Rio Four to be Charged with Stealing Commercial not State Secrets

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Commodities, Global Trade

The China-Rio detention story rolls on. Stephen Hu, head of Rio’s iron ore sales team in China and his three colleagues Liu Caikui, Ge Minqiang and Wang Yong were arrested on July 5 and have been held under allegations of spying and obtaining state secrets. In a statement released through Xinhua and reported in the NY Times, prosecutors said the four Rio Tinto employees had used improper means to obtain commercial secrets from China’s government-controlled iron and steel industry. Although commercial bribery is a criminal charge, the sentence for anyone convicted of the crime is significantly shorter than those for state secrets violations. Still the charge carries normally up to 3 years and potentially up to 7 years in jail. On hearing the lesser charges being considered, players in the market breathed a collective sigh of relief that China appeared to be trying to cool the political row the detentions had created, only for a news release in the Sydney Morning Herald to raise the temperature again. The report quotes a Chinese website as accusing Rio of stripping $123bn from the country through a six-year program of commercial espionage, later announcements by the administration said the article was not the governments official position but it does suggest emotions in China are running high in some quarters.

The article gives no details beyond accusing the miner of ”winning over and buying off, prizing out intelligence ¦ and gaining things by deceit”. It says Rio’s activities led China to pay $123 billion more for iron ore than it otherwise would have over a six year period. ”That means China gave the employer of those economic spies more than $123 billion for free, which is about 10 per cent of Australia’s GDP,” the article says. It does not explain how Rio could be guilty of thieving a sum far in excess of Rio’s total iron ore sales to that country over the period but then the whole saga has been sadly short of facts since it started. The language has been getting gradually more vitriolic with talk of local officials and businessmen who speak with foreign firms as “traitors” and stating the country is experiencing a period of commercial espionage warfare. Most of the accusations appear directed at Rio and one can’t help feeling it has a lot to do with the company’s withdrawal from the deal with Chinalco earlier this year.

The Australian government is maintaining a fine Anglo-Saxon stiff upper lip and saying very little beyond they have yet to see the official statement from the Chinese Government. Other foreign corporations operating in China though are following events with concern.

Typical of China’s murky legal system, the four have not been allowed access to lawyers but have now met with a senior representative of Rio Tinto and are said to be well. So far the four have only been “arrested” the formal charging, when they are told what they are being held for, is yet to come. How this saga will play out remains to be seen but you can be sure someone is already working on the film rights.

–Stuart Burns

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