Outside APEC: Mongolia or North Korea–which will be called in?

There are two nations in Northeast Asia that remain outside APEC despite their common regional interests with the project. Are there prospects for the Forum to embrace two more regional players, namely Mongolia and North Korea? And how would accession by these nations affect the Forum—for better or for worse?

Mongolia – APEC. Why did it not work?

Following the democratic revolution in 1990-1991, it was virtually inevitable that Mongolia would join APEC quickly. It was rapidly integrating into global financial institutions, including the World Trade Organization (WTO), the Asian Development Bank and others, using its ties with the West, Japan and South Korea as a counterweight to its traditional partners, Russia and China (the so-called ‘Third Neighbour’ concept). Ulan Bator made effective use of international humanitarian and donor aid to shape a new liberal economy. Yet, it has not joined the Forum. The Mongolian authorities looked to Moscow, Beijing and Washington for support, but to no avail.

Today, such inconsistency looks even stranger. Throughout the last 20 years, Mongolia has been doing its best to become more open to the world. According to some experts, the country has become much more liberal than Russia or China. The Mongolian authorities are pursuing the idea of ‘open regionalism’, creating a foreign investment market for development of the infrastructure, mineral and raw materials sector, cattle breeding, telecommunications, and the banking business.

Commenting on Mongolia’s reluctance to join the Shanghai Cooperation Organisation officially, where it has the status of an observer, Mongolian experts cite political reasons, pointing to Ulan Bator’s fear of coming under ‘Russian-Chinese pressure’ once again or its reluctance to distance itself too far from ‘the third pillar’ – the United States, Japan and South Korea.

In the case of APEC, these arguments do not work. The Forum is known to have different centres of gravity, focusing exclusively on trade and economic liberalisation. The Mongols are waiting for something. No one knows exactly what they are waiting for, including, perhaps, the Mongols themselves. At least Russia, using its status as the host of the Vladivostok summit, might help determine Mongolia’s reasons by inviting it as a guest to the Forum in September 2012.

The Mongolia we lost?

In general, the Russian-Mongolian ‘cross-section’ fits objectively into the overall contradictory picture of the regional integration and the APEC agenda. As we know, Russia nearly ‘lost’ Mongolia in the early 1990s. This was the time when the era of total Soviet domination in this steppe republic came to an end. Mongolia disappeared from Russian politics and even the signing of the ‘big treaty’ with Mongolia in 1993 did not help much.

In 2000, Russia began its difficult ‘return’ to its former self. The problem was that, in the absence of the Russian Federation, ‘the third brother’ lost no time and all the lucrative economic niches had long since been taken by foreign companies. As for the old Soviet projects, including the Erdenet Mining Corporation, the Ulaanbaatar Railway, Mongolrostsvetmet and others, they all needed investment and technological upgrading. The Mongols demanded their fair share; but Russian officials, unable to shed old stereotypes, still thought of Mongolia as the former ‘16th Soviet republic’.

Vying for the Mongolian ‘diamond’

By that time, however, the Mongolian leadership had rethought its attitude toward Russia according to the principle ‘friendship is one thing and money another’. Russia’s proposals for investment in the major deposits of coal, gold, copper, molybdenum, and uranium were seen not as a ‘benefit’ or ‘favour’ on the part of Moscow but as one modernisation option – yet by no means the only one.

Similar proposals were also coming from Tokyo, Beijing, Seoul, Washington and other capitals.

Participation by Russian companies in tenders became a must. Especially when it came to the main ‘diamond’ of the Mongolian reserves—the giant Tavan Tolgoi coal mine, which holds the world’s biggest explored reserves of coking coal (over 6.5 billion tonnes). Moreover, coal could be mined cheaper there, using opencast methods. Following several failed attempts by Russian businesses to get monopoly rights to this and some other fields, Moscow realised that the Mongols had changed and that Mongolia itself had come of age, turning into a full-fledged bird. This effectively cancelled the old Soviet saying that ‘a chicken is not a bird and Mongolia is not abroad’. It now turned out to be a ‘foreign country’ and even farther abroad.

Forgive debt to get in on the act?

In 2003, Russia agreed to forgive all Mongolia’s Soviet debts (some 10.2 billion dollars). In 2010, some debts of the post-Soviet period were written off as well –172 million dollars. On 25 August 2009, then Russian President Dmitry Medvedev and his Mongolian counterpart Tsakhiagiin Elbegdorj signed a Declaration on Strategic Partnership in Ulan Bator. On the same day, the creation of the Russian-Mongolian joint venture for production, processing and export of Mongolia’s natural uranium (reserves estimated at 50,000 tonnes) was formalised. Russia became the first country to sign such an agreement with Mongolia. At the same time, Russia also invested in the Ulaanbaatar Railway joint venture, getting a stake worth 125 million dollars.

As regards the fate of the main Mongolian ‘pie’ – the Tavan Tolgoi deposits, Russian Railways has built a joint consortium with the Mongols for the tender. In July 2011, the Mongolian government named three winners of the tender to develop the western part of the field—the American company Peabody (40%), China’s Shenhua EnergyCo (24%) and the Mongolian-Russian consortium led by Russian Railways (36%). In this respect, Russian officials are discussing the possibility of building 400 kms of railways to link the deposits to the Ulaanbaatar Railway, in order to transport the coal via the Trans-Siberian Railway in both western and eastern directions.

Today, the Mongolian authorities speak of possible ‘adjustments’ to the tender results, tying them to the results of Mongolia’s parliamentary elections due later this month. According to the constitution, the elections are crucial, since the winning party (and it is difficult to predict the winner) will form the government and, in fact, determine both domestic and foreign policies.

In any case, it seems that the ‘return’ of Russia to Mongolia following a thorough ‘correction of mistakes’ is in full swing, though there will still be potholes and bumps along the way. As for the prospects for Mongolia joining APEC, Russia’s active lobbying for Mongolia at the Forum will help both countries. And Mongolia’s new image as a relatively young, fast-growing liberal economy is obviously working both for this integration and the reputation of Russia.

Pyongyang cornered?

Unfortunately, things are different with respect to North Korea and its prospects for joining APEC. Even before North Korea’s withdrawal from the Treaty on the Non-Proliferation of Nuclear Weapons, China formally declared that ‘Pyongyang wanted to become a member of the Forum’ and that Beijing would support it. Today, China’s message is different: first it is necessary to defuse tension on the Korean Peninsula by peaceful means, then to restart the six-party talks, etc. As for North Korea’s APEC prospects, Beijing is watching and waiting, without making any rash statements.

Western experts view the scenario of North Korea-APEC rapprochement as an opportunity for some kind of ‘liberal involvement’ of the Republic and an option for so-called ‘soft opening’. According to some American experts, the change of leadership, with the young and inexperienced Kim Jong-un taking the helm, is contributing to these aims.

For their part, Russian experts, including Aleksandr Zhebin, a distinguished expert on Korean problems, propose using the Vladivostok summit to invite North Korea, but for a different purpose.

He says inviting the young Kim might persuade Pyongyang ‘to behave in a more responsible and predictable way’ and eventually resume nuclear talks.

So, does it make sense to rush into inviting North Korea or not? The truth lies apparently somewhere in the middle. It is unlikely that the APEC community (except for China and Russia) would welcome a visit by the young North Korean leader to the Summit. So far, the Republic’s prevailing image has not been working for this trip. On the other hand, it would be a mistake to drive North Korea into a corner. This would be both dangerous and ineffective. It is better to talk with Pyongyang about construction of the railway and gas supplies using the language of money and mutual benefits. Here, Russia can do without an ‘interpreter’ but the conversation with North Korea must be begun right away, today, since

Sergei Luzyanin, Voice of Russia