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<p>Aubrey Belford</p>

Aubrey Belford

The Filthy Rich and The Racists in Mongolia’s Mining Boom

A new draft mineral law would end the freewheeling approach of Monogolia's minerals industry. Aubrey Belford toured Monogolia's "Wolf Economy" back when people made their fortune, legally or otherwise.

When Tugsjargal Munkherdene discovered hip-hop, he was a boy growing up in the smog-choked tent slums of Ulaanbaatar.

The Soviet Union had just collapsed, and Mongolia — formerly a sparse Communist client state of nomadic herders, drab towns and thousands of Soviet troops — was in a tortuous whirlwind of democratic reform and free market shock therapy. Year after year, extreme winters snapped the landscape frozen, killing millions of animals and sending hundreds of thousands of destitute nomads to pitch their ger — or yurts — on Ulaanbaatar’s fringe.

As waves of poor herders smashed into Ulaanbaatar’s grey thicket of socialist tower blocks and settled into the slums around him, Munkherdene, just entering his teens, was getting acquainted with the music of Dr Dre, Snoop Dogg and Cypress Hill.

Today, 28-year-old Munkherdene, a popular rapper better known by his stage name Gee, is every inch the modern Mongol, typical of a country barrelling from a nomadic past to an urban future. He is shaven headed and hulking, and his forearm features a tattoo in tribute to the New York City rap collective Wu-Tang Clan. In place of the typical bling around his neck, there is a charm of a metal mirror, bells, a ring, a swastika, and mink and reindeer fur — a gift from his shaman.

<p>by Aubrey Belford</p>

by Aubrey Belford

Gee outside a concert.

As we crawl in a two-car convoy through Ulaanbaatar’s horrendous traffic, it’s clear today’s problems are different to when Gee was a boy. The slums are still vast, but the food queues are gone, and the city fizzes with Irish pubs, Korean barbecue joints and luxury cars, all signs of growing wealth.

Gee considers himself a musician with a message, and he’s developed a huge following among young Mongolians. Economic inequality, corrupt politicians and environmental destruction from mining are all issues he confronts, but rolling up to a nightclub at the base of an apartment building, it is clear where he, and many Mongolians, locate the root of these problems.

Swaggering on a stage in front of a sweaty crowd of university undergraduates, he asks rhetorically: “What is this thing, growing among us every day here in Mongolia?”

The crowd, hands thrust into the air, doesn’t miss a beat: “Hujaa!” they yell, a Mongolian slur for Chinese, something like the English insult “chink.” It’s also the title of one of Gee’s biggest hits, a collaborative effort with a traditional folk band, Jonon. The film clip, which features Gee swaying menacingly in front of dangling sheep carcasses, has been viewed more than 100,000 times on YouTube.

He begins, in the guttural rolls and pops of the Mongolian language:

“Way better than a chink who perceives the world with his stomach / I’m a Mongol / That’s why you have to bow to me.”

As the crowd sings along, he paints a picture often depicted here – adorned with unvarnished racism – of the proud land of Genghis Khan being gobbled up by voracious Chinese. All around, money is flowing in, but greed, division and miscegenation reign. Until, that is, Mongols unite to throw out the interlopers.

It’s a call that resonates in Mongolia at a time of historical uncertainty for the former world conquerors, wedged as they are on a thin expanse of grassland between the heaving powers of Russia and China. Here is a rising tide of ugly ultranationalist sentiment, neo-Nazism at its most extreme.

“The whores you bought, the ministers you bought / They’re not Mongols – they’re half-breeds / Mongolia is growing and will not be tricked by the Chinese / The Mongolian era is coming to wipe everything old out of its way”

The city fizzes with Irish pubs, Korean barbecue joints and luxury cars, all signs of growing wealth.

EVERYWHERE the rise of China is disrupting the old order of things, realigning economies and shaking up politics. But perhaps no country is finding itself as dramatically sucked in by China’s economic magnetism, or as utterly terrified by its growing geopolitical clout.

Mongolia, an impoverished parliamentary democracy encircled by China and Russia, is home to just under three million people, on land three times the size of France where, in many places, even trees are a rarity. Across the border are 1.3 billion Chinese, countless factories, and the growing heft of an ancient enemy growing very rich, very quickly.

Most importantly, under the Mongol earth is the very stuff needed to fuel China’s economic explosion. Largely untapped until relatively recently, Mongolia’s mineral wealth comprises pretty much everything — coal, copper, gold, uranium — in quantities estimated to be worth trillions of dollars. China is the largest buyer by far.

For some at least, Mongolia is a place where you can become filthy rich, if you can tap into the minerals boom, legally or otherwise. Already it is one of the world’s fastest growing economies; it grew 14.8 per cent last year and the rate is widely predicted to top 20 per cent soon. Ulaanbaatar, where nearly half the population lives, is a boom town, bursting far beyond the confines set out by Soviet central planners. At the city’s central Sükhbaatar Square, under a new statue of Genghis Khan, the fashionably-dressed promenade in front of Mongolia’s first Louis Vuitton and Zegna boutiques as old Moscow city buses sputter by, a reminder that the country’s GDP per capita is still just under USD$3,000. Older people walk the streets in richly decorated, long deel, or tunics. The young are fervent fans of hip-hop, punk and electronic music.

Mongolia is also a place where plenty of people fear the future. Government corruption is widespread, and a small number of tycoons exert a large influence on the government and economy. Herders and environmentalists complain that mining development is destroying the grasslands and water sources on which livestock and nomads depend. Foreign companies circle hungrily, and the government choreographs a complex geopolitical contest for access to the mines among China, Russia, the West and other East Asian economic powers.

And then there’s the question of where the money goes. Will Mongolia be able to use the vast wealth to build a fair and equitable society, or will it follow other poor countries afflicted by the “resource curse,” down a path of overdependence on resources leading to stagnation, where only a small elite benefits? Will it be like Australia or Nigeria? Norway or Venezuela?

<p>by Aubrey Belford</p>

by Aubrey Belford

Commuters cram onto a bus at night in downtown Ulaanbaatar.

Will Mongolia, as many fear, become a virtual colony of China? And what happens if China runs out of steam?

In his office in the middle of Ulaanbaatar, Dosbergen Musaev, chief economist with Eurasia Capital, a regional investment bank, enthuses about Mongolia’s boom as the pounding of construction comes through the window. Nearby, skeletons of new office buildings can be seen rising. Beside them is a new strip club that is larger than a nearby supermarket.

“It’s incredible,” he says of the dollar value of Mongolia’s mineral wealth. “We’re talking about what? One-and-a-half, two trillion [US dollars] probably.

“I mean, look at the streets. Ulaanbaatar is probably the capital of Humvees in the world,” Musaev says. “Everything comes down to China. That’s China’s demand for commodities. As long as you are optimistic about China and the Chinese economy, you must be optimistic about Mongolia’s economy. And whatever growth will be in China, it will be much better, much bigger growth here in Mongolia.”

The focus of most of the buzz is on two massive mining projects under the crisp blue skies of the Gobi Desert right by the Chinese border. One the world’s largest unexploited gold and copper mines, Oyu Tolgoi, is run by the London-based, Anglo-Australian resources giant Rio Tinto. The site, set to go into commercial production in 2013, is estimated to contain about 46 million ounces of gold and nearly 37 billion tonnes of copper. The other is Tavan Tolgoi, a massive deposit of six billion tonnes of coal, already operating, albeit at a fraction of its potential.

Mining is nothing new to Mongolia, but the boom is. During Mongolia’s seven decades as a Soviet client state, some mines were developed but much of the country was left untouched. Then came the 1990s, democracy, and a succession of mining laws that gradually came to resemble more closely the regulatory wish-list of the big foreign firms. It is all part of what people like to call the commodities “supercycle.” That is, the developing world, led by China, is undergoing an unprecedented economic rise, even while the West struggles, and in doing so is dragging up the global price of raw materials.

A rising tide of ugly ultranationalist sentiment, neo-Nazism at its most extreme.

Ask what year marks the start of the boom in Mongolia and everyone will give you a different date. But it is clear Oyu Tolgoi, which is estimated to contain hundreds of billions of dollars in deposits, is a watershed, according to Jim Dwyer, the head of the Business Council of Mongolia. “This is the biggest agreement in the history of the country by a magnitude of a thousand,” he enthuses.

OVERSEEING Mongolia’s balancing act are urbane, Westernised, democratic politicians, among them Ganhuyag Chuluun Hutagt, the vice finance minister. Ganhuyag is a regular among the Davos crowd of global business luminaries and he, like the business magnate turned Prime Minister Sükhbaataryn Batbold, enjoys calling Mongolia Asia’s “Wolf Economy,” buzzwords deliberately playing off the better known, booming “Tiger Economies” of Southeast Asia.

Ganhuyag is a big believer in the idea that Mongolia will become a much richer country and will avoid the resource curse. The country’s key strength, he says, is that it’s a democracy. The government currently pays every Mongolian 21,000 tugrik, or about AUD$14.50, a month from mining income, although he concedes it is a policy is aimed at buying public support, money he thinks could be better spent on infrastructure. If everything goes to plan – an uncertain thing given elections set for this year the shakiness of global capital markets – every Mongolian is soon to become a shareholder as part of an initial public offering for Erdenes Tavan Tolgoi, or ETT, the Mongolian company involved in operating part of the massive Tavan Tolgoi coal deposit. A whole constellation of non-governmental organisations will make sure environmental standards are upheld, he says.

The real sticking point is geopolitics. Russia, which formerly ran the show, sits to the north. China wraps around the western, southern and eastern borders, and uses its position as the dominant buyer to get away with paying well below world prices for Mongolia’s commodities. The People’s Republic would prefer to keep all the processing industries — and the jobs that go with them — on its side of the border. It is also quick to anger; China has shut down the border for “maintenance” during one past visit by the Dalai Lama, and lodged a complaint during another visit in November.

“We really are not in a good position to negotiate,” Ganhuyag laments. Mongolia pursues a diplomatic policy of embracing so-called “Third Neighbours” in the West and countries such as Japan and Korea. It even sent troops to Iraq. But this does not completely get the country out of its bind. “Even if we allow American and European interests, Australian and Canadian interests, in Mongolian mining, the main buyers will be in China,” he says.

Tavan Tolgoi has become the crucible of this geopolitical contest. Apart from the area already being developed by the state-owned ETT, control over much of the rest of it is under negotiation, with jockeying from, among others, America’s Peabody Energy, China’s Shenhua, and Russia’s state rail company, RZD.

<p>by Aubrey Belford</p>

by Aubrey Belford

Mongolians stand outside Ulaanbaatar’s first and only Louis Vuitton boutique.

Even though China is less than 200 km away from Tavan Tolgoi, Mongolia’s government is pushing for a huge rail line to the sea through Russia, at an estimated cost of USD$7 billion, to break its dependence on China; currently coal is currently trucked across the rocky desert to China on dirt roads. Part of Russia’s bid is that it will build the railway — as part of its policy of gaining influence in Mongolia and creating “a belt of friendly nations” — but it will only do so if it gets a cut of the mine, says Russia’s ambassador to Mongolia, Victor Samoilenko.

Samoilenko, formerly a Soviet then a Russian diplomat in Asia and Australia, insists this is not about Russian rivalry with China, which is much reduced from the Cold War, when both were rivals for leadership of the Communist world, and Soviet troops in Mongolia pointed like a dagger at Beijing. “It’s not Russian geopolitics,” he says, and pauses briefly. “Maybe it’s Mongolian geopolitics.”

Others tell a similar story. Mongolia wants to be courted by the great powers and is dangling its mineral wealth as a lure. But America is unlikely to warm its relationship any further unless Peabody Energy, the American firm, gets in on the action.

IT IS EIGHT at night on the steps outside Central Tower, Ulaanbaatar’s ritziest mall and office complex, and already blood is spattered on the ground, possibly from a brawl, possibly from a drunk keeling over — both common sights. The bloodstain looks fresh, but there is no sign in the crowd that anything out of the ordinary has happened.

Mongolians pride themselves on their warrior spirit. The post-Communist period has seen the rehabilitation of Genghis Khan from shunned despot to a beloved national symbol. His likeness is found on monuments throughout the capital, in homes, and on no fewer than three different brands of vodka.

Mongolians likewise have never been very good at getting along with each other. In traditional nomadic society “your neighbour is living 20 or 50 kilometres from you,” explains Bat-Erdeniin Batbayar, or Baabar, a former minister and one of Mongolia’s most prominent intellectuals. “They’re producing the same things — milk, skin, wool, meat.” Now maybe only a quarter of the population lives the traditional lifestyle.

He enjoys calling Mongolia Asia’s “Wolf Economy”

Alcohol abuse is widespread, with passed-out and stumbling people visible on the streets day and night. Fights are an almost routine feature of Ulaanbaatar’s nightlife.

The 1990s was when Mongolia’s urban influx really started, but the mining boom is adding to the slums of ger outside the capital and exacerbating social tensions, says Sumati Luvsandendev, the director of the Sant Maral Foundation, a non-profit organisation which surveys Mongolian society. The public is split on the benefits of mining, and a vast majority is convinced the money is not being spread fairly, he says.

“What is rather pessimistic are the two extremes, very rich and very poor,” Luvsandendev says. “We also have a quite significant part of the poor population which [has] actually immigrated to Ulaanbaatar and surrounded it, like a besieging army. On the other side we have these very rich people with their million-dollar apartments or houses.” Besides the big mining projects, there are black market mines, many of them run or backed by Chinese interests, which have popped up largely unnoticed in remote corners of the country, he says. Construction too has brought to the capital thousands of Chinese who live in high-walled compounds. No one, in the government or elsewhere, seems to know how many there are. While Mongolia’s democracy has proved resilient, an ugly ultranationalism has been on the rise. At the most extreme end, a handful of home-grown neo-Nazi groups have, with a blithe lack of irony, turned against Chinese and other foreigners, picking fights, harassing inter-ethnic couples, and carrying out vigilante attacks. More generally, the sort of reflexive racism of Gee’s music has become commonplace. If China’s economy loses strength, Mongolia goes down, Luvsandendev says. Problems also will arise if things go too well and Mongolia’s economy overheats. “If inflation is high then you should expect public disturbances,” he argues.

I ask Luvsandendev about the chipper pronouncements of leaders like Ganhuyag, the vice minister of finance. Earlier, the minister had told me Mongolia could avoid the resource curse with plans that included turning Ulaanbaatar — the world’s second-most polluted city, and the world’s coldest capital — into a Hong Kong or Switzerland-style finance and banking hub for northern and central Asia.

“I hope he knows what he’s talking about,” Luvsandendev says, “but I personally think it’s all bullshit.”

<p>by Aubrey Belford</p>

by Aubrey Belford

Zaamar, west of Ulaanbaatar. Beyond the hills, mining has scored the landscape.

FIVE HOURS outside of Ulaanbaatar, across dirt tracks, past herds of horses, cows, wild deer and the interminable vastness of the Mongolian steppe, there also is blood on the ground.

I have just met Kishigbadrach Batbold, an underemployed electrician from the capital’s ger district, as he pans for gold left behind in mining waste. As we begin talking, an elderly man from Shijir Alt, which translates as Pure Gold, the dusty Wild West-style town around the corner, reels up drunk and begins helping himself to Batbold’s group’s dirt. The reaction is explosive. Amid a crescendo of yelling, a friend of Batbold’s lifts a fist-sized stone from the creek and slams it down across the man’s head, splitting it open and sending him stumbling away, bloodied. “That’s what Mongolians are like,” Batbold says. “It’s not just here. It’s in our nature. We’re quick-tempered.” The region around Shijir Alt is what many fear Mongolia’s future will resemble. The area began seriously opening up to gold mining in the 1990s and was soon inundated with “ninjas” — illegal artisanal miners like Batbold. For dozens of kilometres around, the grasslands have been scored with deep gashes. Trucks kick up plumes of dust along rough tracks, or simply carve new ones into the steppe. On a two-week trip here, each member of Batbold’s group of five people can earn between 1.5 and 2 million tugrik, somewhere in the region of AUD$1,000 to $1,400. It pays well, but it is hard work, and plenty of bribes have to be paid. But finding work in Ulaanbaatar is hard, too. Batbold sees his own fortunes and Mongolia’s in the same light.

“We don’t want to do this forever. We need development. It’s tough to spend a lot of your life digging the ground, getting dirty,” he says. “Everyone seems to think the way to develop out of this situation is mining. Of course, if our country ends up like this site here, then that would be awful.”

Shijir Alt and the region beside it, Zaamar, are nowhere near as wild as they once were. The number of ninjas has dropped from thousands to just a handful, following brutal police crackdowns. While mercury was previously used to help separate gold, there is no sign it is in use now.

Further up the road, where the pits end, Genden Chinchuluun shuffles through a stack of papers in her ger and pulls out a stack of land use permits. Her family and herd — five people, 60 horses, and a thousand goats and sheep — have the right to use the land, she says, but mining companies have been bending the law. Companies — particularly the Mongolian-operated ones, she claims — have been eating away at her land, and sucking away the water table.

“If mining is supposed to make us rich and bring us development, why is it that we don’t even have a paved road in Zaamar?” she asks. Particularly galling is a Buddha statue built on a nearby hill by one of the mining companies. “Instead of spending money on a Buddha statue that’s going to get covered in bird shit, why can’t they dig us a couple of wells?” she fumes. “Maybe when I’m dead, I’ll need Buddha.”

“What is rather pessimistic are the two extremes, very rich and very poor.”

“FROM THE OUTSIDE, to foreigners, we may look like we’re going down a democratic route. But our society is chronically ill, and it’s getting sicker and sicker.”

Sipping on salted tea in his ger, Tsetsegee Munkhbayar is the poster boy for a small section of Mongolians who have become attracted to an increasingly radical brand of environmental activism.

A few years ago, Munkhbayar was a darling of the international NGO circuit; in 2007 he won the international Goldman Prize for environmental conservation, for his efforts to curb excessive water use in mines near his home southwest of Ulaanbaatar. But since then, he has taken an increasingly militant path. As we speak in his camp in a grove of trees by a clear brook outside of Ulaanbaatar, Munkhbayar waits on bail on charges of using a gun to shoot up the equipment of three mines in the south of the country. He faces up to five years in prison for damaging property. Fellow defendants include activists who shot an arrow through the nation’s parliament. “It’s their way of saying, ‘We will crush you if you rise up against us.’ But it won’t crush the hearts of Mongolians,” says Munkhbayar.

He and other activists in recent years succeeded in pushing through a national law restricting mining in sensitive areas of water and forest, but Munkhbayar says the area encompassing Oyu Tolgoi and Tavan Tolgoi is not covered. And, he adds, politicians and companies, both Chinese and Western, are gaming the system.

“I’m confrontational because there’s no other way,” he says.

The backlash that Munkhbayar leads is inspired by Mongolia’s herder past. Sitting cross-legged under books containing the teachings and edicts of Genghis Khan, he brings to mind a sort of country gentleman. He espouses a philosophy that the nomadic life represents a model for a dysfunctional world.

But that is a model Mongolians are abandoning, even in their own forms of rebellion. On the other edge of Ulaanbaatar, the steppe has become the backdrop for regular drag races. Leading the way to a race site in a dust-spattered Mercedes Benz is Gankhuyag Byambatulga, the leader of Dayar Mongol, one of the country’s neo-Nazi groups. Beside him as he drives, his girlfriend, who is well over six feet tall, chain smokes. In the back seat, another man, sporting a black eye, sits brooding.

<p>by Aubrey Belford</p>

by Aubrey Belford

A spectator fiddles with his cell phone at a Mongolian wrestling event in Ulaanbaatar.

As twentysomethings in hotted-up Japanese cars race along an empty stretch of road and a single yellow Humvee tears off at speed across the plain, Byambatulga sketches a swastika on his car’s bonnet and outlines Dayar Mongol’s philosophy.

He swats away the incongruity of Asians adopting the symbols and rhetoric of white supremacists. Hitler, he explains, simply stole his ideas from Mongolia. “If you look at the beginning of mankind, it was in the Gobi. We’re the first people on the planet, and the greatest,” he says. “The real Aryans are Mongols.”

Such thought was not tolerated under the old Communist regime. But now that these sentiments are out in the open, Byambatulga says, nationalism is growing, even if groups such as his stay on the fringe.

“Back in 2002, people used to call the Chinese ‘Chinese citizens’ and almost worship them. Now they call them ‘hujaa,’” or chinks, as in the title of Gee’s song. “We’ve influenced peoples’ mentalities. This will spread.”

I ask about the sulking man with the black eye, and Byambatulga introduces us. Mr Black Eye gives his name, but says he does not want it printed. He is, it turns out, from across the border, in the Chinese province of Inner Mongolia. That region, incorporated into China centuries ago, is what many Mongolians say they fear: economic and demographic domination by Han Chinese, and an eroding Mongolian culture. The killing of a Mongolian herder by a Han truck driver there last year triggered a rare outburst of ethnic rioting.

Back in China, Mr Black Eye was something of a nationalist gangster, beating up and stealing from the Han, for which he spent a spell in prison. Finally fed up with Han domination, he says, he crossed over to Mongolia and sought out Dayar Mongol. But the injury, he says, is not the result of a fight; he simply fell. “I’ve never been beaten up by Chinese. I’m the one who beats up Chinese.”

“This is where Mongolia is headed,” if foreigners are allowed to be the ones to take control of Mongolia’s resources, Byambatulga says. “So many Chinese [are] coming in, our blood is getting impure. Mongolia will exist as a country, but there will be no Mongolians left.”

WHILE DISCONTENT festers in much of the country, optimism bubbles away in international forums, board rooms and the international press. Despite a broad public perception to the contrary locally, the World Bank says Mongolia’s growth has in fact been broad-based — even manufacturing, which normally is hammered in resources booms, is doing well.

Parliamentary elections are set for the middle of this year, and politicians are set to spread out across the country, pressing the flesh in apartments and slums and beaming their promises into TVs in nomads’ camps. Most of the debate will not be whether or not to build mines, but on how to maintain Mongolia’s sovereignty and share the spoils.

In his office, as construction dust blows in through the window, Musaev, the investment banking analyst, says Mongolia has no choice but to be sucked into the boom.

“If the government changes in elections, you know politics will not change, that the mining environment will not have revolutionary changes,” he says.

Unless, of course, China slows down. Then it all falls apart.

11 comments on this story
by Zena

Very interesting and insightful. Love the Indonesian one, too.

Looking forward to more!

February 6, 2012 @ 7:58am
by Altai

Very well detailed and written article. As a Mongolian myself, I agree on the points raised in the article. We have a long history of fear and hatred towards the Chinese. And the worst problem our country is facing today is corruption. The few politicians that rule are determined to gain enormous wealth from our so-called "economic boom". I especially liked the comment where it states that to foreigners, Mongolia looks like it's going down a democratic route but in reality, it is chronically ill. Unless the current politicians stop with their insatiable greed, majority of Mongolia's general population won't benefit anything from this mining boom.

February 29, 2012 @ 4:49am
by Ryan

Makes Australian racism looks likes child's play. Mongolia and China seem on par with their Nationalistic tendencies.

January 15, 2013 @ 5:12pm
by Gekko

Great article about a land and its people that seldom gets reported elsewhere. I never realised it is so sparely populated, and unfortunately, riddled with corruption.

January 18, 2013 @ 4:42pm
by HU

as usual stupid Mongolians try to sell coal somewhere else than China putting rail to Russia.

April 17, 2013 @ 10:13pm
by dono

well excuse us for being nationalistic. How do you think we are an independent nation with merely 3 million people (around 500 thousand at the time of the independence) and a vast amount of wealthy land even though being located between Russia and China? Nationalism is the inevitable result of our geographical location. But don't mistake it for broad xenophobia. We have no bad blood with any nations,race or religion other than the Chinese for obvious historical reasons. It's just that when people like Gee rap about nationalism, hatred towards China, our geographical location and all other surrounding circumstances are such that it's unnecessary to repute them harshly. It's alright that they rap about it, we just don't take it too seriously, unless it's about the national security or sovereignty of our nation.

April 24, 2013 @ 1:47pm
by Agustina DuBois

I Love Mongolia

May 28, 2013 @ 10:32pm
by Jay

What a brilliant comment Hu. They should sell their resources to whoever pays the best, whether China, Russia , or possibly shipping it elsewhere. Not so stupid, a people tired of being pushed. Last time that happened Hu, China fell.

June 8, 2013 @ 5:16pm
Show previous 8 comments
by anil

I love magnolia I wish hope to visit some day my life

June 27, 2013 @ 11:45pm
by Sai

To HU: you just showed yourself as a racist and closed-minded by calling all Mongolians stupid.

July 19, 2013 @ 11:29pm
by taan

maadai's music are brilliant.

July 31, 2013 @ 12:37pm
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