Mongolia has historically remained within Russiaâs sphere of influence, except for it southern regions, now incorporated into the Peopleâs Republic of China as âInner Mongolia.â

Now Beijingâs cash is allowing it to enter the Mongolian market, as a joint venture including Chinaâs Shenhua Energy Co moves to acquire a 40 percent stake in the western Tsankhi block of Mongolia's Tavan Tolgoi coal project, which would give Shenhua the biggest share of one of the world's biggest coking coal deposits.

In a historic reversal of influence in Mongolia between Russia and China, the Mongolian government released a statement noting that after the 40 percent Shenhua share, a Russian-led consortium would control 36 percent of the project and U.S. mining concern Peabody Energy Corp. would own the remaining 24 percent, according to a draft proposal to be submitted to the Mongolian parliament, the Shanghai Daily reported.

UOB-Kay Hian senior commodities analyst in Hong Kong Helen Lau stated, "This is a big win for Shenhua and will give a significant boost to its long-term growth prospects."

While analysts believe that the Tavan Tolgoi project may require an initial investment of more than $7 billion before it begins production, it is seen as an integral component to upgrading the nation's economy.

By. Joao Peixe, Deputy Editor OilPrice.com