China Indictment Could Be Good News for Rio Tinto 4
Posted by: Bruce Einhorn on February 11, 2010
The Australian government has confirmed that four employees of Melbourne-based resources giant Rio Tinto have been indicted in China after being detained for seven months on corruption charges. This might seem like bad news for the four Rio workers – Australian citizen Stern Hu and Chinese nationals Wang Yong, Ge Minqiang, and Liu Caikui - since the chances of them winning an acquittal in a Chinese courtroom are slim at best. The four were arrested last year shortly after the collapse of a high-profile bid by China’s state-owned Aluminum Corp. of China (Chinalco) to buy a $19.5 billion stake in Rio. The Anglo-Australian company ultimately rebuffed the offer - and a month after that deal fell apart, police detained the four Rio employees. Rio, not coincidentally, last year was also the lead negotiator among iron-ore producers in negotiations with the Chinese, talks that went nowhere after the Chinese side refused to accept the price that their counterparts in Japan and Korea had already reached.
So how can this be good news? As Richard Cassin, partner of Singapore-based law firm Cassin Law, tells Bloomberg, the indictment could be the first step toward freedom for the four. “In cases with a political element, clemency often plays a role after the trial is concluded,” Cassin said in an e-mail. “Clemency allows the political authorities to intervene and create goodwill, often in exchange for a political concession. That could happen in this case.”
I would go further and say that will probably happen in this case. By arresting the four Rio workers and charging them with corruption, China has made its point. Good relations with Australia are important to Beijing, which wants to reach a free-trade agreement with the Aussies and increase Chinese investments Down Under to gain more access to minerals and other raw materials needed by China’s factories. Keeping the Rio employees in jail for a long period of time could create a distraction Beijing doesn’t need. So I think chances are good the Chinese government will conduct a short trial and, after obtaining the guilty verdict Beijing wants, will let the Rio Tinto 4 go.
