Mongolia’s reputation takes a hit in latest mining spat

On Monday, Mongolia signaled it will not pay Canadian uranium explorer Khan Resources $104 million ordered by an international tribunal in a licensing dispute. In 2009, Mongolia canceled the company’s licenses to mine the Dornod uranium project and instead granted the rights to Russia’s ARMZ, causing the current spat. The Mongolian government’s decision to annul the payment is a setback for the country’s international reputation — notably because it needs to convince foreign miners to invest enormous amounts of capital if it wants to revive its flagging mining industry.
Jim Doak, the chairman of Khan Resources, traveled to Ulanbataar last week to try to collect the payment, although he was not optimistic about the government’s willingness to pay. Prior to the trip,he said Khan Resources had hired an unidentified company that specialized in collecting delinquent government debts by seizing assets, such as airplanes or ships temporarily located outside the country. Tense talks with the government broke down, as predicted, but the following day Doak was found dead in his hotel room. While police say no foul play was involved, the timing has raised international suspicion of Mongolia’s government. Doak was diabetic and may have died from natural causes, but anything less than a full and transparent autopsy may spook investors for good. Investigators are currently preparing an autopsy, the results of which will be released within ten days.
Mongolia was once the darling of the mining world, and its vast potential and multi-billion dollar inflows of FDI led to the highest GDP growth rate in the world in 2011 (17.3%). Rio Tinto invested $6.6 billion in the massive gold and copper mine Oyu Tolgoi, the flagship of the country’s mining-led transformation. But disputes with mining companies and a decline in commodity prices resulted in a drastic fall in FDI in Mongolia, from $4.45 billion in 2012 to $507.6 million last year. The Mongolian government owns 34% of Oyu Tolgoi, and a bitter dispute with its partner Rio Tinto over cost overruns, profit sharing, management control, and a $30 million tax bill led to an indefinite halt of an ambitious and costly expansion of the mine. Similar conflicts have held up development of the $4 billion Tavan Tolgoi coal mine. The Asian Development Bank now forecasts Mongolia’s GDP growth will slow from 7.8% in 2014 to 3% this year.
However, Mongolian Prime Minister Saikhanbileg Chimed has promised to resolve several high profile disputes with foreign companies, and there have been encouraging developments. In early April, the government announced it had agreed “in principle” to a deal with Rio Tinto to proceed with the $5 billion phase II expansion of Oyu Tolgoi. The prize is too irresistible to keep delaying:according to an updated study from September, over a mine life of 41 years ,it would produce 24.9 billion pounds of recoverable copper, 11.9 million ounces of gold, and 78 million ounces of silver, totaling $92 billion at today’s metal prices.
But the Khan Resources case has given Mongolia’s renewed P.R. campaign a black eye. The firm’s strategy for collecting on its arbitration award “will not change one iota as a result of Jim’s passing,” said its president, Grant Edey. Meaning the dispute will be prolonged and generate additional negative publicity.
But other mining companies may be confident enough in their own arrangements to continue operations anyways. Xanadu Mines announced on Tuesday that it restarted its fully-funded exploratory drilling at its flagship Kharmagtai copper-gold project, in the same province as Oyu Tolgoi. If Khan Resources’ treatment by Mongolia is the exception rather than the norm, then the country may be poised for a mining comeback.
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Alaska, Mongolia state partnership flourishes over a decade

JOINT BASE ELMENDORF-RICHARDSON, Alaska — The state of Alaska partnership between the Alaska National Guard and the country of Mongolia spans over a decade and has evolved into a strategic nation-state relationship.

The two were paired in 2003 under the National Guard State Partnership Program, which began pairing states and countries in 1993. The program was implemented to couple foreign countries with states to develop unique security partnerships that ensure U.S. strategic access and a sustained presence in countries worldwide.

Alaska and Mongolia share similar geography, Arctic climate, isolated rural population and a vast mineral wealth. These commonalities and the similar challenges both face, allow for a better understanding of each other.

“Mongolians and Alaskans face similar social, economic, and climate related opportunities and challenges, particularly in rural areas,” said Maj. Adam Negri, the AKNG bilateral affairs officer. “Mongolia and Alaska have vast mineral wealth, but have a hard time accessing it because of lack of infrastructure. Most of Alaska’s population lives in the Anchorage and Matanuska-Susitna area, while most of Mongolia’s population is centered on Ulaanbaatar with the rest of both populations dispersed and largely rural.”

Mongolia is a stable democracy sandwiched between China and Russia, and is supportive of the U.S. Since 2004, Mongolia has been deploying its soldiers alongside U.S. troops in Iraq and now Afghanistan. Additionally, the Mongolian Armed Forces have over 950 soldiers participating in several UN Peacekeeping operations in Africa.

“The Mongolian Armed Forces are tailored to the peacetime needs and the economic potential of the country,” explained Negri. “They participate quite heavily in peacekeeping operations in Africa supporting the United Nations. Mongolia has realized the tangible benefits of being a global partner in peace and security and enjoys a voice at the international table far greater than it would otherwise.”

Since 2004, AKNG personnel have embedded with MAF and have served along-side them in Iraq and Afghanistan. More than 1,500 Soldiers and Airmen have traveled to Mongolia for training and exercises in support of Mongolia’s peacekeepers and first responders.

“Because of the success of the Alaska - Mongolia state partnership, the Alaska National Guard is continually asked to participate in U.S. Pacific Command exercises and subject matter expert exchanges,” said Negri. “The active duty military has recognized that the State Partnership Program is effective and leverages it to enhance stability in the Asia-Pacific region.”

Approximately 75 Alaska Guardsmen are preparing now to participate for the eighth consecutive year in Khaan Quest; a multi-national, joint military exercise in Mongolia, which is the cornerstone of the U.S.-Mongolia relationship. The AKNG takes a leading role in this exercise and habitually provides one-third of all U.S. participants.

“Khaan Quest for the Alaska National Guard is where friends get together,” explained Negri. “Due to rotation, active duty personnel do not have the ability to send the same exercise planners every year. Alaska Guardsmen and their Mongolian counterparts develop stronger bonds over the years which allows for a much freer exchange of ideas in both directions.”

The SPP is designed to be mutually beneficial. Alaska National Guardsmen get the chance to share expertise, practice their teaching and training skills, experience another culture and learn how a foreign military force organizes and operates.

The military-to-military relationship between the AKNG and MAF has been a catalyst for the nation-to-state initiative. The Alaska-Mongolia partnership has expanded to include relationships between the Division of Homeland Security and Emergency Management, the University of Alaska system, U.S. Army Alaska, and the Alaska District U.S. Army Corps of Engineers, and their Mongolian counterparts.

The U.S. Ambassador to Mongolia, Ms. Piper Campbell, made her first visit to Alaska last week to help strengthen the already positive relationship and recognize the great work Alaska has done in Mongolia to promote peace and security, assist in disaster preparedness and partner for better education.

“The Alaska-Mongolia State Partnership has grown from a modest cooperation between the Alaska National Guard and the Mongolian military to much more,” affirmed Campbell.

The Alaska-Mongolia partnership is looking to expand in two areas; defense support to civil authorities and arctic maintenance and operations.

“As a National Guard, we work very well with our first responders and emergency managers to support the needs of Alaskans in times of disaster,” said Negri. “The Mongolian army has the same mission and they are working to take best practices from Alaska and include them in how they prepare for and respond to disasters.”

Alaska has been working with the Mongolian National Emergency Management Agency since its establishment in 2004. Earlier this month, the AKNG and USARAK joined 100 participants from 30 agencies across Mongolia, the U.S. and other countries, to participate in a disaster response exercise and exchange called Gobi Wolf, hosted by NEMA.

“The exercise, which simulated an earthquake in Mongolia’s largest city, Ulaanbaatar, resembled Alaska’s Vigilant Guard exercise,” said Negri. “NEMA officials attended Vigilant Guard in 2014 and modeled the exercise after their participation in Alaska.”

Future exchanges between engineers from the AKNG and Mongolian military, which would focus on maintenance and operations in the arctic, are being reviewed.

The Alaska-Mongolia partnership is so imperative that the National Guard Bureau and USPACOM assigned an Alaska National Guardsman to the embassy as the bilateral affairs officer and chief of defense cooperation.

“As the bilateral affairs officer for the Alaska National Guard, I coordinate all aspects of the Alaska – Mongolia relationship and make sure all activities are complementary to the embassy, USPACOM and Mongolia’s goals,” said Negri. “I am also the chief of defense cooperation which leads the DoD and USPACOM military security cooperation program and serves as the liaison of humanitarian assistance matters with Mongolia.”

As a member of the ambassador’s country team, Negri feels extremely rewarded that he was given the opportunity to serve in his current position and live in Mongolia.

“Mongolia is a great place to live which parallels with Alaska. Both are extremely friendly and welcoming, have a healthy love for the outdoors, and plenty of open space when you leave the city,” said Negri. “It has been a wonderful opportunity for both me and my family to learn and grow in another culture.”

“Alaska has contributed greatly in Mongolia,” added Campbell. “Whether building hospitals or schools, providing medical and dental treatment in underserved areas, working with students, or training with Mongolia’s military, Alaskans have made a difference in the lives of Mongolians.”

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Mongolian girl to receive surgery in Taiwan: TFCF

TAIPEI, Taiwan -- A five-year-old Mongolian girl, Otgonzul, will undergo surgery at Taiwan National University Hospital (TNUH, 臺大醫院), and will hopefully be able to return to school in Mongolia, her healthy right arm showing from her t-shirt, just like every any other schoolgirl, said a representative for Taiwan Fund for Children and Families (TFCF, 家扶基金會).
According to TFCF Mongolian Branch Office, Otgonzul was born without a thumb on her right hand or a right forearm. Raised by a single mother who struggled on a very low income, Otgonzul and her two sisters currently reside in a factory storage room, instead of a Mongolian yurt, or small nomadic dwelling. Her mother's salary could only just meet their daily necessities. Paying for Otgonzul's arm surgery was out of the question.
Just like many other Mongolian children, given their financial situation and Mongolia's poor medical resources, Otgonzul was in little hope of treatment. According to TFCF's Mongolian Branch Office, most children could only hope that foreign surgeons would come to Mongolia, or foreign funds would come to support overseas medical treatment.
In Otgonzul's case, she was luckily met by representatives from ChildFund Korea last October, whose social workers then raised a fund of NT$1.72 million for TFCF Mongolian branch. The purpose of the fund is to pay for children's medical treatment, overseas transportation fees, and for dietary and nutritional support.
Otgonzul was then the first child to travel overseas for medical treatment with the support of ChildFund Korea.
She has now undergone her first operation, with two more to go before she stands a chance of gaining a healthy right hand and arm. Otgonzul's mother expressed her gratitude to TFCF, saying that she is optimistic about the operations, and that she believes Otgonzul will be able to rest her right arm under the sunshine very soon, never again to have to hide under long sleeves in the future.
As for Otgonzul, she is most looking forward to having the plaster cast removed, and wearing T-shirts to school, hand-in-hand with her classmates.
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Mongolia seeks to annul $100m Khan Resources claim

Mongolia’s justice ministry said it would seek to invalidate a $100m arbitration claim by Canada-listed Khan Resources, following the breakdown of talks and the death of the company’s chairman.
Jim Doak had travelled to Ulaanbaatar to negotiate over payment of the award made by an international arbitration court in March against the government of Mongolia. Khan had pursued the claim after Mongolia in 2010 nationalised the Dornod uranium deposit it was developing.
Doak was found dead in his hotel room on Thursday. Police said there was no indication of foul play. A full autopsy report will be released this week.
Khan terminated negotiations on Thursday. It said it would seek the services of a debt collector instead. After losing the Dornod deposit, the company had ceased to explore or operate mines and had instead focused on the arbitration case.
“In respect of international arbitration, Jim and I and the board had developed a clear and consistent strategy for settlement of the award and for obtaining value for the shareholder. That strategy will not change one iota as a result of Jim’s passing,” Grant Edey, the president of Khan, said in a statement.
The tribunal’s award to Khan was a blow to the cash-strapped nation. Mongolia is struggling with the sharp decline in the prices of its main commodity exports — copper and coal — and foreign investment has plummeted.
The case was one of four arbitration claims Mongolia is facing. Prime Minister Saikhanbileg Chimed told the Financial Times in March that arbitration cases were a “normal” part of doing business for any country.
Khan had originally sought $326m. The basis for the award has not been published but arbitration specialists said it was probably based on the value of the asset at the time of the nationalisation, rather than any calculation of subsequent earnings.
The case was brought through a variety of Khan subsidiaries and drew on precedents set after the collapse of communism in eastern Europe since Mongolia and Canada have not yet signed a foreign investment protection agreement, wrote Canadian arbitration expert Matthew Levine.
Mongolia turned to foreign mining investment, especially from Canada, Australia, and Japan, after the fall of the Soviet Union resulted in the collapse of its Soviet-supported manufacturing industry. But the country has fluctuated between welcoming foreign investment and worrying about giving away its underground wealth too cheaply, especially to Chinese companies.
The nationalisation of the Dornod deposit came after reports that Khan was entertaining a takeover bid from China’s state-owned nuclear developer.

Source:Financial Times


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Khan Chairman Jim Doak Passes Away

TORONTO, ONTARIO--(Marketwired - April 24, 2015) - Khan Resources Inc. ("Khan" or the "Company") (CSE:KRI) regrets to announce the passing of Jim Doak, its beloved Chairman. Mr Doak passed away at his hotel in Ulaanbaatar awaiting a flight home to Canada following the completion of a second series of meetings with representatives of the Government of Mongolia (See Press Release dated April 23, 2015).
Mr. Grant Edey, President and CEO of Khan, commented "Jim's contribution to the success of the Company has been enormous. He a very special and uniquely talented individual whose insights and decision-making abilities were off the scale. His integrity and the constant pursuit of the best interests of shareholders provided the basis for the Company's strategies. He will be sorely missed, both by the Company and by me personally as Jim and I had become very close friends over the years we worked together".
"In respect of international arbitration, Jim and I and the Board had developed a clear and consistent strategy for settlement of the award and for obtaining value for the shareholder. That strategy will not change one iota as a result of Jim's passing".
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Prominent Bay Street figure Jim Doak found dead in Mongolia

High-profile Bay Street personality Jim Doak was found dead in a hotel room in Mongolia on Thursday.
Mr. Doak, 59, had been in the country in his role as chairman of Khan Resources Inc., a small uranium exploration and development company. “It’s very tragic and shocking news,” said Greg Boland, a long-time friend and founder of West Face Capital.
Khan had been engaged in a prolonged legal battle with the Mongolian government over a uranium project. Last month, an international arbitration panel ruled that the government should compensate the company for cancelling uranium licenses in 2009 and expropriating property where Khan had planned to develop a mine. The company said the compensation award, plus interest, totalled $103.8-million (U.S.) as of the end of March.
Company officials, including Mr. Doak, held talks this week with government representatives in Ulan Bator. During those talks, the company demanded full payment of the award and vowed to take enforcement action.
Before he left for Mongolia last week, Mr. Doak talked with enthusiasm about Khan’s arbitration win.
“This case will send a message to foreign governments that they can’t take what isn’t rightfully theirs.” he said at the time.
Mr. Doak, who has been a Khan director since 2005, started his career as a research analyst on Bay Street in the late 1970s and made his mark as an irreverent critic of Canada’s clubby business elite. He did not shy away from questioning chief executive officers or regulators when he believed they had failed to protect investors. “I had the utmost respect for him. He was one of the brightest people in the industry. He had a photographic memory. He was at the cutting edge,” said Michael Sprung, president of Sprung Investment Management Inc. “He was always one of the people that really fought for shareholders and for fairness in the capital markets.”
Frustrated with the constraints financial analysts faced when questioning a publicly traded company’s performance, Mr. Doak decided to get out of analysis and into the business of managing money. He was president of Enterprise Capital Management Inc., a Toronto-based investment firm, from 1997 to 2002. He served as president of Megantic Asset Management Inc. from 2002 until 2014. Recently, he co-founded a new fund company, Sui Generis Investment Partners LP.
Mr. Doak was also a fixture on Business News Network (BNN), where he was famous for skewering poorly managed companies and the herd mentality of investors. “Jim was one of the sharpest minds on Bay Street, but perhaps more importantly, always spoke that mind,” said BNN’s general manager, Grant Ellis. “ Our viewers always knew that what they were getting was 100 per cent his views. Unfortunately, on Bay Street, where most opinions have been washed 1000 times, originals like Jim are few and far between.”
Company officials were unavailable for comment.

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Khan Provides Second Update on International Arbitration Award

TORONTO, ONTARIO--(Marketwired - April 23, 2015) - Khan Resources Inc. ("Khan" or the "Company") (CSE:KRI) announces that, consistent with its preferred strategy of reaching an amicable settlement with the Government of Mongolia, a second series of meetings with representatives of the Government has now been completed. These meetings took place in Ulaanbaatar on April 21 and 22, 2015. The Company has repeated its request for full and prompt payment of the award.
The Company intends to vigorously pursue obtaining value for shareholders. In conjunction with this intention, the Company will commence a complementary initiative for enforcement and collection of the award in the countries that are signatories to the New York Convention. The Company has retained the services of specialists for assistance in this matter.
With regard to the international arbitration, Khan has been notified by the Tribunal Secretary from the Permanent Court of Arbitration (PCA) that the arbitration proceedings were terminated with the issuance of the Tribunal's Award on the Merits on March 2, 2015. After completing its final accounting, a small reimbursement was provided to the parties by the PCA.
On March 2, 2015 the international arbitration tribunal rendered an award to Khan as compensation for the Government of Mongolia's actions in relation to the cancellation of Khan's uranium licenses in 2009. The award consisted of a Base Amount of US$80 million plus interest at LIBOR +2% (compounded annually) from July 1, 2009 to the time of payment. In addition, the Tribunal awarded costs of US$9.1 million in favour of Khan. As of April 23, the award aggregates to approximately US$104 million. Interest is currently accruing at a rate of 2.546% or US$6,485 per day.
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Rio Tinto seeks to build goodwill for huge Mongolian copper mine

(Reuters) - Rio Tinto committed on Wednesday to spending $5 million a year to help resolve conflicts with nomadic herders and water problems that have stoked political opposition to the expansion of a huge copper mine in Mongolia's South Gobi desert.
The 30-year agreement, signed with the province of South Gobi and local towns, is a strong sign the company remains committed to the next stage of the Oyu Tolgoi project, put on hold nearly two years ago amid disputes with the government.
"It's a longer life issue," said Oyu Tolgoi Chief Executive Andrew Woodley. "That means you set up long-term plans, and that's what this cooperation agreement is about."
Disputes with the government over tax and construction costs and long-running nationalistic concerns have prevented the construction of an underground mine that Rio says will unlock 80 percent of the copper wealth at the project.
Rio owns 66 percent of the mine indirectly through its Turquoise Hill Resources subsidiary and the government has the other 34 percent.
The first, open-cut phase of the mine is already in operation. Turquoise Hill reported $1.6 billion in revenue for 2014 from the sale of 733,700 tonnes of concentrate from the mine.
The cooperation deal fulfils one of the requirements of Rio Tinto's Oyu Tolgoi investment agreement, signed in 2009, and could help address concerns raised by Mongolian politicians and environmentalists that the project was failing to help the local community, damaging herding patterns and wasting water.
Rio Tinto, operator of the mine, defended the offer of an annual fixed sum of $5 million, with distributions to start this year, as a practical move.
"It's difficult to fix something to profitability because what you find is that in years when the company is losing money the contributions would dry up," Woodley told reporters after the signing of the agreement in Dalanzadgad, 220 km (138 miles) from the mine.
A recent poll by the Sant Maral Foundation found that two of the three most popular politicians in Mongolia were strong critics of Oyu Tolgoi.
One local opponent, Sukhgerel Dugersuren, has said plans to resettle herders whose grazing areas had been taken by the mine failed to account for all the herders who were affected over a wider area and that there should have been more consultation.
"Only herder communities themselves understand how land is used, where seasonal camps are located, and when springs freeze," she said in a posting on her website in February. (en.minewatch.mn/)
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Mongolia's Choices Matter

Neil Thompson believes that Mongolia, which is resource-rich and relatively democratic, is set to become the bellwether state for 21st century Eurasian politics. That’s because the way Ulan Bator is balancing its ties with Russia and China could provide a model for other Central Asian states to follow.
By Neil Thompson for ISN
Many  Westerners continue to view  Mongolia through the lens of its distant past, when this vast country served as an incubator for the conquering waves of nomadic horsemen that periodically appear throughout history. However, the origins of today’s modern Mongolian republic and its foreign policies reflect its troubled birth as a state on a historic fault line between many competing empires and tribes. Yet that might be about to change, with this landlocked and impoverished but resource rich and democratic Asian country becoming the bellwether state for 21st century Eurasian politics.
Life on a Fault-line
In the 18th and 19th centuries, the region that is now the modern state of Mongolia was, like the rest of Central Asia, first squeezed between and then divided by the expanding Russia and Chinese empires – both cultures which had long suffered from Mongol depredations themselves. The popularity of this political arrangement locally can be measured in the length of time it outlasted the Qing and Romanov dynasties. In 1913, less than two years after the fall of the Qing, Tibet and Mongolia signed a treaty declaring their independence from China. Independence, in turn, inspired nationalist sentiment for an enlarged Mongolian territory that embraced Mongols in both China and Russia.
The Russian reaction however was an ominous sign of things to come. Despite signing a treaty with the new Mongolian government, Russia and China’s disintegrating central government issued a joint declaration stating that Mongolia was still under Chinese suzerainty. This was reinforced by a joint Russian-Chinese-Mongolian treaty in 1915 placing an autonomous Mongolia back under formal Chinese oversight. Russia’s striking respect for the official boundaries of the now-vanished Qing dynasty is easily explained. The Japanese defeat of first China in 1895 and then Russia in 1905 added a third predatory power to north-east Asia. Secret treaties at the end of the Russo-Japanese War of 1904-05 initially forced tsarist Russia to accept Mongolia lay within Japan’s sphere of influence.
Despite a decade of unsavory horse-trading between imperial Japan, tsarist Russia and China’s warlords, it would be Russia into whose orbit the new ‘autonomous’ state of Mongolia would ultimately be drawn. ‘Outer Mongolia’, as Mongolia was then called, was tragically caught up in the drama of the Russian Revolution. It was alternatively occupied and fought over by local nationalists, China’s warlord-dominated Beiyang government, White Russian troops and their semi-official Japanese allies, and the Red Army together with a nascent Mongolian communist movement. The Bolshevik intervention was the decisive one and in 1925 the People’s Republic of Mongolia was proclaimed. Mongolia became a Soviet satellite state of the in the same mold as the countries of Central and Eastern Europe. It would remain isolated from the outside world for seven decades, integrated only with its Soviet mentor and economic prop.
Whither Ulan Bator?
Nowadays, this country of just three million is still encased between her old occupiers, Russia to the north and China to the south, east and west. However the threat from Japan ended after the Second World War, and in 1986 Mongolia restored friendly diplomatic relations with China that had long suffered during the Sino-Soviet split. The 1990 withdrawal of the Soviet military and Moscow’s political and economic support ended decades of communist government. And while Mongolia was plunged into food shortages and economic collapse, a new and vibrant democratic system was kept alive and functioning.
Probably thanks to this Mongolia has not succumbed to the ‘resource curse’ yet, despite sitting on vast quantities of untapped mineral wealth. Minerals already make up over 80% of Mongolia’s annual exports, and that is expected to rise to 95% after a number of massive mining projects come on-stream. Despite squabbles between foreign companies and the at-times erratic Mongolian government, foreign direct investment (FDI) from a number of different foreign states has been transforming its post-communist economy. Mongolia was one of the world’s fastest growing economies until recent times, with high growth rates reported in 2012 and 2013.
A genuinely free Mongolia presents a curious picture today. Twenty-five years after independence Mongolia is still a lone democracy in a region of autocracies (albeit with Kyrgyzstan as a credible contender to join it). Certainly it is a lot freer and less corrupt than its two giant neighbors though there have been plenty of bumps along the way in recent years, including a state of emergency being declared in 2008 after a disputed election led to a drunken riot in which five people were killed. Accusations of corruption and electoral malpractice have also been found to have some substance. In 2012, Enkhbayar Nambar – the former Russian-friendly president - was jailed on corruption charges before being pardoned by his successor (and long-time rival) the following year. The antics of the landlocked and impoverished state’s rapidly expanding merchant navy also continue to raise eyebrows, even as it diversifies revenue streams in an economy heavily dependent upon commodity prices.
Three’s a Crowd
Geopolitically, Mongolia continues to face the tough choices of its location between a reenergized authoritarian Russia and a booming communist China. To its north it has a revanchist neighbor that is currently spearheading a comparatively protectionist customs union as an economic means to a political end. Russia’s own creaking economy is once again bearing the cost of subsidizing the underdeveloped neighbors it has persuaded or bullied back into the fold. As Moscow has revived itself under Putin, it has also sought to breathe new life into bilateral economic and political ties with Mongolia. Russia remains the only alternative choice to China for Mongolian export routes, something that Ulan Bator’s politicians think about when they remember past Kremlin arm-twisting over their Soviet-era debts to Russia.
To the south, China remains the booming source of Mongolia’s new found prosperity, should the legal wrangling over various mining projects ever end. Beijing shares Mongolia’s flexible attitude to the rule of law, desire for efficient economic growth, and lately even a showy crackdown on corruption. Yet many Mongolians remain disturbed by their southern neighbor. While Russia is vast but under populated, China surrounds them on three sides and already rules a Mongolian population that’s twice as large as Mongolia’s. Worries also abound that the mining boom will turn Mongolia into an economic satellite of China in much the same way that the country was a political satellite of Russia in the twentieth century. Having tasted the fruits of full sovereignty Ulan Bator does not want to lose it as wealth literally starts to spring from the ground under its feet.
At present, China is the overwhelming export market for Mongolia, buying 89% of the coal, metals, oil and even livestock that Mongolians send abroad each year. However the figures for China are somewhat deceptive as the impact of large scale FDI by Western mining companies has yet to be fully felt. For instance, British-Australian mining giant Rio Tinto spent $6 billion preparing its copper mine at Oyu Tolgoi and believes it will extract $8 billion in revenue per year for the next several decades. Ulan Bator has also tried to diversify away from overreliance on China, most notably by signing a free trade agreement with Japan earlier this year. With this in mind, analysts predict that Mongolia’s ever-closer connection to the Chinese market will not necessarily translate into Beijing’s increasing political influence there.
Towards an Ever Distant Union
Indeed, the most interesting aspect of the Sino-Russian-Mongolian relationship is the growing importance of Mongolia’s agency relative Beijing and Moscow, a reversal of the situation in 1915. In this sense, Mongolia is a microcosm for the states of the wider Central Asian region which have also been trapped between the two giants since the 17th century. Although Russia and China have been careful not to step on each other’s toes, their economic interests in Mongolia are basically at odds. China has simply tried to pull Mongolia ever closer into the structural embrace of its giant economy, whereas Russia has had to trade on its diminishing assets in the country – such as writing off Ulan Bator’s debts in 2003 and once again in 2009.
Despite Moscow’s scrambling to secure access in a share of Mongolia’s natural resources, its long term success can perhaps be measured by the news that the Mongolian parliament voted in October 2014 to adopt a rail gauge compatible with China’s in order to develop a special 240-kilometer track from the Tavan Tolgoi coal basin to the Chinese border. Coal is Mongolia’s second biggest export, and China is its largest customer. The new gauge will reduce the cost of transporting coal to China by a third, from $6 a ton to $4 a ton, once the line is completed in late 2016.
In addition, the Oyu Tolgoi mining project was once envisaged by Moscow as a means to leverage its split ownership of the trans-Mongolian railway line into economic influence. Russia offered to build a railway link to the main line, and run the copper extracted to far eastern ports via Russia. Instead the contract was given to a Canadian firm which is now part of Rio Tinto and the precious metal is simply trucked to the Chinese border eighty kilometers away. So, despite the maneuvering of successive Mongolian governments to ensure they balance trade with China against trade with other countries, Ulan Bator has also ensured that it remains free from participating in Putin’s pet Eurasian Economic Union project.
No More Backyards
There is a cross-party understanding within political circles that Mongolia has no permanent friends or enemies today, only trading partners. Ulan Bator today ruthlessly seeks out opportunities to cooperate with foreign parties for its own economic development and discards them quickly if a better offer is made. China has found it a tough partner to bargain with economically. Meanwhile, Russia may find that the rest of Central Asia prefers to follow the lead of Ulan Bator as the fruits of Mongolia’s socio-economic experiments bear fruit compared to their own stagnant kleptocracies. The era of Eurasian states having to choose between geopolitical ‘clubs’ is over and Ulan Bator knows it.

Neil Thompson is Content Editor at News4Media and freelance contributor at the Diplomat, Informed Comment, Geopolitical Monitor and similar publications. He holds an MA in International Relations of East Asia from the University of Durham.
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Mongolian Universities Confers Honorary Doctorate Degree to Dalai Lama


On the concluding day of the international conference on "Science, Ethics, and Education" organized by the University of Delhi, the Dalai Lama was conferred two Honorary Doctorate Degrees, one by the Institute of Physics and Technology, Mongolian Academy of Science and another by the University of Ulaanbaatar, Mongolia on March 25, 2015.
Professor Khavtgai Namsrai representing the Mongolian Academy of Science and Professor Sodnamdorj for Yanjinsuren University of Ulaanbaatar presented the honorary doctorate degrees.
"I have received many degrees from so many academic institutions, but it holds a special meaning to receive one from Mongolia," said the Dalai Lama during the acceptance address. He further explained that Mongolia and Tibet shares over a thousand year old connection, with the Dalai Lamas always holding a special relation with Mongolia since the time of Sonam Gyatso, the third Dalai Lama of Tibet.

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Lake Baikal: World Heritage ecosystems at risk from Mongolian dam

Russia's Lake Baikal is under threat by a massive dam and pipeline on the main river that feeds into it, that would supply mines with power and water, writes Anson Mackay. In line to fund the project? The World Bank.

Mongolia is hoping a massive dam on its largest river could provide much needed power and water for the country's booming mining industry.
However environmental groups are concerned that the hydroelectric power plant and a related pipeline project will do immeasurable environmental damage to oldest and deepest freshwater body in the world: Lake Baikal.
As Baikal sits just over the border in Russia, Mongolia risks seriously annoying its northern neighbour at at time when the lake is already experiencing problems with invasive algaealong its coasts, unregulated mining and a water level which just passed a "critically low"point.
The Shuren Hydropower Plant, planned on the Selenga River in northern Mongolia, was firstproposed in 2013 and is currently the subject of a World Bank-funded environmental and social impact assessment.
In tandem, Mongolia is also considering building one of the world's largest pipelines to transport water from the Orkhon River, one of the Selenga's tributaries, to supply the miners in the Gobi desert 1,000km away.
World Heritage at risk
The impact of these projects will be most keenly felt downstream in Lake Baikal. The lake formed in a tectonic rift zone more than 25m years ago in southern Siberia. With a maximum depth of almost 1,700m, Baikal contains 20% of the world's unfrozen freshwater.
Due to its great age, depth and remote location, more than 2,500 species have been documented in the lake, of which more than 75% are believed to be endemic and are found nowhere else in the world - from the microscopic plants that provide the lake with most of its energy to one of the world's few truly freshwater seals, the nerpa or Pusa sibirica.
Because of its unique characteristics and biodiversity, Lake Baikal was made a UNESCO World Heritage Site in 1996.
By far the largest and most important of the 350-plus rivers that flow into Lake Baikal is the Selenga River, which contributes almost 50% of the lake's water. The Selenga and its tributaries cover a vast area, much of it in northern Mongolia, and the catchment of Lake Baikal is bigger than Spain.
The Selenga Delta - vital to the health of Lake Baikal
The river enters Lake Baikal through the Selenga Delta, a wetland of internationally recognised importance.
The delta is crucial to the health of Lake Baikal. Its shallow waters are a key spawning ground for Baikal's many endemic fish and is on the migratory route for millions of birds every year. It also filters out impurities flowing through the river before they reach the lake.
The Shuren dam isn't the only threat to the delta, but it may be the most important. The Selenga is already very polluted; mining for gold and other minerals in northern Mongolia has resulted in elevated levels of heavy metals in the water. Sewage and waste-water treatment plants along its banks are often old, leading to elevated concentrations of nutrients and other contaminants.
However, actually disrupting the river flow into the Selenga delta and Lake Baikal has the potential to cause untold damage to the lake and its life. Any lowering of the delta's shallow waters will disrupt the spawning grounds of many endemic fish species - and other species, including birds and aquatic insects will lose their homes.
Biodiversity loss has the potential to degrade Baikal's unique ecosystems, resulting in severe economic implications for local and regional economies.
World Bank 'disregarding its own guidelines'
Such is the concern that several environmental NGOs such as Rivers Without Boundariesand academics from Mongolia and Russia have lodged a request for the World Bank to be investigated as they claim the bank is disregarding its own regulations by funding an assessment for a project on a unique river system that is home to endangered species.
The Russian Security Council, which advises the president on national security issues, has also voiced its concern.
But Russia cannot be let off the hook either. In the early 1950s, a hydroelectric dam was built in the city of Irkutsk on the Angara River, Lake Baikal's only outflow. On completion, the water levels of Lake Baikal increased by more than a metre, flooding almost 150,000ha of land, displacing 15,000 people and disrupting the Selenga delta spawning grounds.
More recently, the Irkutsk dam has been implicated (along with lower than expected rainfall) in contributing to some of Lake Baikal's lowest water levels for several decades.
But these problems may pale into insignificance if the Shuren Hydropower Plant and the Orkhon-Gobi Water Diversion schemes in Mongolia get the green light.
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China's Shenhua signs first coal trade deal with Mongolia

BEIJING, April 19 (Reuters) - China's biggest coal producer, the Shenhua Group, has signed a deal to buy 1.2 million tonnes of high-grade coking coal from Mongolia, a move that could help pave the way for the state-owned firm to invest in one of Mongolia's biggest mines.
China's State-Owned Assets Supervision and Administration Commission (SASAC) said in a notice posted late on Friday that the transaction signed by Shenhua's foreign business arm and Mongolia's Energy Resources LLC was the first such deal between the two sides and would "build good foundations for future cooperation in trade and other activities".
Neither Shenhua nor Energy Resources, a subsidiary of the Hong Kong-listed Mongolia Mining Corporation, were available to comment when contacted on Sunday.
Along with Energy Resources and Japan's Sumitomo Corporation , Shenhua is part of a consortium expected to take over operations at the massive Tavan Tolgoi coking coal mine, close to Mongolia's southern border with China.
Desperate to rejuvenate its flagging economy, the Mongolian government agreed to hand over the construction and operation of Tavan Tolgoi to the consortium earlier this year, but the deal still needs to be ratified by parliament.
An official with the state-owned firm running the mine, Erdenes-Tavan Tolgoi, said in Beijing on Friday that a vote on the issue was due within one or two weeks and could still be rejected.
"We are not sure if parliament is going to approve or not," said Batbileg Batbayar, head of the firm's sales division.
He said legislators were currently deadlocked, with many wanting a more diversified consortium featuring U.S. or Russian firms.
If the investment agreement is approved soon, a $1 billion railway link connecting the mine directly to customers in China could be completed within two to three years, cutting freight costs into China by more than $10 per tonne, Batbileg said.
Mongolia has long been concerned about the increasingly dominant role that China is playing in its economy, but it has struggled to find alternative sources of investment, especially amid a fall in global commodity prices and a long dispute with Anglo-Australian miner Rio Tinto over the construction of the Oyu Tolgoi copper project.
Batbileg said Mongolia was still hopeful of developing rail links that would allow the country to sell its coal to other countries via ports on Russia's Pacific coast, but conceded that such routes would currently add $50-$60 per tonne to the company's freight costs. (Reporting by David Stanway; Editing by Jeremy Laurence)

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Ancient Mongolian Altai harp reproduced and played again

Ancient Altai harp reproduced and played again

An ancient harp was found by a shepherd in Mongolia's Altai mountains. A replica was manufactured by Mongolian composer Ganpurev Dagvan and the instrument will be introduced to the world by the Altay Band

1,500 year old music instrument Altai Harp which was found in a cave in the Altai Mountains of Mongolia in 2008 will be introduced to the world by Altay Band.

The President of Eurasia Local Government Association Hasan Cengiz told an Anadolu Agency reporter that the 1,500 years old stringed instrument which was accidently discovered by a shepherd is being showcased at a museum in Mongolia. The replica of the music instrument was manufactured by Mongolian researcher and composer Ganpurev Dagvan and he found a music band to introduce the historical instrument to the world. Cengiz informed that they invited the band to Turkey and they made a detailed presentation on the Göktürk instrument to Turkish President Recep Tayyip Erdoğan. "The present showed great interest to the instrument. Culture and Arts Coordinator Orhan Karakurt told us that they can give concerts at the presidential palace when statesmen from Turkic countries visited Turkey. We are very happy," Cengiz went on. He noted that the Göktürk instrument offers its services to the humanity after 1,500 years thanks to the initiatives of President Erdoğan. The presidential seal is composed of 16 stars one of which represents Göktürks. "As far as I understand the president and the presidential palace has adopted this deeply. The western civilization characterizes the Turks as barbaric, warrior and settler but this discovery reveals that Turks were interested in music 2,000 years ago. We are working to tell this to the rest of the work," he concluded.

Dagvan who adapted the Altai Harp to present day said that the historical instrument was not found in one piece; however, its final appearance came into being following the study on the period.

Although it has been centuries, the Mongolian composer pointed out that many of the pieces of the instrument is still intact. He said they study on each hole on the instrument and they shaped the handle of the instrument as the horn of a mountain goat, being inspired from the motifs behind the original harp. Stressing that the Altay Band which was founded with six musicians in order to introduce the historical harp, Dagvan said, "All the members of the band are people interested in local arts of Mongolia. Our main objective is to introduce this music to the world." The musician stated that he has been conducting research on the subject for a while. "Mongolian people are familiar with this instrument however we came to Turkey to introduce it as it belongs to the Turks. I believe that this is not something belongs to Mongolians or Turks but to whole world heritage," he noted, adding he will continue to promote the Altai Harp to the world.
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Ts.Bayarbaatar: Mongolia shouldn’t die of thirst to maintain another country’s lake

Trans. by B.DULGUUN
The following is an interview with Head of the Policy Implementation Department of the Ministry of Energy Ts.Bayarbaatar about various hydro power plant projects that are currently being carried through.
The funding for Eg River Hydro Power Plant project was resolved at the plenary session of the government a month ago. Can you tell us how the project is progressing? 
Eg River Hydro Power Plant is a very significant project for providing Mongolia’s national security, comfortable living conditions for the people, and sustainable conditions for Mongolia’s industrial development and energy sector. We’ve been discussing this since 2005. The project was postponed at the time due to funding issues and tensions within the state. The power plants should’ve been commissioned in 2012. We lost considerable amount of time. We’re not trying to block and stop the flow of water while constructing the power plant. We’re attempting to work on water along the river flow and turn it into a product. In other words, our objective is to turn water into energy before it flows out of Mongolia’s land and border.
Water energy is very cheap. Although the initial cost for construction is high, the price of a kW is cheap. Firstly, inflation rate can be moderated. Mongolia is importing energy at high prices because the variation between the evening workload and the night’s low workload is 300 MW. The price per kW is rising as electricity is distributed for high prices to eliminate this variation gap. The current price per kW of energy is 190 to 200 MNT.
Secondly, Mongolia simply lets water flow away to Russia. Stability of Mongolia’s general and water system will improve and become independent from other countries if we transform water into energy. We’re developing a renewable energy called Wind Park. Wind farms suddenly stop working when there’s no wind. This hydro power plant offsets this issue. A hydro power plant is absolutely crucial as wind farms and hydro power plants operate with adjustment regime to make up for each other’s loss. 
Russians are strongly against the construction of Shuren Hydro Power Plant. Aren’t they cautious because it’s actually harmful to the environment and ecology?
Recently, the Deputy Minister of Natural Resources of Russia visited Mongolia along with 20 representatives, and met with 16 representatives of Mongolia, led by Deputy Minister of Environment and Green Development M.Khurels. Eg River is located in Khuvsgul Lake and Egiin River basin, so it’s under Mongolia’s ownership. Therefore, it means that it’s Mongolia’s issue. It’s completely unrelated to Shuren Hydro Power Plant. The Russian side said that Mongolia doesn’t have legal basis for constructing Shuren Hydro Power Plant and that it’ll negatively impact on the ecological balance of Lake Baikal, which is registered in UNESCO. Mongolia hasn’t actually constructed it yet. The decision to construct the hydro power plant hasn’t been made. We’re only trying to make a feasibility study to see what would happen if it’s built. Whether the hydro power plant is harmful to Baikal Lake, a registered World Heritage, will become definite after the feasibility study and detailed environmental evaluations are made. It’s rather rude to treat Mongolia in this way when nothing has been done. Still, we reached a mutual understanding on this and agreed to exchange information and have a feasibility study made first, and later, introduce it to the Russian side. The government stated to discuss this issue within the scope of what’s been agreed.
Truthfully, Mongolians are people without water. Therefore, our people shouldn’t die of thirst to keep intact and ensure the integrity of another country’s lake. Why can’t we turn our water into a lake and make the environment green? If it’s necessary, we have to use our water sources for drinking water. I consider this treatment from Russia as a blatant attempt to interfere in Mongolia’s internal work. 
What are the expectations for Eg River Hydro Power Plant?
Eg River Hydro Power Plant has a capacity of approximately 270 MWs. We’ve already made feasibility studies and created all conditions for establishing agreements. We’re currently working actively on construction and development after raising investment. Constructing the hydro power plant will become a big booster for the development of Mongolia’s energy system, as well as production. It will open opportunities for developing renewable solar and wind energy, and strive towards green development. It’ll take five years to build.
Also, Mongolians and some NGOs have completely wrong understanding of this issue. They’re all so worried and concerned. Do they want to die of thirst? People come up with unimaginable nonsense and stir trouble. We, Mongolians, must stay together – unified. 
Is it true that Eg River Hydro Power Plant has 20 times the capacity of Durgun and Taishir Hydro Power Plants?
That’s right. Those two power plants have a capacity of 12 MW. A huge uproar was stirred when they were being constructed. Mongolia was experiencing severe drought from 2005 to 2008. At the time, we had Zavkhan River filled with water. Now, a big man-made lake has been created there. Zavkhan River has become such a beautiful lake now. There’s always an obstacle when something is started. Honestly, Govi-Altai and Zavkhan Provinces are alive because of those two power plants. Everyone who visits Zavkhan River is amazed to see what a wonderful development it has become. 
Are Durgun and Taishir Hydro Power Plants able to work at full capacity?
Yes. Out of the 37 MW of electric power supplied from the western region, seven to eight MW is produced by Durgun Hydro Power Plant. In other words, Durgun Hydro Plant is supplying 20 percent of the energy consumption of the western region. Taishir Hydro Power Plant is largely dependent on the water level of Zavkhan River. The lake is filling up well since recent years have had plenty of precipitation. If too much water flows out, the water level of the lake will lower and production will decline. Zavkhan River will face a danger of shrinking if the water level is too low. People and livestock drink from the river, so the ratio is adjusted. Taishir Hydro Power Plant works with a capacity of nine MW when necessary. Normally, it operates with a capacity of four to five MW. 
The government ordered to intensify the construction of Erdeneburen Hydro Power Plant Project at Khovd River. How is this project getting along?
The feasibility study for Erdeneburen Hydro Power Plant was made in 2007. At the time, the estimated cost for constructing a hydro power plant with a capacity of 220 MG at Eg River was 350 million USD. Subsequently, some 290 million USD was estimated for constructing Erdeneburen Hydro Power Plant (67 MW). We halted the project because it was a power plant with low capacity with high costs, and ultimately economically inefficient. A new feasibility was made recently. It was considered that building Erdeneburen Hydro Power Plant would be useful to the local area if the cost is reduced and its capacity is slightly increased. Its capacity has been enhanced to be 87 MW. A while ago, the government discussed this issue and enlisted it in the concession agreement list. Also, a project unit was formed and it was decided that works included in highlighted parts of research works and feasibility studies would be started.
 Is it true that another hydro power plant will be funded by the Turkish government?
Yes. A hydro power plant will be constructed with investments from the Turkish government at Khovd River in Bayan-Ulgii Province. The project unit made feasibility studies and had it approved by our scientific and technological advisory. At Khovd River, one hydro plant will be established in Bayan-Ulgii Province and another in Erdeneburen soum. It doesn’t matter as long as they have sufficient funds. It would be difficult if all these development work leave a huge debt to us and our future generations. The Turkish government said that Mongolia will not have to give money and the hydro power plant will be constructed with a loan. It would be problematic if Mongolia’s debt continues to increase. I’m sure the Mongolian government is thinking of something for resolving this.
Tons of foreigners are attempting to use this time when Mongolia’s facing energy and electricity shortage to come to Mongolia through a  concessional agreement and development work. Yet, the consumption of Mongolia isn’t that high. In other words, Mongolia can carry on until 2030 if we have 1,000 MWs of power. According to the estimations of development works that people want to do, 3,000 to 4,000 MWs will be produced. Ultimately, Mongolia will fall into debt if so many power stations are built without plans and calculations. We need to construct few low-cost power stations in locations that are absolutely in need of energy. 
Source: http://mongolnews.mn/1j3m
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