Geopolitical Report ISSN 2785-2598 Volume 50 Issue 3
SpecialEurasia OSINT Team

Executive Summary

Mongolia is a landlocked nation strategically between China and Russia, with vast mineral resources that are critical to global supply chains. Despite its potential, the country faces economic vulnerabilities, governance challenges, and geopolitical pressures.

This SWOT analysis, based on local and international sources and previous SpecialEurasia’s reports, should assist policymakers and stakeholders in assessing Mongolia’s strategic position and identifying the country’s strengths, weakness, opportunities, and threats.

Geopolitics of Mongolia

The landlocked nation of Mongolia holds a unique geopolitical position, bordered by Russia to the north and China to the south. This geographic reality has profoundly shaped its history, foreign policy, and economic strategies.

The country gained independence from China in 1921 and emerged from Soviet dominance in 1990, transitioning to a democratic political system. While independent, Mongolia’s considerable economic reliance and exposure to geopolitical vulnerabilities stem from its neighbouring countries.

Relations with China dominate Mongolia’s foreign trade, with nearly 90% of its exports, primarily minerals, destined for the Chinese market. Beijing’s influence extends beyond trade to infrastructure development, as evidenced by initiatives like the China-Mongolia-Russia Economic Corridor (CMREC), which aims to improve regional connectivity. This reliance, however, leaves Ulaanbaatar susceptible to shifts in Chinese demand and broader economic trends, including the recent downturn in China’s property sector.

Russia, while accounting for a smaller share of Mongolia’s trade, is its primary energy supplier, providing essential oil and gas imports. Historical ties from the Soviet era still resonate, with Moscow maintaining strategic interests in the region.

Mongolia’s hosting of Russian President Vladimir Putin in 2024 demonstrated its continued efforts to balance relations with its powerful neighbour, though this has occasionally drawn international scrutiny.

To mitigate over-reliance on China and Russia, Mongolia pursues a “third neighbour” policy, fostering relationships with countries such as the United States, Japan, South Korea, and European nations. This strategy is critical for diversifying its economic partnerships and enhancing its international profile. Agreements recently concluded, such as the uranium mining collaboration with the French company Orano, demonstrate Ulaanbaatar’s commitment to leveraging its natural resource assets to draw in global partners.

Although the country pursues a proactive foreign policy, it faces substantial difficulties in the increasingly unstable geopolitical environment. Tensions between Russia and the West have been amplified by the Ukrainian conflict, a situation compounded by China’s increasingly assertive regional actions.

 Mongolia needs to carefully manage its relationships with its immediate neighbours while strengthening its ties with distant partners, ensuring its sovereignty and economic stability in a complex and often adversarial international setting.

SWOT Analysis

Strengths

1. Mineral Wealth and Strategic Resources. Significant deposits of coal, copper, gold, uranium, and rare earth elements are present in Mongolia. These resources are essential to global industries and attract significant foreign direct investment (FDI).
2. Geopolitical Location. Situated between China and Russia, Mongolia plays a key role in the Eurasian corridor.
3. Stable Democratic Institutions. Despite political challenges, Mongolia has maintained democratic governance since transitioning from Soviet influence in 1990.
4. FDI Attraction. Mining projects, particularly the Oyu Tolgoi mine, have become magnets for international investors and key drivers of economic growth.
5. “Third Neighbour” Policy. Mongolia’s diplomatic strategy aims to diversify its international partnerships with developed democracies, reducing dependence on China and Russia.

Weaknesses

1. Economic Dependence on China. China receives over 87% of Mongolia’s exports, chiefly minerals, leading to vulnerability to shifts in Chinese economic policy and demand.
2. Energy Dependence on Russia. Mongolia relies on Russian imports for oil and gas, exposing it to energy supply risks and pricing volatility.
3. Lack of Economic Diversification. The reliance on the mining sector, which accounts for 81% of exports, limits resilience to external shocks such as falling commodity prices.
4. Governance Challenges. Corruption, weak governance, and lack of transparency in public contracts and mining licences undermine investor confidence and public trust.
5. Environmental Degradation. Extensive mining activities and overgrazing have led to significant soil erosion and desertification, threatening agriculture and rural livelihoods.

Opportunities

1. Mineral Market Diversification.  Country’s rare earth elements and uranium reserves can attract Western nations and, therefore, counterbalance the Chinese presence in the national market.
2. Infrastructure Development. Investments in transport infrastructure under the “mine-to-market” strategy could improve trade efficiency and attract more FDI.
3. Strategic Partnerships. Strengthening ties with nations like the United States, India, Japan, and South Korea aligns with the “third neighbour” policy and offers access to advanced technology and markets.
4. Emerging Energy Projects. Collaboration with global partners on renewable energy and strategic mineral extraction provides long-term economic opportunities.
5. Regional Integration. Trilateral cooperation within the CMREC framework presents an opportunity to strengthen trade routes and economic integration with China and Russia; however, careful management of dependency risks is crucial.

Threats

1. Geopolitical Pressures. Ulaanbaatar’s strategic location between Moscow and Beijing creates a delicate balancing act in maintaining sovereignty and avoiding over-reliance on either neighbour.
2. Economic Volatility. Global commodity price fluctuations and a downturn in Chinese steel demand could significantly impact Mongolia’s mining-driven economy.
3. Environmental Risks. Harsh weather conditions like the dzud phenomenon and long-term soil degradation threaten agriculture and food security.
4. Rising Inequality. Non-inclusive growth in the mining sector risks exacerbating social inequalities, leading to political unrest.
5. Regional Instability. The Ukraine conflict and intensified Western sanctions on Russia pose potential challenges to Mongolia’s economic and diplomatic engagement with the Russian Federation.
6. Corruption and Political Instability. Persistent governance issues may deter foreign investment and undermine economic reforms.

Conclusion

Mongolia occupies a pivotal position in Eurasia, balancing opportunities from its resource wealth and geopolitical significance against significant economic and political vulnerabilities.

Effective diversification of its economic partnerships and strategic utilisation of its natural resources are essential for mitigating risks associated with dependency on China and Russia. Investors must assess governance reforms, environmental management, and infrastructure development to evaluate Mongolia’s long-term stability and growth in an increasingly complex geopolitical environment.

*Picture: The relief map of Mongolia (Credits: Teogomez, CC BY-SA 4.0, via Wikimedia Commons)

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