May 2009
The above mentioned three names are the major projects planned by Russian Premier V.Putin during the coming 8-12 years. These are the strategic steps being started well in advance from a very long distance by sensing that the world economic foal point is shifting towards Asia Pacific region.
In the first half of May this year, the political part “preparation completed” for the above projects. During Putin’s visit to Japan, the public shouted in a demonstration demanding to “return the Kuril island.” Although the visit was packed with a very busy schedule with the Japanese officials to sign on 10 documents by S.Kiryenko on uranium cooperation, the main agreement was indeed around the Kruil island.
This time Putin was evasive from the political agenda. The Japanese officials were no different. They seriously discussed energy sector. They finalized the previously held negotiations on cooperating on almost inexhaustible resources under the Sea of Ochotsk. If our readers remember, in February, Japanese Premier Taro Aso’ssudden visit to the south Sahalin caught by surprise the attention of the whole world. It the first step made by a Japanese since Russians’ take over of the Kuril island in 1945. Sahalin state of Russia controls the Kuril and Sahalin islands. There are tremendous amount of oil and natural gas in surrounding islands, especially under the Sea of Ochotsk. It is resource worth is estimated at USD2.5 trillion. Now, seems it is up to Putin and Taro Aso to agree on the matter.
Japanese and Russians discussed about a project titled “Sahalin-3”. A huge oil-gas complex will be built on the island. The main investors will be Gazprom, Rosneft, Mitsui, Mitsubishi and Royal Dutch Shell will take a small part too. They are the partners who have already invested in Sahalin-1 and Sahalin-2 projects. In one word, a close partnership based on the energy demand is already in a full swing in the eastern hemisphere. Russians usually work with its partners on the basis of product sharing agreement. The statistics quoted a very high rate of foreign investment to Moscow region. The second place has been taken for sometime by ”forgotten” Far Eastern Sahalin. A new century is beginning in the Far East and Siberia.
Then Putin visited Ulaanbaatar. The second plan to develop the Far East and Siberia was also ready in Mongolia too. Preparations to establish a “joint venture“ have completed already. A detailed plan on when and which project have to be ready was approved by the minutes by the ”Mongolian-Russian working group on formulating organizational and legal conditions to cooperate on railway transport development of Mongolia” in December 6, 2008. On that day, the destiny of joint Ulaanbaatar Railway Corporation and preparation to establish a new joint company were clearly delineated with projected timing.
It stated that the budget of the joint venture will be formulated and agreed by February 1, 2009, furthermore, the capital investment will be defined, necessary legal documents for establishing a joint venture will be prepared and discussed by February 15, implement requirements of country law and internal regulations to agree on a resolution of establishing a joint venture by March 15, officially register the company in Mongolia by April 1. The work is being actively conducted according to this plan and majority of MPs are not fully aware of what is happening. Some MPs commented on the cancellation of the US MCA aid for the railway that they “did not know about that, was on the countryside trip and would read from newspaper what happened after reaching Ulaanbaatar.“
While legislator themselves were not fully informed what was happening, new trains are already tooting at Ulaanbaatar station. Joint Ulaanbaatar railway has MNT158 billion in debt today. V.Yakunin himself, who is gifting the new trains, is in a huge debt too. It can be understood that the trains, in fact, are the payables of the Gazprom Bank rather than Yakunin’s gift. There are preliminary talks that Ulaanbaatar Railway debt will be repaid by “fundraising“ from Gazprom Bank and the loan guarantee will be provided by the Government of Mongolia.
In terms of Government loan guarantee I would like to update those MPs, who did not hear it due to countryside trips. The Parliament has not extended a right on the guarantee of USD300 million commercial loan from Rosselhoz Bank yet. However, on the sunny day of May 13, around 20 tractors stood in a line as if reminding the Children’s Festival event. Russians have already decided themselves on the first portion of the USD300 million loan and sent the tractors and the staff of Ministry of Food and Agriculture of Mongolia have carefully pasted logos of “Atar-III“ (Cultivation Campaign-3) on the sides of the tractors. Hope that MPs who objected angrily to receive a loan with 10% interest from Russia watched their TVs on that day at least.
Now, let me introduce the person to implement Putin’s project. Although the charter of the joint venture is not publicized S.Morozov is dreaming to become the chairman of the joint venture. Morozov is known a little bit among the public from this time of being the “meat clerk.“ The Association of Meat Exporters raised many complaints against him that while he was a major shareholder of Buriatmyasoprom corporation he did not settle his bill after purchasing meat in a huge bulk from Mongolia. Mongolians forgot his sin soon. However, Mongolian exporters will not forget that he became a head of one department in the Ministry of Agriculture of Russia soon after the event. Since then Mongolian meat has been regarded inferior and has not even crossed the border not to mention to pass the Ural Mountains. Chairman Morozov made initiations to import meat to Russia not from the immediate neighbor Mongolia, but Argentina, Brazil and Australia.
At present, the “meat“ Morozov is likely to stay in Mongolia as the railway clerk. Yelyena Skrinnik, Minister of Agriculture of Russia signed on an agreement to increase meat export 3-4 fold. Morozov’s “Argentinean meat tale” is over happily ever after. Now, meat issue is no longer interesting to Morozov and he is doing best to tie a knot with a key project of the century to build a new railway to the Far East. To be able to participate in the mining projects in Mongolia, there is a version to establish a subsidiary of the joint venture. This issue was pre-determined during the Cabinet meeting in April. In one word, Russians now met a golden momentum to blossom their new business.
There is a provision on the last page of the minutes signed by the Ministry of Road, Transport and City Construction of Mongolia and Russian Railway Corporation management on 6 December, 2008, which stated that “The parties shall review the agreement made between Governments of the People’s Republic of Mongolia and Soviet Socialist Republic Federation to establish Ulaanbaatar railway corporation in 1949 and it noted that the activities of the Mongolia-Russia working groups required to be built up.“ For the last twenty years, Mongolians kept talking about this ignored provision at the end of the minutes.
Mongolians have been wishing how it would be wonderful to increase the ownership to 51%, how it would be wonderful to invest in the railway and how it would be wonderful to dismantle the corrupted railway kingdom. As soon as Mongolian Government becomes more intimate with Yakunin it completely forgot about 51%. Furthermore, the means to let in the air and wind in the hot office rooms of the Ulaanbaatar Railway Shareholding Corporation is gradually distancing away. The fact of supplying of very costly parts from Irkutsk state of Russia is likely to remain as a ghost inside the gray building of the Ulaanbaatar Railway Administration. Nobody is allowed to question why what was happening in the railway and why auditing was not allowed.
V.Yakunin announced that he was rejecting the free gift of America. However, Mongolia paid dearly for the “cheese“, the investment was meant to be given not to Yakunin, but people of Mongolia. It was a token of sending over Mongolian 700 officers and soldiers to Iraq and their courageous missions fulfilled by them forsaking their lives during seven rows since 2003.
The Mongolian media may have overlooked the fact that S.Chemezov, general director of Rostechnology corporation was among the entourage during V.Putin’s visit. Roztechnology owns 49% of the Erdenet Mining Corporation. And we can see that the party, which owns 49% is not likely to open its mouth first. One percent is a not only a strong economic unit but also political. S.Chemezov’ corporation had a huge debt to foreign banks. Russian Government has done its best to repay his debt. In Ulaanbaatar too, V.Putin talked on behalf of S.Chemezov and promised to make a technological renovation in Erdenet. Premier V.Putin is putting a great effort in protecting the interest of Russia on the Mongolian territory. It is his responsibility.
But what is happening among Mongolians? Where is the Mongolian interest to be added on the work schedule ordered by Putin? Whatdoes everyone`s quietness hidden fear and beating around tell about the future?