Create a free account to continue

China: Rio Tinto Workers Stole Price Data

Rio Tinto employees detained on spying charges, accused of bribing Chinese steel company managers to obtain secret information on China's position in iron ore price talks.

BEIJING (AP) -- Four detained Rio Tinto Ltd. employees are accused of paying bribes for secret information about China's stance in iron ore price talks, state media said Friday in a case that highlights the volatile Chinese mix of business and politics.

The four employees, including an Australian, were detained Sunday as Rio, the world's third-largest mining company, negotiated on behalf of global iron ore suppliers with Chinese steel mills. The government says it has proof they stole state secrets.

The Rio employees are accused of bribing Chinese steel company personnel to obtain summaries of meetings by Chinese negotiators and gain an edge in the price talks, newspapers said, citing the Ministry of State Security, China's domestic intelligence agency. They said that damaged China's "economic safety."

The accusations reflect the communist government's sensitivity about fields such as steel and energy that it deems strategic and its intense secrecy about a wide array of economic and industrial information.

"If you're foreign, information is power in China, and they tend to think most of their information is national security information," said Robert Broadfoot, managing director of Political and Economic Risk Consultancy in Hong Kong, who has advised companies on China since the 1970s.

The Australian, Stern Hu, is the Shanghai-based manager of Rio's Chinese iron ore business. Australian diplomats were allowed to meet with him Friday for the first time since he was detained but no details were immediately released.

China is the world's biggest steel producer and has criticized iron ore suppliers for sharply raising prices in recent years. Chinese mills are pressing for substantial reductions. The other major suppliers are Australia's BHP Billiton Ltd. and Brazil's Vale SA.

Information on Chinese steel company ore costs, profit margins and technology spending all are considered official secrets, according to news reports.

The maximum penalty for an espionage conviction is life in prison.

"China has its own laws about state secrets. They are clearly broader than the view that Australia might take," said Australian Foreign Minister Stephen Smith.

"Frankly it is difficult for a nation like Australia to see a relationship between espionage and national security and what appeared to be suggestions about commercial or economic negotiations," Smith said.

Rio responded to the accusation by saying Friday it is "committed to high standards and business integrity."

"The company is surprised and concerned about the allegations," said Rio spokesman Tony Shaffer in Melbourne. "We are not aware of any evidence that would support these allegations."

Chinese authorities have not given Rio any information about the case, Shaffer said.

"We remain ready to assist these authorities in their investigations," he said. "We will continue to support our employees and their families in China."

Employees of the China Iron & Steel Association, the iron ore price negotiator for Chinese steel mills, are also under investigation, the newspaper 21st Century Business Herald reported. An employee who answered the phone at CISA's Beijing headquarters and would give only his surname, Yang, said the association had no comment.

An executive who oversaw iron ore purchases for one of China's biggest steel producers, Shougang Group, was detained this week, according to the Herald. A foreign ministry spokesman declined Thursday to say whether that was linked to the Rio case.

Other Chinese steel companies also are being investigated, the newspaper Oriental Morning Post said.

Many of those caught up in criminal cases over economic and industrial information have been ethnic Chinese from abroad or Chinese-born foreign nationals.

Hu was born in 1963 in the eastern Chinese city of Tianjin and graduated from elite Peking University before emigrating to Australia, according to news reports.

In 2001, a Chinese-born American, Fong Fuming, was convicted of paying bribes to help investors obtain secret information to bid on power projects and sentenced to five years in prison. He was expelled from China in 2003 after three years in captivity.

China's foreign ministry denied speculation in Australia that the Rio case was linked to the company's decision last month to cancel a multibillion-dollar investment deal with state-owned Aluminum Corp. of China, or Chinalco.

In a possible attempt to avert a backlash in Australia, Chinalco issued a statement there Friday insisting it had nothing to do with the Rio case.

"Chinalco has been in contact with Rio Tinto expressing our mutual concern for the current situation with their staff," the statement said. "We have also reasserted that the situation is in no way related to any commercial dealings between Rio and Chinalco."

Despite such denials, the complex politics surrounding economic issues will make foreign companies wonder about Beijing's motives, Broadfoot said.

"They are going to be concerned that China's investments abroad did not go the way it wanted or that China is in the process of negotiating iron ore contracts and is using events like this either as revenge or to enhance its negotiating position," Broadfoot said. "That worries people."

Associated Press Writers Tanalee Smith and Kristen Gelineau in Sydney and researcher Bonnie Cao in Beijing contributed to this report.

More in Supply Chain