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Economy / Featured News / Mongolia News / Politics / September 16, 2014

A New Dawn In the East

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Given the state of current Russian relations with the West over the ongoing crisis in Ukraine, one could be forgiven for considering President Putin’s visit to Mongolia on the third of September to be an oddly timed affair. Certainly for for many, even in Russia, the state of Mongolia is not a primary concern in terms of global politics. However, hidden behind Mongolia’s understated international reputation lies a country holding increasing significance to Russia’s Eastern realignment, as well as an important node in Moscow’s reassertion of its Soviet-era partnerships. Furthermore, the two nation’s extensive history of interactions provide a rich background for cooperation in the 21st century.

Mongolia and Russia: A Shared History

It is a quirk of Russo-Mongolian history that one can avoid hyperbole in declaring Mongolia as a crucial factor in the original development of the Russian nation. Whilst Russia has often been best understood through its interaction with Western nations, it is the East that established much of what we now consider ‘Russian’. Whether one commits to conservative views of the Golden horde as a stagnating presence — or revisionist views which view the Khanates as a force for development — the twelfth century Mongolian invasion had a formative effect on the Russian state. Traditional views have considered the Golden Horde as having had a devastating effect on the Rus’, but recent changes in attitude can be seen in academic circles.2 The Mongols certainly slaughtered thousands, but they also brought benefits to the peoples of Rus including a postal service, paper money and safe borders within the pax Mongolica. Arguably, a unique and unified Rus identity only developed in opposition to the so-called ‘Tatar Yoke’, and the rise of Moscow as the centre of Russian culture can also be attributed to the Golden Horde’s sacking of Kiev in 1240. Perhaps most significantly, it is the Rus’ people’s time under domination by the Khanates which first distinguished an alternate path for Russian development to that of Western Europe.

This relationship was reversed during the years of the Empire, as Russia developed into an industrialised and powerful nation state. Mongolia, by contrast, remained both overwhelmingly rural and tiny in terms of population. Subsequently, during the Soviet era, the then-People’s Republic of Mongolia functioned as a satellite of the USSR, relying heavily on Soviet aid and investment. Since the fall of communism however, Moscow’s presence in Ulaanbaator has declined.

The Myth of Russian Disengagement

It is frequently asserted that the Russian Federation ‘forgot’ Mongolia in the immediate post-Soviet era, but this is an easy generalisation which overlooks important aspects of the Russo-Mongolian relationship. The growth of China, Russia’s domestic problems and a foreign policy geared towards the West have muted Moscow’s voice in Mongolia since ‘91. Nonetheless, whilst Moscow’s political clout may have lessened, its presence is definitely not forgotten. Russia owns a fifty-one percent stake in Mongolia’s railway and forty-nine percent of its largest state-owned copper mine — no small matter in a nation in which mining constitutes 18.5 percent of GDP, and where the most important and transport system for industry is rail.4 The Russian Federation also maintains a stake in over two hundred and fifty smaller ventures worth twenty million US dollars. On top of this, Russia is Mongolia’s second largest importer after China, providing the petrochemicals necessary for the mining and extraction industries upon which the Mongolian economy is structured.

Russia therefore maintains an important economic presence in Mongolia. Furthermore, Russian military cooperation with Mongolia has been steadily growing under President Putin. Russia and Mongolia have held joint yearly military actions in Selenga since 2008, and there is reason to believe that Mongolia will become the newest member of the Shanghai Cooperation Organisation, in which it has maintained observer status since 2004.5 The memory of the Russo-Mongolian defeat of Japanese forces at Khalkhin Gol is frequently revived in order to foster recollections of the two nations’ long history of cooperation.6 The stage is clearly set, therefore, for greater integration.

Why now?

Crucially, Putin’s visit to Ulaanbaator last week comes at a time when both nations are increasingly gearing themselves towards the East, in a move away from the unreliable European economy. Since the collapse of the People’s Republic, Mongolia has attempted to adopt a ‘third neighbour’ policy, seeking to balance Russian and Chinese influence with that of Europe and South-East Asia. This policy has been guided by a fear of economic, and subsequent political, overreliance upon its two primary neighbours. The efficacy of this policy is looking increasingly tenuous, however, in the face of friction between Mongolia and Western corporations. The Oyu Tolgoi mine, for example, is a joint project between the Mongolian government and British-Australian corporation Rio Tinto, and was intended to represent the zenith of the ‘third neighbour’ policy. When at full capacity, it is predicted that the Oyu Tolgoi project will increase Mongolia’s GDP by 30%.7 Despite this, delays and taxation arguments are hampering the mine’s profitability — it has not been open since November — and foreign investors are becoming increasingly wary of becoming involved with Mongolia. Equally, Western governments themselves have done little to capitalise on Mongolia’s ‘third neighbour’ policy; former prime minister Amarjargal Rinchinnyamhas has gone on record as saying the government has been ‘disappointed’ by the visibility of their third neighbours in Mongolia.8

Similarly, Russia is currently undergoing its own eastern tilt in light of increasingly hostile relations with Europe. Mongolia in particular is primed to benefit from Russia’s ban of EU food products due to its extensive levels of meat production. This beneficent relationship goes both ways however. If a deteriorating situation in Europe, or a drop the price of crude oil, begins to threaten energy profits, then Eastern partners will be key. Mongolia has immense potential in this regard. Rapidly developing economies require ever greater energy levels in order to match development, and Mongolia’s growth is certainly rapid. In 2011 Mongolia’s GDP grew 17.5 percent. Admittedly, in recent years, growth has been slowing amid rising inflation and a weak tugrik.10 ‘Weak’ 2013 growth however still totalled 12.3 percent, and there is little evidence to suggest that Mongolia is on the brink of protracted stagnation.11

Sino-Russian Cooperation

Whilst the potential of greater integration between Russia and Mongolia is undeniably significant, it is also necessary to point out that Russia is not the only great power presence in the region. China’s stake in the nation is significant — it is the country’s largest foreign investor, and also has significant ethnic considerations when it comes to Mongolian interaction: there are more ethnic Mongolians living in China than there are in Mongolia. Several publications have interpreted the Chinese presence in Mongolia as posing an inevitable threat to Russia’s desire for influence in the region.12

However, such zero sum assessments of Mongolian foreign policy overlook the nuances through which international relations frequently operates. One need only look at the recent trilateral summit between Russia, China and Mongolia to see the extent to which these nations can be defined by cooperation rather than conflict.13 Furthermore, each nation serves to fill an export niche within the overall trade network between the three countries. China uses Mongolia’s raw materials to support its economic boom, whilst Mongolia utilises Russian energy supplies to fuel its extraction industries. Russia, meanwhile, is looking to import cheap goods produced in China, especially as it increasingly moves away from European trade. Rather than forming a conflict of interest therefore, Russia, China and Mongolia’s shared investments are mutually reinforcing and maintain strong growth potential.

The Future of Russian-Mongolian Relations

Mongolia’s declining interest in a ‘third neighbour’ policy is therefore both pragmatic and somewhat inevitable given its common economic space between China and Russia. The role of the Russian government, therefore, should be to promote this space as much as possible. China is currently considering the establishment of a free trade zone between itself and Mongolia.14 Whilst the suggestion has been made as far back as May, Russia should seriously invest in setting up a special free trade partnership between the EEU and Mongolia, as well as use diplomatic means to push for a free trade agreement between China and Mongolia.15 Creating a common economic space between these three zones would boost trade and streamline the energy-extraction flow from Russia through Mongolia and finally to China. Certainly there are obstacles to overcome in achieving this goal — sticky issues such as the differing track gauge between Chinese and Russian railways is just one example.16 Nonetheless the economic benefit to working through such problems is real and significant, and if Russia is to benefit from the global reorientation towards China, Mongolia is the perfect place to start.

1http://www.aljazeera.com/news/europe/2014/09/putin-mongolia-trade-201493142420136175.html

2http://www.themoscowtimes.com/news/article/was-tatar-yoke-really-all-that-bad/264037.html

3http://bibliotekar.ru/rus/98.htm

4http://www.lse.ac.uk/IDEAS/publications/ideasToday/04/04_Mongolia.pdf; http://mongolianeconomy.mn/en/i/6298

5http://en.itar-tass.com/world/745117; http://www.eurasianet.org/node/69001

6http://www.reuters.com/article/2014/09/03/us-putin-mongolia-visit-japan-idUSKBN0GY1JT20140903

7http://www.bicusa.org/feature/oyu-tolgoi-coppersilvergold-mine-project/

8http://www.dailynewsen.com/europe/putin-visits-mongolia-to-boost-trade-ties-h2599047.html

9http://www.fluor.com/FluorProjectPhotos/OyuTolgoi/oyu-tolgoi-copper-mine-2-fw.jpg

10http://www.bloomberg.com/news/2014-08-20/mongolia-seeks-economic-lifeline-with-pivot-to-china-russia.html

11http://www.bloomberg.com/news/2013-01-14/mongolia-economic-growth-moderates-to-12-3-as-coal-exports-slow.html

12http://www.jamestown.org/single/?tx_ttnews%5Btt_news%5D=3855; http://www.theasanforum.org/sino-russian-competition-in-mongolia/

13http://english.cri.cn/12394/2014/09/11/2361s843831.htm

14http://www.chinadaily.com.cn/business/2010-05/12/content_9838829.htm

15http://www.themoscowtimes.com/business/article/russia-and-mongolia-mull-creation-of-free-trade-zone/500788.html

16http://www.theasanforum.org/sino-russian-competition-in-mongolia/

SOURCE: Russian International Affairs Council




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