Crossroads Asia

The Rise of Mongolia: Minerals, Trade and ‘the Third Way’ 

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The Rise of Mongolia: Minerals, Trade and ‘the Third Way’ 

Mongolia is intent on making sure it has diplomatic and economic options beyond its two neighbors.

The Rise of Mongolia: Minerals, Trade and ‘the Third Way’ 
Credit: Depositphotos

With all eyes on the Indo-Pacific region, the majority of people are focused on East Asia, India, and ASEAN. One country that has flown under the radar is Mongolia; however, this dynamic may be changing soon. In recent months, Mongolia has undertaken actions to raise its international profile and engage with actors within Asia and beyond. Some refer to this as the third way.

Mongolia is positioned between Russia and China, two powerful nations seen as rivals to the United States. In the past century, the country has aimed to foster friendly relations with these two nations on its borders. During the Cold War, Mongolia was “faced with intense confrontation between its two giant neighbors: Russia and China.” Mongolia found itself obliged to forge an alliance with Moscow to ensure its security.

Today, Mongolia has the opportunity to reach beyond its immediate proximity and form relations outside its formidable neighbors. One way Mongolia has been successfully forming new connections is through the exploration of its critical minerals. In August of this year, U.S. Under Secretary of State for Economic Growth, Energy, and the Environment Jose W. Fernandez traveled to Ulaanbaatar, Mongolia, to sign a Memorandum of Understanding (MOU) on Mineral Resources. Under the MOU, the two sides agreed to strengthen sound practices in mineral sector development and “jointly advance secure and resilient critical mineral supply chains in the Indo-Pacific region.”

Further, Mongolia and France have recently strengthened ties, as highlighted by Mongolian President Khurelsukh Ukhnaa’s three-day state visit in October. During the visit, the two sides discussed mining opportunities and signed a 1.6 billion euro ($1.7 billion) deal for Uranium mining. French nuclear energy provider Orano will operate the Zuuvch-Ovoo mine in southwestern Mongolia, and production will begin in 2028. The French government believes the project could account for 4 percent of global uranium in the future. The countries also agreed to cooperate in searching for lithium in Mongolia.

This increase in cooperation is not limited to the economic sector. Ulaanbaatar has also used culture to deepen ties with France. On October 13, the Morin Khuur Philharmonic ensemble performed “Beautiful Mongolia” at Versailles Palace. This ensemble has performed in 14 different countries over 700 times. The two sides also sponsored the opening of the “Chinggis Khan: How Mongols Changed the World” exhibit. 

Mongolia has also increased relations with another EU country, Germany. Minister of Environment and Tourism of Mongolia Bat-Erdene Bat-Ulzii met Ambassador of Germany Helmut Rudolf Kulitz and head of the Development Cooperation Department Ido Weber to discuss tourism and environmental cooperation. The two countries have previously cooperated through the Green Climate Fund, Global Environmental Facility, and Adaptation Fund. They have also agreed to deepen scientific cooperation in a separate meeting between officials. 

Additionally, Mongolia has formed closer relations with fellow Indo-Pacific country South Korea. On the economic front, they have previously agreed to pursue mutually beneficial economic cooperation while “stressing that both countries share the universal values of democracy and human rights.” Recently, South Korea’s Industry Ministry announced the launch of an Official Development Assistance project to establish a mutually beneficial rare earth mineral supply chain. 

Relations have also included defense cooperation, as defense ministers from both countries met in Seoul in late October to discuss cooperation on resolving the North Korea nuclear issue. They also agreed to increase defense and arms industry collaboration.

Further, Mongolia-South Korea relations span multilateral initiatives. These efforts include the International Atomic Energy Agency’s Triangular Cooperation Agreement with Mongolia and South Korea to strengthen Mongolia’s nuclear medicine and radiation oncology capacity. In June, South Korea, Mongolia, and the United States held their first trilateral meeting and agreed to hold meetings on a rotating basis. 

Although Mongolia has increased its “third way” initiatives, China remains an invaluable partner. Economically, China is currently Mongolia’s largest trade partner, and according to a recent Jamestown Foundation report, “more than 7,543 Chinese enterprises are registered in Mongolia.” In October, the Mongolian president met with Chinese President Xi Jinping, and the two leaders discussed the Belt and Road Initiative and Mongolia’s “Steppe Road Program” development strategy. This program, established in 2014, is an effort to increase Mongolia’s transport and trade. The 997-kilometer-long expressway linking China and Russia is a current highlight of this program.

Last year, shortly after the 20th National Congress of the Chinese Communist Party concluded, the two sides held the 17th meeting of the China-Mongolia Joint Commission on Trade and Economic Cooperation. Chinese Minister of Commerce Wang Wentao and Mongolian Minister of Economy and Development Khurelbaatar Chimed discussed increasing economic cooperation and moving forward with the Zamiin-Uud Erenhot Economic Cooperation Zone. Additionally, during China’s Belt and Road Forum in October, Russia, China, and Mongolia held a trilateral meeting, where the three leaders supported the implementation of the Power of Siberia 2 pipeline.

The two countries also have an established military relationship. On November 10, the militaries of China and Mongolia held joint exercises in the Xinjiang Uygur Autonomous Region. In September, China, Russia, and Mongolia held a high-level security meeting to strengthen trilateral cooperation. Finally, China is pushing Mongolia to join the Shanghai Cooperation Organization, which has taken on new security elements in recent years. 

Ultimately, Mongolia wants to avoid finding itself in the same situation that occurred during the Cold War. Consequently, its pursuit of a “third way” and its proactive initiatives reflect a deliberate shift toward broadening its global engagements in an attempt to transcend historical limitations imposed by its geographical proximity to regional powers. By leveraging economic collaborations in critical minerals, forging cultural ties, and deepening relations with countries across Europe and Asia, Mongolia is establishing itself as an emerging player in the geopolitical landscape of the Indo-Pacific. 

The United States should look to deepen, support, and more actively engage Mongolia both economically, politically, and culturally. The USAID-Mongolia Strategic Framework is a great example. This initiative – a five-year (2023-2028) public-private partnership – seeks to leverage American innovation in civil society, governance, and best business practices. As a corollary, it empowers Mongolia to become less reliant on its neighbors for its economic and democratic progress and to address threats to Mongolia’s independence and sovereignty.  

A core objective is for Mongolia to become a self-reliant, well-governed, and prosperous Indo-Pacific partner. This goal statement supports the broader Indo-Pacific Vision including promoting economic prosperity, strengthening governance, and enhancing security.