Implications of Power Politics for OT and Elsewhere “Offshore”

By Marissa Smith

About a week ago, Mendee and I agreed to write a pair of blog posts on the question of how OT and the current wave of corruption investigations and arrests, most recently involving former Prime Ministers Ch. Saikhanbileg and S. Bayar, and this week new actions related to the murder of S. Zorig (involving not the ATG but the General Intelligence Authority and the State Prosecutor’s Office).

In his post, Mendee discusses the many ways that Mongolian politics is fractured — OT is only one of many factors.

I fully agree.

However, in this post I point out that these “power politics” do have implications for OT, especially in terms of how Rio Tinto and other Western mining companies and associates (investors, financial institutions, governments) react to and are positioned in relation to them.

Oyu Tolgoi has itself been the center of a number of accusations in recent months. These have been widely understood and deliberately situated, however, to not really be about any malpractice on Rio Tinto’s part, at least not in Mongolia specifically. Investigations by Swiss regulators, or at least developments related to them in Mongolian contexts, have piggybacked on the “offshoring” controversy around S. Bayartsogt to separate the issue of who took money from who gave it, and explicitly stated that Rio Tinto was not under scrutiny. The SOMO reports, though highly critical of the OT Investment Agreement, were directed at critiquing such practice, which are currently conventional and legal, at a global scale.

In short, the corruption controversies involving Oyu Tolgoi are being used in Mongolian “power politics” while the role of Rio Tinto and other Western institutions is being downplayed. But this does impact how OT and similar Western-led projects proceed.

Understandably, there is a collective interest in not “scaring away” those institutions (again, the practices described by SOMO are largely legal and conventional in the multinational extractive industry). But as Undarya Tumursukh points out in her recent post, there is more at play in the bracketing of Mongolian politics from multinational corporate ethics. The sense that “Western companies are intrinsically good,” as Undarya puts it, is strongly present, and I have often discerned, including recently, the sentiment that there is nothing worth investigating about the OT Agreement at all, and that Mongolian politicians have siphoned off the kind of money that SOMO attributes to lost taxation from Rio Tinto. When asked for what they mean, interlocutors do point to the houses owned by S. Bayar in the United States or the ten million dollars in S. Bayarsogt’s Swiss bank account, in other words a few millions rather than hundreds of millions. My attempts to turn the conversation to larger systematic factors, involving Mongolia/Mongolians’ ability, in relation to international companies and IFIs as such relations are currently structured, to not only raise tax revenue but also to spend it, to answer the question of why Mongolia has crumbling (at best) rather than developing physical and social infrastructures*, often lead to a complete change of subject.

In any case, placing the blame and our analytical focus solely on Mongolia and Mongolians (as also Undarya does in the end of her post) does encourage the country and its inhabitants (not just politicians) to be further seen as bad actors, not suitable for investment (and more). Though excited conversation (much more extensive than any I saw or heard about the SOMO reports or Swiss investigations involving Oyu Tolgoi) about Mongolia as possible host for a summit involving the US and DPRK has been ongoing for over a month now, I see little chance that Mongolia’s involvement in such a summit would have much impact on Mongolia’s image as “corrupt” or not.


*(to elaborate on this, I may write another post to engage with Julian’s post on OT and “political risk” and Mendee’s post on OT Agreement as wrestling match and I hope this post encourages the same from others!)

This entry was posted in Corruption, Development, Foreign Investment, Infrastructure, International Agreements, International Relations, Mining, Mining, Mining Governance, North Korea, Oyu Tolgoi and tagged . Bookmark the permalink.

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