May 2009
During his first visit to Mongolia the Russian President Vladimir Putin was giving a humble “order“ at the luncheon. Putin’s first visit to Mongolia aimed to open the way to start political discussions between the two countries and also to determine new principles for an equal partnership.
It has been almost nine years since Ulaanbaatar Declaration was issued for the Mongolian and Russian people. It had idealistic content about transformation from the old-time brotherhood into a modern equal rights partnership. At the time of his first visit, Chechen war issues, bad behavior by the mayors of the Federation Council, over-confidence and pressure coming from the oligarchy that swallowed Russian televisions, etc. were continuously on Putin’s mind and those were his biggest concerns.
Tomorrow he is visiting Mongolia, so he walks today so confidently. The people of Mongolia share expectations about Putin, the Head of the Russian Government – his choice can be unusual for the lunch. They sense the pace of this strong leader who re-arranged the vast country of Russia into good order both politically and economically solely in the last eight years.
Most probably, Prime Minister Putin will “order“ various options of cooperation in Mongolia’s mineral industry.
A long-term partnership for agricultural development was offered in advance by the Mongolian Government. The Minister of Agriculture of RF, E.Skrynnyk, delegated to herofficers to draft a long-term partnership agreement proposal. To start with, diesel fuel, seed grain, pesticides, and equipment should be supplied on loan for spring sowing. Mongolian agricultural producers will get a loan from the “Russel’khoz“ or Rusagro Bank and the “Rusagroleasing“ company, on commercial terms. The total commercial loan would be 300 million US dollars, which surely is a petit pinkie compared to what Mr.Putin would order at the lunch.
In the season when the homeland quenches thirst with rain and fresh shoots of wicker begin to grow, Putin dropped by the country. In the days almost too late for spring sowing, discussions about machinery, fuel, and seed loans, which are vital in this season, will not surely be a priority topic of the big bosses. However, the 300 million dollar loan will definitely get granted, “someday, somehow“. And then the money shall be used for the Atar-III or Cultivation Campaign-III. As a matter of fact, we are obviously losing time wise. We should understand that Mongolian parliament had to be prudent about vesting the Government with authority for credit guarantees. It needs some important consideration, before legally vesting the Government with the authority for guarantees of commercial credit from other countries. According to a program treaty negotiated with the International Monetary Fund, there is a provision that a commitment for commercial credit should not exceed 200 million USD. The round can be discussed among a small group, but the given authority might also be able to solve the credit guarantee issue of the 15 billion USD from China. Reluctance for popularization of China loan before the presidential election will most certainly be brought to discussion, soon. Well, as of now, preparatory works have been started to get the loan from the “Exim“ Bank of China. The money will come into the country through the Chinese loan because of existing needs of funds in domestic construction and mining industries, like a new good infusion of blood is needed to keep business life alive. Meanwhile, the Democratic Party group in the State Ikh Khural has asked for some time for “clarification“ before the guarantee authority is vested in the Government.
The reason this point has been brought up here is that the country recalls under what economic climate we are meeting with the Head of the northern neighbor. Have we wondered at all, whether we used the wheat that Putin “sold us“ last year, efficiently? We know the wheat was bought when its price was too high on the world market and has since been set aside in the state reserve, which might possibly become an inflation factor for flour in the country, today. If “Putin’s flour“ was cheaper, “Mill House“, a national factory (newly established) would not have stayed idle for a whole month. The same story about a fuel bought from him. The nation suffered a grand loss of nearly 20 billion Mongolian Tugrugs – the fuel that was bought from him at a high price and set aside in reserve, since last year. Now, nobody dares to remind Putin about our half-baked management that resulted in the country suffering irrecoverable losses from the debts. Would the Russians care? No, they would not, because none of their business. But they would care if their own business is involved.
The Head of the Russian Government will present us proposals upon collecting all his businesses’ interests about participating in the International bidding on Tavantolgoi and cooperation on mining radioactive minerals.
We have spoken a little bit of what we see about Mongolia situations now. Let’s see what is economic situation in Russia, today? Small wonder, whether Putin will be able to order everything that he wants?
In fact, Putin’s purse has become thin. However, he still does not want to look poor. AtDUM, when Putin was presenting his annual report of government last April 6, he stated “The gold reserves of Russia are set aside in a reliable bank. Our gold has been secure this way during the last three and a half years now… ”. He sounded confident, although, when a representative of the Liberal Democratic Party put a question, standing from a far back seat of DUM, “Whether the Government will buy foreign debts of the national big companies?”, Putin almost lost his grip, but soon devised an answer. “Russia will spend 500 billion USD to buy their shares, which will be a measure to prevent the shares of the strategically important companies from getting lost in other countries” he replied. These “foreign debts“ are currently throttling the economy of Russia. 100 billion of the aforementioned 500 billion USD are short term loans. Somehow, preferred debts of 174 billion USD have been paid since Prime Minister’s presentation about the Government report to DUM.
Within the scope of the Government plan and against the current crisis, VneshEconomBank proposed a loan program for the national companies with foreign debts. However, the prudent Russian businessmen were more careful and most of them avoided this good-will loan proposal. They, instead, preferred to find a different solution of their own fortune. For example, in February, Mechel company agreed to borrow 1.5 billion USD from the Government, but it changed mind and took the loan from GazProm Bank. The company leaders still did not forget that Putin was keeping eyes on their activity of the past summer. He was condemning the company for selling coking coal too dear in the home market, and even threatened to sue in court. After Putin stated so, Mechel shares fell instantly on the stock exchange, which resulted in the Russian stock market lose 58 billion USD in one day.
Mongolia had similar stories about avoiding State good-will support, as you dear readers remember. The Mongolian State Risk Fund developed procedures of granting loans for the commercial banks. However, big national companies did not request the loans. Like the Russian companies, they preferred their own “fortune“ to get over difficulties.
Today, Russian companies have created a big pool of loans domestically in order to pay their foreign debts. Consequently, “bad“ loan sizes have drastically increased for 20 influential companies according to the official statistics.
Peter Aven, the Head of Alfa bank, stated: “Many Russian banks shall be bankrupted by the summer unless the current rise of noncollectable credits in the banking system is stopped“. Among the big loans from Alfa, Rusal and Basic element of the billionaire O.Deripaska were ranking at the top. These are examples of the Russian companies that are interested in investing in the strategic deposits of Mongolia but are currently going through financial hardships. So, the Head of Russian Government who wants to order an haute cuisine for his lunch in Ulaanbaatar may not be able to afford to pay.
The Russian Railways LLC has cut exactly half of its investment amount for 2009; shortened work hours of 37% of employees; 247 thousand workers are “scheduled“ to have non-paid leaves or holidays. Only one year ago, the Russian Railways worked with a very large profit of 13 billion rubles; but, today, it is grappling with deep financial difficulties.
Moreover, the billionaires, who want to “go in pairs“ with The Russian Railways to participate in Tavantolgoi bidding, are also affected by the financial difficulties. Aleksey Mordashov, the owner of Severstali, had property worth 18.430 million USD in February last year, but today his property is reduced to 2.360 million USD; Viktor Vekselberg, the director of Renova Holding had properties worth 8.250 million US dollars; but, again, it has dropped to 2.220 million. Recent statistics show that the Russian billionaires have been stricken by the global economic crises.
In such an economic condition, Prime Ministers of the two countries are meeting tomorrow. Literally one month ago, Putin said in his speech: “The Government, reporting its performance to the State DUM, should be one step ahead to improve the Russian political system“.
At the discussion about the Government plan against the crises, Putin was carefully listening to every idea coming from DUM Members. Already-established opinions about him were changing because of how he looked, being so worryingly meticulous in writing the ideas down. Since the end of the last year on, when financial problems were rapidly growing, Putin had been to outlying regions several times to explain to people about the Government measures to solve the difficulties. Putin senses that, more importantly, the public must keep confidence in the Government and not get dismayed. So, Putin is visiting Mongolia to seek a fortune for his businessmen, whose wealth and money are reduced twice or almost three times due to the financial crises. May both enjoy the lunch without forgetting that Mongolia is the host and Russia-the guest. The roles should not be reversed.