Four Rio Tinto Employees Suspected of Espionage

July 9, 2009 Posted by China Briefing Reading Time: 2 minutes

SHANGHAI, Jul. 9 – Four employees of the mining company, Rio Tinto, have been detained since July 5 on charges of espionage.

The employees from Rio Tinto’s Shanghai sales office were accused of stealing government secrets. Three are part of the local sales team while one is an Australian national, Stern Hu, the general manager for the company’s China operations. The company maintains a representative office in the city located at the Hong Kong New World Tower.

The detentions occurred amid heated negotiations between the company and Chinese steelmakers over iron ore prices. According to the Sydney Morning Herald, Chinese steelmakers have been asking for larger discounts on iron ore and did not agree with the 33 percent price cut already given to Japanese and Korean steelmakers.

In other sources, it was reported that the China Iron and Steel Association were demanding as much as a 45 percent price cut on iron ore prices.

Yesterday, Shanghai’s State Security Bureau told China Daily that the four were being investigated by the bureau but did not give reasons for their detention. In a company statement made earlier, Rio Tinto said that employees “have been detained for questioning by the Chinese authorities in Shanghai. The reasons for these actions are unclear.”

The company adds: “Rio Tinto intends to cooperate fully with any investigation the Chinese authorities may wish to undertake and has sought clarification on what has occurred.”

Rio Tinto is the third largest mining company in the world and China is its top buyer of raw materials. Iron ore prices is critical for Chinese steel mills hoping for a recovery of the Chinese economy and expecting construction demand to shoot after summer. Currently, Chinese steelmakers import an estimated 50 percent of the world supply of iron ore.

Rio Tinto’s relationship with China has been rocky ever since a controversial deal to buy a majority stake of Rio Tinto for US$19.5 billion fell through. The company chose to do a stock offering and tie-up with BHP Billiton rather than proceed with the deal with state-owned Chinalco.