Rio Tinto espionage case

Last updated

The Rio Tinto espionage case began with the arrest on 5 July 2009, of four staff in the Shanghai office of the Rio Tinto, in the People's Republic of China, who were subsequently accused of bribery and espionage. Two days later, an import executive of the Shougang Group and Laigang Group was also arrested. [1] [2] The Rio Tinto employees, Australian Stern Hu and three Chinese colleagues, Wang Yong, Ge Minqiang, and Liu Caikui, went on trial in Shanghai on Monday, 22 March 2010. [3]

Contents

The government dropped the charges relating to the alleged theft of trade secrets before the trial, and the defendants admitted to having received bribes during the trial. [4]

Following the trial, Stern Hu was sentenced to 10 years jail. [5] Hu and other convicted executives have also had their employment terminated by Rio Tinto Ltd. [6] It is reported that the motive behind the terminations is in regards to a breach of conduct, with Rio Tinto accepting the evidence provided showing instances of bribery. Rio Tinto stated that the trial will not affect business ties, according to its chief executive. [7]

Background

The arrests came during difficult negotiations over the price of iron ore for the 2009-2010 period. After steep increases in 2008, Chinese steelmakers hoped to see iron prices come down again because of the global recession. [8] The Rio Tinto employees are accused of having industry data crucial to the negotiations too detailed to have been obtained legally. [9] On Thursday, July 16 Reuters reported that Rio Tinto had evacuated its iron ore and steel industry research staff from Shanghai the day before, as had "other foreign groups... until conditions there become more certain." [10]

The arrests also came shortly after Rio Tinto declined to sell part of the company to the Chinese state-owned company Chinalco. Chinalco currently owns 9.3% of Rio Tinto; the additional investment would have raised Chinalco's ownership stake in Rio Tinto to 18.5%. The proposed deal met strong political opposition in Australia, and Rio Tinto decided instead to raise the money through existing shareholders and by forming a joint venture with BHP Billiton. [11]

Rio Tinto negotiated on behalf of Vale, BHP Billiton and itself as a consortium with the Chinese side being represented by CISA. Traditionally the role of the Chinese side was filled by Baosteel. [12]

Chinese State Secrets Bureau accusations

Accusations posted on a website controlled by the Chinese State Secrets Bureau, alleging that large amounts of "intelligence and data" have been found on computers of the arrested Rio Tinto employees. A report on publishing website affiliate of China's national secrets watchdog accused Rio Tinto of "winning over and buying off, prying out intelligence... and gaining things by deceit", during critical annual iron ore pricing negotiations. [13]

Rio Tinto was accused of causing US$100 billion worth of damages to the Chinese economy over a 6-year period, by Jiang Ruqin, a Chinese employee with the Jiangsu Province Administration for the Protection of State Secrets. However, Bloomberg data showed that Rio Tinto's global iron ore revenue in the 5 years from 2004 to 2008 were US$41 billion. Jiang consequently admitted to using fabricated[ citation needed ] data from China Central Television and the China Youth Daily newspaper for his accusation. [14]

Aftermath

Chongqing Evening News (重庆晚报) claims that fallout from the espionage scandal, on July 5, has caused Rio Tinto damages to its reputation worth up to 100 billion yuan in share price (US$14.6 billion, 17.4 billion AUD) after dropping from highs of 77 AUD on the Australian Securities Exchange. [15] Share market data shows that Rio Tinto stock actually started to decline on 12 June, 23 days before the espionage case scandal was reported on, reaching the bottom on July 13 at 46.63 AUD before steadily rising to a price of 59.99 AUD as of August 15. [16] [17]

Rio Tinto paid US$5 million to Henry Kissinger, to advise the company how to distance itself from Hu. [18]

In August 2009, BHP Billiton called for iron ore to be traded on an open market like other commodities. BHP CFO Alex Vanselow stated that selling iron ore on the open market like copper would mean that deals would be handled in a more transparent manner and that cases like the Stern Hu case would not be possible. Another benefit would be that investors would have a better idea of price trends. [19]

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Guinea</span> Set of productive activities developed in Guinea

The economy of Guinea is dependent largely on agriculture and other rural activities. Guinea is richly endowed with good minerals, possessing an estimated quarter of the world's proven reserves of bauxite, more than 1.8 billion tonnes of high-grade iron ore, significant diamond and gold deposits, and undetermined quantities of uranium. In 2021, Guinea was the world's biggest exporter of Aluminium Ore 2021 trade surplus was $4.3B.

<span class="mw-page-title-main">BHP</span> Australian multinational mining and petroleum company

BHP Group Limited, also known as Broken Hill Proprietary Company and formerly as BHP Billiton is an Australian multinational mining and metals public company that was founded in August 1885 and is headquartered in Melbourne.

<span class="mw-page-title-main">Rio Tinto (corporation)</span> Anglo-Australian multinational mining company

Rio Tinto Group is a British-Australian multinational company that is the world's second largest metals and mining corporation. It was founded in 1873 when a group of investors purchased a mine complex on the Rio Tinto, in Huelva, Spain, from the Spanish government. It has grown through a long series of mergers and acquisitions. Although primarily focused on extraction of minerals, it also has significant operations in refining, particularly the refining of bauxite and iron ore. It has joint head offices in London, England and Melbourne, Australia.

Aluminum Corporation of China Limited, is a state-owned multinational aluminium company headquartered in Beijing, People's Republic of China. It is a publicly-traded company, listed in Hong Kong and in Shanghai. In 2021, it was the world's largest aluminum producer, ahead of China Hongqiao Group, Rusal and Shandong Xinfa.

Paladin Energy Ltd is a Western Australian based uranium production company.

Events in the year 2009 in China.

<span class="mw-page-title-main">Goldsworthy railway</span> Private railway in Pilbara region of Western Australia

The Goldsworthy railway, owned and operated by BHP, is a private rail network in the Pilbara region of Western Australia built to carry iron ore. It is one of two railway lines BHP operates in the Pilbara, the other being the Mount Newman railway.

Stern Hu is an Australian businessman jailed in China after pleading guilty to stealing commercial secrets and receiving bribes. Hu was formerly an executive of Rio Tinto mining group in Shanghai, having graduated from Peking University before obtaining Australian citizenship in 1994. He was released in July 2018 after serving eight years of a ten year prison sentence.

<span class="mw-page-title-main">Steel industry in China</span> Overview of the steel industry of China

China's steel industry, initially small and hindered by war, expanded rapidly following market reforms in 1978, eventually becoming the world's largest producer. Despite this growth, the industry faced challenges with high debt, market volatility, and environmental pressures. Rising exports from 2023-2024 led to global oversupply, price drops, and tariffs, prompting China to halt new steel mill approvals and encourage overseas investments. China's central government has also worked to phase out unprofitable "zombie" companies while pushing for stricter environmental controls on steel production.

<span class="mw-page-title-main">Fortescue railway</span> Private railway in Pilbara region of Western Australia

The Fortescue railway, owned and operated by Fortescue Metals Group (FMG), is a private rail network in the Pilbara region of Western Australia built to carry iron ore. It opened in 2008. When it was completed, it was the heaviest haul railway in the world, designed for 40 tonne axle loads, 2.5 to 5 tonnes heavier than the other Pilbara iron ore rail systems. On 4 November 2014, FMG Rail commenced trialling 42-tonne axle loads.

The Yandicoogina mine, often shortened to Yandi, is an iron ore mine located in the Pilbara region of Western Australia, 95 kilometres north-west of Newman. it should not be confused with BHP Billiton's Yandi mine, which is located nearby.

The Hope Downs mine is an iron ore mining complex located in the Pilbara region of Western Australia. It comprises four large open-pit mines. The mines are co-owned by the Hancock Group and Rio Tinto, and the complex was named after Hope Hancock, Gina Rinehart's mother.

<span class="mw-page-title-main">Mount Whaleback mine</span> Iron ore mine in Western Australia

The Mount Whaleback mine, officially the Newman West operation, is an iron ore mine located in the Pilbara region of Western Australia, six kilometres west of Newman.

<span class="mw-page-title-main">Iron ore mining in Western Australia</span> Mining in Western Australia

Iron ore mining in Western Australia, in the 2018–19 financial year, accounted for 54 percent of the total value of the state's resource production, with a value of A$78.2 billion. The overall value of the minerals and petroleum industry in Western Australia was A$145 billion in 2018–19, a 26 percent increase on the previous financial year.

The Area C mine is an iron ore mine located in the Pilbara region of Western Australia, 92 kilometres west-north-west of Newman.

The Jimblebar mine is an iron ore mine located in the Pilbara region of Western Australia, 41 kilometres east of Newman.

The Yarrie mine is an iron ore mine located in the Pilbara region of Western Australia, 90 kilometres north-east of Marble Bar.

<span class="mw-page-title-main">Yandi mine</span> Iron ore mine in Western Australia

The Yandi mine is an iron ore mine located in the Pilbara region of Western Australia, 90 kilometres north-west of Newman. It should not be confused with Rio Tinto's nearby Yandicoogina mine, which is also sometimes shortened to Yandi.

The Orebodies 18, 23 and 25 mine, part of BHP's Eastern Ridge hub and officially referred to as the Newman East operation, is an iron ore mine located in the Pilbara region of Western Australia, 8 kilometres east of Newman. The mine is majority-owned and operated by BHP, and is one of seven iron ore mines the company operates in the Pilbara. The company also operates two port facilities at Port Hedland, Nelson Point and Finucane Island, and over 1,000 kilometres of rail in the Pilbara.

The Simandou mine is a large iron ore mine which is tied to one of the biggest mining corruptions in modern history. The mine is located in the Simandou mountain range of southern Guinea's Nzérékoré Region. Simandou represents one of the largest iron ore reserves in the world, having estimated reserves of 2.4 billion tonnes of ore grading 65% iron metal.

References

  1. ↑ Govt: Proof against Rio spies sticks
  2. ↑ 莱钢海运部门负责人"涉力拓间谍案"被调查 (in Chinese). 南方网-腾讯网. 15 July 2009. Archived from the original on 22 July 2009. Retrieved 18 July 2009.
  3. ↑ "Rio Tinto signs mining deal with China's Chinalco". BBC News. 19 March 2010. Retrieved 20 March 2010.
  4. ↑ "Chinese court sentences Hu to 10 years". Sydney Morning Herald . 29 March 2010.
  5. ↑ AAP, March 29, 2010, Hu given 'tough sentence', says Smith, Yahoo!7 News
  6. ↑ AAP, March 29, 2010, Rio Tinto fires Hu, other jailed execs Archived 2010-04-01 at the Wayback Machine , Yahoo!7 News
  7. ↑ AAP, March 29, 2010, China bond won't be broken: Rio Tinto Archived 2010-04-01 at the Wayback Machine Yahoo!7 News
  8. ↑ 'Iron ore pricing system near collapse as talks go on', Sydney Morning Herald, 2009-06-30.
  9. ↑ Qi, Z & Hao, T 'Bribery is widespread' in Rio case, China Daily, 2009-07-15.
  10. ↑ Regan, J 'Rio Tinto moves iron, steel staff out of China', Reuters, 2009-07-16.
  11. ↑ "China detains Rio Tinto executive on spying charges", Mining Engineering, August 2009, p.11.
  12. ↑ Sainsbury, Michael (20 August 2009). "China drops CISA being in charge of iron ore talks". The Australian . Retrieved 20 August 2009.
  13. ↑ Foster, Peter (10 August 2009). "Chinese website slams Rio Tinto "espionage"". The Daily Telegraph . London. Retrieved 15 August 2009.
  14. ↑ "Rio Tinto Accuser Says Article Was His Own Opinion (Update5)". Bloomberg News . Retrieved 15 August 2009.
  15. ↑ "Rio Tinto espionage case causes damage to commercial reputation worth 100 billion yuan" . Retrieved 15 August 2009.
  16. ↑ "Google Finance: Rio Tinto (Public, ASX:RIO)" . Retrieved 15 August 2009.
  17. ↑ "ASX: Rio Tinto (Public, ASX:RIO)" . Retrieved 15 August 2009.
  18. ↑ Garnaut, John (27 March 2015). "Henry Kissinger paid $5m to steer Rio Tinto through Stern Hu debacle and consolidate China links". Sydney Morning Herald. Fairfax Media . Retrieved 6 July 2018.
  19. ↑ "BHP: iron ore reform could have prevented Rio case" . Retrieved 16 August 2009.[ dead link ]
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.