Mongolia expects Russia to start development of the “Power of Siberia 2” gasoline pipeline by means of its territory to China inside two years, as Moscow strikes to attach its Europe-supplying gasfields to Asia for the primary time.
Mongolia’s prime minister Oyun-Erdene Luvsannamsrai instructed the Financial Times that whereas the battle in Ukraine had clouded planning for the road, he anticipated development to go forward.
The Power of Siberia 2 venture has grow to be vital to Russia because it faces dropping Europe as a marketplace for its gasoline following its invasion of Ukraine and accusations it “weaponised” provide to create a value disaster within the EU.
“The feasibility study of this project has finished and we believe construction will begin in 2024,” Luvsannamsrai mentioned.
The prime minister additionally mentioned Rio Tinto’s big Oyu Tolgoi mine venture in Mongolia was on schedule and that the nation was making progress in preparations to cope with looming bond repayments.
Power of Siberia 2 will join Siberian fields that at present provide Europe — which has pledged to finish its dependence on state-backed Gazprom — to China, the place demand for gasoline is rising.
Mongolia, which has a inhabitants of greater than 3.3mn folks in an enormous territory, is landlocked between China and Russia. Luvsannamsrai mentioned being hemmed in by two “superpowers” at a time of rising geopolitical stress created problems, however that Mongolia was used to working intently with each.
Ulan Bator signed a memorandum of understanding with Moscow in 2019 to discover the Power of Siberia 2 pipeline, which might carry as much as 50bn cubic meters of gasoline a 12 months by means of its territory.
Luvsannamsrai mentioned there had not but been any important improve in stress from Russia to speed up development of the road, regardless of Gazprom’s plans to pivot its focus to Asia. Alexei Miller, Gazprom chief, has urged China will grow to be its key buyer sooner or later.
Luvsannamsrai mentioned the ultimate route of the road by means of Mongolia was nonetheless being “deliberated”.
The 2,600km pipeline has been predicted to enter service round 2030, however trade executives imagine that could possibly be introduced ahead given Moscow’s want to seek out new markets.
Transit charges from the pipeline will assist Mongolia’s economic system, which was laborious hit by the coronavirus pandemic. China, its important buying and selling associate, regularly closed Mongolian export routes because it tried to manage the virus.
Luvsannamsrai mentioned he anticipated Mongolia’s economic system to strengthen this 12 months, helped by new rail connections to China that might be used to ship commodities reminiscent of coal and copper.
Exports of copper are anticipated to develop considerably within the subsequent few years as mining firm Rio Tinto expands growth of an enormous copper deposit within the Gobi Desert.
The Oyu Tolgoi mine is Mongolia’s greatest supply of overseas direct funding and gives 1000’s of well-paid jobs, however its underground growth has been beset by delays and price overruns which have triggered bitter rows between Rio Tinto and Ulan Bator.
Last 12 months, Mongolia threatened to halt work on the venture saying it will by no means obtain a dividend from the mine due to the quantity of debt taken on to develop it.
Rio in December agreed to put in writing off greater than $2bn of loans and curiosity utilized by the federal government to fund its share of complete growth prices that had been on Friday revealed to now complete $7bn, up from $5.3bn.
Luvsannamsrai, who met with Rio chief govt Jakob Stausholm final week, mentioned he was “confident” the mine was now operating to schedule, with underground manufacturing to start out within the first half of subsequent 12 months.
“I believe this will be clear example of how Mongolia can work actively and efficiently with its investors,” the prime minister mentioned, referring to the cope with Rio.
Asked about Mongolia’s overseas money owed, Luvsannamsrai acknowledged Ulan Bator had some “issues” to work by means of, however pointed to a current cope with Japan for early reimbursement of a yen-denominated bond as proof of progress.
He mentioned Mongolia had been “focusing on how we can improve our reputation” in capital markets.
Including the samurai bond, Mongolia has about $1.3bn of bonds maturing in 2023 and $600mn in 2024, however low ranges of overseas foreign money reserves.
“We believe the recent drop in commodity prices is a temporary shock . . . due to the pandemic and the Russian-Ukraine crisis,” Luvsannamsrai mentioned. “We have an optimistic view that copper use and production will not decrease in the future but increase.”
Source: www.ft.com