Mongolian PM looks beyond Russia and China
IA paneled desk Mongolian Prime Minister Luvsannamsrain Oyun-Erdene sits in front of a framed gilt painting of a warrior and a fawn. “It’s called Heroes going to war, by the Mongolian painter Otgontuvden Badam”, explains the chief of staff. But, sandwiched between Russia and China, the last thing Mongolia needs is war or heroism of any kind.
Oyun-Erdene is well aware of this as he settles into a leather chair for a video interview in July. “We are located geopolitically between two superpowers,” says the Harvard Kennedy School alum, who became prime minister in January last year after serving two years as chief cabinet secretary. The nation, although twice the size of Turkey, has a population of only 3.3 million. “We are very sensitive to global economic fluctuations,” he says, “which is both a blessing and a curse.”
The advantages are simple: Mongolia has the largest known coal reserves in the world, the second largest uranium reserves and one of the largest silver reserves. Add to that significant deposits of gold, copper, iron ore, phosphorus and zinc, and you can see why soaring commodity prices are a boon to its coffers.
Read more: How Mongolia Illustrates the Problems Posed for Small Countries by China’s Rise
The immediate curse, however, is inflation. The price of fuel, especially diesel vital for the nomadic communities dispersed in the steppes, is soaring. Russian President Vladimir Putin’s invasion of Ukraine on February 24 and subsequent Western sanctions also led to a spike in the cost of Russian chemicals (used for mining explosives, fertilizers and animal feed) and food, of which the Russian Federation is one of the countries. The biggest suppliers of Mongolia.
Tourism, which accounted for 7.2% of GDP and accounted for 7.6% of employment in 2019, has now collapsed – costing the national economy some $470 million since the start of the pandemic until March, according to government figures – and not just because of COVID-19. The European embargo on Russian airspace, following the war in Ukraine, has led to a reduction in flights to the Mongolian capital, Ulan -Bator. Oyun-Erdene deplores “the instability of the international community” and its effects on his country.
The situation threatens its attempt to transform Mongolia from an impoverished agricultural economy – about a third of the population lives in some form of poverty – into a modern mineral exporter with a startup-friendly environment, plenty of international investment and a growing business sector. flourishing financial services. . Upon taking office last year, he implemented an ambitious plan, Vision 2050, to increase GDP per capita nearly tenfold, from $4,009 to $38,359 by mid-century. “We have done our homework and now we need to put these developments into practice,” says Oyun-Erdene.
Oyun-Erdene was born in Ulaanbaatar in 1980 but grew up in Berkh in the eastern steppes of Mongolia. The village is known for its fluorspar mine – a mixture of calcium and fluorine ore – and has 10 times more cattle than people. He had a severe speech impediment until he was 5 years old, but he overcame it thanks to the patient hugs of his grandfather – a renowned Buddhist abbot, chess master and instructor of mathematics and Mongolian language – from which he adopted the surname Luvsannamsrai.
Oyun-Erdene did well academically, earning degrees in journalism and law, then public policy at Harvard. (His Ivy League schooling sets him apart from an earlier generation of leaders trained primarily in the former Soviet bloc.) By age 21, Oyun-Erdene headed the office of governor of Berkh. Later, he worked abroad for the NGO World Vision. The foray into international development left him aware of the problems facing his own country. He later wrote that he was “saddened at how bureaucratic, corrupt and politically divided Mongolia had become” compared to much of the world.
Trucks loaded with coal wait near the port of Gants Mod on the Chinese border with Gashuun Sukhait, in Umnugovi province, Mongolia, October 16, 2021.
Uugansukh Byamba—AFP/Getty Images
The country’s dependence on raw materials was also problematic. As prices soared in the early 2000s, Mongolia briefly became the fastest growing economy in the world, earning it the nickname “Minegolia”. Prospectors from North America and Europe drank expensive scotch in the nightclubs of Ulaanbaatar. But the mining boom was short-lived, and in 2017 Mongolia went to the International Monetary Fund for a $5.5 billion bailout.
Oyun-Erdene had been elected as an MP the previous year and had risen to prominence by helping organize mass protests against corruption. Today, commodity prices are high again and Oyun-Erdene hopes to avoid another boom and bust cycle by modernizing Mongolia’s economy through infrastructural developments – dozens of projects are underway, dams hydroelectric to railways and power stations.
He also gained huge political capital by renegotiating a deal with mining giant Rio Tinto for the $6.75 billion expansion of the vast Oyu Tolgoi copper and gold mine in the Gobi Desert. In December, the Australian company agreed to cancel more than $2 billion in loans that the Mongolian government was using to finance its share of the development. The renegotiation included safeguards to protect scarce water resources vital to nearby herding communities and to ensure that appropriate social infrastructure is provided to workers attached to the mine. Rio Tinto hopes that this decision “will bring greater economic value to Mongolia”. Oyun-Erdene says he wants such cooperation to apply to “other mine sites”.
Modernization is absolutely necessary. China accounts for more than 90% of Mongolia’s exports, and they mainly transit by road. Thousands of rumbling, sooty trucks – laden with minerals, coal or ore – are heading for the Chinese border, where traffic jams regularly stretch for 15 miles. Drivers can wait up to a week to cross. Mongolia falls far short of its export capacity due to these basic infrastructure constraints.
Complicating the issue, Beijing’s draconian zero COVID policy means it sporadically seals the border, blocking trade. In June, a Chinese official suggested its pandemic control measures could last five years. Oyun-Erdene worries about the “negative consequences” this has for his country, adding that “China’s zero COVID policy is, of course, not just Mongolia’s problem, but a global economic problem.”
Exports from landlocked Mongolia to other countries must also pass through Chinese ports. To ensure that “railway export will not depend on the COVID-19 situation”, Oyun-Erdene hopes to open five new level crossings with China by the end of 2022.
Mongolia’s foreign policy demands similar agility. “If Mongolia is not engaged, then we are really landlocked and geopolitically really contested,” says Mongolian foreign relations analyst Bolor Lkhaajav.
The country’s “Third Neighbor Policy” – a longstanding strategy to cultivate relations beyond China and Russia – grew out of this concern. Western nations have reacted in recent months, feeling a kinship with a democratic country in a conflict region. At the end of June, Germany announcement that it was resuming bilateral aid with Mongolia after a two-year break. Since July 1, Mongolians have become eligible for Australia’s coveted holiday visa scheme.
“Generally, the West is waking up to the values of diplomacy, energizing the promotion of democracy,” says Professor Julian Dierkes, a Mongolia expert at the University of British Columbia. “This, of course, is where Mongolia triumphs.”
Mongolian Prime Minister Oyun-Erdene Luvsannamsrai signing the guest book at the National Orchid Garden during his four-day visit to Singapore on July 8, 2022.
Oyun-Erdene wishes to emphasize the openness of his country to the world. He has just returned from Singapore, where he discussed listing Mongolian mining companies on its stock exchange. Before that, he spoke about digital transformation in Estonia and human resources in South Korea. UN Secretary General Antonio Guterres visited Mongolia on August 8. “We have full confidence in our cooperation with our third neighbours,” the prime minister said.
However, in the current geopolitical climate, the approach becomes delicate. Mongolia abstained in the UN General Assembly motion condemning Russia’s invasion of Ukraine and voted against expelling Moscow from the UN Human Rights Council.
Regarding “the war between Ukraine and Russia, we are very sorry and we have sent humanitarian aid to Ukraine,” Oyun-Erdene said. “But Mongolia’s foreign policy must remain independent. We believe that the countries of the UN Security Council – the great and great economic powers – must make decisions without emotional distractions and be pragmatic, because each decision enormously affects the world economy and the lives of millions of people.
The bottom line? “Relations with our two neighbors are the priority.” The warrior painted on his office wall may fight, but Oyun-Erdene’s fight will be to stay unaligned.
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