Nestled between Russia and China, Mongolia is a geographically obscure country with the sparsest population density in the world. It isn’t exactly what comes to mind when one thinks of East Asian or Pacific economic opportunities, yet for Russia, Mongolia is the key that it needs to unlock strategic relations with South Korea.
Ulaanbaatar’s unique Third Neighbor Policy has allowed it to cultivate favorable relations with Seoul, and coupled with its valuable coal reserves and rare earth minerals, it has just the type of resources that South Korea needs. By bridging the geographic divide between the two, Russia stands to gain by entering into a strategic and multifaceted partnership with South Korea that proves the seriousness of its Pacific Pivot and could potentially transform Northeast Asian affairs.
Mongolia’s Third Neighbor Policy
Mongolia has historically been in the Russian sphere of influence, but after 1991, the country spearheaded the so-called Third Neighbor Policy to diversify its relations in the post-Cold War world. This saw it reaching out in economic, political, and military (although largely benign) ways to distant partners such as the EU and NATO, as well as closer ones such as Japan and South Korea.
The guiding philosophy behind this policy was that Mongolia did not want to be dominated by either Russia or China, the latter of which it secured its independence from in 1911 after centuries of control. This concept will be important in later understanding Mongolia’s anticipated role in bringing together Russia and South Korea.
Image: Although securing significant natural resource investment from leading Western companies such as Canada’s Ivanhoe Mines and the UK’s Rio Tinto, it still sells 90% of its natural wealth to China, creating just the type of dependency that it had earlier sought to avoid.
Mongolia’s Chinese Dependency
Mongolia has thus been faced with the dilemma of interacting with the wider world while still being dependent on its neighbors for physical trade networks. Although securing significant natural resource investment from leading Western companies such as Canada’s Ivanhoe Mines and the UK’s Rio Tinto, it still sells 90% of its natural wealth to China, creating just the type of dependency that it had earlier sought to avoid. The fact that 20% of Mongolia’s GDP is dependent on mining, and growth in this field has allowed the country’s GDP to be the world’s fastest growing since 2012 (and expected to remain among the top for the coming years), reinforces the dominant role that Chinese mineral purchases have on the overall Mongol economy.
King Coal and its Curse
There are concrete reasons why Mongolia’s mining sector (and consequently, the mainstay of its economy) became dependent on China. Way more than rare earth mineral demand (of which China is already dominant), this has to do with China’s insatiable appetite for coal. Bluntly put, Mongolia is nothing more than a raw resource appendage of China and has little purpose for Beijing besides helping to keep the lights on. Nonetheless, this arrangement was beneficial for Mongolia, so long as China kept buying coal.
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