How our two neighbours keep the third away

Nobody knows about the progress on the Tavan Tolgoi investors’ bid, and nobody is brave enough to hazard a guess. This is because the deadlock on economically transporting the coal through Russian or Chinese territory still persists, with no resolution in sight, making it impossible for any of us to say something new now. The Mongolian Government’s working committee did its best, but obviously their best was not good enough to have any impact on either Russia or China on issues of routes to sea ports and transport costs. The President and The Prime Minister visited the neighbours in June, and hopes were raised, but no concrete result has so far emerged.

We are bewildered that the fate of Tavan Tolgoi, Mongolia’s prize asset continues to be in the hands of Russia and China. The Mongolian Government faces tough obstacles at every stage as it strives to protect national interests over the neighbours’ own economic and political ends. To squeeze us, one cut off petrol supply, and now the other has increased railway tariff for Mongolian coal between Erlian and Tianjin. The whole Tavan Tolgoi issue once again reveals how helpless Mongolia is when confronted with the greed of its two intransigent neighbours.

A year ago, an amendment was made to the guidelines to Mongolia’s national security policy. It said: “Mongolia shall follow the policy that no one foreign country’s investment will exceed one third of the total foreign investment in the nation. When Mongolia seeks investment in the strategically important deposits, it will similarly restrict investment by foreign state-controlled companies and ensure equal investment from neighbouring countries and from other developed countries.”

Consortiums led by the Russian Railways and Shinhua must be treated as state owned business entities. It’s simple logic that selecting them violates the above mentioned guideline. They now hold all the aces. Will Tavan Tolgoi coal be transported by Russian Railway or shall we have to join Shenhua’s railway network? We have to do either to be able to sell the coal in markets beyond the seas. Our neighbours have a stranglehold on transit freight rates. Even if we succeed in reaching an agreement on these, we have to beg them to give us a terminal at the port of export. Otherwise we shall be left to defreeze our coal in Vanino or jostle for space in the heavy congestion at Tianjin. Finding markets and negotiating for the proper price are easier than this.    
No progress has been made in this essential issue since last year’s Russian proposal, shown as a promise, of a tariff discount. This is what the letter on 9 April, 2010 from Vladimir Yakunin, President of Russian Railways, to our infrastructure minister said. Please note that it is not a literal translation.

Dear Minister Battulga,
RJD discussed your request for reduced freight rates for Mongolian goods to be exported from Vanino, Vladivostok and Solovyovsk.

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