Australia to Press China Over Rio Spy Case as Rudd Returns

July 13 (Bloomberg) -- Australia will today press China to provide more details on Rio Tinto Group employee Stern Hu, who is being detained for allegedly stealing state secrets. Officials will make representations in Canberra and Beijing and ask for the case to be dealt with expeditiously, Foreign Minister Stephen Smith told reporters yesterday, expressing disappointment that his government learned about the detention from news reports before being informed by China. Hu, an Australian national, and three other Rio Tinto employees were detained in Shanghai on July 5 on suspicion they were engaged in espionage for foreign countries, Qin Gang, a spokesman for China’s foreign ministry, said July 9. The case has strained relations between China and the government of Australian Prime Minister Kevin Rudd, a Mandarin-speaking former diplomat to Beijing who will today return from a week-long trip to Europe. “Rudd faces a huge diplomatic challenge on this as there has been so little exchange of information with the Chinese,” Michael McKinley, a professor of global foreign policy at the Canberra-based Australian National University, said by phone from Singapore yesterday. “Rudd will have to deal with this as soon as he gets off the plane.” During the weekend four Australian ministers, including Smith, expressed concern about China’s handling of Hu’s arrest, which occurred after police searched parts of Rio’s Shanghai headquarters. Hu was manager of Rio’s iron ore business in China. The other three employees are Chinese nationals. Chinalco China has accused Hu of bribing steel mill officials in the country during negotiations over the price to be paid for Rio’s iron ore, Smith said on July 10, citing a statement from Shanghai’s Security Bureau. London-based Rio, which has a third of its assets in Australia, in June abandoned a $19.5 billion investment by Aluminum Corp. of China, four months after agreeing to what would have been the Asian country’s biggest overseas investment. Hu’s detention was not made in connection with the failed deal, Alumimum Corp. said in a statement last week. Chinalco, as the state-controlled company is known, has been in contact with Rio to express “mutual concern for the current situation with their staff,” the statement said. Chinese mills and iron-ore producers including Rio are deadlocked in 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. ‘Implications’ The arrests may still give pause to businesses in China, Smith said. “China needs to think very carefully about what implications, if any, this has on the international business community and international investment community’s view of China,” Smith told reporters at a press briefing in Perth yesterday. “I am sure there is not one Australian company that hasn’t noticed these circumstances in the past week.” Smith said he has had to rely on Chinese Web sites for information on Hu. “I would have much preferred these matters were relayed to us diplomatically,” Smith said of information obtained in the past week. “Our officials will continue to make the point we need to have more detailed information about the circumstances of Mr. Hu’s case and this matter needs to be dealt with expeditiously.” Criminal Charges Chinese authorities “established the evidence before they took action against anyone,” the foreign ministry’s Qin said July 9. Ministry officials yesterday declined to comment. Australian officials met with Hu three days ago for the first time since his arrest, while Trade Minister Simon Crean met with Shanghai Government Deputy Secretary General Sha Hailin on July 11 , expressing “concern” about Hu’s welfare and asking for a quick response. “This is a concerning case,” Financial Services Minister Chris Bowen told Network Ten’s Meet the Press program yesterday. “We are dealing with it very seriously, we’re making the appropriate representations very strongly.” Prime Minister Kevin Rudd, who interrupted a meeting with world leaders including U.S. President Barack Obama in Italy to discuss Hu on two radio interviews on July 10, said Australia would work “methodically” through the issue with China. Surprised, Concerned Rio officials yesterday declined to comment. Rio Iron Ore Chief Executive Sam Walsh on Saturday welcomed news of the consular visit to Hu. The company is “surprised and concerned” over the detention, Walsh said. China has helped Australia, the biggest exporter of wool and iron ore, skirt a recession amid the global economic crisis. China bought A$74 billion worth of goods last year, including A$18 billion worth of iron ore and A$1.4 billion in wool. “The relationship with China is an important one,” Bowen said. “It should be a concern for the Chinese government if foreign businesses feel their degree of uncertainty is high.” Australia Employment Participation Minister Mark Arbib said the nation’s trade relationship with China would not compromise its assistance to the detained Hu. “We will take one step at a time and if further action is required, that’s what we will take,” Arbib told Nine Network television yesterday. “It shouldn’t matter what our relationship is in terms of trade and jobs: All Australians should be getting appropriate action from the government.” ‘Long Haul’ Smith said consular visits would now occur monthly and that Hu may face a “long haul” before the case is resolved. Details of the case were not discussed with Hu during the July 10 meeting, Smith said. Australian opposition foreign affairs spokeswoman Julie Bishop criticized the government for not having direct negotiations with their Chinese counterparts and called for Hu to be released if he has not been charged. Bishop said China had been offended by Australia’s latest defense strategy, which highlights China’s growing military power, and by Rudd having outlined human rights issues concerning Tibetans. “Beijing has been snubbing Canberra,” Bishop told the Australian Broadcasting Corp. television yesterday.