Coal to China that does not match up to Chinese railway gauges in this light. China may have the coal, but only at an extra cost, as it will have to transfer this cargo to its own, narrower-gauge rolling stock.
THE BEAR: Russia, meanwhile, has often historically proven an ally, the Red Army helping Mongolia end Chinese occupation in 1921, while Soviet investment was long the main source of external support for the Mongolian People’s Republic.
Since the end of the Cold War, however, trade with Russia has declined dramatically – in 2011, it accounted for just 2% of total exports – with this decline in only beginning to reverse in 2000, when a revitalised Russia started to re-assert its influence in Asia. Old treaties of friendship were then dusted off, and Moscow wrote off 98% of Mongolia’s state debts.
THE WILD CARD: Yet Ulaanbaatar has also been keen to develop a third neighbour to strengthen its position regarding both Russia and China. This policy, a pillar since the end of the Cold War, has involved approaches to South Korea and more recently to the US and Western countries – particularly as the former, under President Obama, has attempted to re-orientate towards Asia-Pacific. The policy took a step forward in 2012, when Mongolia joined the Organisation for Security and Cooperation in Europe. Mongolia also attended the 2012 NATO Chicago Summit, under the Treaty Organisation’s partnership and cooperation programme, as well as send troops to Afghanistan and Kosovo.
In addition to its UN, Non-Aligned Movement, IMF and World Bank membership, it also has Shanghai Cooperation and ASEAN observer status. Trade with the West, however, remains small. The US accounted for just 0.1% of exports in 2011, with the whole of Europe – EU and non-EU together – accounting for 4.5%.
While the third neighbour policy might be able to provide diplomatic support then, China will likely continue to dominate the economic world – a reality that Ulaanbaatar’s policy makers continue to try to balance with approaches to friends from further afield. With two giant neighbours on its doorstep, landlocked Mongolia’s foreign policy has long been dominated by relations with Moscow and Beijing. This also extends to the economic field, where China accounts for almost all of Mongolia’s exports, while years of alliance with the Soviet Union have left a legacy of Russian involvement in many vital areas. To counter these geostrategic realities, Ulaanbaatar has long cultivated a “third neighbour” policy, attempting to balance Russian and Chinese influence with that of a third, more distant force. At the same time, Mongolia has been looking to the wider world, taking its place in global forums and signing up to trade and security agreements.
THE DRAGON: Relations with China are centuries long, with this including long periods of conflict, and even occupation. Indeed, until 1984, there was even disagreement over the demarcation of borders. That year saw a rapprochement between the two countries begin, however, as relations between China and Soviet Russia – Mongolia’s closest ally – thawed. These relations had previously become openly hostile with the Sino-Soviet split, as Mongolia sided with the Soviets.
In 1986, the first of a series of agreements between Ulaanbaatar and Beijing was signed, on trade and transport links, and in 1988 a treaty on border control was also finally inked. A 1994 treaty of friendship and cooperation followed the end of the Cold War, ushering in an era of large-scale Chinese investment in Mongolia, with trade booming. By 2011, out of a total $4.78bn in Mongolian exports, some $4.4bn went to China. This proximity to the world’s second largest economy is, to some extent, of great benefit to the country. Rich in minerals that China needs for its continued development, railway lines and roads over the border serve huge demand. Yet, this voracious appetite also creates some alarm among many Mongolians. A sense that the economy – and thus the politics – of their country could become too dependent on China does sometimes fuse with ancient suspicions. Many have seen the late-2012 decision by Mongolia to build a railway line to deliver