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Australia shrugs off China resources “argy bargy”

Posted on: June 14, 2009

AFP – Friday, June 12

SYDNEY (AFP) – – Australia has shrugged off Chinese threats to slap trade sanctions on two mining giants after a massive deal went sour, describing the reported comments as “argy bargy.”

Resources Minister Martin Ferguson said on Friday it was normal for Beijing to be unhappy after Rio Tinto snubbed Chinalco’s offer of a record cash injection in favour of a joint venture with bitter rival BHP Billiton.

“Obviously China is disappointed. You can expect some angst but I believe we’ll return to a normal commercial alliance,” Ferguson told ABC Television.

“China has got to understand that the arrangement between BHP and Rio is a commercial outcome.”

Ferguson was speaking after the Sydney Morning Herald said Beijing threatened trade sanctions against Rio and BHP if they go ahead with plans to combine their iron ore businesses without getting Chinese permission first.

“According to China’s anti-trust law, we can veto such a merger agreement if the concentration of overseas business operators will affect domestic market competition,” a senior Ministry of Commerce official was quoted as saying in Beijing.

Chinese state media earlier hit out at the “perfidy of Rio” and blamed politics for the deal’s collapse following strident opposition from some Australian lawmakers.

“There is an old Chinese saying: ‘A gentlemen’s agreement is beyond the letter.’ Honesty is the blood of business behaviour,” a Xinhua news agency editorial said.

“For Chinalco, the one-time failure in international trade will soon fade. Yet for Rio Tinto, it will take years to overcome the lost honesty and tainted image,” it added.

Japan’s competition watchdog has also said it may probe the joint venture while European steelmakers have called for similar action from the European Union.

Ferguson played down the concerns and said BHP and Rio would maintain proper commercial relations with its big trading partners.

“We are in the middle of a range of price negotiations with important commodities at this point in time,” he said.

“From time to time there’s going to be argy bargy about foreign investment considerations.”

Anglo-Australian company Rio and BHP, the world’s biggest miner, plan to join their massive iron ore operations in Western Australia, saving some 10 billion US dollars.

Rio also announced a 15.2 billion US dollar rights offering as it walked away from state-owned Chinalco’s 19.5 billion cash injection, which would have been China’s biggest foreign investment.

China is a key market for Australian commodities, which it has tapped to fuel its industrial boom of recent years.


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