Jewelers shedding blood rubies

NEW YORK (Fortune Magazine) -- If it's rubies you're dreaming of for Christmas, you might need to rush. Both Cartier and Bulgari have sworn off the precious gems - 90 percent of which are mined in Myanmar - and won't be restocking their showcases.

"We didn't want to be supporting a regime using direct violence on civilians," says Pamela Caillens, Cartier's corporate-responsibility director in Paris. The images of Burmese soldiers firing on pro-democracy demonstrators in September, she adds, were "appalling."

Still smarting from the controversy surrounding the so-called blood diamonds that helped finance conflicts in Sierra Leone and Liberia in the 1990s - and left some consumers with a lingering distaste for the stones - the jewelry industry is scrambling to avoid another public relations disaster over gems from Myanmar.

"We learned a lot from that," says Matthew Runci, CEO of Jewelers of America, a trade organization that represents 11,000 retailers. "Public trust is a very fragile thing." Jewelers of America has urged its members to avoid buying rubies, sapphires, jade and other stones from Myanmar by requiring suppliers to provide documentation of origin.

And it is pressing Congress to ban the import of polished Burmese gems from other countries, a loophole that has allowed business as usual, despite four-year-old U.S. sanctions. Legislation is expected to be approved by the Senate and House of Representatives before Christmas. (The European Union agreed to a similar measure in October.)

Myanmar's gem revenues account for only about $300 million a year - its real jewels are oil and gas, which brought in $2.2 billion last year - but a boycott could have an immediate impact on the country's military rulers. Unlike oil revenues, gems bring quick, hard cash from state-run auctions and cross-border smuggling.

"It's a very lucrative business," says David Mathieson, who works for Human Rights Watch in Bangkok. That could change.

When a 12-day auction opened in Myanmar's capital on Nov. 14, a leading Thai gem dealer told a reporter he dared not buy Burmese stones, fearing that new U.S. sanctions would leave him unable to sell them. Asia still provides a ready market, but some members of Congress are proposing a presidential appointee to coordinate sanctions with Asian governments.

That might help put real pressure on Myanmar's leaders, who are negotiating with Korean, Indian, Chinese and other Asian companies eager to sign deals for huge gas finds off Myanmar's west coast - deals that could bring the junta from $12 billion to $17 billion by 2017. (Two Western oil companies, Chevron and Total, produce small amounts in Myanmar, but they are banned from new investments under existing sanctions.)

As for Cartier (Charts), it is bracing for a ruby drought. "We're turning to other stones," says Caillens.