Rudd presses China to release detained Australian

By Michael Perry and Lucy Hornby

SYDNEY/BEIJING (Reuters) - Australian Prime Minister Kevin Rudd said on Tuesday efforts to free an Australian detained in China over claims of spying took precedent over bilateral ties and he was not worried about antagonizing Beijing.

Chinese investigators have questioned executives at several steel mills in a widening probe of alleged leaks of state secrets to the world's second-largest iron ore miner Anglo-Australian Rio Tinto, steel officials and Chinese media said.

The Shanghai State Security Bureau earlier this month detained Australian Stern Hu, Rio's iron ore salesman in Shanghai, and three of his Chinese colleagues, alleging they "pried and stole" state secrets.

"Australia's national interest always and under every circumstance comes first," Rudd told local radio. "That means the wellbeing of any Australian citizen. They come first."

Rudd said he would pursue every avenue to free Hu in a case that has cast a shadow over bilateral trade worth $53 billion last year. China is Australia's major trade partner.

The investigation has left 2009 iron ore price negotiations between China's iron and steel association and miners Rio, BHP Billiton and Brazil's Vale in limbo.

Rudd, a former Beijing diplomat and fluent Mandarin speaker, is under domestic pressure to contact Chinese President Hu Jintao to seek the Australian's release.

Rudd said he had raised the case with China's vice foreign minister in Italy last week and that Canberra was vigorously pursuing diplomatic channels.

"We will take this up at whatever level of the Chinese government is necessary as facts in each level of this complex case come clear," Rudd said. "Our interest is the individual concerned -- Mr Hu and his wellbeing. We're not interested in political grandstanding."

Asked if he was worried about antagonizing Beijing, Rudd said: "Absolutely not."

CHINA BROADENS INVESTIGATION

The broadening investigation targets some of China's largest mills, all influential members of the China Iron and Steel Association (CISA), which represents the country's industry in annual negotiations with global iron ore miners.

That could increase tensions between CISA and the steel mills, many of which are impatient with the association for so far failing to reach a new price settlement for 2009 with Rio, BHP Billiton and Brazil's Vale.

The investigation may reflect a rift between mills which want to settle on a term price to ensure normal supply and CISA, which wants to centralize control over the fragmented and intensely competitive industry.

Uncertainty over what information should now be considered "secret" has also unnerved the industry and foreign investors.