Rio Tinto in Mongolia

By Julian Dierkes

Recently, Bulgan B and I pointed out that there have been as many CEOs at Oyu Tolgoi over the past ten years as there have been PMs of Mongolia.

I also appeared on a live BBC radio show from Oyu Tolgoi (I was patched in from the CBC’s studio in Vancouver), “Business Matters”.

So, Oyu Tolgoi has been on my mind, as it always looms large in discussions of contemporary Mongolia.

When a Twitter follower pointed me to an interview with Rio Tinto CEO JS Jacques (previously overseeing Oyu Tolgoi as part of Rio Tinto’s copper group), I was keen to check it out.

Resource Nationalism

I was disappointed to see this discussion of “resource nationalism”. Apparently, Jacques talked about this “topic” at a Miami conference in May, but I haven’t been able to locate a recording/retelling of that speech.

I have previously attempted to examine the claims made that Mongolia is falling victim, home to rising, [pick your verb] resource nationalism. Jacques seems to fall entirely into the category of using this term as a way to scare the world about governments that are asking for a greater share of profits, dividends, business in large mining projects. Apparently, Jacques even called for a UN of the mining industry to counter this “threat”. He also seems to have mentioned Mongolia/Oyu Tolgoi in this context.

In the interview that appears in the video above, Jacques talks about this around 11′. He talks about governments wanting a greater share. However, that is the constitutional duty of any government so if Jacques and Rio Tinto want to “counter” this, good luck! Mongolian resources belong to the people and the state acts as a caretaker of this property. This is the same in Australia, Canada, the DRC and elsewhere. As the owner of this resource, every people or the government that acts on the people’s behalf, should absolutely strive to maximize the benefits from granting a private investor the right to explore/mine this resource. Obviously, this investor has every right to negotiate about the distribution of benefits. However, there is no political ideology, movement or anything that I recognize in how Jacques describes “resource nationalism”, nor do I understand how this could be “on the rise”.

Rio Tinto in Mongolia

Interestingly, Jacques stated that “we [Rio Tinto] don’t do politics as a matter of principle” (around 7′). To me this is problematic and this is where the frequent turnover of Rio Tinto-sent executives to Oyu Tolgoi is problematic. Just like politics can’t be kept out of sports (the World Cup or other events), so it is silly to pretend that a company that is involved in a project that will at some point account for 1/3 of a country’s GDP “does not do politics”.

In Jacques’ terms, I think that Rio Tinto is not doing very well at the “B2P business”, the business-to-people business in Mongolia. One of the reasons may be executive turnover or the type of executives that have been sent to Oyu Tolgoi, but for many Mongolians I interact with, the contributions that Oyu Tolgoi makes to their material well-being are not clear, even though I see many such contributions. That is a challenge to Rio Tinto/Oyu Tolgoi and the claim that an executive who has spent time at Oyu Tolgoi that he doesn’t do politics does not give me much reason to expect that Oyu Tolgoi will be successful in creating more stable regulatory environment for itself in Mongolia until the B2P business is taken more seriously and the company engages the concerns, understanding and aspirations of the Mongolian people more directly. Note that I would not suggest that Oyu Tolgoi meet all these expectations which can be somewhat outlandish at times, but that it engage in a discussion about them.

Yes, as Jacques points out, Rio Tinto has been a transparency leader by disclosing contracts, including the Oyu Tolgoi Investment Agreement, but it has been lagging in helping Mongolians understand this agreement and in engaging them in discussions about this agreement.

One example of this also showed up in this video. Jacques discussed the importance of technological innovation, AI, etc. for Rio Tinto (around 25′). Later on he also mentioned the large proportion of Mongolians on Oyu Tolgoi’s workforce. Many Mongolians look at employment as a central element of benefits that project will provide. So, here’s Rio Tinto priding itself in providing employment, but also selling itself to investors as striving to reduce the number of employees. That, I think, requires some more discussion in the Mongolian context.

This entry was posted in Foreign Investment, International Agreements, Mining, Mining, Mining Governance, Nationalism, Oyu Tolgoi, Policy. Bookmark the permalink.

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