A new spring in the Steppe - Monocolumn | Monocle


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7 October 2010

For decades, the term “buffer state” has been invoked as shorthand for Mongolia’s political raison d’être. The country is wedged between two BRICs, and more than 20 Chinese cities each exceed its entire population. If such a hinterland survived the 20th century intact, the phrase implies, it must be because the central planners in Moscow and Beijing permitted it to.

But today, fiercely independent Mongolia has an opportunity to play geopolitics at a scale not seen since its imperial heyday in the 13th century. In recent years, explorers have discovered vast quantities of gold, copper, uranium — and especially coal — beneath the grasslands.

One coalfield, the Tavan Tolgoi deposit in the South Gobi, is thought to hold 6.5 billion tonnes of the stuff, placing it among the world’s largest untapped reserves. The area is less than 200km from China. Exporting the coal to power-hungry China would pay off immediately, but could have potentially dire political consequences down the line. “For Mongolians, it is essential to find an alternative outlet for their minerals to avoid over-dependence on just one market,” says Michael Aldrich, an international corporate attorney who represents the firm Hogan Lovells in Ulan Bator.

The Great Hural, Mongolia’s parliament, decided in June to scrap a planned railway from Tavan Tolgoi to China and instead develop much longer rail links with the Russian ports of Vanino and Vladivostok. Russia promises to offer discounts of 52 to 68 per cent to Mongolian coal crossing its territory, but the upfront investment is tremendous. According to World Bank estimates, selling Tavan Tolgoi coal via Russia instead of China will more than double the cost of exporting it to $125 a tonne, including construction expenses. Since the announcement, China has met attempts for further dialogue with silence, but Mongolia continues to plan for eventual tripartite talks.

Mongolians are keenly aware of their newfound clout. “Unlike a decade ago, [Mongolia] is not a supplicant grateful for any favours granted,” writes reporter E Saikhantuya in Mongolian Mining Journal, “but an emerging force with the strategic power to bestow some favours of its own.”

World Bank officials and others have publicly questioned the economic wisdom of the Russian plan. But Mongolians insist that the new line will bind the country together for the first time on an East–West axis, and that social benefits, including jobs at a new industrial complex in Sainshand, will easily outweigh economic costs.

There are historical precedents for this approach, says Aldrich. “In the 19th century, the Trans-Siberian railway made no economic sense. But without it, Russia would have lost its Far East and Eastern Siberian provinces.”

Russia has been so eager to cooperate that some think Mongolia should seize the opportunity to step up its demands. Saikhantuya wonders, “Are we even now getting what we really need?”


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