China says Rio Tinto employees stole state secrets

[July 09, 2009]  BEIJING (AP) -- China has proof four detained employees of miner Rio Tinto Ltd. stole state secrets for foreign countries, the government said Thursday, following their detention amid contentious iron ore price talks.

A foreign ministry spokesman, Qin Gang, confirmed those detained were employees of Rio's Shanghai office and included an Australian citizen, Stern Hu.

"Hu is suspected of stealing China's state secrets for foreign countries," Qin said at a news briefing. He declined to give details but said, "Competent authorities have sufficient evidence to prove they have stolen state secrets and have caused huge losses to China's economic interests and security."

The official Xinhua News Agency, citing security officials, said the four employees were arrested, which can mean an almost automatic conviction. But Qin said they were detained, a step before a formal arrest.

Qin warned Australia not to politicize the case: "It's improper to exaggerate this individual case or even politicize it, which will be no good to Australia." He rejected speculation in Australia that the case was retaliation for Rio's decision last month to cancel a multibillion dollar investment deal with a Chinese state-owned company.

The detentions Sunday came as Rio, the world's third-largest mining company, acted as lead negotiator for global iron ore suppliers in price talks with Chinese steel mills. But there has been no indication whether the case is linked to the negotiations.

China's vague spying and national security laws give authorities wide latitude in deciding what to prosecute. The government treats a sweeping array of economic and other data as state secrets. The maximum penalty for an espionage conviction is life in prison.

The Chinese-born Hu is general manager of Rio's Chinese iron ore business. The Australian government says the three other detainees are Chinese. Rio is headquartered in London but also has executive offices in Melbourne.

Meanwhile, a Chinese steel executive who had "close contact" with Hu was detained Tuesday by Beijing police, the newspaper 21st Century Business Herald reported.

Tan Yixin, general manager of Shougang International Trade & Engineering Corp., oversaw iron ore purchases, the Herald reported, citing unidentified sources. It gave no indication whether the two cases were linked. Qin, the foreign ministry spokesman, would not say whether Tan was linked to the Rio case.

A spokesman for Shougang Group, parent company of Tan's employer, said he could not confirm whether Tan was detained. He would give only his surname, Wu.

Australia's foreign ministry summoned China's acting ambassador to Canberra to press for access to Hu, Foreign Minister Stephen Smith said in a statement. He said Chinese authorities later said Australian diplomats can see him Friday.

"We are perplexed by the reason for his detention," Smith told Australian Broadcasting Corp. television. "We're asking for additional information as to the basis of his detention."

Prime Minister Kevin Rudd, a Mandarin-speaking former diplomat, said he had no immediate plans to call Chinese President Hu Jintao to discuss the case, the Australian Associated Press news agency reported.

"The advice from our consular officials is to work step by step and we will raise it at whatever level of the Chinese leadership is necessary at the relevant time," Rudd said during an official visit to Rome.

Rio said it knew of no evidence of spying.

"We are not aware of any evidence that would support such an investigation," the company said in a statement. It declined to comment further.

Iron ore price talks failed to produce an agreement by the June 30 expiration of previous buying contracts after China's steel industry association rejected prices negotiated by Rio with Japanese and Korean mills. The other major suppliers are Australia's BHP Billiton Ltd. and Brazil's Vale SA.

China criticized Rio and the Australian government last month after the company abandoned a deal to have state-controlled Aluminum Corp. of China, or Chinalco, invest $19.5 billion in Rio Tinto.

Rio launched a rights issue to raise money instead. Chinalco took up a portion of the $15.2 billion share issue to maintain its 9 percent stake in the company.

The Chinese steel industry group also criticized Rio's plan to form a joint venture with Billiton, combining their mining assets in western Australia. The group said the tie-up might reduce competition, raise prices and hurt customers.

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On the Net:

Rio Tinto Ltd.: http://www.riotinto.com/

[Associated Press; By JOE McDONALD and ROHAN SULLIVAN]

Joe McDonald reported from Beijing and Rohan Sullivan from Sydney. Associated Press Writer Audra Ang and researcher Bonnie Cao in Beijing contributed to this report.

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