Will Mongolia’s Presidential Election Put Batbold and Foreign Ownership of the Oyu Tolgoi Mine at Risk?

U. Khürelsükh is the odds-on favorite to win Mongolia’s June 9 Presidential election after an irregular ruling by the Supreme Court denied incumbent President K. Battulga his constitutional right to run for re-election.  Initial predictions were that the election of Khürelsükh, the former Prime Minister and current chair of the Mongolian People’s Party (MPP), would end the investigation into whether corruption infected the deal Mongolia struck with foreign investors on the Oyu Tolgoi mining project, Mongolia’s ticket to economic prosperity. 

The reasoning was that any investigation would implicate former MPP Prime Minister S. Batbold and other senior MPP members.  As this blog has reported (here, here, and here), the evidence of Batbold’s corrupt dealings with the foreign investors in the project, Australian mining giant Rio Tinto and controversial U.S.-Canadian entrepreneur Robert Friedland, seems strong and Batbold’s denials unconvincing.  But the expectation was that the MPP, the lineal descendant of the Marxist-Leninist party that ran the country when it was an appendage of the Soviet Union, still observed the principle of “democratic centralism.” Or as Benjamin Franklin put the principle more colorfully when signing one the foundational documents of true democracy, “We must all hang together, or, most assuredly, we shall all hang separately.”  

The assumption that MPP members would hang together is now at risk thanks to what Khürelsükh said last week on Mongolian TV9’s interview program.

When asked about the investigation of Batbold and other party members, he replied:

“The matter is being investigated by police and intelligence agencies. I received information that it is being checked. The court will decide whether he [Batbold] is guilty or not. If [MP party members] are found guilty, they must be held accountable. There is political responsibility. Political responsibilities, such as not being re-nominated or expelled from the party, must be considered step by step.”

Khürelsükh is part of the next generation of MPP leaders, and his statement accords with reports that that MPP’s younger members are splitting with the old guard. That across Mongolia a new generation of leaders is rising committed to rooting out corruption (here).

If that is true, and Khürelsükh holds to his position, Rio Tinto and Friedland’s stake in Oyu Tolgoi, one of the largest and most lucrative resource projects now under production, could be at risk.  Article 34 of the UN Convention Against Corruption provides that states may “consider corruption a relevant factor in legal proceedings to annul or rescind a contract.”  Even if the investigation shows Mongolia could invoke what is corruption’s “nuclear option,” the government may decide to stick with the developers but demand more of the profits.  That would seem presaged by its latest move in a dispute with Rio and Friedland where, according to a recent news report, “the government is seeking compensation for damages caused to Mongolia by corruption and bribery schemes in connection with the Oyu Tolgoi project.”

Mongolia’s future – both politically and economically – rides on whether Khürelsükh meant what he said in the TV9 interview.  Mongolians have an enormous stake in seeing that he did.

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