Mongolia Today

Is Mongolia the next Dubai, the Road to Nowhere, or a segment of the New Silk Road? Vladimir Putin, Wen Jaibao, and Hillary Clinton follow in the footsteps of Genghis Khan.

Mongolia achieved great recognition during the time of Genghis Khan. He was born a slave, endured a violent childhood; and ultimately changed world history; becoming the leader of a Eurasian Mongol Empire. Millions of people were subjugated to his 13th Century rule; which spanned from the Yellow Sea to the Caspian Sea including what is today China, the Middle East, and Europe.

Kahn’s looks were antithetical to the handsome Omar Sharif who starred in the movie, Mongol: The Rise of Genghis Khan. However, his skills as a ruthless warrior and outstanding administrator enabled his dynasty to continue for 150 years after his death. With many wives and countless children, his empire spread the length and breadth of the ancient silk routes. Trade included spices, teas, porcelain, ivory, textiles, precious stones, pepper, gold, silver, wine, carpets and jewels. When Mongol rule ended, so did the Silk Road trade.

Ancient Silk Routes are being resurrected. Last week Prime Minister Vladimir Putin, and Chinese Premier Wen Jiabao held talks in Saint Petersburg to support a new “Silk Road.” It was a meeting of the Shanghai Cooperation Organization (SCO) which China formed in 2001 with “The Gang of Five”; Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Prime Minister of Pakistan, Syed Yousaf Raza Gilani, attended at the personal invitation of Putin. Their goal is to expand economic opportunity. This requires international transportation such as railway, roads, and air transport; for a new “Silk Road” between Europe and the Asian-Pacific Region. Recently Mongolia, Pakistan, India, and Iran were granted Observer Status; a United States application for membership was rejected.

Today’s Mongolia is land locked between Russia and China, with a population of just over 3 million people. Herding and agriculture have been main features of the economy. There are vast landscapes of the Gobi Desert, snowcapped mountains of Bayan-Olgi, sparkling lakes and rivers, Buddhist temples, wild horses and camels. Nomads live in transportable felt walled gers. Cities, such as the capital of Ulaan Baatar, are smog choked. Arctic blasts sweep across lakes and rivers which freeze and are only navigable in the short summer. Less than 15% of the roads are paved.

Current speculation is that tiny Mongolia might become the next Dubai. International investment capital is vying for placement in untapped precious metals and mineral resources. For example, Ivanhoe Mines of Mongolia has mineral deposits of $1 trillion in the Oyu Tolgoi Copper Mine. Mongolia has the world’s largest coking coal deposit, Tavan Tolgoi. Coking coal is a vital component in the steel industry. It appears that a public offering may be pending after contract Parliamentary renegotiations with the mine in the South Gobi Desert. Mongolia would retain 51% of mining rights. London, Hong Kong, and NASDAQ are competing for the listing which could be over $7 billion. If estimates are correct, it will generate $5 billion per year for the next 50 years. Mongolia also has large reserves of uranium which will be extracted by new liquefaction techniques.

China, South Korea, Brazil, India, and the USA have all submitted competitive bids for rights in the Tavan Tolgoi mine. Russia and China have proposed building a new railway to transport the valuable mining assets. Currently there is no railway that can handle the anticipated tonnage. A key factor in Mongolia’s decision process is whether the proposed railroad will go from the South Gobi to the Russian border or to the Chinese border.

Russia has leverage with President Tsakhia Elbegdorj and Prime Minister Sukhbaatar Batbold. Russia already owns 50% of the state railway. Russia has written off all but $300 million of Mongolia’s debts. Mongolia depends on Russia for fuel. Russia is not above arm twisting for results, and has shortened supply and raised duties using energy policy to coerce political concessions.

Secretary of State Clinton brought up a new “Silk Road” plan in October, 2011 Her plan envisions Turkmen gas fields, meeting Pakistan and India’s energy needs. Clinton’s plan dovetails with the American plan to lessen the ties these countries have with Russia. Her plan currently has no specifics, but entails new infrastructure such as railroads, highways, pipelines, and free trade agreements. Similar projects were discussed in the past; but did not come to fruition.

Whether we have the Shanghai Cooperation Organization’s Silk Road or the US State Department’s Silk Road or both; it would appear that the silk road of ancient times will again have a dynamic influence on world trade.