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Jul 24, 2009

Stern Hu and the unpleasant truth about Rio Tinto

Rio Tinto is a company renowned for playing hard-ball in its commercial operations around the world.

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The arrest and imprisonment of Stern Hu has been construed in Australia as a conflict between a big company honestly going about its business in a tricky environment and a bullying government with no respect for the rule of law.

Whatever the facts surrounding Hu’s role in negotiating iron ore contracts, Rio Tinto is a company renowned for playing hard-ball in its commercial operations around the world. The mining behemoth is no model of business propriety.

One of the ironies of Rio’s battle with the Chinese Government is that the company has a long history of forming cosy relationships with dictatorial regimes, beginning with General Franco in 1937, whose forces were welcomed by the company when they drove republicans out of the Rio Tinto (Red River) mining area in Andalusia (from which the company took its name).

“Since the mining region was occupied by General Franco’s forces, there have been no further labour problems”, the company’s chief Sir Auckland Geddes told shareholders.

“Miners found guilty of troublemaking are court-martialled and shot.”

In the modern era Rio Tinto — now the fourth largest mining company in the world — has worked closely with the apartheid regime in South Africa, General Pinochet in Chile and General Suharto in Indonesia.

Last year the Government of Norway decided to divest itself of around $1 billion of shares in Rio, citing concern over severe environmental damages from its Grasberg mine in West Papua, the world’s biggest gold mine, part-owned by Rio and Freeport McMoRan.

Accusing the company of “grossly unethical conduct”, the Norwegian Finance Minister declared that “Rio Tinto is directly involved, through its participation in the Grasberg mine in Indonesia, in the severe environmental damage caused by that mining operation.”

In 2005 the New York Times published a damning investigation of the Grasberg mine. It exposed a network of corrupt relationships with local military and government officials in violation of US law, noting that for many years Freeport, presumably with Rio’s knowledge and blessing, assiduously courted Suharto and his cronies, including paying for their children’s education and cutting them in on lucrative deals.

And in a practice that may have a bearing on the Hu case, Freeport, “working hand in hand with Indonesian military intelligence officers”, established a covert program to spy on its environmental critics by intercepting their e-mails. Company lawyers had advised that intercepting other people’s emails was not illegal “outside the United States”.

Rio Tinto has also been found by Indonesia’s official National Human Rights Commission to have committed “egregious violations” of human rights at its PT Kelian gold mine operation in Kalimantan.

A report in 2000 found that Indonesian military and company security personnel “forcibly evicted traditional miners, burned down villages, and arrested and detained protestors since the mine opened in 1992”. Abuses included s-xual assaults, theft of land and destruction of property of local inhabitants, all by people employed by Rio’s PT Kelian.

In Australia, these sorts of tactics are not acceptable, but that has not stopped Rio playing hard-ball whenever its commercial interests are at stake. Rio Tinto is one of the handful of big companies behind the self-described greenhouse mafia of industry lobbyists that has been so effective first at blocking and then at watering down all attempts to limit Australia’s carbon emissions. They have used every dirty trick this side of the law.

And of course Rio Tinto was at the forefront of the campaign to prevent Indigenous Australians securing land rights in 1997-98. In 2005 the company was chastised by traditional owners in the Pilbara for refusing to negotiate over native title.

Stern Hu is collateral damage in a battle between a ruthless mega-corporation and a despotic government. He may be a diligent executive doing an honest job, but he is also a pawn in a power struggle, a company man squeezed as the tectonic plates of history come together.

Having opened China to capitalism, the Communist Party government is discovering just how powerful are the corporations that control the world’s resources, and it does not like what it has found.

Perhaps the members of the Central Committee should take a refresher course in Marxism. They might recall the following lines from Marx and Engels on the power of capital:

The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate.

It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst.

Come to think of it, if there is a copy of The Communist Manifesto in the drawer beside his prison bed, Stern Hu might want to reflect on the meaning of this passage too.

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