Friday July 10, 10:13 PM
Australia says Rio arrests linked to iron ore talks
By Talek Harris
SYDNEY (AFP) - Australia on Friday said China's arrest of a top Rio Tinto (LSE: RIO.L - news) executive was over alleged bribery during fraught iron ore negotiations, as Chinalco denied the move was payback for a collapsed deal.
Mining giant Rio said it was "surprised and concerned" at the claim against Shanghai office chief Stern Hu, an Australian passport holder who led the iron ore talks, and three of his Chinese colleagues.
Australian Foreign Minister Stephen Smith said Hu, accused of spying and stealing state secrets, appeared to be the subject of a criminal investigation into claims that Chinese steel mill officials were paid off during the talks.
"As understood from Shanghai State Security Bureau, during China's iron ore negotiations with foreign miners in 2009, Stern Hu gathered and stole state secrets from China via illegal means including bribing internal staff of Chinese steel companies," said Smith, quoting from a Chinese government website.
"This has caused huge loss to China's national economic security and interests."
The Australian Associated Press reported that Australian officials met with Hu for the first time Friday after earlier being denied access to him since his arrest, with China having previously given assurances about his well-being.
Smith would first brief Hu's family and his employer about the visit before making official comment, the report said, without elaborating.
It added that Trade Minister Simon Crean was trying to arrange meetings with Chinese officials in Shanghai Saturday during a pre-arranged trade visit to discuss the detention of the Rio executive.
Earlier Smith said it was "difficult for a country like Australia to see a link between espionage or national secrets and commercial negotiations."
Rio said it was not aware of any evidence against Hu, and his three colleagues, whose arrest on Sunday has cast a shadow over one of Australia's most important trade and diplomatic relationships.
"The company is surprised and concerned about the allegations," a spokeswoman said. "We are not aware of any evidence that would support these allegations."
Rio, the world's third-largest miner, has been locked in difficult talks with China to set iron ore prices for the coming year, with negotiators missing a key deadline on June 30.
Chinese media have reported that the head of iron ore trading at Shougang Group steel company, who had "close contact" with Hu, has also been arrested for suspected commercial crimes.
The detentions also follow Rio's snubbing of a 19.5-billion-US-dollar cash injection from state-owned Chinalco, its biggest shareholder.
But Chinalco Friday moved to quash speculation that there was any link to the deal's failure. "The situation is in no way related to any commercial dealings between Rio and Chinalco," a spokesperson said in a statement.
Earlier, Mandarin-speaking Prime Minister Kevin Rudd rejected calls to intervene in the highly sensitive case and stressed the need for caution.
"With all complex consular cases, we have to proceed cautiously on the basis of the advice as it unfolds," the former diplomat told public broadcaster ABC.
The incident has already caused diplomatic ructions, with Canberra summoning the acting Chinese ambassador Thursday for an explanation.
China is the world's biggest consumer of iron ore and Australia's second-most important trade partner, with the relationship worth 58 billion US dollars last year, according to official figures.
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