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from Alexander Smith:

Beijing’s Rio talks must avoid iron fist

Chinese anger at Rio Tinto for reneging on a deal with aluminium group Chinalco and opting instead for an iron ore joint venture with BHP Billiton last month was understandable. Indeed, China has good reason to question the Rio-BHP JV on competition grounds.

But the detention of four Rio Tinto employees -- on suspicion of espionage according to Australia's foreign minister -- bang in the middle of sensitive negotiations on iron ore exports to China is a
dangerous step in the wrong direction. Beijing must either justify the arrests publicly or release the Rio staff immediately.

Rio is locked in tough negotiations with China's massive steel sector following its refusal to agree to Chinese demands for a bigger cut in contract prices. As a result, Rio is for now at least charging its Chinese customers spot market prices, which are considerably higher.

Comments earlier this week by a Rio Tinto spokesman saying the company has never been so busy and is selling all the iron ore it can make can't have pleased its customers or the government in Beijing.

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