Australian Foreign Minister Steven Smith stated today that Stern Hu, General Manager of Rio Tinto China, was detained on espionage charges earlier this week. Hu’s firm, Rio Tinto, is a major Australian supplier of iron ore (a necessary ingredient for making steel). The company is currently negotiating annual contracts with China that dictate pricing terms of the commodity for the next year.

Rio Tinto was also the target of an investment bid by Chinalco, China’s state owned aluminum firm, as it seeks to acquire access to strategically important commodities. The deal fell apart last month due to backlash over the terms and fears in Australia that China would be taking a substantial stake in a strategic commodities firm.

More details will likely emerge over time, but the Australian Press hints that the arrest may be in connection with the unsuccessful investment bid. Such speculation is premature as no facts have been released. At the least, this case dampen dealmaking in strategic sectors as it will likely raise fear within the expat community in China that business executives may be personally responsible for “failed” dealings from China’s perspective. And at worse, China has unveiled a serious intimidation strategy as its firms expand globally.

In a lightly publicized event over the weekend, a trader in London at PVM Oil Futures, the largest oil trading firm, made “unauthorized” purchases of oil contracts at 2 am. The trades pushed the price of Brent crude up to $73.50/bbl on Tuesday, the highest price this year, before dropping to $66 by the end of the week. The episode highlights the role that traders may play in affecting prices.

The incident comes at a time where many analysts, such as Deutsche Bank and well, me, believe that oil prices are divorced from basic supply and demand factors. If oil remains near $65 a barrel in a weak economic environment, and analysts have trouble ascertaining why, such stories and follow-up investigations into the role that energy traders play will likely become bigger press events.

The oil market is very complex (read: opaque). Its dominated by traders and very large companies, often state-owned. Other commodity markets, such as wheat and rice, also share some similar characteristics. When prices remain unexplainably high, conspiracies – some of them true – take hold and consumers will push for government action.

Today, the Commodity Futures Trading Commission (CFTC), the regulator of commodity markets in the US, is set to propose regulations aimed at curbing speculation by requiring firms to report their holdings and limiting the amount firms may invest in certain markets. Their goal is to reduce volatility and the influence of individual firms in controlling commodity prices. Although CFTC’s actions may curb the action of some US firms, it is just the start of the debate.