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Desert Storm

KHANBOGD-SOUTH GOBI DESERT, MONGOLIA - OCTOBER 11: Trucks move tons of ore at the open pit mining area as a rainstorm approaches at the Oyu Tolgoi mine October 11, 2012 in the south Gobi desert, Khanbogd region, Mongolia. The Oyu Tolgoi (Mongolian for Turquoise Hill) copper and gold mine is a combined open pit and underground mining project. The site, discovered in 2001, is located approximately 550 km south of the Mongolian capital, Ulan-Batar in the South Gobi Desert. Turquoise Hill Resources (Formerly Ivanhoe Mines) and Rio Tinto signed a long-term comprehensive investment agreement with the Government of Mongolia in 2009 with the deal awarding Turquoise Hill Resources, whose majority shareholder is Rio Tinto, with a controlling 66 percent interest and The Mongolian Government with a 34 percent interest in the project. Rio Tinto provided a comprehensive financing package and assumed direct management of the project under an agreement with Ivanhoe Mines. Initial production from open pit mining is currently underway and commercial production is planned to start in first half of 2013. An 85million USD investment was earmarked for education and training projects, with Mongolians expected to constitute 90 percent of the work force when production begins in 2013. When Oyu Tolgoi starts fully operating Mongolia will be set to become one of the world's top copper and gold producers with production estimates of 450,000 tons of copper and 330,000 ounces of gold annually. Mongolia is currently the world's fastest growing economy with its GDP increasing by more than 17 percent last year and an estimated $1.3 trillion in untapped mineral resources. Oyu Tolgoi is Mongolia's largest foreign investment project and the country's biggest economic undertaking to date, which is projected to add one-third of future value to the country's GDP by 2020. (Photo by Paula Bronstein/Getty Images)

 

The Oyu Tolgoi copper and gold mine, located in the south Gobi Desert, 550km south of the Mongolian capital, Ulan Bator

July 2018, south Gobi Desert

The wind picks up, whipping the clouds of dust on the dirt track into an opaque spiral that briefly obscures a procession of trucks heading to China.

We have travelled more than 550 kilometres from Ulan Bator, the Mongolian capital, to this remote corner of the south Gobi Desert. Along the 12-hour drive we have passed the occasional ger, a traditional circular yurt-like dwelling, and countless horses, Bactrian camels, cashmere goats and sheep, tended by the occasional herder on a motorbike, but over this tremendous distance we have passed through no more than half a dozen towns. It feels a million miles from anywhere.

Genghis Khan led his army through this stark landscape nine centuries ago. Legend has it he paused near here so he and his thousands of soldiers could slake their thirst at a fast-flowing river.

These days, however, the river doesn’t run. Many local herders have been displaced, their pastures have deteriorated, their livestock are dying of thirst. Meanwhile, the area’s gold- and copper-laden rocks are being mined by the phantom that hovers on the horizon: the Oyu Tolgoi mine, a vast operation employing more than 17,000 workers. Oyu Tolgoi is so well-endowed that it is expected to be the third-largest copper mine in the world when it is fully operational in 2025 and is projected to increase Mongolia’s GDP by 30 percent.

“Mongolians have a saying: suffer under your own rule, rather than frolic under someone else’s”

“I was born in this beautiful place,” says Battsengel Lkhamdoorov, an energetic 45-year-old with a twinkle in his eye, showing me where his family had its winter camp before the arrival of the mine. “There was a spring there, there was enough water for the animals to drink,” he continues, pointing to where the land gently undulates as it spreads into the distance under a darkening sky. Nestled in the distance beyond is the distinctive turquoise outline of Oyu Tolgoi, the arc of a roof, the spike of a chimney. Battsengel’s shoulders slump as he stares into the distance. “Of course, I miss [the old life] very much – I miss being free and independent.”

Conflict between mining giants and local indigenous people has been played out all over the world for decades, from Australia to the Democratic Republic of the Congo. It is a familiar scenario with a familiar ending – the giant moves in and the powerless locals are forced to give way. Only here, it didn’t end quite like that. Mongolians have a saying: “Suffer under your own rule, rather than frolic under someone else’s.” And it was here, in that spirit of independence, that a small group of  herders led by Battsengel decided to take on the giant.

Battsengel Lkhamdoorov, 45 (right), with his mother Tseesuren, 88, and brother Mendbayer, 58

Nergui, 68, shows a picture of herself as an MP in her ger in Khanbogd, South Gobi, Mongolia

Mongolia has been a country of nomadic herders for thousands of years. Herding livestock – camels, sheep, horses and cows – between seasonal encampments is the very essence of Mongolian culture and identity. Even the traditional Mongolian ger embodies the nomadic life: portable, easily collapsed and reassembled and insulated with thick felt made from sheep’s wool, tied with ropes made from horse hair.

Today, by some accounts, up to 40 percent of the population continue to live as nomadic herders in the most sparsely populated nation on earth, a country that’s six-and-a-half times the size of the UK but home to just three million people.

In recent years, though, climate change has taken a toll on that 40 percent. The dreaded dzud, a severe winter weather phenomenon, has become more frequent, hitting drought-weakened livestock and destroying livelihoods. As nomads lose whole herds to the extreme weather, more and more are forced to abandon their life on the move and head to Ulan Bator where they erect their ger in great shanty-town clusters on the periphery of the rapidly growing city in the hope of finding work.

But herders were not always so vulnerable. Mongolia’s economy has long been based on livestock and agriculture and during the years of the Mongolian People’s Republic, between 1924 and 1992, when the country was effectively a satellite of the Soviet Union, the state took an active role in encouraging herding.

Communities were organised into collectives. The state offered livestock husbandry training and ensured that animals were regularly checked by vets with well-equipped local offices. The government built and maintained wells and water pumps and supplied fodder, when necessary, to help animals survive harsh winters. Herders had direct representation in parliament, elected by the constituents of the districts, and were given national awards for exemplary work.

Nergui, now 68, won the prestigious national Young Champion Herder award when she was 22, and a decade later was elected to represent three adjoining districts in parliament for a five-year term. We meet in her ger in the town of Khanbogd, where her six-year-old granddaughter sits in her lap as we talk. Nergui thumbs through a yellowing directory of MPs before holding it up and pointing at the small black-and-white image of herself, looking unwrinkled but otherwise much the same. Her job, she explains, was to bring the concerns of her constituents to parliament. “But back then there were no complaints as the district administrators took care of everything from water to pastures,” she says.

Not everyone was happy with the heavy-handed control of the Soviets, though. In 1990, the Mongolian Revolution, which began with demonstrations in Ulan Bator, led to the peaceful establishment of democracy and the beginning of a transition to a free-market economy. It was a testing time for many. As the Soviet Union collapsed, the subsidies it had provided to shore up the Mongolian economy ended. Inflation raged and food rationing was introduced.

But Mongolia was sitting on abundant untapped mineral wealth. Before the 1990s were over, exploitation of natural resources was flourishing in the fledgling free market and some Mongolians had been turned into overnight millionaires. The real game-changer came in July 2001, when a Canadian company called Ivanhoe Mines announced the discovery of huge gold, silver and copper deposits at Oyu Tolgoi (meaning ‘Turquoise Hill’), which had long been a sacred site for herders. It was later reckoned that it could be the largest unexploited reserve of its kind on the planet. The Mongolian gold rush had begun.

In 2004 Ivanhoe set up operations at Oyu Tolgoi, and on the basis of an exploration agreement with the Mongolian government, licensed 250 square kilometres of land which included some of the area’s most prized pastures. The company resettled families who had been herding on that land for centuries, and tapped water sources for use in their exploration operations at the mine. The stunned herders reacted passively. “I didn’t understand but I thought if they said I had to move, then I had to,” explains Tseesuren, 88, a lifelong herder, from her ger set up in the fenced-in yard of her son’s brick home in Khanbogd.

“Herding is the only livelihood we know; we grew up herding”

It took time for Ivanhoe to arrive at an investment agreement with the Mongolian government, without which exploitation could not proceed. In 2009, after the government approved a windfall tax on mineral exports and altered investor laws in preparation for a commodities boom, the agreement was finalised. Ivanhoe, which until 2009 had retained sole interest in the mine, was later renamed Turquoise Hill Resources and became a subsidiary of the Anglo-Australian multinational mining giant Rio Tinto. It was awarded a 66 percent interest in mining at Oyu Tolgoi, with the Mongolian government retaining a 34 percent stake. Robert Friedland, the chairman of Ivanhoe Mines, declared the agreement to mark “the godfather of new beginnings for Mongolia”.

Local herders, however, did not share his optimism in the new dawn. They claimed that the use of water by the mine had led to a scarcity that was claiming the lives of their livestock, contributing to the deterioration of pastureland and pitting them against one another in a fight over limited resources. They said that the conditions threatened to make herding – which is dependent on both water and pasture – all but impossible.

Twelve-year-old Oyungerel rides a camel in the south Gobi Desert

Back in the south Gobi Desert, Battsengel points in the other direction. “Over there, where the airport is now, that is where the animals grazed,” he says. “We would herd the livestock riding camels. But in 2004, we were resettled.” He and his family were moved to a spot three kilometres away. He ended up giving up herding. He couldn’t take seeing his animals suffer from not having enough water or food, becoming ill from the dust that coincided with operations at the mine and from eating the rubbish tossed away by Oyu Tolgoi workers.

Ivanhoe had promised compensation to the resettled herders, including jobs in ‘road maintenance’ but according to Battsengel that had turned out to mean picking up refuse discarded by the Oyu Tolgoi workers who were building a new road and airport.

“For us, herding is the only livelihood we know; we grew up herding,” says Battsengel. “Before 2004, my parents and my two brothers and I owned 600 sheep and goats, 100 camels, 30 horses and 20 cows,” he remembers. But once he stopped herding, he says, “all we were doing was picking up rubbish. I was very angry, very frustrated.”

After several years of the new regime, the herders had reached breaking point. “In 2012, we said enough! Why are we proud herders doing this? It is our land. Our pasture and everything under it; it is the wealth of our people, the Mongolian people,” said Battsengel. “‘I also thought about the future of my children. Would they also live like us, collecting rubbish for someone else? My parents didn’t bring us up to do this.”

The fightback started small. Battsengel and a small group of other herders, none with more than eight years of basic education, set up loudspeakers in front of Oyu Tolgoi’s offices in the town of Khanbogd. They began chanting, “Stop using ground water! Stop mining!”

“We started protests and demonstrations at the gate of Oyu Tolgoi’s offices. We were feeling like heroes,” Battsengel said. “But we didn’t know anything.” The protests got them noticed by Ulan Bator-based OT Watch, a Mongolian NGO which had been created to monitor the Oyu Tolgoi mine’s impact on the environment, with water scarcity the central issue. Battsengel and his fellow protesters joined forces with OT Watch in 2012 and filed a formal complaint with the US-based Compliance Advisor Ombudsman (CAO), an independent resource for conflict resolution in projects backed by the International Finance Corporation and the Multilateral Investment Guarantee Agency, both private-sector funding arms of the World Bank.

The herders’ complaint was summarised by the CAO as concerning “the project’s use of land and water, which they claim disrupts their nomadic way of life, and puts in jeopardy their indigenous culture and livelihood. The complainants contend they have not been compensated or relocated appropriately, and question the project’s due diligence, particularly around the issue of sustainable use of water in an arid area.” The CAO hired an independent mediator and facilitated negotiations as a neutral party.

Accountability Counsel, a California-based NGO, assisted the herders. “The reason the herders brought this to the CAO is that they didn’t have confidence in the local courts,” says Caitlin Daniel, an attorney for Accountability Counsel who played a key role in the negotiation process.

The mine’s 2009 investment agreement with the Mongolian government had been dogged by suspicions of misuse of power by officials. These came to a head in early 2018 when an investigation into these suspicions by the Mongolian government, triggered by revelations in the Panama Papers, led to the arrest of two former Mongolian prime ministers.

The Oyu Tolgoi mine employs more than 17,000 workers

Munkhbat, 5 , plays with plastic horses outside his ‘ger’

Battsengel’s group of herders and Oyu Tolgoi agreed to the CAO mediation, to find a solution geared to improving the herders’ lives. Negotiations were difficult from the start.

“You had these rural livestock herders going up against this mining company,” says Daniel. “Obviously, these are people who have no negotiation training and have never had to sit in a room in this kind of a scenario or even come together as a community and decide together what their position is… They had to learn how to strategise in the negotiation process, to think: ‘What do we want to get?’ ‘How is the company going to react to that?’ ‘What are its interests?’ And ‘How can we put together an offer that’s going to, in some way, meet its interests as well?’” Daniel and her team spent long hours giving Battsengel and his fellow herders legal advice and negotiation training – but they were still going up against an extremely powerful and well-resourced company.

“We had no idea how big the fight would be”

There were also logistical hurdles. Communication with herders spread over a vast area of desert was difficult for all parties, while distance made it hard for herders to attend meetings which could be many miles away and which incurred transport costs they couldn’t afford. They had no source of funding to fall back on, and were not paid for their work. “We had no idea how big the fight would be,” Battsengel concedes.

There were serious disagreements between the two sides on the important underlying facts about the crucial issues, including: the adequacy of Oyu Tolgoi’s compensation programme; the impact of its diversion of the Undai, a subterranean river that ran through the mine site; and the degree to which the mine impacted herders’ water sources and pastures.

Mining consumes a huge amount of water, and the southern Gobi region is one of the most arid places on earth. But Oyu Tolgoi has always maintained that its water comes from the Gunii Hooloi aquifer, which its hydrologists discovered deep below the surface of the desert. The water in this aquifer, which is salty, would be of no use to livestock, and is separate from the shallower aquifers accessed by the herders.

However, a report published in September 2014 by the Centre for Investigative Reporting suggested that a series of wells drilled by mine contractors to reach the Gunii Hooloi aquifer had been insufficiently sealed, allowing fresh water to drain from the shallow aquifers used by herders into the Gunii Hooloi aquifer below. Oyu Tolgoi claimed that this would not have had a significant effect on the water available to herders.

It seemed like the two sides would never reach an agreement. “In the early days there were a lot of emotional breakdowns [among the herders], a lot of anger, a lot of coming to the table and expressing a feeling that this was a really unjust situation they were finding themselves in,” says Daniel, who describes the negotiation process as a “rollercoaster”.

At the suggestion of the CAO, the parties hired teams of independent experts to conduct studies on key issues and formulate recommendations to address them. This – and the founding of the Tripartite Council in 2015, a forum where herders, Oyu Tolgoi and local officials could conduct negotiations -– slowly started to change things. While the two sides remain at odds to this day on how to attribute blame for local pasture and water scarcity, the mine’s owners agreed that more should be done to enable local herders to continue their traditional livelihoods.

“There is a saying that if you don’t have livestock, you are not Mongolian any more”

“Reaching consensus took time and focus from all parties to find common ground,” says Sugar Gonchigjantsan, Oyu Tolgoi’s manager of compliance and governance. “The fact-finding method facilitated by CAO was a very useful tool to find solutions and options.”

After four years of talks, on the 9th May 2017 the Tripartite Council signed two agreements. Their 60 undertakings laid out steps to create additional compensation, increase access to water, provide retraining for herders and create new infrastructure to help them maintain their way of life.

The deal was heralded as an historic achievement and as a potential template for indigenous communities around the world facing conflicts with big corporations. Battsengel and his fellow herders were exultant.

In July 2018, just over a year later, there was little sign of the spoils from that hard-fought victory, and time was running out for the herders. For them, the agreements’ most critical provisions were those intended to create added value for the diminished numbers of livestock their depleted land is able to nourish, and which promised to generate a viable livelihood.

These included the construction of a slaughterhouse, a lab equipped to verify meat quality and a market that could supply Oyu Tolgoi and facilitate local trading. Of these measures, only the lab had been built when I visited. But with no staff, it was useless. “The majority of the provisions should have already been done or begun,” says Battsengel. “But the most important, producing a working slaughterhouse, lab and market – this has not happened.”

For some herders, any change will come too late. I met with Erdene Bayar in his simple Khanbogd home. On the wall was an ornate, embossed leather saddle that his father gave him in a traditional rite of passage on his 16th birthday. “It was the first precious thing I owned and is the most precious thing I have to this day,” he says.

With resources in short supply, Bayar had to give up herding after he was resettled. He struggles to articulate what the loss has meant to him. “The most difficult thing is to live without purpose. There is a saying that if you don’t have livestock, you are not Mongolian any more. It is not like the minerals can be replenished: one day they will be gone. For those of us who live in Gobi, the wealth is the livestock – only this can be replenished forever.”

The competition for water has created confrontation among those who continue to herd. “Now herders won’t be greeted nicely if they move their livestock to another pasture. The person there will say, ‘Don’t bring your burden to us,’ and send them away,” laments Nergui. “Some people are even locking the wells.” In May 2018 tensions turned deadly. When a group of herders wouldn’t let another man’s livestock graze on their land or drink from their well, the spurned herder pulled out his rifle and started shooting. One person was killed.

There is still hope that the Tripartite Council’s  agreements will eventually make the herders’ way of life financially sustainable. Battsengel has ensured every herder has a copy of them, and confidence in him as their representative is unwavering. But everything hinges on implementation.

“Oyu Tolgoi is fully committed to ensuring
[the agreements’] success,” Sugar Gonchigjantsan of Oyu Tolgoi assures me. Asked to explain the delays, she states: “These projects in such an environment are by their very nature complex and it is important that the solution is suitable and sustainable for the herders going forward.”

In February 2019, Accountability Counsel, which had given legal and negotiation support to the herders, released a report on the progress of the agreements between the herders and Oyu Tolgoi in the 18 months since they were signed. “The agreements have the potential to improve livelihoods and alleviate… desperate circumstances,” it says. But due to “implementation delays, many households have not yet seen any tangible benefits from the agreements. Some particularly vulnerable families are still struggling to feed their families and keep their herds alive.”

While there is more to be done, the report highlights what has been achieved by the Tripartite Council. It cites a series of provisions made by Oyu Tolgoi, including university scholarships for herder children, solar-powered pumps for ten herder wells and 114 new compensation packages for households that were physically or economically displaced by the mine, totalling payments of approximately $945,000.

Despite the large amount of work that remains to bring Battsengel’s deal to fruition, the Tripartite Council recently voted to bring the CAO’s monitoring phase to an end. But the herders will not be left alone. Accountability Counsel and OT Watch will continue toassist them.

Battsengel remains determined. “We spent so many years working on these agreements, we need them to work,” he says. “We have to keep the pressure up on this. It’s up to us.”

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