July 19 (Bloomberg) -- China’s arrest of Rio Tinto Group’s Stern Hu is related to a criminal probe into iron-ore price talks, not espionage, and the case may result in a decision to charge the mining executive, Australia’s foreign minister said.
Stephen Smith, who met with Vice Foreign Minister He Yafei on July 17, again urged China to provide more information about the arrest of the Australian citizen, the minister told the Australian Broadcasting Corp. today. “If they do charge him, the precise details will be there for all to see,” Smith said.
The investigation into Hu and three other Rio executives detained on July 5 has strained relations between China and Australian Prime Minister Kevin Rudd, a Mandarin-speaking former diplomat to Beijing. China said on July 16 that Australia was an “interference” with the nation’s legal sovereignty.
“It’s getting more and more mired in what looks like politics and high-level Chinese bureaucracy,” said Peter Arden, a resource analyst at Ord Minnett Ltd. in Melbourne. “It’s going to have some impact, in the short-term at least, on iron- ore supply and commerce more generally.”
Foreign ministry spokesman Qin Gang had said on July 9 that Hu was suspected of “stealing Chinese state secrets for foreign countries.” China has also accused Hu of bribing steel mill officials during the iron-ore negotiations, Smith said on July 10, citing a statement from Shanghai’s Security Bureau.
Rio’s Denial
Rio, the world’s third-largest miner, has denied the allegations against Hu, who manages the London-based company’s iron-ore business in China, and the three other employees, who are Chinese nationals. Rio Tinto spokeswoman Amanda Buckley today declined to comment when contacted by phone.
China is the world’s largest steelmaker and relies on iron- ore shipments from Rio, BHP Billiton Ltd. and Brazil’s Vale SA to feed the industry. The round of iron-ore talks is meant to set contract prices for the raw material from April 1.
“It’s quite clear they are focusing on a criminal or judicial investigation relating to the 2009 iron-ore negotiations,” Smith told the ABC’s Insiders program today. “They are not interested in what we would regard as espionage or national security matters.”
Rio Tinto denied allegations this week that the four executives had bribed officials at Chinese mills. Employees “acted at all times with integrity and in accordance with Rio Tinto’s strict and publicly stated code of ethical behavior,” iron-ore unit chief Sam Walsh said in a statement on July 17.
The case is making many Australian businesses “wary of getting entrapped in something unwittingly,” Ord Minnett’s Arden said by phone.
‘No Magic Solution’
Julie Bishop, the opposition’s foreign affairs spokeswoman, today called on Prime Minister Rudd to raise the issue of Hu’s detention with senior Chinese officials.
While Australia will continue to push China to resolve the case quickly, “there is no magic solution,” Smith said. “We have to expect that we may well be in for a long-haul here.”
Smith said he also told Vice Minister He that he would have preferred to get more information from Chinese officials much earlier. “I was frankly disappointed that I didn’t get those through the usual channels,” Smith told the ABC.
Rio, which has about a third of its assets in Australia, last month scrapped a $19.5 billion investment by Aluminum Corp. of China. China is Australia’s second-biggest trading partner, with two-way trade worth A$68 billion ($55 billion) in 2008, and largest source of foreign investment.
