Introduction
For almost 70 years, Central Asian states and Mongolia were part of the Soviet sphere, as constituents of the USSR and as a satellite of Moscow. After the peaceful transition from communism to electoral democracy and market economy in Mongolia in 1990 and the dissolution of the USSR two years later, Kazakhstan, Kyrgyzstan, Uzbekistan and Mongolia started to look closely at each other for economic and strategic cooperation in the context of reducing dependence on Russia as the successor of the USSR in the region, and more recently on China, as a geopolitical player in full ascent, or to balance each other to decrease the sole reliability on either of them.
Beyond the shared Soviet legacy, Central Asia and Mongolia present strategic features of regional interconnectivity along the Middle Corridor, the transit route from China to Europe and the Middle East that bypasses internationally sanctioned Russia and geopolitically unstable Persian Gulf.
The Mongolian economic dependence
From 1924 to 1990, the People's Republic of Mongolia was a one-party satellite state of the USSR under the leadership of the People's Revolutionary Party. Until then, the East Asian state was for a long time a client state of the Qing dynasty, the last Chinese dynasty before the ascent of the Chinese Republic in 1912. Squeezed for centuries between Russia/USSR and China, Mongolia have played a long-running dual policy, both of breathing through proximity to other democratic non-neighbouring states with market economies through its `third neighbour` policy, or to co-exist with its biggest neighbours by not taking positions that could antagonize either China or Russia. Through a well-calibrated foreign policy, Ulaanbaatar chose not to join the Shanghai Cooperation Organization, an intergovernmental platform patronized by China, as well as abstaining in international forums in reference to the application of sanctions on Russia for the war in Ukraine. But fully independent foreign policy away from Chinese and Russian sphere of influence was difficult against the background of entrenched economic dependencies. Almost 90% of Mongolia's export revenues are minerals that are either bought by China or need to transit it for further reaching international markets. Moreover, Chinese companies and investment are overly present in the mining industry in Mongolia, and Ulaanbaatar still overly relies on Chinese loans for infrastructure development. Until more international investment comes in, Mongolia will most likely continue to stick to the financial benevolence of its southern neighbour. On the other hand, Mongolia is dependent on the export of fuel with more than 90% of domestic imports coming from Russia. Mongolia is also part of the Power of Siberia 2 megaproject aimed at transporting Russian fuel to China with 1/3 of the segment transitioning Mongolia. Unless Ulaanbaatar diversifies its import markets for fuel, it will continue to depend on its northern neighbour for energy.
The Central Asian balancing act
After the dissolution of the USSR and gaining independence, Central Asia has remained in the sphere of influence of the Soviet successor, Russia, both culturally (Russian remains the main language of communication and business), economically (Kazakhstan and Kyrgyzstan are member states of the Eurasian Economic Union whereas Uzbekistan remains an observer), and political (Kazakhstan and Kyrgyzstan are member states of the Collective Security Treaty Organization, an intergovernmental military alliance in Eurasia, as well as in the Commonwealth of Independent States together with Uzbekistan). But while Mongolia seeks a diversification of economic relations away from China and Russia through the attraction of alternative foreign investments and new international markets, the Central Asian states are more eager to balance Russian influence with Chinese. One way to do this is through regional infrastructure projects in collaboration with Beijing. A particular example worth mentioning is the China-Kyrgyzstan-Uzbekistan railway (CKU) seen since 1997, as one of the great regional connectivity initiatives but which has stagnated ever since due to a lack of alignment among the participating states regarding the design route, the high costs that Uzbekistan and Kyrgyzstan could hardly afford and China's refusal to bear more than half of the project's 4.7 billion USD financing. But in May and June 2024, high meetings between Chinese, Uzbek and Kyrgyz officials revived the initiative through the signing of a memorandum of understanding aimed at transforming the CKU into reality by the end of the year. The three parties agreed on the route of the railway which kept the beginning of constructions frozen due to a division between Kyrgyzstan on the one hand which desired a more northern transit also aimed to connect the country's north with its south, and Uzbekistan and China on the other hand which favoured a cheaper more southern passage. Additionally, China agreed to finance half (USD 2.35 billion) of the project through low-interest rate loans to the consortium responsible for the project. As a compromise to Beijing, Tashkent and Bishkek made arrangement for China to receive 52% shares through a Chinese-designated company in the project's joint holding company, with Uzbek and Kyrgyz authorizing companies remaining with a 24% each.
Uzbekistan and Kyrgyzstan see CKU as an important leverage asset against Russian dominance in the region. China is also looking forward to decreasing Moscow's connectivity influence over the Central Asian States, but Beijing's pushing hard for the project to be effective at the end of this year comes as a reason for international sanctions on Russia because of its actions in Ukraine in recent years. Russian sanctions have made China's access to Europe via the northern Corridor (via Russia) problematic. Moreover, due to instability in the Persian Gulf due to incursions by the Yemeni Houthi group, the Southern Corridor (via the Indian Ocean) is preferable to be avoided, making the Middle Corridor (via Central Asia) predominate in Chinese preferences for access to Western markets. Consequently, the project will create stable and durable transit routes for China. Diversity is of strategic importance for Beijing since the Russian sanctions together with the several tensions between Moscow and Astana are making the traditional routes between China and Europe via Russia and Kazakhstan unstable. For Tashkent and Bishkek in particular, CKU will provide with 200 million USD in transit revenues, making them not only less dependent on the connectivity networks patronized by Moscow but also more economically independent.
Mongolia's `third neighbour` policy with Central Asia
Given Mongolia's desire for economic diversification away from Russia and China, and Central Asian balancing act between the two, cooperation between them appears naturally. Since the beginning of the 1990s, Ulaanbaatar has made its proximity to the Central Asian states a priority and a foreign policy objective, a path endorsed by Kazakhstan, Kyrgyzstan and more recently, Uzbekistan. In 1993, the long serving Kazakh leader, Nursultan Nazarbayev, visited Mongolia a year after the opening of the first Mongolian diplomatic mission in Kazakhstan (the Kazakh diplomatic office in Ulaanbaatar was opened later in 1997). During the visit, the Kazakh and Mongolian leaders signed an agreement on Friendly Relations and Cooperation aimed to support enduring diplomatic relations and cooperation and regional stability. A similar act was signed in the same year between the president of Mongolia and his Kyrgyz counterpart during the former's first visit to Ulaanbaatar. The good diplomatic relations continued years later with the Mongolian president, Natsagiin Bagabandi visiting Kazakhstan in 1998 and Kyrgyzstan in 1999. But in the first decade of the 21st century, high-level visits became rarer and the strong diplomatic course that began a decade ago stagnated visibly. Moreover, the trade flows between Mongolia and the region remained unchanged at most. A reason for this could be their divergent cultural and economic path that raised a wall in the way of even stronger political and economic integration. Following the dissolution of the USSR, Central Asia remained in the political, economic and cultural sphere of Russia, with Russian being the main language of communication against the background of strong economic relations with Russia within the Eurasian Union and political within the Collective Security Treaty Organization and the Commonwealth of Independent States. Mongolia, on the other hand, pursued a more independent way from the Cold War legacy, with attention being switched towards the Chinese markets and with English as the chosen language of business.
In the last half decade, Mongolia and Central Asia resumed their diplomatic `revolution` of the 1990s. In 2019, Mongolia opened its first diplomatic office in Bishkek and three years later it was agreed for a visa free regime with Uzbekistan, the newest Central Asian state interested in boosting diplomatic relations with the Far East Asian state. In 2023, the Kyrgyz president, Sadyr Japarov, visited Ulaanbaatar for the opening of the first Kyrgyz diplomatic mission, and between 23-26 June 2024, Ukhnaagiin Khürelsükh, made the first ever visit of a Mongolian president to Uzbekistan where, together with the Uzbek president, Shavkat Mirziyoyev, signed a Joint Statement of Interstate Relations and Cooperation as a result of agreed negotiations to increase bilateral trade and investment, as well as to contribute to scientific, economic and agricultural collaboration. Additionally, the first Mongolian embassy will be opened in Tashkent, a positive sign of a new chapter in diplomatic relations between Mongolia and Uzbekistan. Additionally, a visit of the Kazakh president, Kassym-Jomart Tokayev, to Ulaanbaatar is expected later this year. Against the background of these revival of diplomatic interactions, Mongolia, Kazakhstan, Kyrgyzstan and Uzbekistan agreed to raise commercial exchanges to new highs following more than a decade of poor trade performances.
Mongolia's rediscovery of interest in Central Asia comes as a consequence of the latter's increasing importance in Eurasian trade, logistics and connectivity. The more sanctioned Russia becomes, the more unreliable is the overdependence on the Russian transits along the northern route, and the more attention is directed to the Middle Corridor where the Central Asian states play or will play an exponential role as a regional hub. For Kazakhstan, Kyrgyzstan and Uzbekistan, the partnership with Mongolia will lead to a diversification of economic relations with new orientations towards Far East Asian markets and thus the exit from the Soviet sphere with the envision of new routes outside Moscow's control. Consequently, during the June meeting in Tashkent between the Mongolian and Uzbek presidents, an important agreement signed was the Intergovernmental Agreement on International Road Transport, whereby the governments of Ulaanbaatar and Tashkent undertake to facilitate inter-Eurasian trade from Europe to China via Uzbekistan and Mongolia, as well as from Asia's Far East to Europe, South Asia and the Middle East through Uzbekistan.
Conclusion
Based on the available evidence previously exposed, there is room for negotiation and agreement between Mongolia and Central Asian states. While Ulaanbaatar is looking for a diversification of economic relations away from its overreliance on China and Russia through the `third neighbour` policy, Kazakhstan, Kyrgyzstan and Uzbekistan are considering increasing their partnership both with China and Mongolia to balance their legacy tied to Russia. Mongolia's participation in the Middle Corridor where the Central Asian states represent an exponential hub would lead to a diversification of export and import markets between Ulaanbaatar, Astana, Bishkek and Tashkent, away from any subjection to China and Russia. Mongolia could increase its independence from Russian imports of fossil fuels with the help of new alternative resources from Kazakhstan, as well as decrease in exposure to Chinese markets for mineral exports in favour of new markets in Central Asia and especially Europe and the Middle East where green energy sources are highly demanded (Mongolia is rich in molybdenum and copper that can be found in wind and solar technologies). For their part, Central Asia could make Mongolia one of the biggest trading partners outside the former Soviet sphere and a good source for foreign direct investments in a Far East country where almost 50% of the population is below the age of 30 and where youth activism still drives the country's political direction. Therefore, Mongolia sees Central Asia as an important transit for accessing European, Middle Eastern and South Asian markets, while Central Asia perceives Mongolia as an important partner whose domestic market is worth considering for exports and investment. While Ulaanbaatar still remains dependent on Russia and China for any terrestrial connectivity with Central Asia, this could be better facilitated through a trilateral partnership with China as Beijing is already interested in the development of the Middle Corridor as a gateway to European markets. The coupling of the Middle Corridor with Mongolia via Kazakhstan, Kyrgyzstan and Uzbekistan could be in the interest of China, with a diversification in direct transit routes and better connection between China's far north-eastern region and Europe via Mongolia and Central Asia. This would keep Chinese trade away from the possibly sanctioned Northern Corridor through Russia and the increasingly unstable Southern route via the Indian Ocean and the Persian Gulf where geopolitical tensions in the area would lead to significant delays in shipping.
Bibliography:
Foreign Policy Magazine, `Mongolia Is Walking a Fragile Democratic Path`, Mongolia's Elections Are a Beacon of Democracy Between Dictatorships (foreignpolicy.com).
The Jamestown Foundation, `Mongolia Bolsters Relations With Governments of Central Asia`, Mongolia Bolsters Relations With Governments of Central Asia - Jamestown.
The Jamestown Foundation, `Beijing Revives China–Kyrgyzstan–Uzbekistan Railway`, Beijing Revives China–Kyrgyzstan–Uzbekistan Railway - Jamestown.
Middle Corridor, Транскаспийский Международный Транспортный Маршрут (ТМТМ) (middlecorridor.com) for full map access.