerp court to launch a judicial investigation. Former U.S. Ambassador to Sierra Leone, Joe Melrose, also visited Antwerp in December, to speak with diamond dealers and experts. "Do we have terrorists as diamond people in Antwerp? I'm pretty confident that we don't," said Mark van Bockstael, director of international affairs at Antwerp's Diamond High Council, which co-regulates the industry with the Belgian government. "Is it possible that somebody has, as a client, a terrorist network? That's a totally different question."

In the closed and secretive world of Antwerp's diamond industry, where Israelis and Indians, Belgian Jews and Lebanese Muslims collaborate and compete, an answer is hard to find. Several dealers interviewed said they did not know Nassour or Osailly personally. According to the diamond council, neither man has been dealing in Antwerp for the past three years, and neither is registered on Antwerp's stock exchange. While Osailly remains in Antwerp, Nassour now lives in Lebanon.

But a recent study by Christian Dietrich, an African diamond analyst at Antwerp's International Peace Information Service, traced almost a dozen local companies with direct or indirect ties to Nassour. "I think it's quite common there's money laundered through the diamond trade," said Dietrich, who nonetheless remains skeptical about alleged local terrorist links. "But it's not just here. It's South Africa, and Israel, and a lot of other places."

"The Belgium government has successfully managed to give the impression they are concentrating and cracking down on illicit diamonds," said Alex Yearsley, a campaigner against conflict diamonds for Global Witness, a London-based advocacy group. "But from all the information we get from diamond dealers, it's business as usual in Antwerp."

For their part, diamond merchants and government officials argue Belgium alone cannot regulate illegal diamond sales made in dirt-poor African countries, where customs agents are corruptible, and the lines of legality are blurred at best.

The United Nations, for example, has banned all trade in conflict diamonds--those enriching certain African rebel groups--mined in Liberia, and demanded special certificates for those legally extracted in Angola and Sierra Leone. But no such ban, or certification system, currently exists for diamonds mined in the Democratic Republic of Congo, which has helped fuel more than three years of civil war.

"There is an ethics problem and a business problem" when it comes to Congo, said diamond dealer Samy Doppelt, whose company, S. Langer Diamonds, does business with the Congolese government. "Should you work in rebel territory? That's an ethics problem. But when it comes to business, it's totally legal."

At a July 2000 meeting in Antwerp, the world's major diamond organizations issued a joint resolution vowing to crack down on the conflict-diamond trade. The city's top diamond banks warned customers they would sever relations with anyone dealing in conflict diamonds. Brussels also earned kudos for issuing import statistics, and working with several African governments to put controls in place.

But watchdogs like Global Witness say Belgian import statistics are increasingly hard to obtain. Other critics claim the country is slow to enforce its own regulations, and that customs agents screen flights from Africa with a casual eye. "You can basically lie and say the diamonds are from the Caribbean," said Dietrich, who travels to Africa regularly. "Even though there wasn't a flight that day from the Caribbean."

Governments and private groups hope an ambitious international plan, aimed to be operational by the year's end, will root out most conflict diamonds from the market. Known as the Kimberly Process, the plan would require certificates for all legal diamonds, and procedures to trace their journey from mines to trading hubs like Antwerp.

Even so, Antwerp dealers like Gregg Hupert argue terrorists and ordinary crooks will merely switch their sights to other lucrative raw materials, such as exotic timber and coltan. "People don't fight because of diamonds. They fight for power," says Hupert, managing director of Independent Diamond Valuators, who has worked in Africa for years. "Everybody wants to come down on the diamond business. They think this is going to be the quick fix. Wrong."

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