【the age】China's $120bn Rio spy claim

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China's $120bn Rio spy claim
http://www.theage.com.au/national/chinas-120bn-rio-spy-claim-20090809-ee9f.html
John Garnaut, BeijingAugust 10, 2009

CHINA alleges Rio Tinto stripped $A123 billion from the country through a six-year program of commercial espionage, as it signalled it will broaden its spy blitz beyond the four mining employees detained in Shanghai.

The new allegations published on an official website - by far the most detailed and explosive by an official source - all but end hopes that Australian Stern Hu and his three Chinese colleagues will avoid convictions and long jail terms.

The Australian Government has received scant information about Mr Hu as well as several blunt diplomatic rebuffs.
And senior Rio Tinto managers have been humiliated in their attempts to see the former head of iron ore sales in China, who is being detained in the Shanghai Detention Centre, and to learn the whereabouts of three Chinese staff who were arrested at the same time.

The Age believes senior Rio Tinto executives were shadowed and intimidated in a recent visit to Shanghai. Mr Hu and the three other executives were detained on July 5 for allegedly stealing state secrets and actions that harmed the nation's economic interests and security. Australia, which has said the detentions might be connected to yearly price talks for iron ore, is seeking more information and has urged China to deal with the case quickly.

The report, published at the weekend on a website administered by the Secrets Office of the Communist Party of China's Central Committee, alleges that Rio Tinto was involved in a six-year clandestine operation against China's steel mills. It accused the Anglo-Australian miner of ''winning over and buying off, prying out intelligence, routing one by one, and gaining things by deceit''.

It said Rio's activities led China to pay $A123 billion (700 billion yuan) more for iron ore than they otherwise would have. ''That means China gave the employer of those economic spies more than $A123 billion for free, which is about 10 per cent of Australia's GDP,'' the article said.

The report does not explain how Rio is accused of stealing a sum that is far in excess of Rio's total iron ore sales to China during that period.

Rio strongly denies it has been involved in bribery or improper conduct in China, but a spokeswoman yesterday said she could not comment on the new allegations.

For most of the past six years, Rio Tinto and BHP Billiton have sold iron ore to Chinese steel mills at a steep discount to the prices received by domestic Chinese and other international producers.

The report also revived Cold War terms such as ''espionage warfare'', signalling the nation may be embarking on a campaign of suspicion against foreigners. It said outside businesses must come under stricter controls to stop them from spying and obtaining commercial secrets.

''Our country has entered a peak period of commercial espionage warfare, and the threat to important economic intelligence and security of national economic activity increases by the day,'' the report said.

It urged strict controls of contact between foreign businesses and local officials, experts and managers, asserting that ''traitors'' were enriching themselves at the expense of Chinese businesses. For three weeks the state-controlled media have been warning Chinese citizens how to protect themselves and their country against what they allege is a foreign espionage blitz.

There has also been vitriolic media commentary directed at Rio, including calls for China to boycott all of Rio's product on the grounds that it will cripple the mining company more than it hurts China.

Mark Goulopoulos, senior investment adviser at Patersons Securities, said Rio's share price had been largely insulated from the spy claims, until now. ''I think investors will probably feel a little nervous about Rio … if it turns out to be really serious, then I think investor sentiment around Rio will be impacted.''

With MATHEW MURPHY

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