China arrests Rio Tinto employees on spy charge

BEIJING — Four employees of Anglo-Australian miner Rio Tinto Ltd. have been arrested on charges of stealing state secrets, China’s foreign ministry 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. Qin declined to give any other details or say when the Australian, Stern Hu, might be allowed to talk to his country’s diplomats.

“Hu is suspected of stealing China’s state secrets,” Qin told reporters at a regular briefing. “Authorities will deal with the case according to law.”

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 a conviction on espionage charges under Chinese law is life in prison. A formal arrest in China means an almost automatic conviction.

The Chinese-born Hu is general manager of Rio’s Chinese iron ore business, according to the Australian government. It says the three other detainees are Chinese nationals.

Meanwhile, a Chinese steel executive who had “close contact” with Hu has been detained by Beijing police, the newspaper 21st Century Business Herald reported Thursday.

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.

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. The foreign ministry and Beijing police did not immediately respond to questions by phone and fax.

Australian diplomats are pressing for access to Hu and details of his case, according to Australian Foreign Minister Stephen Smith. Under a consular agreement, China has a week to respond and Smith said diplomats expect to see him Friday or Saturday.

“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.”

Rio, which is headquartered in London but also has executive offices in Melbourne, said it knew of no evidence of spying.

“We have been advised by the Australian government of this surprising allegation. We are not aware of any evidence that would support such an investigation,” the company said in a statement. It declined to comment further.

The two sides failed to reach 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.

China’s Commerce Ministry said the breakup of the Rio-Chinalco deal would not harm Beijing’s ties with Australia. But a ministry spokesman warned that the deal with Billiton might face an anti-monopoly investigation by Chinese authorities.

In a previous case in 2002, a Chinese-born American, Fong Fuming, was convicted of paying bribes to help investors obtain secret information to bid on power projects. Fong was sentenced to five years in prison but expelled from China in 2003 after three years in captivity.

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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Rio Tinto Ltd.: www.riotinto.com