This article critically examines the corruption rampant in the Mongolian People's Party, as well as the reasons for its decline. The author illustrates in detail the extent of corruption that has engulfed the ruling party.
In the past twelve months, Mongolia has faced a political crisis, where the parliament and the president find themselves in sharp confrontation. This situation highlights that the current governance model and economy do not allow the population to benefit from the country’s mineral wealth.
Although on paper Mongolia's economy shows growth — record exports, increased budget revenues, and impressive economic growth rates — in practice, citizens do not feel this. It has been six years since the protests triggered by air pollution and corruption, but the situation has only worsened.
Since then, public discontent regarding the embezzlement of state resources has escalated into an open constitutional crisis. Last October, the parliament decided to dismiss Prime Minister Zandanshatar Gombojav just four months after his appointment.
Three days later, the president vetoed this decision, citing constitutional norms. The Constitutional Court of Mongolia confirmed the legality of the presidential veto, pointing to violations of procedural and constitutional principles in the parliamentary decision to dismiss the prime minister.
Western media typically adopt simplified approaches to covering events. For example, in early 2025, the British newspaper Times published an article about a "president connected to Putin," who allegedly organized a coup against reformist Prime Minister Oyun-Erdene Luvsanamsrai, who was educated in the USA. However, the article did not reveal the true nature of what was happening.
However, the Mongolians themselves do not perceive the crisis in this way. They see prices for food, fuel, and rent rising, while politicians display luxury cars and expensive accessories. Open "anti-corruption" hearings usually do not lead to real consequences for those behind the schemes.
If a coup did occur, it was a slow process carried out through coal contracts and behind-the-scenes deals, rather than a sudden power grab.
From a party-state system to a financial pyramid
Theoretically, Mongolia is a parliamentary democracy with a democratic constitution and separation of powers. However, in practice, politics has become a hybrid of party and state, where the ruling Mongolian People's Party controls the main levers of power.
"Discontent over the embezzlement of state resources in Mongolia has led to an open constitutional crisis."
Getting on a party list or into a key ministry is perceived as an investment.
You finance a campaign, demonstrate loyalty, "carry the bag" ("цүнх барих") for the faction leader, and in return gain access to procurement, licenses, and projects. Official rules apply, but there are also unwritten codes of factional obligations and behind-the-scenes deals.
For this reason, many Mongolians have stopped using the term "corruption" in its narrow sense. They see a system where the main principle becomes rent-seeking, and patron-client networks penetrate bureaucracy and political parties, undermining formal power.
Cleaner prices, better deals
A striking example of this is coal contracts. In a standard agreement, the buyer commits to purchase a certain amount of coal before it is produced, ensuring a stable income stream for resource-rich countries like Mongolia.
However, recent investigations have revealed that millions of tons of coal were sold to Chinese companies through opaque deals made with Erdenes Tavan Tolgoi (ETT) and a limited number of trading firms. ETT manages the Tavan Tolgoi coal deposit, one of the largest in the world, playing a significant role in the country's economy.
After protests in the winter of 2022, triggered by allegations of "coal theft," the government attempted to improve the situation by proposing to export coal through an auction platform on the Mongolian Stock Exchange (MSE). This was supposed to ensure transparent pricing.
Partially, this worked: prices on the exchange approached the real prices paid by Chinese buyers at the border. A new law on mining product exchanges was adopted, and officials took pride in this step towards transparency.
However, upon closer examination, most of the coal still leaves the country under long-term contracts. According to parliament member Zoljargal, about 80% of coal continues to be exported under these agreements.
At MSE auctions, mainly residual low-quality coal with uncertain volumes is offered. Society sees the price, but the real benefit is hidden from view.
Aggregator as a switch
Supply contracts, especially those related to infrastructure or prepayment, help maintain strategic freedom of action. At the center of many agreements is Bodi International. By examining large contracts with Bodi International and ETT, we can see the full picture.
Experts argue that deals through aggregators like Bodi allow coal to be sold at undervalued prices, while intermediaries take their share from transportation and resale. Some contracts include options to convert debt into equity.
If a state enterprise cannot fulfill full coal deliveries, the creditor can exchange the debt for shares in the project company or infrastructure asset, effectively receiving state assets as collateral.
"Society sees the visible price, but the real benefit is out of sight."
Other state enterprises and their clientelist networks compete for maximum coal export volumes. This reached a peak when one faction began lobbying for the construction of a railway, while another pushed for a border port, leading to price freezes.
When you add to this the financing of infrastructure through barter paid in coal, we see the main features of the "coal mafia" or "coal theft."
Clientelism as an infrastructural force
During the COVID-19 pandemic, exports plummeted, and the difference in delivery times meant real benefits in terms of resources and influence. Priority delivery provided by ETT effectively gave factions and clientelist networks leverage over logistics.
Determining which ton of cargo would pass through which border points became a complicated task. Reports confirm that customs officials, military officials, and local administrators charged fees for their services or favored their acquaintances. Freight companies linked to the political elite thrived, while ordinary truck drivers and businesses faced bottlenecks.
"The state does not disappear, but disintegrates. Power still exists, fragmented into pieces that can be traded."
Sociologists like Michael Mann describe infrastructural power as the state's ability to "intrude" into everyday life through roads and railways. In Mongolia, this power has been divided and leased out, effectively captured.
Railways and border points, such as Gashuun Sukhait, have become not only objects of infrastructure but also subjects of influence struggles. The fight has unfolded over which faction will benefit from construction, who will gain access to resources, and which officials will issue permits.
As a result, the state does not disappear, but disintegrates, and power remains fragmented and subject to deals.
Two budgets, one shadow
To achieve results, the Mongolian government uses about a hundred state enterprises, such as ETT, which bypass bureaucracy. Coal supply contracts ensure future deliveries in exchange for advance payments, while infrastructure loans are secured not by taxes but by specific export flows.
Abroad, there are escrow accounts where export revenues are held until they are transferred to the state treasury. In oil-exporting countries, double tax systems are often observed, and Mongolia is no exception.
"Citizens feel that the budget is growing, but essential services are not provided."
From the perspective of public finances, this creates parallel fiscal structures, redistributing powers away from the budget. The formal structure appears normal and slow, while the informal seems flexible and politicized.
When global prices rise, the second set of channels becomes very attractive. You can take a loan secured by tomorrow's coal to cover today's needs. You can finance the construction of new facilities or make "populist" cash transfers before elections, avoiding the complicated budget process.
Promises of long-term revenues enshrined in contracts can lead governments to ignore the need for accountability, expanding the budget and effectively bribing voters. Citizens see that the budget is growing, yet essential services are absent.
Each new scandal only confirms the complex state of affairs. Political scientists speak of the erosion of the legitimacy of results, which depend on the state's ability to solve collective problems. Citizens begin to feel that the state has lost its moral purpose.
Slow violence, not sudden collapse
The concept of slow violence proposed by Rob Nixon describes the gradual, often unnoticed harm caused by pollution, climate change, and resource depletion.
In Mongolia, the coal economy has led to similar consequences: air pollution in border towns, destruction of ecosystems around mines, and human casualties from coal burning. Nixon notes that ecological disasters occur in "temporal scales that exceed human perception," making it difficult to unite people against long-term threats.
Violence manifests in political, emotional, and ecological spheres. The state promises universal education, but classes are overcrowded as salary increases for teachers are not on the agenda. Anti-corruption hearings are broadcast nationwide, but investigations often stall when they involve high-ranking officials.
People lose faith in justice long before they begin to ignore elections. This is especially true for poor and marginalized groups who have no influence on power structures in Ulaanbaatar.
"Laws change, the composition of the cabinet is reshuffled, new anti-corruption bodies emerge, but the main scheme remains unchanged."
On the ground, citizens see not a democratic consolidation but a strange form of manipulation of public opinion. Everything is "reformed," but it still does not work. The essence remains the same: the weakening of presidential power and the strengthening of the prime minister, with a desire for dominance by the ruling party.
Laws change, cabinets are reshuffled, new anti-corruption bodies emerge, but the main scheme remains the same. "If justice were applied consistently tomorrow," people joke, "there would be no one left in politics."
Protests as a memory of democracy
Despite all the difficulties, public discontent does not subside. In 2019, protests against smog and corruption took place in Ulaanbaatar, and in 2022, young activists took to the streets again, demanding the truth about "coal thefts." Over the past two years, new protests have erupted in response to government reshuffles, extravagant spending, and corruption scandals.
Critics often view these protests as manipulations by the opposition or as naive idealism of the youth. However, both perspectives overlook the importance of these actions.
Each protest, even if it does not lead to results, serves as a reminder of the significance of democracy. It underscores that the purpose of the state is to provide public goods and justice. Hope for a better future persists, and institutions can become inclusive rather than exploitative.
Elite brokerage services in a climate of global uncertainty
In the current conditions, the political economy of Mongolia functions through elite mediation, where authorities act as a link between national wealth and global markets, profiting at every stage.
These brokerage services are not limited to coal. In the copper sector, the Erdenet mine was involved in scandals when trading companies received lucrative contracts for the supply of copper concentrate, allowing profits to be redirected.
"The state acts like a brokerage firm, not as a regulator ensuring maximum benefit for society."
Even at the giant Oyu Tolgoi copper-gold mine owned by Rio Tinto, disputes arose over cost overruns, which observers believe benefited contractors linked to the elite. In these cases, the state acts as a brokerage firm, not as a regulator ensuring maximum benefit for society.
This situation has serious implications for democracy and development in Mongolia. In the parliamentary elections in June 2024, the opposition, leveraging discontent over corruption and economic conditions, achieved significant success in the legislature. Voter turnout was nearly 70 percent, indicating that Mongolians have not yet become apathetic. Voters associate one-party rule with corruption and the undermining of democratic accountability.
Devastation of democracy
All these aspects lead to a troubling trend identified by Peter Meyer over a decade ago: the weakening of democracy. This occurs not through the complete abolition of elections, but through the gradual erosion of their essence.
The situation in Mongolia demonstrates what happens when a resource-rich economy is built on extraction without considering inclusive institutions. It is easy to talk about the need to strengthen institutions, but it is important to understand which ones specifically and in what order need to be strengthened.
Continuous pressure for reforms will only be effective if people see real changes. The harsh paradox of slow violence is that it not only causes harm but also undermines citizens' patience. Year after year, scandals without consequences teach people not to hope for anything.
In this vacuum, various problems arise: conspiracy theories, nationalism, internet trolls, and more. Nevertheless, the current crisis presents an opportunity for the masses to fill the resulting vacuum and demand a new voice. The success of the Mongolians in this will determine the country's path to genuine accountability and democracy.
Author: Sanchir Jargalsaihan — Research Fellow at the University of Oxford.
Translation: Tatar S.Maidar
Source: MiddleAsiaNews
