The MasterBlog: Rio Spying Cost Steel Mills $102 Billion, China Says
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Monday, August 10, 2009

Rio Spying Cost Steel Mills $102 Billion, China Says

Rio Spying Cost Steel Mills $102 Billion, China Says (Update1)

By Bloomberg News

Aug. 10 (Bloomberg) -- Rio Tinto Group, the third-largest mining company, spied on China’s steel mills for six years, creating 700 billion yuan ($102 billion) in excess charges for iron ore, a report on a Chinese government-run Web site said.

Government agencies should enhance surveillance of the secret-protection work at key companies they supervise, said the article posted yesterday on http://www.baomi.org, which is affiliated with the National Administration for the Protection of State Secrets.

China, destination for half the $52 billion global seaborne trade in iron ore, has detained four members of Rio’s Shanghai team, including Australian Stern Hu, on charges they stole state secrets. The detentions have strained relations between China and Australia and followed Rio’s abandoning of a $19.5 billion deal with Aluminum Corp. of China four months after agreeing to what would have been China’s biggest overseas investment.

“That means China gave the employer of those economic spies more than $100 billion for free, which is about 10 percent of Australia’s GDP,” the article said. “It also caused the serious consequence of climbing losses in China’s pillar industry of steelmaking.”

Hu and three other executives of London-based Rio were detained by Chinese authorities on July 5 for allegedly stealing state secrets and actions that harmed the nation’s economic interests and security. Australia, which has said the detentions may be connected to annual price talks for iron ore, is seeking more information and has urged China to deal with the case expeditiously.

‘Without Foundation”

Rio Tinto’s Melbourne-based spokeswoman Amanda Buckley declined to comment on the report today, referring to a July 17 statement. The allegations in media reports “that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation,” Sam Walsh, head of Rio Tinto’s iron ore unit, said that day. Rio, listed in London and Australia, has a third of its assets in Australia.

“This is another step forward and we are moving toward the Rio employees being charged,” said Michael McKinley, a professor of global politics at Australian National University in Canberra. “History tells us that if someone is charged, there is a strong prime facie case and they will most likely be found guilty.”

Australian Prime Minister Kevin Rudd told reporters July 15 that the world was “watching closely” how China handled the Hu case. China is the world’s largest buyer of iron ore and Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($57 billion) in 2008.

The Web site is operated by the Gold Wall Press, which is administered by the Secrets Office of the Communist Party of China’s Central Committee, according to an introduction on the Web site. The article’s author is Jiang Ruqin, the Web site said, without providing further information.

“The case will still take some time,” McKinley said, “and China has a different definition of national security.”

--Zhang Dingmin. With assistance from Gemma Daley in Canberra and Jesse Riseborough in Melbourne. Editors: Mike Millard, Andrew Hobbs.

To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

Last Updated: August 9, 2009 18:56 EDT

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