WASHINGTON, July 3 (UPI) -- In the post-Soviet space from the Caspian to Mongolia, the slippery nexus between energy megabucks and politics has been a source of voter unrest. In many former Communist nations the electorate sees their governments sign lucrative contracts with foreign companies but wait, sometimes for years, for some of the energy revenue to "trickle down."
On July 1 voter resentment boiled over following Mongolia's June 29 parliamentary elections, the fifth since Mongolia abandoned Soviet influence in 1990 and shed communism two years later.
According to General Election Committee spokesman Purevdorjiin Naranba the Mongolian People's Revolutionary Party won 47 of the 76 seats in the Great Khural, or parliament, while the Democratic Party gained 26 seats; two smaller parties and an independent candidate won the remaining three places. To gain a parliamentary majority a party needs to win at least 39 seats. The MPRP is the country's former Communist Party, which ruled the country from 1921 to 1990, and again during 2000-2004 as the MPRP. The DP claims that the elections were rigged, referring to the fact that up to two days before the elections all opinion polls showed both parties having a similar number of supporters.
Claiming electoral fraud, on the evening of July 1 a crowd of 80,000 to 10,000 demonstrators in the capital Ulaan Baatar took to the streets, torching the MPRP headquarters and engaging in pitched battles with the police, who used batons, water cannons, tear gas and rubber bullets. According to the state-owned Montsame news agency, five people died during the disturbances and 300 were injured, among them 97 policemen and more than 700 arrested. In response President Nambaryn Enkhbayar, an MPRP member, announced a four-day state of emergency, the first in the history of the country, and banned all television coverage of the unrest except for the state-owned Mongolian National Broadcaster channel. Security was reinforced at Ulaan Baatar's power and heating stations, electrical plants and water stations, sewage plant, petroleum stations, oil and food storage facilities. Public gatherings and the sale of alcohol were also banned.
The U.S. Embassy, which contributed 23 election monitors and had earlier lauded "the Mongolian people for exercising their democratic rights on Election Day," expressed concern, calling "on all political parties to work together in the best interests of the people of Mongolia."
On July 2 Justice Minister Tsend Munkh-Orgil told a news conference, "Border troops and armed forces are being used to improve security in the city because of an insufficient number of police" and predicted future unrest.
The subtext for the political bickering is the imminent development of Mongolia's vast mineral resources, which has been postponed as the country finalizes amendments to its Mineral Law governing foreign investment. While in 2007 direct foreign investment in Mongolia totaled $500 million, foreign capital inflow is set to explode once the legal intricacies are resolved. In January 2006 the government identified 49 strategically significant mineral deposits that could impact national security or economic growth.
The potential scale of development projects is enormous. The mining sector, Mongolia's largest industry, was little explored and developed before 1990. According to Ivanhoe Mines and Rio Tinto, the Oyu Tolgoi ("Turquoise Hill") copper and gold project in the Gobi region becoming operational alone would boost the economy by 33 percent. Ivanhoe projects that over a 35-year mine lifespan Oyu Tolgoi could produce an average of 440,000 tons of copper and 320,000 ounces of gold annually. While last year Ivanhoe agreed to a draft investment that would give the Mongolian a 34 percent stake in Oyu Tolgoi, earlier this year the government withdrew the offer following opposition from smaller parties in the coalition government.
According to Mineral Resource and Petroleum Authority chairman Luvsanvandan Bold, the coalition government was considering amending the country's Mineral Law to give the state 51 percent of all "strategic deposits," up from the current maximum rate of 34 percent for state ownership. Regarding the scope of potential joint ventures, Luvsanvandan added, "There are about 15 projects and they are valued in the tens of billions of dollars. These are very big projects." How to develop the nation's massive copper, gold, uranium and coal deposits was a key campaign issue.
In this context, a clear electoral victory by the MPRP could break the political logjam. The June 2004 elections saw the MPRP handed a major defeat, losing 35 seats, forcing the MPRP into a coalition government with the democratic coalition opposition, which produced three different prime ministers in four years. It is the smaller democratic opposition parties that have stymied MPRP attempts to force through a definitive Mineral Law.
Allegations of corruption have long dogged the MPRP. In 2007 Mongolia ranked 99th in the Transparency International Corruption Perceptions Index, while an August 2005 report on corruption by the USAID noted, "opportunities for corruption are increasing in Mongolia at both the 'petty' or administrative and 'grand' or elite levels… emerging areas for corruption include the banking and mining sectors."
Inflation, which reached 15.1 percent last year, has ravaged a population where the United Nations estimates that more than 10 percent live on less than $1 a day. In such a context, a significant number of the Mongolian electorate are disinclined to believe that former communists gazing at billions in foreign investments necessarily have their best interests at heart, and frustration over the election's outcome boiled over into the capital's streets. Enkhbayar's actions over the next few days will be critical if the situation is to be pacified. There are already indications that the issue will not quietly go away, as on July 3 hundreds of people gathered near the Ulaan Baatar detention center to demand the release of the 700 protestors who were arrested. Whatever the outcome, it would seem that the foreign mining interests will have to wait a bit longer before they can dig up Turquoise Hill.