The deal is the first made since the UN lifted a six-year-old moratorium on the mining, sale and export of diamonds it imposed during Liberia's civil war.

IDI managing director Eli Avidar said the return of the rule of law to Liberia meant it had great potential.

The UN embargo was imposed in 2001 to stop diamonds being used to fund wars.

Former Liberian President Charles Taylor is accused of having fuelled conflict in neighbouring nations by giving rebel groups guns, training and money in exchange for diamonds from the areas they controlled.

He is on trial at The Hague on charges of backing rebels in Sierra Leone in an 11-year campaign that left thousand of civilians dead.

'Resource curse'

After signing the agreement in Tel Aviv, Liberian President Ellen Johnson-Sirleaf said she hoped her country's diamonds would now help fund development and address poverty.

"Mineral wealth has played a major role in the past, not in serving the needs of our people but in promoting conflict," she said.

"In fact, for us and some of our neighbouring countries that are resource-rich, these resources were characterized as a resource curse," she added.

"Liberia has an opportunity for national renewal and national reconstruction."

The IDI's managing director said Liberia had a great deal of potential because its Ms Johnson-Sirleaf had ensured the country would be stable.

"Liberia can be a big market. All its neighbouring countries have diamonds, so there's no reason to believe there are no diamonds there," said Mr Avidar said.

"And the new president has brought new leadership and a rule of law."

As part of the co-operation deal, the IDI will offer Liberia's government the services of its top diamond specialists to conduct a survey of the country's potential resources.

The diamond trade is one of Israel's largest industries, with polished diamonds accounting for nearly $6.6bn of the country's exports in 2006, according to the Diamond Institute.

(BBC)

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