Each year in carefully concealed movements, thousands of carats of rough diamonds from Soviet mines in Siberia are transferred to vaults owned by a South African-run emterprise based in London. In exchange, the Soviets are paid millions of dollars by the South Africans.
This diamond connection between two of the world's bitterest enemies, who are also through a twist of geological fate two of the largest treasure-troves of precious stones and strategic minerals, is part of a series of secret and regular contacts between South African businessmen and Soviet officials.
Some of the contacts, the best documented ones, involve South African marketing for Soviet diamonds. Others reportedly are aimed at sharing information about mining technology and the marketing of certain strategic minerals in addition to the diamonds.
As the major competitors on the Western market for such important commodities as gold, coal, asbestos, iron, manganese and platinum, Pretoria and Moscow share a common interest in seeing a high or at least a stable price for these products, vital to both their economies. So despite their ideological distaste for each other -- and Moscow's support for economic sanctions against South Africa in international political forums condemning apartheid -- calmer and friendlier relations prevail in the discreet world of international finance and business.
It would be going too far to say there is collusion between South Africa and the Soviet Union to fix mineral prices, especially in the case of gold. But their covert contacts undoubtedly provide them both with valuable information and contribute to what financial people like to call "orderly marketing."
Diamonds are forever and the South Africans would like to market them for everyone forever. For decades, maintaining a controlled world supply of diamonds has been the prerogative of De Beers Consolidated Mines. This is the diamond section of Harry Oppenheimer's Anglo-American Corp., the world's largest mining empire headquarted on a quiet, tree-lined street in this city's financial district.
For many years the Soviet Union, second-largest producer of gem diamonds in the world, had an open contract with the London-based, De Beers-controlled Central Selling Organization to market their diamonds. Although this was abrogated in 1963 for political reasons, a working relationship still exists.
European diamond dealers buying from "the syndicate," as the Central Selling Organization is also called, say they find Soviet gems in their purchases. Oppenheimer has privately told people hee that his cousin Philip Oppenheimer, who heads the Central Selling Organization, regularly travels to Moscow and that De Beerss executives meet the Soviets in London. Earlier this year a British Broadcasting Corp. "Panorama" television program told how a Soviet delegation visited the South African diamond mine in Kimberley and how Oppenheimer has dined in London with Boris Sergeev, deputy president of the Soviet diamond and platinum marketing organization in Moscow.
The Soviet Union is not the only ideological foe of South Africa to deal with the Central Selling Organization. Marxist-run Angola, which is virtually at war with South Africa because of its support for anti-Pretoria insurgents in Namibia, also sells its diamonds through the group's pipeline.
Mining and Technical Services, a Liberian-registered company whose board was several directorss formerly associated with De Beers, has recruited expertise and technological aid since 1977 to help the Angolan diamond industry recover from its disruption during the civil war there in 1975-76, according to a British diamond expert, Timothy Green.
It was at the Bolshoi Theatre in Moscow that the curtains were accidently raised on other acts in the Kremlin-South African connection. In the audience watching a performance of the opera "Boris Godunov" one night last November was one of Oppenheimer's right-hand men, Gordon Waddell. As chairman of Anglo's Johannesburg Consolidated Investments, Waddell directs operations of the world's largest platinum mine. A former son-in-law of Oppenheimer, Waddell is also on the four-man Operating Committee that makes top day-to-day executive decisions for the Anglo American Corp.
Waddell was accompanied by another Angelo executive and two unidentified Soviet officials. He told an inquisitive BBC reporter who spotted him that he was "just passing through."
"I would find that explanation quite difficult to believe," said William Gutteridge, professor of international studies at Birmingham's University of Aston and an expert on Soviet-South African relations. "You don't just pass through Moscow and get good seats at the Bolshoi ballet by accident," Gutteridge said in a telephone interview.
South Africa and the Soviet Union supply 95 percent of the world's platinum. South Africa's major mines sell on long-term contracts. But the Soviets, who produce about one-fifth of what South Africa's major mines sell on long-term contracts. But the Soviets, who produce about one-fifth of what South Africa does, sell their platinum on the free market. A tacit agreement for the Soviets not to accept a free-market price substantially under the South African contracted prices would be in the long-term interests of both parties, observrers note.
"You've got to have some kind of marketing arrangement," said one South African trader commenting on Waddell's presence in Moscow.
It would not be the first time Waddell met the Soviets. Each May in London's Savoy Hotel, platinum merchant Barry Salter brings together about 200 of the world's major platinum producers and consumers. The Soviets and South Africans are among the guests quaffing quality wine and talking shop.
Gutteridge says that he also knows of at least one secret meeting two years ago between Soviets and South Africans in Oslo during which the Soviets told the South Africans they were temporarily dropping out of the platinum market.
"There are some cases too, for example in chrome, of the Soviet Union indirectly contacting South Africa on prices," he added. But "the evidence on platinum is pretty clear cut . . .I would not be surprised if they are not also discussing mining and refining techniques."
While there is no evidence of direct discussions on gold sales between the two countries, which together supply 80 percent of this precious metal, there are ample opportunities through intermediaries to learn about each other's intentions.
The South African Reserve Bank, which last year sold more than $10 billion worth of gold, and the Soviets' Zurich-based Wozchod-Handels-bank deal with the same bullion dealers and Swiss banks. In addition, Anglo-American owns 29 percent of the London-based Consolidated Gold Field, a gold-mining finance house that besides owning profitable gold mines in South Africa is regarded as the expert source in the West on Soviet gold production.
The company's executive director, Michael Beckett, visited Moscow for discussions with Soviet officials last September that he said were to gather information for his company's annual bullion survey and to discuss gold mining technology. He also acknowledged that his company regularly speaks with officials of Wozchod-Handelsbank.
Christopher Stolz, senior deputy director of the South African Reserve Bank, agrees his country and the Soviet Union "have common interests in marketing operations of gold" that could lead to similar sales policies. But he denies any formal or informal discussions.
The bank does, however, "get a lot of information, quite good information sometimes" on Russian sales through banks and dealers used by both countries in New York. Frankfurt, Zurich and London, Stolz said.
Ian Wright, a former executive of Consolidated Gold Fields and now a London stockholder specializing in gold, said in a telephone interview that "the strings or ties between the Soviet Union and South Africa are very slender indeed, but I'm quite sure some kind of link has been made."
Wright speculates that any tacit agreement might be along the lines oof agreeing on a floor price below which both countries would not sell. Sun an agreement would be all the more useful now than in the past due to what Oppenheimer calls the volatilty of the gold market.
As Communists who pride themselves on their anti-South African posture in international bodies, the Soviets appear more embarrassed by the publicity of these contacts than the South Africans. But they have not been as adept as the South Africans in denying them.
Anatoli Gromyko, head of the Soviet Africa Institute, told a Swiss newspaper that asked him about Soviet ties to the Central Selling Organization: "The Soviet Union has contacts with the cartel which deals in diamonds, which is not to be confused with official government ties with South Africa."
And when a BBC team questioned the Soviet deputy ambassador to London, Vladimir Bykov, about Oppenheimer's meal with Sergeev, Bykov replied, "Harry Oppenheimer is an international businessman. I assure you that our representative when he talked to him, he talked to him as a businessman, perhaps from Britain or the U.S., not like to a South African."
"There is no cooperation at all," Oppenheimer said last May in Frankfurt when asked about the Waddell excursion to Moscow. "There are common interests obviously in these markets and naturally both sides try to know what the other is doing. There are no agreements. Perhaps it would be better if there were, but I'm afraid there are not."
Waddell did not attend Salter's platinum lunch this year. When a rival South African platinum producer, Sidney Newman of Lonrho, playfully broached the subject of Waddell's visit to Moscow, Soviet trade official Eugene Manakov shouted from his seat, "He was at the Bolshoi," according to a participant at the lunch.
At this, grins and chuckles bubbled over in the Savoy's dining room.