nourishing obscurity

On the surface, the Rio Tinto spy case is just another industrial espionage story, except for two aspects – the ongoing tricky relationship between Rio Tinto Australia and China and the very fact that it is actually Communist China involved.

Australians are well aware that south-east Asian countries don’t muck about when it comes to summary justice and the business sector in both Australia and Canada are well aware of the pitfalls of dealing with China.  From that article from May 14th, 2009 [at the end of the link]:

It was a strategy of mutually-assured destruction. If they failed to find common ground that day, [it would plunge] the Australian mining industry and Chinese steel makers into an unpredictable world of spot market sales and retaliation from Chinese industry and government.

For weeks Baosteel had been privately promising a blanket Chinese embargo of most or all Australian iron ore cargoes if negotiations broke down and Rio knew there was a real chance that Baosteel and its controlling shareholder, the Chinese Government, would follow through on the threat. Nobody knew where that might lead.

So, there is heavy brinkmanship going on anyway and now one of the four has pleaded guilty to industrial espionage.  That’s not really the point.  The point is the different mindset of the Chinese:

The case has highlighted the risks of doing business in a country with a huge market but close ties between the ruling Communist Party, police and courts. Shanghai is likely to want the case over quickly, before its much ballyhooed 2010 World Expo opens in Shanghai in May.

This is not dissimilar to Yeltsin’s Russia and the Vladimir episode in 1997.  I can’t get in to the article but I can get you to the opening excerpt.  Essentially, there were two stories.  One was the Russian fishing boat fleet owner who went to a Moscow bank for a loan and was strong-armed to the extent that he lost his fleet to the mafia and the other was the Brit who opened a crystal factory in Vladimir, taught the locals how, was locked out of the factory on a technicality over the title of the land, had the equipment spirited away in the interim and when he got back in there, one or two machines were left, the reg numbers filed down and the machines painted a different colour.

That did enormous damage worldwide, as the article came out at the time of Yeltsin’s defaulting on the ruble.  Having been involved in the trade process [albeit from a distance] between 2006 and 2008 in Russia, even I could see it had certainly come lightyears from those bad old days and yet doubts still linger in the west.  Take Sakhalin 1&2, Shell and Exxon-Mobil, companies you’d imagine were large enough to tip things their own way.  What all of these boys and girls fail to understand is the Russian mindset.  The Chinese mindset I’ve seen at closehand too [in young Chinese].  A glance at the hukou system illustrates this mindset.

Fair play does not come into it and with the government integrally involved in all negotiations, there is the impossibility of getting the best deal and the distinct possibility of consequent inefficiency and corruption after the deal.  With western socialist governments on their ideological rollercoasters, incurring mega-debt through their greed, corruption and incompetence, there’s absolutely no one on our side able to compete with the state-industrial complexes of the totalitarian [or formerly so] regimes of Russia and China.

Filed under: Politics & economics