Mongolia was rapidly driven into a deep recession. That was prolonged by the Mongolian People’s Revolutionary Party’s (MPRP) reluctance to undertake serious economic reforms and become a free market society. Without the Soviet bayonets, the MPRP (in reality, the Mongolian Communist Party) was quickly replaced by the Democratic Union Coalition (DUC). The Democratic Union Coalition (DUC) administration embraced free-market economics, eased price controls, liberalized domestic and international trade and attempted to restructure the banking system and the energy sector. Restructuring of the banking system… Well, they had to create one first, and that was not easy. No one ever had money there, and the banking system was not really needed. But, the free, market society could not exist without one. Major domestic privatization programs were undertaken as well as the fostering of foreign investments through the international tender of the oil distribution company, a leading cashmere company, and the financial institutions.
Reforms were held back by the ex-Communist MPRP opposition and by the political instability brought about through four successive administrations under the DUC. Despite all that, some economic growth picked up again in 1997-99 after stalling in 1996 due to a series of natural disasters and declines in world prices of copper and cashmere. In August and September of 1999, the economy suffered from a temporary Russian ban on exports of oil and oil products and Mongolia remained vulnerable in that sector. Mongolia finally joined the World Trade Organization (WTO) in 1997. At the Consultative Group Meeting held in Ulaanbaatar in June of 1999, the international community pledged help that was over $300 million per year. The MPRP government, elected in July of 2000, was anxious to improve the investment climate. It also had to deal with a heavy burden of external debt that was still mounting. Falling prices for Mongolia’s primary sector exports, widespread opposition to privatization and the adverse effects of weather on agriculture in early 2000, and 2001 had limited the GDP growth. Despite the drought problems in 2002, GDP rose 4.0%, followed by a solid 5.0% increase in 2003. Yet, the first claims under the land privatization law have been marked by many disputes over particular sites. Thus, the economy started to slide down again. The Russian claims that Mongolia owed it $11 Billion from the Soviet times were expressed loudly with every opportunity. If paid, it would choke the Mongolian economy to near death. Any settlement in respect of $11 billion could substantially increase Mongolia’s foreign debt burden that was back-breaking already. This was a problem Mongolia did not know how to deal with yet, something had to be done and fast. But what? Life was getting rather tighter even for the government officials, and there was no light in sight.
2004 spelled another disaster for Mongolia and its leaders. Mongols were leaving towns and cities in mass going back to the steppes and the lifestyle of the ancestors. After all, they were going back. It seemed that half of the country was moving out. Was it that deep in their genes? Still, it was popular and very fashionable. They preferred to lead the simple, lazy but somewhat modernized nomad life to the complex organized city life of the almost industrial nation. They did not want to work in factories and stores. They wanted to ride horses and camels, hunt, and fish and move around freely as the wind. They wanted to feel like the wind. They wanted to be that wind. Well-made tents, portable generators, all-terrain vehicles and the electronics with rechargeable battery packs were the hottest items on sale. The Silk Road started to wake up to the motor caravans from China to Russia carrying contraband of all types: clothes, shoes, crafts, drugs, stolen vehicles, antiques, food, household items, electronics and whatever else market demanded at the lowest possible price. The caravans were bypassing or paying off the law enforcement agents of all countries involved. Life was getting good for everyone who wanted in. One could beat that price only by producing the goods at zero cost or by stealing them, and stealing was much easier to achieve.
Both sides, Russia and China, loved it so much. Chinese were very good at producing the cheapest knock-offs in electronics, consumer goods, clothes, music CD’s, computer hard and software and other popular items. They would “re-engineer” anything. That was while the Russians offered the arms, ammunition, cars stolen from Europe, trainloads of natural resources, food, and the western goods. That was just a perfect arrangement where history was repeating itself. Silk Road was still the Silk Road. The market economy was influencing the movement of goods, and everyone involved was making a living. Even slavery came back (frankly, it never left). Women and children from Russia and Asia were sold and moved to the Middle East, Europe, and Japan.
Islam and the Muslim countries always enjoyed the slavery business, and now, it was really booming. Sex slavery was leading the way. Almost any Muslim with a little money could purchase a white or an Asian woman or a child for personal use, and they often did. But, if one did not want to own too many slaves, the forced prostitutes of the proper age and underage, male and female, were readily available even in the most conservative countries as Saudi Arabia. It was not openly displayed, but one could ask, and it would be delivered. It was even fashionable in many Muslim societies. Western Europe and Latin America were somewhat trailing behind in the usage of the forced prostitution and white slavery, nonetheless, it was still there and quite popular. They could not afford to miss such an opportunity. No one could. Even in the United States and Canada, one could find numerous places offering that service and more. Drugs and drug usage were on the rise. The Russian — Chinese axis and all the associates and the middlemen were happy, making a good leaving. They were stealing the goods and people, moving them around the world. The world did not embrace it but did not resist much either. It was okay, but it was. Many politicians closed their eyes and enjoyed the perks. Was there a good history lesson in it? Maybe it was, but we did we learn anything?
Productivity in Mongolia fell behind and kept falling, not that it ever was high. Plants, factories, and the agricultural cooperatives were closing down for not being economically justified any longer. Were they ever? Goods produced in Mongolia were too few, too expensive and of the inferior quality on top of it. Cost of production in Mongolia was just too high, and the goods were almost useless comparing to the rest of the world. The outside world did not want it, and the Mongols did not want it either. The ancient Mongolian currency — Tugrik — went down to the drain of uncertainty, having no chance to recover any time soon.
Even printing and minting it was more expensive than its worth. There were hard times before, and now, it was getting close to impossible. Repayments to Russia, even the small ones, were driving the economy of Mongolia to the lowest pre-historical level but the Russians demanded more. They wanted Mongolia. And, the Russians could become a real threat if not handled properly. Because most of the former Soviet Bloc countries told Russia to get lost or presented the own bills early in the game, Mongolia was charged for everything and threatened with sanctions if the obligations were not paid. Mongolia depended on so many things from Russia that even a small resistance could break it completely. The situation that spelled disaster was on hand, and it needed immediate attention. But what to do? There was no experience, no precedent to rely on. Mongolia could not pay, and that was it. The future looked very bleak and with no bright light at the end of the tunnel. Oh yeah, it was a tunnel, deep and dark. Help was needed, but where to find it? The government of Mongolia was in disarray.