Mongolia Hangs in the Balance: Political Choices and Economic Realities

Year 2015 marked the twenty-fifth anniversary of Mongolia’s democratic revolution. Ever since it escaped the protective embrace of its northern neighbor, Mongolia maintained an astute foreign policy, pursuing positive dialogues with China and Russia and also reaching out to its so-called collective “third neighbor,” usually understood to be Western countries plus Japan. The election of ostensibly “pro-Western” President Tsakhiagiin Elbegdorj in 2009 gave a new impetus to Mongolia’s search for global recognition through sponsorship of multilateral dialogue, participation in international coalitions, and, of course, developing bilateral relations with both China and Russia but especially with the “third neighbor.” Elbegdorj’s first term in office (2009-2013) also saw Mongolia registering unprecedented economic growth. China’s appetite for natural resources briefly made Mongolia the world’s fastest-developing country, even as growing sentiment of resource nationalism clouded the horizons for global investors.

In recent years, the positive dynamic has been reversed, and the economic outlook remains very uncertain. The changing business climate has contributed to domestic political instability. In the meantime, Elbegdorj has had to navigate a much more complicated foreign scene, characterized by a deepening conflict between Russia and the West and menacing tendencies in Sino-American and Sino-Japanese relations. Elbegdorj’s answer to these challenges has been to engage closer than ever before with Russia and China. Xi Jinping recently called Sino-Mongolian relations the “best ever” in their bilateral history.¹ Putin, too, has shown a greater trust in the Mongolian leader. In the meantime, Western observers have begun to question whether Mongolia still has the willingness or the ability to maintain its “third neighbor” policy. As Russia and China close ranks, will Mongolia, too, toe the line drawn by its more powerful neighbors, or will it be able to continue exploiting existing contradictions between the two, which it has so successfully done in the last 25 years? This article is an attempt to answer this question by evaluating Mongolia’s response to Russia’s conflict with the West, reflecting on the ups and downs of Sino-Mongolian and Russo-Mongolian relations, and analyzing the particulars of the Mongolian domestic political scene.

Mongolia Reacts to Crimea

Russia’s annexation of Crimea in February and March 2014 was closely followed in Mongolia. Ulaanbaatar’s interest was not colored by the same sort of alarm, as for instance, the reaction in the Baltic states or even by cautious apprehension of the sort exhibited in Central Asia. This is because, notwithstanding the lengthy historical record of Russia’s meddling in Mongolia, the northern neighbor is not seen today as a threat to the country’s sovereignty and territorial integrity. Indeed, there were even voices of active support for the Russian position in the conflict with Ukraine. For example, a former deputy of the Great Khural Delegiin Zagdjav called a press conference to condemn hideous plots of Western intelligence services in Ukraine.² But Zagdjav hails from the margins of the political scene. His views, though promoted by the Russian embassy in Mongolia and attracting positive commentary in Russia, were basically inconsequential.¹ More curiously, some form of support for Russia was expressed by Mendsaikhany Enkhsaikhan, the former prime minister and now the head of the (relatively minor) Mongolian National Democratic Party, and even by the Deputy Speaker of the Great Khural Logiin Tsog.⁴ The line taken by these politicians was that Crimea’s residents demonstrated their preferences by overwhelmingly voting to accede to Russia and that this choice must be respected.

Much greater controversy erupted when the minister of Industry and Agriculture and parliament deputy “Jenko” Khaltmaagiin Battulga, in an interview with the Russian media, stated that “of course, we support Russia as neighbors” on the question of Crimea.⁵ As one commentator noted, “who is this ‘we’. Is he talking about the government position?” These comments, as Battulga’s detractors suggested, clearly violated Mongolia’s third neighbor policy.⁶ “It is important,” noted a well-known Mongolian journalist L. Narantugs, “to approach the situation by measuring seven times before cutting” so that “instead of cheering for the bear who had caught a squirrel [in reference to Crimea],” Mongolia would consider where its own interests lie.⁷ Battulga, a world sambo champion, was accused of being an agent of Russian influence if not a Russian spy. “You can’t insult our national intelligence agency like this,” was Battulga’s reply.⁸ Battulga, who is also a billionaire and one of his country’s richest men, could more accurately be described as Mongolia’s Donald Trump, a firebrand politician who thrives on controversy. While popular with the public, his views have not represented the outlook of the political mainstream.

In the meantime, the mainstream remained extremely cautious with regard to Crimea and the broader Russian-Ukrainian crisis. “Everyone criticized Battulga because our position was not to take a position,” recalled one insider.⁹ This was a similar attitude to that of the Chinese who also treaded carefully and very different, for instance, from the Japanese, for whom Mongolian policy makers had long advertised special affinity. Pressed on the question during his May 2015 visit to Japan, Elbegdorj replied, tellingly: “First, we are neighbors [with Russia]. Second, we hope that the conflict will be resolved by peaceful means.”¹⁰

This logic and the order of priorities underpin most of the informed Mongolian discussion of the Crimean situation and the Ukrainian crisis. The media coverage of the Russian moves in the lead-up and in the immediate aftermath of the contentious March 16 referendum generally omitted words such as “aggression” or “occupation.” Pundits reasoned that Mongolia could not afford to alienate its powerful northern neighbor: the country heavily relies on Russian imports, particularly energy. “If the Russians raise the price of petrol or won’t supply it for a few days, it’s hard to contemplate what will happen in Mongolia,” argued Gombojavyn Otgonbayar, a respected public affairs commentator, noting that for Mongolia the real lesson of the crisis was that the country was overly dependent on its neighbors.¹¹ Another concern that crept up repeatedly was the potential consequences of endorsing a change of borders for a country that has its own minority nationalities, especially the Kazakhs of the western provinces, whose long-term commitment to Mongolian statehood could not be taken for granted. There was also a strongly negative public reaction in Mongolia to reports that the annexation of Crimea could encourage irredentist thinking in China with regard to Mongolia that had once been part of the Qing Empire.¹² These kinds of underlying connotations made it a politically costly proposition to show sympathy for the Russian cause.

More importantly still, Mongolian policy elites concluded that Russia’s international isolation, and, in particular, anti-Russian sanctions imposed by the European Union, the United States, and Japan, offered a potential opening to Mongolia for making significant economic gains. This thinking was facilitated by two developments. First, Mongolia’s gross domestic product (GDP) experienced serious decline from its highpoint of 17.5 percent annual growth in 2011 to 7.8 percent in 2014. Decline in foreign direct investment (FDI) was even more precipitous: from USD 4.7 billion in 2011 to USD 644 million in 2014.¹³ Some economic difficulties were self-imposed. Protracted conflict over the operation of the massive copper-gold Oyu Tolgoi mine, legislative action to ward off potential Chinese ownership of mining projects in Mongolia, and repeated reversals and uncertainty over the disposition of one of the world’s largest coal reserves at Tavan Tolgoi, scared off foreign investors. Even if the investment climate had been much better, the Mongolian economy would still have been hit by the falling prices of copper and coal on the global markets (the two are among its key exports). The result of these travails was that the government has had to rely on external financing, including through the issue of “Chinggis Khaan” bonds, and on hugely unpopular domestic austerity measures.

The second development was the emergence of China’s agenda of regional economic development along the “Silk Road Economic Belt.” First articulated during Xi Jinping’s visit to Central Asia in September 2013, the idea expanded into “One Road, One Belt,” a road in every direction, including the sea, promising a (still largely unrealized) bonanza of Chinese commerce and investments to all. What made this idea especially interesting, from the Mongolian perspective, was China’s promise to take into account Russia’s interests in extending this belt (the promise was formalized in a May 2015 Sino-Russian agreement on coordinating the “Silk Road” with the Russia-led Eurasian Economic Union). These initiatives were discussed in the context of Vladimir Putin’s “pivot to the East,” which was greatly facilitated by economic sanctions against Russia. Whether Russia pivoted to the East or China to the West, Mongolia offered the shortest distance for Sino-Russian collaboration with the prospect of considerable windfall for a country in dire economic need. In view of Mongolia’s difficulties and hopes, it is not surprising that the country reacted as it did to Russia’s war in Ukraine and to the annexation of Crimea: by following strict neutrality. It was a characteristically astute choice for a country that is often short of choices. But Ulaanbaatar went further than simply refusing to participate in the Western effort to isolate Russia; it proactively exploited Russia’s growing isolation to gain importance in the Kremlin’s eyes and bring Russo-Mongolian relations to a new level.

The Corridor to Happiness

Russo-Mongolian relations today are at their closest since the late 1980s. In some ways, this is unexpected, especially that the key proponent of closer ties between Moscow and Ulaanbaatar is Tsakhiagiin Elbegdorj, one of the founding fathers of Mongolian democracy, who had previously enjoyed a reputation as something of a pro-Western politician.¹⁴ Moscow was not particularly enthused by Elbegdorj’s election as president in 2009: Russian sympathies were with his predecessor and rival Nambaryn Enkhbayar, who had developed a close personal relationship with Putin. Russia’s disappointment deepened when the Mongolian government rebuffed attempts of the state-owned company Russian Railways (until recently led by a close Putin ally Vladimir Yakunin) to gain access to the Tavan Tolgoi coal deposit. Moscow also had no patience for Mongolian efforts—begun under Enkhbayar but continued by Elbegdorj—to attract US financing in the modernization of the trans-Mongolian railroad, jointly owned by Mongolia and Russia. Putin had long eyed with suspicion Mongolia’s participation in the US-led wars in Iraq and Afghanistan, and the US involvement in the multinational Khaan Quest military exercise in Mongolia (held since 2003), all indicative of Washington’s alleged efforts to draw Mongolia into a security relationship with the United States. Elbegdorj’s advocacy of democratic governance and human rights (highlighted in Mongolia’s Presidency in the Community of Democracies in 2011-2013) only deepened Russia’s unease about Ulaanbaatar’s political trajectory.

The spring of 2014 brought important changes. In the wake of Russia’s widening rift with the West over Ukraine, Putin redoubled his efforts to open up to Asia. His most immediate target was China. The opening gambit was Putin’s May 2014 trip to Shanghai, from which he managed to carry a long-delayed contract on the construction of a gas pipeline to China. This was an important personal victory for Putin, a sign that Russia had other friends and markets and did not fear Western economic sanctions. While pundits debated the merits of the gas deal, Putin was busy in bilateral meetings, including one with Elbegdorj on May 20. Elbegdorj used the opportunity to advertise Mongolia as a transit corridor. This was not a new idea: Mongolian policy makers had long called for establishing a number of Sino-Russian transport corridors, including rail, highways, oil and gas pipelines, and energy.¹⁵ But even as Putin’s visit to Shanghai demonstrated that pipelines would be built around Mongolia and not through it, the Mongolians persisted, playing up their country’s geographic advantages. Days after Elbegdorj’s meeting with Putin, Prime Minister Norovyn Altankhuyag turned up at that year’s St. Petersburg Economic Forum. He, too, met with Putin, assuring the Russian leader that relations with the northern neighbor was a priority for Mongolian foreign policy and restating Ulaanbaatar’s preparedness to accept Russian pipelines and increased railroad traffic.¹⁶

Altankhuyag’s trip to St. Petersburg had an important symbolic dimension: he was the most senior foreign government official to participate in the economic forum at a time Russia was practically stonewalled in the West. The Russian leadership clearly appreciated this token of support. In the following months, the intensity of bilateral contacts increased significantly. In June 2014, Mongolia welcomed the chairwoman of the Russian Federation Council Valentina Matviyenko.¹⁷ The speaker of the Russian Parliament Sergei Naryshkin came to Ulaanbaatar in February 2015 then again in September 2015 (to participate in a session of the Organization for Security and Co-operation in Europe (OSCE) Parliamentary Assembly).¹⁸ The latter visit was especially symbolic and politically significant: it came shortly after the same Naryshkin was banned from attending an OSCE session in Helsinki (the Finnish government refused to grant him a visa). Naryshkin devoted most of his speech at the Ulaanbaatar session to denouncing Western immorality and duplicity in the Ukrainian and Syrian crises.¹⁹ But he also praised Mongolia for “maintaining a position of independence in international relations.”²⁰ Among other Russian celebrities visiting Mongolia was the viciously anti-American and highly corrupt head of the National Security Council Nikolai Patrushev who praised Ulaanbaatar for its position in the Ukrainian conflict. Naryshkin and Patrushev both highlighted that Russia now regarded Mongolia as “one of its leading strategic partners.”

One interesting new element of the relationship has been Ulaanbaatar’s rediscovered willingness to emphasize its historical links with Russia. In the past it was mostly the Russians who harped on the historical themes. The Mongolians, by contrast, have not been so keen to advertise the heartwarming legacies of Soviet-Mongolian friendship. This time, though, Elbegdorj proved a lot more willing to engage in the diplomacy of historical commemoration, seen, for instance, in the celebration of seventy-fifth anniversary of the Khalkhin Gol/Nomonhan battle of 1939. The border conflict, which pitted the Japanese and their unrecognized client state of Manchukuo against the Soviets and their unrecognized Mongolian client, would seem like an unlikely cause for commemoration in today’s Mongolia. Yet it was not only widely commemorated but also discussed in terms reminiscent of the bygone days of the socialist era. In his anniversary speech, Elbegdorj highlighted the “heroic achievements of the humble Mongolian-Soviet warriors [who] did not spare [their] flesh and blood [haluun am’, buleen tsus] for the sake of the protection of Mongolia’s sovereignty and independence.” Tellingly, Elbegdorj characterized the Russians as Mongolia’s “brothers” (akh duu), a formerly omnipresent term that fell into disfavor after Mongolia’s democratic revolution.²¹ “The Khalkhin Gol battle is a special page in our relationship,” Elbegdorj explained in an interview. “The [fact that] our country’s freedom was defended by Soviet citizens who did not spare their lives will forever remain in our hearts. This cannot be compared to any help by any other country.”²²

By far Elbegdorj’s most symbolic move was to attend the seventieth anniversary victory parade held in Red Square on May 9, 2015. The symbolism was in the fact that Putin’s invitations to Western leaders were mostly turned down. Elbegdorj found himself in a rather colorful company that included Cuba’s Raúl Castro, Turkmenistan’s Gurbanguly Berdymukhamedov, and even Zimbabwe’s Robert Mugabe. Not only did Elbegdorj attend in person but Mongolian troops marched in Red Square, alongside troops from some other countries that Russia regards as its close friends or allies. “Neighbors must help each other,” Elbegdorj emphasized, speaking in Russian, in an interview on Russian television. Asked what he thought of those world leaders who turned down Putin’s invitation, Elbegdorj replied that it was “their business. It is our right: where we go and who we meet.” He continued: “When we had difficulties we always turned to our northern neighbor. Also, only one country, only one nation spilled blood for our independence.” Elbegdorj explained that, as he had graduated from a Soviet military school, he considered it a matter of personal honor to be present at the parade.²³

Mongolian commentary on the Russian parade was very positive, with the media mostly highlighting the performance of the Mongolian troops and staying well clear of any criticism of Russian militarism that was so prominent in the Western coverage of the anniversary. One point did cause some consternation: it was the fact that Elbegdorj was not given the prominence that the Mongolians felt he deserved during the official ceremonies.²⁴ Although seated in the front row at the parade, he was far removed from Putin (who was instead flanked by China’s Xi Jinping and Kazakhstan’s Nursultan Nazarbayev). Some Mongolian observers were quick to note that their country’s contribution to the defeat of Germany was at least as great as Kazakhstan’s and certainly greater than China’s. Others argued that Mongolia itself was partly to blame, because certain aspects of its foreign policy, e.g., the Khaan Quest military exercises, gave the Russians reasons to doubt Mongolia’s sincerity. G. Otgonbayar, for instance, noted that it was Mongolia’s own past unreliable record as a “friend” that has decreased its importance in Russia’s eyes. “It’s impossible to develop by dealing over the heads of the two neighbors, by ignoring them and linking up with others.”²⁵ To be fair to Elbegdorj, however, he has anything but ignored Russia. Improbably, the long-time leader of the Democratic Party, the allegedly pro-Western Elbegdorj has done more to improve relations with Russia than any Mongolian leader of the last 25 years.

Even as Mongolia’s relations with Russia have improved, so have relations with China, both in terms of the multiplicity of the angles of engagement and the depth of political and economic cooperation. The closeness of the relationship was on full display in August 2014 when Xi Jinping came to Mongolia on a state visit after a hiatus of 11 years. Xi was given an opportunity to speak to the Great Khural (Mongolian Parliament). His historic speech almost went disastrously wrong when he began by reciting, in Chinese, the famous poem of D. Natsagdorj, “My Land,” which says at one point: “This is the land where I was born – beautiful Mongolia.” This literary exercise was not taken lightly by Mongolian commentators, only too happy to suspect China of irredentist sentiment.²⁶ Fortunately, these (likely well-intentioned) remarks were followed by a firm assurance that China “will always respect Mongolia’s independence, sovereignty, and territorial integrity.”²⁷

Xi’s visit to Mongolia inaugurated a new stage of the bilateral relationship, “a comprehensive strategic partnership.” Most important, however, was Xi Jinping’s assurance that China had a “positive and open attitude” (jiji he kaifang taidu) toward Mongolia’s “steppe road” initiative. This “steppe road” idea is central to Elbegdorj’s hopes for cashing in on Eurasian integration, and he had lobbied both Xi and Putin to endorse it (they did). However, supporting ambitious plans is not quite the same as paying for them. The infrastructural price tag is a projected USD 50 billion, well beyond the means of the Mongolian budget.²⁸ Elbegdorj’s repeated visits to Beijing (in May 2014, November 2014, September 2015 and, again, in November 2015) each offered occasions to discuss how China may help. Elbegdorj also initiated the idea of trilateral Sino-Russian-Mongolian summit meetings. The first of these took place in September 2014 in Dushanbe, and the second in July 2015 in Ufa. Both were intended not as political coups for Elbegdorj (placing Mongolia front and center in Sino-Russian relations) but as opportunities to advertise Ulaanbaaatar’s hopes for becoming a regional transit hub. As Elbegdorj told Putin and Xi at the July meeting, “adding economic content to our exceedingly favorable political relations is in the interest of all three parties.”²⁹ Mongolia’s quick agreement to join the China-sponsored Asian Infrastructure Investment Bank (AIIB) was motivated by similar considerations. During his November 2015 state visit to China, Elbegdorj secured China’s support for the prospect of financing the “steppe road” via AIIB or the recently created Silk Road Fund.³⁰

Elbegdorj’s brave gambit—closer engagement with Russia and China—raised questions elsewhere. Mongolia watchers have claimed that “the country’s future is [being] mortgaged to solve short-range problems” or that Mongolian policy makers are increasingly driven by the “bottom-line mentality.”³¹ Elbegdorj on occasion has found himself in a rather uncomfortable role of being a spokesman for his neighbors, as during a May 2015 visit to Japan, when he defended China’s record as a “responsible” power by invoking, perhaps not very appropriately, Mongolia’s own past experience as an empire. “When you are big, you have great responsibility. You have the responsibility to respect others’ interests and the responsibility to take the initiative.”³² Even Xi Jinping could not have put it better. In September, Mongolia sent troops to participate in the Chinese military parade, something the Japanese (who skipped the honor) could not have liked, especially after all the effort that Abe Shinzō had spent on courting Elbegdorj in recent years. Of course, once Mongolian soldiers made their appearance in Moscow, it would have been a serious snub to China if these soldiers did not show up in Beijing (never mind that during World War II, Mongolia’s help to “liberate” China was primarily animated by expectation of expanding Mongolian territory at China’s expense).

The new policy direction also met with serious internal criticism. National security experts, including Elbegdorj’s former (2009-2012) foreign policy adviser Migeddorjiin Batchimeg, have flagged the rather unfortunate precedent for trilateral Sino-Russian-Mongolian diplomacy, the 1915 Kyakhta Treaty, when Mongolia, having only recently proclaimed independence from China, was arm-twisted by the Chinese and the Russians into accepting Beijing’s sovereignty. What sort of leverage could Mongolia hope to achieve in trilateral discussions with its two immeasurably more powerful neighbors, and what are the benefits of such trilateral meetings that are not vastly outweighed by underlying dangers of being compelled into endorsing positions that Ulaanbaatar would rather not endorse? Batchimeg’s departure from the president’s office (she was elected a Member of Parliament (MP) of the Great Khural) meant that some of these questions were left unanswered and the tone of policy discussion in Elbegdorj’s circle of advisers turned in favor of “trilateralism.” Still, according to knowledgeable insiders, the recent experience of trilateral meetings proved that some of these concerns were well-founded: Mongolia did find itself increasingly under pressure to back Russia over Ukraine and China in its disputes with Japan and in the South China Sea. There also have been indications that Ulaanbaatar came under pressure to join the Shanghai Cooperation Organization, something that Elbegdorj had long made clear he did not want to do (Mongolia is presently an observer).

These recent experiences highlight just how exceptionally difficult it has become for Elbegdorj to tread the ground between Mongolia’s different neighbors without causing jealousy, suspicion, and apprehension. His September 2015 announcement that Mongolia would pursue “neutrality” in international politics can be seen as an answer to these concerns, and an effort to keep Mongolia away from too tight an embrace with either China or Russia. In the announcement made in the course of his speech to the United Nations General Assembly, Elbegdorj cited Switzerland and Turkmenistan as role models for what Mongolia hoped to achieve. However, the neutrality proposal has raised new questions about Elbegdorj’s foreign policy. According to one insider familiar with recent Russian-Mongolian discussions, Moscow voiced displeasure with the idea, seeing it, predictably, as some sort of a Western ploy. Russian policy makers are reportedly concerned what this new status could mean for the annual Russian-Mongolian military exercises and for the prospects of Russia’s supplies of weapons to Mongolia (currently, the country relies entirely on Russian arms, including refurbished tanks and personnel carriers). China’s views on Elbegdorj’s latest maneuver remain unknown.

Domestic Politics and Foreign Policy

The numbers 1435 and 1520 have become familiar to any attentive observer of Mongolian politics. They are railway gauges: the first, 1435 millimeters, is the standard gauge used in much of the world, including China. The second is the wider Russian gauge, 1520 millimeters. The trans-Mongolian railway, built between 1947 and 1956, uses the Russian gauge. The wheels on all carriages headed for China are changed at the border, and vice versa, a time consuming procedure that has the practical benefit of, quite literally, derailing an enemy invasion, which is why the broad gauge was originally adopted by the Russian empire. The Russian gauge of the Mongolian railroad is a legacy of the country’s long history of Soviet domination. It is also one of the most contentious issues in contemporary Mongolian politics.

In June 2014, Mongolian television audiences were treated to a curious special. Produced by Hero Entertainment, the nearly 1 hour 40 minute long film broached an explosive topic: Mongolia’s growing dependence on China. The central argument was that building railroads using the standard (Chinese) gauge was a dangerous proposition for Mongolia. Chinese settlers would follow the railroad tracks, and Chinese armies would follow the settlers. At one point the film showed a video of purportedly Russian tanks transported on rail carriages into Ukraine (in fact—ironically—they were Ukrainian tanks transported eastward toward Donbass). The viewers were shown maps of Mongolia, with China’s color spreading menacingly northward, along the projected railroad tracks. The intended message was clear: Mongolia’s future was at stake. Pro-Chinese policies, pursued, allegedly, by mixed-blood politicians (former Prime Minister M. Enkhsaikhan was specifically named as one of these half-blood pro-Chinese traitors) would 20, 30, or 40 years down the road lead Mongolia back into the Chinese fold. Toward the end, the poet L. Galsansukh, wearing a golden swastika on a necklace, offered some final reflections: “the Mongolians are dumb. They’ll be fried and eaten… [If it goes like this], one morning you wake up to find yourself hung up on a hook in a prison.”³³

The man behind the scandalous film was the billionaire Kh. Battulga, already known to us from his support for the Russian annexation of Crimea. The production was part of a broader controversy about the rail development strategy. In June 2010, the Mongolian Parliament already addressed this problem, adopting a resolution to continue building 1520 millimeter tracks. This concept was very much in line with Russia’s preferences, because Russia jointly owns the Ulaanbaatar Railroad (which operates the trans-Mongolian railway). Russia, in fact, repeatedly tried to use the leverage afforded by this railway to gain access to mineral deposits in Mongolia, all to no avail. Despite the resolution, the legislative battles over the railroad gauge continued and intensified. The key point of contention was the building of a railroad to one of the world’s largest coal deposits, the Tavan Tolgoi. The Russians have long offered to build a railroad track to take the coal eastward to Saishand (on the trans-Mongolian line), from which it could be exported either north or south (they asked for access to coal in return). But many in the Mongolian business community and political circles believed that a much better idea was to build a narrow gauge rail track from Tavan Tolgoi directly to the Chinese border, only 267 kilometers away. In May 2013, the contract to build the railroad was awarded to South Korea’s Samsung C&T.³⁴

On April 30, 2014, Minister for Economic Development Nyamjavyn Batbayar submitted a draft bill to the Mongolian Parliament, requesting approval for the construction of three 1425 millimeter railway sections: one, from Tavan Tolgoi to the Chinese border (where Samsung had already carried out preparatory work), one from Khuut (in the East) to the Chinese border, and one from Saishand (on the existing trans-Mongolian line) to the Chinese border.³⁵ This proposal seriously angered the Russians. Vladimir Yakunin wrote a letter to Prime Minister Altankhuyag, suggesting that the proposed legislation “threatens the prospects of creation of an attractive transit route, which in the future will assure Mongolia’s key role in Eurasian integration.”³⁶ Yakunin’s diplomatically phrased but clearly very acrimonious letter arrived just weeks after Altankhuyag’s controversial trip to the St. Petersburg Economic Forum, discussed above. Yakunin’s point was that no amount of newly rediscovered warm sentiment for the Russian brothers could blind Moscow to geopolitically unacceptable ploys—that is, construction in Mongolia of a Chinese-gauge railroad.

Yakunin’s reservations were expressed privately. Battulga, though, made a highly public gesture. His film caused such uproar that Elbegdorj summoned him for a televised meeting, telling the stone-faced MP that his politics stirred domestic conflict and were out of tune with Mongolia’s foreign policy. “Mongolia must not fall behind the development of the infrastructure that connects Europe and Asia. We must definitely participate in it,” Elbegdorj said, explaining to Battulga that there were competitors out there, notably Kazakhstan and even Turkey, which could leave Mongolia out in the cold. For Elbegdorj—who used every one of his meetings with the Chinese and the Russian leaders to call for creation of transport corridors—, statements like Battulga’s were exactly the wrong kind of message, the sort of thing that was a serious liability for the “intimate” relationship that the president claimed he had developed with Xi Jinping. It did not matter that Battulga’s views were in this case more or less aligned with Russia’s concerns. “One cannot have a good neighbor policy and speak badly about a neighbor. You cannot have a policy of speaking badly about someone next to you,” Elbegdorj said. Battulga was unrepentant, tweeting after his meeting with the president: “[he] says I am speaking badly about a neighbor… Can we forget history?”³⁷

In the end, Battulga and Yakunin’s attempts to sabotage the proposed legislation did not succeed. The Great Khural voted in October to adopt the Chinese gauge for two railroad sections, including the railway from Tavan Tolgoi to the Chinese border.³⁸ It was, in a sense, a pyrrhic victory for supporters of the narrow gauge: construction of the railroad came to a halt in February 2015, ostensibly because the money ran out (this prompted an ongoing corruption investigation). In the meantime, parliamentary sentiment turned against bringing China’s Shenhua and Japan’s Sumitomo as stakeholders in the Tavan Tolgoi project. New prime minister Chimediin Saikhanbileg (N. Altankhuyag was toppled in November 2014 in a vote of non-confidence) has recently tried hard to trump up investor confidence, promising that Mongolia was “back in business” and that it was ready to welcome investors and push forward with large-scale projects. It is unlikely, however, that such projects will have a smooth ride in the parliament in the face of hostile nationalism exemplified by politicians like Kh. Battulga. In the meantime, Mongolia’s worsening economic fortunes have already prompted acts of radicalism, such as that of the head of the miners’ labor union, S. Erdene, who set himself on fire in the middle of a press conference, in which he protested declining fortunes of the Tavan Tolgoi miners. Mongolia’s worsening economic situation amid ongoing political wrangling over investment projects makes for an explosive combination ahead of the parliamentary elections next June.

Conclusion

Mongolia’s closer engagement with its two neighbors, Russia and China, is not a strategic change of direction but a tactical move. It is based on the realization that, with Mongolia’s economy in increasingly dire straits, political engagement could bring increased economic benefits. Elbegdorj hopes to catch the wind of China’s “One Road, One Belt” initiative even as Russia’s “pivot” to the East brings prospects of additional investment and economic cooperation. Unfortunately, some of Elbegdorj’s calculations have clearly fallen far short of his initial expectations. The most worrisome development has been China’s economic slowdown. As growth in the world’s second largest economy slows, there is also decreasing demand for Mongolia’s key exports, especially coal. M. Enkhsaikhan who had fought protracted battles with Kh. Battulga, among others, on the width of the railroad gauge and the terms of engagement with China, noted on November 3: “We lost six to seven years talking about wide and narrow gauges, tanks, and geopolitics.”³⁹ Now, he added, Mongolia is hopelessly behind as other countries – including, notably, Russia, are rushing to fulfill China’s energy needs at a time China needs less than expected. Enkhsaikhan is certainly right to lament the time that had been lost in endless debates. But the broader picture is even more disturbing than he is willing to allow.

The basic problem of the Sino-Russian rapprochement that was supposed to give such great impetus to Mongolia’s infrastructural development is that in economic terms it has generally failed to deliver. For instance, Russian experts are now increasingly skeptical that the ambitious plans for pumping gas from Western Siberia will be realized in the foreseeable future.⁴⁰ Doubts have crept in with regard to the May 2014 gas agreement, which was at the time hailed as Putin’s major victory. China’s slowing economy may not need all that gas after all.⁴¹ Recent studies of Sino-Russian regional cooperation suggest the operation of “One Belt, One Road” is confined primarily to rhetoric. Chinese businessmen are wary of underwriting political projects. ⁴² For all the political proclamation and meetings between Xi and Putin with or without Elbegdorj, Sino-Russian trade has remained stagnant since 2013 and Russian-Mongolian trade experienced what is best called a precipitous collapse (32.5 percent decline in the first 11 months of 2015).⁴³ In the meantime, Russia’s hopes that it will itself become a transit corridor between China and Europe are facing political obstacles, not least Moscow’s tense relationship with the West and the ongoing economic malaise. So the basic problem for Mongolia is that its resources are worth less and less, and its transport corridor leads to a dead-end – Russia. Even if today Mongolia miraculously found (or, unfortunately, more likely, borrowed) the billions of dollars that are required to upgrade its aging railroad infrastructure and even if there was a political consensus (at last) to build mighty railroads of whatever gauge or lay pipelines in every direction, it is far from clear that the promised bonanza would materialize. After all, Mongolia’s successes or failures are largely defined by the fortunes of its neighbors, and both of its neighbors are feeling the heat, Russia, of course much more than China.

Finally, Mongolia’s foreign policy is limited by the degree of the domestic political consensus. In the past, Mongolian parties, whatever their internal disagreements, generally shared a similar outlook on foreign policy. The astute maintenance of the “third neighbor” policy under successive presidential administrations points to a considerable degree of support for the policy. This remains the case even today. However, as Mongolia continues to limp economically and political struggles intensify, foreign policy will become hostage to domestic debates. Battulga’s attempt to derail the Chinese railway gauge proposals is but one example of the sort of dramatic scenarios that may play out on the Mongolian political scene in the months and years ahead, never ceasing to surprise even the most seasoned observers of Mongolian politics and society.