Rio Tinto Detention Linked To Chinalco Deal-Australian Senator
July 08 2009 - 1:15AM
Dow Jones News
The detention by Chinese authorities of four employees from Rio
Tinto PLC's (RTP) Shanghai-based operations shows that the
relationship between the Chinese government and its state-owned
entities is "anything but arms length", and has links to a failed
alliance between the Anglo-Australian miner and Aluminum Corp. of
China Ltd., Australian upper house lawmaker Barnaby Joyce said
Wednesday.
Joyce, leader of the country-based Nationals party in the Senate
and a vocal critic of a recent surge in Chinese investment in
Australia's resources sector, said the detention of Rio employees
appears to have been inspired by the failure by state-owned
Aluminum Corp. of China, or Chinalco, to buy an 18% stake in Rio
Tinto.
Rio last month walked away from a $19.5 billion alliance with
Chinalco, in favor of a rights issue and iron ore joint venture
with BHP Billiton Ltd. (BHP) to pay down debt. Some officials in
China reacted bitterly to the spurning of Chinalco's
investment.
"This should be a clear example to Australia, and other
countries around the world, of the extent of the relationship
between a 100%-owned entity in the Peoples Republic of China and
the actions of the Chinese government," Joyce said in a
statement.
"The two are one in the same in ownership, in action, in
purpose. A check in the progress of one has ramifications far
beyond a purely commercial arrangement with a corporate entity on
the stock market," he said, adding: "This should be a sobering wake
up call for all Australians."
Australia's center-left Labor government in a sense dodged a
bullet over the failed Chinalco-Rio alliance in that Rio's decision
to abandon the deal came just as Australia's Foreign Investment
Review Board was poised to advise Australian Treasurer Wayne Swan
whether or not to approve it.
But the news four members of Rio's Shanghai-based iron ore team
have been detained since Sunday by Chinese authorities - for as yet
unconfirmed reasons - reignited political debate on China's growing
interest in Australia.
Tensions had been simmering below the surface for months between
Canberra and Beijing over the Chinalco deal, which would have given
the state-owned company an 18% stake in Rio, the world's
third-largest miner, and two board seats.
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 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 detention of the Rio employees comes as Rio and Chinese
steel makers are in the midst of drawn-out iron ore price talks.
But people familiar with the situation said it would be surprising
if the detentions were in any way related to the talks as it would
hardly serve Chinese interests to use such an unsubtle negotiating
tactic.
Joyce, with other opposition lawmakers, played a key role in
spearheading an ongoing Senate inquiry into foreign investment by
state-owned entities in Australia.
Australian government officials have made clear through the
inquiry that they don't favor Chinese state-owned enterprises
making large-scale takeovers of Australian miners but market
participants say that China won't likely be deterred.
China's investment in Australia has surged in recent times to be
now the third biggest behind the U.S and the U.K. after being sixth
last year.
-By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; rachel.pannett@dowjones.com