375 grammes is the weight of an Olympic gold medal, an item that ranks among the
most desirable on Earth for the next couple of weeks. Many of the yearned-for
discs are lumps of Mongolia, hewn from under the Gobi Desert, refined by Rio
Tinto near the Chinese border and minted in Wales.

The
medals are a neat symbol of Mongolia’s emergence as one of the mighty resource
kings of the 21st century. But to make absolutely sure the point was made to
the international audience, Tsakhia Elbegdorj, the President, flew to London
last week to attend the Games opening ceremony and settled in for two days of
hard commercial schmoozing.

His
message to Britain — and to other hubs of potential investors outside his
country — has become a familiar siren call. As an investment destination, Mr
Elbegdorj says, the country has made the definitive shift from ugly and
troublesome to irresistible and gorgeous.

In some
ways, he has a decent case. Mongolia is a reasonably functioning democracy in a
part of the world not flush with those. The potential commodity reserves being
discussed are gargantuan. Companies that extract Mongolian minerals represent a
clean(ish) way to play the Chinese demand story, if you’re not squeamish about
emerging markets.

But
Ulan Bator’s bid for global profile and investment has some fairly big holes in
it. The first is that Mr Elbegdorj’s foreigner-welcoming tone (and that of
other Mongolian politicians) changes somewhat when he is back in Mongolia and
in front of his increasingly nationalistic domestic audience. Ancient fears of
Chinese imperialism have muddled toxically with a modern dread that China will
achieve its desired land grab simply with money.

Shortly
before arriving in London, Mongolia passed a law to limit foreign investment,
requiring deals to get special approval. Deals and mining approvals have been
heavily delayed. The accompanying political rhetoric — the risk to Mongolia of
“waking up one morning to discover China controls most of our land” — has left
many foreigners very nervous.

The
result is a barrage of increasingly stark warnings from foreign business
leaders who deal closely with Mongolia. They say that the country is rapidly
becoming a distinctly harder place to do business.

When it
faces the outside world, Mongolia talks of warm welcome for foreign investment,
the president of one foreign-owned mining company told The Times,
but the reality is an increasingly ferocious and unpredictable nationalism.
“People want to play the Mongolian resource story but if our investors could
see how the sausage was being made, they would be absolutely horrified,” he
said.

The
problem, he added, is that while some Mongolians have focused on how they can
corner spectacular shares of wealth, politicians have played on an acute fear
of being cheated out of a prize that could, if fairly distributed, transform
all Mongolians’ lives. On the cusp of epic mineral wealth, Mongolian
entrepreneurs and officials have taken note of the experiences of resource-rich
nations elsewhere and are scrambling to act. The resulting scene, say those
involved in it, is not pretty.

“People
at a certain level in Mongolia are desperate to become oligarchs. They want to
make generational wealth and keep it. They see what happened in Russia and
elsewhere and they believe that the window to become an oligarch is closing
fast. There is a lot of corruption and a lot of disturbing stuff,” one senior
financier based in Ulan Bator said.

Mongolia’s
ten largest mines have enough metal and coal in them to make every single
member of the 2.7 million population a millionaire: keep buying our gold,
copper and coal, whisper the Olympic medals, and our country will have the
richest citizens on the planet.

But
Mongolia is not rich yet and two thirds of its GDP last year came from foreign
direct investment. The lure of resource nationalism is tempting, but premature.