The India-Mongolia partnership reached a new milestone with the start of construction of Mongolia’s first oil refinery in a remote corner of the Gobi Desert in June 2018.
As part of the financial assistance, India is providing a soft loan of US$ 1.2 billion for the project, repayable over 20 years. Mongolia, despite having 400 million tons of oil reserves, is dependent on Russia for almost all of its petroleum product needs.
Due to become operational in 2025, the refinery will help Mongolia achieve energy self-sufficiency as it will have the capacity to process 1.5 million tonnes of oil per year. The project is also expected to increase Mongolia’s GDP by up to 10 percent.
A popular Mongolian news channel that praised India’s development aid recently aired a 15-minute program highlighting the refinery’s impact on Mongolia’s energy security. The program defined the various nuances of oil production, its refining, and its connection with the Mongolian energy matrix. The news item brought together relevant data, interviews, and infographics about an oil refinery project that was put into operation in Dorn Gobi province, the first of its kind in Mongolia.
She praised Indian workers for working hard in the inhospitable Gobi desert to fulfill Mongolia’s long-held dream of running its oil refinery. The Mongolian Ministry of Mining and Mongolian Refinery officials also praised the Indian engineers for overcoming the challenges of carrying out this complex technical project in one of the harshest terrains.
Incidentally, the news program highlighted tax and compliance irregularities by Chinese companies that have long dominated Mongolia’s oil production ecosystem. Specific cases, e.g. Petro China’s irregularities were discussed. The audience was informed about the local population’s opposition to Petro China’s field operations due to environmental issues and unethical business practices.
The oligopolistic and cartelizing tendencies of Chinese companies have also been detailed, with illustrations of how they inhibit the entry of reputable international oil companies despite the liberalization of Mongolia’s energy sector since the 1990s.
Notably, Mongolia is not the first country where Chinese companies have engaged in unethical business practices. Several cases of tax and regulatory violations, failure to pay local vendors, importation of prohibited items, and environmental risks of Chinese-funded projects have been reported from recipient countries. Lessons should be learned from several examples where the opaque credit terms of Chinese financing led to the ceding of strategic assets to Beijing, thereby jeopardizing the sovereignty and territorial integrity of recipient countries.
Image Source: ANI News