The Russian economy may be coming under increasing stress, but that is not stopping the Kremlin from handing out credits and other forms of assistance to foreign governments. Mongolia is the latest nation to be favored with assistance authorized by Russian Prime Minister Vladimir Putin.
At a meeting in Moscow with Mongolian Prime Minister Sanjaagin Bayar on March 17, Putin offered a loan of $300 million to help support Mongolia's agricultural sector. Bayar said Mongolia expected to receive the initial $150 million tranche by the end of 2009, adding that the loan would be managed by Russia's Rosselkhozbank.
The Putin-Bayar meeting also reportedly produced an agreement to pursue a railway joint venture, as well as a Russian commitment to continue training Mongolian military officers. And in a gesture reminiscent of Soviet-era inter-party relations, Bayar indicated that the governing Mongolian People's Revolutionary Party would strengthen ties with the United Russia movement that is headed by Putin.
Also in connection with Bayar's visit to Moscow, Nikolai Spassky, deputy head of the Russian nuclear agency Rosatom, signed a cooperation agreement with Sodnomyn Enhbat, head of the Mongolian Nuclear Energy Agency. The pact paves the way for the creation of a joint venture to develop uranium deposits in Mongolia. Rosatom would also potentially be involved in the construction of a nuclear power plant in Mongolia.
Several Russian consortia have been active in Mongolia over the past few years, working to develop deposits of coal and precious metals.
Russian media outlets, notably Nezavisimaya Gazeta, commented that Mongolian leaders seemed somewhat disappointed with the Russian loan amount. Apparently, hope was running high in Ulaanbaatar before the visit that the Kremlin would cough up an assistance package worth several billion dollars. On the other hand, a Nezavisimaya Gazeta commentary pointed out that Russian corporations remain leery of doing business in Mongolia. A windfall profits tax instituted by the Mongolian government has cost Russian companies $2.5 billion in recent years, the newspaper noted.
During the Soviet era, Mongolia was closely affiliated with the Soviet Union, so much so that some observers dubbed Ulaanbaatar as the capital of the 16th Soviet republic. The crash of the Communist economic system in 1991 caused bilateral relations to deteriorate. In 2003, the Kremlin decided to forgive most of Mongolia's debt, estimated at $11 billion. But this move did not immediately produce the desired increase in trade.
Even so, Moscow remains one of Ulaanbaatar's most important foreign trade partners, with Russia accounting for about a 20 percent share of Mongolia's overall turnover total. On March 17, Putin announced that bilateral trade reached $1.3 billion in 2008.
Sergei Blagov is a Moscow-based specialist in CIS political affairs.