Patrick Carlton 01 - The Diamond Conspiracy

by Nicolas Kublicki

  Thus Vasily Orlov had been elected to power.

  Untainted by scandal or corruption, the high-level, well-meaning government civil servant was the only rational choice. Orlov quickly proved himself to be an effective and careful reformer. He created a currency board and pegged the ruble to a reserve of mixed Western currencies including the U.S. dollar, the British pound, the German deutsche mark, and the French franc before the last two were replaced by the lackluster euro. He wisely avoided adding the Japanese yen to the reserve until Japan jumped into economic maturity and adopted its own sorely needed economic reforms. He pushed Russia closer to the European Union, knowing it was one of the few hopes to prevent the economy from backsliding. Tax reform, then collection from all citizens and corporations, wealthy or not, became a national priority, an annual reality, initially encouraged by countless military raids on corporate—and mafiya—accountancy offices. Most energy and raw materials monopolies were dismantled and state- owned enterprises privatized. The directors of all remaining state facilities were fired, cutting deeply into the FSB’s power base. But Orlov had studied Niccolo Machiavelli’s writings and knew to keep both the FSB and GRU very close, as enemies should be.

  The shock therapy started to work. But for a country without a democratic history or sense of free market economics, the process was slow. Too slow and too painful for many. Soon, the good yet long-suffering Russian narod again started to complain about the economy. Foreign investment was slow to return. Job creation remained low. Paychecks were again late. After Orlov’s reelection, accomplished with little help from the cautious military, the military began to suffer from shortages and a yet unrepaired infrastructure. Orlov was again on shaky political ground, faced with a nationalist-communist coalition, who some suspected included the mafiya, led by a mysterious man who called himself Molotok - the Hammer.

  Slythe accepted a glass of tea proffered by Novirsk on a silver tray. What he really wanted was a snort of cocaine.

  Orlov sipped his tea, lit a Davidoff cigarette. “Now, Mr. Slythe. I do not wish to waste your time. As you can see, Finance Minister Voroshilov and the directors of Komdragmet, the Federal Diamond Center, Almazy Rossii, and Almazy Rossii-Sakha did not join us. By my request. This conversation will be private.” He looked up at Vladimir Novirsk, Lester Churchman, and Ian Witsrand, indicating that Slythe should unleash his dogs.

  “If you wish.” Slythe turned to his aides, sniffed. “Please excuse us.” They stepped outside.

  “Mr. Pyashinev is not here, of course. But you already know that.”

  “Yes,” Slythe said sadly. “An unfortunate accident, I understand. His expertise will be greatly missed.” He meant every word. If Pyashinev had survived, Waterboer would now be in possession of the Russian diamond stockpile. He sniffed again.

  Orlov began in perfect English. “Let us recap the current situation, if you will permit. Since 1985, Russia has had a contract with the great Waterboer Mines Limited company. Under the terms of this contract, which as we both know expires this month, Russia sells 90 percent of its rough diamonds to Waterboer, approximately nine million carats a year. In exchange for this, Waterboer pays Russia a little less than $1 billion a year. Although the Union of Soviet Socialist Republics was dissolved in 1991, the Russian Federation continued to honor the terms of the agreement without question.”

  Slythe nodded, wondering where Orlov was heading.

  “I do not know how to say this diplomatically, Mr. Slythe, but you and I are beyond formalities and I am a simple man, so I will state it plainly. My predecessors were overly generous with Waterboer. The terms of the contract cannot continue.”

  Orlov paused, stood, and began to pace heavily but slowly through the room, cigarette firmly clenched in his fingers. Slythe craned his neck to follow the heavyset Russian.

  “This is so for several reasons. First,” Orlov enumerated on his left hand, “new Russian mines have come on line since 1990. Russia produces far more diamond roughs than in 1990. Second, Waterboer has undervalued the quality of Russian diamonds.”

  “Mr. President, I—”

  “Please allow me to finish,” Orlov snapped. “Russia realizes Waterboer loaned us $2 billion to modernize our diamond mining operations.” He bowed slightly, touched his chest. “For this, Russia is grateful. I am grateful. But as you recall, the terms of that loan were quite strict. Russia turned over her entire diamond stockpile to your company in exchange for the loan. That single act removed Russia’s ability to destabilize the international diamond market. And Russia’s diamond stockpile was worth far more than $2 billion, but that is history, and I mention it only in passing.”

  “Russia agreed. Of its own accord.”

  “That is true. My predecessor accepted the terms. Just as Germany and Japan accepted the terms of surrender after World War II. What other choice did Russia have? Russia needed the hard currency to finance its astronomical defense projects of the Cold War. But when Russia needed the money most, in 1991, after the Cold War, to implement the reforms that would save Russia and finally transform it into a true world power,” he jabbed a finger at Slythe, “Waterboer reduced its purchases by 40 percent, damaging us beyond measure. That 40 percent would have meant the success of our reforms, but again, Russia was powerless to break the agreement.”

  His pause left Slythe in a tense silence.

  “Now, on top of all this, I learn Waterboer pays $400 per carat in some African countries as opposed to the $150 per carat it pays Russia.” He lifted his hand to silence the South African. “Do not deny it!” He shouted. “The FSB is many things, but blind and inaccurate it is not.”

  He continued softly. “Do not misunderstand me. We are pleased that poor African nations are getting high prices for their precious natural resource from a company that enslaved black miners for decades. But the Russian people will not tolerate a low price for its diamonds. However, we are willing to continue selling our diamonds to Waterboer. Waterboer needs this. Russia needs this.” He stopped pacing, regained his position behind his desk. “So what is to be done?” He stared into Slythe’s eyes. “Shto?”

  “Mr. President, you...you take me quite by surprise.”

  Orlov allowed the comment to reverberate in the ornate room. He lit another cigarette and expelled the smoke upward. “Nyet. I don’t believe I do.”

  “I am shocked by your assessment of our relationship, Mr. President.”

  Orlov ignored the man’s theatrical outrage, scrutinized his cigarette. “Shocked?”

  “Yes. Quite shocked indeed. First, Mr. President, Waterboer Mines reduced its purchase in 1991 not out of a desire to harm the Russian state but because of the drop in the diamond market. A great drop, Mr. President. There simply was no way for Waterboer to purchase as many diamonds as before. You know this.”

  “Not so. Not only could Waterboer have continued its purchases. It was required to continue. It was part of the contract. A contract you signed personally, sir.” Orlov wagged the cigarette between his index and middle fingers. “A contract Russia and the Russian people adhered to. To the letter.”

  “Mr. President, although I detest legalism, I will remind you the agreement also contained provisions for a change in purchase quantity. Waterboer also adhered to the contract,” Slythe continued, regaining his confidence. He shifted in the eighteenth-century chair. “Second, Russia did not adhere to the contract, as you argue. The quantity of diamonds your government delivered to Waterboer was far less than Russia’s thirty-million-carat stockpile. Roughly $4.5 billion at the time. Third, it is true Waterboer has, in very rare circumstances, paid $400 a carat. But that is immaterial. The purchase price for Russian diamonds was set by the contract terms at $150 a carat. It was not subject to change.”

  “As a base price, yes. A base price. But the price could increase if there was a change in quality of the diamonds produced. There was such a change.”

  It took a few seconds for the South African to recover from the President’s s
tatement. Slythe had overconfidently assumed Orlov had never read the agreement. “Mr. President, no analysis has shown an increase in Russian diamond quality.”

  “You mean your analyses. Pardon me for saying so, Mr. Slythe, but your team of analysts could make the Hope diamond look like dirty glass. I am discussing real analyses.”

  “Surely you don’t suggest that—”

  Orlov raised his bulk to full height and scowled. “I most certainly do! Enough games, Mr. Slythe! Do you really think Waterboer is so powerful it can keep corruption from the eyes of the Russian government? The old KGB noticed nothing. Probably because Waterboer paid them off. But after 1991, the SVR detected it.”

  Bluffing was Orlov’s strong suit. In 1991, the SVR didn’t have anywhere near the funds to perform such detective work. It could barely afford carbon paper and videotapes, much less diamond analysts. But Orlov knew he was right, particularly after what Kovanetz had told him about the payoff to Pyashinev. If Waterboer had corrupted Pyashinev, far more corrupt plundering of Russia’s natural resources was occurring, he knew.

  Slythe took the defensive. “I have no knowledge of such payoffs, Mr. President.”

  Orlov sat down, crushed out his cigarette and opened a manila folder filled with numeric information. “Would you like account numbers and wire transfer dates? Our dearly departed Mr. Pyashinev’s South Pacific bank account, for instance?”

  Genuine shock struck Slythe. For the first time in many years of negotiations, he began to sweat.

  “Come, now. You really thought that we didn’t know? That we wouldn’t find out?” Orlov paused. The outline of an enlarged vein protruded from his temple. “The Russian people who it seems you consider poor, stupid, and backward will no longer tolerate Waterboer’s rape of its diamond resource!”

  “But I—”

  Orlov again bolted out of his chair. “No more lies! Lies about not paying off our officials! Lies about the Russian diamond stockpile! I personally reviewed the files. Every carat in our vaults was transferred to Waterboer. Do not lie to me! The Russian people will not be lied to!” He slammed his palm on the polished desktop.

  Two presidential guards, busy watching and recording the meeting through hidden cameras, exchanged silent smiles. They liked what they saw. A true Russian who drank vodka like a Cossack and rebuffed attacks by Western multinational corporations with verbal cannon fire. Maybe voting for Russkost in the next election would be a mistake. Orlov was a good leader.

  Slythe felt lost. Nothing was happening the way he had planned. The Russian was threatening him. Him. Piet Slythe. The Diamond Lord. He reassured himself with the knowledge the Russian had no leverage, no matter how right he was. But he would have to change his tactic. Lying to Orlov would not succeed. Lies were only powerful when seen as truths.

  Orlov knew the truth. About everything except for the stockpile, it seemed. It was strange. Could it be Orlov didn’t know the Russian diamond stockpile had been only partially transferred to Waterboer? If so, Pyashinev had done his job very well. A pleasing thought. If Orlov didn’t know about the stockpile, he wouldn’t look for it. It would make Molotok’s search easier, increase Waterboer’s chances of taking possession of the destabilizing stockpile.

  Orlov sat back down, composed himself. He forced a smile. “Come, now, Mr. Slythe. Russia and Waterboer have had a relationship for decades. Poor during the last few years, but good health can return.” He lit a third cigarette. “Since the 1960s, we’ve been selling diamonds to Waterboer. Let us not become enemies because of a few unfortunate mistakes. Regardless of what has occurred in the past, Russia is still very interested in a new contract with your company.”

  Slythe glanced up hopefully. “I propose a price of $175 a carat.”

  Orlov disregarded the proposal as though he had not heard it. “I propose Waterboer and Russia enter into a contract for three years. Russia will sell 50 percent of its diamond rough to Waterboer. The rest, Russia will keep and sell on the secondary market. Russia needs new jobs as well as hard currency. Why not those of diamond cutters and marketers? The price will be fixed at $200 per carat for the first year, to be reevaluated annually based on a neutrally supervised sampling of every mine in Russia. The diamonds we keep and sell on our own will be subject to purchase by Waterboer, of course. But on the secondary market.”

  Where the price is higher, Orlov did not have to add.

  Slythe was stunned. In truth, the terms were not far off from present market prices, but they were unacceptable to Slythe. More troublesome than the high price Orlov demanded was the sale of only half of the Russian diamond rough, allowing Russia to sell the other half at realistic prices in direct competition with Waterboer. The market price for diamonds would drop like a stone. In its 120 year history, Waterboer had never engaged in true competition with any other large-scale diamond producer. Its strength was based on monopoly.

  “I’m afraid those terms are unacceptable, Mr. President.”

  “I see. Too much competition for your monopoly.” Orlov smiled wickedly. “I understand. There is, of course, a second option.”

  Slythe leaned forward, eyebrows arched.

  “Russia will sell every single carat mined to Waterboer, its entire diamond production—”

  “Yes?” Slythe could not contain his excitement. Sniff.

  “At $300 a carat.”

  “Three hundred? Impossible. Waterboer would become insolvent within months.”

  “I doubt it.” Orlov smiled, blew smoke through a mischievous smile.

  “No, Mr. President, it’s simply too much.”

  “Russia wants to be reasonable, of course. The last thing Russia wants is for Waterboer to perish. To whom would we sell our diamonds? But I disagree with your dire economic prediction. Waterboer would not suffer such a fate. True, $300 a carat is a high price, but only compared to the prices paid by Waterboer. Not the prices it charges. In that light, $300 is quite within the market price, a price that includes the added premium of control, Mr. Slythe. Control of the entire production of Russian diamonds would allow Waterboer to continue to raise the price of diamond roughs, as it has every single year for the last one hundred years, and to turn its attention to stemming the massive flow of diamonds on the open market from Canada and Australia and the civil war—torn countries of Africa.”

  Slythe shook his head. “I cannot agree to such a proposal.”

  “Of course, if you wish, Waterboer can operate without a new contract with Russia. We would have to find a new purchasing source for our diamonds. It would be difficult. But far more difficult for Waterboer. It would result in a loss of control of twelve million carats into the market each year. A loss of control I doubt Waterboer could afford.” He stared. Silence.

  “None of these options are viable.” Sniff.

  “There is, of course, a third option.”

  Slythe waited for it in stoic silence.

  “You could be arrested.”

  Slythe was stunned. “Arrested? Are you mad? On what charge?”

  “I’m not a lawyer, of course. But I would assume the charge would be the possession of illegal narcotics, assault, battery, and rape. Maybe attempted mur—”

  “Rape?” He stood. “Are you insane? You dare accuse me?” He shouted, placing a hand on his chest. “Me?”

  Orlov retained his calm. “You would be granted a full jury trial, of course. These are not the times of Stalin and Beria. We have juries in Russia now.” Orlov smiled wickedly. “Perhaps you would like to view the evidence?”

  He grabbed a file folder from his desktop, opened it. He leafed through its contents, selected a particularly nasty photograph of Slythe’s chilling S&M session with Lena, showed it to Slythe. “This is my favorite.”

  Slythe gazed at the glossy black and white, shuddered. Not at the bloody image, but at the implications. His considerable public relations team had succeeded in creating an image of Slythe as a benevolent corporate patriarch. Photographs of him smiling sadistically
over the bloody body of a Russian prostitute would destroy that façade in one blow. The thought made him so nauseated he had to sit down.

  “It was a mistake reserving a room in a government-owned hotel. Russia hasn’t completely changed. Particularly its intelligence organs. So many cameras. Of course, I’m certain Waterboer can afford better trained lawyers than the impoverished Russian state, but it would be a pity if these photos were to find their way to the international press, don’t you agree? Cocaine and rape. A bit far from the ’Diamonds Are Beauty’ campaign. Not a good marketing combination. The Western news organizations adore shocking stories. They would pay us handsomely for these photographs.”

  “Enough. I know when I’m beaten,” his voice cracked. “I will sign the new contract.”

  “I’m so pleased.”

  “This is blackmail, you realize. This is not done of my free will. It’s unenforcea—”

  “Blackmail. Something with which Waterboer has no experience.” Orlov’s smile disappeared. “Please don’t use that reasoning with me. It’s insulting. I’m impervious, but I am reasonable. Which of the contract term options will Waterboer select? Fifty percent at $200 a carat or one hundred percent at $300?”

  Slythe bowed his head in defeat. “Russia’s entire diamond production at $300 a carat.”

  “Da. Harasho.” Orlov grinned. “I will destroy these negatives.” He picked up another folder from his desk, removed a two-hundred-page document, pages alternately written in Cyrillic and Latin alphabets. Orlov’s own legal team had stayed up several nights in a row preparing contracts for each of the president’s alternatives. “Here is the contract. Have your lawyers review it. I suggest you make as few changes as possible. The contract is concluded between you and me, of course, but the Duma is touchy. It may want to start modifying its terms if you don’t sign it soon. And Piet? Between you and me. The cocaine? Drop the habit. It will kill you.”