The proposed 20-year agreement has set off a firestorm within Mongolian politics, highlighting sensitive issues of dependency and neutrality. Mongolia is embarking on a major deal to secure a 20-year supply of aviation fuel from Russia. The goal of the agreement is to dodge fuel interruptions caused by external disturbances over which Mongolia has no control. Yet the Mongolian public and legislature view the deal as premature, and critics say the timing of the agreement may not best suit Mongolia’s national interest at the moment.  
Mongolia’s dependence on Russian energy is no secret: a whopping 97 percent of Mongolia’s fuel consumption depends on imports from Russia. So long as Mongolia’s economy runs on Russian energy, the government and businesses will remain closely attached to Moscow. For its part, Russia, as a major global energy supplier, needs Mongolia to remain as a consumer. Given the geographic proximity and Mongolia’s own immature energy sector, this is nothing new. 
But the recent aviation fuel deal has stoked controversy. The draft agreement stipulates that a joint state-owned company will be formed, with Mongolia’s state-owned Erchis Oil LLC owning 60 percent, and Russia’s state-owned Rosneft Aero owning the remaining 40 percent. The new joint venture will then be responsible for fuel storage, refueling operations, and the management of Chinggis Khaan International Airport’s jet fuel system. The time frame – the deal is set to run for 20 years – also raised some eyebrows not only from the Mongolian public but also from government officials and foreign policy pundits. 
Supporters of the agreement argue that securing a long-term deal with Russia is the best option – especially now, with global energy price fluctuations. Having a stable supply of aviation fuel is important to Mongolia’s efforts to boost tourism and expand international air travel. Having an uninterrupted supply of aviation fuel for the Chinggis Khaan International Airport might be just the first step. The draft agreement also includes a separate document that targets the uninterrupted supply of A92 and A80 diesel fuel. 
According to parliamentary data, Mongolia’s aircraft fuel consumption has grown rapidly in the past three years. Between 2021 and 2024, fuel consumption increased from 27,900 tonnes to 70,000 tonnes. This growth directly correlated with increased air traffic. According to some estimates, in 2024, passenger flights reached 91,800, up 44.6 percent compared to 2023, and cargo transportation grew by 21 percent. Supporters say that, given this increased demand, locking in a long-term supply is crucial for Mongolia.
But after Mongolia’s parliament approved the draft agreement on April 17, opposition gained steam. Protesters took to Ulaanbaatar’s Sukhbaatar Square, demanding the ousting of Prime Minister Oyun-Erdene Luvsannamsrai and his government for proposing agreements that critics say will further Mongolia’s dependency on Russia.
The opposition took particular issue with that the fact that the draft agreement included a clause stating that, in the event of a dispute between the parties, the matter will be resolved by the International Commercial Arbitration Court under the Chamber of Commerce and Industry of the Russian Federation. 
There is also concerns about the potential backlash from Ulaanbaatar’s “third neighbors.” There are questions over the impact of international sanctions, especially when Russia is still actively at war with Ukraine. Foreign policy pundits questions whether the long-term deal will deepen Mongolia’s dependency on Russian energy, at odds with the government’s official aim to reduce dependency on foreign supplies.
In response to the criticism, Mongolia’s Minister of Industry and Minerals Tuvaan Tsevegdorj defended the draft agreement, which is the first of its kind. He said that Russia will be obligated to supply Mongolia under the agreement, even when there is a shortage or issues on Russia’s end. Tuvaan further explained that Mongolia’s doesn’t have a lot of alternatives when it comes to accessing aviation fuel. “In the short term, until we find and allocate the financials and the infrastructure to improve our situation, the deal with Russia can secure our industry for the next twenty years without interruptions,” the minister concluded.
The debate over whether Mongolia should sign a 20-year aviation fuel agreement with Russia touched on deeper questions, including issues of geopolitics, economics, and politicization. 
Geopolitically, Russia’s ongoing war with Ukraine complicates Ulaanbaatar’s position on the world stage. From a foreign policy point of view, it may not be in Mongolia’s best interest to pursue a major deal with Russia at the moment. Signing a long-term agreement with Russia at a time when its energy companies are facing heavy sanctions in Europe and elsewhere could create the perception that Mongolia is aligning with the Russian bloc – and taking sides in great power competition is something Ulaanbaatar actively aims to avoid. 
On a bilateral level, however, Mongolia and Russia enjoy a Comprehensive Strategic Partnership, built on their long historical ties. Supporters of the agreement say that it’s in Ulaabaatar’s interest to maximize the benefits from Mongolia-Russia bilateral relations, including a long-term deal to secure a low-priced fuel supply. 
Following the backlash, the Democratic Party caucus in the Mongolian parliament rejected the draft agreement. The caucus concluded that locking in a single supplier for the next 20 years is excessive and does not protect Mongolia’s national interest. 
On April 21, the draft agreement was rejected by the parliament’s Standing Committee on Economy and the Standing Committee on Security and Foreign Policy, with 73.3 percent opposing it and just 7 percent in support. 
Legislators are calling for key changes to the proposed agreement, including shortening the term from the current 20 years, clarifying usage of the Chinggis Khaan International Airport, and enabling arbitration in Mongolia.
By Bolor Lkhaajav

Published Date:2025-05-02