L.Bolormaa
June saw a flurry of strategic foreign visits. The President went to Russia and headed for the USA a few days later, while the Prime Minister attended an Asian summit before arriving in China to sign agreements. Mongolia calls these three countries its strategic partners. Russia and China are called good neighbours, while the USA is the most significant of our third neighbours. It is important to maintain close relations with these three super powers, and one also has to remember the high probability that bidding companies from Russia, China and the USA will be the final choice for Tavan Tolgoi and will be asked to form one consortium.
These strategic visits will be the pillars of our new foreign policy, based on principles of economic cooperation. All the three joint statements released after the visits stress the need to strengthen economic relations. It will be interesting to analyse how each of the three powers uses different tactics to develop economic relations with Mongolia.
RussiaVladimir Vladimirovich Putin’s “pocket directors” are in charge of Mongolia-Russia joint ventures. By “pocket directors”, I mean people close to Putin, his trusted allies. Dmitry Medvedev gives broad hints that he wants radical changes in the way the Russian economy functions. His perceived “campaign” for a second term as President began with support for a policy that would free the economy from the domination of the state and encourage the real private sector as well as attract foreign investment. He also wants more financial powers for local governments. However, even though it has wide popular support, it is by no means certain if Medvedev’s policy to loosen the tight state control will succeed in Russia.
State-owned companies are Mongolia’s partner in most Mongolia-Russia joint ventures. Putin’s men command companies like Russian Railways, RosAtom, and Rostechnologii, our partners in Mongolian Railway, Dornod Uranium, and Infrastructure Development respectively. When the winds of change in Russia push these companies into the private sector, sooner or later, Mongolia will have no way to “inspect the inside and outside character of the groom”. But we do know a groom who demands too much can create problems. Readers might have noticed that after President Elbegdorj’s visit, the present Russian grooms complained a lot, upset that Mongolian officials have still not handed over Tavan Tolgoi to them. They were also upset that Badamdamdin, director of MonAtom, referred to Khan Resources as a world standard company. Their response had the effect that on his return, our president called the heads of ministries and agencies and reminded them of the need to coordinate their actions and follow one good national policy.
He also met the Prime Minister to exchange views on the matter and told him how Russia wants to enter the oil retailing business in Mongolia. Elbegdorj’s view was that Mongolia can no longer afford to rely on Russia to supply all its petrol needs and should open serious discussion with China to import oil. In 2008, Parliament refused an earlier offer of Rosneft to build 100 petrol stations in Mongolia, in return for assured supply of petrol. This time the push has been harder and quite rude.
Russian investment in Mongolia is just 3 per cent of the total foreign investment, and only 2.7 per cent of our exports are to Russia. However, 33.3 per cent of our total import bill is paid to them. Mongolian offers to expand economic and trade relations have never been properly considered. Putin’s style of functioning is to turn off natural gas supply to Europe and trying to sell instead to China at the same high price.
“Both sides agreed to revise the railroad agreement of 1949, and agreed on everything except one or two issues that remain unresolved,” President Elbegdoej commented about his visit to Russia. These “one or two” unresolved issues remain so as that suits the Minister of Road, Transportation, Construction and City Planning Kh.Battulga. In general, the visit was tough and Mongolia once again realised that Russia wants concessions of appeasement more than serious talk about any strategic partnership.
China
The Prime Minister asked China for what Russia had not agreed to give. S. Batbold offered long term cooperation with China as it asked for oil, and China agreed, giving $500 million in soft loan and aid as bonus. A deal was also made on opening a new railway route and improving the capacity of border posts. Chinese investment is 55 per cent of foreign investment in Mongolia, 30.1 per cent of our imports come from China, and 85.4 per cent of our export goes there. In possibly the first ever public admission of Chinese power, the Prime Minister emphasized that Chinese growth opens the doors of opportunity for Mongolia. Earlier concerns that Mongolia would be sucked up by the “Chinese vacuum cleaner” were now replaced with avowal of cooperation as strategic partners. Is Mongolia unwittingly entering a Chinese trap that will cut it up piece by piece under the Russian groom’s gaze?
Mongolia trades with Russia through 29 border points while it has only13 such posts on its borders with China. With trade with Russia almost disappearing, Mongolia has been talking about closing some border posts but with China the talk has been only about increasing their capacity. China’s tactics have been very different from Russia’s. The tough conditions placed by Russia left Mongolia with no option but to ask the southern neighbour for money to build an oil refinery. The Prime Minister also got China to accept a proposal to review the present auto road agreement between the two countries. The Mongolian offer has been pending for several years and thanks to China’s affirmative nod, Chinese transporters may soon be working under Mongolian law in Mongolia territory. This is an important step to trade cooperation on an equal footing, after years of Chinese dominance.
Our leaders asked both Russia and China to take part in mega projects of regional infrastructure development, such as building oil and gas pipelines. Both say they will consider it.
USA
President Elbegdorj went to the USA much relaxed and was apparently under less pressure. He was received as a symbol of Asian freedom and shown much respect everywhere. This was mainly a political visit, though Elbegdorj referred to the important role that U.S. companies could play in the development of the Mongolia’s coal and other mineral resource, infrastructure, agriculture, energy and tourism industries. The MIAT decision to order three new aircraft from Boeing was a nice footnote to the main text.
Political talks during the visit did not put any pressure on the visiting Mongolian head of state. In stark contrast to the emphasis on regional cooperation in Russia and Chine, America and Mongolia talked about peace, stability and prosperity in the Asia-Pacific region.
4.8 per cent of Mongolian imports comes from the USA but its exports there are less than one per cent of its total. American investment in Mongolia is 3 per cent of total foreign investment here, the same as Russia’s. Even when committing itself to intensify bilateral economic cooperation, the USA values Mongolia mainly for its politics of democracy. For Mongolia, America is still the guarantor of safety and the third neighbor.
Mongolian leaders have been trying to balance the interests of these three super powers. The June visits revealed that there are extremely powerful factors going beyond our rich resources. The visits were also to decide on the international investor in Tavan Tolgoi but Mongolia realised that we cannot deal with super powers according to our desire even if we have a world class deposit to offer.