China Detains Rio Tinto Exec On Espionage Charge

SYDNEY (AP) -- An Australian who heads Rio Tinto's iron ore operations in China has been arrested in Shanghai and accused of espionage, Australia's foreign minister said Wednesday.

The detention of the executive and three Chinese nationals working for Rio comes at a tense period between the Anglo-Australian miner and China due to tough negotiations on iron ore prices and the failed plan for China's state-owned Chinalco to buy a big stake in Rio Tinto.

Australian Foreign Minister Stephen Smith said he had seen no evidence the arrests were linked to commercial matters between Rio Tinto and China.

Smith said Chinese officials had confirmed Wednesday the arrest of Stern Hu, the Shanghai-based general manager of Rio's Chinese iron ore business, and that he was "very surprised" to learn of it.

"Australian officials were advised that the reason for Mr. Hu's detention was that he was being detained on suspicion of espionage and stealing state secrets," Smith told reporters in the western city of Perth.

Hu was one of four Rio Tinto workers who were detained in recent days, though the exact timing was not clear. Smith said the three others were not Australian citizens, but few other details have been released.

The Sydney Morning Herald newspaper identified them as Chinese nationals who were also members of Rio Tinto's iron ore sales team. The company declined to identify any of the workers.

Rio Tinto has been unable to contact the employees, said Ian Head, a company spokesman in Melbourne. Australian diplomats in Shanghai were urgently seeking access to Hu, Smith said.

"Rio Tinto intends to cooperate fully with any investigation the Chinese authorities may wish to undertake and has sought clarification on what has occurred," the company said in a statement. "Rio Tinto is concerned about the employees' well-being and is doing everything possible to help them and support their families."

A spokesman for the Shanghai police, who would give only his surname, Liang, told The Associated Press that he had no information on the case.

Rio Tinto, the world's third-largest mining company, is acting as lead negotiator for global iron ore suppliers in price talks with Chinese mills.

The two sides failed to reach agreement by the June 30 expiration of previous buying contracts. China's steel industry association, representing the country's mills, rejected prices negotiated by Rio Tinto with Japanese and Korean mills.

The other major suppliers are Australia's BHP Billiton Ltd. and Brazil's Vale SA.

China criticized Rio Tinto and the Australian government last month after the company abandoned the deal to have state-controlled Aluminum Corp. of China, or Chinalco, invest $19.5 billion in Rio Tinto.

Rio Tinto, which is traded on stock exchanges in London and Sydney, launched a rights issue to raise money instead. Chinalco took up a portion of the $15.2 billion share issue to maintain its 9 percent stake in the company.

The Chinese steel industry group also has criticized Rio Tinto's plan to form a joint venture with Billiton, combining their mining assets in western Australia. The group said the tie-up might reduce competition, raise prices and hurt customers.

China's Commerce Ministry said the breakup of the Rio Tinto-Chinalco deal would not harm Beijing's ties with Australia. But a ministry spokesman warned that the deal with Billiton might face an anti-monopoly investigation by Chinese authorities.

Australia's foreign minister said he had seen speculation that Hu's detention could be linked to commercial matters between Rio Tinto and China but added that, "I have no basis for any such speculation."

Sen. Barnaby Joyce, a right-leaning opposition lawmaker who campaigned against the Rio Tinto-Chinalco deal, said its failure "would appear to have inspired" the arrest of the Rio Tinto workers.

"This should be a clear example to Australia, and other countries around the world, of the extent of the relationship between a 100 percent (state) owned entity ... and the actions of the Chinese Government," he said in a statement.

China's vague laws on industrial espionage and other spying give authorities wide latitude in deciding what to prosecute. The government treats a sweeping array of economic and other data as state secrets.

In 2002, a Chinese-born American, Fong Fuming, was convicted of paying bribes to help investors obtain secret information to bid on power projects. Fong was sentenced to five years in prison but expelled from China in 2003 after three years in captivity.

Many of those charged with spying in China have been businesspeople from rival Taiwan who are accused of working for the island's government.

In 2001, a group of Chinese-born academics and others with links to the United States were prosecuted on charges of spying for Taiwan. Most were expelled from China after being convicted and sentenced.

McDonald reported from Beijing. Associated Press researcher Bonnie Cao in Beijing contributed to this report.