Mongolia’s Fuel Shortages Reveal a Deeper Energy Crisis

Mongolia’s recurring energy shortages expose a systemic failure to diversify beyond its powerful neighbours.

Mongolia recently faced acute fuel shortages. In October, motorists in Ulaanbaatar reported two-hour waits and hundreds-of-meters-long queues for A-92 gasoline.

By mid-October, at least ten provinces were rationing fuel, with gas stations in Khovd and Dornod limiting daily sales.The government blamed Russian refinery maintenance and logistical delays, but this was no isolated disruption. The crisis has become an annual ritual — the product of long neglect rather than bad luck.

By early November, supply began stabilizing as new shipments arrived from Russia and distributors prioritized urban centers.

Mongolia imports every drop of its fuel, nearly all of it from Russia, with small volumes from China. When Moscow restricts exports or temporary halts refineries, Mongolia’s economy grinds to a stop. The October shortages have now eased, but they underscored how a single-supplier system leaves the economy hostage to events in Russia.

Russia’s export curbs and sanctions have only tightened regional fuel flows, leaving Mongolia exposed to disruptions it cannot control. Yet that exposure is precisely the failure: decades of underinvestment, policy complacency, and a perpetually delayed refinery have turned a foreseeable risk into a chronic vulnerability.

On October 22, the Cabinet ordered the creation of a 30-day strategic fuel reserve and directed Finance Minister Javkhlan and Industry and Mineral Resources Minister Damdinnyam to secure concessional loans for reserve-holding companies. These are sensible steps, but long overdue. The government has since begun replenishing stocks, though reserves of A-92 remain below pre-2024 levels.

Fuel reserves fell 42% last year, and stocks of A-92 remain worryingly low. The plan is a short-term patch for a problem that demands long-term reform.

Distorted market policy makes matters worse. Price caps and subsidies keep fuel artificially cheap, discouraging importers from maintaining adequate supply. Consumers respond by hoarding, emptying tanks faster. Retail prices have stayed roughly flat around ₮2,350–2,450 (~$.66) per liter despite global fluctuations, showing that the government’s price-control regime remains intact.

The government blames external shocks, yet its own price controls are part of the shortage it claims to be fixing. Removing subsidies overnight would punish the poor, but keeping them ensures the cycle repeats. A gradual phase-out, coupled with targeted support for low-income households, is the only sustainable path.

Diversifying fuel sources is equally urgent. Minister Damdinnyam met Kazakhstan’s ambassador in Ulaanbaatar to discuss becoming a “third source” of petroleum, given Mongolia’s 90% dependence on Russia and 10% on China. But such diversification remains aspirational without investment in rail links, storage, and financing. Promises of alternate supply mean little without infrastructure to deliver it.

Mongolia’s energy insecurity stems from delay, dependence, and policy inertia. A nation that pumps crude oil yet imports nearly all its fuel from a sanctions-hit neighbor is paying for years of complacency.

The India-funded refinery, now delayed until 2028, offers hope but not immunity. Construction has resumed at a slower pace, and Prime Minister Zandanshatar’s recent visit signaled urgency and political backing

Until Mongolia embraces market-driven reforms and genuine diversification, its economy will remain hostage to refinery schedules in Russia and politics in Moscow.