Mongolia’s government sees the temporary FTA as tool to expand imports, but business groups and policy experts in Mongolia have voiced concern about the deal’s implications.
As Mongolia prepares to sign a temporary free trade agreement with the Eurasian Economic Union (EAEU), analysts and businesses alike are weighing the potential economic benefits against long-term structural risks. 
During a March meeting between Andrey Slepnev, the EAEU’s trade minister and Gantumur Luvsannyam, Mongolia’s first deputy prime minister and minister of economy, the two sides finalized the remaining issues of the free trade agreement (FTA), paving the way for its upcoming signing. Mongolia is expected to sign the three-year FTA with the Russia-centered EAEU during Mongolian President Khurelsukh Ukhnaa’s official visit to Moscow in May.
If Mongolia and the EAEU were to sign the free trade agreement, this would be Mongolia’s second bilateral FTA after its 2015 Economic Partnership Agreement with Japan, and its first such agreement with a regional bloc. The interim agreement follows years of negotiation with the EAEU, which comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. 
The move marks a significant step in Mongolia’s broader efforts to diversify its economic partnerships and expand access to regional markets – particularly at a time of increasing geopolitical complexity and economic volatility. Policymakers see the temporary FTA as a test-run to see if Mongolian goods and services can be exported to destinations other than Russia and China. Mongolian officials have emphasized that the agreement is strictly temporary and focused on trade facilitation – not political or institutional alignment. 
On April 16, during a government session, Mongolia’s Foreign Minister Battsetseg Batmunkh explained that the temporary FTA with the EAEU is for three years only – after that Mongolia can choose to let the deal lapse or renegotiate it. She emphasized that Mongolia has no obligation to keep a free trade partnership with the EAEU after three years.  
Established in 2015, the EAEU is the product of Russia’s vision for a more integrated Eurasian economic space with its neighbors. The union facilitates free movement of goods, capital, services, and labor among its member states. In the first half of 2024, trade between EAEU member states rose by 7 percent. Yet the grouping has faced some questions regarding the benefits of membership, especially following Russia’s 2022 invasion of Ukraine. Uzbekistan and Tajikistan, for example, have resisted pressure from Moscow to pursue full membership. 
Beyond its internal trade, the EAEU has concluded external FTAs with Vietnam, Serbia, and Iran, and has ongoing negotiations with Singapore, Egypt, Israel, India, and Mongolia. For Ulaanbaatar, a three-year FTA might present opportunities to expand exports and access a market of over 180 million consumers. 
In 2015, the government of Mongolia and the EAEU signed a Memorandum of Cooperation. That year, a joint working group was established by the two sides, with its first session held in Ulaanbaatar. The second session took place in Moscow in 2016. In 2020, Mongolia and the EAEU agreed to establish a joint research team that would explore the feasibility of concluding an FTA, focusing on reducing tariff and non-tariff barriers.
The current interim FTA, covering the 2025–2028 period, builds upon these earlier frameworks. The timing of the deal – amid ongoing global economic shifts, sanctions on Russia, and China’s regional assertiveness – reflects Mongolia’s delicate balancing act between its two immediate neighbors. Expanding export destination is crucial for Mongolia’s national security. 
According to a study by the Business School of the National University of Mongolia, an FTA with the EAEU could boost the export of niche Mongolian products, especially meat and textiles. Currently, Mongolian meat exports to EAEU countries face tariffs ranging from 15 to 50 percent. If the deal succeeds in reducing these, horse meat exports alone could rise by $1.7 million annually. Similarly, cashmere exports, though modest in absolute terms, may increase by up to $300 million with preferential access, particularly to Kyrgyzstan. In all, the study highlighted around 38 exportable product categories – including cashmere garments, leather goods, processed meat, and copper concentrates – where Mongolia has competitive potential. 
On the import side, however, the impact is expected to be more substantial. Russia and other EAEU countries are poised to increase exports of vodka, dairy, poultry, fruit juices, and refined fuels to Mongolia. The National University of Mongolia study projected a 95 percent increase in imports from EAEU countries, potentially widening Mongolia’s already significant trade deficit. For example, imports of yogurt could rise by $2 million, while fuel imports may swell by over $80 million. 
The same study warned that the agreement may lead to a 6.1 percent decline in Mongolia’s GDP growth, a 117 percent surge in imports, and a 3.2 percent reduction in government revenue by 2028. Key sectors like food production, textiles, and small-scale manufacturing could face heightened competition from cheaper, better-subsidized imports from Russia and Kazakhstan.
With that in mind, business groups and policy experts in Mongolia have voiced concern about the FTA’s implications for domestic industries. 
While tariff concessions included in the FTA may boost exports to some extent, non-tariff barriers remain a major hurdle for Mongolia. Russia alone enforces nearly 800 non-tariff measures, including 38 veterinary requirements for horse meat imports. In many cases, Mongolia must meet stringent sanitary and phytosanitary standards to benefit from tariff reductions. This raises questions about whether local producers can scale to meet both quantity and quality demands in time.
Moreover, a 2016 study argued that a Mongolia-EAEU agreement may inadvertently deepen Mongolia’s economic dependence on Russia. While designed as a trade pact, the FTA comes at a time when the EAEU – especially under Russian leadership – is increasingly seen as a geopolitical tool amid tensions with the West. 
The FTA could provide momentum for bilateral infrastructure cooperation between Mongolia, and Russia, particularly around railway and road development. The Ulaanbaatar Railway Joint Venture, co-owned by Mongolia and Russia, is already central to trade flows across the region, but concerns persist over its preferential treatment of Russian cargo over domestic needs.
Standard harmonization and technical cooperation could also be expanded under the deal, particularly if linked with broader Eurasian transport corridors. This could support Mongolia’s long-term ambitions to become a land-linked transit hub between Europe and Asia.
Following resistance from the public and businesses, the Mongolian parliament has delayed debate on the trade deal with EAEU, citing incomplete research and public consultation. A motion to hold the Budget Committee meeting behind closed doors was rejected, and 52.6 percent of lawmakers supported postponing debate.  
For a landlocked country with a relatively small domestic market, Mongolia’s effort to deepen trade relations with regional blocs makes sense. The interim nature of the agreement offers a testing ground to assess its real benefits and challenges before committing to longer-term arrangements. 
Still, the deal also carries significant risks. It may exacerbate existing trade imbalances, increase dependency on Russia, and undermine local producers unless carefully managed. While Mongolia aims to expand its economic diplomacy, its leaders must ensure that liberalization measures do not come at the cost of national food security, industrial competitiveness, or strategic autonomy.
As the global order continues to fragment, Mongolia’s decision to engage with the EAEU reflects both pragmatism and pressure. The challenge lies not just in securing access to new markets, but in doing so in a way that balances growth with sovereignty. 
By Bolor Lkhaajav and Erdene-Ochir Enkhbayar

Published Date:2025-04-23