Australian Rio Tinto executive held in China

NEWS.com.au
July 09, 2009 04:00pm

* A man with "ties" to Rio arrested
* Comes after Stern Hu detained
* "Espionage and stealing state secrets"
* No explanation - Stephen Smith
* Rio Tinto: Latest share price, profile

THE iron ore chief of Shougang Corp has been arrested as part of a crackdown on raw materials trading in China, Bloomberg News reported, quoting the 21st Century Business Herald.

The man arrested was identified as Tan Yixin, Shougang’s general manager of mineral imports and exports, Bloomberg News reports. Other executives from the company were also detained.

A Shougang spokesman told the Herald he had no information on the detention and the Herald did not cite the specific source or sources used for its report.

News of the arrests comes after a senior Australian mining executive was arrested in Shanghai by secret police on charges of espionage and theft of state secrets.

The arrest of Stern Hu, the general manager for China operations at Rio Tinto's iron ore division, prompted speculation that it was linked to fraught negotiations over Australian iron ore exports to China, The Australian reports.

The Herald report said that Mr Hu had "ties" to Mr Tan but it isn't know if the new arrests are directly related to the arrest of Mr Hu and the three other Rio Tinto executives.

As the Opposition called on Kevin Rudd to use his special relationship with China to secure Mr Hu's release, analysts and Nationals Senate leader Barnaby Joyce pointed to the protracted negotiations between Rio and Chinese steel mills over iron ore prices and the thwarted bid by state-owned Chinalco to take a strategic stake in Rio earlier this year.

Despite Mr Hu's arrest on Sunday, along with three Chinese colleagues, and diplomatic approaches to Chinese authorities in Beijing, Canberra and Shanghai, by last night Australian consular officials had yet to gain access to the executive.

Speaking in Perth last night, Foreign Minister Stephen Smith confirmed Mr Hu and the three other Rio officials were being held on suspicion of espionage and stealing state secrets.

"We're continuing to seek explanations for the reasons for the detention," he said.

"I've also seen speculation that Mr Hu's detention may be linked to commercial matters between Rio Tinto and China; I've seen no evidence and I have no basis for any such speculation but I do underline that when our officials were advised of the reason for the detention, that came as a surprise to us as it came as a surprise to Rio."

He said Australian officials in Shanghai had "immediately made contact with Chinese authorities" and Mr Hu's wife on Sunday.

The arrests come after the failed $US19.5 billion ($24.8bn) bid by Chinalco to increase its shareholding in Rio and take minority stakes in key projects, such as the Pilbara iron ore operations.

Although Chinalco expressed only "disappointment" when Rio ditched the deal in May in favour of an alliance with rival BHP Billiton, the move sparked fury in the state-owned Chinese press, which accused the Anglo-Australian miner of betrayal.

Rio has also been leading the tense negotiations between Australian miners and Chinese steel mills on the price China will pay for iron ore in the current financial year.

China has been holding out for a 40 per cent-plus cut in iron ore prices, although last night there were unconfirmed reports that the steel mills had buckled and accepted a 33 per cent drop in iron ore contract prices, matching prices agreed to by Japanese, South Korean and Taiwanese steel mills.

Mr Hu has been a prominent figure in the Chinese iron and steel sector. In late 2007, as annual benchmark iron ore price talks approached, Mr Hu spoke at the annual China International Steel and Raw Materials conference, saying Australian iron ore landed at Chinese ports was much cheaper than Brazil's and that big Chinese companies were making good profits. The remarks later drew the ire of Chinese steel manufacturers.

In confirming the arrests, Rio said it would co-operate with the Chinese authorities.

"We intend to co-operate fully with any investigation the Chinese authorities may wish to undertake and have sought clarification on what has occurred," the company said yesterday.

It is understood Australia's ambassador to China, Geoff Raby, intervened with Chinese authorities yesterday to seek details about the reasons for the arrests, which threaten to undermine bilateral relations.

- with The Australian

Read more on this story at The Australian.