Meeting with authorities of Rosneft Public Joint Stock Company of Russia www.montsame.mn

Chief of Staff of the President of Mongolia Mr Z.Enkhbold received on Tuesday top officials at the “Rosneft” Public Joint Stock Company, including the First Vice-President Pavel Fedorov, Vice President Otabek Karimov, Vice President Yuri Kalinin and Chief Geologist Andrey Lazeev. At the beginning of the meeting, the officials of the Russian company touched upon the increasing oil demand in Mongolia and held an extensive discussion on means to meet this demand and the exploitation, refinery and export of oil in Mongolia. At the end of the meeting, Rosneft Company informed that it will be donating EUR 8 million for the purpose of redeveloping the Khalkhgol soum center, Dornod province, in frames of the Mongolian-Russian joint celebration of the 80th anniversary of the victory of the battle in the Khalkha River. Chief of Staff Mr Z.Enkhbold expressed his gratitude for the donation and wished a bright future for the Company.

Dutch Development Bank Arranges USD 120 million loan to Khan Bank www.montsame.mn

Ulaanbaatar /MONTSAME/ The Dutch Development Bank FMO arranged a USD120 million loan to Khan Bank, Mongolia’s leading universal bank. This USD 120 million loan (equivalent to MNT 300 billion) is the largest loan in Khan Bank’s history and will strengthen its strategy to reach out to even the most remote areas of Mongolia. The financing signals FMO’s long-term commitment to the Mongolian market and is expected to pave the way for additional funding from other financial institutions.

Khan Bank is a robust institution with prudent management and a leader in digital banking. The loan will support Khan Bank’s successful growth and will expand access to financing for small and medium-sized enterprises.

Through its extensive network of 536 branches nationwide, Khan Bank provides banking services to an estimated 70% of Mongolian households. The bank provides comprehensive banking services and access to finance to individuals, small and medium-sized enterprises (SME) and corporate customers in even the most remote areas of the vast country. Khan Bank has been a client of FMO since 2009 and is an important partner in Mongolia.

The USD 120 million syndicated loan facility supports Khan Bank's ambition to remain the country’s leading SME and retail bank reaching out to most people in Mongolia. The term facility will also contribute to Khan Bank’s funding stability. In addition to the loan facility, capacity development support will be provided to further strengthen the bank’s environmental and social management system. The inclusiveness and developmental impact of the facility is good through the bank’s strong remote outreach, significant SME portfolio and the bank’s steps to further digitalize banking activities.

FMO commits USD 45 million and in addition mobilized funding from diverse international financing partners: The German development finance institution DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH commits USD 23 million. The International Investment Bank (IIB) commits USD 20 million, the Belgian Investment Company for Developing Countries (BIO) commits USD 17 million and the Development Bank of Austria (OeEB) commits USD 15 million.

John Bell, CEO of Khan Bank commented to the occasion, “With shrinking foreign investment in Mongolia due to an economic downturn in recent years, this syndicated loan facility of USD 120 million from leading international financial institutions is critical not only for Khan Bank’s customers, but also for the overall economy. It is a promising manifestation of increasing confidence of investors in Mongolia. Khan Bank is honored to be leading the way forward.”

Linda Broekhuizen, Chief Investment Officer of FMO commented: “We feel privileged to build further on our warm and longstanding relationship with Khan Bank. This facility will help ensure that more than 2.4 million people from every part of Mongolia can benefit from the country’s development”.

Mongolia's central bank purchases 14.3 tons of gold in 1st 3 quarters www.xinhuanet.com

ULAN BATOR, Oct. 2 (Xinhua) -- The Bank of Mongolia has purchased 14.3 tons of gold from legal entities and individuals in the first three quarters of the year.

Spy arrest! Foreigner arrested in Ulaanbaatar www.news.mn

A foreign citizen was taken into custody in C block of the Golomt apartment complex, which is located near the Western Road Intersection in Ulaanbaatar, earlier today (2 October). According to the General Intelligence Agency of Mongolia, the unnamed foreign national living in Ulaanbaatar was arrested on Tuesday for allegedly spying. Furthermore, intelligence officers have seized four boxes of evidence from the home the suspect. The special operation lasted for two hours and shocked neighbours.

Partners announce $31bn Canada LNG project gets go ahead www.bbc.com

A major C$40bn ($31.9bn; £24.6bn) liquefied natural gas (LNG) project in Canada has received the go-ahead from its partners.

Mongolia to send military personnel to Afghanistan for NATO-led mission www.xinhuanet.com

ULAN BATOR, Oct. 1 (Xinhua) -- Mongolia will send its 8th contingent military personnel to Afghanistan on a NATO-led mission, authorities said on Monday.

What does the China-Mongolia-Russia Economic Corridor mean for Mongolia? www.beltandroad.ventures

(Guest contribution by Connor Judge. Connor is a PhD Candidate at SOAS, University of London specializing in Chinese history and China-Mongolia relations. He holds an MA in International Relations from the University of Nottingham, Ningbo China, where his research focused on Eurasian regionalism and Mongolia’s economic development. His research output is supported by the Wolfson Foundation.)

2019 marks 70 years of diplomatic relations between China and Mongolia. The two countries are eager to use the opportunity to strengthen relations and lay out a blueprint for future cooperation. It was in this context that Chinese Foreign Minister Wang Yi visited Mongolia in late August. During the visit, it was agreed that both sides would accelerate construction of the flagship China-Mongolia-Russia Economic Corridor (CMREC), one of the key corridors under the Belt and Road Initiative (BRI).

The central CMREC route (also known as the “Prairie Road” (Талын зам\草原之路) “starts” at the port of Tianjin, China and heads northwest before entering Mongolia at the Erlianhaote border crossing. In practice however, Siberian and Mongolian resources are exported out of Tianjin. The route then heads through Mongolia before entering Russia along the trans-Siberian express at Ulan Ude. For North East China’s provincial powerhouses, this primary route represents the shortest path to Europe; and Mongolia is keen to position itself as the pivotal logistics hub.

Container trains have already traversed the new corridor. The Mongolian Vector (Mongolia-Brest, Belarus) and Zhengzhou-Hamburg (China-Mongolia-Germany) trains have already been running successfully along the route and are providing European firms with potential for both Mongolian and Chinese market access; as well as vice-versa.

Other CMREC routes face delays

Beyond this central route, alternative ideas have been put forward for CMREC, but progress has been slow.

● Tavan Tolgoi Rail Project: Seeks to link Mongolia's giant Tavan Tolgoi coal mine to the Chinese border. $200 million has already been invested. However, funding for the route, contributed thus far by Shenhua Group and Sumitomo Corporation, falls short by $800 million.

● The Mongolian government was also enthusiastic about integrating a rail route stretching from Choilbasan to the town of Ereentsav near the eastern Russia-Mongolia border within CMREC, but China has been less receptive to this.

● A proposed Sainshand-Ereentsav, Nomrog, Bichil crossrail is also seeking funding from the Silk Road Fund (SRF) and Asia Infrastructure Investment Bank (AIIB).

● The construction of an international UHV electric transmission “super grid” along CMREC routes and existing grid upgrades are also being considered at multilateral dialogues.

Mongolia is pushing China and Russia to turn words into action

Financing, rail gauge incompatibility, customs, environmental and broader conceptual issues continue to be roadblocks for CMREC and the proposed projects mentioned above. Mongolia nonetheless is keen to resolve these issues. As a result, Mongolia is an active and vocal BRI partner, while simultaneously pursuing a self-promotion drive. For example, former Mongolian Transport Minister Jadamba attended a plenary Transport and Logistics in Eurasia conference in Moscow in December 2017 in which he reiterated Mongolia’s pivotal role as the “shortest” path between Europe and Asia, while also emphasizing Mongolia’s desire to seek third-party partners for CMREC and mineral export financing.

More recently in June 2018, the Mongolian President Khaltmaagiin Battulga also spoke at the Mongolia-Russia Economic Forum where he promoted the Altanbulag FTZ at the northern extreme of the central route, efforts to significantly increase trade turnover with Russia by 2020 and establishing of an FTA with the Eurasian Economic Union.

In the same speech, however, Battulga stressed that CMREC “remains no more than a dialogue today” and that Mongolia expects deeper reciprocation of its “robust implementation” of the project. Battulga continues to seek more buy-in from Russian and Chinese partners, and at the Shanghai Cooperation Organization (SCO) summit in June 2018, the three CMREC country leaders arrived at a further consensus on expanding CMREC, but also agreed that Mongolia should engage more with the SCO. Subsequently, Mongolia participated alongside China in the Vostok games, Russia’s largest war games since 1981.

Hedging bets?

Faced with challenging realities of landlockedness, Mongolian officials recognize that rail and road infrastructure remain key to the economy’s sustained growth and development (following a lamentable $5.5 billion IMF bailout package in 2017). As such, Mongolia recognizes that, if implemented well, CMREC could be a game changer and hence is pressing for it with vigour.

At the same time, Mongolia is wary of economic over-reliance on China and the asymmetric implications that may come with CMREC. Already, around 80% of Mongolia’s export volume goes to China (primarily copper, coal and gold). This explains why Mongolia is seeking additional international investment partners and political allies, including agreeing to expand a comprehensive partnership with the US. Additionally, despite Chinese interest, the Mongolian government continues to lease the “backbone” of the Mongolian mining industry, the South Gobi Oyu Tolgoi mine, to Canadian Ivanhoe Mines and multinational Rio Tinto.

Mongolian interests

Nevertheless, the overall trend for Mongolia’s economic engagement with China remains positive. The Mongolian side likewise appears willing and invested in CMREC and stakeholders can safely assume this attitude will persist. For Mongolia, CMREC embodies fervent hopes for sustainable regional collaboration and development.

China And Russia Eye Mongolian Gas Route www.rfa.org

Warming relations have renewed prospects for delivering Russian energy supplies through Mongolia to China as rising demand competes with historical mistrust.

Hopes for transit through Mongolia appeared to brighten last month following a meeting of the three countries' presidents at Russia's Eastern Economic Forum in Vladivostok.

Mongolian President Khaltmaagin Battulga took the occasion to repeat his appeal for new oil and gas pipeline routes through his country, eliciting a positive response.

"This is all in the works," said Russian President Vladimir Putin on Sept. 12, Interfax reported.

Chinese President Xi Jinping's reaction to the pipeline plan was not reported, but in a speech at the forum, Xi called for regional cross-border links.

"We need to make connectivity a priority. We need transnational infrastructure," Xi said, according to Platts Commodity News.

"Based on the principles of mutual trust, ... China is willing to work with Mongolia to seize opportunities, remove interferences and solidly carry out exchanges," Xi said earlier in June.

In a further sign of improving relations, contingents from both China and Mongolia joined in Russia's massive Vostok-18 military exercises in Siberia last month.

In June, the three countries agreed to establish a "China- Russia-Mongolia economic corridor." Last month, Battulga also hailed China's cooperation on a high-voltage transmission project as the start of a Northeast Asian electricity grid.

According to a recent report by Mongolia's English-language UB Post, a cooperation agreement has been signed for a trans-Mongolian gas pipeline project by China Railway 25th Bureau Group Co., Ltd. and a Chinese investment company "that could not be identified in English."

No further details on the agreement have been available.

Support for Mongolian energy transit has been building since the first trilateral meeting in 2014 with then-President Tsakhiagiin Elbegdorj at the Shanghai Cooperation Organization (SCO) summit in Dushanbe, Tajikistan.

That meeting followed two weeks after Xi's icebreaking visit to Ulan Bator, marking the first trip by a Chinese president to neighboring Mongolia in 11 years.

Four years of bridge building have so far produced a series of optimistic statements on the pipeline possibilities but, so far, few results.

"We generally support the idea," Putin said in June during the last trilateral meeting. "But of course, as always in such cases, you need to thoroughly work out the feasibility," he said at the last SCO summit in China's port city of Qingdao.

Complicating factors

Behind each of the positive statements are a series of complicating factors and considerations that have slowed developments down.

From Russia's standpoint, building a gas pipeline across the Mongolian steppe is likely to be faster and easier than completing its planned 2,800-kilometer (1,740-mile) western route through a narrow corridor to Xinjiang over the remote Ukok Plateau of the Altai Mountains.

Among other problems, the Altai nature reserve area has been designated as a world heritage site by UNESCO, the United Nations Educational, Scientific and Cultural Organization.

The proposed mountain route through the Kanas Pass is said to be at an elevation of 2,650 meters (8,690 feet).

Despite the drawbacks, Russia's monopoly Gazprom has pushed the Altai project for over a decade as its preferred option to supply China, even as it rushes to complete its 4,000-kilometer (2,485-mile) Power of Siberia eastern route.

The giant pipeline is scheduled to open in December 2019.

The Power of Siberia line is designed to deliver 38 billion cubic meters (1.3 trillion cubic feet) of gas per year while the Altai project would supply 30 billion cubic meters annually.

A Mongolia route could break the Altai impasse, avoiding both the mountains and restive Xinjiang, which already has a surplus of resources and pipelines.

"I don't think the Chinese are particularly interested in Altai, in spite of the change in rhetoric," said Edward Chow, senior fellow for energy and national security at the Center for Strategic and International Studies in Washington.

Chow said the project would "get gas to the wrong place" in China, far from its biggest consuming markets in the east.

"From an energy supply and logistics point of view, it strikes me that Mongolia makes more sense," he said.

But Russia's reports on a Mongolian option stress that all of its gas routes "are direct pipelines from Russia to China without transit states."

The argument makes Putin's comment that something is "in the works" all the more remarkable, suggesting that Russia's policy on the Altai route could be subject to change.

When asked about the Altai plan at the Vladivostok meeting, Russian Energy Minister Alexander Novak told Reuters that President Xi had set the task of "concluding the agreement of a contract on gas supplies ... in the nearest future."

"All the technical conditions have been agreed," Novak said, repeating a statement that Russian officials have been making for years.

Officials said they had been tasked with signing a contract for gas supplies from the western route by the end of this year, but the completion of the Altai pipeline was originally set for 2015.

From China's standpoint, the openings to Mongolia have been aimed at steadily building trust with investment in projects such as renovating Ulan Bator's shantytown districts.

The unusual aid for a social welfare project in a neighboring country may be needed to overcome historic resentment in Mongolia, which gained independence from China in 1911. Past reports suggest that China's commercial mining investments in Mongolia have stirred public anger.

"From the steppe to the streets of the capital, Ulan Bator, Mongolians evince a distrust of Chinese," the Associated Press reported in 2012. "Almost everyone says China is stealing Mongolia's coal."

Leaning towards Russia

Although China is Mongolia's top trading partner, the country has leaned heavily toward Russia since Soviet times.

In the past, mistrust between Mongolia and China has worked both ways with regard to energy transit.

Before Russia opened a direct branch to China for oil exports from its East Siberia-Pacific Ocean (ESPO) pipeline in 2011, it tried to supply China through two Trans-Siberian Railway routes.

Most of the oil traffic was routed through the more distant Zabaikalsk border crossing with China to the east, avoiding Mongolia, while smaller volumes were shipped across Mongolia through the Naushki crossing in southern Siberia.

After a series of complaints over high tariff costs on both routes, the Mongolia traffic was halted entirely in 2007 amid reports that China considered it less secure. The border between the two countries is 4,700 kilometers (2,920 miles) long.

A decade later, Russian energy supplies and routes to China have increased dramatically along with Chinese demand, particularly for gas.

China's gas consumption rose 15 percent last year, according to the National Bureau of Statistics (NBS), and increased by 17.5 percent in the first half of 2018 as the government pursued its push for cleaner-burning fuels.

The question is whether conditions have changed enough for China to rely on Mongolian transit.

In an interview, Chow said the statements at the latest meeting of the three presidents should not necessarily be taken as signs of progress on either the Altai or Mongolian supply routes.

"My instinct is that every time Xi and Putin meet, they have to announce something, and gas seems to be one of the favorite topics," he said. "They can't meet and not have something to announce."

Moscow has continued to press its case for the Altai project because it would rely on its well-developed resource base in Western Siberia, which also serves Europe, spurring competition for Russian gas.

But Chow said that China wants nothing to do with the Russian strategy.

"It does nothing for the Chinese," he said.

(An analysis by Michael Lelyveld)

Mongolia to establish sovereign wealth fund www.news.mn

Mongolia will establish a sovereign wealth fund next year as part of its strategy to manage growing revenues from its resources.

President Kh.Battulga addresses at the opening of Autumn Session of the Parliament www.montsame.mn

Ulaanbaatar/MONTSAME/ President Khaltmaagiin Battulga addressed at the opening of the Autumn Session of the Parliament on October 1.

In his speech, the President asserted that Mongolia is suffering from a systematic crisis that is the reason and root of all present problems and that the political and governance system, formed in 1992, has fundamentally lost its ability to resolve and regulate the social challenges that Mongolia is currently facing.

He stressed, “The problem lies within the system itself, rather than due to a single individual or political party. Regardless of how good the person or the political party is, they become victims of the irresponsible, poorly coordinated, and unaccountable system, and an adverse condition is set where problems keep piling up and stress levels in the society keep rising. I have decided to share with you, the Members of the Parliament, constituents, and the people of Mongolia, proposal and solutions to overcome this systemic crisis, which are the result of my careful consideration and talks with various politicians and political science researchers after being elected as the President.”

He stated, “Unless the system is changed, nothing will change. To use an analogy, when the foundation and pillars of the house that we built together have developed faults and face a risk of collapsing, we have been making superficial changes instead of tearing it down and constructing new foundations and firm pillars. But the crisis has come to a point where it cannot be dodged and evaded. The house is already on the verge of collapsing. …The key is to build a stable system that can organize, arrange, and facilitate a government that is capable of resolving the problems that have been accumulated and fulfills its duty to lead and manage the society well so that the people would be employed, healthy, educated, satisfied with their lives, and happy.”

“The Government of Mongolia is facing a full-front accountability crisis. It has been defined that “accountability is the ability of decision-makers to respond and to solve issues.” Responsibility is the ability of the government to respond and find solutions when the people point at the “things that are not working.” But it is ever clearer that the institutions that must be accountable and look after the social system, including the Parliament and the Cabinet, are in an accountability crisis themselves. The poor state of the economy and widespread poverty and income inequality are indelible signs of bad governance. All social classes, political groups, and researchers have reached a common understanding that the governance system has to undergo a drastic change that is suited for the developmental needs and social requirements of Mongolia. This can be accomplished only through the Constitution.”

“The democratic new constitution served as an important mechanism in facilitating the transition from one social system to another. But now, we need to amend the Constitution in accordance with the developmental needs and social requirements. Now is the time to thank the current Constitution and those who drafted it and move on to the discussion of the next version of the Constitution.”

For the interest of the country’s future and building a prosperous and power Mongolia, the President urged the parliament members to make a systematic reform through collective judgment and rational discussion with the political parties, academics and researchers and their constituents.

“First of all, with active discussion and involvement of all people, let us adopt a new Constitution, which reflects our present and future goals and needs of society. This is the most important issue that we have to resolve,” the President appealed and said, “Our new Constitution shall:

-Dissolve monopoly power of a few group of people that are controlling politics, economy, and wealth distribution of Mongolia, and reform into a fair system of optimal allocation of power of governance that is democratic, transparent, balanced, mutually accountable, and meets the demands and expectations of the public.

-Establish a system where the exploitation and distribution of natural and social resources are transparent and fair, overseen by the public, and tied with accountability.

-Prioritize the national interest of Mongolia above all, completely cease entering international treaties and agreements that contradict our national interest, and include provisions for accountability.

-Reform judicial and law enforcement organizations which should serve the citizens and not those in power, comply with the law, have a clear responsibility, and enjoy proper judicial power.

-Revise the Law on Political Parties, define the boundaries between the involvement of the government and political parties in economic and social life, and separate political parties’ policies and politicization from government

-Include an accountability mechanism that specifies the means to truly implement and not just declare the government’s duty to ensure the conditions for the Mongolian people to be the true rulers of the society, to live in healthy and safe environment, to acquire education, and to be employed.

A reform will be more vibrant and practical if it is based on mutual understanding and support of the government and people."

The President also called upon the politicians and the people to join all together in this act, a responsible and inevitable act to build a rational, well-arranged, transparent, and beneficial to the people political system. “The winners of the reform will be the people, and the losers will be the oligarchs who enriched themselves with public funds.”

Putting an end to the power-seeking and pedestrian arguments, and instantly starting the bold systemic reform shall fully comply with the core interest of Mongolia and the people of Mongolia. As the official responsible for ensuring the national unity under the Constitution, I, as the President, express my commitment to providing full support to the political reform to establish a fair government. The reason is, in the long-run, unity of the people of Mongolia will be ensured by fair government, fully-enforced law, and the prosperous life of our people. Mongolians can make a difference together. We only need to unite and cooperate.”

Concluding his speech, the President said, “Dear Members, prepare for the drastic reform, amend the Constitution in line with the interests of people, and let them discuss and support you. Failure to do it will be considered as evasion from a historic responsibility. If the narrow interests of political parties and groups interfere with the systemic reform, it will be a sin, a crime equivalent to betrayal of the national interest. The time is forcing a drastic reform on us. Recognize this as a historic responsibility in front of our people.”

source: president.mn