Mongolia's Uranium Boom

In March, a few international media outlets quietly reported that Mongolia and the U.S. had been holding informal discussions on a proposal that would have Mongolia serve as a regional depository of spent nuclear fuel. The arrangement would allow South Korea and Taiwan, which the U.S. supplies with nuclear rods, to dispose of their spent fuel, resolving what has become an increasingly thorny problem for the U.S.

News of the story spread quickly in the Mongolian press, and public opinion came out decidedly against the proposal. The Japanese nuclear crisis in Fukushima has compounded opposition in Mongolia to nuclear energy. Whether popular concerns are realistic or not is irrelevant to most Mongolians.

The Mongolian Foreign Ministry officially denied the reports of the talks over the spent fuel depository, claiming that it was inconsistent with the country's laws "prohibiting the import of dangerous waste to Mongolian territory." However, while the Mongolian government remains publicly adamant that it will reject such a depository, it has demonstrated its diplomatic savvy by approaching the issue as a legal constraint rather than a strategic decision. By framing the discussion around legal principles, the government of President Tsakhiagiin Elbegdorj has avoided disappointing its emerging strategic partners in Washington and Moscow.

The Elbegdorj administration also made sure not to let its repudiation of the proposal cast any doubt on its interest in the continued growth of its uranium exports. Mining is Mongolia's largest export sector, accounting for nearly half its outgoing trade. While its most heralded industries are coal, copper and gold, Mongolia also has a substantial investment and industrial vision attached to uranium exploration. The country's most important uranium mine is located in Dornod province, in the easternmost region of Mongolia. Despite its isolation from the capital, Dornod's population has boomed as a result of economic opportunities attached to the mine. There are now several daily flights between the national capital, Ulan Bator, and Dornod's capital, Choibalsan, to accommodate investors and workers.

Uranium exploration is not a recent development in Mongolia. After the conclusion of World War II, the Soviet Union carried out geological studies to determine and identify regions for uranium extraction. The context of the Cold War and the nuclear arms race contributed to drive the hunt for uranium in Mongolia. Subsequent tests in the 1960s and 1970s identified four provinces in northern Mongolia, including Dornod, as having potential for future mining production. Ironically, it was not until 1989, with the Soviet Union in its final days, that uranium production began in Dornod. It is estimated that Russia has spent more than $500 million on developing Mongolia's uranium infrastructure since its early involvement after World War II.

In mid-2009, the Russian-Mongolian partnership was codified when both governments signed a high-level agreement to cooperate in identifying and developing Mongolia's uranium resources, with special reference to Dornod. Russia's state nuclear energy corporation, Rosatom, continues to maintain an exclusive and cozy relationship with the Mongolian Nuclear Energy Agency (MNEA), despite the efforts and presence in the country of international suitors such as Canada, France, Japan, South Korea and China.

In addition to MNEA, Mongolian state-owned uranium corporation Monatom LLC maintains a big stake in the country's nuclear future and continues to express interest in finding global business partners and investors. Nevertheless, further strengthening Moscow's hand is its friendly posture toward Mongolia's declared intention to construct its first nuclear reactor by 2020. Despite this, Rosatom will have to compete with international companies such as French nuclear giant Areva, which recently signed an agreement authorizing it to explore and mine uranium in Mongolia. South Korea has also demonstrated an interest in Mongolia's nuclear industry, as evidenced by a memorandum of understanding on peaceful uses of nuclear energy, inked March 25.

Mongolia's geostrategic location has prompted some observers to suggest that it might be interested in developing a nuclear weapons program or in housing strategic warheads of allied nations. However, this scenario seems highly unlikely considering that Mongolia has little capacity or desire to project force outside of its borders. Mongolia unilaterally declared its territory a nuclear-weapons-free zone in 1992, 14 years before the five Central Asian post-Soviet republics -- Kyrgyzstan, Uzbekistan, Turkmenistan, Tajikistan and Kazakhstan -- followed suit by formally declaring their territories a nuclear-weapons-free zone in 2006. The treaty formalizing the Central Asian Nuclear-Weapons-Free Zone was ratified in May 2009. While Mongolia has yet to institutionalize its zone, it is clear that it intends to remain outside the nuclear fray.

Mongolia is also a strong proponent of the nonproliferation regime as a state party to the Nuclear Non-Proliferation Treaty. Furthermore, the Additional Protocol to its safeguards agreement with International Atomic Energy Agency (IAEA) -- ensuring more-robust verification standards -- has been in force since 2003. The Additional Protocol will also help to ensure that the construction of any nuclear reactors in Mongolia is consistent with IAEA standards for safety and monitoring.

Through continued coordination with the IAEA and respected international investors, Mongolia can successfully continue its march toward nuclear power. While the recent events in Japan are sure to shape public opinion, this is unlikely to change the Elbegdorj administration's calculus that nuclear energy will enhance Mongolia's economic and energy security in the future. Moreover, debate surrounding Mongolia's willingness to house spent fuel remains a peripheral issue in the context of its greater strategic vision on nuclear energy. Attracting international investment in its nuclear sector will continue to be a priority for Ulan Bator as it seeks to exploit its substantial uranium reserves.

Jonathan Berkshire Miller is a public sector analyst on the Asia-Pacific region and has considerable research and policy experience in issues relating to nuclear nonproliferation, arms control, counterterrorism and intelligence. He is also a regular contributor to the Diplomat on Asia-Pacific security issues.



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