Rio Tinto launches blast at the Chinese over spy charges

Jim Armitage
17.07.09

Rio Tinto's patience with the Chinese has broken.
Today, for the first time since the arrest on 5 July of four of its employees in Shanghai on spying charges, the London-listed mining giant launched a fully-fledged offensive against the government of its biggest export market.

Until today, Rio has been careful to give only brief statements, saying it is unaware of any evidence that its staff have been, as the Chinese claim, bribing local steelmakers for information about the country's position on how much it is prepared to pay for iron ore.

Against a background of a frenzy of rounds of diplomacy between Canberra (the most senior of those arrested was an Australian national) and Beijing, Rio has chosen to keep calm and measured in its public statements.

But now, in a sign that it is becoming increasingly angry at the country's intransigence, Rio's iron ore divisional chief executive Sam Walsh issued a more forceful statement. “Rio Tinto believes that the allegations in recent media reports that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation.”

He added: “We remain fully supportive of our detained employees, and believe that they acted at all times with integrity and in accordance with Rio Tinto's strict and publicly stated code of ethical behaviour.”

The statement was seen as part of a coordinated ratcheting-up of pressure on Beijing over the scandal that is starting to damage the image of Mandarin-speaking Australian Prime Minister Kevin Rudd, a former Beijing diplomat.

Last night Canberra and Beijing traded warnings over the affair while the US urged China to ensure fair treatment of foreign company staff working within its shores.

Meanwhile, analysts warned the image of China with foreign businesses is being damaged hugely with every day that passes. “The Chinese government knows that if it really does not have evidence at this critical time, its image will be damaged, “said Scotia Capital China strategist Na Liu.

“In recent years, China has been very conscious in terms of its image and has been improving its PR skills. It would probably not risk the prospect of future foreign resources acquisitions with baseless allegations against Rio.”

The iron ore price negotiations are hugely important to China, as the metal is one of the key ingredients of steel used in the breakneck building and infrastructure programmes which have secured its economic growth.