WHEN the trials of four Rio Tinto employees opened in Shanghai last week, their guilty pleas to the first of the charges, of bribe-taking, dampened hopes that the matter might be settled without any severe penalties. Even so, the harshness of sentences handed down on Monday March 29th was unexpected. The mining giant's four executives—three Chinese, one an Australian of Chinese descent—were jailed for between seven and 14 years for bribery and theft of commercial secrets (only one of them admitted the second charge). Australia called the sentences tough “by any measure”. But it appears there is little it is able or willing to do about them.

That the trial began with confessions came as a surprise. Rio had previously said an internal examination had turned up no wrongdoing. However, denials of guilt can lead to far harsher treatment by the Chinese courts. As a result of his confession the Australian defendant, Stern Hu, had his sentence reduced from 12 years (seven years for accepting bribes, five years for receiving commercial secrets) to ten. Admissions of guilt are also said to enhance the prospects of being shown clemency in the future.

An acrimonious period

The court accepted the prosecution's argument that the four men's actions had damaged China by forcing it to accept higher prices for imported iron ore during last year's annual negotiations. It is more likely that the cause of the price increases was rising demand, especially from China. But the Chinese went into negotiations last year intent on capping the rises and were enraged by their inability to do so. The defendants were detained in July, during an acrimonious period when prices had bounced sharply off the lows hit earlier in the year, and after Rio had just backed out of an agreement in which Chinalco, a Chinese state-controlled company, would have increased its stake in the mining firm.

The bribery case concerned money the Rio employees received from smaller Chinese steel firms in exchange for giving them direct access to iron ore. Under ordinary circumstances this is routed through the large state-controlled firms and—as evidence at the trial suggested—trickles down to private companies through a system of payments that is, at the least, inefficient and ripe for corruption. Mr Hu, who was head of Rio's operations in China, acknowledged receiving $900,000 from small firms in return for access to ore. One of China's richest citizens, Du Shuanghua, a politically-connected private steel operator, testified that he had provided $9m (either as a payment or a loan—the facts were disputed) to another Rio executive, Wang Yong.

It is unclear how the bribery allegations were linked to those of commercial espionage, since the latter charges were heard behind closed doors—even Australian diplomats were barred from the hearing. According to some reports the court was told that that the four had got their hands on a confidential memo from a meeting of the Chinese steelmakers' association, containing details of their negotiating position in the talks with Rio and other big ore producers. Depending on how they had done so, that might have strengthened the case against them. But before the trials, Western mining executives had assumed that the four were being treated as criminals for simply gathering basic information about their negotiating partners' likely demand for ore—the sort of thing that is rarely considered secret elsewhere in the world.

Growing worries

China's authorities, and many of its citizens, will insist simply that crimes were committed and appropriate penalties handed down. Rio swiftly announced that it was dismissing the four. But their case has left unresolved questions about what constitutes a crime in China, and whether its law is being applied consistently. The Rio four were convicted of taking bribes and receiving sensitive information but, so far, no one from a Chinese company has been charged with paying the bribes or providing the information. Local employees of multinationals are likely to draw the chilling conclusion that unpleasant consequences will follow if ever they fall afoul of China's interests.

The verdict comes as foreign businesses operating in China have become increasingly pessimistic about the local business climate. Google's decision, in effect, to exit the Chinese internet-search business because of censorship is unique only in that it is a particularly prominent company willing to make a loud statement. Other firms suffer in silence, afraid of retribution—a fear that will only increase with the Rio sentences. A survey published on March 22nd by the American Chamber of Commerce in China found that many American firms feel shut out of Chinese markets because of discriminatory government policies and inconsistent treatment by the legal system.

Even so, Rio is already making efforts to move beyond the case. Earlier this month it agreed to enter a big joint venture in Africa with Chinalco. Rio's boss, Tom Albanese, has acknowledged that he does not want to put the firm's ties with China at risk. The state-owned metals company—which is already Rio's biggest shareholder despite the abandoned plan to increase its stake—has said it is actively seeking seats on the miner's board. This would, in effect, place representatives of China's government inside the firm. Meanwhile negotiations are under way for this year's round of iron-ore price-setting, and once again—unhelpfully for China—prices on world markets are rising. This time, though, the talks are being held outside the country.