Mongolia Strengthens Cooperation With Russia in Fields From Nuclear Research to Transit Rail

When Khaltmaa Battulga assumed the presidency of Mongolia in July 2017, most foreign and domestic observers believed he would pursue a much more pro-Russian policy than his globalist-minded predecessor, Tsakhia Elbegdorj. Battulga’s anti-Chinese rhetoric buttressed this prediction during the political campaign, followed by his first trips abroad to meet Putin at the Hungarian 2017 World Judo Championships (Kremlin.ru, August 28, 2017) and in Vladivostok, Russia, later in September. Among his “Mongolia First” principles was the promise of stronger ties with Moscow to alleviate Mongolia’s overwhelming economic dependency on China (UB Post, September 12, 2017). In the last few months, further concrete steps toward a closer Russo-Mongolian relationship have become evident.

During the 21^st Meeting of the Mongolia-Russia Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation, held in Moscow, on February 26–28, Mongolia and Russia agreed to expand cooperation in trade, economy, education, health, social protection and sports. One of the major agreements that emerged was a Memorandum of Understanding to establish a Nuclear Science and Technology Center (CNST) in Mongolia. Mongolia’s Nuclear Energy Commission Secretary Gun-Aajav Manlaijav and Rosatom’s (Russia’s State Atomic Energy Corporation) Deputy Director General for International Relations Nikolay Spassky signed the document (Xinhua Net, March 1). The center’s primary focus will be civil nuclear energy use, with Russian specialists assisting their Mongolian partners to establish the CNST facilities, as the two sides design a preliminary roadmap for the CNST project via specialized expert groups (Rosatom, February 28). Mongolian physicists for the past 50 years have been trained at Russia’s Joint Institute for Nuclear Research (JINR). The Nuclear Energy Agency of Mongolia, along with the Center of Nuclear Research at the Mongolian State University and the Institute of Physics and Technology at the Academy of Sciences are traditional JINR partners in Mongolia (Jinr.ru, March 7).

During the same timeframe, an interbank lending agreement between the Development Bank of Mongolia (DBM) and the International Investment Bank (IIB), headquartered in Moscow, was also concluded. The deal raised the IIB’s lending limit for the DBM to 50 million euros ($62 million) for a period of up to seven years to implement socially and economically significant projects in Mongolia. Since 2012, the total volume of IIB investments in the Mongolian economy has amounted to over $650 million. Starting from November 2016, the DBM has executed 24 trade finance deals to supply 8.6 million euros’ ($10.6 million) worth of products from the Czech Republic, Japan, Oman, Switzerland, Russia, Belgium, Spain and Germany to Mongolia. The IIB’s loan portfolio in Mongolia includes syndicated loans with the International Finance Corporation and the Dutch Development Institution FMO (Iib.int, February 28).

On the eve of the intergovernmental commission meeting, Russia and Mongolia agreed to a plan to create three trans-boundary protected areas in the Trans-Baikal region, Buryatia and the Altai Republic. This plan is a positive step toward deescalating a variety of trans-water disputes in the Baikal region, which led to Russia labeling Mongolia an “eco-threat” (Siberiantimes.com, May 13, 2016). According to Sergey Donskoy, the Russian minister of natural resources and ecology, the first cross-border reserve of Istoki Amura would connect more than 318,000 hectares of the Zabaykalsky Krai’s security zone, the Sokhondinskii reserve, with the Mongolian National Onon-Balwinski Park. The second cross-border territory would be in Buryatia, located within the Russian Tunkinsky National Park and the Mongolian Khubsugul Park. The third border area would stretch from the Saylyugemskiy Park in the Altai Republic to the Selham reserve in Mongolia. The establishment of joint protected areas will enable the two countries to conduct long-term ecological monitoring of certain species of migrating animals across the borders and to protect flora and fauna (RIA Novosti, February 28).

Just a week earlier, Russian Prime Minister Dmitry Medvedev authorized his minister of transport to sign a railway transit transportation agreement with Mongolia to promote flexible tariff policy over the next 25 years with the purpose of enhancing cooperation on freight transportation trade. The objectives of this new agreement include easing border checkpoint procedures on transit freight, increasing freight volumes, stimulating infrastructure development of railway transport and assisting Mongolian exporters to overcome maritime transport obstacles (Ubinfo, February 28). One of the clauses covers modernization the infrastructure of the Ulaanbaatar Railway (UBR), a Russian-Mongolian governmental 50/50 joint venture, which is Mongolia’s sole north-south railroad connecting Siberian Russia to North China. Freight turnover in 2017 for the UBR was 23 million tons, a 16 percent increase from 2016 (UB Post, February 5). The Russians reported that the draft agreement on renovating the UBR was prepared by the Mongolian side and presented to them at the end of 2017. Early in February, Oleg Belozyorov, the president of Russian Railways (RZD), met in Ulaanbaatar with President Battulga and his cabinet to discuss the draft document on reforming the UBR as part of Mongolia’s goal to become a cost-effective economic transit corridor, especially for its two border neighbors, Russia and China. During the meeting with Belozyorov, Battulga said that railways development was of great significance for Mongolia’s economic growth and proposed to advance the talks on renovating the Ulaanbaatar Railway JSC (Montsame.mn, February 5).

The railroad transportation agreement was the culmination of September 2017 discussions between Battulga and Putin at the third annual Eastern Economic Forum in Vladivostok. Although the economic corridor was the policy of President Elbegdorj (see EDM, January 24, 2014), Battulga enthusiastically embraced it and promised to export coal from Mongolia’s largest coal deposit of Tavan Tolgoi to third markets over Russian Railways. In Vladivostok, the Mongolian president also put forward a proposal to establish a free trade agreement with countries of the Eurasian Economic Union to maximize trade turnover with Russia and abolish tariffs and non-tariff obstacles (Mongol Messenger, September 8, 2017). In May 2017, the UBR restarted its transport of Russian oil from Rosneft and Transoil from Russia to Chinese customers. The two oil companies had suspended the transportation since 2005. The revival is connected to China’s One Belt One Road initiative, which promises to include Mongolia in its economic network linking Asia and Europe, as well as developing Mongolian transit infrastructure to Russian Siberia with Chinese loans (Ubinfo, February 28).