The Asian nation has for some time now been following the road of the diplomatic strategy known as the "third neighbor," which is intended to improve the nation's political independence from its two big neighbors.
Put democracy aside and focus on economic growth instead, which should be outsourced to autocratic regimes in the surrounding areas. This is the fate that awaits Mongolia, which is landlocked and hemmed in on three sides by China, Russia, and China's neighboring countries, with no access to the ocean.
Two heavy neighbors
The Asian nation, which only achieved democracy in 1992 following the fall of communist regimes in Eastern Europe, has for a long time been following the path of the diplomatic strategy known as the "third neighbor," which is intended to strengthen the nation's political independence from its two powerful neighbors.
For this reason, Mongolia has worked to build diplomatic connections with liberal nations such as Japan, South Korea, and the United States in the hopes of one day being independent from China, a critical conduit via which it sells copper and coal, as well as from Russia.
The Asian nation, which is three times the size of France but has a population of only 3.5 million people - of which half live in the capital city of Ulaanbaatar - is becoming a preferential corridor for Russia, from which Mongolia imports virtually everything. The country is three times the size of France. oil, which is at this point the focus of worldwide condemnation.
As a result of being severely impacted by sanctions and embargoes placed on oil and gas production, Moscow is travelling east to enhance its shipments to Beijing, crossing via Mongolian territory on its way there. The rise in the export of crude oil from Russia gives Beijing with a beneficial chance; at the same time, China is able to maintain its pressure on the Buddhist population in Mongolia. This presents China with a twofold opportunity. According to The Diplomat, it is therefore very likely that Beijing will ask Moscow for assistance in exerting pressure on the primary religious community in Mongolia, with the goal of getting Mongolia to sever its ties with the Dalai Lama and instead select a Jebtsundamba Khutuktu, a Buddhist monk who is more in line with the Chinese line of thinking.
China closed its borders with Ulaanbaatar after Ulaanbaatar offered hospitality to the Dalai Lama, who has been in exile in India since 1959. This followed the violent repression of the Lhasa revolt by the Chinese army, which had occupied Tibet in 1950. Since then, Tibet has become an autonomous region of China with a special status, and its governors are chosen directly by the Chinese Communist Party. The country in Asia has already experienced the repressive methods of China. Because of this, the handing up of Mongol power to China in exchange for the acceptance of the Tibetan religious leader might be seen as a significant reduction in the amount of sovereignty held by the Mongols.
Ulaanbaatar's position on the war in Ukraine
Then there is the conundrum of where one should stand with regard to the crisis in Ukraine. Since the beginning of the conflict in Russia, Ulaanbaatar's two authoritarian neighbors have increased the amount of pressure they are putting on the city to give up its independence and join forces with them in an anti-Western triangle of cooperation. The Asian nation, which is adamant about following a course of neutrality, is, nonetheless, unable to avoid the role of energy connector between China and Russia.
After reducing exports to European countries as part of retaliation for sanctions introduced after the Russian invasion of Ukraine, Moscow recently celebrated a new all-time high in Russian gas supplies to China. This came shortly after Moscow celebrated a new all-time high in Russian gas supplies to Europe. Gas shipments to China surged by 63.4 percent between January and June 2022, according to half-yearly statistics from the Russian energy giant Gazprom. On July 18, Gazprom routed a record amount of gas through the 'Power of Siberia' pipeline.
Russia currently exports natural gas to China from fields located in eastern Siberia. At the same time, Gazprom is working on the construction of a new gas pipeline called the "Power of Siberia 2," which will cross Mongolian territory. If completed, the new pipeline will enable the Kremlin to reroute natural gas from countries in Europe to new customers in Asia. It will be a 2,600-kilometer-long pipeline that will have a capacity of 50 billion cubic meters of gas per year, Mongolian Premier Oyun Erdene Luvsannamsrai stated in an interview with the Financial Times. Construction of the new pipeline will begin in 2024 and will be finished in 2030.
At the Eastern Economic Forum in 2018, Mongolia was introduced to the concept of a transmongol gas pipeline, which has been around for quite some time. A trail was established in a rather quick manner. In 2019, Gazprom and Erdenes Mongol, a state-owned business in Mongolia, began conducting a feasibility study on the Mongolian Power of Siberia 2 portion, which is the Soyuz-Vostok oil pipeline. This was done with the tacit agreement of Beijing.
Even though the Soyuz-Vostok feasibility study is still being conducted, the Mongolian government and Gazprom gave their approval to the project earlier in this year. The rapidity with which the procedures are being carried out is evidence of how keen Moscow is to expand its client base, placing its bets on the state of the economy in Mongolia. The Asian nation is compelled to depend on its vast natural resources in order to continue growing and expanding its trade routes to nations outside of Asia as a result of the ongoing economic crisis. Therefore, in order to secure the financial backing it needs for development, Ulan Bator must eliminate the risk of Russia turning off its water supply to the city.
Erdenes Mongol and Gazprom rapidly signed a deal for the engineering works and the design of the pipeline within days of the beginning of the Russian invasion of Ukraine, with the intention of beginning construction in 2024. With a capacity that is equivalent to that of the already delayed Nord Stream 2 project to Germany, the Soyuz-Vostok segment is meant to carry gas from the Russian peninsula of Yamal to China. As a result, the European markets are deprived of the Russian fuel.
In the grip of debt
Nevertheless, there is a limit that is doubled. According to The Diplomat, in the absence of an accurate assessment of the project and the participation of third parties, Mongolia is likely to welcome a large loan from Russia, possibly on predatory terms, to finance its share of the costs, while agreeing to repay the Kremlin from the proceeds of gas transit taxes. This would be done in exchange for an agreement to repay the Kremlin from the proceeds of gas transit taxes. In Ulan Bator, on the other hand, all that is left to do is accept Chinese funds (with conditions) to strengthen the commercial channels between China and Russia and thus maintain a crucial role in the Chinese project of the New Silk Road, which otherwise could be covered by neighboring Kazakhstan. If this is done, the commercial channels between China and Russia will be strengthened, and Ulan Bator will maintain its crucial role.
In this case, Mongolia would be responsible for bearing significant financial burdens, but it is possible that the country would not be able to reap the long-term advantages of the project, such as receiving cheap gas supplies. None of Mongolia's major parties are interested in opposing the Russian pipeline project, despite the very little amount of public resistance to it.
Because of this, there is little reason to assume that Mongolia will be able to shield itself from the geopolitical and geotechnical dangers that will be posed by the 'Power of Siberia 2' project.
Moscow might threaten a political closure of the gas taps, as it has previously done with Europe, a condition that could further raise the country's debt, which will amount to $33.9 billion in March 2022.
However, there are also political dangers that come from China, which is the nation that is located at the other end of the pipeline. Every time the Dalai Lama travels to Mongolia at the request of Mongolian Buddhists, Beijing has the opportunity to apply diplomatic pressure on the country. As a result, Russia and China have "crushed" Mongolia using the threat of cutting off gas supplies and violating human rights.