An Israeli tycoon, the Virgin Islands, and Africa's blood diamonds

Israeli diamond tycoon Dan Gertler, grandson of Israel Diamond Bourse founder Moshe Schnitzer, recently purchased stakes in oil and mining projects in the Congo. It's unclear where the money is going.

Israeli diamond tycoon Dan Gertler appears to be working his magic again in the Congo. Various sources have reported his involvement in Caprikat, a company registered in the British Virgin Islands that was reported to have taken oil blocks 1 and 2 in Lake Albert. At the same time, he is reportedly behind Highwinds, another British Virgin Islands-based company, which is reportedly taking over the lucrative Kolwezi Tailings copper & cobalt concession that is being expropriated from Canadian company First Quantum.

Neither company has any reported expertise in mining or oil drilling. They both appear to be newly-founded companies.

In both cases, Mr. Gertler's alleged companies have stepped in to take over concessions whose worth is well-known and that are being claimed by other parties. In the case of Kolwezi, First Quantum says it has already sunk $700 million in the project, whose rich mineral deposits are well-known. In Lake Albert, the blocks are being claimed by two other parties already – Tullow Oil first had the rights for both blocks, one of which was sold on to Divine Inspiration, much to the alarm of Tullow. On the one hand, this makes the investments safe bets for Gertler, as at least he knows the value of the concessions. On the other hand, he will have to weather the international legal disputes that are currently unfolding. (First Quantum has gone to arbitration, while at the same time being sued by the Congolese state for $12 billion).

Gertler also recently bought the BIC bank from Congolese businessman Pascal Kinduelo (whose curious involvement in the Divine Inspiration deal was also documented here). And he has been rumored to be involved in several offshore oil concessions, as well, in the Atlantic off the Congolese coast.

Gertler was just 27 when he first became involved in the Congo in 2000, obtaining a monopoly of diamond exports (worth around $600 million) in return for $20 million. He had previously been involved in diamonds in Angola and he is the grandson of Moshe Schnitzer, the founder of the Israel Diamond Bourse. He is now one of the richest Israelis.

In 2007, one of the companies that Gertler helped found, Nikanor, went public on the London AIM stock exchange, raising a record $434 million. Again, it was a company with no previous record or expertise in mining that had been granted some of the Congo's richest copper and cobalt assets.

Gertler's success has been closely linked to his warm relations with the presidency. He was one of the only westerners to be invited to Kabila's wedding in 2006, and has very close links with Katumba Mwanke, the president's closest financial adviser.

For those interested in Middle East politics, Gertler, a devout Orthodox Jew, is also behind the Green Park and Green Mount companies that are helping to finance the building of new Israeli settlements in the occupied West Bank.

Why these new concessions, whom do they benefit? Not clear. The fact that they are registered in the British Virgin Islands will make it difficult to find out who is a shareholder. The investments are certainly risky, and the shenanigans with the existing contracts has certainly not helped boost investor confidence in the Congo - the World Bank's IFC, a partner in the First Quantum project, has suspended activity in the Congo for the time being. Risk insurance premiums have risen by 40 percent over the past 18 months due to contractual insecurity, a serious headache for investors.

Industry insiders, however, suggest that the last big round of mining concession acquisitions happened just before the last elections and helped the president raise funds for his expensive campaign. The next elections are in 2011.

--- Jason Stearns blogs at Congo Siasa.

Add/view comments to this post.