A MAJOR diplomatic row was brewing last night between resource-rich Australia and its biggest customer, China, after four steel industry analysts for the mining giant Rio Tinto were detained over spying allegations during iron ore price talks.
The four analysts, including a Shanghai-based Australian Stern Hu, in charge of Rio Tinto’s Chinese iron ore business, were detained on July 5th while Rio was acting as lead negotiator for global iron ore suppliers in price talks with Chinese steel mills.
Little is known about the circumstances of their detention, but the official China Daily reported this week that executives from 16 Chinese steel mills taking part in talks this year were given payments by Rio employees.
Government spokesman Qin Gang said China welcomed foreign companies to work in China, once they followed the rules of the land, and he said the behaviour of the employees of Rio Tinto had hurt China’s interests.
“In this regard, I think Stern Hu and his company are clear about it and it is legal for related Chinese organisations to take measures against them,” Mr Qin told a news conference.
The stakes in these talks are high and they have been running since January without a deal – a record for the negotiations.
China is the world’s biggest buyer of iron ore, using nearly 60 per cent of world output, and Chinese demand is crucial to the global resources industry. The country is planning to spend tens of billions of euro this year on steel for infrastructure projects which form the backbone of its four-trillion-yuan government stimulus plan. However, it wants to pay significantly less for the product.
Chinese state media say the detained analysts are accused of bribing employees of Chinese steel companies to obtain confidential information on China’s negotiating strategy.
Rio Tinto has pulled its steel industry researchers out of the country, and they have been moved to Singapore or Australia.
Australia’s prime minister Kevin Rudd said this week that the Australian government had yet to receive information directly from Chinese authorities about why Mr Hu was detained.
Beijing responded by saying that Australian “noise” on the case was interfering in Chinese sovereignty. China says information on steel production, sales and iron ore costs is secret, and Mr Qin said Australia was not acting in its own best interests in the matter.
The Chinese say they have switched to talking to Brazil’s Vale ore producer about prices because “there is no one at Rio that we can talk to”.