Mongolia sitting on a gold mine

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ULAN BATOR, Mongolia — It is late June, but a biting north wind has swept in from the Siberian steppe, driving temperatures down by 40 degrees and bringing an icy drizzle that chills the skin.

Bundled in an inadequate cloth coat, Khavdal Khurman stoops behind a makeshift mine piling with a small sack, sifting through the detritus for a few lumps of coal to heat his tent against the unseasonal chill. Around him lies a coal-blackened Mad Max landscape of abandoned mining equipment and derelict buildings, the windows long since stripped of glass.

Life has been tough for Mr. Khavdal, who worked for 11 years in the coal mine a few miles outside of the capital until it was closed because of safety concerns in 1990 — the same year Mongolia rejected socialism in favor of democracy and a market economy.

Aged somewhere “over 40,” he receives a small pension from the government because of a mining-related ailment, but “it is not enough to survive. I run out of tea and salt,” he says. Yet like almost all Mongolians, he still has faith in the country’s new commitment to democracy.

“Eventually life will get better,” he says.

U.S. officials, who would like to hold up Mongolia as a role model for other countries poised on the cusp between democracy and authoritarianism, sincerely hope he is right.

During a visit to Washington in early June, Foreign Minister Sukhbaatar Batbold received access far beyond what might be expected for a country with a population of just 2.7 million and a gross national product roughly equal to Buffalo, N.Y., including meetings with Secretary of State Hillary Rodham Clinton, Commerce Secretary Gary Locke and senior members of Congress.

“The United States has no greater foreign policy goal than to expand the number of democratic countries in the world,” said Ambassador Mark Minton, who lauded Mongolia as a country that, almost entirely through its own efforts, has done just that.

“That is useful in and of itself,” he said. But it also “gives hope to other countries that … are geographically isolated and under pressure that they can in fact develop democratic institutions for the benefit of their own people.”

For that to happen, however, Mongolia must demonstrate that free markets can improve the lot of its people, and in that respect it has hit a bump in the road. After several years of rapid economic growth, the country has been hard hit by the global recession, which knocked the bottom out from under prices for its main exports — copper, other minerals and to a lesser extent the cashmere that goes into the fine suits of New York and London stockbrokers.

Coupled with that have been several years of droughts and harsh winter storms that have decimated the herds of Mongolia’s traditional nomadic herders. As a result, close to half the population is now clustered in Ulan Bator, the majority living in vast tent and shanty communities that sprawl across the hillsides overlooking an increasingly shabby city center.

At the city’s core, a few soaring glass-and-steel towers, initiated amid high hopes and soaring commodities prices of a few years ago, stand vacant on streets with gaping potholes surrounding a modernist new parliament building with an imposing statue of Genghis Khan.

Hopes for a turnaround are focused almost entirely on some enormous mineral deposits in the southern Gobi Desert that, in the words of Mr. Minton, have the potential, if properly developed, to turn Mongolia into “a prosperous middle-class country” within 20 years.

More than five years of bickering over how to develop the first of those deposits, a mine site called Oyu Tolgoi with copper and gold reserves estimated in excess of $200 billion, appears to be coming to a conclusion and could be settled within days or weeks.

Mongolians say the deal that is being negotiated with a Canadian company that holds licenses on the property will serve as a model for negotiations to develop nearby Tavan Tolgoi, billed as the world’s largest undeveloped deposit of coking coal with estimated reserves of more than 6 million metric tons.

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