The Kindest Cut of All

Traditionally barred from many occupations, the Jews of Europe's ghettos gravitated for centuries toward dealing in money and jewelry. By World War II, roughly half of the diamond cutters and polishers in Antwerp and Amsterdam were Jewish. Those who managed to flee the Nazis took their skills with them. In the late 1930s, several hundred anguished but unbeaten refugees started the industry that today produces Israel's chief export: polished diamonds.

It is an industry perfectly suited to the country's scant resources. Diamond cutting and polishing require no water, little power, few fixed assets and only a small work space. The business generates handsome profits for Israel--20% is added to the value of stones by processing them. Diamonds also gain the foreign exchange that Israel's deficit-ridden war economy badly needs.

Holding Prices Up. Last year Israel exported $216 million worth of polished diamonds, which ranked second in the world only to Belgium's $250 million. This year the economic slump in the U.S., which is the biggest customer, has hurt the trade. According to Moshe Schnitzer, the 49-year-old Israeli exporter who is president of the World Federation of Diamond Bourses, global sales have dropped by 30% so far in 1970. But Israel has done better than its competitors because it concentrates on the smaller stones, about one carat or less, which are becoming the most popular ones, particularly in the U.S. and Japan. Israel's gem exports have declined only 11% this year.

Diamond prices have not softened, partly because most raw diamonds are sold to cutters by the London-based Central Selling Organization. This group is controlled by South Africa's Oppenheimer family through its De Beers company, of which the British and French Rothschilds are directors. The syndicate has a policy for holding up prices: it regularly increases them during times when world business is strong and during times of slump keeps stones in inventory rather than reduce prices. As a result, many investors continue to put their money into diamonds, which over the past five years have risen in value by 20% to 60%, depending on size and quality.

Israel still depends on the syndicate for 42% of its diamonds, but it has developed other sources as well. Western but not capitalist, white but not colonial, skilled but not rich, the Israelis were able to find friends--and diamonds --in the Congo (Brazzaville), Ghana, Sierra Leone, Liberia and the Ivory Coast. Israel even gets stones from Arabs; Syrian and Lebanese diamond buyers in Africa secretly sell to Tel Aviv.

Handshake and Blessing. The Israelis have prospered in diamonds for several reasons. The government helps by providing cheap credit: 6% loans for importers of rough stones. Tel Aviv also has the world's largest diamond exchange, a new 28-story tower of Babel that houses 1,000 Israeli dealers and buyers from 50 foreign countries. Every day on its bustling trading floor, hundreds of Israeli, American, Belgian, Dutch, Japanese, Indian and Hong Kong dealers gather in small groups to inspect and bargain over $60 million in stones. A man's word is his best asset on the trading floor, since there is not time enough to examine every stone in a packet of 50 to 100. Whatever their native language, the dealers seal each trade with a handshake and the Hebrew words mazal ve bracha, which means "luck and blessing."

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