Mongolia has existed historically at the interface of two great powers - China and Russia. This continues to shape it. Under Soviet Union domination till 1991, it then underwent a political transition after their departure, and has since become a parliamentary democracy. But despite this, the fact that It remains a vast landlocked country (it covers an area three times that of France) with huge mineral deposits means that it is largely dependent on the immense markets to its south, in China, rather than the sparse northern territory of Siberia for its exports. And these exports tell the story of Mongolia's predicament - huge dependence on one country: 90 per cent of Mongolia's exports go to China, from the USD4.3 billion of overseas trade that was completed in 2013.

 

　　For a China, which is always hunting for competitively priced resources to service its immense industrialization process and its huge developing market, Mongolia's meaning to it materially and economically is easy to understand.  Having a country with a plentiful source of copper and coal just over its northern border is of immense strategic interest. Discussions about having the right logistics framework in place to service these were at the heart of President Xi Jinping's August visit. But despite the surface common interests in the economic realm,  China has been surprisingly neglectful of its northern neighbour. This is the first visit by a Chinese head of State to Ulan Bator for over a decade.

 

　　Facts like this have probably served to accentuate Mongolia's sense of vulnerability and pushed it to trying to at least create other alliances. Signing a strategic partnership agreement with China during Xi's visit adds to the security relationships that the state has with the US, and with Russia. As a country it has no choice about this. Barely three million people fill its vast territory, and historically it has been claimed by both China and Russia. Russia influence during the Cold War was very great, with leaders of the country largely decided in Moscow. Mongolia was a target of fierce, angry rhetoric during the Cultural Revolution, with the radical leadership in Beijing claiming that there was forces encouraging separatists in Inner Mongolia, the autonomous region which was part of the People's Republic.

 

　　Mongolia's need to balance its two huge neighbours is neatly illustrated by the planned visit of Russian Federation President Putin only a month after President Xi's visit in September this year. On both the Chinese and Russian visit, the key issue will be how to fund and put in place the right infrastructure network to best exploit the country's huge resources. China this time agreed to help with rail links and with allowing access from Chinese ports for Mongolian goods.

 

　　Mongolia is well aware that it is in a vulnerable position. While it has had little practical choice other than this dependency on the Chinese market, the urge is still very strong to diversify. And having a relationship where both Russia and China are balanced against each other would at least in terms of security suit Mongolia well. The signing of the pipeline deal for liquid national gas between Russia and China in May after many years of negotiations offers a new dimension. Both China and Russia have a mutual interest in a stable northern border over which the energy can flow, and a cooperative Mongolia. The May deal created a very tangible area of common interest between Russia and China, and one in which Mongolia can find a role.

 

　　For Russia, irritated by Europe and the US and feeling isolated since Ukrainian unrest caused it to have conflict with the west, finding a new market for its plentiful energy resources was urgent. For China, uneasy about its reliance on energy and material coming from an unstable middle east along supply routes which were largely controlled by the US or its allies, enjoying the relatively free northern access routes to bring its energy in has become more appealing. In the past, it was loath to put too much trust in a Russia it has had such complex and often fractious ties with. But the new geopolitics means that if for no other reason than raw pragmatism, Russia and China have to do business with each other. Mongolia sits at the crossroads of this.

 

　　Whether Mongolia can avoid being overwhelmed by its two neighbours is as yet unclear. It cannot become too close in security terms to either and needs to do everything to preserve its own sovereign identity. During President Xi's visit a commitment to an extra USD5 billion in trade a year was made. But there might be a hefty political price tag for this. China will expect diplomatic allegiance, and will certainly tie Mongolia closer to its own strategic interests as it enjoys its neighbor becoming more dependent. Mongolia will have to have a very supple and well thought out foreign policy in order to avoid the perils springing from this. It has allowed foreign companies like the mining conglomerate Rio Tinto to operate mines in the country, but this sort of diversification is very limited.

 

　　For Mongolia, therefore, having a trilateral entity where Russia, China and itself sit around the same table is reassuring, on the surface at least, and creates the illusion, if not the reality, of economic and diplomatic diversity. It creates commitments towards it from both Russia and China, to respect it as an international partner. It is also at least an attempt to forge a common framework where they can all work together and create the outlines of a vision of shared security. This is fine as long as Russia and China sustain their current pragmatic relationship. Whether that will continue into the future is a good question. Xi Jinping made Russia his first destination after being appointed country president in 2013. In this he was just emulating his predecessor Hu Jintao who did a similar thing ten years earlier. Putin reciprocated, with a successful visit in May. At the moment, Russia is isolated and needs China more than perhaps China needs it. But these things can change quickly. It is quite possible that differences over, for instance, the middle east (Russia has, until now, led the response on Syria at the UN while China has followed), the US, or other areas might cause the two to start drifting apart from each other. In that scenario, Mongolia will be torn.

 

　　Mongolia has one of the toughest strategic positions of any country in the world at the moment. Sparsely populated, rich in resources, poor in infrastructure, and with governments to north and south that are far stronger than it, it is truly having to live on its wits. It is hardly helped by the very low profile that the country enjoys internationally.  Mongolia remains, as many in its government have said over the last two decades, like the filling of a sandwich. The last thing it wants is to be devoured, which is why this new trilateral is so significant for it. The most precious things it has is its sovereignty and autonomy, and, as with any country,  it is the preservation of that which must be its main priority, even while it aims to optimize its economic opportunities.

 

　　Original doc name: Mongolia and China.doc

 

　　Professor Kerry Brown