Mongolia snubs China; initiates process for Indian assistance

China has been carrying out a sort of blockade against this landlocked north Asian nation following its hosting of Dalai Lama, who's also the spiritual Guru of the Mongols.

Mongolia snubs China; initiates process for Indian assistance

Mongolia has initiated the process to avail of the promised $1 billion assistance, despite China's threatening posture on the issue.

In the second week of this month, Chinese official media called Mongolia names and dubbed it as “politically harebrained” to seek India’s help.

China has been carrying out a sort of blockade against this landlocked north Asian nation following its hosting of Dalai Lama, who's also the spiritual Guru of the Mongols.


In fact, the institution of Dalai Lama was created by the Mongols in their heydays of the conquest of vast swathes of Asian landmass.

International media reports indicated on Monday that Mongolian officials have already initiated the process for approval from the Import-Export Bank of India to secure the fund negotiated in May 2015 to build an oil refinery and pipelines.

When completed, the project could boost Mongolia's gross domestic product by 10 percent. Because of its excessive reliance on commodity exports to China, Mongolia's GDP growth rate decelerated to less than one percent in 2016, falling sharply from 2.3 percent in 2015.

Ulaanbaatar has chalked out a plan to use $700 million of the loan for an oil refinery and $264 million for oil pipelines, according to a statement on its official website last week. Prime Minister Erdenebat Jargaltulga has instructed relevant ministries to negotiate with the Ex-Im Bank of India, according to the statement.

During his visit to Ulaanbaatar in May 2015, Prime Minister Narendra Modi signed agreements to provide the $1 billion credit line to fund railroad and infrastructure projects in Mongolia.

Mongolia has been looking to India and other investment partners, particularly Japan, to boost its economy that is hit by commodity slowdown and consequent debt burden. Last month, China backed off from talks with Ulaanbaatar over a loan package to help the economy after a dispute over the visit to Mongolia by the Dalai Lama.

The refinery, to be sited in Sainshand county, will have the capacity to process 1.5 million tons of oil per year. It will produce 560,000 tons of gasoline, 670,000 tons of diesel fuel and 107,000 tons of liquefied gas annually. The refinery could boost Mongolia’s GDP by 10 percent, according to the statement.

Sainshand, located on the Trans-Mongolia railway, is planned to be a transportation hub. Mongolia’s oil fields are primarily located in Dornod province in eastern Mongolia, about 545 kilometers northeast of Sainshand. PetroChina Daqing Tamsag Llc operates the oil fields and has produced 7.5 million barrels through the first 11 months of this year, according to the National Statistical Office. All of Mongolia’s crude is exported to China.

The 20-year loan will have an interest rate of 1.75% and principal payments will be waived during the five years, according to the April statement.

Mongolia imported 346,500 tons of gasoline worth $172 million and 479,800 tons of diesel worth $219 million in the first 11 months of this year, according to the NSO. More than 97 percent of the petrol and diesel was imported from Russia.