A Rio Tinto executive detained by Chinese authorities has been accused of spying and stealing state secrets.

Sterm Hu, an Australian citizen and the Anglo-Australian mining giant's general manager of iron ore in China, was detained by agents from the Ministry of State Security in Shanghai on Sunday.

Three other executives, all Chinese nationals who were members of Rio’s iron ore sales team, were also arrested.

Stephen Smith, the Australian Foreign Minister, today confirmed that Mr Hu, who has lived with his wife in Shanghai for years, had been accused of espionage.

"This afternoon, Australian officials were advised that the reason for Mr Hu's detention was that he was being detained on the suspicion of espionage and stealing state secrets,'' Mr Smith said.

He added that the Australian Government was seeking further explanations from the Chinese authorities.

Mr Smith said that, under an agreement between the two countries, Australian officials must be allowed to see Mr Hu by Saturday and he had asked that Mr Hu's wife and Rio officials be allowed to see him.

"The Australian Government was very surprised by both the detention and the reason for the detention given by Chinese authorities. We continue to seek explanations for the reasons for the detention,'' he said.

"The reason for Mr Hu's detention came as a surprise to our officials and to Rio Tinto."

The arrests come amid bitter negotiations over iron ore sale contracts and Chinese fury over Rio's decision earlier this year to abandon a $19.5 billion (£12 billion) deal with Chinalco, the state-owned metals group, in favour of a joint venture with BHP Billiton, its long-term rival.

Rio and other iron ore suppliers are locked in discussions with China’s steel mills about iron ore pricing for 2009-10. These issues have not been resolved even though many contracts expired on June 30. Rio has refused Chinese demands for a bigger price cut.

The Age newspaper in Melbourne reported that Rio’s iron ore team were so concerned that their phones and emails were being bugged, and that information was finding its way back to the China Iron and Steel Association, that they had avoided meeting in China for more than a month, flying to Hong Kong and Singapore for discussions instead.

However, Mr Smith appeared to rule out iron ore price negotiations as a reason for Mr Hu's detention, saying: "I've seen no basis ... for any such speculation.''

Rio said it was not aware of any evidence to support the espionage allegations.

"We have been advised by the Australian Government of this surprising allegation. We are not aware of any evidence that would support such an investigation," a spokeswoman said.

In a statement, the company said: "Rio Tinto intends to co-operate fully with any investigation the Chinese authorities may wish to undertake."

The Government was advised of Mr Hu's detention by Rio on Sunday.

Australian officials have made representations in Shanghai, Beijing and Canberra since Monday seeking urgent consular access to Mr Hu.

A spokesman from the Department of Foreign Affairs and Trade told The Times that Mr Hu's wife, also an Australian citizen, was being kept informed of developments.

"We are seeking urgent consular access and are in communication with the man’s family and his employer," the spokesman said. “Obviously China is a very big market for us, particularly in terms of iron ore, so we have quite a significant presence [there].”

Rio’s Shanghai office is mainly a sales and marketing base for the world’s second-biggest iron ore producer, which is listed in London and Sydney.

Malcolm Turnbull, Australia's leader of the Opposition, expressed his concern at Mr Hu's detention.

"We have raised our concerns with the Chinese embassy in Canberra. This is a matter of very real concern and it is completely unacceptable for Australian executives to be detained anywhere in the world without cause," Mr Turnbull said.

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