Rio Tinto spies cost us $143b - China

CANBERRA - The future of Australian iron ore negotiator Stern Hu and three Chinese colleagues has darkened further with allegations that six years of bribery and industrial espionage by mining giant Rio Tinto had cost China $143 billion.

Hu and fellow Rio Tinto executives were arrested last month by the State Security bureau in Shanghai for allegedly obtaining state secrets, apparently data providing Beijing's bottom line in tough iron ore negotiations.

The new allegations appeared in articles on the website of the National Administration for the Protection of State Secrets (NAPSS), which oversees the security of all but military data.

Although neither the Australian Government nor Rio Tinto have commented on the allegations, the arrests of Hu and the determination of Beijing to proceed with criminal charges has strained relations between the two countries.

The arrests have also alarmed other Western corporations doing business in China because of the lack of any clear guidance on what constitutes a state secret, and a widening crackdown on corruption.

China alleges that a mass of secret intelligence was found on computers seized from Rio Tinto, and Vice-Foreign Minister Liu Jieyu said during a visit to Australia last week that the case against Hu would also constitute crime under Australian law.

Liu also said that Australia should respect China's legal system.

While Australian commentators have drawn a link between Hu's arrest and Rio Tinto's rejection of an 18 per cent shareholding by China's Chinalco, reports from within China suggest a broader move against perceived corruption involving foreign companies.

China Daily reported that as well as the Hu allegations - which allegedly involved the bribing of executives from all 16 Chinese steel mills involved in this year's iron ore price negotiations - Beijing was considering invalidating 20 ore importing licences.

The newspaper said executives from five leading steelmakers and officials from industry associations were under investigation involving the "unwritten industry practice" of bribery to gain confidential information.

NAPSS has launched a campaign against the internet leaking of state secrets, and the two new articles on its website (www.baomi.org) urges reform of secrecy law, especially relating to state-owned companies and economic information.

The allegations made in the articles confirms the strength of Beijing's determination to prosecute Hu and his colleagues, and commentators believe there is little chance of the Chinese-born Australian escaping jail.

The articles allege that by obtaining secret information, Rio Tinto was able to overcharge China an estimated 700 billion yuan for iron ore.

"The large amount of intelligence and data from our country's steel sector found on Rio Tinto's computers and the massive damage to our national economic security and interests are obvious," Jiang Ruqin, a former director of Jiangsu province's Huai'an State Secrets Bureau, wrote.

"The economic espionage in this case involved winning over and buying off, prying out intelligence, routing one by one, and gaining things by deceit over six years.

"This virtually blackmailed Chinese state businesses to pay the heavy price of an extra 700 billion yuan or more for imported iron ore."

Luo Jianghua, another former state secrets official, wrote that the Rio Tinto allegations were only the tip of an iceberg that included years of espionage by "economic spies" that had inflicted major economic damage in China.

The articles use expressions such as "traitors" and "treason" and speak of "shameless ... high-level corruption".

For Hu and Western corporations, they key issue is the lack of clarity and definition of a state secret. The loose definitions under the State Secrets Law include national and social development, and can be invoked by disclosures considered to have harmed China's political or economic dealings with other countries, or to have weakened the nation's economic and technological strength.