What to expect from a Khurelsukh-Battulga showdown

While the resignation of Khurelsukh’s cabinet on January 21st in response to anti-government protests elicited cheers from some commentators, more seasoned watchers of Mongolian politics read it as a “grand accountability gestureto kick off a presidential campaign. Khurelsukh’s parting comments, in which he blamed President Kh.Battulga for inciting the protesters, give credence to this interpretation of events.

The stage now appears set for a showdown between Mongolia’s two most powerful politicians in June’s presidential elections, provided that Battulga can find a way to circumvent the one-term limit to presidential terms introduced by 2019’s constitutional amendments (something analysts believe he is likely to achieve) and see off other challengers from the faction-riven Democratic Party (DP). Khurelsukh, who remains chair of the Mongolian People’s Party (MPP), is favored to secure his party’s nomination.


Former Prime Minister Khurelsukh and President Battulga (image from ubn.mn ).

Most concerning about this coming confrontation is the credible evidence that both men have amassed power through the use of anti-corruption investigations against political opponents. While this is by no means a new phenomenon in Mongolian politics, the increased weaponization of Mongolia’s Independent Authority Against Corruption (IAAC) and its judiciary are amplifying cycles of political retribution. The emergence of a winner-take-all style of politics in Mongolia and the continued erosion of rule of law bode ill for the future of the country’s democracy.



The rise of “anti-corruption” populists


Like many of its post-socialist peers, Mongolia suffers badly from corruption, which can be traced to the imposition almost overnight of market capitalism in the 1990s without the legal or social institutions to stop those with access to political and economic resources from rigging the system in their favor.


In many ways, Mongolia’s experience was similar to other post-socialist nations: the plundering of state assets and consequent concentration of wealth (and, with it, political power) during the “wild nineties” gave rise to patronage networks in government that do not serve the public interest.


And yet, Mongolia’s vibrant civil society, its largely free media, and its enshrinement of democratic norms have prevented it from being warped into the sort of illiberal, ersatz democracy common to large swathes of Eurasia.


However, the guardrails around Mongolian democracy are showing signs of severe wear.

The country’s failure to diversify its economy away from mining has shackled it to boom-bust commodity cycles that fuel inequality and undermine social cohesion.


Officials’ embezzlement of funds meant for small businesses (the SME Fund scandal) and the brazen attempt by proxies of the Trade & Development Bank to acquire 49% of the Erdenet copper mine with funds loaned from state coffers have been painful reminders of the country’s lack of progress in fighting corruption.


Oligarchic control of major media outlets has meant that the public is bombarded with sensationalist reporting about politicians and celebrities, while the much-needed work of independent investigative journalists necessary to hold the powerful to account is silenced or goes undone.


Desperate for solutions, Mongolians appear to have opted for a shortcut: the leadership of two populist politicians who, despite their own personal wealth, have each promised to rid the country of its corrupt elite in exchange for unchecked power.


Under the pretext of cleaning up corruption in the MPP, Khurelsukh in 2019 garnered enough support in parliament to remove then-speaker M.Enkhbold, setting in motion his own ascendence to party chair.


Soon after, corruption cases were opened against two other MPP heavyweights: N.Nomtoibayar and former prime minister J.Erdenebat, who were subsequently sentenced to lengthy prison terms. (Erdenebat’s case was recently returned to the prosecution.)


Battulga has been equally aggressive in sidelining opponents within his own DP. For the past few years, former president Elbegdorj has been under investigation for his role in the aforementioned Erdenet deal, as well as decisions around the Tavan Tolgoi coal mine.


Image via pbs.twimg.com

Former prime minister Ch.Saikhanbileg, the architect of the so-called Dubai Agreement that allowed the underground phase of the Oyu Tolgoi mine to move forward, fled the country following his initial arrest in April 2018. Now a vocal critic of Battulga, Saikhanbileg is believed to be hiding in the U.S. In September, Mongolia’s prosecutor general announced that the government was seeking his extradition.


Two of the Dubai Agreement’s Mongolian signatories, B.Byambasaikhan and Da.Ganbold, have been sentenced to multi-year prison terms on the grounds that they failed to satisfactorily represent the commercial interests of the state and therefore deprived Mongolia of tax revenues.



The curious Batbold case


On November 23rd 2020—the eve of the Thanksgiving holiday in the U.S.—a case was filed in the Supreme Court of the State of New York by the law firm King & Spalding on behalf of Mongolia’s state-owned enterprises against the former prime minister Su.Batbold, members of Batbold’s family, and individuals alleged to be Batbold’s proxies in business dealings.


The plaintiff’s case was built largely on a highly detailed investigative report by the firm K2 Intelligence (now K2 Integrity). Alleging embezzlement and corruption relating to Erdenet and the commencement of Oyu Tolgoi’s development, it makes for a highly engrossing reading.


But not long after the case was filed, it was quietly dropped by the plaintiffs. Just prior to that, the defense’s attorney submitted a letter asserting that all three heads of the state-owned entities that were the case’s supposed plaintiffs had “confirmed that they neither authorized nor requested the filing of this action”.


The letter also obliquely speculated that the case had been initiated by the president’s office to sully the reputation of the former prime minister, who is “likely one of the [MPP’s] candidates for Mongolian President in 2021.”

The Batbold case is potentially significant for at least three reasons. First, it may or may not be entirely about Batbold: the timing of the allegations does point to a deliberate effort to smear a political rival ahead of this summer’s presidential race. But the inclusion of Oyu Tolgoi appears to be yet another attempt to undermine the legitimacy of the project’s legal foundation at a time when relations between the government and OT investors are problematic.


Second, as some observers have speculated, the negative reputational fallout may end up changing Batbold’s political calculus, encouraging him to throw his support behind Khurelsukh.


Finally, it represents a rare instance of Mongolia’s government using international courts to combat corruption, or—if the defense is to be believed—to harass political opponents.



What’s next, and what’s after that


Should a clash between Khurelsukh and Battulga indeed be on the cards, perhaps the most interesting aspect of the contest will be how each of the two men defines themselves in contrast to the other.


While the two have been rivals for some time, they have also declined to interfere as the other stripped rivals of power and influence. Differences may well come down to matters of style.


But the true test of Mongolian democracy will not come in June, but rather in the months that follow. Should Battulga prevail, he will still have to contend with an MPP-controlled parliament that, at the time of writing, is attempting to wrest control of the IAAC from the president’s office. That is probably of little comfort to Battulga’s DP adversaries, who would still be unlikely to see relief from further corruption investigations.


A Khurelsukh victory is a different matter, as it would give the MPP control of all levers of state power. Shortly before winning the presidency in 2017, Battulga and his associates were under investigation for misappropriation of funds from the Tavan Tolgoi railway.


It is not hard to imagine that this investigation will be reopened should Battulga lose. One can therefore reasonably expect him to approach the presidential race as an all-or-nothing contest—a dangerous prospect for the health of a country’s democracy.


Khurelsukh and Battulga each appear to be locked into their respective trajectories. It is perhaps too much to expect either of them to do anything but engage in rounds of escalating hostilities.


There is no telling how much further damage the country’s already-battered reputation will suffer among international investors as Oyu Tolgoi is again rhetorically taken hostage for the sake of political theater.


Perhaps this confrontation will not come to pass. Maybe—just maybe—Mongolians will reject all of this tough-guy posturing and elect former Culture Minister and MP Ts.Oyungerel as their country’s first female president (a highly unlikely scenario judging from the current environment).


Or perhaps the incoming government led by L.Oyun-Erdene will break with tradition by toning down the tired political stunts, articulating a coherent, farsighted agenda, and actually delivering on their promises.


But no matter what, there is still much hard work left to be done when it comes to combatting corruption in Mongolia, and it is too important to be left to politicians.

If the country is to sustainably grow its economy and ensure the survival of liberal democracy within its borders—an outcome its authoritarian neighbors will not encourage and may well seek to undermine—citizens need to demand elected officials put an end to politicized corruption investigations, declare a renewed commitment to rule of law, and pledge to restore the independence of the judiciary laid out in Article 49.1 of the Constitution of Mongolia.


Entrusting the law to any one party or person in a bid to salve the wounds of a country is a devil’s bargain.


Note: Jake Hartnett is an investment analyst and economic consultant based in Ulaanbaatar.

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