Namibia, China: Curious Cases of Bribery

[Teaser:] Recent crackdowns on Chinese companies in Namibia could reveal Rio Tinto’s hand.

Summary

The Namibian government announced another bribery case involving a Chinese company, the second in the past week. China’s financial involvement in Namibia and Rio Tinto’s ownership interest in the Namibian mining sector suggest a possible link between the Namibian crackdown and the lingering Rio Tinto case in China.

Analysis

The Namibian government announced July 23 that Namibian President Hifikepunye Pohamba had suspended the country's defense force chief for allegedly accepting kickbacks from a Chinese company[we need to name this company somewhere in the piece] that supplies the defense force. This followed a July 17 announcement by Namibian authorities that three people, including one Chinese citizen, had been charged with bribery in a case involving the Chinese company Nuctech, which used to be headed by Chinese President Hu Jintao's son, Hu Haifeng.

China has made considerable investments in Namibia. According to contracts signed in 2007, the Chinese would purchase[purchased?] Namibian products worth $34.7 million [that year?] and promised more in concessional loans[standard terminology?] and export buyers credit[standard terminology?]. Because of this, we found it odd that Namibia would be willing to take on the high-profile Nuctech case, implicating not only a Chinese company but also a company that has ties to the Chinese president's son.

The Chinese have blocked all media on this case within China, and STRATFOR sources say their personal emails on the subject are being blocked. Indeed, with China in the midst of its own anticorruption crackdown, it could be devastating for Hu Jintao's son to be implicated in a corruption scandal in another country.

The timing of Namibia's crackdown is also curious, coming only a few weeks after the Chinese Ministry of State Security detained four Rio Tinto employees, including one Australian citizen, for bribery during contentious iron-ore price negotiations. Even if Chinese companies were engaged in bribery in Namibia, Namibia would not likely be inclined to spoil its relationship with China without receiving a carrot (or a stick) from somewhere else[something in return?].

There has been some speculation that Australian intelligence is playing a role in the recent Namibian corruption crackdown, but a STRATFOR source thinks otherwise. If there are strings being pulled, the source believes, Rio Tinto is the puppeteer. Rio has a 69 percent interest in the Rossing uranium mine in Namibia, which is the fifth largest [uranium mine?] in the world, producing 8 percent of the world's primary uranium oxide and a major contributor to the Namibian economy. For the past 30 years that the mine has been in production it has been able to consistently sell on term contracts[is this an industry phrase, ‘on-term contracts’?] well above spot-market prices because buyers fear a supply risk and are willing to pay extra to maintain a uranium supply from an independent country. On July 9, Rio Tinto announced plans to increase production at the mine, and on July 20 the Namibian president visited the mine at the invitation of Rio Tinto.

This may merely be a coincidence, but as we recently noted[LINK?], on July 17 -- the same day that Chinese Vice Foreign Minister He Yafei indicated to Australian Foreign Minister Stephen Smith that the [Rio Tinto?] espionage investigation may be dropped, leaving only the bribery investigation -- Nuctech's African representative was detained on bribery. Other sources note that perhaps the Chinese companies involved in the two bribery cases failed to bribe the right person, or Namibia was simply fed up with Chinese corruption and these companies were obvious offenders in Namibia's anticorruption campaign.

However, the timing is such that we must consider Rio Tinto’s hand in the Namibian crackdown on the Chinese companies, while Australian citizen Stern Hu, general manager of Rio Tinto’s iron-ore division in China, remains in custody in China without formal charges.