Strengthening Ties: India-Mongolia Economic Collaboration Unveiled

In the world of international trade and cooperation, the relationship between India and Mongolia is steadily deepening. Recent developments have highlighted their joint efforts in strengthening economic ties, with an eye toward expanding trade routes through Russia. Let's delve into the key facets of this evolving partnership and the challenges they face.

Strengthening India-Mongolia Economic Collaboration and Trade Routes

In July 2023, Ulaanbaatar played host to a significant event in India-Mongolia relations, as Lok Sabha Speaker Om Birla visited to further cement bilateral collaboration. This comes as a continuation of the growing rapport between the two nations, initiated by Prime Minister Narendra Modi's visit to Mongolia in 2015 and reciprocated by President Khaltmaagiin Battulga's trip to India in 2019.

Indian Prime Minister Narendra Modi in Mongolia in 2015. Credit: newindianexpress.com

Strategic Significance and "Act East" Policy

India views Mongolia not only as a strategic partner but also a "spiritual neighbor" within its Act East policy. This policy aims to fortify economic, political, security, and cultural ties with East and North Asia. This strategic outlook underscores the broader objective of regional stability and cooperation.

Mongolia's First Oil Refinery: A Symbol of India-Mongolia Economic Collaboration

A significant symbol of the growing partnership is the ongoing construction of Mongolia's maiden oil refinery, aided by a substantial $1.2 billion Line of Credit from India. This ambitious project seeks to decrease Mongolia's reliance on Russian imports of petroleum products. Gasoline, aviation fuel, liquefied petroleum gas (LPG), and diesel are among the key products that will be locally produced, bolstering Mongolia's energy security.

Exploring New Trade Avenues: Leveraging Russia and India

Beyond the oil refinery, there's a strategic contemplation of using Russia as a potential transport corridor for Mongolian resources like coal, copper, and critical minerals. This approach capitalizes on the strong partnerships Mongolia enjoys with both Russia and India, allowing for efficient use of existing infrastructure and trade routes.

Historical and Cultural Ties: A Strong Foundation

India-Mongolia economic collaboration is rooted in a shared history of cultural and spiritual connections that date back centuries. Today, this foundation has evolved into a strategic and spiritual camaraderie on the global stage. A noteworthy instance of this bond was India's donation of 150,000 COVID-19 vaccine doses to Mongolia in early 2021, further solidifying their partnership.

Challenges on the Horizon: The China Factor

However, challenges persist. The ongoing border tensions between India and China, along with economic nationalism, raise concerns. Mongolia's economic landscape is intricately tied to China, and these factors could potentially impact the trajectory of the India-Mongolia partnership. The recent agreement of Indian Prime Minister Narendra Modi and Chinese President Xi Jinping on the sidelines of the 2023 BRICS to de-escalate border tensions is a welcoming development.

The Road Ahead: Overcoming Hurdles

The journey of constructing the India-Mongolia oil refinery has encountered obstacles such as delays and cost escalations, potentially affecting its targeted completion by 2025. Nonetheless, both nations remain steadfast in their commitment to unlocking the economic potential of this refinery.

Shared Goals and Opportunities: Economic Prospects

The mutual benefits of trade, cultural exchange, and strategic partnerships continue to be the driving force behind the growing India-Mongolia relationship. India's interest in accessing Mongolian mineral resources is reciprocated by substantial partnerships in critical minerals, coal, and steel.

Diversification and New Markets: India's Role

In the event of shifts in China's coal consumption and economic slowdown, Mongolia would need to explore new markets, with India emerging as a potential trading destination. This emphasizes India's role as a diversified partner contributing to Mongolia's economic stability.

Alliance Evolution: The India-Mongolia Partnership

The alliance between Mongolia and India is evolving. Once rooted in history, diplomacy, loans, and IT ventures, it has now expanded. The declaration of a "strategic partnership" by the Prime Ministers of both nations in 2015 marked a pivotal moment in this trajectory.

Mongolia's Support for India: Global Collaboration

Mongolia has consistently shown support for India on the global stage. This is evident in its backing of India's quest for a permanent seat on the United Nations Security Council, showcasing their shared objectives on the international platform.

A Historical Journey: India-Mongolia Relations

India and Mongolia's relationship, spanning over 2600 years, is deeply rooted in their shared connection to Buddhism. This historical tie has paved the way for cultural exchanges and enduring relationships between the two nations.

A Path Forward

The collaboration between India and Mongolia is on a promising trajectory. Their joint efforts to bolster economic ties and explore new trade routes, coupled with their historical and cultural bonds, create a solid foundation for a prosperous partnership.

While challenges loom, their determination to overcome obstacles and seize opportunities showcases their commitment to realizing the full potential of this alliance.

Subscribe to Mongolia Weekly and receive a premium newsletter each week featuring in-depth analysis and commentary on politics and policy in Mongolia. Don't miss out on this valuable insight. Use promo code MW97 to get your first month for just $0.90. Stay informed and empowered with our exclusive content!