TABLE OF CONTENTS PART ONE

THE BURMESE RUBY AND SAPPHIRE SITUATION

by Robert Genis

As long time readers of this newsletter are aware, National Gemstone has been recommending clients place a portion of their gemstone portfolio into unheated Mogok Burma ruby and sapphire. We find this area of the world fascinating. Burma gemstones are on the top of our list for collecting. Let's look at the situation today.

Background
The two main sources of Burma ruby today are Mogok and Mong Hsu. Mogok is the traditional source and their goods are considered the creme de la creme of Burma gemstones. For hundreds of years, The Mogok Stone Tract has been producing gem quality ruby, sapphire, and spinel. In 1992-1993, a sister location was discovered in Mong Hsu, Burma. Unlike Mogok, these stones look like bad garnet until they are heated. Once cooked, they turn into bright, lively red gems.

Few dealers actually travel to the source. Some dealers buy stones directly from Mogok dealers. However, most of the goods end up in Bangkok after being smuggled across Thailand at Mae Sot or Mae Sai. These stones usually are recut and often heat treated in Bangkok, the distribution center for most of the world's ruby and sapphire.

The Thai/Burma Border
Mae Sot is now the primary Thai border town where Burma gems are smuggled, even though Mae Sai is closer to Mogok and Mong Hsu. Burma goods used to flow through Mae Sai, about 400 kilometers north, but now cannot due to the Burmese government controlling the area across from Mae Sai.

Khun Sa, the notorious drug lord, once reigned in the area directly across from Mae Sai. He has relinquished control of this land to the Burmese government. It is rumored he was offered amnesty from US drug charges and allowed to open many business ventures, including a gemstone cutting factory. Khun Sa is reported to be living in Rangoon. The Burmese government recently turned over Li-Yun-chung, a key aide to Khun Sa, to Thailand for his connection with 1,070 pounds of heroin seized in Hayward, California in 1991.

The Burmese smugglers and Thai dealers now meet in Mae Sot to transact business. Reports indicate that fine gems do not stay here but go straight to Bangkok for distribution. The town is closed to foreigners or strangers trying to buy gems. It is impossible to get an accurate representation of how much material comes across from Burma.

Mae Sot is now the homeland to many Karen in Thailand. They have been fighting the Burmese central government for over 50 years. As reported in earlier Gemstone Forecasters, the Burmese government offensive this year has pushed them into Thailand. The Karen have vowed to continue to struggle. In the meantime, the Karen have lost revenue from gemstone smuggling. The Karen now face a future as a refugee nation. The Thai government is trying to force the Karen back into Burma. This reality has already caused the slowdown of Burma goods. Goods are still finding their way out of Burma but in reduced quantities for top quality single gemstones. Burma goods are now being controlled more tightly by the Burmese government, rather than the smugglers and bandits.

Thailand and Burma are attempting to become friends. The Friendship Bridge which will connect the two countries across the Moei River will soon be completed. One theory is these governments and their friends want to monopolize the colored gemstone market at the border. This monopoly could force increasing prices on Burma goods.

Bangkok Today
What is the present situation of Burma ruby in Bangkok today? There is plenty of low, commercial quality ruby from Vietnam, Cambodia, and Africa. The problem is with high quality goods. Recent reports from dealers and the trade press indicate all Burma goods are extremely rare and in short supply. There is a noticeable shortage of ruby, especially in larger sizes.

The supply of Mong Hsu ruby is down dramatically. This is the first time since the introduction of these goods in the early nineties that there has been any supply disruptions. Plus, the buyers want unheated Mogoks. This desire decreases the pool of available goods even more. Mogok Burma ruby has always been rare. Certain Burma and European dealers are buying the limited production in Mogok and bypassing the traditional marketing channels to Thailand. This has put great strain on prices for Mogok ruby in Bangkok. As a result, any two carat ruby is a hot stone.

US/Burma International Politics
The army has ruled Burma with an iron grip since the 1960s, crushing an uprising in 1988 and since then terrorizing or jailing democracy activists. The United States and many other Western countries have criticized Burma for human rights abuses and for failing to recognize the democratically elected government of the opposition National League for Democracy, which was co-founded by Nobel Peace laureate Aung San Suu Kyi.

President Clinton, citing "severe repression" in Burma, recently imposed economic sanctions on Rangoon, including a ban on US investment in its oil and natural gas development. This will affect Unocal, Texaco and Atlantic Richfield. The United States is the fourth-largest investor in Burma, after France, Singapore and Thailand. Clinton said he was taking the action because of "serious abuses" by the military government against political opponents. He also complained about the flow of illegal drugs through Burma.

In May, the Burmese Government arrested 50 Aung San Suu Kyi supporters. The sweep occurred as the result of the US economic sanctions. May 27 is the seventh anniversary of when the National League for Democracy Party won 82% of the vote, but the Burmese government refused to honor the election. They have been trying to curtail Aung San Suu Kyi's freedom of movement since last year.

New Source?
Many dealers believe the land between Thailand and Cambodia is potentially ruby rich. Many of the Khmer Rouge troops guarding this area have recently defected to Thailand. However, this area has been under the control of the Khmer Rouge for more than 20 years. They do not want to lose control of it. A former Khmer general now rules this area. There is some unreported gem trading going on between Cambodia and Thailand.

Blue Sapphire
Besides Burma ruby, Burma Mogok sapphire is practically nonexistent in Bangkok. Actually, Mogok Burma sapphire is probably 500 times rarer than Burma ruby. The amount of blue sapphire found at Mong Hsu is nil. Thai sapphire is virtually mined out. Australian imports to Thailand have recently decreased by 25%. Large scale Australian mining and cutting make these stones cost prohibitive. African sapphire production is small and not gem quality.

Fracture-Filled Issue
The gem industry is aware that all of the new Mong Hsu Burma ruby is heated. According to the American Gemological Laboratories (AGL), 70% of the Mong Hsu Burma ruby is fractured-filled. Fracture-filling is a process that occurs during heat treatment. A glass-like material seeps into ruby and improves the gems' appearance. The process appears permanent. The Gemological Institute of America (GIA) has stated the stones are not fracture-filled, but rather simply heated with borax.

The problem that has arisen is certain dealers and retailers are selling Mong Hsu material without disclosing that it is heated or possibly fracture-filled. People are attempting to dupe buyers into believing this Mong Hsu is the same as buying Mogok material. Some do this with intent and others by omission. The bottom line is that there will always be separate markets for the two materials. Mong Hsu will probably always trade at prices lower than unheated Mogok. The recent events have put a scare into the Mong Hsu Burma ruby market. Dealers and collectors are now primarily searching for unheated Mogok Burma ruby. This is causing upward pressure on these gemstones.

Conclusion
Market Recommendation
The following was written in GFN 14, #3 Fall, 1996. Every serious collector's portfolio should contain these goods. In order of priority, we suggest collecting:

  1. Unheated Burma Mogok ruby and blue sapphire.
  2. Heated Mogok ruby and sapphire.
  3. Heated Mong Hsu ruby.
  4. Thai ruby and sapphire (top 3.5 colors only).
Consider this portfolio based upon your finances. If you can afford only one gemstone, attempt to purchase an unheated Burma Mogok ruby or blue sapphire. You can purchase a one carat Electric Pink Burma ruby from $2000 per carat; a one carat unheated Burma Sapphire from $1000 per carat. Move down the list based on your available funds. If money is not a major concern, try to gear your portfolio to the largest Burma rubies and sapphires you can afford. You may wish to diversify your portfolio with mixture of all the types and varieties.

Remember, ruby is probably the most traded gemstone by collectors. There is presently a shortage of ruby worldwide. Of course, no one knows how long this shortage will last. Presently, look for upward pressure on ruby and sapphire prices. If you need specific portfolio assistance, please call National Gemstone at 1-800-458-6453.

LAND OF OPIUM, MULES AND GUNS

This fascinating but difficult to read historical article on the "Golden Triangle" was printed in The Nation (April, '97).

"During the latter half of the 20th century the little-known and often lawless region where Laos, Burma, Thailand and China meet has become known and widely romanticized as "The Golden Triangle". Originally a Western designation applied to the region because of its wealth in jade, silver, rubies, lumber, rare animal products and, above all, opium, the name has stuck and is today accepted both in Chinese and in Thai.

By reputation, by very definition, the area is off the beaten track. The home of drug warlords, arms dealers, insurgent armies, latter-day slave traders and plain, old-fashioned bandits, it's also the home of an extraordinarily wide range of colourful ethnic minorities, many still only partly known and understood, and a veritable Tower of Babel linguistically.

In recent years the defeat of communist insurgences in Thailand and Burma, coupled with the lowering of the Bamboo Curtain in China and Laos as both those countries slowly switch to free trade, has opened some parts of the Golden Triangle to the outside world for the first time in decades.

Other areas- most notably Burma's unadministered Was States- have never been open. Even during the British Raj the area remained sealed off, closed to outsiders. And for good reason; the "Wild Was" were head-hunters who lived in all-but-impregnable thorn- stockaded villages. The only way by a narrow, winding tunnel, pierced with narrow slots which ensured the uninvited could be pierced with spears as they wormed their way in. Heads were taken to ensure the fertility of the harvest, and prominently displayed near the frontiers of Was territory. Hardly surprisingly, people stayed away.

People stayed away; yet there was one exception. The rugged, indomitable Chinese muleteers known to the Burmese as Panthay, and to the Thai and Lao as Haw or Chin Haw, were- and to some extent still are- the masters of the Golden Triangle. Certainly they were the traders par excellence, penetrating into the remotest reaches of forbidden territory such as the Was States, while at the same time their mule caravans, laden with everything from precious stones and jade to opium and copper pans, traded as far as Luang Phabang in Laos, Moulmein in Burma, Tali and Kunming in Yunnan, and Chiang Mae in northern Thailand. Wherever they went they were protected with the best weapons money could buy, and they used these to good effect to ensure the respect of the law-abiding and the fear of the lawless.

When the British first arrived in the Shan State in 1886, they were amazed to find the Panthays armed with Remington repeater rifles better, in most cases, than those of their own troops. Today, of course, it is the semi-automatic AK 47, with it's tell-tale curved ammunition clip, which rules the roost. The question arises, who are these hardy people, and where did they come from? The Thais- even Thai academics- often designate them as a ""Chinese Hill Tribe", and lump them together as Chin Haw (a designation they detest and will not recognise) to distinguish them from the far more numerous Hua Chiao, or "Overseas Chinese", who arrived in Thailand by sea and have settled in large numbers throughout the country, forming an estimated 10 percent of the Thai population.

If the Hakka, Hokkien, Hainanese and Cantonese can be styled Overseas Chinese, then an altogether appropriate designation for the "Chin-Haw" must be Overland Chinese. Yunnanese-speaking muleteers and traders, they walked or rode into Thailand and Burma by the back door of the Golden Triangle. They do not consider themselves Chinese, and the only distinction they recognise is between Hui, or Muslim Chinese, and Han, or non-Muslim Chinese. At this point those unacquainted with the complex ethnic and religious patchwork of the Golden Triangle may legitimately raise a quizzical eyebrow. Muslims in the Golden Triangle? And Chinese ones at that?

Sop Ruak, where Burma, Thailand and Laos meet, is a long way from the Middle East by any standard. Why, how, when did this come about? To find an answer we have to travel back in time about 600 years, to the Yunan Dynasty, when the Mongols ruled not only China, but a broad swathe of land extending across Central Asia to the Russian steppes and large parts of the Middle East. Like any large and successful empire, the Mongols used mercenary and conscript troops. In remote frontier areas- such as southern Yunnan- they also borrowed from Chinese tradition, "using barbarians to control barbarians". In suppressing the remnants of the Southern Sung and extending their control as far as Pagan, then capital of Burma, they employed fierce Uzbek fighters from the Khanate of Bukhara in Central Asia.

By the late 13th century Yunnan had been successfully incorporated in the Mongol realm, and Kublai Khan turned his attention further afield. Some of his Turkic mercenaries were sent to attack Burma- the likenesses of tow are still recorded in frescoes to Pagan, one officer supporting a fierce hunting falcon on his wrist. Others were ordered to settle in newly conquered Yunnan to ensure the continued pacification of the province. They were given Chinese wives, and one Shams Alden Al Becker was made governor. As a further reward, the faithful Muslims were given control over roads and communications. From that time, their grip on the trade of the region has rarely slackened. Even today most out of the way hostelries are Muslim run, and truck drivers, as much as muleteers, are likely to be followers of the Prophet Muhammad.

During the centuries following their settlement in Yunnan the Uzbek followers of Shams Alden gradually became assimilated through intermarriage into the local population a process which continues today. They became increasingly Chinese in appearance , and they adopted Yunnanese Chinese as their language, retaining Arabic only for religious instruction, and forgetting Turkish completely. To their Han neighbours they became known as Hui, or Chinese speaking Muslims.

Relations weren't always good, but they got along fairly well until the mid- 19th century, when oppression by the Ch'ing authorities sparked a major Muslim rebellion. Between 1855 and 1873 a large part of Western Yunnan broke away from the Ch'ing Empire as local Muslim set up their own state, Ping Nan Kuo, or "Kingdom of the Peaceful South". Their leader, Tu Wen hsiu, styled himself Sultan Sulayman and tellingly donned Ming Dynasty costume, indicating loyalty to the Ch'ing's predecessors rather than to some distant Middle Eastern potentate.

In the end the more powerful Ch'ing armies triumphed, massacring innocent Hui as well as rebels as they advanced. Many Hui, amongst them the most hardened supporters of Tu Wen hsiu, fled into the hills of the Golden Triangle with their horses and arms. This was no new territory to them their trade routes had criss crossed the region for centuries, and because of their influence Yunnanese Chinese was already the lingua franca of the area.

Some of the Hui refugees made their way south, through the Golden Triangle to Chiang Mae, the capital of northern Thailand, where they established a small trading post which became known as Ban Chin Haw, or Chin Haw Village today the area of the world famous Chiang Mae Night Bazaar. Others settled as far afield as Vientiane and Rangoon, though they maintained touch with each other, and with their fellows at home in Yunnan, through an extensive network of trade links and caravan routes. The toughest of Tu Wen-hsiu's followers made their way into the Was States, where they made a temporary treaty with the Was ruler and established themselves at the small, isolated settlement of Panglong. In time they defeated and dominated the local Was, making Panglong the defacto capital of the region.

When the British arrived in 1886 they contracted with the new rulers of Panglong to supply mule trains for the colonial armies. Records form the time make it clear that the British regarded the hardy Chinese Muslims whom they styled Panthays, after the Burmese usage as the most advanced people in the region, noting with evident surprise the wealth and power of Panglong. But how was such money amassed in so remote a point of the Golden Triangle? As Sir George Scott, the first commissioner of the Shan States, cryptically observed armed with repeating rifles, financed by Chinese syndicates form Singapore, the Panthays of Panglong sent long caravans of mule trains the length and breadth of the region, carrying yes, carrying pots and pans and walnuts and cotton and all manner of knick kancks but above all, carrying opium.

Until the fall of the Ch'ing Dynasty and the establishment of the Chinese Republic in 1911, the Yunnanese Muslims of the Golden Triangle had things pretty much their own way. Nobody neither the French, nor British, nor Siamese, nor Chinese exerted more than a nominal influence over the region, and the traders flourished. By way of example, in 1926 Panglong was visited by GE Harvey, British superintendent of the Shan states, only to be informed by the inhabitants: "Neither the Chinese government nor the British means anything to us. It's we who rule here."

Those who made big money often chose to become respectable, setting in towns like Chiang Mae and Mandalay and opening trading houses. Many went on Haj to Mecca, others devoted themselves to charitable causes. It was a Chinese Muslim a Thai "Chin Haw" who donated the land for Chiang Mae railway station to the Thai crown, for example.

During the 20th century, however, the ethnic makeup of the "traders of the Golden Triangle" began to change. Increasing numbers of non-Muslim, Han Chinese fled the chaotic situation in Yunnan, driven first by rival warlord factions, then by Japanese invasion, and finally by the long and savage civil war between Chiang Kai-shek's Nationalists and Mao Tsetung's communists. The crisis peaked in 1949, when the victorious PLA entered Yunnan, driving remnants of Chiang's Nationalist forces across the border into Burma, Laos and Thailand the very heart of the Golden Triangle.

During the early years of Cold War period many of these staunchly anti-communist soldiers became front line paramilitary forces for the Thai and Lao governments. Armed, and to some extent protected by the CIA they mounted two unsuccessful counter invasions of Yunnan, only to be forced back to their mountain strongholds along the Thai-Burma Lao frontier. Here, as anti-communism waned and the bitterness of isolation and defeat crept in, the Kuoomintang remnants turned increasingly to the opium business to finance not just their way of life, but life itself.

Armed with sophisticated modern weaponry, they soon developed a strangle hold on the trade and of course the muleteers they needed for transport were already there and spoke the same Yunnanese dialect, Not that the indigenous hill peoples made much distinction Hui caravaneer or renegade KMT general, they were all "Chin Haw", Yunnanese Chinese, the ubiquitous traders of the Golden Triangle.

Today, in the wake of the Cold War, some things have changed. The Muslim Yunnanese have, by and large, settled in urban communities in large centres like Chinag Mae, Chiang Rai and Mae Sai in Thailand, Lashio, Mandalay and Taunggyi in Burma. They still maintain links with their fellows in Yunnan, and dominate much of the regional caravan trade in consumer goods between China, Burma and Thailand. A visit to, for example, the prosperous Attaqwa Mosque in Chiang Mae reveals pictures of Kunming as well as of Mecca. Chinese script, as well as Arabic and Thai, is much in evidence as are pictures of Sun Yat-sen, the founder of the Chinese Republic. Trade remains the lifeblood of the community, albeit they are quick to assure only in strictly legal commodities.

The former KMT soldiers, participants in the second mass wave of migration sparked by the communist victory in 1949, have enjoyed more mixed fortunes. More recent arrivals than the 19th century Muslims, they have settled in isolated hill top villages in Chiang Rai and Chiang Mae provinces. The best known of these is undoubtedly Doi Mae Salong. Once an impoverished, heavily armed KMT outpost at the sharp end of the Cold War, it is today a tranquil oasis of tea gardens, fruit orchards and Yunnanese style houses. Much of the village's prosperity is derived form Taiwanese tourists who come here to see the remains of Chinag Kai shek's "Lost Army" but not all. A quiet investigation of the sloping backstreets in the chilly early morning mists may often reveal a mule train departing northwards, carrying who knows what? A sign near the bottom of the steep hill leading to Doi Mae Salong announces in three languages Thai, Chinese and English "The man who cannot make it to the top of the hill is not a man". Against the odds, the traders of the Golden Triangle continue to achieve prosperity and success."

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