OPINION: by Baabar
I wrote four articles on Oyu Tolgoi (OT) in the past. The “Oyu Tolgoi”, (Daily Newspaper, September 14, 2008), “Oyu Tolgoi on the way to its real owner” (Daily Newspaper, July 18, 2009), “Baron Robert” (Daily Newspaper, February 1, 2010) and “Oyu Tolgoi agreement is terrible” (Daily Newspaper, May 15, 2011). A global giant BHP conducted exploration around OT deposit and drilled several holes in hopes of finding copper; however, they retracted the license since they did not find anything. After this, a small company named Ivanhoe Mines tried its luck there. It is said that they drilled 150 holes and did not find anything and was about to give up when they got lucky and found copper deposit in depths of 600 meters. This was in 2001. First of all, this deposit containing 72 billion ounce of copper and 30 million ounce gold was the biggest luck for Mongolia. However, this vast wealth, which was not used until today, became the root of the biggest quarrel, argument and fight of this decade. If the deposit was not found, we could not have found it ourselves. Maybe, we would have lived peaceful to that extent?! There is a Mongolian proverb that says “do not tell rumors to a bad man, do not show water to a stubborn cow!” Ivanhoe is a junior that tried its luck. They took a risk in order to discover huge deposits and sell it to big companies that can develop mine in those deposits. That is actually the general principle of mining businesses. In my article “Baron Robert”, I compared him to Baron Ungern. Ungern is a crazy genius. He came to Mongolia to bring back Chinese, Mongolian and Manchurian emperors back to their thrones and stabilize the statehood and chased away the Chinese.

If there was no Ungern, current independence of Mongolia would have been very doubtful. However, Ungern was cursed by Mongolians for several generations for making Mongolia independent. This must be the game of fate. Robert Friedland also cursed by Mongolians for discovering this vast wealth in Mongolia which was never found before. “He obtained exploration license of OT which was abandoned by global giant BHP after conducting explorations that cost billions of dollars and found nothing. This is a fact. If he did not find anything, he would have gone bankrupt; however, he was lucky enough to find the largest copper deposit in the world from the Gobi desert of Mongolia. This is also a fact. Rather than Friedland, Mongolians were the lucky ones. Only a crazy person would take such a crazy step. If he did not find OT and took such an unbelievably brave risk, Mongolia would have remained as an abandoned country that nobody is interested in. This is also a solid truth. Friedland started promoting Mongolia as an unbelievably good country in the world in an attempt to save his huge investment and asset that was on the verge of bankruptcy. He lied through his teeth, saying “there are room for corruption in Mongolia”, “its laws are reliable”, “the judicial system is very solid”, “the Government keeps its promises” and “the Parliament is very good and the lawmakers are honest”, etc. This promotion of Mongolia, which was based on Friedland’s personal interest, attracted western companies and those who do not know much about Mongolia to invest here. This is also another fact. Robert is one of those people who brought the revival of new Mongolia in the 21st century.

Maybe, in some other places, he is called “Toxic Bob”; however, he did not cause any harm for Mongolians. On the contrary, he actually helped us. This is an inevitable truth. Business entrepreneurs like him, who takes risk in order to get profit, brought development of today’s world. This is the true history. However, his name is used as a curse in Mongolia. Cursing him is a big opportunity to demonstrate one’s patriotism. Anybody related to him, talked with him and/or smiled to him are identified as public enemy, and demonstrating one’s patriotism is one of the stages for our generation to get awards,” says the “Baron Robert” article. Since Ivanhoe cannot develop the giant deposit like OT on its own, it promoted it throughout the world and brought in a giant company called Rio Tinto. “Ivanhoe Mines-Mongolia” is a company which holds the license of the deposit established by Ivanhoe. Rio Tinto, which lent huge sum of money to this company, came to convert its loan into company shares. This was perceived as if foreigners were taking over Mongolia’s OT deposit. Hysteria that Mongolians, specifically Mongolian state, should rob 34 percent, or even 50 percent, of a foreign company took ground. Comments such as “why Mongolians have to give 66 percent of our wealth to others as a gift” became a trend. Actually, OT is Mongolia’s and nobody tried to take it away from us and nobody has such right. It was just a matter of arguing about and fighting over the shares of a foreign company established according to Mongolian law and has the mining license.

When Rio became a player on OT, “corruption” became impossible
“Someone literate cited from the internet and talked on TV about how Friedland is exploiting Mongolia to their skin. Friedland, who wanted to boost his company shares, exaggerated in Brazilian stock exchange, saying “it is possible to spend five dollars in OT and earn 100 dollars”. Unless it is a narco business, there is no such business with such high returns in the world. While he was trying to promote his company and sell the shares on the exchange, many people understood it as if he was selling our land for higher prices abroad. Exaggerated talks of Friedland about how OT is massively profitable were perceived by many Mongolians as though he is pocketing 95 percent and about to run away. It is a deposit that is not developed and used until today. Many socially-active people saw that it is possible to get rich by blackmailing. They did not want to understand common business practices and they do no need to. Their goal was different. A certain policy was developed to force Mongolian people to own a minimum of 50 percent of OT. Numerous street demonstrations were organized. It became inevitable that anybody who spoke with a sound logic will be identified as a traitor from the motherland.

The more stupid they acted, the more patriotic they have become. This company, who not only knows, but comply strictly with proper ethic and standards, was ready to cooperate with Mongolians unlike Friedland. They developed the deposit according to established international practices and standards. When they arrived in Ulaanbaatar, they met with some insane people, really. The negotiation was to be conducted not by the Government, but Parliamentary opposition in charge of this issue. They said, when Ivanhoe was about to exploit Mongolia, they were shocked by 68 percent windfall profits tax and this way, they secured rights to get 30 percent stake ownership for the Government. Mongolia obtained 30 percent stake and then talked about having them finance it. Then the 30 percent stake ownership felt too little and they wanted to get 50 percent and said we will not be responsible for the financing. They often reminded the investors to get out of Mongolia.” This is what I wrote in the article “Oyu Tolgoi”. In 2009, Rio Tinto, Ivanhoe Mines and the Government of Mongolia concluded a Preliminary agreement on three partite ownership of the OT. As for Ivanhoe, they sold half of their shares and were interested in selling the remaining shares at a higher price and they actually sold it soon after.

As for the Government of Mongolia, ownership of this company’s shares was a very illogical matter. First, digging earth is not the Government’s work. It would lead to large corruption and bribery cases. Secondly, it was possible to get half of OT’s revenue or more from taxes and royalties only, without lifting a single finger. There was no use of ending up in debt and taking a risk. However, the Parliament demanded and legalized the Government to own a minimum of 34 percent of the Ivanhoe Mines Mongolia company, borrowing from its future profits. Such huge Western investment in Mongolia was a big surprise for Russia and China. During his visit to Mongolia, Russian President Putin inquired his ambassador about this. That ambassador did not know anything about this. So he was removed immediately. Later, when I visited Moscow, I heard that the Ministry of Foreign Affairs and National Security officials complained that Mongolians did not include them in the OT deal. Chinese also did not notice that large global mining company was aiming to make a huge investment in Mongolia. The fact that a large amount of Western investment was decided without the participation of these two giant neighbors means a real danger to the buffer zone.

If the Parliament was to confirm its decision to allow in Rio Tinto, this could have been rejected by the lawmakers’ votes. I have written an article “Oyu Tolgoi on the way to its real owner” to explain that western investment has been stalled under implicit and strong pressure of China, which was the only neighbor who can invest instead of them, and that the real “owner” of OT was China. Chinese were really trying to get the shares of Ivanhoe Mines at a good price. “During the last six years, Ivanhoe Mines Mongolia, sat down behind the negotiation table with the Government three times. A corruption method that stretched to three Parliament was perfected in this long period. There is an unconfirmed report among the public that some influential members of the first Parliament, especially, some Government members received large bribery from the Ivanhoe Mines. Based on this, the next Parliament considered they were discriminated and began to demand their shares in various forms. Over the time, it became clear that some groups of the Parliament lawmakers were organizing almost an armed attack and protest as the number of racketeer-patriots against the foreign companies was growing. It is documented that some demonstrations were led by a Cabinet member who demanded money.

However, when Rio Tinto, with its good reputation, became a player on OT, “corruption measures” became impossible. With a sudden global economic downturn, commodity prices fell sharply and shares of mining companies plunged. This became a good opportunity for China, which needed commodity and raw materials for its rapid development. They managed to increase their hard currency reserve to USD 2 trillion and began to acquire mining companies as they were cheaper. It was agreed that China would invest nearly USD 18 billion in Rio Tinto; however, it failed and that became almost a national tragedy that went beyond the business circle and turned into a political conflict. Mongolia’s economy, which depends solely on copper export, deteriorated sharply because of the crisis and its budget deficit reached hundreds of millions of dollars. Therefore, Mongolia negotiated with China to get USD 3 billion loan. This deposit were to turn Mongolia into another Kuwait in a short time and the lawmakers knew this very well. However, there was one bad disadvantage. A group which made such important decision will not get any direct benefit. This was demanded during the last six years directly and indirectly and failed”.

That is what I wrote in the article “Oyu Tolgoi on the way to its real owner”. During the OT negotiation, the three parties were always in conflict with each other. Especially, the conflict between Ivanhoe Mines and Rio Tinto was very serious; however, Mongolian side saw them as one party. Generally, the agreement was different than the international practices. Three ministers that represented Mongolian Government had no relevant experience and knowledge. Actually, there was not a single person with such relevant knowledge and experience in Mongolia. According to international practices, not only the government, which owns the wealth, but also private companies need to hire experienced companies to conclude such agreements. It was definitely not a simple matter that ministers and officials could sit behind the negotiation table. For writing these, I made many enemies such as racketeer, corrupt officials, blackmailers etc. I do not want to name them as enemies of Mongolia that betrayed national interest. Actually, they do not have such concepts. That is just how they are. They are born like that and therefore, what can we do? They are just trying to live in the given circumstances. Motherland and the future of the country are too holy and alien to them. I will tell a new story of what happened to Oyu Tolgoi four years after signing the agreement.

2013-05-19

Published Date:2018-07-23