A new Russian gas pipeline is a bad idea for Mongolia – The Diplomat
Ukrainian President Volodymyr Zelenskyy spent his middle years in the Mongolian mining town of Erdenet, as the son of a Soviet specialist with corresponding privileges. At the time, Mongolia’s dependence on the Soviet Union was the source of many jokes and the giant Erdenet copper mine was being developed to supplement the bloc’s copper supplies. communist after the 1973 Chilean coup.
Today, as Zelenskyy leads his country in the fight against renewed Russian aggression, Mongolia’s political class is sleepwalking into a pipeline deal that will increase its dependence on Moscow (and therefore its vulnerability pressure from) Moscow, while exposing its Tibetan Buddhist community to pressure from Beijing. intervention.
The idea of a trans-Mongolian gas pipeline is not new and has been revived by Mongolia at the Eastern Economic Forum 2018. In 2019, with tacit approval from Beijing, Gazprom and Mongolian state-owned Erdenes Mongol launched a feasibility study on the Mongolian section of Power of Siberia 2, the Soyuz-Vostok pipeline.
Earlier this year, Mongolian authorities and Gazprom approved the Soyuz-Vostok feasibility study, despite the fact that the overall Power of Siberia 2 feasibility study is still ongoing. A few days after the start of the Russian invasion of Ukraine, Erdenes Mongol and Gazprom quickly signed a agreement for engineering and design work of the gas pipeline, with the aim of starting construction in 2024. With a capacity comparable to that of the suspended Nord Stream 2 project, the Soyuz-Vostok is well placed to bring gas from Russia’s Yamal Peninsulainitially intended for European markets, to China.
Although it has no expertise in developing gas pipelines, Ulaanbaatar has so far not engaged any third-party advisors to assess the technical and financial aspects of the Soyuz-Vostok project. Neither Mongolian political leaders nor Gazprom seem interested in involving a third party, which could have potentially increased transparency, provided additional capital and allowed for closer scrutiny of the financial, technical and environmental aspects of the pipeline.
As a result, Gazprom appears to have locked Erdenes Mongol into a predetermined set of technical and financial parameters, which will allow the Russian company to transfer an unjustified amount of the total project cost to the Soyuz-Vostok section while leaving itself, or the Power of the Siberia 2 pipeline, the lion’s share of net profits.
Without proper project assessment and third-party involvement, Mongolia is likely to take out a large loan from Russia, perhaps on predatory terms, to fund its share of the costs, while agreeing to repay it out of gas transit. In this scenario, ironically similar to the development of the Erdenet copper mine in the Soviet era, Mongolia would incur heavy, perhaps unwarranted, cost burdens, likely earning just enough for the project to break even without be able to obtain long-term benefits such as scalable gas supplies at reduced prices. As a result, negotiating transit fees, gas prices and project financing in an information asymmetry will be detrimental to Ulaanbaatar’s interests.
From the way Soyuz-Vostok has been depoliticized and excluded from public scrutiny, it is clear that Russia has successfully co-opted the kleptocratic Mongolian political class. Only recently, following the war in Ukraine, have some corners of the public begun to question the morality of welcoming a new Russian pipeline. However, no significant debate on the economic, geopolitical and social impacts has taken place; apparently none of the Mongolian political parties want to oppose the project.
Such depoliticization and co-option of the Mongolian political elite would have been impossible without Russia’s recent push for soft power in Mongolia. From the mid-2010s, Russia intensified its activities to promote Russian language and culture, provided direct military assistance in the form fighter planes and reconnaissance drones, and revive soviet-era war memorials in Mongolia.
In addition, Moscow exported the May 9 Victory Day celebrations to Mongolia in a format indistinguishable from that of Russia. Russia has also integrated unique Mongolian experiences – the commemoration of the Battle of Khalkhyn Gol in 1939 and the assistance of Mongolia during World War II – into its new monuments, such as the main cathedral of the Russian Armed Forces. Meanwhile, pro-Moscow politicians in Ulaanbaatar have been systematically promote an illiberal value system driven by the rise of neo-Eurasianism, with far-right and anti-LGBT motivations. It is not surprising that the ruling party in Mongolia, which controls all branches of government, was among the two dozen international parties that expressed their support for Russia’s war in Ukraine.
Moreover, there is little reason to believe that Mongolia will be able to protect itself from the geopolitical and geotechnical risks of the Soyuz-Vostok pipeline. A politically motivated suspension of gas transportation from Russia could stunt cash flow, devalue Ulaanbaatar’s investment and deepen the country’s indebtedness. In this context, it is suspicious that Russia continues to block Mongolia’s attempts to build indigenous hydroelectric generating capacity, which could provide an alternative to Russian power.
The political risks in this case also come from the country at the other end of the pipeline, China, which has a history of closing borders and exert diplomatic pressure on Mongolia whenever the Dalai Lama visits at the invitation of Mongolian Buddhists.
Russia, constrained by sanctions and oil and gas embargoes, be even more eager to increase exports to China by making use of a co-opted regime in Ulaanbaatar. This gives China not only the leverage to negotiate cheaper gas prices, but also a means to impose its will on the Buddhist community in Mongolia. In particular, Beijing is likely to ask Moscow for help in pressuring Buddhists in Mongolia to cut ties with the Dalai Lama and choose a pro-Beijing Jebtsundamba Khutuktu.
Mongolia’s historical deity, Jebtsundamba Khutuktu, is also one of the three most important lamas of Tibetan Buddhism, along with the Dalai Lama and the Beijing-controlled Panchen Lama. His ninth reincarnation died in 2012. The Jebtsundamba Khutuktu reincarnation process, currently guided by the Dalai Lama, will significantly shift the balance of power in the struggle for Tibetan Buddhism and has long been a ticking time bomb for China-Mongolia relations. For Mongolia, which has experienced numerous border closures and other diplomatic fallout with Beijing following the Dalai Lama’s visits, ceding control over the recognition of its religious leader will be interpreted as a highly symbolic loss of sovereignty.
Under the current circumstances, the risks of agreeing to a deal with Gazprom include Mongolia’s increased dependence on both Russia and China, further exposing Ulaanbaatar to political risks and potential pressure on internal affairs. sovereigns of its neighbours. All of this will come with minimal economic gains, given the high cost of the project and Mongolia’s reluctance to aggressively negotiate its fair share of the benefits.
Mongolia cannot afford to host a Russian gas pipeline given the repercussions on political and religious freedom. Shelving the Soyuz-Vostok pipeline project until better times is the best choice Ulaanbaatar can make given the current geopolitical environment and the state of its weakened democracy.