”IN RECENT YEARS, THE MONGOLIAN-RUSSIAN ECONOMIC COOPERATION HAS STEADILY GROWN AND BECOME AN IMPORTANT PART OF THE DEVELOPMENT OF MONGOLIA’S ECONOMY. AT THE CURRENT STAGE TRADE AND ECONOMIC COOPERATION BETWEEN OUR COUNTRIES IS BASED ON THE TREATY ON FRIENDLY RELATIONS AND COOPERATION OF JANUARY 14, 1993 AND ON THE ULAANBAATAR DECLARATION OF NOVEMBER 14, 2000. THESE DOCUMENTS ARE REFLECTED SUCH PRINCIPLES AS MUTUAL RESPECT FOR SOVEREIGNTY, TRADITIONAL NEIGHBORHOOD, EQUAL PARTNERSHIP AND MUTUALLY BENEFICIAL COOPERATION. INTERGOVERNMENTAL AND INTERDEPARTMENTAL TREATIES, AGREEMENTS AND CONDITIONS REGULATE BILATERAL COOPERATION AND INTERACTION OF SEPARATE MINISTRIES AND DEPARTMENTS. FOR THE LAST 20 YEARS, MORE THAN 100 AGREEMENTS WERE SIGNED. THESE DOCUMENTS ARE THE BASIS OF OUR RELATIONS.“
Despite the diversification of foreign economic relations and a policy of openness, Russia remains one of the main trade and economic partner for us.
According to Mongolian statistics in 2018 the total Mongolian-Russian trade turnover increased by 37.6% compared to 2017 and amounted to $ 1,796.2 million, of which export from Mongolia to Russia amounted to 85.9 million, and import from Russia to Mongolia – $ 1,710.3 million. These figures indicate that at current there is a trend towards an increase in trade. The main articles of Mongolian exports to Russia are ores, slag, ash, salt, sulfur, lime and cement, animal products and light industry. In the structure of Russian exports to Mongolia, the main place is occupied by oil products, machinery and equipment, automobiles, food products, chemical products, building materials, cigarettes and tobacco, household appliances and electricity.
The energy area takes an important place in the development of Mongolian-Russian trade and economic relations and is one of the traditional directions of cooperation between our countries. This cooperation can be divided into two stages: the period of socialist development of the country and the transition to a market development path.
Our energy cooperation began in the early 20s of the last century, and it was with the help of the USSR that the foundations of the modern fuel and energy industry of Mongolia were created. Today its fuel and energy complex is an essential part of the economy and functions in conjunction with other sectors of the national economy with a view to sustainable economic growth.
The Soviet Union has been of great assistance to Mongolia in creation of the energy base. First of all, with its help, the production process at a coal mine near Ulaanbaatar in Nalaiha was mechanized – and thereby the foundations of the modern energy system of Mongolia were laid. As a result, coal production, as the main source of electricity production in Mongolia, increased.
In the 1940s , the Soviet site participated in creating a central station in the capital and in the creation of small power stations in aimaks.
All seven currently operating coal HES located in the zone of the Central Energy System (CES) of Mongolia were built during the years of the socialist period of the country's development with the help of the Soviet Union and upon projects of it. These are stations with combined production of electricity and heat (combined heat and power plants) operating to provide basic electric load, production of hot water for district heating and steam for technological needs of industry.
As a result of economic support from the Soviet Union in Mongolia, in the 1980s a very high rate of growth in electricity production was achieved: in 1985, electricity production reached 3,568.3 million kWh. Thus, at the end of the 80s of the last century, a large fuel and energy base was created in Mongolia.
The second stage in the development of cooperation between Mongolia and Russia in the energy sector begins in the early 90s . After the breakup of the USSR, economic cooperation between Mongolia and Russia, although it developed, remained low until the end of the 1990s , especially in the energy sector. Consequently, the deep systemic economic crisis in Mongolia connected with the transition to a market economy and curtailing economic support from the USSR, in 1996 there was a reduction in electricity production to 2614 million kWh. In subsequent years, a gradual restoration of the energy sector began, as a result of which the pre-crisis (1989) level of electricity production was exceeded only in 2007.
Currently, seven coal power plants operate in the energy sector; more than a dozen hydroelectric power stations of low power (from 0.5 to 2 MW), as well as solar and wind power plants. Dozens of diesel power plants with capacities from 10 kW to 3 MW provide electricity to the centers of aimaks; almost all local power plants are connected to the power systems of Mongolia.
Over the past almost 30 years, the energy sector of Mongolia has become one of the most important components of the country's economic development. In the late 90s , it basically completed the transition from a centralized administrative command system to a market one, and currently electricity is sold in the Central Energy System through the main market – the Single Purchaser Model (SPM) – and two other related markets: spot and competitive.
Today, Mongolia is one of Russia's partners in export operations on electricity, and cooperation between our countries in the energy sector is based on the “route map” that has developed over the years of the socialist period in the development of Mongolia. The geopolitical position of Mongolia – the lack of direct access to world oil and gas markets, as well as the presence of an extended border with Russia and China – determines the economic vector of its development in the energy sector.
Meantime, work on the reconstruction of Ulan-Bator HES-4 is underway using credit from Vnesheconombank of Russia and the International Investment Bank, and the Ural Turbine Plant (Yekaterinburg) supplies turbines and other equipment. Because of the reconstruction, the capability of the HES will increase by 120MW. However, the shortage of electricity will continue. According to the Ministry of Energy of Mongolia, in 2018, our country received 20% of its electricity through imports from Russia and China.
Today, Mongolia’s electricity system, created with the technical and economic assistance of the Soviet Union, consists of four independent electricity systems: the Central Energy System, the Western Energy System (WES), the Eastern Energy System (EES), and the Altai-Ulyasutai Energy System. The main share (79%) of electricity is produced at the HES with an installed capacity of 823 MW, 4% at diesel power plants with a capacity of 46 MW and at a number of small-capacity hydro-solar and wind power plants.
The power shortage during the peak load in the Central Electric Power Plants and almost the entire volume of electricity needs in the WES are met through the electricity imported from Russia. Due to the growth of the economy of Mongolia (in 2018, GDP growth amounted to 6.9%), the demand for electricity, including its import from Russia, will increase. The latest forecast of demand until 2020, prepared by Economic Consulting Associates for the World Bank, assumes that the average annual growth in demand for electricity in the framework of the Central Electric Station will be 3.5%. In addition, resulting from the beginning of open mining at the Oyu Tolgoi copper-gold deposit, demand is expected to increase in the South Gobi region to 600 MW by 2020.
According to the Ministry of Energy of Mongolia, electricity consumption is increasing by an average of 6% per year, and this growth will continue. It should be emphasized that Mongolia is a country with a huge territory, a small population and a relatively underdeveloped industry, as a result of which household consumption predominates in electricity consumption. The equipment of existing power plants deteriorates physically and morally, which leads to a shortage of electric power, especially peak during winter highs. In addition, the energy system has a small load, the length of the lines is huge, and the number of generating sources is small and they are concentrated in a limited area; the process of summer-winter or morning-evening regulation of the voltage and reactive power of the system is also very difficult. To this must be added that investments in the electricity infrastructure have not kept pace with demand, and this significantly reduces the reliability of power supply and increases overloads in a worn distribution network.
Thus, low operational efficiency and poorly maintained and outdated equipment are a serious problem in the Mongolian energy system. Recall also that the power system of Mongolia is dependent on the power system of Russia and does not have a regulatory power source for various cases – for example, in emergency situations or when peak loads change to minimum night loads.
In one word, the energy system of Mongolia is in deep trouble today, especially given the increasing domestic demand for electricity.
To solve the above problems, it is necessary, in the first place, to take measures to improve the structure of generating capacities in Mongolia. That would require to solve the issue of creating a hydroelectric power station that could work as a system regulator; to place in operation renewable and other sources of electricity; to put in service generators with a wide range of reactive power regulation. In this regard, Mongolian-Russian cooperation in the electric power industry can be developed, in our opinion, in the direction of joint construction of new generating capacities and electric grid facilities providing parallel work with border energy systems and the creation of an interstate electric power system. The problems of the energy sector of the economy of Mongolia can also be successfully solved through cooperation with other countries, in particular with China.
It is energy cooperation in a trilateral format (Russia, China and Mongolia) has great potential, and it was discussed during a trilateral meeting on the SCO summit on June 14, 2019, where President of the Russian Federation Vladimir Putin, Chairman of the People’s Republic of China Xi Jinping and President of Mongolia Battulga Khaltmaa participated.
During a meeting with the leaders of Mongolia and China, Vladimir Putin said that Russia was ready to ensure uninterrupted supply of electricity to energy-deficient regions of China and Mongolia, as well as ready for closer cooperation with China and Mongolia in the energy sector. “We are interested in receiving specific proposals on possible joint projects from Chinese and Mongolian partners,” – the Russian president said.
The realization of concise energy projects in a trilateral format will be an important step in the implementation of the “One Belt – One Way” project. On June 24, 2016, in Tashkent at the SCO summit between the Russian Federation, the People’s Republic of China and Mongolia, an agreement was signed on the creation of an economic corridor “Mongolia – Russia – China”.
Currently, experts from the three countries constantly consider the possible joint energy projects relevant to the creation of an economic corridor between the three states. In order to create a legal basis for the development of cooperation, a draft Agreement on cooperation in the field of electric power between the Government of the Russian Federation and the Government of Mongolia has been prepared. It is hoped that this document will be signed in the near future. Of course, the conclusion of such an agreement will contribute to the development of both bilateral and trilateral cooperation in the energy field. Moreover, resource and economic opportunities for its expansion, in our opinion, are available.
One of the strategic directions of trilateral cooperation is the gasification of the Baikal region of Russia, the central region of Mongolia and the northern regions of the PRC in case of the construction of an export gas pipeline Russia – China through the territory of Mongolia. At the plenary session of the IV Eastern Economic Forum in September 2018, the President of Mongolia Battulga Khaltmaa said: “The main foreign policy directions of Mongolia are the stable development of friendly and goodneighborly relations of comprehensive cooperation with Russia and China, as well as participation in political and economic integration processes in the region. We are ready to cooperate on the construction of a gas pipeline from Russia to China through the territory of Mongolia".
It should also be noted that the laying of this gas pipeline will contribute to solving the issue of preserving the ecology of Lake Baikal, and may become one of the conditions for removing the threat of building a hydroelectric station on the main artery of Lake Baikal – the Selenga River and its tributaries. Russia strongly opposes the construction of a hydroelectric power station, and proposes to replace the energy shortage of Mongolia with an additional volume of electricity supplies at reduced prices. Nevertheless, the construction of a hydroelectric station on the Selenga remains an urgent issue for Mongolia.
In analyzing the cooperation of Mongolia and Russia already in the oil sector, it is noteworthy that Russia is our main trade and economic partner. Since the volumes of oil produced in Mongolia are not enough to satisfy the ever-growing demand for hydrocarbons, the country's fuel market is almost completely dependent on imports of petroleum products from Russia.
Important in the development of energy cooperation between the two countries is engagement in developing of the Tavantolgoi coal deposit in a part of the supply of mining equipment and the construction of the railway to ensure the export of coal to the market of Northeast Asia through the Far Eastern ports of Russia. It is one of the largest reserves in the world: 6.5 billion tons of coal, about 40% of which is high-calorie coking coal.
g coal. In summary, it should be noted that the aim of energy policy of the Government of Mongolia is the supporting energy independence and energy security of the country including by the formation an energy resource market and the creation a reliable energy base for sustainable economic growth. The resource potential of Mongolia in case used effectively should be one of the most important prerequisites for the steady growth of the country's economic development and its entry into the reserve of world mineral resources. Scientists predict that after 2020 a dry technology of oil and gas extraction will appear, as a result of which the fields of several countries, including Mongolia, will be involved in the operation.
In the performance of a task of reliable energy supply and energy security of Mongolia, development of integration and close interaction of integration associations in the energy sector are necessary. Energy cooperation should also strengthen in the use of alternative energy sources and energy-saving technologies. At the same time, the main part of energy resources is non-renewable, and therefore resource flows must be rationally distributed.
In conclusion, I would like to express an opinion on the implementation the “Asian Energy Super Ring” project, involving the consolidation of the energy systems of Russia, China, Mongolia, the Korean Peninsula and Japan, that is, those countries that are geographically part of the macro-region of Northeast Asia. It should be emphasized that the realization of this project is corresponds to the energy policy of Mongolia. The President of Mongolia, speaking on September 12, 2018 at the plenary session of the IV Eastern Economic Forum, laid emphasis that Mongolia was interested in the project and called for speeding up its implementation. Russia, China, South Korea and Japan also express interest. However we understand that there are still many unsolved problems, since this project is not only a matter of energy, but also to a large extent a question of geopolitics.
Nevertheless, we are confident that in the new geopolitical conditions, mutually beneficial energy cooperation remains the mainstream for solving problems and ensuring energy security in the countries of Northeast Asia, as well as for the sustainable economic development of Mongolia.
Demchigjavyn Chimiddorj Graduated from Mongolian State Technical University (specialty - electrical engineer); took a master's degree in IT management from Strayer University in the USA. He has been working in the energy sector of Mongolia for more than 30 years: he was the head of the electrical service of the Central Energy System (CES) of Mongolia, the executive director of the National Dispatch Office of the Energy System of Mongolia, the general director of the Ulaanbaatar HES-3 and the director of the energy policy department of the Ministry of Energy of Mongolia. By decision of the Government of Mongolia, in 2018 he was appointed director of the department of business strategy and planning of the state mining corporation Erdenes Mongol LLC, which is an enterprise established for the purpose of planning, developing and operating strategically important mineral deposits