Last updated: March 22, 2010 8:17 pm

Rio treads tangled path through Chinese diplomacy

The relationship between Rio Tinto and China requires an entire branch of Sinology to itself.

If last summer’s detention of Stern Hu, Rio’s chief iron ore negotiator, seemed to have put bilateral ties between the Anglo-Australian miner and the people’s republic into the chiller, his reported admission that he took bribes should on any normal analysis freeze them solid.

And yet Rio and Chinalco have just confirmed plans for a partnership to develop iron ore deposits in Guinea. That is the sort of deal that seemed impossible last year when Rio shunned the state-owned aluminium producer’s promise of a capital injection in favour of a rights issue. Rarely can a guest speaker have uttered the cliché “Today, I want to look to the future” with more feeling than Rio’s boss Tom Albanese in his speech to the China Development Forum on Monday.

The speech reads like standard-issue diplomacy, with the chief executive tiptoeing through the sensitive passages and laying heavy emphasis on the opportunities for co-operation and the mutual interdependence of Rio and China.

But Mr Albanese actually goes to the heart of the problem of trying to disentangle the various parts of the relationship between China and Rio, or between China and many of the western companies that work with, in and for the country. It can’t be disentangled. At the same time as Rio can be at odds with its largest customer (China) over, say, iron ore pricing, it can with the other hand be forging an agreement with its largest shareholder (China) over iron ore deposits.

The latest news from the Shanghai courts on Monday did not trouble Rio’s share price – indeed, the stock rose in London. In typical hard-bitten style, investors understand that, when it comes to China and the west, there will be good days and there will be bad days. As court reporters might put it: the trial continues.

Libya keeps Göldi

Spare a thought for Max Göldi, the ABB country manager caught in seemingly intractable stand-off between Libya and Switzerland. Mr Göldi, a Swiss citizen promoted barely a year earlier to head ABB’s Libyan unit, in July 2008 found himself detained in an apparent tit-for-tat response to the arrest in Geneva of Hannibal Gadaffi, son of the Libyan leader.

Gadaffi junior and his wife had been detained after police were summoned to their luxury hotel on allegations of violence against two domestic servants. After two nights in jail, Mr Gadaffi was released and the servants’ charges were dropped on payment of unspecified compensation.

Libya reacted by withdrawing $5bn from Swiss banks and stopping oil supplies. Sadly for ABB and its country manager, matters did not end there. Mr Göldi, along with a second Swiss businessman, were detained on visa charges. Although released, the two were not permitted to leave and ended up taking refuge in the Swiss embassy in Tripoli.

Persistent attempts to resolve matters by the Swiss collapsed. International arbitration proved as fruitless, with matters not helped by the publication in a Geneva newspaper of demeaning police mugshots of Gadaffi jnr.

A month ago, the second detainee – who held joint Swiss-Tunisian nationality – was finally allowed to leave. Mr Göldi, by contrast, voluntarily left the embassy and is now serving a four-month jail sentence, although his ultimate fate is unclear.

Amid persistently conflicting signals, the Libyan leader this month called for a boycott of Swiss goods and jihad, or holy war, against Switzerland.

Fortunately for big companies, the Göldi case appears unique. Multinationals are no strangers to threatened, or actual, violence, against staff. Usually the culprits are kidnappers seeking ransoms or international terrorists and “freedom fighters” pursuing domestic grievances.

But the case of a manager being treated as a pawn in a diplomatic battle is unusual. How should employers react, in the best interests of staff, family members, and their own broader reputations? ABB has kept its head down, leaving matters to the diplomats.

Matters have been complicated for ABB by the unusual nature of the Swiss political system: a decentralised structure which restricts the influence of the federal government, notably over the independent canton of Geneva, where the “affront” to Mr Gadaffi took place. And Switzerland, already under pressure over bank secrecy, does not have many favours to call in from its neighbours.

ABB has probably been acting discreetly via its international contacts to lobby for Mr Göldi’s release. Other companies would be wise to show sympathy. For, unusual as the case may be, another group could find itself in a similar bind, somewhere else, sometime soon.

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