Mongolia Energy and Security

By | June 1, 2022

Economy and energy

The Mongolian economy was deeply affected by the Soviet collapse and the consequent interruption of the flow of aid by the USSR. In the 1990s the country therefore found itself facing a phase of economic recession which caused an increase in poverty and unemployment. As a result, the government has decided to initiate a controversial transition to a market economy through liberalization and privatization policies. Agriculture and livestock are the traditional sectors of the Mongolian economy and account for about 16% of the GDP. However, agriculture is vulnerable to severe climatic conditions and is not enough to make the country self-sufficient in food production.

The real engine of the national economy is the mining industry, the development of which has made Mongolia one of the countries with the highest GDP growth rate in recent years. Although resistance remains to the granting of rights to exploit natural resources to foreign companies, the mining sector has attracted large foreign capital (about 3 billion dollars in the three-year period 2008-10). The government then signed agreements with numerous foreign companies and seeks to maintain a policy of investment diversification, consistent with the policy of ‘ neighboring third parties. ‘. Of particular note is the signing in February 2015 of a free trade agreement with Japan and the Indian decision to open a billion dollar credit line with Ulaanbaatar, following the visit to the country by Indian Prime Minister Narendra. Modi in May 2015. In the same month, the government of Mongolia and the British-Australian mining company Rio Tinto resolved the long-standing cost dispute over the expansion of the Oyu Tolgoi gold and copper mine, whose work is expected to begin in course of 2016.

The main exports are copper, gold and cashmere goods that make the economy highly vulnerable to the volatility of prices of basic products. China is the main market for Mongolian exports, with a growing share of their total, reaching 93% in 2015. Finally, the tertiary sector, which is constantly growing, accounts for half of the GDP, and has recorded a growth of ten points in a two-year period. Recently the country has also experienced a strong development of the tourism sector, thanks to its natural beauties.

According to indexdotcom, Mongolia has significant coal and oil fields, which represent the main national energy sources – respectively 66% and 29.5% of the energy consumed. Although the development potential of renewables appears high and in 2006 the World Bank granted around seven billion dollars for their development, the share of clean energy in Mongolian consumption remains rather low (3.7%). The country exports coal and oil but, at the same time, purchases more than three quarters of its crude oil products and part of the electricity it consumes from Russia. It thus remains partially dependent on imports. The World Bank also estimates that around 25% of the population does not have access to electricity and uses wood to meet their needs.

Business Economy

Defense and security

Although no armed groups operate in Mongolia, the country, also in consideration of the porosity of its borders and the limited size of its army, collaborates with the United States in some initiatives to fight terrorism.

As part of the policy aimed at promoting multilateralism, the country has contributed to some international missions. Mongolia has sent soldiers in support of Operation Enduring Freedom in Afghanistan, participating in the NATO ISAF mission. The Mongolian government has also sent soldiers to Iraq and Kosovo. Furthermore, following an initiative between Mongolia and the United States aimed at training Mongolian military forces for peacekeeping missions, the country sent troops to Sierra Leone in January 2006. Still on the African stage, Mongolia is now engaged in missions. Unmiss in South Sudan and Unamidin Sudan. As a seal of the growing collaboration with the United States and the Atlantic Alliance, in March 2012 Mongolia signed an Individual Partnership and Cooperation Program (Ipcp) with NATO. An agreement aimed at deepening the operational exchanges between the troops and developing mechanisms for the prevention and management of crises. However, Mongolia also pursues military cooperation with Russia, with which since 2008 it has restored the practice of joint exercises, the last of which was held in August 2015.

In 1992 Mongolia declared before the United Nations General Assembly that its territory would be nuclear-free, adopting a law in 2000 that enshrines this status. The decision was supported as much by the neighboring nuclear powers as by the Non-Aligned Movement.

Beyond China and Russia: the policy of ‘third neighbors’ and multilateralism

As part of its so-called ‘neighboring thirds’ policy (a term coined in 1990 by then US Secretary of State James Baker), Mongolia is strengthening ties with other countries in addition to its neighbors. Ulaanbaatar has developed relations with Japan, its main donor since the 1990s, and with South Korea, today a major trading partner. The country also participates in the regional forum of the Association of Southeast Asian Nations (ASEAN) since 1998, has been a member of the Pacific Economic Cooperation Council (PEEC) since 2000, observer of the Shanghai Cooperation Organization (Sco), founding member of the Asia-Pacific Partnership for Democracy (Apdp), and requested to join the Asia-Pacific Economic Conference (Apec). Because it has relations with both North and South Korea, Mongolia has also sought to act in coordination with the countries engaged in negotiations with Pyeongyang on the nuclear program (‘Six Party Talks’) and in 2007 hosted a meeting between North Korea and Japan. The country has also improved relations with the European Union and the United States, commercial partners and also donors. In particular, the United States has launched cooperation projects also in the military and security fields, as evidenced by the visit, in April 2014, by the then US Secretary of Defense Chuck Hagel. At the same time, Mongolia began to participate more actively in the work of some international organizations: in 1997 it joined the World Trade Organization (WTO) and, since 2005, contributes to some United Nations peacekeeping missions.

Mongolia Energy