Pres­i­dent Kh.Bat­tulga ex­pressed in­ter­est in us­ing the Rus­sian port of Vostochny in the re­gion of Pri­morsky Krai dur­ing his visit to Rus­sia as part of the Eastern Eco­nomic Fo­rum held in Vladi­vos­tok on Sep­tem­ber 6 and 7. The Pres­i­dent en­vi­sions us­ing the port for the tran­sit of car­goes, namely coal, to the coun­tries of the Asia-Pa­cific re­gion.

Pres­i­dent Kh.Bat­tulga made his in­ten­tions clear dur­ing a meet­ing with the Gov­er­nor of Pri­morye Vladimir Mik­lu­shevsky.

"First of all, we are in­ter­ested in the Vostochny Port. To­mor­row I in­tend to visit the port to get ac­quainted with its oper­a­tions on site," said the Pres­i­dent, speak­ing of plans to im­ple­ment projects in the field of lo­gis­tics and trans­port with Pri­morye.

The Pres­i­dent hopes to sup­ply coal from Ta­van Tol­goi to large Asian mar­kets in Ja­pan and South Korea us­ing the Vostochny Port. His lat­est ini­tia­tive has been the topic of much dis­cus­sion, mainly due to the fact that it over­lapped with the Coal Mon­go­lia 2017 con­fer­ence. Many sec­tor ex­perts and econ­o­mists had their fair share of views on the pos­si­bil­ity of us­ing the Rus­sian port.

Ac­cord­ing to many of the par­tic­i­pants, the idea of us­ing Rus­sian ports and even us­ing the Vostochny Port is not a new one. En­ergy Re­sources LLC re­port­edly con­ducted a trial run to Vostochny in 2011 in an ef­fort to di­ver­sify their ex­port routes. The com­pany’s of­fi­cials say that lo­gis­tics alone cost 171 USD per ton, which did not in­clude load­ing and un­load­ing.

Cur­rently, most coal ex­port­ing com­pa­nies re­port that their lo­gis­tics cost is steady at around 28 USD per ton. Any one, let alone a qual­i­fied econ­o­mist, can see the dis­crep­ancy be­tween the two op­tions and have con­cerns. So why does the Pres­i­dent want to push this ini­tia­tive, even though it is not eco­nom­i­cally ben­e­fi­cial?

There are a num­ber of pos­si­bil­i­ties why Pres­i­dent Kh.Bat­tulga might want to use the Vostochny port in spite of its eco­nomic draw­backs. The most log­i­cal and likely ex­pla­na­tion is that the Pres­i­dent is sim­ply adamant and un­wa­ver­ing on his cam­paign prom­ise of al­le­vi­at­ing Mon­go­lia’s trade de­pen­dence of China and he will do what­ever it takes to ac­com­plish that, even if it seem­ingly dam­ages Mon­go­lia’s coal sec­tor. A por­tion of the vot­ing base of Kh.Bat­tulga has been known to be na­tion­al­is­tic and the Pres­i­dent’s po­ten­tial push to use the Vostochny Port could be a move to ap­pease his vot­ers.

Al­though it is not as sim­ple as Pres­i­dent Kh.Bat­tulga de­cid­ing that Mon­go­lia should use the Vostochny Port. The op­tion of us­ing the Vostochny Port is only on the ta­ble be­cause the Rus­sian gov­ern­ment wants it on the ta­ble.

“Help­ing” Mon­go­lia by let­ting it use the Vostochny Port is far more ben­e­fi­cial for Rus­sia than it is for Mon­go­lia. For one, in­creas­ing busi­ness and de­vel­op­ment on its lesser devel­oped eastern shores has been a pri­or­ity for Rus­sia. One is­sue that has been un­der­re­ported is that Rus­sia and Mon­go­lia are com­peti­tors in the coal mar­ket.

In March, China im­ported 19.5 per­cent more coal from Rus­sian, bring­ing in 2.3 mil­lion tons, the high­est monthly to­tal since June 2014, ac­cord­ing to data from the Gen­eral Ad­min­is­tra­tion of Cus­toms on Tues­day.

Rus­sia is slowly but surely ramp­ing up its coal out­put and in­creas­ing its routes to China while Mon­go­lia bick­ers over a 200-km rail­way to China. In the wake of China’s coal im­port ban on North Korea due to nu­clear test­ing, Rus­sia and Mon­go­lia are the two prime com­peti­tors as China’s im­me­di­ate neigh­bors. Coal ex­ported from the Ta­van Tol­goi mine through the Vostochny Port will have to travel around 5,000 kilo­me­ters to get to its fi­nal con­sumer, com­pared with the 283-km pro­posed rail­way be­tween Ta­van Tol­goi and China’s bor­der cross­ing in Gashu­un­sukhait, which al­ready reaches its fi­nal des­ti­na­tion. Rout­ing Mon­go­lian coal through the Vostochny Port in­creases trans­port cost and ren­ders Mon­go­lian coal es­sen­tially un­com­pet­i­tive. It is even more con­ve­nient for Rus­sia that Mon­go­lia has spent eight years at a stand­still bick­er­ing over a rail­way to China.

Many par­tic­i­pants in the Coal Mon­go­lia 2017 con­fer­ence noted that while Mon­go­lia was busy fight­ing over which rail­way to build, in­creas­ing po­lit­i­cal di­vide, Rus­sia’s rel­a­tive sta­bil­ity has al­lowed it to build up the port city of Vladi­vos­tok. All signs point to Rus­sia ramp­ing up coal ex­ports even fur­ther.

The truth of the mat­ter is that Mon­go­lia has far more ben­e­fi­cial and prof­itable op­tions than us­ing the Vostochny Port. How­ever, there are many is­sues and mov­ing parts when it comes to this is­sue; it blends into pol­i­tics, geopol­i­tics, and even na­tional se­cu­rity. Look­ing at the is­sue strictly through an eco­nomic lens shows us that there are less costly ways to reach other Asian mar­ket. Due to the sheer dis­tance and un­der­de­vel­oped in­fra­struc­ture be­tween Mon­go­lia and Rus­sia, ex­port­ing Mon­go­lian coal through Rus­sia is not eco­nom­i­cally sound.

Coal han­dling sec­tion at Vostochny Port

A map show­ing the prox­im­ity of Vostochny Port to large Asian mar­kets

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