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Govt: Proof against Rio spies sticks
By Tong Hao and Wang Linyan (China Daily)
Updated: 2009-07-10 08:39

Sufficient evidence exists that employees of a multinational mining group committed acts of espionage and stole State secrets, according to a Foreign Ministry spokesman.

Stern Hu, a general manager for the Chinese operation at Rio Tinto's iron ore division, as well as three other employees at the mining company were detained July 5 for alleged spying. Their acts caused huge losses for China's economic and security interests, said Qin Gang Thursday.

During iron ore price negotiations that China held earlier this year with Rio Tinto, Vale of Brazil and BHP Billiton of Australia, Hu and the three Rio Tinto employees procured national secrets by bribing insiders with Chinese steelmakers, according to Shanghai's State Security Bureau.

Though authorities have not revealed details of the State secrets and how they affected the price talks, the 21st Century Business Herald cited an anonymous source close to the issue that Hu was in close contact with a senior executive from the Shougang Group, the sixth largest steelmaker in China.

The executive, Tan Yixin, is head of the export and import business of iron ore for the Shougang Group. He was arrested on July 7 for commercial crimes.

According to the anonymous source, Tan maintained a close relationship with Hu. This April, according to the newspaper's report, Hu went to the headquarters of the Shougang Group in Beijing and had conversations with Tan and other executives on iron ore prices.

The Shougang Group has denied all links with Rio Tinto and said it knows nothing about Tan's detention.

The company also denied any connection between the detention of Hu and its firm.

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At the end of last year, Rio Tinto signed a 10-year contract with Jiangxi's Ping Xiang Iron & Steel Co Ltd, with Stern Hu as Rio Tinto's representative.

Hu also signed similar agreements with small- and medium-sized steelmakers in Shanxi and Hebei.

The China Iron and Steel Association was strongly against such agreements because they said the contracts would influence the iron ore price negotiations.

In China, steel makers are banned from signing long-term iron ore supply contracts with foreign suppliers such as Rio Tinto without permission.

The source also said the arrest of Tan may be just the beginning and more investigations will be carried out in China's major steel production areas such as Shandong and Hebei, aiming to regulate the disordered iron ore market of the country.