The Australian government Friday downplayed any political element in the collapse of a proposed US$19.5 billion deal between Anglo-Australian mining giant Rio Tinto Plc (RTP) and Aluminum Corp. of China, or Chinalco.

Still, tensions have been simmering below the surface for months between Canberra and Beijing over a deal that would have given state-owned Chinalco an 18% stake in Rio, the world's third-largest miner, and a board seat.

It raised concerns among some Australian opposition lawmakers about the potential for Chinalco, also a major buyer of Australian commodities, to influence prices. Rio owns rich iron-ore and copper mines in Australia and offshore. Some even argued that the proposed deal posed a threat to Australia's national security.

The collapse of the Rio deal could revive memories in China of another failed natural resources foray: Cnooc Ltd.'s attempt to take over Unocal Corp. of the U.S. four years ago. That deal fell apart after U.S. lawmakers raised concerns about the ties between China's government and its businesses.

For its part, the center-left Labor government has played its cards close to its chest throughout the process, stating frequently that it welcomes foreign investment - a line reiterated Friday by Treasurer Wayne Swan, who would have decided the fate of the deal had it not been abandoned by Rio.

The end of the deal is a "commercial matter between the partners", Swan told reporters Friday, strongly denying any link between Australia's drawn out foreign investment review process and the deal's collapse.

Nevertheless, Canberra has in a sense dodged a bullet in that Rio's decision to abandon the deal comes just as Australia's Foreign Investment Review Board was poised to advise Swan whether or not to approve it by June 15.

Rio said the deal looked less valuable in the wake of recent market movements, which have seen Rio's share price strengthen and commodity prices recover. The transaction also faced strident opposition from some institutional shareholders in London.

In addition to the fading commercial terms, however, local media had speculated that Canberra might impose strict conditions on the deal designed to check Chinalco's influence over Rio, which could have made the deal unpalatable to both parties.

Australian Trade Minister Simon Crean Friday declined to comment on whether the government may have sought to impose tough conditions on the deal that contributed to its collapse.

He said the protracted deliberations by Australia's FIRB were due to the deal's "complexities", rather than any concerns about China's increasing interest in Australia's vast natural resources sector.

"Whatever the outcome was, I don't think it would have been tricky. I think that the explanation would have stood on the justification or the merits of the case," Crean told reporters.

Nevertheless, Patrick Colmer, executive director of the Australian Treasury's foreign investment division, this week provided a telling insight into the way Australia's foreign investment review process works.

Testifying to a Senate economics committee Thursday, Colmer told lawmakers that FIRB considers that any government-owned entity cannot operate completely independently of the foreign government in question.

Instead, it looks at the governance of the entity, seeking to satisfy the key question of whether it is operating independently, and "without direct or continuing government control", Colmer said.

For its part, Chinalco largely directed its disappointment at the deal's collapse toward Rio Friday, although it did indicate the deal would have needed amendments to appease regulators.

Chairman Xiong Weiping said the Chinese group had worked hard to engage with Rio on potential changes to the deal terms to reflect the changed market conditions and feedback from shareholders and regulators.

"As a result, we are very disappointed with this outcome," he said.

The Australian government has made repeated public statements about its openness to foreign investment in recent times. And, it has approved a string of smaller resources deals, albeit with conditions attached.

But that can't mask an undercurrent of concern about China's aspirations in Australia. Opposition toward China's growing appetite for Australian resource and energy assets has been shrill.

Malcolm Turnbull, leader of the main opposition Liberal-National coalition, panned the deal in a public speech, arguing that it would give Chinalco direct management control and a level of influence right down to the operating level of Rio's most important assets.

Barnaby Joyce, a Nationals senator, and independent senator Nick Xenophon, went a step further, sponsoring an advertising campaign against the deal.

Chinalco remains Rio's largest shareholder with a combined 9% stake.

Analysts say the collapse of the Chinalco deal is likely to strain relations between the pair. But Rio is too important as a producer of key commodities, namely iron ore, to provoke a serious backlash.

"China has to be realistic that the market moved in Rio's favor," one Sydney-based analyst said.

The decision to terminate the Chinalco deal also won't hamper progress on long-stalled free trade talks between China and Australia, Australian Trade Minister Crean said.

"In all of the discussions that I have had with China on the FTA, the Chinalco deal was not linked to the FTA by us, or by the Chinese," he told reporters.

-By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; rachel.pannett@dowjones.com (Elisabeth Behrmann in Sydney contributed to this story)