China Claims Evidence Shows Rio Tinto’s Hu Stole State Secrets

From Bloomberg:

China said it detained Rio Tinto Group’s Stern Hu, head of iron ore operations in the country, after obtaining evidence he stole state secrets.

“Competent authorities have established the evidence before they took action against anyone,” the foreign ministry’s spokesman Qin Gang said in a regular press briefing in Beijing. Hu, an Australian national, and three Rio workers, all Chinese citizens, were arrested by the Shanghai state security authority, the official Xinhua news agency reported earlier today.

Chinese mills and iron-ore producers are continuing the longest-running negotiations in the 40-year history of setting annual prices for the steelmaking material. China, the largest buyer, rejected Rio’s push for a 33 percent price cut, which was agreed to by rivals in South Korea and Japan, and is seeking a steeper discount to counter losses as demand drops.

Hu “is suspected of stealing Chinese state secrets for foreign countries and was detained on criminal charges,” the ministry’s Qin said. The act “caused huge loss to China’s economic interest and security,” Qin said, without elaborating on how Hu stole the secrets.

Rio’s staff stole state secrets by corrupting employees at Chinese steelmakers, the China Business News reported on its Web site, citing the Shanghai state security authority.

This reeks of desperation. Is it coincidence, the Chinese government arrest the long-term negotiator after long term contract talks have failed? Sounds like China is taking these long-term negotiations a bit personally. Who's the big bully now?

Some of the comments claim that iron ore manufacturers should bend to China's will. I doubt they will, seeing how China reacted to the unsuccessful contract negotiations. China will come to them after the smoke has cleared, obviously China still wants the long term contract. Probably the suppliers will demand more due to the risk that China will pull a similar stunt.