Global Courant
The Power of Siberia-2 (PoS2) gas pipeline has the potential to transform energy security dynamics in Northeast Asia, provided Moscow and Beijing agree to the specific terms. With a predicted annual transport capacity of approximately 50 billion cubic meters of gas, the construction of the pipeline will also be increase in natural gas reserves to China and Asia.
This new source of natural gas will help states diversify their energy portfolios and potentially enable a more rapid transition from coal. The construction and maintenance of the pipeline will be create thousands of new jobs across the region and billions of dollars in revenue.
While China is the clear winner of this new source of stable supply at a bargain priceMongolia will also see socio-economic and strategic advantages.
Some observers have warned Ulaanbaatar is against cooperation with Russia and China on ideological and strategic grounds. But a cost-benefit analysis suggests that Mongolia has much more to gain than to lose from its potential intermediary role in the project.
Economically, Mongolia expects the PoS2 to contribute to 1 billion dollars a year’s worth of transit fees to increase the country’s revenue, create employment, facilitate economic diversification And accelerating the energy transition away from coal. All these developments are necessary conditions for Mongolia Sustainable Growth.
Mongolia is a developing economy with a average income per capita of just over US$4,500, an unemployment rate of more than 12% and an overdependence on raw material extraction. Such an economic windfall will have substantial consequences for the development of Mongolia.
Graphic: Facebook
On energy, Mongolia possibility to import natural gas through the PoS2 pipeline, it will help accelerate the transition from coal. Mongolia uses coal for 85% of its energy supply and relies on Soviet-era coal-fired combined heat and power (CHP) plants to serve its major cities.
These aging coal-fired CHPs create heavy air pollution in winter and directly affect the quality of life of Mongolia’s urban residents.
While Mongolia needs to invest in solar and wind energy in the long term, natural gas offers a means of reducing coal use in the short to medium term. It also provides a long-term remedy offset intervals in the field of sustainable energy supply.
From an environmental point of view, the PoS2 would be a positive influence on Mongolia’s total ecological footprint. While environmental groups have criticized Mongolia’s decision to substitute one fossil fuel for another, such criticism is misplaced.
When burned, natural gas produces about half as much carbon dioxide as coal and produces far fewer harmful pollutants, such as sulfur dioxide and particulate matter.
Like many Asian economies see the transition away of fossil fuels as an incremental process – one based on the transition from coal to cleaner alternatives – so the Mongolian government has prioritized short-term solutions over a long-term one. In this regard, Ulaanbaatar has rightly avoided the perfect getting in the way of the good.
These are the fundamental considerations – economic, energy and environmental security – that should and will guide Ulaanbaatar’s decision about participating in the PoS2 project. It is not the geopolitical “turn of the screws” as some analysts have proposed.
Little or no reference to alleged coercion from Russia and China is found in Mongolian writings on the PoS2. Mongolian analysts largely view the PoS2 as a strategic windfall — one that elevates the country’s stature within Northeast Asia and with Russia and China.
But Mongolia still needs to try to mitigate the potential risks of the PoS2 project. Ulaanbaatar can work closely with regional organizations such as the Asian Development Bank ensure transparency and accountability during the tendering and construction process.
Mongolian leadership can also adhere to international best practices in environmental impact mitigation and take measures to ensure that the country proper energy infrastructure be there to take advantage of gas inputs when the time comes.
Fortunately, Mongolia can use a lot of that the same energy infrastructure for natural gas it needs for other renewable gaseous fuels. This means that investments in gas infrastructure now will help integrate renewable energy sources into the country’s energy grid later.
Mongolia can also mitigate the PoS2’s potential contribution to strategic vulnerability through a foreign policy based on omni-entanglement and balance of influence. This means maintaining ties with both Russia and China to avoid dependence on either – a strategy Mongolia and other Central Asian states have used successfully for decades.
The Oyu Tolgoi mining site in Mongolia. Image: Facebook
For states like Japan, South Korea and the United States – all of which have vested interests in Mongolia’s strategic autonomy – this means promote cooperation through operations and dialogue designed to reinforce a stable regional order.
While these mitigation efforts should allay remaining concerns among analysts, they can also be seen as direct benefits of Mongolia’s involvement in the PoS2 project.
The more Mongolia integrates into Asia’s energy networks, the more it gains strategic value across the region, such as in the US. Seize the initiative strategy.
Ulaanbaatar should not shy away from such opportunities because of potential drawbacks. It should run towards them instead.
Jeffrey Reeves is Asia Practice Lead at Onyx Strategic Insights.
This article was originally published by East Asia Forum and has been republished under a Creative Commons license.
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