Russia’s coal miners could boost exports to China, the world’s number one energy consumer, after Beijing slapped tariffs on Australian imports amid a growing trade rift.

Chinese authorities completely halted supplies of coal from Australia in late 2020 after Canberra voiced its support for an international inquiry into China’s handling of the coronavirus crisis.

But with China’s appetite for energy imports steadily increasing, Russia is looking to fill the void by boosting coal exports to its neighbor.

“As imports of coal from Australia to China are expected to decline, Russia has a chance to replace at least part of it with its own coal,” said TS Lombard analyst Madina Khrustaleva, as quoted by SCMP, a Hong Kong-based English-language news outlet.

The expert noted that Russia has several large coal deposits ready to begin supplying China, with transport being the only hurdle.

Mutual trade between Russia and China has been growing since 2014, and China has since become Russia’s biggest trade partner.

“Russia is clearly in pole position to substitute imports from Australia. The increase in oil prices is also helping Russia, so all in all there are really tailwinds for Russia,” Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, told the media.

Over the past year, a political rift between China and Australia has spilled over into the economic world. Chinese authorities applied import duties on a wide range of Australian produce, including wine, lobster, meat, barley, timber, and coal. Canberra hit back with tariffs on Chinese aluminum, paper, and steel.

Last week, Russian President Vladimir Putin called for boosting coal exports to Asia by at least 30 percent over the next three years. Putin also approved financing for expanding the country’s rail routes for transporting coal to the continent from the Kuzbass region, Russia’s key mining area.

According to Khrustaleva, Russia has invested in modernizing the Baikal-Amur and Trans-Siberian railway networks, the nation’s key rail routes. The expert also said that Russian coal companies are developing joint ventures with Chinese firms to boost coal trade.

In December, Elgaugol, the company behind the Elga coal project in the Russian Far East, agreed to launch a joint venture with China’s Fujian Guohang Ocean Shipping Group that will export metallurgical coal to China. The Elga project aims to ship 30 million tons of coal to China in 2023, almost doubling Russia’s total coal exports to China, which stood at around 33 million tons in 2019.

On 10 March 2021, the EU and Mongolia launched their first annual Political Dialogue, marking another important step in a relationship that has further grown in strength over the past years.

The Dialogue was an opportunity to deepen a comprehensive partnership. The two sides reaffirmed their commitment to multilateralism and to the rules-based international order and committed to further strengthening multilateral cooperation in the framework of the ASEAN Regional Forum, the OSCE, as well as ASEM.

The EU and Mongolia face many similar challenges. This first Political Dialogue allowed to deepen the respective understanding on engaging with two major neighbours, China and Russia. The two sides also reiterated their shared objective of the denuclearisation of the Korean peninsula.

The EU and Mongolia also discussed the importance of connectivity, notably energy, transport and digital connections, for overall economic growth and resilience. The EU recalled its commitment for increased connectivity between Europe and Asia on the basis of sustainable, comprehensive and rules-based principles. Both sides stressed the need for a predictable, stable and open investment climate.

The next Political Dialogue is scheduled to take place in Mongolia, when conditions will allow.

The Dialogue, which was held as a video conference, was chaired by Deputy Secretary General, Mr Enrique Mora, Political Director of the European External Action Service and was co-chaired by Mongolia’s Deputy Foreign Minister, Mr Munkhjin Batsumber.

March 11 (Xinhua) -- Mongolia recorded 80 new locally transmitted COVID-19 cases in the last 24 hours, raising its national count to 3,561, the National Center for Communicable Diseases (NCCD) said Thursday.

Seventy nine of the latest cases were detected in the capital Ulan Bator, the country's hardest hit region, while another one was reported in the central province of Tuv, the NCCD said in a statement.

Meanwhile, Mongolia registered one more COVID-19-related death during the past 24 hours, taking the death toll to eight, the center added.

The Asian country launched a national COVID-19 vaccination campaign on Feb. 23, and more than 48,200 people have been vaccinated so far, according to the Health Ministry.

The country plans to immunize at least 60 percent of its 3.3 million people with four types of COVID-19 vaccines.

Mongolia is a country of long, rolling steppes, with a population density of only two people per square kilometre, well-suited to the traditional occupation of herding animals. Even today, while the capital, Ulaanbaatar, is a large, reasonably modern city, 40% of the country’s population still live as nomadic herders, raising six animals which all give both milk and meat: cows, sheep, goats, yaks, horses and camels.

“I came to a conclusion that was pretty obvious. There are about a billion litres of milk laying around the [Mongolian] countryside, for which there is no market,” explained Michael Morrow, the American-born Cheeseman of Mongolia. Cheese making would create an income stream for herding families. It would also diversify and increase Mongolia’s exports, while helping the country to move up the value chain. Through the Mongolian Artisan Cheese Makers Union (MACU), founded in 2015, Michael hopes to establish 100 cheese plants, in rural, herding communities, teaching local people to produce 2,000 tonnes of cheese per year.

Michael has lived four lifetimes, first as a war correspondent in the Vietnam War, then as a businessman in Hong Kong and subsequently in China, and now as Mongolia’s Cheeseman. Starting with his work as a correspondent in the Vietnam War in 1966, Michael says he has spent his entire adult life in Asia. Eventually, he found himself based out of Hong Kong, running a technology company. When he decided to leave the company, around 2012, they asked him if he would be willing to take over the only non-performing investment he had made as director, the company’s subsidiary in Ulaanbaatar. Michael had been to Ulaanbaatar several times, over the years, and by 2014, he found himself running his own small company there.

Michael made a friend in Mongolia, named Tumurkhuyag, who was on the brink of bankruptcy. He had borrowed $15,000 from a bank, in the 1990s, to start a small cheese company, and suddenly discovered he owed $60,000. Tumurkhuyag had originally taken the loan from a bank which collapsed; now, nearly two decades later, the state bank had contacted him to say that they had bought up the assets of the defunct bank, and that Tumurkhuyag’s debt was now owed to them, including about 20 years of interest payments.

Michael was so outraged that an honest person could be caught in such an odd mess of bureaucracy, that he became involved. He negotiated with the bank, saying that if they would forgo the interest payments, he would repay the $15,000 principal. In the end, Michael found himself a partner in a very small Mongolian cheese company, an industry he knew nothing about.

Tumurkhuyag showed how to make a good quality cheese without the need for a major plant.

The “company” was a single building with a few vats and processing machines, out in the countryside, 80 kilometres from Ulaanbaatar, where there was no market or distribution for the cheese they produced. “It was a place that was hard to find and hard to live,” remembered Michael. The remoteness of the location and the harshness of the life, in a country where winter temperatures regularly drop to -40 Celsius made Michael respect the hard work Tumurkhuyag had already invested in the company. When he sampled the cheese, Michael was impressed with how good it was, giving him hope that maybe the company could be expanded into something more profitable. “He made a good quality cheese and showed me that you could do that without a big factory,” said Michael.

How Tumurkhuyag learned cheese making and how the art came to Mongolia in the first place relates to the Przewalski's horse which dates back to Genghis Khan. The Mongolians call the horse takhi, a name of reverence, meaning “spirit.” As the only breed of horse that has never been broken, Smithsonian magazine calls the Przewalski's horse the last truly wild horse left on Earth.

The Przewalski’s horses nearly died out. European zoologists tried to conserve the animals, breeding them on preserves in various countries. At one point, there were as few as 12 breeding stock left. By the 1990s, however, the breed had made a comeback, reaching close to 1,000 animals, protected in multiple countries, on more than one continent. At that point, the decision was taken to reintroduce the horses into the wild. Mongolia had just transitioned from being a Soviet satellite to a democracy, keen on cooperating with the West. In 1993, the Mongolian government created Hustai National Park, about 80 km from Ulaanbaatar, as a Specially Protected Area for the reintroduction project of the Przewalski's horse. The Dutch government was instrumental in helping to support the establishment of the park and over time has underwritten a number of its ecological initiatives.

Tumurkhuyag had been a hunter in the area as a young man, before becoming trained as an accountant. He knew the wildlife in the area and was given a job with the park, helping to establish its boundaries. In addition to the Przewalski's horse, other protected species would find refuge there, including deer and elk.

Due to the establishment of the park, many local herders lost their grazing lands. “The Dutch, being Dutch, thought the best way to compensate people was to teach them how to make cheese,” said Michael, with a smile. “But almost all of them forgot everything they learned as fast as they learned it. The Dutch gave them some basic equipment, and they sold it. But Tumurkhuyag didn’t.” In the process, Tumurkhuyag “became the father of the concept of pastoral cheese in Mongolia”.

Overcoming challenges

Conducting research, Michael came across reports from foreign organisations, which said that dairy had no future in Mongolia. One issue is that, because of the extreme weather conditions, the window of time, when milk can be collected, is extremely narrow. “But, I disagreed,” said Michael, defiantly. “Tumurkhuyag had managed to survive very far from the city, with no natural distribution, and only one type of cheese. So, if you had 100 people, all around Mongolia, all making different kinds of cheese, and if they had a network to help…”

Tumurkhuyag’s little company could only make cheese in summer, and because he had no heating, he had to sell it before winter, or it would freeze. As the cheese plant was far from the city heating grid, Michael devised a coal-powered heating system for the cheese. Later, he learned that there also had to be humidity control, or the cheese would become dry.

Thanks to a coal-powered heating system devised by Michael, Tumurkhuyag can also now make cheese in the winter.

While being so far from the city was detrimental to distribution, it did mean that the company was close to the source of milk. So, there were some advantages which convinced Michael that the plan was feasible.

Michael was confident that Mongolia could make good cheese. It is one of the last places on earth where all of the animals are free range, grazing on natural grass and herbs. Additionally, “although they don’t give a lot of milk there are a lot of them”, he pointed out. As he was trying to work more closely with the herders, Michael began to understand their culture and the challenges they face. This led him to conclude that there was a significant social component to the project.

Mongolians, particularly mothers, are very concerned about the education of their children. Out on the steppes, there are no schools, so at the end of summer, each year, the family will pack up their children and send them to live with relatives in villages or towns, so that they can attend school. The herder economic cycle is such that they have very little cash for most of the year. They receive no salary and only earn money about twice a year. In the spring, they get money for the sale of cashmere, and in the autumn, they get money for the sale of animals for slaughter. School fees, however, must be paid in August, a time when many families have no money. Cheesemaking, Michael discovered, would create summer income for these families.

Participating in a cheesemaking project would mean doing a bit more work, milking the animals. Coincidentally, milking is generally done by women, and it is the women who are most concerned about raising school fees for their children. This meant that cheesemaking could fit well into the existing culture of the nomads. The mothers generally wake up early, milk the animals and have the work done by the time the family wakes up for breakfast. The cheese business, as Michael envisioned it, would create an income of about $1,000 per summer for a herding family. In a country where the average income is only $4,000 per year, this is a significant sum of money, and many times what is needed to pay for children’s education.

Michael explained how the arrangements had been working so far, saying, “The women want to be paid by August 15, so they have money to send the kids back to school.” The cheese work continues into the autumn. “They will calculate through the end of the season, but want to be paid in advance by August 15,” adds Michael. Credit is a tremendous problem in Mongolia. By some estimates, as much as 80% of the population is in debt. Paying the herders in August, meant that they would not have to borrow money to send the children to school. Breaking the cycle of debt may be one of the most significant socio-economic outcomes of this arrangement.

Additionally, there is an environmental component to the cheese business. Currently, cashmere is valued much more highly than meat or milk. However, the increasing number of goats, necessary for cashmere, has been largely to blame for the degradation of 70% of the Mongolian grasslands. If a herder wishes to earn more money, the two options are to raise goats for cashmere, or raise more of the other animals for meat. Cheese gives them a third option, one which increases their income, without increasing the number of animals.

Placing cheese plants in these remote areas would increase local income, ensure that children are able to attend school, preserve the grasslands and also create a few jobs in the plants themselves.

“I did some analysis and decided his [Tumurkhuyag’s] business was not efficient but the problems were fixable,” said Michael. In 2015, Michael began studying cheese production, eventually designing the small cheese plants he would go on to build. “Everyone thought I was nuts, including my wife. By then, I had discovered there were a few other small cheese makers in Mongolia. So, I went out and met them and thought I could organise them into a network to solve the distribution problems, but I got nowhere, because Mongolians are very distrustful even of each other,” he added.

By nature, herders are fiercely independent, which complicates attempts to organize them. Michael thus went on to set up the Mongolian Artisan Cheese Makers Union (MACU), the original purpose of which was to do sales and distribution for remote cheesemakers. The cheesemakers, however, refused to give Michael cheese on credit. They were too small to let him take the goods on consignment, and needed cash up front. This meant that Michael had to come up with large amounts of cash and had to incur all of the risks himself. Next, he found that when he bought cheese from the cheesemakers and placed it in grocery stores, the makers would then go to the grocery stores directly and undercut him.

This led Michael to develop a financing model which he began first with Tumurkhuyag and later used with others. Under this system, he would place orders at the beginning of summer and pay in installments, with part at the end of summer and a final payment at the end of the year, although the actual work would extend into the autumn.

He realised that there was a need to make multiple cheeses and that he needed a model cheese plant to show to investors and prospective cheesemakers. So, by 2018, he had built an analogue, just outside of Ulaanbaatar. Given the close proximity to the city, the price of milk near the model plant is too high to do actual cheese production, but it can serve as a training school for new cheesemakers.

Michael’s next step was to send his wife to France to study cheesemaking. Once she returned, she began teaching the required skills at the model cheese plant. The plant is an exercise in simplicity. It occupies only one hectare of land, with the building itself, measuring 10 metres by 10 metres. There are two gers (yurts) for workers to live in, out back. The plant has its own transformer for electricity and gets its water from a well. The building is designed so that the workers are in the centre, while deliveries and shipping occur at various doors, around the outside. This saves space and means that the workers and the cheese move around very little. Michael’s vision is for this model to be replicated in communities across the country. There are six projects already in progress, with one scheduled for 2021, in Dornogovi Province in the Gob Dessert.

The plant currently makes 20 kinds of cheese. Each kilo of cheese requires ten kilos of milk. The curds can be dried and sold and the whey can be made into candy or drinks which have a higher value than milk. Moving forward, the hope is to add whey processing to the cheese plant. Due to the Covid lockdowns, with schools and hotels closed, herders lost their milk income, so the government has offered to buy each kilo of milk for 5,000 Mongolian tugrik ($1.75) over the market price. This would increase the price of a single kilo of cheese by 50,000 tugrik, a price the market cannot bear. Consequently, there is a shortage of cheese and the only cheeses available are the hard cheeses which were made and stored last year.

Export market

The Ulaanbaatar cheese market, explained Michael, is price sensitive, unsophisticated, and small. And so, export markets had to be found. It is, however, not easy to export cheese from Mongolia. Food is subject to strict regulations in both the export country and the import country. And each import country has its own, unique regulations. Being approved for one country does not guarantee being approved for another. Not only is cheese food, it is also classified as an animal product and a dairy product, making the restrictions even more stringent.

Clearing the export hurdles would be a boon for Mongolia’s cheese industry. Michael estimates that 100 cheese plants could produce 2,000 tonnes per year. “China alone consumes 200,000 tonnes, Korea 200, Japan 300 and Russia 500,000 tonnes. Not all of that is high end cheese. At the high end of those markets is say 50,000 tonnes. As a conservative number, it is not impossible to sell 2,000 tonnes of Mongolian cheese into such a large market when we can compete on quality and price.”

“This is the only place in the world where you can make cheese from animals grazing on wild grass. The great Mongolian commons is the only [such] place in the world left,” said Michael. “We are an exotic supplier. And, we not only have cows we have goats and sheep and horses and yaks and camels.”

Currently, yak cheese is being used to make yak cheddar in Ovorhangai Province. They have had goat cheese in the past and plan to make more in the future. Of all of the milk-giving animals in Mongolia, the horse is the only one whose milk cannot be used to make cheese, because the lactose level is too high. It can be used, however, to make the Mongolian traditional drink of fermented horse milk, called Airag (kumis).

Michael’s vision is for Mongolia to become a niche producer of exotic, high-end cheese which differentiates itself in quality and uniqueness. Mongolian hoofbeats will, once again, find their way to Japan, Russia, Korea, and the world.

The author, Dr. Antonio Graceffo PhD China-MBA, worked as an economics researcher and university professor in China, but is now living in Ulaanbaatar, writing about the Mongolian and Chinese economies. He holds a PhD from Shanghai University of Sport Wushu Department where he wrote his dissertation “A Cross Cultural Comparison of Chinese and Western Wrestling” in Chinese. He is the author of 11 books, including A Deeper Look at the Chinese Economy, The Wrestler’s Dissertation, and Warrior Odyssey. He completed post-doctoral studies in economics at Shanghai University, specializing in US-China Trade, China’s Belt and Road Initiative, and Trump-China economics. His China economic reports are featured regularly in The Foreign Policy Journal and published in Chinese at The Shanghai Institute of American Studies, a Chinese government think tank.

Mongolia, which was recently given observation status by the IMMAF Board, is determined to move quickly as a powerhouse of Asian, and global MMA, under the guidance of a former Judoka and Diplomat Pantii Gankhuyag.

The national body was established in January 2019 to promote and develop martial arts in Mongolia and increase physical activity among the youth of the country, in line with government objectives, and to widen cooperation among domestic martial arts groups toward integration at the international level. The Association has begun a long-term four-year plan towards development of coaches and cultivation of MMA athletes to competition level.

The Association builds on sport development through seminars, workshops and training opportunities. It’s president, Pantii Gankhuyang, is tasked with leading the national body over the next 3 years and to obtaining government recognition for the sport of MMA.

Mongolia counts on vast resources from the volunteer sector to help in national development of sport with schools, universities and student clubs often involved. The IMMAF is committed to providing technical support in building foundations for recreational participation and competitive amateur MMA.

Pantii Gankhuyag is a judoka and member of the Mongolian Democratic Party, formerly a diplomat in Japan who served as Governor of the Mongolian Dornogovi Province from 2008-2016. Mr Gankhuyag has a lifelong passion for martial arts with an interested in how sport and MMA can contribute to national society.

The national Association benefits from the experience of Olympic competitors and coaches and maintains diversity of skillsets through invitations to experts from government and developed sporting backgrounds to provide guidance for new generations.

Covid-19 border closures meant the first ‘active network management’ system was planned and commissioned for the Asian nation by the U.K. division of Saudi-owned smart grid specialist ZIV Automation.

The travel restrictions imposed on Mongolia during the Covid-19 pandemic led the developers behind the nation's first ‘active network management' (ANM) system to install it entirely remotely, from the U.K.

The system installed by Spanish business ZIV Automation–to free up enough grid capacity to connect a 30 MW solar plant–was developed, tested and commissioned by the U.K. unit of the company.

ZIV–which is owned by Saudi electricals parent Alfanar–was commissioned to enable connection of the Desert Solar Power One solar farm to the Central Energy System, the most expansive of Mongolia's five electricity network sections.

The solar project–built by engineering, procurement and construction (EPC) services business Monhorus LLC in Sainshand, Dornogobi province–was enabled to connect to the network ahead of a planned expansion of the Central Energy System grid with 220km of new transmission lines. The smart grid ANM system developed by ZIV Automation manages the network in such a way the 30 MW solar farm can generate at full output other than when the grid nears capacity during demand peaks, when solar production can be curtailed.

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EPC company Monhorus is a joint venture established by local diesel-generator installer Monhorus International and Polish peer Horus Energia.

ZIV Automation says Mongolia's Central Energy System has peak demand of 1.2 GW and generation facilities include 90 MW of solar and 155 MW of wind farms. It is not clear whether the Desert Solar Power One project is included among that 90 MW of solar generation capacity.

English company UB Grid Consultancy Ltd acted as consultant on the ZIV Automation project.

According to the last year’s performance, the mining sector accounted for 22 percent of GDP, 71 percent of industrial output and 94 percent of exports.

Budget revenue in 2020 decreased by 12,6 percent compared with 2019 due to the outbreak of the COVID-19 pandemic, dropping to MNT 10.4 trillion. However, the mineral industry’s contribution to the government budget accounted for 25.7 percent, 1.4 percent increase compared with the previous year.

The Ministry of Mining and Heavy Industry reports that the government budget in 2019 was MNT 11.9 trillion, of which MNT 2.9 trillion or 24.3 percent was mineral industry’s contribution.

At the cabinet meeting held on March 9, Minister of Finance B.Javkhlan delivered a presentation on actions being taken to improve and optimize the ownership type, functions and organizational structures of wholly or partially state owned enterprises.

The cabinet is seeking to tackle issues related to state owned enterprises that have been unprofitable and operating with large expenses for many years within the first 100 days of the current government, formed on January 29, 2021.

As of 2019, 107 state-owned enterprises and locally owned 339 companies were holding debts totaling MNT 37 trillion and gained profits of around MNT 1.5 trillion. In particular, Erdenet Mining Corporation earned MNT 1.1 trillion and Erdenes Tavantolgoi earned MNT 440 billion and the remaining enterprises operated at a loss.

The government will further take following measures;

- Publicly disclose the strategically important companies and ensure their stable operation under 100-percent government ownership,

- Dissolve and merge loss-making and unprofitable companies whose roles can be fulfilled by the private sector,

- Ensure greater control and establish good governance by publicly trading up to 34 percent of stocks of some companies, and

- Necessary measures will be taken to fully implement the Law on Glass Accounts, which aims to improve transparency of decision-making processes and activities regarding state and local budgets.

Mongolia is to receive 1.3 million doses of COVID-19 vaccine TO BE donated by the Government of Japan with the support of UNICEF. According to L.Ariun-Uchral, press secretary of the Foreign Ministry, it is a part of a USD 21.5 million worth project by UNICEF’s to strengthen Mongolia’s emergency health response to the virus.

The COVID-19 vaccines produced by Pfizer, AstraZeneca and Moderna are expected to be airlifted to Mongolia in June.

Mongolia started its vaccination rollout against COVID-19 on 23 February with AstraZeneca donated by India. The country of three million is aiming to vaccinate 60 percent of the population above the age of 18.

Vuno, a company developing medical software, said Tuesday that it would supply its artificial intelligence (AI)-based chest X-ray solution, VUNO Med-Chest X-ray, to the National Center for Communicable Diseases of Mongolia.

Mongolia’s health authorities requested the World Health Organization (WHO) to purchase Vuno’s AI solutions to meet the country’s increasing demand for lung and chest diseases, including the Covid-19, and introduced it to the nation.

The VUNO Med-Chest X-ray can detect abnormal findings, such as nodule, fibrosis, pneumothorax in chest images, assisting healthcare providers to lesions in a clear image.

The new product helps medical experts improve the diagnostic efficacy by providing an initial reading of the patient’s chest images and report abnormal findings, allowing the healthcare givers to quickly follow-up with the lesions, the company said.

Mongolia’s National Center for Communicable Diseases was established in 2001 to manage, prevent, monitor, diagnose, and treat patients with infectious diseases in the country. It conducted the clinical trials of Vuno’s AI-based solution for sexually transmitted diseases in 2017, and introduced it to the country’s hospitals.

Vuno won the product's approval from the Ministry of Food and Drug Safety in August 2019 by proving its excellent sensitivity and specificity for detecting five abnormal symptoms in clinical trials, the company said.

It also has won the Conformite Europeenne (CE) certification, which allows European countries to use the product.

“We are glad to supply VUNO Med-Chest X-ray solution to the Mongolian National Center for Communicable Diseases, which has maintained a long relationship with us,” Vuno CEO Kim Hyun-jun said. “Vuno will keep making efforts to help more countries in need of healthcare.”