Mongolia is the least densely populated country on Earth. A semi-nomadic society situated in northern Asia’s grassy steppes and Gobi Desert, few outsiders take the time to understand this young democracy beyond taking an interest in its most famous leader, Chinggis Khaan. Some might underestimate Mongolia’s ability to navigate today’s great power competition, but it is an underdog worth watching.

Russia-China-Mongolia trilateral cooperation, especially in the transportation and energy sectors, exemplifies Mongolia’s attempt to balance the costs and benefits of working with the world’s two most powerful authoritarians. Still, Mongolian policymakers know that overreliance on Russia and China is a long-term vulnerability, and they are keeping the door open to partners such as the United States.

Why Is Mongolia Important to Russia and China?

To mark seventy-five years of diplomatic relations, Russian President Vladimir Putin and Chinese President Xi Jinping convened in Harbin in May 2024 and signed a joint statement outlining the two countries’ shared priorities. It covers several expected topics, such as defense cooperation and bilateral trade. Perhaps unexpectedly, this carefully curated statement also spotlights trilateral Russia-China-Mongolia economic cooperation. Out of all the possible topics, why mention Mongolia?

After Russia invaded Ukraine in 2022, several countries spearheaded by the United States imposed harsh sanctions on Russia. As many doors closed in the West, Russia increased engagement with the East, where the world’s second-largest economy was waiting. However, the People’s Republic of China (PRC) only has so many resources to offer—and this is where Mongolia comes in.

For Beijing, Mongolia is a reliable source of critical minerals as well as a cost-saving land route connecting China to Russia and Central Asia—a vital corridor in its flagship Belt and Road Initiative. For Moscow, Mongolia is a major destination for petroleum exports and a bridge to influencing East Asia. For Ulaanbaatar, the economy is extremely reliant on Chinese markets for revenue and depends on Russia for fueling its growing fleet of trucks and trailers hauling shipments across the steppes.

Since gaining independence from China in 1921 and then from the Soviet Union in 1990, Mongolia’s primary geopolitical challenge has been managing relations with its two neighbors. Mongolia is a geopolitical buffer constantly nurturing its bilateral relationship with each powerhouse while avoiding overreliance on either. At the same time, Mongolian policymakers have cultivated ties with a range of “third neighbors”—developed, democratic nations such as the United States, India, and others.

Key Sectors for Trilateral Cooperation

Overland transportation and energy are the foundations for Russia-China-Mongolia trade. In 2022, Mongolia exported a whopping 84 percent of all its products (mostly coal and copper) to the PRC. In the same year, 35 percent of Mongolia’s imports were from the PRC (primarily vehicles, machines, and iron products), and 30 percent were from Russia (primarily refined petroleum).

The Mongolian central route is the shortest between Europe and Asia, but prolonged lack of funding means it is underutilized and underdeveloped. To that end, in 2014, the leaders of the three countries launched the China-Mongolia-Russia Economic Corridor (CMREC), a series of projects designed to synchronize Russia’s Trans-Eurasian Railway, Mongolia’s Steppe Road, and China’s Belt and Road Initiative—and therefore facilitate smoother trilateral trade. The initial thirty-two projects are intended to upgrade roads, railways, aviation, ports, customs, checkpoints, cross-border transport organizations, and communication mechanisms across the region.

Russia has the natural gas and petroleum that Mongolia and the PRC rely on. Last year, 708,000 tons of petroleum moved through Mongolia’s railway network, and authorities have secured this supply through 2027. In May 2024, Russian Deputy Prime Minister Alexander Novak said that Russia and China are expected to sign a contract “in the near future” for the Power of Siberia-2 Gas Pipeline, which is supposed to carry fifty billion cubic meters of Russian natural gas to the PRC through Mongolia under the CMREC banner. However, negotiations have dragged on for years so a complete contract is probably farther from the finish line than what Novak conveyed.

Mongolia’s economic growth is dependent on its mining industry and therefore is vulnerable to market shocks and price fluctuations. The majority of its exports are minerals such as coal, copper, gold, iron, and zinc. In 2022, 56.6 percent of exports to the PRC were coal. The same year, the two countries opened a new rail line connecting the colossal Tavan Tolgoi coal mine in Mongolia to a port in Inner Mongolia, cutting transportation costs by twenty-four dollars per ton.

However, natural gas, petroleum, and coal are all finite resources, and both the PRC and Mongolia have committed to transitioning to more renewable alternatives. China’s fourteenth Five-Year Plan aims to provide 33 percent of its energy from renewables, and Mongolia is aiming for 30 percent by 2030. Although Mongolia uses domestically sourced coal to generate 93 percent of its electricity today, its vast landscape of flat steppes and desert makes it ideal for wind and solar generation. One ambitious CMREC project is to create a regional integrated power supply and transmission network in which Mongolia exports clean energy to China and others in the region. Of course, this threatens Russia’s profit margins, and Moscow is therefore not eager to push the project forward too quickly.

Conclusion

The war in Ukraine has put Mongolia in a vulnerable political situation. It cannot endanger its own population by poking the bear to its north, but it also cannot alienate the world’s leading democracies, such as the United States. For example, on the one hand, Mongolia is attempting to maintain neutrality at multilateral forums such as the United Nations. On the other hand, following heavy economic sanctions from the West, Russia-Mongolia trade increased by 41 percent.

Mongolia is one of many small countries around the world that cannot afford to get caught up in great power competition. Its economy is simply too intertwined with those of China and Russia. Washington is unlikely to drive a wedge between Mongolia and its neighbors today, but it can invest in Mongolia’s future. Ulaanbaatar’s top policy goal between now and 2050 is to diversify its economy by decreasing dependence on the mining sector, Russian petrol, and Chinese imports. The United States and other partners can help facilitate this diversification by increasing trade and investment in sectors such as agribusiness, green energy, information technology, and e-commerce. Such cooperation could strengthen Mongolia’s negotiating power and sovereignty in an increasingly hostile environment.

The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.

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