Stephen Bartholomeusz
The real Rio story
The latest allegation against Rio Tinto emanating out of China – that Rio’s "spying" cost China $US102 billion over six years in excessive charges for iron ore – is preposterous. Given that the charge was made in an editorial on a website affiliated with China’s National Administration for Protection of State Secrets, however, it is also very disturbing.
Over the past six years Rio Tinto’s total iron ore production has generated revenues of $US40.75 billion. Given that a large proportion of that would have been devoted to Japanese, Korean and other Asian customers, there is no possible factual base for the accusation.
Unless if Rio was somehow held to account for the entire production of the seaborne iron ore producers, and the Chinese were somehow arguing that they would have got their share of that production for nothing if not for the dastardly Rio, the numbers are nonsensical.
Given that Rio has only ‘led’ the last two rounds of price negotiations; that the most recent one remains unresolved; and that until last year’s settlements it was the Japanese mills that took the lead in the buyers’ negotiations with the producers, the claims are even more ludicrous. Not to mention the fact that China bought – and Rio sold – a significant amount of ore on the spot market last year.
Bloomberg interviewed, it said, the author of the article, Jiang Ruqin, and reported him as saying that he had no involvement in the case against Rio’s Stern Hu and three other senior executives arrested by the Chinese and accused of stealing state secrets. It also quoted him saying that the numbers he used came from China Central Television and the China Youth Daily newspaper.
The disconcerting aspect of the latest outpouring of vitriol against Rio is the way the rhetoric in China keeps escalating.
The continued whipping up of hysteria based on false and faulty premises, and mis-characterisations and misconceptions of the way western companies operate, will only complicate attempts to have Stern Hu and his colleagues freed and relations between Rio and China normalised.
The new broad and extraordinary vague definition of what constitutes a state secret in China (it appears, just about anything the Chinese deem a secret after the fact) and the emotion that is being whipped up around the supposed threat to national security posed by companies collecting commercial intelligence will also be increasingly disturbing for any western company doing business with China.
The claims made in the NAPSS article – and its urgings that the legislation on state secrets should be overhauled to make it more effective – were broadcast around the globe, appearing prominently on the Financial Times and Wall Street Journal websites, and interpreted as a reflection of the importance Beijing is now attributing to the Stern Hu affair and the broader issue of protecting the ‘state secrets’ held by its state-owned enterprises.
Until the ‘evidence’ against the Rio executives is available, and the nature of a ‘state secret’ in China is clarified, the breakdown in relations between Rio and China is probably going to be as damaging for the Chinese as it is for Rio, if not more.
Apart from the chilling effect the uncertainty could have on western companies dealing within China, the Chinese are still going to need iron ore and spot prices are now well above the benchmark prices agreed to by the Japanese and Korean mills. Oh well, Rio must be manipulating the market again…
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