Chapter 2. How it began - the Oppenheimer Coup.
This chapter tells how the Oppenheimer family took control over the company established by Cecil Rhodes to further the development of the British empire by controlling diamond production. It demonstrates how Ernest Oppenheimer locked away diamond resources in order to keep diamonds apparently rare and to maintain high prices.
The Oppenheimer family controlled the supply and prices of untold millions of uncut diamonds throughout the world since Ernest Oppenheimer took charge of De Beers. They justified their monopoly by preaching it was essential to sell diamonds through a single outlet to keep prices "healthy". But they gained power by doing precisely the opposite. Ernest's tactics in the 1920s included all the "diamond heresies" he later condemned when others used them against him. He set up rival diamond syndicates and undercut De Beers prices.
...They still justify high diamond prices on the grounds of the rarity of diamonds. De Beers strenuously objected recently to "the false premise that the supply of diamonds is plentiful". It also strongly protested against the idea that "the production of diamonds has been suppressed " . These quotations are from a threatening letter written on behalf of De Beers by its lawyers, Fasken, Campbell, Godfrey against our film "The Diamond Empire". ( see Chapter 13 below.) But when we looked at the history of De Beers and the Oppenheimers, we found that again and again Ernest Oppenheimer acted to prevent production precisely in order to keep prices high. We found documents in which he explicitly said this was his intention. So - in the order to better judge the modern spin about De Beers, here is what we found when we examined its history. ...
...When Rhodes was at the peak of power, Ernest Oppenheimer was only just commencing work as a 16 year old junior clerk in Dunkelsbuhler and Company, a member of the London Diamond Syndicate. In May 1896 he had just arrived from Germany to take up a position offered to him through his brother Louis who also worked at Dunkelsbuhler. Louis also offered him a room in his home in the busy inner London suburb of Camden Town. They would work together for the rest of their lives and even marry sisters.
... Meanwhile the German threat to De Beers and the London Syndicate was increasing. The Syndicate was dominated by expatriate Germans, operating out of London with its major customers on the Continent. But it lost customers who preferred to buy directly from the German mines. Then Belgians became rivals, setting up their own Antwerp Syndicate to bid for the German production.
..... In 1919 - 1920 there were new discoveries of vast diamond deposits in the Belgian Congo and in Angola Diamond extraction there only required a pan and brush. Ernest warned the Diamond Producers Association that Angola's diamond producers 'were the principal and most dangerous competitors of all the foreign producers. They produced very cheaply and they would have no difficulty in increasing their production, In fact they could double it. Their diamonds were also of a much better quality than the Congo diamonds and, if uncontrolled, would be a very serious menace to the market."
... The Kleinzee farm on the bleak 'Skeleton Coast' of Namaqualand, the only coastal farm where the South African government did not have mining rights, was extremely rich in diamonds. The problem for Ernest Oppenheimer was that it was in the hands of the wealthy Chester Beatty of Selection Trust. A former Managing Director of Selection Trust's West African diamond mines, Edward Wharton-Tigar, later reported: 'Here (at Kleinzee) there were diamonds galore, and Beatty's engineers set about recovering them, much to the consternation of the South African moguls, who had already been thrown into near-panic by Hans Merensky's discovery of the famous 'oyster line' of diamonds in Alexander Bay and by the simultaneous development of new rich diamond fields at Lichtenburg. ' (This quotation is from a book that allegedly has now been removed from the market by De Beer buying up all copies.)
Oppenheimer made a deal with Beatty by which Kleinzee production would be limited in return for a generous investment in Beatty's company. Oppenheimer told Anglo American shareholders: 'we arranged to acquire an interest in the company [Selection Trust] and to purchase the diamonds, always with a provision that the annual output be limited.' Beatty also agreed 'he would not make any further incursions into South Africa' if Oppenheimer left Beatty's Selection Trust with 'a free hand on the West Coast' of central Africa. Beatty consequently sold his holding in Kleinzee to Oppenheimer under another provision of this 'gentleman's agreement.' This left Beatty with control over Sierra Leone's diamonds.
....... this chapter contains much on the bitter fight that left the Oppenheimers ruling the diamond world - the diamond world we know today.