From domain-b.com | May 27, 2009
Former Treasury head John Stone has openly come out against the proposed Rio Tinto-Chinalco deal which he says is against the national interest. He has warned the government that any conditions imposed on the Chinese company would prove ''utterly worthless.''
Stone was one of the most powerful Treasury secretaries in recent times and his strong criticism will add to the political pressure on the Rudd government over the issue.
Stone said that the government's stern conditions on Chinalco would not amount to much as the Chinese company would patiently wait out for a few years and then ignore them. He said no Australian government would be inclined to push the matter with the Chinese a few years down the line.
The Australian government is to take a decision on the $25.1-billion deal shortly. The original proposal had called for the state-owned Chinalco to lift is shareholding in Rio to 18 per cent then acquire stakes in some of its key mining projects including Hamersley iron ore operations in the Pilbara.Chinalco and Rio are in the meantime in talks to take the concerns into account. Chinalco is believed to be willing to be agreeable to capping its shareholding to 15 per cent and also to curbs on access to marketing and management arrangements.
Most industry observers were favourably disposed to the deal subject to the concerns being addressed. But according to industry sources the government and market forces may demand greater curbs that could eventually abort the deal.
Stone's attack has considerably weakened the position that it is possible to protect the Australian national interest through traditional sort of concessions aimed at maintaining control. The Opposition has already weighed in against the deal in its present form particularly since Chinalco is state owned and has a conflict of interest as both customer and major shareholder of Rio.
Stone's statement that any conditions imposed would be meaningless goes even further and reflects how cautiously the government will need to tread on the issues associated with the deal.
Nationals senator Barnaby Joyce and independent senator Nick Xenophon are suggesting through advertisements that the deal is a sell out of Australian national interest to the Chinese. Stone who was also a Nationals senator once has fully backed the senators.
Meanwhile China's ambassador to Australia Zhang Junsai sought to reassure Australians about China's intentions, saying that the proposed deal would prove a ''win-win'' solution that would further cement relationship between the two countries.
He told the Minerals Council of Australia conference in Canberra that China was not trying to gain control of the Australian mining sector and discounted unwarranted fears of a Chinese take over. He added that while Chinalco was state-owned it was not state-run.
Rio chairman Jan du Plessis arrived in Australia earlier this week and is engaging shareholders on the proposal. He is to present a revised version to shareholders assuming the company gets conditional approval from the government early next week.
Stone has come out equally forcefully against Rio for ignoring conditions set by Australian governments, following the merger of the UK-based Rio with Australia's CRA in 1995. He said Rio has largely ignored its original assurances to the Keating government that it would maintain a high Australian profile on the board and in management.