Already blessed with some of the earth's richest mineral resources, Australians are being dazzled with a fabulous new find: the world's biggest diamond mine.
But all the glitter, discovered in an ancient volcanic range in remote northwestern Australia, has caused nettlesome political and commercial problems.
Optimistic assessments -- evaluating the find at up to $17 billion with a capacity to yield an annual production equal in carats to the entire world's current output -- run into the view here that South Africa, which dominates the international diamond industry, is determined to control the production and marketing.
This effort would be critical for South Africa because its diamond empire, a mainstay of the economy, already faces serious difficulties.
South African businesses indirectly own stakes in two of the three companies in the Ashton Joint Venture that is developing the site just west of Lake Argyle in the Kimberley region of the state of West Australia. Moreover, South African interests control the Central Selling Organization, the international syndicate that markets 80 percent of the Western world's gem-quality rough diamonds.
The South African involvement stems from the international network of the De Beers company run by the family of Harry Oppenheimer, who has been dubbed here the "Goldfinger" of the international diamond trade. De Beers and the Oppenheimers work closely with the South African government.
Domestically, the issue of major South African influence has entailed an apparent disagreement at the top of Australia's governing coalition, a rift between the federal and state governments and friction among the Ashton Joint Venture partners, who are developing the site.
Controversies about a rival company's claim to the leases and protests by aboriginal groups that the mining violates a "sacred site" known as the Dreaming Place of Barramundi Gap cap all the fuss.
The South African issue came to the fore recently when Australia's Liberal prime minister, Malcolm Fraser, suggested in Parliament that the federal government might intervene to make sure Australian diamonds are marketed independently of the South African syndicate.
In reply to a question from an opposition spokesman, Fraser said, "I can see no advantage to Australia or to Australian industry in having arrangements in which Australian diamond discoveries only serve to strengthen a South African monopoly in these areas."
The questioner, Labor Party minerals and energy spokesman Paul Keating, said Fraser's statement marked "the first indication from the government that it would not be prepared to see Ashton fall easy prey to the South African diamond syndicate."
Keating said two other major diamond producers, Zaire and the Soviet Union, "have already left the Central Selling Organization and are marketing independently. Australia can do the same thing."
Australia should cut and polish its own diamonds to derive added value, he added, and, if it wants to sell part of its production through the syndicate, "it should do so on an arm's- length basis and on appropriate commercial terms."
The South African issue is particularly sensitive because of Fraser's efforts to strengthen ties with black Africa and other nations vociferously opposed to the Pretoria government's apartheid policy of racial separation. His Third World alignment, particularly on demands for the independence of South African-run Namibia, has drawn fire from some supporters of his conservative coalition with the National Country Party.
Fraser's remarks in Parliament appeared to conflict with the stated views of the leader of his coalition partner, Deputy Prime Minister Douglas Anthony. Anthony, who is also minister for trade and resources, had told Parliament that there was "no need at this stage" for government export controls on diamonds.
Labor's Keating charged that whereas Fraser "has at least indicated some concern for the national interest," Anthony and his department did not mind seeing the South Africans "raping our fledgling diamond industry."
On the other hand, an official of one of the Ashton Joint Venture firms said that "the deputy prime minister's aim is to maximize exports and encourage exporters, while the other guy is playing the world stage. There's a natural split between a guy who represents his constituents and a leader who takes the broader political view."
Meanwhile, the West Australian premier, Sir Charles Court, insisted that control over production and marketing should be left to the state government, which owns its mineral rights.
Differences have also emerged within the Ashton Joint Venture, with the minority partner claiming that the two other members have undervalued the diamonds found so far. The minority firm, Northern Mining, holds a 5 percent share in the venture and is the only wholly Australian-owned partner.
The other partners are the mining conglomerate CRA with 57 percent and Ashton Mining with 38 percent. CRA, in turn, is more than 50 percent owned by the London-based Rio Tinto Zinc, in which De Beers holds a significant but officially undisclosed share. De Beers also has a piece of Ashton Mining through shareholdings in two of its owners, according to published reports.
The exact percentages of the complex web of shareholdings are a matter of dispute, but at least some South African influence in CRA and Ashton Mining is widely acknowledged.
According to an internal document leaked to an Australian newspaper in August, Northern Mining accused CRA of promoting a long-term contract with the Central Selling Organization that would give the joint venture below-market prices for its diamonds. An account in the Sydney Morning Herald quoted the document as saying that a marketing study group headed by a CRA official limited its inquiries to the syndicate and contacted rivals only at Northern Minings's insistence.
A senior official of CRA, John Macleod, dismissed any South African control of the Ashton Joint Venture as a "crazy suggestion" and said the group was still trying to decide its "marketing strategy."
He said bypassing the syndicates was possible but extremely difficult because Australia lacks experience in marketing diamonds. In addition, the diamond market is the softest since the Depression and De Beers, despite its apparently eroding international control, could flood the market with a strategic stockpile estimated at a billion carats.
In what was interpreted here as a warning to the joint venture, Oppenheimer was quoted as saying recently in London that it would be foolish to ignore the real strength of the Central Selling Organization.
CRA claims that Australia's position is not as strong as it may appear because most of the diamonds in the Argyle mine are lower-quality industrial stones rather than gem-quality ones. However, Northern Mining disputes the extent of the quality difference.
A boost came with the announcement Oct. 15 of the discovery of a new deposit estimated to be worth as much as $57 million. Although small compared with the main diamond site estimated to contain from $5.7 billion to $17 billion worth of diamonds, the new find is alluvial and thus easily mined, and it represents an important source of financing to exploit the main deposit.
Commercial production at the main Argyle deposit is due to begin in early 1985. Then the venture hopes to cash in on investment expected to total as much as $460 million.