The Mongolia misunderstanding

IT WAS meant to be the mining story of the decade. Now we know better. The Outcrop by Robin Bromby
The Mongolia misunderstanding The Mongolia misunderstanding The Mongolia misunderstanding The Mongolia misunderstanding The Mongolia misunderstanding


Staff Reporter

Prospectivity? Fantastic. Politics? Not so much.

A director of an exploration outfit active in Mongolia sounded a jaded man when we talked this week. It sounded as if Mongolia had become just a little too hard. In fact, he even revealed a fatalistic streak and a realisation that his fortunes would all depend on whatever the government in Ulan Bator decided. And what that decision would be was very unclear.

All this as the Oyu Tolgoi mine gets its official opening by the Mongolian mining minister, the project itself being a poster child for all the complexities of getting anything bedded down in that country.

My exploration interlocutor made the very good point about having a look at the 52-week charts for ASX companies operating in Mongolia. They make dismal reading. Investors in those explorers must be dismayed at how what seemed such a fantastic mining frontier story had turned out so disappointingly.

Perhaps all they needed to do was look at the history of the country, which used to be known as Outer Mongolia but – and this is a key point – went officially under the name of the Mongolian People’s Republic.

And realise, too, that the preoccupation with mining laws and government interference is only one dimension. Far more important in the long term is that Mongolia is Asia’s Alsace-Lorraine – Germany and France may have settled their differences, but Russia and China have only put them on the backburner. Territorial memories linger.

Here’s another telling fact: Mongolia is building a railway across the Gobi Desert to the Chinese border. However, it is laying the track to the 1520mm gauge – the Russian gauge – while Chinese main lines are 1435mm between the two rails. What does this tell you? It means the Russian state of mind still pervades Mongolia. After all, Russia (while still under the Tsars) adopted its gauge to be different to the rail lines of Europe as a self-defence measure. It meant that any European invader could not run its trains on Russia’s rail network. The Nazis could supply their invading army in France in 1940 with their own trains, but not in 1941 in Russia.

Don’t you suppose the Mongolians, even if only subconsciously, have learnt the lesson of 1941?

So here’s my point: stop thinking of Mongolia as just another Asian country. From 1921, those who ruled in Ulan Bator adopted the philosophy and politics of those who ruled from the Kremlin. In 1932, the Mongolian government even tried to collectivise all farmers and herders, with disastrous results.

For at least 60 years, Mongolia was a Soviet satellite. Even in the 1960s, when Ulan Bator had a supposedly “fraternal” communist government in Peking (as it was then known), the fraternalism was wafer thin. The Soviets were building large military bases in Mongolia, putting fighter aircraft in bunkers and installing radar detection. It was estimated at the time that Chinese and Soviet troops, totalling some 1.5 million men, were facing each other across the Mongolia-China border.

The famed journalist and Asian expert, Harrison Salisbury, wrote a piece for The New York Times in July 1969 headed “Will there be war between China and Russia?”.

At that time, more than 80% of Mongolia’s foreign trade was with the Soviet Union.

Meanwhile, in Moscow in the present day, Vladimir Putin is pursuing his Eurasian Economic Union plan aimed at bringing back into Moscow’s orbit many of the former Soviet republics. Belarus and Kazakhstan are keen, while Tajikistan and Uzbekistan are next in Putin’s sights. (Ukraine is a certain no-show, being on bad terms with Moscow.)

So far this has been little, if any, mention of Mongolia being part of this.

But keep in mind that Russian-Chinese rivalry is no new phenomenon in the region of which Mongolia (Manchuria on one side and Siberia on the other) is part.

In 2009, Australian National University associate professor Li Narangoa penned an article for the academic journal Asian Survey.

She argued that “recent history still haunts the Mongolians: in the 1910s and 1920s, they struggled to free themselves from the new Chinese Republic but in doing so became dependent on the Soviets”.

Her point was that Mongolia’s foremost concern was to preserve its sovereignty and avoid returning to dependence upon a powerful neighbour.

Seen in this context, you can better understand what is happening. The Mongolians have snubbed Chinese miners. The Canadian company Khan Resources in 2009 found its uranium licenses being revoked and a large project handed over to the Russian state-owned Atomredmetzoloto. No mining company should expected anything except the unexpected in Mongolia.

Mongolia, prospective one day, unpredictable the next.

This article first appeared in ILN's sister publication

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