Russia and Mongolia: Potential Economic Projects

Legally, ties between Russia and Mongolia currently stand at a level of Comprehensive and Strategic Partnership, which they did so following the signing of an indefinite treaty of friendship and comprehensive strategic partnership in 2019 by the leaders of the two nations.

Therefore, their continued expansion should be maintained not just by expanding already-existing spheres of cooperation but also by looking for radically fresh “points of interaction.” The global political and economic processes such as growing hostility between Russia and the United States, as well as between the United States and the PRC, the Ukrainian crises, and the worldwide “post-coronavirus” recession, are not the best ways to affect Mongolian-Russian relations.

Notwithstanding these challenges and dangers, bilateral ties nevertheless have room for productive collaboration in a number of areas. This article tries to classify prospective initiatives in Russian-Mongolian relations in this regard.

1- Transport highway to the ports of Primorsky Krai to create an alternative route for Mongolia’s exports to third countries.

Currently, Mongolia has a transit route to the Chinese port of Tianjin, where China and Mongolia are currently constructing a new cargo terminal.  Many Mongolian experts, however, have expressed skepticism regarding the political viability of this export route because the Chinese side is allegedly still able to restrict the entire flow of mining exports from Mongolia to third parties if it deems doing so to be inappropriate and hazardous to itself.

Due to the ability to enter into more dependable and stable export agreements, the development of a different channel for the marketing of Mongolian commodities is considered as enhancing Mongolia’s national security. In turn, recent agreements between Kazakhstan and Mongolia to build a network of suppliers for rare earth metals can provide this project practical content.

However, the development of the Russian Far East and its transportation and infrastructure system is a problem that must be properly addressed in order to carry out the project on the alternate transit route. The second obstacle is the worsening of ties between Russia and countries that might acquire raw materials from Mongolia, such as Japan and the Republic of Korea.

2- Perspective of the oil pipeline: transit advantages and new channels for Russian hydrocarbon exports.

The new Soyuz-Vostok gas pipeline, which will transport gas from Russia to China via Mongolia, is now being coordinated by Russia and Mongolia. With the construction of the pipeline and an agreement to expand oil supplies with the Chinese side, the People’s Republic of China could be reached by the quickest export route possible from fields in Western Siberia, the Urals, Bashkiria, and Tatarstan. As a result of such a project, Mongolia would gain financial and material bonuses in the form of transit payments and cheaper oil prices.

3- Development of bilateral tourism.

Known as ’Visit Mongolia’ year, the Mongolian government has authorized a strategy for the growth of the country’s tourist sector for the years 2023–2024. The Mongolian side has great expectations for the influx of Russian tourists.

The two sides’ potential for cooperation in this area has not been fully implemented. Citizens from Russia’s border regions can help increase tourist traffic from Russia to Mongolia. A number of Russian republics (Buryatia, Kalmykia, Altai, and Tuva) may be interested in the development of cultural and religious tourism and exchange between the two countries.

At the same time, an abundance of cultural, religious, and historical ties, as well as the significant cultural and historical heritage of nomadic culture, as well as the two countries’ immediate geographical proximity, can increase the flow of tourists from Mongolia to Russia.

To summarize, the prospects of bilateral relations include the enhancement of cross-border and national tourism. The expansion of cooperation in this industry is a critical prerequisite for the development of Russia’s south and east of Siberia.

4- Exploration and mining partnerships.

During Mongolian President Ukhnaagiin Khürelsükh’s visit to Moscow in 2022, Russia was invited to participate in the exploration and development of potential Mongolian deposits, the most prominent of which are rare earth metal deposits. Russia has a substantial scientific and technological foundation in this field (for example, mining technologies have been tested for many years at a deposit in the Murmansk region, and an SPA in Korolev manufactures high-tech products using rare-earth raw materials).

As a result, Russia can contribute to the growth of a crucial and promising area of the Mongolian economy, where it may gain access to rich resources and exert political and economic control over potential customers for its rare earth raw material.

5- Compact nuclear power plants as a potential alternative to the construction of hydroelectric power plants that harm the ecology of Lake Baikal.

The Russian Federation is concerned about Mongolia’s intentions to construct many hydroelectric power stations on Selenga River tributaries because they could endanger the environment of the Baikal region. Currently, the challenge is getting a building permit from the Russian-Mongolian environmental review. The Baikal region faces an unacceptable external environmental threat, according to Russia’s stance, which has not changed.

Russia can offer Mongolia several initiatives in exchange for its rejection of potentially dangerous construction projects: first, Mongolia’s inclusion in the Northeast Asia Power System interconnection. (In this case, the effectiveness of the proposal will depend on negotiations with other potential participants). Furthermore, prices for Russian electricity imports are being reduced. (The Mongolian side may reject this due to its desire to provide the country with domestic sources of electricity). The third alternative is to construct small stationary (or possibly mobile, depending on the quantity and size) nuclear power plants in Mongolia using Russia’s expertise in developing compact nuclear reactors. Implementing such a project would serve as a model for other developing countries, encouraging them to collaborate with Rosatom in a completely new industry.

6- Prospects for joint ventures in the food industry.

Mongolian nomadic cattle breeding can provide high-quality, low-cost raw materials to Russian food companies. As a result, according to the Food and Agriculture Organization of the United Nations, Mongolia’s cost of producing one ton of mutton is half that of Russia’s ($889 vs. $1,563), and the price of horse meat is one and a half times. The greatest potential for exporting these two categories of food raw materials to Russia for further processing or sale in frozen form. So, there is a chance that new global value chains or joint ventures will be established.


Consequently, there are still many opportunities for Mongolia and the Russian Federation to work together in productive manners beneficial to both parties. Yet, in this regard, it should not be overlooked that the extent of this potential’s fulfillment depends more on the two countries’ respective national development concerns as well as the worsening global political landscape.

By Boris Kushkhov
Source: New Eastern Outlook

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