Publication: Eurasia Daily Monitor Volume: 5 Issue: 99

In the new “Great Game,” the U.S. and more lately China, jostle with a resurgent Russia for control of Central Asia’s vast energy and mineral resources. In no country is the triangular tussle more sharply defined than Mongolia.

Dmitry Medvedev was inaugurated as President or Russia on May 7. On May 22 he arrived in Kazakhstan on his first trip abroad as Russia’s new chief executive (Kazinform, May 22). The visit acknowledges Kazakhstan’s rapid rise as the FSU’s second largest oil exporter behind the Russian Federation. Following his four-day sojourn in Almaty, Medvedev will then fly onward to Beijing for his first visit as president outside the CIS for meetings with President Hu Jintao and other Chinese officials.

In contrast, Mongolian President Nambaryn Enkhbayar hastened westward to Moscow, where he met Medvedev in the Kremlin on May 16, Medvedev’s first meeting with a foreign head of state ( After Medvedev expressed a desire to see bilateral trade reach $1 billion annually, Enkhbayar said, “I would like to take this opportunity, Dmitry Anatolyevich, to invite you to visit Mongolia. Perhaps it would be possible to tie in this visit with the celebrations of the seventieth anniversary of our common victory at Khalkyn-Gol.”

The stark divergence between the two leaders’ travel agendas highlights the fact that Mongolia remains dependent on the Kremlin’s benevolence, and the price for such assistance is having political repercussions in Mongolia (Olloo, May 19).

Less pleasant economic negotiations awaited Enkhbayar; according to a Kremlin official. “There will also be detailed discussions on the issue of joint initiatives in the mining industry in Mongolia. Russian business circles, represented by major corporations–Basic Element, Renova, Severstal, Rosatom, Polymetall, Gazprombank—show an interest in investment projects in Mongolia, mostly in the production of such mineral resources, as coal, copper, silver and uranium” (Itar-Tass, May 20).

The reality for Mongolia is that it remains heavily dependent on Russia for both oil and energy imports and the prices for both have been rising rapidly, which has not prevented Moscow from seeking concessions amid the rising inflation. Russia’s Rosneft, which supplies 90 percent of Mongolia’s petroleum and fuel, raised prices from $62 $89 a ton this month alone, but offered price rollbacks in return for gasoline station concessions (Olloo, May 16). For a country totally dependent on its railway network for exports, Moscow’s penetration of the Mongolian economy is highlighted by the fact that Russia already owns 49 percent of the Ulaanbaatar Railway.

In 2007 Mongolia’s inflation reached 15.1 percent, its highest level in a decade, and it is deepening its hold in the economy, threatening to reverse the country’s recent fiscal gains. In April alone the price of bread increased 50 percent and the cost of a 55-pound bag of flour tripled as consumer prices increased by 5.1 percent over those of March, with food increasing overall by 11.1 percent. In February wheat shortages forced Mongolia to seek emergency imports from Russia, striking a deal for 200,000 tons of wheat at subsidized prices. In turn Moscow has been seeking further concessions in Mongolia’s economy.

Russia’s interest in Mongolia extends to the military sphere. On May 21 Ulaanbaatar’s Chingghis Khaan International Airport was a busy place, as Russian Defense Minister Anatolii Serdiukov paid an official visit to Mongolia accompanied by Army General N. E. Makarov, Chief of Armaments and Deputy Minister of Defense; Lieutenant General V. B. Feodorov, Chief of the Ministry’s Department of International Military Collaboration and Major-General V. N. Chernov, Chief of the Ministry’s Foreign Relations. Mongolia’s Defense Minister Jamyandorj Batkhuyag received the delegation (Interfax, May 21). According to Serdiukov’s press secretary, Col. Aleksei Kuznetsov, “The Russian Defense Minister noted that at present there are all the objective preconditions for expanding cooperation between our countries in military matters and the military-technical field. To this end, the sides have outlined ways to intensify bilateral cooperation.”

The U.S. is not abandoning its ties with Mongolia either. The same day as Serdiukov’s visit, the Commander of U.S. Marine Corps Forces, Pacific, Lieutenant General John F. Goodman also arrived in Ulaanbaatar for meeting with Batkhuyag and Armed Forces General Headquarters director Lieutenant General Ts. Togoo. Goodman and his entourage also visited the Defense University and Army peacekeeping contingents (Montsame, May 21). In January Mongolia sent its ninth contingent of soldiers to Iraq. Mongolia deployed its first peacekeeping contingent of 173 soldiers to Iraq in 2003, which has been followed by an additional eight contingents of soldiers (Xinhua, January 4).

While Mongolia strives to liberalize its politics and open up its economy to the outside world, geographical constraints require that it continue to give priority to its giant neighbors Russia and China, neither of which wants to see the country tilt further westward. As a Kremlin observer noted during Enkhbayar’s visit, “Russia would welcome intensified activities of Mongolia as an observer in the Shanghai Cooperation Organization and its active use of the possibilities of the organization to promote business cooperation with Russia, China, Kazakhstan and other SCO members.” If Mongolia is to feed its people and power its vehicles, its “business cooperation” with the SCO can only increase, which, of course, will require increased “bilateral cooperation” with Russia in the “military-technical field” as well. In the latest act of the “Great Game,” Washington remains in the wings while the Russian bear increasingly moves center stage.