Ministry of Mining and Heavy Industry of Mongolia and the Korea Petroleum Quality and Distribution Authority (K-Petro) signed a Memorandum of Understanding on technical cooperation on August 8.

State secretary of the Ministry G.Nandinjargal exchanged views with the Chairman of K-Petro’s Board of Directors on the possibilities of further cooperation in the field of oil quality, standards and control system.

Within the framework of the MoU, the parties will cooperate in improving oil quality, standards and control systems, exchanging experiences, creating database as well as conducting a joint research. The two organizations will also jointly organize training and seminars and exchange information on techniques and technologies related to oil refining and petrochemical production in South Korea.

We, the defacto team, reach all of our readers with a fresh interview with Junichi Hattori, a member of the founding family of Seiko Holding, and the largest shareholder of Khan bank, the largest commercial bank of Mongolia. In this interview, he talked about his businesses in Mongolia and acquisition process of Khan bank.

Jargalsaikhan Dambadarjaa: Please tell us about you and your connection to Mongolia?

Junichi Hattori: I came here 4 years ago for the first time. My friend Reiko Okano san and I came as tourists. Before that, I studied geopolitics for a few years and read a lot of material and became interested in it. I have found that Japan is unique, and it is not getting along with all the surrounding countries very well. Relation with China is delicate, South Korea – is delicate, North Korea – is hostile, now Russia – is hostile. Somehow, we survived for the last 60-70 years because of a Military Treaty with the United States. I think, that is the only way we could survive safely in this environment. But now it is time to think about what to do by ourselves as a country. In that concept, Mongolia is very attractive for Japan.

J: For us, Japan is attractive too.

H: Because it is on the north side of China and in front of Russia. We have a long history of a good relationship between Mongolia and Japan.

J: It has been already 50 years since Mongolia and Japan have established a diplomatic relationship.

H: Mongolia also has a very good relationship with both countries, Russia and China.

J: You graduated from Stanford University, California. I was there last year for an international conference. Also 20 years ago, I went there to listen to Dalai Lama’s speech. Now, I do interviews with many guests and meet interesting people, like you. Please tell us about your connection with Seiko. Who founded the company? And who is running it?

H: My great great grandfather founded the Seiko watch shop in Ginza in 1881. I’m the fourth generation.

J: Did he open it as a shop for watches, was it only for the Seiko watch?

H: At that time, it was a small shop, selling imported watches and clocks because there was no manufacturing of watches in Japan at that time. They imported watches and clocks from Switzerland. After some years, they started manufacturing it by themselves.

J: But now you have the best watches. Probably, Number 1 or Number 2 in the world.

H: It is now Number 1 in the world as a matter of production of quality watches because there are many manufacturing companies based in Hong Kong, selling very cheap electronics, for $10 a piece. We have a lot of products priced above $100-300.

J: What is the secret for keeping that name for many years in such a competitive market?

H: We started with manufacturing clocks. Then we started producing watches just after WW2, I think. The difference between a Swiss and a Japanese watch at that time was that we have an integrated manufacturing system unlike a Swiss company, which consists of many suppliers of parts, such as base plate, gears, spring and assembling services and cases from all different companies. But our system is all integrated.

J: You mean, you do everything by yourself.

H: Yes, as far as the mechanical movement is concerned. This helps us to improve the quality. We do quality control (QC) and manage to mass produce high-quality watches. We were the first to introduce practical quartz watches on a mass production basis. The reason we could do this is the integrated system. We manufacture all the parts and run the entire manufacturing system by ourselves. In watch industry, for many parts manufacturers, it is not easy to introduce an electronic system because it is risky and may cost jobs. We have highly skilled professionals in the chain and we could convert some process into electronics work.

J: Who is now running the company?

H: My family, my younger brother.

J: How do you become an investor? You shifted yourself into finance. Please, tell us about it.

H: I have originally been working as the group company chair, not only for the watch company but also for the electronic parts. We are selling all parts to mobile phone manufactures. We produce semi-conductors, LCD panels, batteries, and all parts. We also manufacture watches, which makes up less than 20 percent of the business. I do not like to talk about the details, but there were problems in the family. Some family members were not interested in electronics and wanted to focus only on watches. So, I decided to leave the company.

My investment in Mongolia was a coincidence because of my studies in geopolitics. I was interested in Mongolia as a country, and I came here. Many people approached me presenting investment opportunities for many businesses. Among those businesses, I am somehow interested in acid spar-fluorspar because this is the material, an essential part of a semi-conductor. Because of my experience in parts and semi-conductors, I became interested in these materials.

J: By fluorspar reserves in the world, China is number one, Mexico – number two and Mongolia is number three. I am also familiar with fluorspar deposits, reserves in Mongolia, and have visited plants that are producing concentrates, including the one in Mexico. The process is the same across the countries. They float the particles, then wipe away the cream on top.

When will you produce fluorspar in Berkh mine, Mongolia, that you are investing in now?

H: Some Mongolian people approached me that they have and will develop mines. They took me to Delgerkhaan site, and I found that the site was excavated for many years by Russians and then they just left after the USSR fell apart.

J: How deep are those mines?

H: I never went down there.

J: Is it an open pit?

H: No. There were some holes and tunnels. Probably, not very deep, maybe, less than 10 meters. I am not quite sure, though.

J: Then, there must have been artisanal miners, they dig holes by themselves by hand. The main deposits were developed by Russians. That Berkh mine might be owned by some Mongolian family. You now bought a part of it?

H: Yes, because there is the evidence of excavation. I’m not quite sure that we could still develop this fluorspar. But it is a lemon of the mining business, I think, there is a sign of higher probability of mining. So, I have decided to invest in it.

J: Now about your other business in Mongolia. You have bought share of the largest bank in Mongolia, the Khan Bank. What percentage of shares do you own?

H: It was around 60 percent. Now, 55.3 percent because we sold some shares to the Khan Bank employees.

J: It belonged to Sawada san.

H: Sawada san invested in it a long time ago. Sawada san is an entrepreneur. He started and invested in many businesses. But his main business is H.I.S., a travel company. He is trying to retire and is thinking of giving this business to his son. But then, he came to the idea of selling those other businesses and concentrating on H.I.S. And he was trying to sell the shares of Sawada Holdings. At that time, there were many other buyers. All of a sudden, he was in a very difficult position due to the corona virus pandemic. His travel business is in a very difficult environment now. He has to concentrate on H.I.S. now. So, he sold the other businesses.

J: You changed the name Sawada Holdings to S.H. What percentage of Sawada Holdings did you buy?

H: Almost 43 percent as per yesterday (22.08.04) at Tokyo stock exchange and together with other friendly groups, we control the majority.

J: You have spent 22 billion yen from your family investment to buy them?

H: I am not directly buying H.S. Holdings; I buy through a limited partnership managed by Meta Capital. Meta Capital is investing and buying those shares.

J: Meta Capital initiated a tender offer for Sawada Holdings. There is a name of Upsilon Investment Limited Partnership. Where did this name come from?

H: I am not quite sure. Upsilon is a company that manages the partnerships of Meta Capital.

J: Are you a board of member of H.S.? Are you a managing director?

H: Yes, the managing director, but not the CEO.

J: There is a scandal here in Mongolia, concerning the transfer of the shares of Khan Bank. According to our law, one should disclose how the shares are sold and who is involved. There was a conflict: the Ex-Finance Minister was saying one thing and the President of Mongol Bank was saying something different. Do you know about that?

H: Yes, we have a lot of talks and exchange of documents between the Central Bank of Mongolia. Because the Central Bank has consented that this acquisition is legitimate according to the laws. Since Sawada san has not really agreed to sell until the Central Bank admits those transactions as legal. And so that TOB has not been successful because it has been more than one year, and it has never been accepted by the Central Bank. At that time, I gave up. After some months, the Central Bank approved everything, those transactions. And Sawada san agreed to sell the shares.

J: I understood that the Central Bank of Mongolia agreed to the transaction to Upsilon. The legal owner of Khan bank is now Upsilon, right?

H: Yes, 55 percent. We got an approval last July, 2021 and then an official letter came from the Central Bank, this May, 2022, saying that we are the legitimate owner.

J: Can I have a copy of the letter?

H: I’m not quite sure. I did not see it. Meta Capital managed everything. I can ask them.

J: Here, it is still causing some issues. It is required by our law, that banks have to issue IPO’s this year. I do not know what percent, but they have to issue IPO’s this year. Next year, it is required by law that banks should have at least five owners, which means that you have to sell some shares, too. How would you do that? Would that happen here or in Japan?

H: We have not decided yet. But we are talking to the Central Bank here and we are already approved to go public. There are some processes on variations of all the owners of the company. The variations are inside (among) the Khan Bank first before we officially go public.

J: Have you got Khan Bank’s value (estimation) already?

H: We are now starting that process.

J: Do you make it by yourself or are you asking someone to do that?

H: We are asking PwC to conduct an Asset Quality Review.

J: Do you make it in cooperation with your Mongolian partners or are you doing it separately?

H: I think that it is separate. I am not quite sure. But we got an approval from the Central Bank to start it.

J: You, 55 percent of Upsilon, got approved by the Central Bank to do an independent an AQR?

H: Yes, to prepare to go public.

J: Have you met your Mongolian shareholders, the 40 percent owners of the bank?

H: No, never. I understand that there are some litigations from the other owners against the Central Bank.

J: That is the reason why you have not met your Mongolian owners (partners-shareholders). Once the litigations are resolved, would you meet the Mongolian partners?

H: We may do. If the Central Bank agrees, we could get together.

J: Delicate situation. According to the law, you must sell some shares this year. How would you do this? Will you sell some of your shares? 40 percent or so should be sold. What is your position on that?

H: Well, we are preparing to go public. The Central Bank requires that each owner should have less than 20 percent of the bank before the end of 2023.

J: IPO will start this year and you will sell more than half of your shares. What is your understanding? Will you sell it in the Mongolian market or in the Japanese one?

H: We have not decided yet. Because in my thinking, it is natural and the right thing that eventually major bank shareholders are Mongolian people, but not under special forces. Many diversified shareholders are essential for the stable management of banking. Banking is the center of the monetary policy of the country. This is important to the Government policy.

J: The operation of the banks should be transparent. That is the assurance of the banking quality and assurance towards their clients.

H: My concern is that if we go public at this point, anybody can buy it on the market. It is easy to buy all the shares. Some special groups can buy the majority after going public. This regulation said that one owner’s holdings should be less than 20 percent. But it is not really safe because multiple related companies or persons can buy it.

J: Our law specifically says that the final owners cannot be connected (related persons) and the government will make sure that it is not the case. That is why they will ask to see your transactions, to check whether they are connected or not.

H: But it is not easy to find out.

J: Of course.

H: It is very difficult. It is the same thing in Japan. There are a lot of regulations to eliminate shadow owners.

J: In the process of buying shares from Sawada san, have you met any other Mongolian investors who are interested in working with you?

H: Not yet. Nobody has approached me.

J: You do not know any Mongolians through Upsilon?

H: No because all management of shares is controlled by the general partner, not by me.

J: Who is the general partner?

H: Upsilon because I invested in buying the shares through Meta Capital, which is managed by Upsilon. That is why I am not a Board Member of Khan Bank.

J: That is the reason you have not met the Mongolian owner because they have a litigation at the Central Bank. What is that litigation about?

H: I am not quite sure. There is some news that the litigation against the Central Bank is about the process of some approval. Under the Mongolian law, they say any contact should go through the commercial bank itself, however, since we were approved directly by the Central Bank, other shareholders are complaining. I know about it only news, though, and I am not sure.

J: The key here is that Mongolian people should understand clearly. It is very important. One thing, is it legal or not? The other thing is that the Mongolian public wants to know about the Japanese buyer and the largest share owner of our largest bank. That is why it is a key for us to receive that permission from the Central Bank. It should be public information. You can ask Upsilon and other people for a copy of the letter. If you could send me a copy of the letter that would settle many doubts in Mongolia. If that letter remains as undisclosed to the public, then there will be many doubts.

H: I will ask them. They might need an approval from the Central Bank to release that information publicly.

J: If the Central Bank refuses to disclose that approval letter, I will ask them directly why they are not disclosing that information to the public. This is one reason for all these doubts because it is the largest bank of the country, where 2.2 million people out of the 3.4 million population bank with. These people really want to make sure that their money is safe. Instead of Sawada san, we now see you as the largest owner of our largest bank.

That is the reason that we are interviewing you to introduce you. You are a wealthy man, with a long history in business. In that sense, we talked about your Seiko history. In the same way, we also want you to ask a copy of that letter.

H: I am really contributing to the Mongolian economy through my investment. My major business is fluorspar, not banking.

J: Still, you are the largest share owner of the largest bank and our people are very serious to get to know you, your intentions with the bank.

H: That is why I am very positive to go public to sell the shares to Mongolian people and diversify the owners.

J: Sounds well. We want to see your fluorspar business moving. You will export fluoride acid and will compete with China. It will make life easier for many businesses in Taiwan, Japan and Korea, as it is used for some parts of electric vehicles.

H: Because, we have almost no mineral resources in Japan. There is no domestic mining industry in Japan. So, we rely on imports. Mongolia has a lot of underground assets. Thus, it is a very good partnership.

J: I think, when you start to produce fluorspar in Mongolia, you will use the best technology and train people. There are many other deposits in Mongolia.

H: We would like to invite many investors from Japan.

J: That is also what we want to see. At the beginning of our interview, you said that Japan has a problematic relationship with its surrounding countries.

H: Yes, it is risky.

J: Mongolia and Japan have a good relationship and that relationship should be growing and bringing more investment and more business.

H: I hope that we develop our relationship for a long time.

J: Are there any other things that you would like to tell Mongolians?

H: There will be some TV program shootings in here. It is a very popular program in Japan. The previous series of the program will be on TV in Mongolia this year.

J: What is the name of the program?

H: Hanzawa Naoki. Probably, this year, the program would be released with Mongolian translations. Subtitle is now being produced here.

J: What does the name mean?

H: It is the name of the person in the banking business. It is a very banking scandal and is a funny and interesting story. The new series of drama will be produced in Mongolia.

J: Is it happening between Mongolians and Japanese?

H: Yes. If broadcasted in Japan, then many people would come to Mongolia.

J: How long will you stay in Mongolia?

H: Leaving on the 5th and coming back in October. I come here 4-5 times a year.

J: Our interview will be published in English, Mongolian, Russian, and Japanese in our Defacto Gazette soon. Thank you very much Hattori San.

The 25th Annual Meeting of the Asia-Pacific Anti-Money Laundering Group - organized by the Asia-Pacific Anti-Money Laundering Group (APG) – took place in Kuala Lumpur, Malaysia, during 24 to 28 July, 2022. D. Bayarsaikhan (Chairman, FRC) represented Mongolia, along with participants from related organizations.

The Financial Action Task Force (FATF) had previously presented recommendations regarding the identification of virtual asset service providers, implementation of requirements on anti-money laundering and combatting the financing of terrorism (AML/CFT), and implementation of a risk-based methodology.

Member countries had also been notified by FATF to implement the recommendations.

To create an appropriate legal environment for virtual asset service providers (and a system that supports innovation and reduces risk) the FRC had assessed the risks related to AML/CFT at the national level. The Commission had also developed and approved regulations, expanded cooperation, and warned the public.

To improve the evaluation of FATF Recommendation 15 (New technologies) within Mongolia, the FRC submitted reports and clarifications to the APG for re-evaluation, and worked to ensure the implementation of technical recommendations. On 27 July, 2022, the Revaluation Report of Mongolia was discussed and approved by Member States. At the meeting, the re-evaluation was presented - within the framework of Recommendation 15 - and with respect to Mongolia Recommendation 15 was assessed to be ‘mostly implemented’; in contrast to ‘half implemented’ in 2021.

The FRC participated in a presentation, sharing with member states of the APG its experiences on adoption of FATF requirements and international standards in the field of proper regulation of virtual asset service providers, AML/CFT, and prevention of financial crimes.

The Chairman, and representatives of the National Security Agency, congratulated and praised Mongolia for its improvements, and its creation of an AML/CFT system.

In addition, Ian McCartney (Chairman, APG) received Mr Bayarsaikhan (and representatives of related organizations) in a meeting, where they exchanged views on expanding cooperation AML/CFT. Mr Bayarsaikhan also participated in a meeting - Participation of Women in AML/CFT - with Raja Kumar (the newly appointed President of FATF) and representatives of member states.

Source: Financial Regulatory Committee of Mongolia

On August 9, Prime Minister L. Oyun-Erdene received UN Secretary-General António Guterres, who is on an official visiting to Mongolia.

At the outset of the meeting, the PM said he is glad to meet him again in Mongolia after the 2022 Winter Olympics in Beijing.

PM said, “During the Olympic Games in Beijing, we discussed with you about hydropower plant to be built on the Eg River, which is the first important hydropower plant project of our country. Construction work for this project began in 2016 with a USD1 billion soft loan from China, but the work was put on hold due to Russia’s complaint filed with the UNESCO World Heritage Committee. However, studies conducted in the past have shown that this project will not have a negative impact on the water regime and resources of the Selenge River and Lake Baikal in Russia. In addition, our country announced an international tender. A French company is conducting a biological impact assessment. The results of the assessments and studies will be presented at the meeting of the UNESCO World Heritage Committee next year. If the Committee issues a decision, it will become possible to continue the project”.

He asked Mr. Guterres for active support in resolving the problem of this project, which will play a crucial role in ensuring Mongolia's energy security.

In turn, UN Secretary-General António Guterres stressed that developing countries should not be in energy dependency. Therefore, in this regard, the UN is ready to provide policy support by familiarizing with the results of the studies at the 46th session of the UNESCO World Heritage Committee. He also commended the Mongolian government for digitalizing its public services and making progress on e-governance to reduce the corruption index.

The Mongolian government aims to become a ‘digital nation’. In this context, the government intends to involve at least 90 percent of public services in a unified platform ‘E-Mongolia’ by 2024. The ‘New Revival Policy’ proposed by the government aims to decentralize the urban population, develop rural areas, and create new jobs.

At the end of the meeting, the parties agreed that the UN will conduct an assessment on urban and rural areas’ concentration.

Greens Party leader Adam Bandt has warned the Australian government needs to start moving away from coal exports to prop up its bottom line, saying net zero goals in major trade partners will cut into fossil fuel earnings.

Bandt said three of Australia’s biggest export markets for thermal coal — Japan, South Korea and Taiwan — had all pledged to reach net zero carbon emissions by 2050 or 2060. The process to decarbonize their economies to meet those targets would act as a “deadline” for Australian coal exports, he added.

“It’s going to be increasingly untenable for the government to maintain its desire to keep opening new coal and gas projects,” Bandt said in an interview with Bloomberg Television.

The Greens Party has a significant number of senators in Australia’s upper house, making Bandt’s support vital to passing Prime Minister Anthony Albanese’s policy agenda. Since he was elected in May, Albanese has attempted to push greater climate action in Australia, including increasing emission cuts targets to 43% by 2030 and rolling out a strategy for greater use of electric vehicles.

However, Australia’s economy is heavily reliant on its mining and minerals exports, with the trade surplus hitting a record high in August off the back of strong growth in the resource sector. Coal is forecast to generate about A$104 billion ($73 billion) of export earnings in the year through June 30.

Australia is the world’s largest exporter of metallurgical coal and the second largest exporter of thermal coal.

Bandt has called on Albanese to go further in his action on climate change, including committing to end all new coal and gas mines in Australia. Albanese’s rejection of a moratorium on new fossil fuel projects is undermining his government’s promise of bolder decarbonization policies, according to campaigners.

“These weak targets could be blown out of the water in the next 12 months or so as the government approves some very big coal and gas projects that are on the books in Australia at the moment,” Bandt said.

(By Ben Westcott)

The 44th World Chess Olympiad was held in Chennai, India from July 28 to August 9, in which Mongolian chess players showed outstanding results.

In specific, a 17-year-old B. Mungunzul, chess player of the Khangarid sports club of Orkhon aimag, achieved a record in the chess sports history of Mongolia by winning a gold medal at the World Chess Olympiad.

Also, international master T. Munkhzul was awarded the prestigious title of international grandmaster among women while B.Nyamdavaa was granted a title of international judge.

In the 44th World Chess Olympiad, men’s team of Mongolia took 35th place out of 188 countries, with 6 wins, 2 draws, and 3 losses. In women’s category, national women’s team won 15th out of 162 countries, with 7 wins, 2 draws, and 2 losses.

N. Gaprindashvili Trophy, created by FIDE in 1997, is given to the teams with the best combined performance in the Open and Women’s tournaments according to the sum of their positions in both results tables. According to the sum of men’s and women’s team results, the Mongolian Chess Federation ranked 24th in the world.

In a wood-paneled office Mongolia’s prime minister, Luvsannamsrain Oyun-Erdene, sits in front of a gilt framed painting that depicts a warrior and fawn. “It’s called Hero 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 heroics of any kind.

Oyun-Erdene is acutely aware of this as he settles in a leather armchair 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—while twice the size of Turkey—is home to just 3.3 million people. “We are very sensitive to global economic fluctuations,” he says, “which is a blessing and a curse at the same time.”

The blessings are straightforward: Mongolia has the world’s biggest known coal reserves, second largest reserves of uranium, and one of the largest of silver. Throw in significant deposits of gold, copper, iron ore, phosphorus and zinc, and it’s clear why spiking commodity prices are a boon for its coffers.

The immediate curse, however, is inflation. The price of fuel—especially the diesel vital to nomadic communities scattered across the steppes—is soaring. Russian President Vladimir Putin’s Feb. 24 invasion of Ukraine, and ensuing Western sanctions, have also led to spikes in the cost of Russian chemicals (used for mining explosives, fertilizer, and agricultural feed) and food, of which the Russian Federation is one of Mongolia’s biggest suppliers.

Tourism, which made up 7.2% of GDP and accounted for 7.6% of employment in 2019 has now collapsed—costing the national economy some $470 million from the start of the pandemic until March, according to government figures—and not just because of COVID-19. The European embargo of Russian air space, as a result of the war in Ukraine, has led to a slashing of flights to Mongolia’s capital Ulaanbaatar. Oyun-Erdene laments the “instability of the international community” and its effects on his country.

The situation threatens his bid to transform Mongolia from an impoverished agricultural economy—about a third of the population lives in some form of poverty—into a modern minerals exporter with a startup-friendly environment, plenty of international investment, and a thriving financial services sector. Upon taking office last year, he implemented an ambitious plan, Vision 2050, to increase GDP per capita almost tenfold, from $4,009 to $38,359 by the middle of the century. “We have done our homework and now we have to put these developments into real life,” Oyun-Erdene says.

Oyun-Erdene was born in Ulaanbaatar in 1980 but grew up in Berkh on the Eastern Mongolian Steppes. The village is known for its fluorspar mine—a mineral ore mix of calcium and fluorine—and has 10 times as many heads of livestock as people. He had a severe speech impediment until he was 5 years old, but overcame it with the patient coaxing of his grandfather—a renowned Buddhist abbot, chess master and instructor of mathematics and Mongolian language—from whom he adopted the patronymic Luvsannamsrai.

Oyun-Erdene did well academically, earning degrees in journalism and law, and then public policy at Harvard. (His Ivy League schooling marks him out from a previous generation of leaders mostly educated in the former Soviet bloc.) At the age of 21, Oyun-Erdene ran the governor’s office in Berkh. Later, he worked overseas for the NGO World Vision. The foray into international development left him mindful of the problems his own country faced. He later wrote of being “saddened to see how bureaucratic, corrupt, and politically divided” Mongolia had become by comparison with much of the world.

The country’s reliance on commodities was also problematic. As prices soared in the early 2000s, Mongolia briefly became the world’s fastest-growing economy, earning the nickname “Minegolia.” Prospectors from North America and Europe quaffed expensive Scotch in Ulaanbaatar nightclubs. But the mineral boom was short-lived, and by 2017 Mongolia went cap in hand to the International Monetary Fund for a $5.5 billion bailout.

Oyun-Erdene had been elected as an MP the previous year and grew in prominence by helping to organize mass protests against corruption. Today, commodity prices are high again and Oyun-Erdene hopes to avoid another cycle of boom and bust by modernizing Mongolia’s economy through infrastructural developments—there are dozens of projects underway, from hydroelectric dams to railways and power plants.

He has also earned himself tremendous 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 firm agreed to write off more than $2 billion in loans that Mongolia’s government was using to fund its share of the development. The renegotiation included guarantees to safeguard scarce water resources vital to nearby herder communities and to ensure that proper social infrastructure was provided for workers attached to the mine. Rio Tinto hopes that the move will “deliver greater economic value to Mongolia.” Oyun-Erdene says he wants such cooperation to be applied to “other mining locations.”

Modernization is badly needed. China accounts for over 90% of Mongolia’s exports—and they mostly travel by road. Thousands of rumbling, sooty trucks—loaded with minerals, coal or ore—make their way to the Chinese frontier, where tailbacks regularly span 15 miles. Drivers can wait for up to a week to cross. Mongolia is nowhere near its export capacity due to such basic infrastructure constraints.

Complicating the issue, Beijing’s draconian zero-COVID policy means that it sporadically seals the border, blocking trade. In June, a Chinese official suggested that its pandemic control measures may last for five years. Oyun-Erdene expresses concern for the “negative consequences” this has for his country, adding that “the zero-COVID policy of China is, of course, not only Mongolia’s issue, but a global economic issue.”

Landlocked Mongolia’s exports to other nations must also use Chinese ports. In a bid to ensure that “railway exportation will not depend on the COVID-19 situation,” Oyun-Erdene hopes to open five new rail crossings with China by the end of 2022.

Mongolia’s foreign policy requires similar agility. “If Mongolia is not engaged, then we are truly landlocked and geopolitically really challenged,” says Bolor Lkhaajav, an analyst on Mongolian foreign relations.

The country’s “third neighbor policy”—a long-running strategy of cultivating relationships beyond China and Russia—was born out of such concern. Western nations have been responsive in recent months, sensing kinship with a democratic country in an adversarial region. In late June, Germany announced that it was restarting bilateral aid with Mongolia after a two-year break. From July 1, Mongolians became eligible for Australia’s coveted holiday visa program.

“Broadly speaking, the West is reawakening to values diplomacy, energizing democracy promotion,” says Prof. Julian Dierkes, a Mongolia expert at the University of British Columbia. “This is, of course, where Mongolia triumphs.”

Oyun-Erdene is keen to emphasize his country’s openness to the world. He’s just returned from Singapore, where he discussed listing Mongolian mining firms on its bourse. Before that, he was talking about digital transformation in Estonia and human resources in South Korea. U.N. Secretary-General Antonio Guterres visited Mongolia on Aug. 8. “We have full confidence in our cooperation with our third neighbors,” the prime minister says.

Yet, in the current geopolitical climate, the approach is becoming tricky. Mongolia abstained from the U.N. General Assembly motion to condemn Russia’s invasion of Ukraine and voted against expelling Moscow from the U.N. Human Rights Council.

With regard to “the Ukraine and Russia war, we are truly regretful, and we have sent humanitarian assistance to Ukraine” Oyun-Erdene says. “But the foreign policy of Mongolia must remain independent. We believe that countries on the U.N. Security Council—major, big economic powerhouses—must come to decisions free from emotional distractions and be pragmatic, because every decision hugely affects the global economy and lives of millions.”

The bottom line? “Relations with our two neighbors is the priority.” The painted warrior on his office wall may be going to battle, but Oyun-Erdene’s fight will be to stay nonaligned.

In a visit to Mongolia on Tuesday, Secretary-General António Guterres underscored the UN’s full solidarity for the country, which he described as “a symbol of peace in a troubled world”.

Mr. Guterres was speaking to journalists at a press conference in the capital, Ulaanbaatar, following a meeting with the Foreign Minister, Battsetseg Batmunkh.

He stated that in a world with dramatic geopolitical divides, and where conflicts proliferate everywhere, Mongolia - as an area free of nuclear weapons - is an example for other countries to follow.

No more nuclear weapons

“We live in a world where for the first time in decades people are thinking that a nuclear war might be possible again,” said Mr. Guterres.

“There is only one way to be absolutely sure that a nuclear war is impossible, and that way is if there are no nuclear weapons.”

Mongolia is the latest stop on the Secretary-General’s visit to Asia, which began in Japan on Friday.

Tribute to peacekeepers

Over the past six decades, the country has become an increasingly important contributor to the UN’s work, he said.

Mr. Guterres expressed gratitude to Mongolian peacekeepers serving at UN peace operations, “often in the most challenging settings and with courage in the way they protect civilians where unfortunately, there’s sometimes no peace to keep”.

The Secretary-General had met with Mongolia’s President, Khurelsukh Ukhnaa, and other senior officials, earlier on Tuesday.

They discussed the geopolitical situation in the region, the challenges Mongolia faces as a landlocked country, and national efforts to tackle climate change.

Relatedly, Mr. Guterres also joined young people and peacekeepers at a tree-planting ceremony, part of Mongolia’s One Billion Trees campaign to address climate change and desertification.

“My generation was very stupid. My generation declared war on nature – with climate change with the loss of biodiversity, with pollution,” he said.

Mr. Guterres stressed how “nature is striking back” with storms, desertification, floods and disasters, which are making life very difficult for many people around the world and causing many victims.

“Your generation has an important task to make peace with nature,” he said. “And what we are going to do today, must be a gesture of that new attitude to make peace with nature.”

The Secretary-General also visited a nomadic family in Mongolia and learned about their way of life.

He also met a group of beneficiaries from UN projects, including women entrepreneurs and youth activists.

Mongolia exported 11.1 million tons of coal in the first seven months of this year, data from the Mongolian Customs General Administration showed Tuesday.

The figure marks a year-on-year increase of 11.2 percent, the data showed.

Coal is the main export commodity of Mongolia, which is rich in natural resources.

The landlocked Asian country has planned to export at least 36 million tons of coal in 2022, according to the Mongolian Ministry of Mining and Heavy Industry.

The country exported 15.9 million tons of coal in 2021, down 44.3 percent year on year.

Two Territory riders have travelled halfway around the world to compete in the world's longest and toughest horse race.

Set to cross the start line on Wednesday, Katherine's Jess Di Pasquale and Darwin-based Natalie Bell, will be competing in the Mongol Derby, a gruelling ten-day horse race across 1000km of Mongolian wilderness.

The race aims to recreate a legendary part of Mongolian history: In 1224, Genghis Khan established the world's first long-distance postal transmission system, using a large network of horse stations spaced from Kharkhorin to the Caspian Sea.

Changing their horses every 40km, riders - who travel from all over the world to take part in the race - will be living with herders or camping under the stars along the way.

They are allowed to carry only a 5kg of essential survival kit and the navigation between the 25 horse stations will be up to the riders alone as there is no marked course.

Combining survival skills and horsemanship, competitors will need an extra level of determination and sometimes sheer luck to make it to the finish line or even take out the win.

"We trained as much as we could," Mrs Di Pasquale said.

"It was hard fitting it in around life, work and family, but we rode every chance we had, got several long distance endurance rides in and tested and trialled our gear within an inch of its life."

But the experienced rider, who has followed the race for a long time, said it wasn't lack of preparedness she was worried about, but her navigation skills.

"We are both sh***ing ourselves to be brutally honest," she said.

"I think the navigation will be the hardest part.

"Hopefully we don't end up in Russia or China."

Using the race as a challenge after having two children, Kace (5) and Primrose (2), Mrs Di Pasquale said together with her friend - and former Pony Club rival - Natalie Bell, she also wanted to raise money for two good causes: Steppe and Hoof, an organisation that supports Mongolian herders, and cancer charity Sock it to Sarcoma.

"One of our friends who used to ride with us at pony club died from one of the rarest forms of sarcoma in 2017," she said.

"If she was still here (the Mongol Derby is) definitely something she would be keen on doing as well."

Ms Bell added while she joined the challenge to test and push herself to see how 'tough and resilient can I be when I really needed to dig deep', it was the memory of her late friend that encouraged her to enter the race.

"It is a chance for me and Jess to keep Stevie's memory alive, to pay tribute to her fight and how brave she was though her fight, and her zest and passion for life to be everything you make it," she said.

"We will be riding in recognition of our Stevie girl, who fought a battle tougher than any steppe, and who would've been our third musketeer on this adventure."

The two Territorians started their training days in the Mongolian Steppe yesterday, with the actual race starting on Wednesday. Those interested can follow their adventure here.

In 2017, Katherine's Jodie Ward finished in equal sixth place in the Mongol Derby.

BY: Annie Hesse Northern Territory Correspondent

I am an award-winning media and communications professional with experience across print, digital, social and radio broadcast, as well as photography and videography. I am the NT Correspondent at Australian Community Media and I write for my hometown newspaper, the Katherine Times. I love telling people's stories, and I am passionate about giving those a voice who may otherwise remain unheard. When I am not busy putting pen to paper, I spend time in my garden, go bushwalking or travel across the Northern Territory, Australia or the world. In my spare time I write, illustrate and publish books.