For the second time this year, Mongolians are protesting against the government in significant numbers. In April, protests seemed to primarily grow out of younger Mongolians’ disappointed expectations with the government. Today’s protests were sparked by apparent revelations about grand corruption, involving coal deliveries by state-owned Erdenes Tavan Tolgoi, one of the country’s largest mining companies, to China.
Interpretations in Mongolia continue to focus on political conspiracies rather than actually addressing issues around corruption or the government’s puzzling strategy to stake its fiscal fate on coal at a time when the global energy transition and Mongolia’s potential role in it are pointing in very different directions.
This fall has seen several strands of discussions on coal in Mongolia. First, the government placed the management of state-owned Erdenes Tavan Tolgoi under closer supervision because of allegations regarding shady dealings in its deliveries of coal to China. Then the budget that was passed by the government in November made some fairly heroic assumptions about the resumption and volume of coal exports in China to fund a looming round of payments on sovereign debt.
The third string has been a loud chorus focused on energy transition from international donors, many of whom are eager again to engage Mongolia in a values-based cooperation policy following Russian aggression against Ukraine and the changed geopolitical situation that Mongolia finds itself in.
Erdenes Tavan Tolgoi Corruption Allegations
Tavan Tolgoi, a coal deposit in the South Gobi desert, has been the focus of international attention and Mongolian government initiatives for some time. One of the three operators is state-owned Erdenes Tavan Tolgoi (ETT). In contrast to Energy Resources, a private operator, ETT’s reputation in terms of governance but also operational issues is rather poor. While there are frequent expressions of a view that state-owned enterprises should be better at working toward positive outcomes for not only the government but also the general population, ETT’s record on the environment, community engagement, and on delivering value to Mongolians has been spotty.
There was some good news earlier this year when the completion of a railroad link from the Gobi to the Chinese border was announced, which would move some of Mongolia’s coal transport onto the rail. In the fall, however, there were several announcements of increased scrutiny of the ETT management in response to allegations of improper dealings surrounding export contracts of coal. A further decision on ETT came in late November when the government announced the ambition to turn its operational nature into more of a sovereign wealth fund. Today, there were further discussions following a press conference that alleged more corruption at ETT. It is this announcement of corruption findings that prompted protests by what images suggest to be hundreds if not thousands of Mongolians on December 5. Protesters can be seen storming the Government House and dismantling the fences around the building in scenes that are more reminiscent of the cycles of protest and revolutions in other Asian countries like Kyrgyzstan. The Government House includes Mongolia’s parliamentary chambers and officers, as well as some offices of the executive.
Yet, Mongolia’s twittering classes are primarily exercised by various conspiracy theories that allege President Khurelsukh Ukhnaa’s involvement in orchestrating protests just ahead of a Mongolian People’s Party congress that is likely to add further pressure on Prime Minister Oyun-Erdene Luvsannamsrai’s government.
Allegations of grand corruption or the existence of a “coal mafia” in parliament seem to be interpreted primarily in terms of backroom dealings rather than the reality of the existence of such corruption. Curiously, the political discourse has little connection to Mongolians’ frustration with corruption at a time when post-COVID economic challenges, including corruption, are leading to real daily struggles of consumer survival.
The Global Energy Transition: Is Coal the Fiscal Future?
Further complicating the question of coal and corruption is the very future of the coal industry. As one of the dirtiest energy sources, coal use has been a particular target for those advocating reduced global emissions. Yet Mongolia’s fiscal planning seems content to ignore that trend.
The budget that was passed in the Mongolian parliament in mid-November was drafted partly with significant payments on sovereign debt that are due in 2023 in mind. The budget included revenue projections that assume significant demand from China in volume and at prices that seem rather optimistic.
While copper exports from the very large Oyu Tolgoi mine which is majority-owned by Rio Tinto will power future Mongolian budgets, the budget imagines that immediate financial needs will be met by coal exports. Regardless of the realism of the price and volume assumptions behind this budget, it seems unlikely that sovereign debt payments will be met entirely by these projected revenues and another round of re-financing conversations with international organizations seems likely.
All this comes at a time when many parts of the world are waking up to the realities of a climate catastrophe that will demand radical changes to energy policies. Many Mongolian politicians and business people feel aggrieved by expectations on Mongolia to atone for the environmental sins of developed countries when coal is one of Mongolia’s main resources and is seen as a necessary element in economic development domestically.
Yet, many donor organizations and many of Mongolia’s Third Neighbors are looking to encourage an energy transition domestically that not only mitigate against emissions but makes a positive contribution to the global energy transition by developing Mongolia’s ample alternative resources in solar, wind, and hydropower. As these Third Neighbors are re-embracing Mongolia in a changed geopolitical context cognizant of the country’s dependence on Russia when it comes to fuels, for example, creative thinking will be needed about how to bring about a “just transition” in the particular case of Mongolia.
Responses to the protests on December 5 were limited initially, but parliament also voted on and ultimately rejected the declaration of a state of emergency. These kinds of large protests have been rare in winter in Mongolia in the past; spring has been the most active “protest season.” They are especially surprising at a time Ulaanbaatar is experiencing very cold weather after an initially fairly mild fall.
source: The Diplomat