MONGOLIA PROFITS IF ITS NEIGHBOURS VIE WITH EACH OTHER TO OFFER IT CONCESSIONS

L.Purevbaatar , deputy chairman of the newly established logistics center, answers questions on export transport and the possible of outcome of talks with Russia and China.

Russia has announced a 52%-65% discount on its rates for transport of Mongolian commodity exports through Russian territory. Is this a satisfactory rate and can we expect a transit transport agreement to be ratified soon?

Of course, this is not perfect, but it is  not too bad, and it should be possible now to ratify an agreement. The other important thing is to negotiate the term of the agreement. We  proposed at the 14th session of the Mongolia-Russia intergovernmental commission of trade, economic, scientific and technical cooperation that the agreement should be for not less than 50 years, to help us make long-term plans and projections. The Russian side has not yet given a response.

Russia has said the rate discount is applicable only to goods meant for the Far Eastern ports. How will this affect our anticipated exports to third markets, beyond Russia and China?

The problem is that the cargo handling capacity of both Vanino and Vladivostok, the two ports we can reach through the territory of Far Eastern Russia, is below what we would like. An experts’ team plans to visit Vladivostok to study the situation and to discuss issues.
It is almost certain that our coal will be exported through Russian ports and that is why the new railway will be built in that direction. But coal is not the only commodity for which we require transit transport facilities. We shall need them for iron ore, copper concentrate and other items also and not all of this will go to Russian ports. The iron ore will reach such ports through Naushki or Choibalsan, but some of it will also go through Naushki and Bayantumen to Manchuria, from where it can reach the Khailar region. Going further through the southern territories it can to reach Ussuriski and Zarubino of the Far East. Thus we require agreements with both neighbours and this is why we need to hold tripartite talks.

Most Russian sea ports are owned by private companies. Will it be difficult to reach an understanding with them?

Actually, we have not yet approached them, though we have begun talking to South Korea and North Korea. Erdenes MGL is studying the ownership of Russian ports, but talks have not started yet.  The World Bank will fund the visit to Vladivostok of an Erdenes MGL team, which will review all aspects of work there, including the tariff for various services.

Is it enough for companies to talk to each other and not involve the Governments?

The two Governments are already discussing conditions, rates, land use, and port rental fees. However, it is good if Mongolian companies also have their own talks on details of service with Russian companies, independent of Government negotiations.

Mongolia plans to have a new logistics centre to coordinate transport through both the railway and roads. How much of our transit transport can use roads in the two neighbour countries?

The proposed centre will coordinate the export transport work of three administrative organizations: a road authority, a railway authority and a sea transport authority. However, the brunt of  the export load will be borne by the railway, and the shortest way to reach third markets is through Russia. 
It makes no sense to discuss the road transit transport with the Chinese as it is not viable to transport such huge quantities of commodities to either Jinjou and Tianjin port or to Hunchin port on the way to Vladivostok, in the scope of the Tumengol project. No country will allow that kind of traffic on its roads.

But we already have a road transportation transit agreement with Russia…

As in the case of China, it is not practical at all to think of transporting commodities by road through Russian territory. Good roads will, however, be needed inside Mongolia to transport the commodity from the mines to the railway. This work should be coordinated by the logistics centre. The road transit agreement with Russia allows Mongolian vehicles to travel to the Far East with coal and iron ore but there is no economic benefit in that. Road transit for export is a non-starter and we do not intend to bring it up during our talks.

Does China hold the key to the tripartite negotiations on transit transportation? How is it that it never responded to a letter from the Foreign Ministry sent months ago?

I do not know about that but, yes, talks with China have stalled since our decision to build the railway to Russia, and not China. Transit transport issues were regularly discussed with both neighbours. When  S.Bayar was Prime Minister, it was decided to establish a representative office in Tianjin and utilise Dunzian and Lingzhou ports. Unfortunately, nothing further was discussed when Premier Wen Jiabao was here. At present, Mongolia enjoys no preferential treatment from China as a landlocked country. We could discuss railway transit through China only if it offers discounts.

Has Mongolia tried for Chinese concessions, taking the example of Russia?

I personally think we would profit by letting our two neighbours compete with each other on offering better terms to us. That is what our negotiation strategy should be. Maybe our decision to take the railway to the north was an attempt to nudge the southern neighbour.

If China refuses to join any three-nation talks, then all negotiation will be between Mongolia and Russia?

There is a chance of transit transport through Chinese territory if their railway capacity is increased, or if Ulaanbaatar Railway and Erlian Railway get more lines or if new tracks are laid through Bichigt and Numrug. We shall explore with the Chinese Railway Ministry the possibility to transport coal through Erlian, using high-capacity trains and locomotives.

There must be many other outstanding issues to do with transport?

The main issue is the new railway. There are issues that can be settled by talks between  transport organizations and between officials. Neither will be a problem once there are agreements at the highest level. A comprehensive transit transport agreement will open the doors to break bottlenecks at lower levels. For example, work can then begin on the four-point plan of the Minister of Road, Transportation, Construction and Urban Development on exporting mineral products from Darkhan and Selenge regions,  building the Sainshand industrial complex, building 1,100 km of road from Tavan Tolgoi to Choibalsan, and renovating Ulaanbaatar Railway. 

What happens if there are no tripartite talks?

Let us assume that a bilateral agreement is made with Russia. I don’t think China will refuse to discuss it with Russia and Mongolia. That is what diplomacy is about.  

When do you think a deal with Russia will be finalised?

The Prime Minister will lead a high-power team to the Baikal forum on September 20, where some hard bargaining can be expected. The talks can continue when the Prime Minister visits Russia in November and the President does so at the end of the year.
Mongolia would press for increased capacity of transport through Manchuria to the Far East, more tariff discount, and at least a 50-year agreement.