Rio Tinto 'Spies' - What the F***??

**Bigfella** · 10th July 2009 03:42

I'm hoping that some of those on the board with a better understanding of the internal workings of the Chinese government might be able to shed some light on this.

It seems unlikely to say the least that these guys are actually spies. It also seems too much of a coincidence that this comes soon after the Chinalco bid was rejected and Chinese negotiators failed to get their preferred price in new iron ore negotiations. Other reports have stated that the delegation was already convinced it was being bugged.

This is clearly not just some local official getting carried away. Can anyone here shed any light on what the Chinese government is trying to do here?

Plot thickens in Rio exec 'spying' case

By China correspondent Stephen McDonell

Posted Thu Jul 9, 2009 2:01pm AEST
Updated Thu Jul 9, 2009 2:23pm AEST

Four Rio Tinto workers have been detained in Shanghai for alleged involvement in espionage. (flickr.com: triplefivedrew)

Australian man Stern Hu, the head of Rio Tinto's China operations, has been detained in Shanghai along with three other Rio Tinto staff for alleged involvement in espionage.

Now a senior executive from China's Capital Steel, Tan Yixin, has reportedly been arrested in Beijing for "business crimes".

The 21st Century Business Herald has reported that Tan knows Stern Hu very well and that the two met in April this year at Capital Steel's headquarters to discuss iron ore prices.

But Capital Steel has denied that it is involved in any way in the accusations against Mr Hu.

The company says it knows nothing of the details of his detention and that no speculation should be made on the link between the two separate arrests.

According to the 21st Century Business Herald, the three other Rio Tinto staff being held are: Liu Caikui, a manager who recently joined Rio; Wang Yong, a long time employee of Rio in China; and Ge Minqiang.

The newspaper report says other people have either been detained or are being investigated in relation to the matter.

The Australian Government says it cannot be certain Mr Hu has been treated appropriately since he was detained on Sunday on suspicion of espionage and stealing state secrets.

The Chinese Government has not yet allowed Australian consular officials to meet Mr Hu, who has been living in Shanghai for the last 10 years with his wife.

Foreign Minister Stephen Smith says the Government is urging China to allow Australian officials to see Mr Hu as soon as possible.

"That's one of the reasons why we want access to him, is to satisfy ourselves as to his welfare, to satisfy ourselves as to his wellbeing and to get some indication from him as to how we can be of assistance," Mr Smith said.

Both the Federal Government and Rio Tinto say the accusations come as a complete surprise.

Mr Smith says the Government is doing what it can to try to get access to Mr Hu.

"I'm satisfied, very satisfied, that our response to date has been a sensible and proportionate response," he said.

"We will continue to make all the points we've been making privately and now publicly to Chinese officials."

Nationals Senate leader Barnaby Joyce says he is convinced Mr Hu's detention is linked to Rio Tinto's decision to abandon a takeover offer from the Chinese state-owned mining firm Chinalco.

But Federal Treasurer Wayne Swan says there is no evidence the incident has anything to do with the failed Chinalco deal.

"I don't think it would be the responsible course of action to be speculating about what has occurred in this case," he said.

"I think some of the comments that have been made by others about the possible ramifications of this, or flow through of this from other matters in the commercial sphere, simply cannot be supported by any back-up material."

**Skywatcher** · 10th July 2009 03:54

Considering that the PRC classifies all sorts of mineralogy reports as state secrets, its possible the Rio Tinto guys could have just stumbled into the morass while researching Chinese mineral deposits to get an idea of the Chinese bargaining power.

**Parihaka** · 10th July 2009 04:19

Originally Posted by Bigfella

It seems unlikely to say the least that these guys are actually spies.

Why?

**kyli** · 10th July 2009 06:04

As number of other people have either been detained or are being investigated in connection with Mr Hu's arrest(from chinese steel companies), I would guess it might be commercial espionage.

**sumob** · 10th July 2009 07:01

The timing of the arrests is surely more than a coincidence, or is it the work of some over zealous Govt. dept.

**Bigfella** · 10th July 2009 07:32

Originally Posted by Skywatcher

Considering that the PRC classifies all sorts of mineralogy reports as state secrets, its possible the Rio Tinto guys could have just stumbled into the morass while researching Chinese mineral deposits to get an idea of the Chinese bargaining power.

I'm thinking along those lines too.

**Bigfella** · 10th July 2009 07:37

Originally Posted by Parihaka

Why?

I'm particularly thinking of the senior management guys here - at least one is on the board of the company. High profile people in an industry that currently has a high profile with the Chinese government seem like unlikely espionage operatives. Under too much scrutiny already.

**captain** · 10th July 2009 08:31

I would be surprised if it has anything to do with state secrets or espionage.

The men arrested work for Rio in the sales and supply contract area, not research or prospecting and any geology reports would be about Australia, not China.

The Chinese have for some time tried to get a controlling interest in Australia's mineral wealth.
They have succeeded to some extent with smaller companies but Rio was the jewel in the crown.
Rio opted out of the deal and entered a more favourable joint venture with the other main iron ore producer, BHP.

What is not mentioned in the story is the apparent demand made on Rio now for a $195 million opt out of negotiation payment.

This payment has been refused by Rio and from what I can gather, never was a formal agreement, therefore it may be a "save face" demand.
Not how Australia does business nor do we cowtow happily to blackmail!

It may also be possible that palms within the Chinese hierachy that were being greased and had the expectation that this would continue, now see the cash cow walking out the door hence some form of vindictive reaction.

If this escalates, the China/Australia relationship will sour but only for a while hopefully.

Interesting times ahead I think.

Cheers.

**Parihaka** · 10th July 2009 08:39

Originally Posted by Bigfella

I'm particularly thinking of the senior management guys here - at least one is on the board of the company. High profile people in an industry that currently has a high profile with the Chinese government seem like unlikely espionage operatives. Under too much scrutiny already.

As the article suggests they already thought they were being bugged. I'd guess that all it would have taken was the mention by him and his associates of 'sensitive' information regarding the steel companies to provide the necessary justification.

**Parihaka** · 10th July 2009 08:41

Your Foreign Minister had pertinent comments on sky news this arvo on how the Chinese Govt. differs from Australia on how it views confidential information relating to its various companies.

**Bigfella** · 10th July 2009 14:33

Originally Posted by Parihaka

As the article suggests they already thought they were being bugged. I'd guess that all it would have taken was the mention by him and his associates of 'sensitive' information regarding the steel companies to provide the necessary justification.

Your Foreign Minister had pertinent comments on sky news this arvo on how the Chinese Govt. differs from Australia on how it views confidential information relating to its various companies.

Indeed. Very different definitions of 'espionage', or at least differnt views of which espionage governments should be banging people up for.

**Bigfella** · 10th July 2009 14:38

Originally Posted by captain

I would be surprised if it has anything to do with state secrets or espionage.

The men arrested work for Rio in the sales and supply contract area, not research or prospecting and any geology reports would be about Australia, not China.

The Chinese have for some time tried to get a controlling interest in Australia's mineral wealth.
They have succeeded to some extent with smaller companies but Rio was the jewel in the crown.
Rio opted out of the deal and entered a more favourable joint venture with the other main iron ore producer, BHP.

What is not mentioned in the story is the apparent demand made on Rio now for a $195 million opt out of negotiation payment.

This payment has been refused by Rio and from what I can gather, never was a formal agreement, therefore it may be a "save face" demand.
Not how Australia does business nor do we cowtow happily to blackmail!

It may also be possible that palms within the Chinese hierachy that were being greased and had the expectation that this would continue, now see the cash cow walking out the door hence some form of vindictive reaction.

If this escalates, the China/Australia relationship will sour but only for a while hopefully.

Interesting times ahead I think.

Cheers.

Thanks Captain. Interesting info.

This pertains to the bit I'm hoping our resident 'China watchers' can help with. I had some suspicions as to the 'why' (iron ore negotiations), but what I can't work out is why go about it in such a hamfisted way? I thought China was a bit more sophisticated than that. Do they not see the potential damage this might do in terms of dealings between Chinese companies & non-Chinese ones, or do they just not care? Is there a cleverer game going on here that I'm not seeing, or is it as foolish as it looks?

**captain** · 10th July 2009 15:46

Apparently Rio has agreed to pay the $195m penalty.

China still very unhappy with Rio/BHP JV witch would make that consortium the most powerfull iron ore producer in the world.

Rio is considering a rights issue to raise cash which will force Chinalco to find another 1.5 billion to avoid having it's current share holding diluted.

A seat on the Rio board is now even more unlikely.

The plot thickens.

Cheers.

**xinhui** · 10th July 2009 17:24

Bigfella,

I would wait until some solid evidences before jumping into conclusion.

Nationals Senate leader Barnaby Joyce says he is convinced Mr Hu's detention is linked to Rio Tinto's decision to abandon a takeover offer from the Chinese state-owned mining firm Chinalco.

But Federal Treasurer Wayne Swan says there is no evidence the incident has anything to do with the failed Chinalco dea

**xinhui** · 10th July 2009 17:31

China still very unhappy with Rio/BHP JV witch would make that consortium the most powerfull iron ore producer in the world.

No one is happy to see (and a possible anti-trust issue) such alliance either. I am sure you follow the news that both Korea and Japan just re-negotiated iron ore pricing Rio. Having a single player that dominated such an important sector will make people take notice.

But, going back to my last post, is this related to the arrest, I don't know.

BHP, Rio JV hopes to sidestep antitrust concerns | Reuters
BHP, Rio JV hopes to sidestep antitrust concerns

Japanese, Chinese and European steelmakers joined forces to fight a plan by Rio Tinto (RIO.L) and BHP Billiton (BLT.L) to link up iron ore operations, while China called for "a fully open international market."

China, Europe steelmakers join anti-Rio/BHP chorus | Deals | Reuters

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