Guest Post: Erdenet Update 100%, Again Contested

By Marissa Smith

At the close of the fall session of the Ikh Khural, Mongolia’s Parliament, the body voted to invalidate the sale of the 49% shares of Erdenet carried out in summer 2016, which transferred the ownership of the 49% from the Russian state enterprise Rostec to the recently created Mongolian Copper Corporation. As of March 29th, the Erdenet enterprise has now been registered as 100% government-owned. The Spring Session of the Ikh Khural opened on April 5th. Though, as reported, no direct references in session have yet been made to the matter of the Erdenet 49%’s “taking by the government” at the close of the fall session, the month of March and beginning of April have seen several relevant events.

The legality of the Parliament decision to revoke the sale 49% of Erdenet shares is being reviewed by the Tsets, Mongolia’s constitutional court, an event that has been lightly covered and may stretch out for a long period of time .The event that I see as most important to discuss at this point in time and which I will focus on in this post, however, is the removal of MCC board members and their replacement with members of government ministries, and the re-entry into discourse of the Erdenet “100%,” which has previously been associated with former Prime Minister Saikhanbileg’s much contested assertion that the sale of the 49% to MCC constituted Erdenet’s transformation into a “100% Mongolian” enterprise.

Increased Government Control, to What Ends?

The three directors of the board associated with the Mongolian Copper Corporation (MCC), the CEO of the Trade and Development Bank (O. Orkhon), long-time politician and proponent of market liberalization and reform (D. Ganbold) [See Morris Rossabi, Modern Mongolia: From Khans to Commissars to Capitalists, Berkeley: University of California Press, 2005.], and M. Munkhbaatar (http://www.news.mn/r/314463), have been replaced with members of the government from the energy ministry (Z. Mendsaikhan), mining and mid-sized industry (D. Davaadorj), and Committee on State Property (A. Dagvadorj). It appears that the central government in Ulaanbaatar may be moving to wrest at least more control of Erdenet from the largely separate group who have been involved with the enterprise since the Tsedenbal period.

The ousted board members – with the exception of former TDB CEO Orkhon — are speaking out and calling the events “highway robbery” (deerem), and Ts. Purevtuvshin, the twenty-something director of the MCC has emerged and been giving interviews and press conferences.

The new members of the board are obscure, so it is hard to say now how the central government may or may not  be seeking to further change the relationship with Erdenet, and there would be other forces of resistance to its actions than free-market logics and those espousing them, domestically and internationally. The silence of O. Orkhon about his removal suggests that these forces may be moving, however.

In terms of the other forces, the position of Russian actors in relation to these three groups of Mongolian actors continues to be important. Through intermediaries who must also be taken into account, the Erdenet enterprise requires continued access to Russian electric power and gasoline, as well as replacement parts for equipment. With Mongolia’s railway continuing to be a Mongolian-Russian joint enterprise, the feasible transport of copper and molybdenum concentrates also requires Russian cooperation. In March Erdenet’s general director, reportedly visited Russian mining equipment manufacturer Rudgormash.

Director, A Long-time Mining (but not Erdenet) Insider, Under Threat

But most lately, Badamsuren is at the center of a storm of controversy about his salary and other benefits (a story also just appearing in Russian-language news outlet asiarussia.ru). Though he was appointed director after the sale of the 49% to MCC, Badamsuren is associated more with the late socialist-era engineering technocracy that also characterizes the administration of Erdenet, rather than Western-oriented business and finance circles (though like members of the Erdenet establishment, Badamsuren studied at the Colorado School of Mines in the 1990s).  Is he (along with the MCC management) being particularly targeted for replacement, possibly for seeking contracts with new or, the wrong, new suppliers? Badamsuren was previously associated with Mongolrossvetmet (the very little discussed Mongolian-Russian mining enterprise, which produces Mongolia’s world-leading levels of fluorspar among other nonferrous metals and minerals, whose shares were also sold last summer) and appears to be an outsider to Erdenet and its networks.

In any case, public discourse is continuing in much the same form as Mongolian news outlets have released many, many stories about the salaries, consulting fees, and somewhat luxurious possessions of Erdenet’s directors (on Wednesday, April 5, a half-hour long press conference on this topic was held and webcast by the State Property Committee). Concern over taxes is also populating the Mongolian press and social media, and conversations (and protests) about offshore accounts are back with a vengeance.

Unfortunately, these stories and conversations miss and lead us away from examining the structural conditions underlying the difficult situations and justified outrage that generate and make attractive simplified narratives of corruption. Similarly, and we may expect the discourse to be increasingly structured along these lines with presidential elections drawing closer, the matter of the 49% is not one involving and to be decided only by two sets of actors facing off, as in alignments between those seeking privatization, the MCC board members, and Democratic Party on the one hand and those supporting government ownership and management and the Mongolian People’s Party on the other, or alliances between government members across party lines (“MANAN”) and other “oligarchs” versus the rest of the Mongolian people.

In particular, in this and my other writing about Erdenet I have sought to highlight the character of Erdenet as involving a largely separate group of actors or “establishment,” with their own sets of networks not only in Mongolia, but also abroad. Though much focus has been placed upon the “taking” of the 49% from the MCC, attempts to take Erdenet from the people who have been operating the enterprise and the networks that keep it running for forty years has been little discussed, and would in many ways prove much more difficult, as has been evident with similar cases involving many large post-Soviet enterprises across Eurasia over the past two and a half decades.

About Marissa Smith

Marissa Smith obtained her PhD from Princeton University’s department of anthropology in 2015, after defending a dissertation about Erdenet and its position in local, national, regional, and international contexts. She currently teaches at De Anza College in Cupertino, California. 

This entry was posted in Corruption, Erdenet, Marissa Smith, Mining, Mining, Mining Governance, Policy, Politics. Bookmark the permalink.

3 Responses to Guest Post: Erdenet Update 100%, Again Contested

  1. Dan says:

    I have a hard time believing the Erdenet 49% purchase is a partisan issue. Aside from a couple of DP MPs (Erdenebat.D, Erdene.S) and the president Elbegdorj.Ts, not many democrats are voicing strong opinions in favor of the TDB clan. Especially, the democrats running for the presidential election this June are being especially cautious for a good reason. I think the public opinion being overwhelmingly against the dubious privatization and the fresh memory of loss in 2016 election have something to do with it. The rumors that MCC already took out 60 million USD for 2016 dividend plus some highly problematic purchase agreements Erdenet Factory made with other TDB subsidiaries such as Hutul cement factory and Darhan metallurgy plant shortly after the privatization further undermines MCC credibility. The outcome of the presidential election this June will be crucial to determine the fate of Erdenet factory imo.

    http://vip76.mn/content/45670

  2. Dan says:

    Btw, anyone making any connections between another very controversial case of solving former MP S.Zorig’s murder and Erdenet 49% purchase? I think there’s a lot there than meets the eye. S.Zorig’s murder investigation has been used to intimidate and blackmail political opponents more than a few times ever since the tragic event that took place in Oct, 1998.

  3. Hi Dan, yes there is a lot going on, and Erdenet issues and the elections will continue to be closely intertwined, I’m sure…

    Thanks in particular for the link to the piece about L. Bold, will definitely check it out. An important figure related to previous scandals around privatizations, bank failures, and elections involving American as well as Mongolian actors. Would refer people again here to Rossabi’s “Modern Mongolia: From Khans to Commissars to Capitalists.”

    Also I have been meaning to follow that source vip76 more closely!

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