Israel's Purchase of Excess Industrial Diamonds from the Strategic and Critical Materials Stockpile

LCD-77-414: Published: Mar 11, 1977. Publicly Released: Mar 11, 1977.

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The United States sold 300,000 carats of industrial diamonds to Israel for $9.1 million over a one-year period beginning July 22, 1975. The sale was part of a disposal of 4,961,000 carats of industrial diamonds authorized by Congress in 1971.

The sale to Israel of 300,000 carats at $9.1 million was proper, considering the disposal law and congressional intent. The sales contract did not prohibit resale by Israel, and the diamonds were resold, subject to contract provisions that lessened market disruption by the sale. The sale to Israel was negotiated, but proper. The United States received fair market value for the stones. Israel did receive higher quality stones than in a sealed bid sale, contrary to General Services Administration policy of selling lower quality stones first. Mixing different quality stones may increase profits and help dispose of lower quality materials. The precedent established must be carefully considered in future negotiated diamond disposals. Further negotiated sales of this type could lower the quality of the diamond stockpile.

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