Mongolia: Between A Rock And A Hard Place?

Courtesy of STRATFOR (subscription required), an interesting article on Mongolia’s efforts to find a third party to balance its two powerful neighbors, China and Russia reliance. As the report notes:

“U.S. Vice President Joe Biden will visit Mongolia on Aug. 21-23. Aside from this, a series of high-level meetings between officials from the two countries’ governments are scheduled, including a visit by U.S. Secretary of State Hillary Clinton to Mongolia and a trip by Mongolian President Tsakhiagiin Elbegdorj to the United States. These meetings come amid plans for increased bilateral and multilateral military exercises as well as statements such as one from Clinton in May calling Mongolia a “new partner.”

Mongolia sits in a strategic location wedged between Russia and China, the two regional powers. While providing a strategic territory buffer to both countries, Mongolia is landlocked between the two powers. Ruled by China for nearly a century, Mongolia was later part of China’s territory as the Qing dynasty ruled the country from the 17th century until its fall in 1911. After briefly declaring independence, Mongolia fell into the Soviet sphere of influence as a satellite state, with Soviet aid accounting for nearly 40 percent of the country’s GDP at one point. Mongolia remains under heavy political influence from Russia, but China has an ambitious plan to expand influence. Mongolia’s resource and energy sector has exposed the country to greater economic influence by China. Trade with China now accounts for 70 percent of its total trade and nearly 40 percent of Mongolia’s GDP. Mongolia is attempting to reduce its dependence on China and Russia by establishing resource relationships with Asia Pacific countries such as South Korea and Taiwan — as well as bigger players such as Canada and the United States.

Given its geographic location, Mongolia has sought to counterbalance the China-Russia influence and reliance through its “third neighbor policy.” This policy provides an opening for the United States to establish a foothold in the region. Since establishing diplomatic relations in 1987, the United States and Mongolia have developed economic and military cooperation, including counterterrorism efforts and peacekeeping missions. In particular, the end of Mongolia’s one-party communist state and democratic reforms initiated with U.S assistance in 1991 have enabled the two countries to forge closer relations. In fact, Mongolia places a high priority on cultivating U.S. relations. Being sandwiched between China and Russia, however, has created a dilemma for Mongolia, and has limited access for the United States and other countries to wield significant influence in the country in the event of a crisis. Mongolia, one of Asia’s least developed countries, hopes its abundant resources will attract a third power and further facilitate its foreign policy agenda.

The Mongolian government announced in July that it had picked three companies to develop its Tavan Tolgoi mine, the world’s largest untapped coal reserve. It is the country’s most critical project in introducing foreign investment to address Mongolia’s poverty. Among the top three companies selected, China’s Shenhua Group will control 40 percent of the project, a Russian-led consortium will control 36 percent and the United States’ Peabody Energy will control 24 percent. The project generated enormous interest from several countries when it was first announced, and the companies that claimed the contract clearly were backed by intense lobbying from their respective countries. Russia has long wanted to involve itself in the project, and its political influence in Ulan Bataar gave it an advantage. China, too, has an advantageous position, having closer access to ports and more cash on hand. However, the Mongolian government has long distrusted Beijing and has been resistant to its expanding influence, especially in resource extraction.

Meanwhile, with the potential to become one of the largest uranium producers in the world, the Mongolian government has been determined to develop its uranium assets. Russia has been involved in the Mongolian uranium sector since the 1950s, but China became involved in 2009. To balance the two, Mongolia has been attempting to introduce the United States into the uranium war. The United States began uranium-related discussions with Mongolia in 2010. Nearly a year later, it was reported in March that the two had been holding informal discussions over a proposal that would have Mongolia serve as a regional depository of spent nuclear fuel, specifically for countries such as Taiwan and North Korea.

Mongolia’s attempts to find a third party counterbalance to China and Russia is complicated by its geographic position. Its landlocked nature means any resources claimed by such a party must transit either China or Russia to reach its destination. Further, it is difficult for a third power to actively intervene should Mongolia have a crisis with a neighbor. What Mongolia does, then, is try to balance Russia and China and interject different third powers into economic arrangements. Mongolia tries to avoid allotting too much influence to any one party and encourages the various parties to keep one another’s ambitions in check. While still in the relatively early stages of expanding its U.S. relationship, Mongolia is a strategic country for the United States, enabling interaction with China and Russia while providing a regional counterbalance.”

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