Beijing accuses Rio executive of spying after three arrests

By RUPERT STEINER FOR THE DAILY MAIL
Updated:


Rio Tinto executive Stern Hu has been accused of spying on China after he and three colleagues from the mining giant were arrested and detained by the communist country's authorities.

The strong-arm tactics come as Rio is locked in a bitter battle over the price it charges China's steel mills for iron ore. Rio has refused to kowtow to demands to cut costs.

Hu is the general manager at the mining giant's Chinese iron ore business. He stands accused of espionage and stealing state secrets, after being arrested over the weekend. 

An employee is seen leaving Rio Tinto's Shanghai office at the centre of controversy yesterday

An employee is seen leaving Rio Tinto's Shanghai office at the centre of controversy yesterday

State-run Chinese media said of the bribes: 'This seriously damaged China's economic security and interests. The activities of Stern Hu and the others violated Chinese law as well as international business morality.'

The detention of the Australian national caused uproar down under. The move was viewed as revenge after Rio jilted China's state-owned aluminium producer Chinalco, which was proposing a £12billion investment that would have handed control of some key Rio assets to Beijing.

Stephen Smith, Australia's foreign minister, claimed it would be wrong to suggest China is wreaking revenge on the mining giant.

He said: 'I've seen no evidence and I have no basis for any such speculation. But I do underline that when our officials were advised of the reason for the detention, that came as a surprise to us, as it came as a surprise to Rio Tinto.'

Rio (down 24.5p at 1,920p) is the latest western firm to fall victim to suspected state sponsored bullying. China's dramatic move has echoes of BP's experience in Russia last year. 

There, the state also used strong arm tactics to pressure the oil major in a row over a joint venture.

Rio said: '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. We will continue to work to support our employees and their families.'

The escalating dispute between Rio and China comes just weeks after the miner gave Chinese officials a bloody nose. It snubbed Chinalco's £12billion investment, opting instead to raise £13billion through a rights issue and a joint venture with one-time suitor BHP Billiton.

The controversial Chinalco deal had been put together in February at the height of the financial crisis in a bid to halve Rio's £23.7billion debt pile.

Rio's operation in China mainly revolves around sales and marketing and fostering relations with various state owned clients.

China is Rio's biggest market for iron ore.

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