A
s its commodities-driven economy began taking off
at the start of the decade, Mongolia was warned
repeatedly to guard against the “resource curse”
associated with the corruption, waste, internal
power struggles, runaway inflation and political
instability that has befallen many developing
economies. Tragically, Mongolian leaders paid little
heed as they feasted on – and, indeed, openly fought
over – the huge windfall brought in by foreign
investors hoping to exploit the country’s vast
reserves of coal, copper, gold, uranium and other
minerals.
Coal was and remains one of Mongolia’s biggest
attractions, as China, India and other energy-short
emerging economies coveted the world’s largest
untapped treasure trove of the fuel in the Gobi region near
the Chinese border. Fanning the world’s energy lust,
Mongolia’s Ministry of Fuel and Energy claimed in 2010 that
the country held as much as 150 billion t of inferred coal
resources – about 15% of the world’s total – including proven
reserves of 2 billion t of metallurgical coal and 10.1 billion t of
thermal coal.
Today, Mongolia’s party mood is clearly over. By 2013, the
vast landlocked country, with a population of fewer than
3 million people, sandwiched between Russia and China,
developed all the symptoms of the resource curse. Inflation is
holding stubbornly above 10% and the currency has lost a third of
its value since 2011. Foreign investors are turning their backs on
Ulan Bator, while China – the market for more than 90% of
Mongolia’s exports – has switched to other suppliers for its coal after
two years of troubled bilateral ties. Instead of achieving record export
September 2014
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World Coal
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