President Backed Rio Spy Probe

The Sydney Morning Herald reports on the investigation of Rio Tinto staff in China for allegedly “stealing state secrets”:

THE Chinese President, Hu Jintao, personally endorsed the Ministry of State Security investigation into Rio Tinto that led to the detention of the Australian iron ore executive, Stern Hu, and three staff, Chinese Government sources say.

The investigation appears to be part of a big realignment of how China manages its economy, with spy and security agencies promoted to top strategy-making bodies.

The ministry and the Public Security Bureau have significant new roles – the former focusing more on international economic dealings and the latter on domestic political unrest that might flow from economic instability.

The Australian has more details about the case:

It is now clear that the allegations against Mr Hu and his colleagues are directly related to prolonged and unresolved negotiations over benchmark prices for iron ore being sold by Australian miners to Chinese steel mills.

Chinese media reports said Rio – and possibly its one-time rival and new joint venture partner BHP Billiton – had been approaching Chinese steel mills in the past month, seeking compensation for broken contracts after the steel makers allegedly reneged on promises to buy certain volumes of iron ore.

Also from The Age:

But in China, with its enormous system of laws that are seldom enforced, the specifics of Rio’s iron ore dealings are only the starting point in working out how things went so horribly wrong.

“There is always the question: why did they choose to go after these people at this time?” says Jerome Cohen, a leading expert on China’s state secrets laws at New York University.

“Was there such hostility between Chinese and Rio Tinto iron ore that coloured this crackdown?”

The answer to that question is obviously “yes”.

See also a report from the New York Times, “China Rattles Investors With Detentions of Executives.”

July 12, 2009 7:47 PM
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