On October 15, the third meeting of the Mongolia-China joint council on mineral resources, energy, and infrastructure cooperation took place virtually.

The meeting was chaired by Minister of Mining and Heavy Industry G.Yondon from the side of Mongolia, and Vice Chairman of the National Development and Reform Commission Ning Jizhe from the side of the People’s Republic of China.

The two sides introduced opportunities for joint projects in the sector of mineral resources, energy, and infrastructure during the meeting. They also discussed accelerating the works to be carried out for some large-scale projects that have been previously discussed. For instance, the Mongolian officials expressed interest in jointly implementing projects on constructing a complex to produce and export renewable energy based on solar and wind in the southern region of Mongolia, constructing a highway and light rail transit route in Ulaanbaatar city, and constructing transmission lines and a substation that are necessary to fully utilize the capacity of the Baganuur Thermal Power Plant.

The Mining Minister also noted how it is possible for Chinese entities to cooperate by participating in bids for tender that are openly announced for projects in the sector.

He then continued to express that the side of Mongolia is ready to provide support in establishing long-term commercial agreements for coal export, and put forth the suggestion to increase the container transportation of coal through the border checkpoints of Gashuunsukhait and Shiveekhuren, and accelerate corresponding works to connect the two countries’ border checkpoints in four routes (through Gashuunsukhait, Bichigt, Khangi, and Shiveekhuren border checkpoints) by railroads.

In turn, the Chinese side expressed that special attention is being paid to increasing coal trade and quickly organizing its transport, and corresponding measures are being taken in the framework of the agreement made between the government heads of the two countries.

As the two countries’ corresponding entities have agreed on the border point for the railroad at Gashuunsukhait-Gantsmod checkpoint, both sides also noted the importance of urgently having the agreement confirmed through the Foreign Ministries, and actively cooperating in the infrastructure construction.

Pledging that the matter regarding the acceleration of infrastructure projects reflected in the Mongolia-Russia-China economic corridor program will be focused, they came to the decision to develop a protocol on the meeting’s results and organize biannual meetings to discuss its implementation.

Mongolia reports 1,131 new cases of COVID-19 for the past 24 hours, the Health Ministry said on Oct 18.

731 cases were confirmed in Ulaanbaatar city, 400 cases in rural regions.

The total number of confirmed COVID-19 cases in Mongolia has reached 339,536.

14 new COVID-19 related deaths have been reported, raising the country’s death toll to 1,483.

18,804 people are receiving hospital treatment for COVID-19 whilst 59,603 people with mild symptoms of COVID-19 are being isolated at home.

6,146 patients have recovered per day.

North China’s Inner Mongolia Autonomous Region on Saturday launched a large-scale photovoltaic power construction project in the Kubuqi desert. It is estimated that it will realize a total installed capacity of approximately 2 GW.

Located in the city of Ordos, the project is expected to cover approximately 6,700 hectares and achieve its full grid-connected power generation capacity before the end of 2023.

With photovoltaic panels, the new base will integrate planting and breeding industries with green power generation, aiming to restore the local ecosystem while promoting rural revitalization.

Nearly 12 billion yuan (about 1.86 billion U.S. dollars) will be pooled for the project in a bid to better utilize and restore the desert, safeguard the ecological security of the Yellow River basin, and help the country achieve its carbon peak and carbon neutrality as promised.

The project will log an annual average of more than 4.1 billion kilowatt-hours (kWh) of on-grid electricity, thus helping save over 1.25 million tonnes of standard coal or slash 3.4 million tonnes of carbon dioxide emissions.

Situated in the Kubuqi desert, China’s seventh-largest desert, the base is of great importance to the region’s green and sustainable development in terms of its ecosystem, economy and society, according to Zhang Bin, deputy director of the region’s energy bureau.

Australia continues to back its coal industry as many Western nations have turned their back on the dirtiest fossil fuel, approving a third coal mine extension in a month and bolstering partnerships for long-term coal exports.

We already know the demand is there, with China requiring increasing coal to bridge its fuel demand gap, but Australia is one of the few remaining nations outside of Asia to continue to back coal as a major energy source.

Earlier this month, Australia approved its third coal mine extension within a month. In September, Environment Minister Sussan Ley approved extensions for the Whitehaven Coal and Wollonggong Coal mines. The latest extension approval was for the Glencore Mangoola thermal coal mine in New South Wales, allowing it to continue production for eight more years, mining approximately 52 million tons of coal.

But it’s not just other countries that are putting pressure on Australia to join them in curbing its coal production. In May, a ruling from Australia’s high court encouraged the country’s environment minister to reconsider coal mine expansions due to the obligation the ministry has to the Australian childrens’ future, as well as the general impact of coal production and use on climate change.

While environmental activists and international energy organizations are less than happy with Australia’s ongoing support for coal, many Australians back the decision to expand mines because of their contribution to the country’s employment. Around 400 workers are currently employed at Glencore, and the expansion will add 100 construction jobs.

Australia is the world’s biggest exporter of coal, with strong links to the Asian market. To date, Australia has made no pledge to reduce carbon emissions to net-zero by 2050, unlike many of its Western counterparts. Many countries across Europe and North America have vowed to rapidly reduce carbon emissions, an aim that is expected to be reinforced in the upcoming COP26 climate summit in Glasgow this month, which Australia’s Prime Minister Scott Morrison will attend.

However, shortly after the announcement of the third expansion project, Australia’s resources minister proposed the establishment of a state-run $180-billion lending option for the coal industry, with the stipulation that borrowers support a net-zero carbon emissions target. This strategy comes as banks and insurers become less willing to lend to the dying coal sector.

Australia’s dependence on coal is not surprising considering its close proximity to the Asian market, where coal demand remains high. Several Asian countries, most notably China and India with their ever-expanding populations, continue to rely on coal, as well as oil and gas, to meet their national energy demand.

“While China unambiguously needs as much coal as it can get its hands on to avert a [fourth-quarter] slowdown due to the tyranny of rolling power shortages, geopolitical tensions with Australia have waylaid the most convenient source of high-calorific coal from Down Under,” Vishnu Varathan, head of economics and strategy for Asia and Oceania treasury department at Mizuho, stated of China’s reliance on coal imports.

However, in late 2020, China ended its coal imports from Australia following difficult trade relations, namely Australia’s support for an international inquiry into China’s management of the Covid-19 pandemic. Coal is Australia’s third-largest export to China, a country that accounts for 32.6% of all Australian exports, with Australia exporting more to China than it imports.

After reportedly telling utilities and steel mills to stop all Australian coal imports, China began to import its coal from regional exporters Indonesia, Mongolia, and Russia. India has apparently been buying discounted coal that was left stranded in Chinese customs following the falling out between China and Australia. In recent months, Indian cement makers and sponge iron plants have sought to boost supplies with this low-cost option.

The Chinese stockpile of Australian coal, and its willingness to sell the supply at a discount, suggests the dedication it had to cutting trade ties with Australia. However, the energy crisis experienced in recent months has finally proved too much for China to continue holding a grudge. Fuel shortages and high energy costs have led the Chinese government to resume Australian coal imports. This month, China released Australian coal from bonded warehouses in addition to receiving 450,000 tons of Australian coal cargoes at the beginning of the month.

During the time that China refused imports, Australia did not just simply wait for China to come running back, rather it fostered its relationship with India. Australia held its first joint working group meeting on coal and mines with India this September to encourage greater participation in Australia’s ongoing coal production. Australia identifies India as a key market for some of its lower-grade coal, with prices significantly undercutting those of the premium coal products imported by China.

With little commitment to net-zero aims, ongoing support for coal plant expansion projects despite a high court interjection, and ongoing trade links with high-demand countries across Asia, it seems unlikely that Australia will curb its coal production or make it more carbon-friendly any time soon, despite international pressure to do so

The Ministry of Health reported today, October 17 that 1,897 new cases of COVID-19 have been reported in the past 24 hours. Specifically, 1,121 cases were confirmed in Ulaanbaatar city, with 776 cases in rural regions.

Today, the total number of confirmed COVID-19 cases in Mongolia has reached 338,405. 5,968 patients have made recoveries in the past 24 hours.

Furthermore, 15 new COVID-19 related deaths have been reported, raising the country’s death toll to 1,469. Currently, 18,833 people are receiving hospital treatment for COVID-19 whilst 55,853 people with mild symptoms of COVID-19 are being isolated at home.

Shares in Canada’s Turquoise Hill Resources (TSX, NYSE: TRQ) cratered on Friday after the company shocked the market late on Thursday by announcing the ongoing expansion of the massive Oyu Tolgoi copper mine in Mongolia required $1.2 billion in additional funding than previously expected.

The Vancouver-based miner, in which Rio Tinto (ASX, LON, NYSE: RIO) has a 50.8% stake, lost almost 22% of its value on Friday in both New York and Toronto, with the stock dropping to $12.09 and C$14.88 respectively in early trading.

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Delays in underground mining as well as some deferred open-pit metal production have caused an increase in estimated incremental funding requirement to $3.6 billion — up from the $2.4 billion expected in July.

Total costs for the move underground is now approaching the approved total budget of $6.75 billion, which already is significantly higher than the original $5.3 billion set in 2016.

Some metal production from open-pit mining is expected to be delayed to beyond 2024, the company said, partly due to under way impacts of on-site covid-19 curbs and geo-technical events that have resulted in delayed waste movement.

BMO analyst Jackie Przybylowski said it was unclear how such a material change to sequencing and cost emerged over the past three months. The project is quickly approaching its authorized spending, she said, and all work could be halted if further investment is not approved by the Oyu Tolgoi board, she wrote.

“In our view, successful execution in terms of timing, budget, and securing the required financing is increasingly risky,” Przybylowski said.

Turquoise Hill noted further delays would increase the incremental funding requirement further yet, and would also likely in turn adversely affect the ability of both the company and Oyu Tolgoi to obtain additional funding, or re-profile existing debt as set out in an agreement with Rio Tinto inked last April.

The miner’s disclosure could stoke tensions with the Mongolian government, which has called for more transparency from Rio Tinto and its development vehicle on the problems at Oyu Tolgoi. It comes as financial regulators in the UK and US examine Rio’s disclosures about issues previously announced.

Rio Tinto last month challenged the findings of an independent review into $1.4 billion in cost overruns and delays at Oyu Tolgoi, saying the project’s troubles were caused by unpredictable geology issues.

The Independent Consulting Group’s (IGG) report concluded last month that poor management was the main reason the mine’s underground expansion has run into problems affecting its cost and timeline.

The company said its copper production rose 16% to 41,935 tonnes in the third quarter from a year ago, while gold output more than tripled to 130,799 ounces.

It also said copper and gold production guidance for 2021 remains within the ranges of 150,000 to 180,000 tonnes and 400,000 to 480,000 ounces respectively.

Once completed, Oyu Tolgoi’s underground section will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.

The mine is the country’s biggest source of foreign direct investment, having created thousands of jobs and generated almost $3bn of taxes and fee revenue over the past decade.

The Mongolian government holds a 34% stake in the Oyu Tolgoi project, with Turquoise Hill holding the remainder.

(With files from Reuters)

Asia is home to diverse and vibrant culinary cultures. Traditional nomadic meals in Mongolia, however, generally require only two basic ingredients: meat and flour. Even now, with all the choice brought by the global market, many Mongolians keep to simple diets of meat and flour for their day-to-day meals, making flour an irreplaceable strategic resource.

In this background, Oeg Flour LLC, a flour producer from rural Mongolia, succeeded in uplifting their business and began exporting internationally with business expertise from the EBRD and the European Union (EU).

Competition in the Mongolian flour market

Oeg Flour LLC began its operation in Darkhan-Uul Province, Mongolia, in 2011 with the aim to supply 100 per cent of rural regional flour demands, then expand to the capital city of Ulaanbaatar. Today, Oeg is a well-established flour brand in Mongolia with a market share of 20 per cent and has positioned itself as a major regional flour distributor.

“Many people only think of Darkhan as the third largest city in Mongolia. While we are distant from the capital, people in rural areas still require new opportunities,” says Ms. Oyunsuvd Enkhbold, General Manager.

However, to truly become a major competitor and take their business to the next level, they lacked a number of essential ingredients in their operations.

With 68 per cent of the country consuming flour-based food and 35-45 per cent cooking with flour daily, the Mongolian flour market provides opportunities for growth and expansion. However, this also means there is fierce competition among Mongolian flour brands.

While Oeg boasted high sales figures, concerns over product quality, malfunctions in production processes, flour wastage and unmonitored inventory meant the company needed to urgently overhaul its business practices.

“Despite our best efforts to set high standards, the fluctuation in product quality has been exceptionally high. We were gaining notoriety for poor quality and losing customers,” she says.

EBRD and EU’s role in Oeg’s revival

In 2019, government agencies from Mongolia and China reached an agreement to allow flour exports to China, creating an exciting new opportunity for Mongolian flour producers. Oeg needed to act quickly to seize this chance or it would fall behind the competition.

The company approached the EBRD’s business advisory service team with their issues in 2019 and Observe Consulting LLC were selected to introduce a Hazard Analysis and Critical Control Point (HACCP) quality management system.

The consultants identified that Oeg had retained the same management structure and style since 1997 and had not evolved to fit the changing market environment of the past decades.

“Had flour not been such an important part of the Mongolian diet, we might have faced business challenges years ago. The popularity of the product had made the management less keen on pursuing innovation and development,” Oyunsuvd reflects.

Throughout the advisory project, the consultants identified several major issues and introduced some notable key solutions. They helped Oeg obtain the quality management standard ISO 9001:2015 and introduced HACCP controls to maintain food safety standards.

With revitalised management, many of Oeg’s troubles, including procurement, quality control, and lack of oversight and bookkeeping, became things of the past. The business was now not only ready to re-establish itself as a stronger competitor in the Mongolian flour market, but poised to enter the lucrative Chinese market.

Firm foundations for regional growth

Since 2019, Oeg has continued to hit new milestones in sales. In Mongolia, Oeg’s management created a plan to establish a reliable supply chain encompassing all activities from wheat planting to delivering flour to consumers. They are now eyeing the patisserie market.

For the international market, the company has submitted a formal application to the Mongolian Ministry of Food, Agriculture and Light Industry and are expecting to be among the pioneering Mongolian flour exporters to China by 2022.

Thanks to joint support from the EBRD and the EU, Oeg Flour is now a well-established business that is making signification contributions towards its community’s sustainable growth. The producer has become a role model for many other businesses – and an inspiration to those studying and developing rural supply chains.

Source: EBRD

In the third quarter of 2021, 5.8 thousand foreign citizens from 74 foreign countries were working in Mongolia with labor contract with the purpose of earning wage and income or voluntarily without purpose of earning wage and income. The number of foreign workers increased by 495 (9.4%) from the previous quarter. In terms of gender of all foreign workers with labor contract in Mongolia, 5.2 thousand (89.4%) were male and 0.6 thousand (10.6%) were female.

In terms of country of all foreign workers in Mongolia, 65.3% is from China, 4.2% is from Vietnam, 3.7% is from Russian Federation, 3.2% is from South Korea, 3.0% is from India, 2.5% is from United States, 2.0% is from Philippines, 1.1% is from Great Britain, 1.1% is from Australia, and remaining 13.9% is from other countries.

By age groups of foreign workers, the highest percentage or 16.7% was persons aged 50-54, 15.9% was persons aged 45-49, 14.3% was persons aged 35-39 and the lowest percentage or 2.5% was persons up to 24 years.

By region, 2.7 thousand foreign workers (47.0%) of total foreign workers were in Ulaanbaatar, 2.1 thousand (35.9%) were in Central region, 0.4 thousand (7.0%) were in Eastern region, 0.3 thousand (5.3%) were in Khangai region and 0.3 thousand (4.8%) were in Western region.

By education attainment of the foreign workers, 2.3 thousand (39.4%) had diploma or bachelor degree, 1.9 thousand (34.3%) had technical and vocational education, 1.1 thousand (18.9%) had upper secondary degree, 0.3 thousand (5.8%) had specialized secondary degree and 0.1 thousand (1.6%) had lower secondary degree.

In terms of the occupation of foreign workers, the highest percentage or 2.7 thousand (47.5%) were professionals and the lowest percentage or 3 persons (0.1%) were skilled agricultural, forestry and fishery worker.

In the third quarter of 2021, 1.7 thousand workers (29.6%) are working in construction sector, 1.6 thousand workers (28.0%) are working in mining and quarrying sector, 597 workers (10.4%) are working in education sector, 526 workers (9.1%) are working in manufacturing sector, 443 workers (7.7%) are working in transportation and storage, 351 workers (6.1%) were working in wholesale and retail trade, repair of motor vehicles and motorcycles, 91 workers (1.6%) are working in administrative and support service activities, and 434 workers (7.5%) are working in other sectors. Compared with the previous quarter, the number of foreign workers in construction sector increased by 721 (73.5%) and by 237 (2.2 times) in transportation and storage sector.

Source: National Statistics Office of Mongolia

In June 2021, Ukhnaagiin Khurelsukh, the former chairman of the Mongolian People’s Party (MPP) and prime minister, became the sixth President of Mongolia. The run-up to the presidential election was turbulent even by the standards of modern Mongolian politics.

Russia's President Vladimir Putin, Rossiya TV presenter Sergei Brilev, Kazakhstan's President Kassym-Jomart Tokayev and Mongolia's Prime Minister Ukhnaagiin Khurelsukh attend a plenary session as part of the 2021 Eastern Economic Forum at the Far Eastern Federal University on Russky Island, Vladivostok, Russia, 3 September 2021 (Photo: Reuters/Mikhail Tereshchenko).

The incumbent president Khaltmaagiin Battulga of the Democratic Party — who had been blocked from running for a second term by the MPP-dominated parliament — sought to mobilise popular support by gathering mass rallies in the main square of Mongolia’s capital Ulaanbaatar. Yet Khurelsukh mostly relied on support from the bureaucracy and law enforcement.

Khurelsukh’s presidency is unlikely to affect Ulaanbaatar’s relations with Moscow. Russia, along with China, is a critical neighbour and partner for Mongolia. 2021 marks the 100th anniversary of the establishment of diplomatic relations between Russia and Mongolia, with Moscow becoming the first foreign power to formally recognise Mongolia’s sovereignty in 1921.

Despite former president Battulga’s reputation as a politician with pro-Russian sympathies, Moscow remained neutral in Mongolia’s domestic political struggle. After the election was decided, the Kremlin promptly congratulated the newly elected president. Russian President Vladimir Putin and Khurelsukh spoke in July confirming ‘their mutual resolve to continue developing friendly ties and comprehensive strategic partnership between Russia and Mongolia’.

In September, Khurelsukh made a virtual appearance at the Eastern Economic Forum in Vladivostok. In his remarks at the forum, Khurelsukh made noted that Mongolia supports both Putin’s foreign policy vision of the Greater Eurasian Partnership and Chinese President Xi Jinping’s Belt and Road Initiative. Khurelsukh also mentioned the possibility of a free trade agreement between Mongolia and the Russia-led Eurasian Economic Union. So far Mongolia’s only free trade agreement is with Japan.

Yet concerns over Mongolia’s plans to build river dams that may impact the fragile natural environment of areas across the border in Russia’s eastern Siberia remains an irritant in Russian–Mongolian relations and is likely to continue under Khurelsukh. Partly because of Russian pressure, Mongolia halted projects to build hydropower plants on the Egiin Gol and Shuren rivers — tributaries of Selenga river which feeds into Russia’s Lake Baikal.

Still, Mongolia has launched the construction of a dam on the trans-border Uldza river. The dam is needed to divert water for mining projects in Mongolia’s southern Gobi region. The Uldza dam, if completed, may disrupt the ecology of the unique Torey Lakes in Russia’s Daursky Reserve, a UNESCO World Heritage Site. Despite Moscow’s concerns, Mongolia’s Foreign Minister Battsetseg Batmunkh made it clear that the country will not abandon its ambitions in hydropower and dam construction, which Ulaanbaatar views as a path to energy self-sufficiency.

Despite disagreements over dams, Russia and Mongolia are pressing ahead with the Soyuz Vostok natural gas pipeline project that would transport gas from Russia’s western Siberia into China via Mongolia. A feasibility study is nearing completion, with Russia’s Gazprom expecting to start the construction next year. If realised, the pipeline will become the biggest joint undertaking by Russia and Mongolia since the Soviet era. Russia and China have the option of constructing a gas pipeline from western Siberia directly into western China via the Altai Mountains. Yet, the Mongolian route would bring gas directly to the areas of China that need gas.

The pipeline route through Mongolia is not completely risk-free. Mongolian resource nationalism has troubled foreign investors in the country. The pipeline traversing Mongolian territory could potentially hold the project hostage to Mongolia’s turbulent domestic politics. This may be one reason Beijing has not yet signed off on a binding contract for the pipeline. An energy crunch that is now afflicting many parts of China could prompt Beijing to make a final decision in favour of the Mongolian route for Russian gas.

The election of Khurelsukh has not changed the patterns of Mongolia–Russia military collaboration, which remains active. In September and October, Russian and Mongolian units conducted the annual Selenga bilateral exercise. Taking place in Mongolia, it involved around 1,400 servicemen from both sides. Still, Russia is watching warily as Mongolia pursues its ‘third neighbour’ policy and develops military-to-military ties with the United States. Moscow is especially uneasy with Mongolia hosting the Khaan Quest international exercises, which are conducted in close collaboration with the US Indo-Pacific Command.

Mongolia’s establishment of a ‘strategic partnership’ with South Korea, agreed at a September virtual summit between Khurelsukh and South Korean President Moon Jae-in, is another example of Mongolia’s pro-active multi-vector foreign policy. South Korea became Mongolia’s sixth strategic partner, after Russia (2006), Japan (2010), China (2014), India (2015) and the United States (2019).

Ulaanbaatar’s foreign policy hedging is also visible in Mongolia’s vaccine diplomacy, with the country receiving vaccines from Russia, China, India and the West. Mongolia initially ordered 1 million doses of Russia’s Sputnik V vaccine, but as of July had received only 80,000 doses, apparently due to production bottlenecks in Russia. The majority of the jabs administered in Mongolia have been China’s Sinopharm vaccine.

Regardless of who holds the presidency in Mongolia, Ulaanbaatar will continue to have a vital interest in strong relations with Moscow. Despite Mongolia’s pro-active multi-vector foreign policy, Russia, rather than distant ‘third neighbours’ will remain the ultimate guarantor of Mongolia’s security and sovereignty.

Alexey Mikhalev is Director of the Center for Studies of Political Transformation, Buryat State University, Ulan-Ude.

Artyom Lukin is Associate Professor at the Institute of Oriental Studies, Far Eastern Federal University, Vladivostok.