Mining giant BHP Billiton lobbied the Australian government hard to bring down a proposed US$19.5 billion deal between its rival Rio Tinto and China’s Chinalco, a leaked US cable shows.
BHP refused to comment on the US diplomatic cable released by WikiLeaks and published in the Sydney Morning Herald yesterday.
But the confidential document reveals that the chief of staff to then-Australian treasurer Wayne Swan had told US Embassy officials that BHP had outplayed Rio and that US officials believed this had helped ensure that Chinalco’s planned multi-billion-dollar cash injection into Rio Tinto collapsed in early June last year.
The cable, from June 7 last year, said Swan’s chief of staff “has told us on several occasions that BHP has played its cards with consummate skill, in part due to the increasing marginalization of BHP CEO Marius Kloppers as BHP chairman Don Argus has taken the lead in lobbying the GOA [government of Australia].”
“BHP has been lobbying extensively to block the deal, highlighting concerns about Chinese investment and the possibility that seats on the Rio board would give the Chinese representatives important insights into the producer side of the annual iron ore price negotiations,” it said.
The deal’s collapse “spared” Canberra from having to make a difficult decision on whether to approve the proposal, but left then-prime minister Kevin Rudd to face “an unhappy China,” the cable said.
“We noticed a very glum Chinese Ambassador Zhang Junsai [章均賽] waiting outside Rudd’s office with the Chinalco CEO Xiong Weiping [熊維平],” it said.
US officials said BHP’s lobbying caused the Rudd government to delay its decision on the bid and that in the intervening time global commodity prices recovered to an extent that Rio no longer needed China’s cash injection.
“Chinalco has made clear that it considers the Rudd government’s reluctance to approve the deal [as] one of the major reasons for its collapse,” the cable from the US Embassy in Canberra said.
The cable adds weight to earlier reports that BHP executives had targeted Canberra over the deal and an assessment to China’s State Council which reportedly said the collapse exposed China’s lack of experience and political acumen related to its foreign investments.
According to a separate cable from Sept. 16 last year, Rio informed Chinese authorities that it had found unexplained amounts of cash in the homes of jailed employees.
The cable, also published yesterday, said Rio found A$4,440 (US$4,340) in the room of one of its four employees after they were jailed in China.
Written by US government representatives in Taiwan and obtained by the Sydney Morning Herald, the cable said that Rio’s investigators had also found one of its Shanghai staff had received US$20,000 in “dividends” from -private Chinese steel mills.
“Rio’s internal investigations have uncovered no evidence of employees stealing secrets, but have found two employees holding relatively small amounts of money from sources they cannot verify,” the cable said. “Rio reported this finding to the Public Security Bureau.”
The cable does not make clear whether Stern Hu (胡士泰), the only Australian among the four executives, was one of the employees with the cash.
The four Rio executives were arrested in July last year during contentious iron ore contract talks between top mining companies and the steel industry in China.
Hu was jailed for 10 years in March after a Shanghai court convicted him of taking kickbacks worth millions of dollars from Chinese steel firms and stealing corporate secrets during last year’s iron ore talks.
Rio sacked the four after the verdict, lamenting their “deplorable” actions. It said yesterday it would not be commenting on the cable.
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