OT project future looks grim

Share price of Oyu Tolgoi project, the biggest and most eagerly awaited contributor to the state budget of Mongolia, is really going to slump regardless of its gain in the past few days? Business-Mongolia.com is sharing it view with our readers as follows.

Influence from Neighbors

In the last few years, especially during the reign of Mongolian People’s Party (MPP but actually formerly MPRP), Russian counterparts with the Mongolian decision-makers were quite arrogant and aggressive on Tavan Tolgoi project, claiming clear advantage in distributing the rights of the state owned Tavan Tolgoi. Such signals can be interpreted through the increase of petroleum price and sudden decrease or delay of importing its petroleum to Mongoliaa.

In reverse , Chinese counterparts’ requests were quite pacifist and less pushing. Chinese claims were more likely to saying “OK, we agree but please include us in your plan of realization, in return we are ready to cooperate with your in all extent”. As stated in the Mongolian proverb, a man who is quitting never allowed to fasten the caravan load, 90% of the Chinese policymakers and decision-makers  are being changed within this year and some clear evidences of fraction conflict is seen by the public and to world, such as Bo Xilai. As consequence, visit of Mr. Dai Bingguo, the State Councilor of the People’s Republic of China, which was made straight after his visit to the Russian Federation, showed almost no mercy to its Mongolian friendly neighbor. Its request was changed into “ultimatum” like offer on Tavan Tolgoi ransoming electricity supply to OT project, which was agreed by the Mongolian Government according to the Investment Stability Agreement of Oyu Tolgoi project. Sources are informing that the Chinese side is pushing the Mongolian side to allow itself advantage over Tavan Tolgoi project, just like it was made by the Russians.

It is still very interesting that how big change is made in the Chinese requests or comments. Was it because of his visit to Russia or newly decision-makers were appointed? Anyhow, OT electricity supply issue is pretty much related with the selection of Tavan Tolgoi bidders. OT is about to issue it quarterly statement in next 20 days, and will this development affect its share price?

Not only such external factors are affecting the future of the project, but urging demand to tighten or so called “improve” the Stability Agreement on OT Project, made by populist MPs at the State Great Khural. More tension to the issue was added by MP D.Gankhuyag’s statement, Minister for Mining, saying that he will be voluntarily leave the Cabinet if he fails to improve the Agreement.

Business-Mongolia.com will update our readers with recent developments of the project.


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