Page 29 - bne magazine September 2023

bne September 2023 Companies & Markets I 29
Economically, Mongolia is extremely dependent on China. That often makes it difficult for Mongolia to resist Beijing’s influence.
Historically, Mongolian leaders have managed to balance relations with Moscow with closeness to China, and vice versa, preserving their nation’s integrity. At the same time, Mongolia is always looking to strengthen relations with “third neighbours” such as the US, Japan, South Korea and India, as a way of offsetting Chinese and Russian influence.
Ulaanbaatar often refers to the US as an “important strategic third neighbour”. It signed a strategic partnership with Washington back in 2019.
The war in Ukraine has put Mongolia in a difficult position. With respect to relations with Beijing and Moscow, Mongolia and the Central Asian republics have not condemned the war. But the conflict has caused a marked shift across the region, away from Russia and towards China, as the former Soviet satellites do not wish to in anyway become regarded as a possible next point of Russian expansion.
While toeing the line between China and Moscow, Mongolia is also being careful not to damage its relationship with the US or other third neighbours. The meeting between Harris and Oyun-Erdene comes at a time when Mongolia wants and needs to intensify its third-neighbour relations, particularly with the United States.
On the US side, the meeting is fortuitous because Washington does not want China’s growing influence to squeeze the US out of Mongolia and the wider region. Furthermore, Mongolia is the perfect geographic location from which to monitor both Beijing and Moscow.
In June, the two countries signed a memorandum of understanding on securing reliable mineral supply chains. On the agenda this time was cooperation on rare earth minerals, which play a vital role in national security. Such critical raw materials (CRM) are required for the manufacturing of advanced weaponry, space applications and computer chips. They are also crucial to achieving climate goals as they are needed for the production of electric cars, wind turbines and solar panels.
Currently, China, which possesses 36% of the world’s
rare earth minerals, controls over 70% of the world's REE extractive capacity, as well as 90% of processing capacity. Mongolia has 61.4mn tonnes of copper and 3.1mn tonnes of rare-earth minerals, access to which could decrease US rare- earth dependence on China.
Given that Mongolia is landlocked, it is difficult for the country to export anything by rail or road without Russia or China’s agreement. Seeking a mitigation strategy, a source
at the US State Department told Reuters that the US was exploring “very creative ways” that would enable Mongolia to get its extracted rare earth minerals to world markets beyond Russia and China.
Oyun-Erdene also met with US Secretary of State Antony Blinken to discuss enhancing democratic values. Mongolia is often talked of as an island of democracy as Russia and China are, effectively, single-party autocracies, while the nearby Central Asian “Stans” have low-quality democracies.
Supporting democracy is talked of by diplomats as the essential path via which the US can forge closer ties to Mongolia. And for that democracy to be free and meaningful, the US must help Mongolia develop economically, so that it will be less beholden to Russia and China.
Mongolian PM L. Oyun-Erdene and US Vice President Kamala Harris giving a White House press briefing. / White House live feed, screenshot.
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