Strongman's hand in BHP deal

Leading questions: John Howard watches Cambodian Prime Minister Hun Sen sign the visitors' book at Parliament House in 2006. (Photo: AAP)

Bretton Sciaroni (R) shaking hand with Hun Xen

New cables reveal Hun Sen's role in the failed project.

March 26, 2013
Richard Baker
canberratimes.com.au

A BHP Billiton mining deal being investigated for alleged corruption was personally overseen by Cambodian strongman Hun Sen, diplomatic cables reveal.

The miner's aborted attempt to establish a bauxite mine in Cambodia, and its hospitality program for Chinese officials at the 2008 Beijing Olympics, are at the centre of a foreign bribery investigation by the Australian Federal Police and the US Justice Department.

Diplomatic cables, several marked ''sensitive'' and ''protected'', show for the first time Prime Minister Hun Sen's close involvement in 2006 negotiations with BHP executives that led to him announcing to a private audience he would give ''BHP 1 million hectares of land'' weeks before an agreement was signed and ''a possible tax holiday''.

They also reveal how BHP stopped all mineral exploration in Cambodia just months after a British non-governmental organisation published a 2009 report highlighting the company's payment of $US3.5 million to Cambodian government departments and concerns it could not be accounted for.

The payments were described by one Cambodian politician in the Global Witness report as ''tea money'', a phrase sometimes used in Asia to describe bribes. There is no evidence suggesting any of the money went to Mr Hun Sen or his associates, and he has dismissed reports suggesting BHP was involved in bribery in Cambodia.

The cables, released under freedom of information by the Department of Foreign Affairs and Trade, show BHP in 2006 took what Australian officials regarded as an unusual step of asking them to approach Mr Hun Sen for a meeting to ''go to the next level and close the deal''. The cables have been heavily redacted to protect Australia's international relations and BHP's commercial interests.

Although Australian officials rejected the BHP request to ''preserve our political capital'', embassy staff in Phnom Penh contacted Mr Hun Sen's office to get a contact name and number for BHP.

In September 2006, Mr Hun Sen and BHP executives signed an agreement granting the firm and joint venture partner Mitsubishi rights to explore a huge area of land for bauxite deposits. The deal was formally witnessed in Canberra a month later by then prime minister John Howard and Mr Hun Sen.

The cables make clear that although BHP's exploration was progressing slowly during 2007 and 2008, its Cambodia-based executives were optimistic about the project's ultimate success.

However, the diplomatic cables show a change in BHP's stance on its Cambodia operations in early 2009, shortly after the release of the Global Witness report and its reference to the $US3.5 million payments. Two months later, in April 2009, Australian diplomats sent a ''confidential'' cable to Canberra raising doubts about BHP's long-term commitment to Cambodia, blaming the global financial crisis and the country's ''own poor financial management''.

The cable stated any withdrawal would ''not only breach BHP's MOU (memorandum of understanding) with the Cambodian government (signed in the presence of Prime Ministers Hun Sen and Howard in Canberra in 2006)'', but also ''diminish Australia's influence in this major sector''. Australian diplomats in Phnom Penh also sent a cable to Canberra in response to the Global Witness claims stating ''the specific references to Australian companies are very concerning''.

Despite Australian officials becoming concerned in early 2009 BHP might pull out of Cambodia, one of the company's Phnom Penh-based executives - quoted in an April 2009 diplomatic cable - was optimistic about the bauxite operation proving ''commercially exploitable'' because the ore was at shallow depths in accessible sites.

But just two months later, in June 2009, BHP advised the embassy in Phnom Penh it would cease exploration in Cambodia on the basis the bauxite deposit would not be competitive to mine given ''current global conditions''.

A cable sent to Canberra, marked ''sensitive and confidential'', asked for the news of BHP's withdrawal to be ''closely held'' until the company formally advised the Cambodian government.

The Cambodian government was not told of BHP's decision until almost two months later, when BHP executives negotiated a settlement with Mr Hun Sen's deputy, Sok An. Other cables show BHP arranged for Mr Hun Sen to be chairman of a sub-committee examining legal issues of its bauxite proposal.

Former Reagan administration lawyer Bretton Sciaroni has been Mr Hun Sen's long-time legal adviser in Cambodia. In 2011, US online site Salon.com reported Mr Sciaroni also advised BHP on its dealings in Cambodia. BHP declined to discuss whether it hired Mr Sciaroni and the lawyer could not be reached for comment.

On Monday, BHP said ongoing investigations meant it was unable to answer specific questions but confirmed it handed licences for the bauxite project back to the Cambodian government in 2009.