Rio cuts Iran ties amid Mongolian sovereign risk www.afr.com

Rio Tinto will divest another contentious African asset as the company's leadership conceded its Mongolian copper venture was experiencing sovereign risk challenges and was complicating the company's shift away from fossil fuels.

Rio announced on Monday it would sell its 68.8 per cent stake in Namibia's Rossing uranium mine to China National Uranium Corporation for a sum that could range between $US6.5 million and $US106.5 million.

Rossing is the latest in a string of unwanted Rio assets to be divested, and recent experience suggests there is a strong chance the proceeds from the sale will be returned to shareholders just as the proceeds of Australian coal divestments have been in the past two years.

But the Rossing sale will also liberate Rio from a contentious governance issue given the investment arm of the Iranian government was a fellow shareholder in the Namibian mine.

The Iranian Foreign Investments Company owns 15.29 per cent of Rossing and while it has not had directors on the Rossing board nor purchased Rossing uranium in recent years, the relationship was uncomfortable for Rio in the context of sanctions imposed on Iran by western nations including the US.

Those sanctions were lifted to some degree in 2015 when Iran agreed with nations including the US, Germany, Russia and the UK, to reduce its nuclear capabilities, but the sanctions were reinforced this month by US President Donald Trump.

The sale continues the shrinking of Rio's presence in the developing world, which has been marred by scandals in Guinea and Mozambique.

Speaking in Sydney on Monday, Rio chairman Simon Thompson said those scandals had clearly "dented" Rio's reputation, while chief executive Jean-Sebastien Jacques was frank about challenges Rio was still facing in the developed world, including at the Oyu Tolgoi copper mine in Mongolia.

'We do have some challenges'
The relationship between Rio and Mongolia appears to have deteriorated in 2018 with Mongolia seeking changes to interest rates on loans, reviewing the 2009 investment agreement that governs Rio's investment in the mine, and changing the power supply rules that Rio must abide by.

Mr Jacques has traditionally expressed confidence that common sense will prevail in Mongolian politics despite the emotion surrounding the $US5.3 billion expansion of Oyu Tolgoi, which is widely viewed as a bellwether for foreign investment in the developing nation.

But on Monday Mr Jacques named Mongolia as one of two places Rio was seeing sovereign risk.

"We do have some challenges, we have sovereign risk challenges in our Minerals Sands businesses in Africa and in Mongolia," he said, during a presentation to civil society groups in Sydney.

Mongolia's decision to compel Rio to source Oyu Tolgoi's power from within Mongolia, rather than continuing to import power from neighbouring China, means the mine will almost certainly require a new coal-fired power station, with the Mongolian government keen for the station to built in the Tavan Tolgoi coalfield.

Mr Thompson described Oyu Tolgoi's likely reliance on coal-fired power as an "intractable problem" for a company that had sought to distance itself from fossil fuels by selling its coal mines.

"The decision to disinvest from fossil fuels was informed by our view on the supply and demand outlook for thermal coal and the opportunity that we saw to sell our coal assets for full value and to redeploy the capital into sectors where the outlook is better, in a carbon-constrained world," said Mr Thompson on Monday.

"We do face some intractable problems, including our reliance on coal-fired power in Mongolia and in South Africa. But in both cases, our operations clearly bring huge economic and social benefits, and play a major role in poverty alleviation in two relatively poor countries."

The Rossing sale comes barely two weeks after Rio netted $US576 million ($799 million) from the sale of a wharf and nearby land in the Canadian province of British Columbia.

Rio said the $US6.5 million was payable upon completion of the deal, and the total transaction cost could rise as high as $US106.5 million depending on uranium spot prices and the profitability of Rossing between now and 2025.

The transaction comes after a 44 per cent rally in uranium prices since April.

While still at very low levels by historic standards, the price rally has followed supply curtailments by Canadian producer Cameco and Kazakhstan's state-owned producer Kazatomprom, which floated a minority portion of its shares for the first time earlier this month in Astana and London.

The importance of Mongolia's boreal forests www.unenvironment.org

Every year as the sun warms and the days lengthen, 28-year-old Baganatsooj moves his herds to their summer pastures outside the town of Tunkhel in Mongolia’s far northern Selenge province—a nomadic lifestyle his ancestors have practiced for thousands of years.

The snow has melted, and Baganatsooj’s 300 sheep and goats, 40 cows, and 30 horses graze in the wide green valley. He heard through word of mouth that the rains have been good here, so, along with his wife Munkherdene and two children, travelled 50 kilometres with their livestock to their new home.

But it’s not just the weather that determines where the herder and his family set up their ger, or traditional yurt.

They also follow the forest. “Forests generate more water, and the grass is good there, so the animals graze at the edge of the forest,” Baganatsooj says. The trees also provide scraps of fuelwood and timber for temporary fences.

Life is changing for traditional herders—who make up a third of Mongolia’s total population—and for everyone else, too. In 1990, the country transitioned from socialism to a market economy, the new freedoms leading to a quadrupling in the number of livestock. Urbanization is also increasing—the population of the capital Ulaanbaatar has grown by 70 per cent since the 1990s.

More importantly for the herders, the weather is becoming less predictable. Baganatsooj has noticed changes even within his working life: “Ten years ago the grass was very good. Now it’s getting drier. Last year was the driest year in a long time and there was lots of fire.”

Average annual temperatures in Mongolia warmed 2.1 degrees Celsius between 1940 and 2014—around triple the global increase over the same period—and Mongolian tree-ring records indicate that the 20th century was one of the warmest centuries of the last 1,200 years.

Herd animals have been devastated by repeated dzuds, a local term for a peculiarly Mongolian natural disaster—a dry summer followed by a harsh winter. Drought affects grass growth, and less grass means livestock are unable to put on enough weight to survive the winter cold. The phenomenon used to occur around once a decade, but there have been at least seven dzuds since 1998. In the worst, in 2009-2010, nearly 10 million animals died.

Climatic changes are driving further migration, says Oyunsanaa Byambasuren, the General Director of the Department of Forest Policy and Coordination at the Mongolian Ministry of Environment and Tourism (MET).

Oyunsanaa and colleagues used tree-ring data to analyze the frequency of droughts over the past two millennia, and found that the recent dry spell is abnormal.

“We haven’t seen anything like it in the last 2,000 years—we did not have such a frequency of droughts. It is making people lose their livestock or their livelihoods, and they’re moving to the city or more central places in order to seek a better life – and once they move, they don’t go back. It’s scary, really. The forests and pastures are under pressure.”

“People who are 40 or 50 years old say, ‘when I was a child, the situation was very different.’ Now, it’s completely unpredictable. Climate change is happening right now.”

Boreal forests—dominated by larch, pine, and birch trees—line Mongolia’s northern border with Siberia, covering 14.2 million hectares, or nine per cent of this vast country.

They are part of a huge expanse of boreal forest—the world’s largest terrestrial biome—that stretches right across the earth’s northern latitudes. These forests are both intensely affected by climate change—recent studies have found that the hotter, drier summers inhibit tree growth in Mongolia’s forests—but they are also a possible, partial solution to it.

Wolves, bears, lynx, elk, deer and boars thrive here. Hawks, falcons and owls hunt from the skies, while pelicans, hooded cranes and numerous other birds spend part of the year in the nearby lakes.

The forests store large amounts of carbon and methane in both the plants and soils, and can help to increase water availability. They also prevent erosion on steep mountainsides and are a natural barrier against the encroaching desert. They are also a source of fuelwood, timber, nuts, berries and honey, and contribute to the livelihoods of rural people in diverse ways.

As temperatures climb, Mongolia’s permafrost is shrinking, too. Permafrost is ground, rock or soil that remains frozen for more than two years in a row. In Mongolia, it’s found across the country’s north, over much the same area as the forests.

That’s no coincidence—in arid regions, permafrost can increase the amount of moisture available in the ecosystem, says Yamkhin Jambaljav from the Institute of Geography-Geoecology at the Mongolian Academy of Sciences.

To measure the extent of Mongolia’s permafrost, Jambaljav and his team covered 24,000 kilometres over several years, as they criss-crossed the country. They drilled 120 holes of up to 15 metres into the frozen ground to measure the temperatures beneath.

They found that five per cent of Mongolia’s permafrost—13,150 square kilometres—had thawed completely between 1971 and 2015. In 1971, temperatures were low enough to support some form of permafrost in 63 per cent of the country. By 2015, that had fallen to just 29.3 per cent.

The thaw is caused by climate change—but also amplifies it. Plants and animals have been living and dying in the boreal region for thousands of years. Where the ground is frozen, it prevents their remains from decaying, storing the carbon in the soil and keeping it out of the atmosphere. But if the soil thaws, microbes decompose the ancient carbon and release methane and carbon dioxide.

It’s estimated that the Northern Hemisphere’s frozen soils and peatlands hold about 1,700 billion tonnes of carbon—four times more than humans have emitted since the industrial revolution, and twice as much as is currently in the atmosphere.

In 2011, scientists from the Permafrost Carbon Network estimated that if they thaw, that would release around the same quantity of carbon as global deforestation does—but because permafrost emissions also include significant amounts of methane, the overall effect on the climate could be 2.5 times larger.

So what can be done? According to Werner Kurz, an ecologist at Canada’s Pacific Forestry Centre in British Columbia and a contributing researcher to the Intergovernmental Panel on Climate Change (IPCC), two things have to happen at the same time if we’re to avoid runaway climate change, and meet the goals of the 2015 UN Paris Agreement.

“We cannot do that without simultaneously massive reductions in fossil fuel consumption and managing the land in such a way to contribute the greatest possible sink—so that it keeps sucking carbon dioxide out of the atmosphere but also provides a continuous supply of timber, fiber and energy to meet society’s demands.”

That means preventing forests from becoming farmland or desert, fighting the fires and insects, and encouraging local people’s involvement in protecting their forests.

Mongolia has taken up the challenge. Alongside other efforts by the national government, the country is also the first outside the tropics to begin preparing for REDD+, an international climate change mitigation scheme under the United Nations Framework Convention on Climate Change (UNFCCC) that aims to assist developing countries to protect their forests and the carbon stores within them.

Although Mongolia’s UN-REDD National Programme will come to a close this year, the country’s REDD+ implementation will forge ahead. “National ownership of this programme is important,” says Zamba Batjargal, Mongolia’s National Focal Point for the UNFCCC at the Ministry for Environment and Tourism. “I believe that the UN-REDD Programme will leave a good legacy and continue without any outside support. We have made big strides for our forests and we will continue forward.”

China-backed coal projects prompt climate change fears www.bbc.com

As levels of greenhouse gases reach a new record, concerns are growing about the role of China in global warming.

For years, the increase in the number of Chinese coal-fired power stations has been criticised.

Now environmental groups say China is also backing dozens of coal projects far beyond its borders.

Coal is the most damaging of the fossil fuels because of the quantity of carbon dioxide it releases when it's burned.

Last year, the concentration of carbon dioxide in the atmosphere reached its highest level for the past 3-5 million years, according to the latest research by the UN's weather agency, the World Meteorological Organisation (WMO).

And last month the UN's climate science panel said that coal must be phased out by 2050 if the world is to have any chance of limiting the rise in temperatures.

The Chinese-supported coal projects are under way or planned as far afield as South America, Africa, southeast Asia and the Balkans.

Contracts and financing for these facilities are often not fully transparent but campaign groups including Bankwatch have tried to keep track.

"You cannot be a world leader in curbing air pollution and at the same time the world's biggest financier of overseas coal power plants," the group's energy coordinator Ioana Ciuta told the BBC.

According to Ms Ciuta, efforts to tackle the dirty air of Chinese cities have led many power companies to limit their ambitions for coal-fired power stations in China itself and to target their technology and labour overseas instead.

"By having China invest in over 60 countries along the Belt and Road Initiative, it's perpetuating a source of pollution that has been demonstrated to be harmful not just to the climate but also to economies," she said.

No carbon capture
In Serbia, one of the country's largest coal-fired power stations is being expanded with the help of a loan from a Chinese bank and with the work being led by one of China's largest construction companies.

An hour's drive east of the capital Belgrade, in the coal-rich Danube valley, construction has already started at the site, known as Kostolac B3.

An existing power station towers over the rolling landscape, a steady stream of pollution twisting from a massive smokestack, and conveyor belts ferry coal from a nearby open-cast mine at Drmno.

The power station is run by the national Serbian electricity company, EPS, which provides about 70% of the country's power by burning coal - the rest comes from hydro-electric schemes.

Now, under a $715m (£560m) contract agreed by the Serbian government and Chinese President Xi Jinping, an extra unit is being added, which will bring 350MW of additional capacity with the latest "super-critical" technology.

When we visit, we catch a brief glimpse of a group of Chinese workers wearing hard hats on their way from the construction site to a vast set of accommodation blocks - by next year, some 1,500 Chinese staff will be here.

Safety signs and notice boards are written in Serbian and Chinese. Equipment and shipping containers carry Chinese labels.

I ask the EPS official running the project, Zeljko Lazovic, what he feels about such a large and important venture being in the hands of Chinese engineers and workers.

"In the next few months a lot of Chinese will come here and this will be a big challenge," he says.

"With Chinese workers and Serbian workers, at the beginning we had some cultural problems but we have overcome them and there is now very good cooperation."

Efforts to tackle pollution in Chinese cities such as Beijing have pushed Chinese power companies to look overseas
When asked about the environmental cost of the new project, Mr Lazovic insisted it would meet all the EU's standards on pollution by dust, nitrogen dioxide and sulphur.

However, the new unit will not be fitted with any carbon capture technology so it will fit into a pattern of Chinese-backed projects that will add to carbon dioxide levels in the atmosphere.

'Locked into high emissions'
Christine Shearer is an analyst with the group CoalSwarm, which tracks coal developments, and she is scathing about the implications.

"These projects are not compatible with limiting global warming to 1.5C or 2C," she said, referring to the two targets of the Paris Agreement on climate change.

She says that Chinese financial institutions are filling a gap left by Western banks and agencies deciding to limit their involvement in coal.

"These projects, if completed, will lock the countries into high carbon-emitting infrastructure and volatile coal imports precisely at a time when prices for clean energy are starting to fall below that of coal power."

We tried to contact the Export-Import Bank of China, which is providing the loan, and the China Machinery Engineering Corporation, which is leading the construction, but did not hear back.

For the Serbian power company, EPS, the attraction of a local supply of coal has combined with a cheap Chinese loan and the prospects of valuable exports of electricity.

Respiratory diseases
About 3,500 jobs depend on the Kostolac complex but some local people have become increasingly outspoken about the pollution in the area.

Momir Savic showed me how the conveyor belts carrying coal run close to the villages and he fears a further expansion of the operation.

"The quality of our air and water is very poor. We cannot grow fruit and vegetables. There is also a lot of noise. All this affects the health of people living here, many of whom have respiratory diseases," he said.

EPS says it is spending hundreds of millions of euros on environmental protection but its track record clearly does not inspire trust.

Pera Markovic, a lawyer with Cekor, an environmental group, is critical of the company's failure to limit pollution in the local area.

But he concedes that Serbia is heavily dependent on coal for its power.

For how long? "Decades," Mr Markovic says.

That's likely to be the same in many other countries too, whatever climate scientists say is needed.

Mongolia’s developing air ambulance service www.news.mn

Helicopter landing sites (HLS) are being constructed outside three big hospitals in the Mongolian capital Ulaanbaatar with the aim of developing the air ambulance service. Recently, the National Centre for Communicable Diseases has become able to receive medical helicopters with the construction of an HLS. A 11728 square meters site consisting of the HLS, a car park with a capacity of 194 vehicles, 2580 meters of pavements, 125 street lights, 104 seats and 41 rubbish bins has been constructed.

Gazprom stops auction as it’s ‘sold out’ for 2018 www.rt.com

Gazprom Export, the export arm of Russian gas giant Gazprom, has stopped the natural gas auctions on its electronic sales platform because all natural gas available until the end of 2018 has already been sold.
Gazprom Export launched on August 17 its Electronic Sales Platform (ESP) for physical natural gas sales to European consumers, in addition to supplies under existing contracts. The Russian firm expects the platform “to become an additional mean to optimize supplies of gas,” Elena Burmistrova, Director General of Gazprom Export, said.

8.7 million livestock to winter in transhumance www.montsame.mn

Ulaanbaatar /MONTSAME/. According to the Ministry of Food, Agriculture and Light Industry, preparation for winter has been done by a total of 169.7 thousand herder families, that own over 68 million livestock, while another 8.7 million are to spend the winter and spring in transhumance.

Yuhan-Kimberly assists reforestation in Mongolia www.koreaherald.com

Yuhan-Kimberly, a South Korean manufacturer of sanitary products, said it was joining forces with the Mongolian government to restore a forest and open an observatory tower there.

IMF suggests tighter monetary conditions www.zgm.mn

An International Monetary fund (IMf) staff team led by Geoff Gottlieb has visited Ulaanbaatar to conduct discussions on the sixth review of the three-year extended fund facility (eff) arrangement. The team highlighted the widening current account deficit and suggested the central bank to rein in high credit growth.“As we reach the mid-way point of the IMfsupported program, significant progress has been made by the authorities in overcoming the economic crisis. Growth has revived to over 6 percent, the overall fiscal balance has swung from a large deficit to a small surplus, and government debt has fallen sharply. While the external environment has been supportive with buoyant export demand, the recovery has become broader based with consumption and investment rising sharply.

Mongolia: small embassies can have a big impact www.blogs.fco.gov.uk

By:Catherine Arnold Former British Ambassador to Mongolia
Part of BBC Inside the Foreign Office 2018 UK in Mongolia

Mongolia is everything you expect. Mongolia is also everything you don’t expect. At least that’s what I found as the UK’s Ambassador. The world’s least densely populated country, which was once one of the largest empires in world history, it is a land of immense beauty and rich history.

Mongolia is also a vibrant 21st century democracy. Many issues that matter to Mongolia, matter to us – media freedom, climate change, global peacekeeping. And, it’s quite literally sitting on a gold mine. Home to over 6000 deposits of more than 80 different minerals, Mongolia has the potential to be the richest country per capita in the world.

That means the small, motivated embassy of three UK diplomats and our excellent Mongolian team, covers a huge range of work.

The UK and Mongolia have recently celebrated 55 years of diplomatic relations and, as Mongolia’s second largest trading partner, our trading relationship matters for both countries. To celebrate the 55th anniversary, we announced:

the appointment of Julian Knight MP as the Prime Minister’s Trade Envoy to Mongolia;
that UK Export Finance will increase how much it lends to support suppliers and buyers of UK exports to Mongolia.
Having fretted about meeting our export targets the excellent Department of International Trade team exceeded them.

Cambridge Mask Company’s initial consignment of pollution masks sold out within 24 hrs of the fashion show they were launched at, developing into a thriving collaboration with a Mongolian pharmacy chain.

The mask fashion show also means more people have started to wear effective masks – of whatever brand. The embassy has since taken this to the next level, focussing on supporting the poorer parts of Ulaanbaatar, where pollution levels often go off the international air-quality scale.

This is typical of our work in Mongolia – supporting UK trade is of course an essential part of what diplomats do around the world but the relationship between our two countries is about so much more than that.

We work with Mongolia in the UN Human Rights Council, Mongolian troops joined coalitions with ours in Kosovo, Iraq and Afghanistan, and Mongolian peacekeepers are currently working across Africa. UK expertise is supporting education reform and a UK funded mobile app and training for border guards is helping to counter the illegal wildlife trade (IWT) here.

The last had swift, positive results, including a 25-fold increase in detection of smuggled, endangered wolf-parts. The Mongolian Foreign Minister spoke powerfully about this at the recent major international conference on IWT, in London.

It’s true that supporting UK trade is important work for diplomats around the world and small embassies can have a big impact. The British Embassy Ulaanbaatar has helped UK companies in Mongolia to secure exports worth many times the total running and staff costs of our embassy.

But diplomacy works best when trade is one of many links between the UK and the countries we work in. A key task for diplomats is to fit together the people and pieces to make the UK’s presence overseas much more than the sum of its separate parts.

Mongolia's economy to maintain positive growth next year www.xinhuanet.com

ULAN BATOR, Nov. 22 (Xinhua) -- Mongolia's economic growth has been recovering rapidly thanks to the recovery of commodity prices in the global market and the International Monetary Fund (IMF)'s economic bail-out program for the country, a Mongolian economic researcher said.