The exploitation of Mongolia's minerals could turn into one of the world's fastest growing economies over the next decade. However, political uncertainty ahead of parliamentary elections in June 2012 has worried investors, with Mongolia's shaky coalition government under pressure to renegotiate a landmark 2009 investment agreement for the Oyu Tolgoi copper deposit.

The government has now formally given up on renegotiating its Oyu Tolgoi investment agreement. The government wanted to increase its interest in the project before the 30-year waiting period passed. Some politicians have called for the resignation of Prime Minister S. Batbold over his handling of the issue.

Problems remain in the Tavan Tolgoi coal project as well. Mongolia hopes to complete an investment agreement before the end of 2012. However, the initial July proposal to hand development rights in the project to China's Shenuha, Peabody of the United States, and a Russian-Mongolian consortium was rejected, and the government is trying to devise another deal that will Japanese and South Koreans partners.

Mongolia's dependence on mining has alarmed environmentalists and opposition politicians, and the country is already showing classic symptoms of “Dutch disease,” including soaring inflation and high interest rates. The government is trying to introduce protections against fluctuations to commodity prices and is interested in investing in infrastructure, health, and education using its revenue from the mining sector.

Mongolians are also concerned about growing Chinese and Russian influence, and their fears were not allayed by the plan to hand the majority of Tavan Tolgoi's West Tsankhi to Chinese and Russian interests. China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2012. Yet, Mongolia needs to focus on expanding trade with China to ease its long-term dependence.

Dependence on Russia and China for fuel, power, and transportation also poses a major risk to its mining sector. Russia has been known to cut its supply, and China is not averse to closing crucial railway links. Mongolia also depends on Russia's railways to fulfill plans to deliver coal to Japan and South Korea.