Is Stern Hu spying on China?
Rio Tinto, the multi-national company based in Melbourne and London, is the second largest exporter of iron ore in the world. One of its senior Beijing-based executives, Stern Hu, a Chinese-born Australian, along with three Chinese employees, have been imprisoned on suspicion of ‘stealing state secrets’.
Is this a case of commercial espionage? Would it not be true that a company executive like Stern Hu would never be in a position to have access to state secrets? Would it not also be true that a small country like Australia could do nothing with any supposed state secrets even if they did exist?
Could this be a result of some retaliation over the price of iron ore or retaliation because BHP Biliton entered into a 50/50 mining joint venture between the two companies which meant that Rio Tinto decided to scrap the proposed $19.5 billion investment by Chinalco into the company?
Does the Chinese Government believe Rio Tinto decided on the BHP Biliton deal because the Australian Government Foreign Investment Review Board did not want the Chinese Government backed Chinalco venture to go ahead? Is an innocent Australian going on trial for espionage because of a failed China-Australia trade deal?
I think the answer to all of these questions is YES.
This could be a routine case of corporate espionage where the price of iron ore demanded from Rio was revealed to another Australian company also in negotiations over price, such as Fortescue which came to an agreement this week over the price of iron ore from the Pilbara.
Recently the unpredictable fluctuations in commodity prices, and problems with various trade deals, have caused mounting tension between China’s steel producers and the overseas iron-ore suppliers they deal with. It is well known that the Chinese have been pressing for a 70% discount on iron ore sales. Did Hu refuse to give the price reduction?
China’s less than transparent criminal-justice system makes it difficult to discover any further details of the charges, and both Prime Minister Kevin Rudd and Foreign Minister Stephen Smith have been tiptoeing round the issue in fear of upsetting our major trade partner. Meanwhile an Australian citizen is in jail without a clear charge.
Prime Minister Kevin Rudd said the detention of Hu jeopardizes China’s trade relations with our nation and the rest of the world. But he has made no intervention and believes the Chinese justice system must run its course. Of course Mr Rudd already knew that China was about to agree with a $50 billion dollar sale of natural gas and so he would not want to rock the boat.
Recently a State owned newspaper revealed that the Rio Tinto negotiators supposedly attempted to bribe Chinese officials from a number of steel mills during negotiations over iron-ore prices. That would not surprise me in an environment where officials expect to be offered personal deals.
It is suspicious that Stern Hu’s arrest came just after the collapse of a bid by state-owned aluminium company Chinalco to invest $19.5 billion in Rio Tinto which would give it power to set prices on iron ore.
The new joint venture will own the prized iron ore assets in the Pilbara region of Western Australia of both miners, and will supplant Brazil’s Vale as the largest iron ore producer in the world. The effect of this joint venture is to reduce the number of major global iron ore producers from three—BHP, Rio Tinto and Vale—to two—the BHP/Rio Tinto joint venture and Vale. Even before the deal with BHP was announced, conflict had begun between the miners and China, their biggest customer, over price negotiations.
In terms of the global competition for resources that is becoming increasingly expensive, as China, India and other emerging countries industrialize the conflict is exacerbated. The world’s supply of iron ore, one of the most basic building blocks in an industrial economy, will now be in the hands of a powerful duopoly.
This seems to be a normal example of important issues of supply and demand, which has resulted in market conflict over price. Poor old Stern Hu is no spy, just an executive trying to do his best for his employer and his shareholders.
That is why Kevin Rudd should make intervention and reassure the Chinese that this is not an international political incident, but a commercial one that can be worked out without company staff being imprisoned.
Rev the Hon. Dr Gordon Moyes AC MLC