MOSCOW -- Russia is rebuilding financial and military ties with Mongolia, partly to create new opportunities in Asia but also to counter Beijing's growing influence in the country.

A sign of this came in September, when Moscow announced it would set up a $1.5 billion investment fund to finance infrastructure projects in Mongolia

According to the Mongolian Customs General Administration, trade between Russia and Mongolia reached $1.8 billion in 2018 -- a nearly 40% increase from the preceding year.

Almost three decades on from the collapse of the Soviet Union, Russia is finding particular success in reaffirming its role as Mongolia's primary energy supplier. Following a series of agreements signed in 2014, Russia's share of the Mongolian oil market rose to 80%. At the St. Petersburg Economic Forum last year, Russian state oil company Rosneft signed $2.1 billion worth of contracts with several Mongolian importers.

The impetus for Russia's return gained new momentum in 2014, when Western sanctions over the annexation of Crimea prompted Kremlin's pivot to the east. Some Russian officials began to speak of rebuilding ties with Mongolia as a means of increasing economic access to the rest of Asia, describing the country as a key transit corridor.

Russia and Mongolia are also cooperating more in the security realm, with the latter joining Russia and China last September for Vostok 2018 -- the largest military exercise since the end of the Cold War. In August, Mongolia hosted about 1,000 Russian troops for the annual Selenga joint drills.

During his most recent visit to Mongolia in early September, Russian President Vladimir Putin and Mongolian President Khaltmaagiin Battulga signed the Treaty on Friendship and Strategic Partnership.

Putin later backed Mongolia's offer to build a gas pipeline to China through its territory, after which the president summoned Alexei Miller, CEO of state-controlled energy giant Gazprom, to the Kremlin in September to flesh out plans for the new pipeline.

"Please, look into the resources of Yamal [Peninsula] as well, in order to gather the necessary resources for supplies via the western route to China via Mongolia," Putin told Miller at a meeting, adding that China also favored the route.

China is at the forefront of Russian economic thinking as regards Mongolia. Russian analysts note that Mongolia represented the most attractive route for delivering natural resources to China.

Artyom Lukin, deputy director for research at Far Eastern Federal University, stated that running Russia's Power of Siberia pipeline to China via Mongolia would be easier and cheaper than constructing it across the Altai Mountains as originally planned.

He added that a Mongolian route was also preferable because it would "bring Russian gas straight to the heart of China, instead of its northwestern regions that don't need it all that much."

Alexei Maslov, a professor at the National Research University Higher School of Economics, pointed to Mongolia as "the quickest land transit for the delivery of Russian agricultural products to China." He noted that transporting goods from Russia's Far Eastern regions through Mongolia would only take three to four days to reach China, whereas other routes could take considerably longer.

At the same time, Russian experts interviewed by the Nikkei Asian Review admitted that Moscow had serious concerns about Beijing's growing economic clout in Mongolia, viewing it as a potential long-term threat. They explained that balancing China's influence is a major priority for the Kremlin.

Lukin predicted that if Russia loses too much ground to China, it could find its "Siberian underbelly" vulnerable in several decades. He noted that while Beijing recognizes Mongolia's independence, that could change if Chinese nationalism continues to rise.

"Moscow understands that we cannot exert economic influence in Mongolia that is greater than China's or even on the same level as it -- that is absolutely unrealistic. But we must maintain a minimal presence in Mongolia," Lukin said.

Maslov warned that if China absorbs Mongolia into its economic orbit, Russia could find itself even more economically dependent on Beijing than it already is. "If Mongolia falls under Chinese economic control, then 70% of Russia's border will be with China, making us more economically dependent on them," he said.

Nevertheless, Mongolia is unlikely to derail the burgeoning Sino-Russian partnership anytime soon. As Lukin told Nikkei, Moscow and Beijing have far more pressing geopolitical concerns than dominance in Mongolia.

"Two strategic partners are not interested in butting heads over Mongolia, if for no other reason than that they have a much more important common goal: resisting the United States."

Soviet Russia played a pivotal role in forming modern Mongolia. The Soviet Union helped secure Mongolia's independence from China in 1921 and subsequently took on the role of Ulaanbaatar's patron. Relations between the countries were so tight that Russian elites often referred to Mongolia as "the 16th Soviet Republic" because of its political and cultural deference to Moscow.

Following the collapse of the Soviet Union, however, Russia's influence in Mongolia rapidly diminished. Trade between Russia and Mongolia fell by nearly 80% during the 1990s, as Western and Chinese companies moved to fill the gap once occupied by Moscow. Younger Mongolians increasingly chose English as a second language instead of Russian.

Sergey Radchenko, director of research at Cardiff University School of Law & Politics, explained that Russia's decline in Mongolia could be primarily explained by the decision by former Russian President Boris Yeltsin to spurn former client states like Mongolia in favor of the West.

"It was not that Mongolia lost interest in being part of the Russian orbit, but that Russia no longer had an interest in Mongolia and felt that it was a burden economically. Maintaining a close relationship with it no longer made strategic sense," he said.

Now, with the rise of China as the region's leading economic and military power, Russia is eager to bolster its standing with the country that borders each.

Published Date:2019-10-04