Mongolia’s Fuel Crisis Is a Demand Problem, Not Just a Supply One www.thediplomat.com

As Mongolians prepare for the back-to-school season while tourists prepare for long road trips, the transportation sector is in limbo. Long lines of cars wait for hours for fuel, sometimes to find no fuel at all. The government was forced to impose restrictions on fuel sales by limiting the maximum amount that can be purchased on select days. 
The cause of the crisis can be attributed to both external geopolitical factors and internal country dynamics, highlighting Mongolia’s ongoing energy insecurity. The cure might be a path toward transportation electrification.
While Mongolia has proven crude oil deposits, the country is solely dependent on imported fuel, with 97 percent of it coming from Russia. The war in Ukraine and the conflict in the Middle East are creating instability in global energy systems, which could impact the supply side. However, despite the popular notion of delays in Russian fuel shipments to Mongolia, sources have not cited any “major” delays from Russia, which makes it harder to pinpoint the cause of the current situation. 
Internally, urbanization and a mining boom in Mongolia have pushed demand higher, by up to 14 percent annually. For instance, Mongolia imported roughly 500,000 tonnes of petrol and diesel fuel in 2005; however, this number jumped five times higher within 20 years, reaching close to 2.7 million tonnes in 2025.   
The strategic vulnerability caused by Mongolia’s fuel dependency is a well-established fact within energy security calculus. The government has been pursuing a diversification plan, including talks with Kazakhstan on fuel imports and, more recently, with South Korea. Last week, Mongolian Minister of Industry and Mineral Resources Damdinnyam Gongor was in South Korea, striking deals on petroleum products. The country is expected to receive the first batch of diesel, petroleum, and aviation fuel from South Korea as soon as this month, according to the Government of Mongolia’s social media page. However, this strategy of diversification does not address the fundamental question of Mongolia’s dependency on fuel imports.
As of August 5, the average reserve for petrol (AI-92 and AI-95) ranged from 11 to 13 days. The diesel reserve was enough for 18 days, and aviation fuel stood at 10 days, further showcasing the country’s unpreparedness for major fuel disruption. While previous governments aimed to secure and maintain three to six months of fuel reserve, a lack of proper infrastructure and implementation caused this target to be repeatedly missed. The current government vowed to expedite the reserve infrastructure, but it will not be operational until 2028.
Furthermore, the spike in global energy prices is likely to weigh heavily on average consumers and the state budget alike. In 2025, diesel and petrol alone accounted for roughly one-third of all imported products by value in Mongolia, and that’s was with discounted Russian fuel. Other fuel sources, including ones from China, could be economically challenging.
With a record high number of foreigners visiting Mongolia this summer, the current fuel shortages not only affect Mongolians. Many tourists are seeing disruptions to planned trips. On August 4, the U.S. Embassy in Mongolia advised Americans to delay or defer any non-essential travel to the country, citing the fuel shortage. This is a significant and unfortunate message to the rest of the world, as Mongolia has prioritized tourism as one of its key priority areas for economic diversification. Summer months are the peak season for tourists, and according to industry experts, the ongoing fuel shortage is forcing the tourism sector to stand still while undermining economic activity.  
While the government has been issuing press releases with its policy responses, there is one interesting point missing thus far: transportation electrification. While the policymakers seem to recognize the risk of fuel dependency, replacing one source of imports with another source (diversification) will not change the end calculus. Yes, the continued establishment of Mongolia’s first oil refinery is underway and is expected to be operational by 2028. However, Mongolia’s long-term energy strategy must move toward electrification and renewable energy expansion. 
There is a quiet but visible presence of electric cars in the streets of Ulaanbaatar. With their bright green license plates, they roam without “day restrictions” (conventional vehicles are required by law not to operate one day a week in an effort to curb Ulaanbaatar’s infamous traffic). Big Chinese EV producers like BYD are slowly establishing their dealerships in Mongolia’s capital city, perhaps waiting for the government to prioritize transportation electrification.
While almost every part of the global economy suffers from an energy crisis, including Mongolia, the country has the opportunity to craft a substantial long-term energy security policy that includes transportation electrification. Fuel as a whole accounts for the largest import commodity by value in the country; Mongolia’s untapped renewable energy capacity could point to a different future for its transportation needs.

AI-92 Petrol Imports from Russia Continue www.montsame.mn

AI-92 petrol imports from Russia are continuing, with 43 rail tank cars, or 2,580 tonnes, of AI-92 petrol entering through the Sukhbaatar border port on August 5 and an additional seven rail tank cars, or 420 tonnes, clearing the border on August 6.

The imported fuel is currently being transported to Tolgoit, Arshaant, Darkhan, Erdenet, and Ulaanbaatar railway stations, where it is being unloaded for distribution to gas stations.

Fuel imports from Russia are still coming into the country without interruption, according to the Ministry of Industry and Mineral Resources. A total of 10,017 tonnes of AI-92 petrol entered the country through the Sukhbaatar border port between August 1 and August 5.

Furthermore, 33 rail tank cars carrying 1,980 tonnes of AI-92 petrol, dispatched from Russia’s Angarsk Oil Refinery on August 2, are scheduled to be delivered to Mongolia.

Regulation Approved for Single-Source Procurement of Essential Pharmaceuticals www.montsame.mn

The Cabinet has approved the regulation on the "Single-Source Procurement of Pharmaceuticals, Medical Devices, Biological Products, and Vaccines."

By sourcing 16 essential strategic pharmaceuticals as well as four types of anti-hemophilic recombinant Factor VIII and Factor IX products directly from international manufacturers recognized by the World Health Organization (WHO) and international health bodies, the state budget achieved a cost savings of MNT 3.15 billion, yielding a procurement efficiency gain of 10+1%.

Centralized procurement is a widely adopted global model, utilized on a national scale in countries such as South Korea, Japan, Singapore, and New Zealand. The primary advantages of single-source procurement include securing volume-based wholesale discounts, reducing public expenditure, obtaining medications at fair prices from WHO-regulated stringently controlled facilities, and ensuring an uninterrupted supply of critical drugs subject to shortages.

Most importantly, this mechanism fully safeguards against the risks of substandard and counterfeit pharmaceuticals while mitigating price inflation, thereby helping relieve financial burdens on citizens.

Government Imposes Austerity Measures Across All Levels www.montsame.mn

 During its regular session on August 5, the Cabinet has approved a resolution ordering fiscal discipline, budget prioritization, and fund management across government organizations.

Under the resolution, key social and operational expenses will remain fully funded. These include civil service salaries, one-time retirement benefits, local allowances, pensions, child money allowances, and all social welfare programs.

Additionally, funding will proceed as normal for operational repairs and costs for schools and educational institutions, government internet and utility bills, law enforcement and security force transportation, fuel, domestic travel, meal allowances, and uniform expenses. Expenses related to the COP17 international conference, government debt payments, and local emergency reserves will also be maintained.

However, the government has banned non-essential conferences, anniversaries, public celebrations, and cultural events unless privately funded. Foreign travel—excluding pre-approved high-level visits—guest receptions, non-essential equipment purchases, non-military training, public relations media spending, and non-mandatory bonuses are also prohibited.

The austerity period will remain in effect through December 31, 2026.

Prime Minister Uchral Nyam-Osor clarified that the health sector is exempt from the restrictions. Essential health initiatives, including early screening for students, vaccinations, and seasonal flu prevention, will proceed as scheduled.

All chief budget governors have been directed to cut operating expenses by 20% within their departments. Additional mandates include freezing new hiring, canceling team-building trips, prohibiting new government positions, conserving power and heating, transitioning meetings online, and allowing remote work on select days.

The restrictions will be gradually eased once fiscal discipline improves and conditions normalize.

Z.Mendsaikhan: 2026 budget amendment to be submitted together with the 2027 budget draft www,gogo.mn

The Cabinet discussed budget savings, food supply, and improvements to the registration and monitoring system at its regular meeting today. Finance Minister Z.Mendsaikhan briefed the media on the decisions made.

According to the Minister, the Government has officially switched to austerity mode and approved a resolution to prioritize public spending.

The budget financing will be prioritized in three stages: First, funding will be fully secured for the salaries and pensions of civil servants, special government agencies, and operating expenses for hospitals and the education sector. Second, funding will be provided for essential government-approved events and activities. Third, all expenditures that can be postponed or reduced over the longer term will be subject to savings measures.

State budget revenue reached MNT 14.6 trillion in the first half of 2026, while expenditure totaled MNT 16.7 trillion, resulting in a preliminary balanced budget deficit of MNT 2.1 trillion.

Without expenditure controls, the government could face difficulties financing salaries, pensions, and other essential state obligations by the end of the year.

The budget deficit was caused by several factors, including: approximately MNT 1 trillion in tax revenue that would normally have been collected in 2026 being collected in advance during 2025. An additional MNT 820 billion allocated in May to eliminate salary disparities for teachers and healthcare workers.

As part of the austerity measures, government agencies will postpone anniversary celebrations and non-essential events while reducing operating expenses wherever possible.

The 2026 budget amendment will primarily include funding for the salary increases granted to teachers and healthcare workers, as well as additional financing needed to establish strategic food reserves. The amended budget will be submitted to Parliament in September together with the draft 2027 State Budget.

The government also plans to strengthen Mongolia's food security by improving the registration system for meat reserves. This autumn, the electronic registration system of the Agricultural Exchange will be integrated with the capital city's system to improve transparency and oversight.

Additional support measures will include: Reduced electricity tariffs for businesses operating food warehouses and cold storage facilities. Preferential loans for companies investing in standard-compliant storage facilities. A transparent electronic system to monitor meat procurement and reserve inventories.

The new system will:

Increase transparency in meat procurement and reserve management.

Prevent the misuse of concessional loans intended for reserve storage.

Improve market competition and accessibility.

Allow consumers to purchase meat directly from warehouses and processing facilities.

Enable herders to sell directly to end consumers through the electronic platform.

Improve the preparation and management of state meat reserves, reducing market uncertainty.

He added that the budget amendment will also include funding for electricity tariff discounts and concessional financing to expand standard food storage infrastructure.

N.Uchral: All conferences, forums, and meetings to be canceled www.gogo.mn

Prime Minister N.Uchral announced that the government is introducing austerity measures at all levels in response to the global geopolitical situation and growing international uncertainty.

As part of the decision, certain government expenditures and funding will be suspended.

“All events, including regional conferences, sectoral conferences, forums, and meetings, will be canceled. No official overseas travel will be permitted without government approval.

Any essential meetings or conferences should be held online whenever possible. The budget saved through these measures will be redirected toward winter preparedness, energy and fuel supplies, and other essential activities that directly support the lives and well-being of citizens”, the Prime Minister said.

G.Damdinnyam: We are buying fuel wherever it is available, prioritizing supply over price www.gogo.mn

The Government presented the decisions made during its regular Cabinet meeting, including measures being implemented by the Rapid Response Headquarters to stabilize the country's fuel supply.

As part of the emergency measures, fuel is currently being sold under an even-odd license plate system, with purchases limited to MNT 50,000 per vehicle. The government has also temporarily prohibited the sale of fuel in containers.

Minister of Industry and Mineral Resources G.Damdinnyam said the first day of the new system had produced positive results.

“The government is working to diversify fuel import sources and increase import volumes. People are asking how Mongolia will import fuel from the Republic of Korea. We already purchase fuel from South Korea and Singapore. The issue is not where we buy it, but increasing the volume. We are buying fuel wherever it is available. Our priority is securing supply rather than focusing on price or tariffs.

Mongolia normally consumes around 2,000 tons of gasoline per day, but daily consumption has risen to 3,000–4,000 tons due to public concern and panic buying. Also, the construction of new strategic fuel storage facilities has begun.

Mongolia currently has storage capacity for only about one month's worth of fuel. By this time next year, we expect to have reserves sufficient for two months, and by 2028, we aim to build reserves covering three months of consumption," he said.

To help stabilize prices and prevent supply disruptions, the government has also exempted all fuel and petroleum products from import customs duties.

Under the Cabinet resolution "Measures to prevent shortages of gasoline", the government has decided to:

Ensure the prompt import, transportation, and unloading of petroleum products and all types of fuel at border crossings.
Set the import customs duty on all petroleum products and fuels at zero percent until February 1, 2027.

Reduce fees for the use of foreign railway tank cars.

Expedite the approval of permit applications that meet all legal requirements.

Remove administrative obstacles affecting the import of raw materials required for petroleum product production.

Instruct the relevant Ministers to ensure a stable national fuel supply.

Lionel Laurens assumes office as UNDP Resident Representative in Mongolia www.undp.org

 Mr. Lionel Laurens has assumed office as the new Resident Representative of the United Nations Development Programme (UNDP) in Mongolia and presented his credentials to H.E. Battsetseg Batmunkh, Minister of Foreign Affairs of Mongolia. He will lead UNDP’s work in the country in close partnership with the Government of Mongolia, national institutions, civil society, development partners, and communities to advance inclusive, sustainable, and resilient development.

Mr. Laurens takes up his assignment as Mongolia prepares to host the seventeenth session of the Conference of the Parties to the United Nations Convention to Combat Desertification (UNCCD COP17) in Ulaanbaatar from 17 to 28 August 2026. Held under the theme “Restoring Land, Restoring Hope,” COP17 will bring global attention to land restoration, drought resilience, sustainable rangeland management, and practical solutions that protect livelihoods, ecosystems, and communities closely connected to the land. 

“I am honoured to take up this role at a pivotal moment for Mongolia and to carry forward UNDP’s longstanding partnership in the country,” said Mr. Laurens. “Mongolia has made important strides in advancing sustainable development, strengthening climate resilience, and expanding opportunities for people and communities. UNDP remains committed to supporting the country as it accelerates progress toward the Sustainable Development Goals and builds a more resilient, inclusive future.”

Mr. Laurens brings extensive experience in governance, inclusive and sustainable economic growth, crisis response, resilience, and poverty reduction across Africa, the Middle East and Asia. He has held senior UNDP leadership roles in a range of development, humanitarian, and post-crisis contexts, bringing a strong focus on integrated, people-centred approaches to development. 

UNDP has partnered with Mongolia for five decades, supporting national priorities across democratic governance, climate resilience, environmental sustainability, inclusive growth, digital transformation, gender equality, and sustainable financing. Under Mr. Laurens’ leadership, UNDP Mongolia will continue working with partners to support innovative solutions that respond to Mongolia’s development priorities and deliver lasting benefits for people and planet. 

Fuel sales capped at 50,000 MNT under plate rule www.ubpost.mn

Mongolia is temporarily limiting fuel sales as it faces growing pressure from global energy supply disruptions, Minister of Energy and Mineral Resources G.Damdinnyam announced on August 3. Due to the challenging external environment, the Ministry has introduced temporary restrictions on fuel purchases starting August 4. Under the new arrangement, fuel purchases will be limited to no more than 50,000 MNT per vehicle, with access determined by the even-odd license plate system. For example, vehicles with odd-numbered plates will be eligible to purchase gasoline on August 5.  

The minister said that despite ongoing geopolitical tensions, Russia had previously maintained a relatively stable fuel supply. However, global energy markets have recently faced severe disruptions due to geopolitical conflicts, including the closure of the Strait of Hormuz following tensions between the US and Iran, which affected international oil transportation and refined petroleum product supplies.

According to G.Damdinnyam, the global energy situation has reached an unprecedented level, with the World Energy Organization warning of a major oil and energy crisis. He added that continued drone attacks on Russian energy infrastructure have contributed to fuel shortages in Russia, where some regions are experiencing supply difficulties and restrictions have been introduced for consumers. Russia has decided to suspend gasoline exports until January 1, 2027, while diesel fuel exports have also been temporarily restricted. At the same time, Russia has begun importing jet fuel from other countries to meet domestic demand.

Minister G.Damdinnyam also noted that the country’s petroleum consumption has been increasing by approximately 14 percent annually, largely due to rapid growth in the mining sector. In 2025, the nation consumed around three million tonnes of petroleum products annually, while in the first seven months of 2026, consumption reached approximately 1.8 million tonnes. AI-92 gasoline accounts for about 30 percent of total fuel consumption, while diesel fuel makes up 63.5 percent. 

The government is currently negotiating with multiple countries to secure additional fuel supplies. Discussions have been held with Kazakhstan, although transportation and logistics challenges have prevented immediate supply arrangements. Negotiations are now underway with China and Singapore. 

G.Damdinnyam emphasized that Mongolia has long discussed the need to establish strategic fuel reserves but failed to implement the plan for two decades. He said that after taking office in June 2025, the Government renewed efforts to address the issue. The budget for the construction of a large-scale fuel storage facility was approved on December 30, 2025, and construction began in March. The facility will have a total storage capacity of 300,000 tonnes. A 150,000-tonne storage unit is expected to become operational within this year. According to the Minister, maintaining a three-month fuel reserve would allow the country to withstand a temporary supply disruption of up to 40 percent without major difficulties.

The minister also reported that negotiations are underway to secure crude oil supplies for the oil refinery currently being constructed in Dornogovi Province with a concessional loan from the Government of India. He said Kazakhstan could potentially supply up to one million tonnes of crude oil annually if transportation and logistics issues are resolved.

On top of that, State Secretary of the Ministry of Industry and Mineral Resources B.Dashpurev reported on August 4 that 49 railway tank cars carrying AI-92 gasoline arrived overnight and were unloaded at Darkhan and Ulaanbaatar railway stations. Fuel distribution will continue around the clock, while an additional 20 tank cars are currently being transported. Authorities said customs clearance procedures will be accelerated to ensure the fuel reaches consumers as quickly as possible. B.Dashpurev noted that Ulaanbaatar normally has around 700,000 vehicles participating in daily traffic, while the current number has decreased to approximately 350,000 vehicles. He said traffic congestion has not increased despite the fuel supply concerns. 

Public Input to Be Incorporated into 2027 Education Sector Budget www.montsame.mn

A public discussion on the draft 2027 education sector budget was held, bringing together citizens, non-governmental organizations, teachers' trade unions, and representatives of teachers and parents to share their views and proposals.

During the discussion, participants emphasized the need to include funding for variable costs, school lunch accessibility, school psychological services, and equal learning opportunities for children with developmental differences in next year’s budget.

Furthermore, citizens can review the 2027 education sector budget projections via the website www.ebudget.edu.mn and submit their proposals and requests online until August 10.

Looking at the budget indicators of the education sector in recent years, the sector's budget accounted for 4.0-5.2% of the Gross Domestic Product (GDP) and 12.6-16.4% of the total unified budget expenditures between 2022 and 2026. The approved budget for 2026 stands at 16.4% of the total unified budget expenditures. According to preliminary estimates, the education sector budget for 2027 is projected to reach 7.61% of the GDP, marking an increase of 2.94 percentage points from the 2026 level.

The public discussion aims to increase civic participation in the drafting and approval of the education sector budget and to refine the draft budget so that it aligns with actual needs and requirements.