Avirmed Davaasuren, Doctor of Economics, Professor, Head of the ‘Russia’ Sector of the Institute of International Studies of the Mongolia Academy of Sciences, specially for the ‘Eurasian Dialogue’ magazine.
The collapse of the USSR and the cancellation of the Council for Mutual Economic Assistance (CMEA) marked the beginning of a new era in the development of Mongolia’s relations both with Russia and with other states, both formerly members of the CMEA and those newly formed in the post-Soviet space.
This phase has been going on for more than 30 y ears. And our states, which are connected by a long history of relations, deep political, economic and cultural ties, have been establishing a model of mutually beneficial cooperation in a market economy all these years.
This phase has been going on for more than 30 y ears. And our states, which are connected by a long history of relations, deep political, economic and cultural ties, have been establishing a model of mutually beneficial cooperation in a market economy all these years.
Until the early nineties of the last century, for several decades, Mongolia’s foreign economic policy was aimed exclusively at deep cooperation with the states of the Council for Mutual Economic Assistance (CMEA). Let me remind you that this intergovernmental economic organization was created by the decision of representatives of Albania, Bulgaria, Hungary, Poland, Romania, the USSR and Czechoslovakia, and operated from 1949 to 1991.
After the transition to a market economy, Mongolia’s foreign economic policy became multipolar. The differentiation occurred due to the fact that all CMEA countries built and conducted foreign economic policies differently. Since then,
Mongolia has significantly changed its foreign policy; it is also based on multipolar vectors of development. Today, Mongolia has trade and economic relations with more than one hundred countries of the world.
Relations between Russia and Mongolia in a market economy had to be built virtually from scratch. Since 1993, the states have adopted five fundamental documents that govern joint work.
In particular, the fifth agreement on friendly relations and comprehensive strategic partnership was signed on September 3, 2019.
Despite the obvious opportunities and serious economic potential for development of relations between Russia and Mongolia, the trade turnover between our states after the 1990s tends to decrease.
For example, according to statistics, in 2022 the foreign trade turnover between our states amounted to $2.7 billion, of which exports from Mongolia to Russia amounted to $93.4 million, and from Russia to Mongolia – about $2.6 billion.
There are several reasons behind this imbalance, and they are primarily related to the breakdown of integration economic relationships, which we still cannot restore in any way. I am referring to those successful and well-established production, technological, trade and other chains that have been established within the framework of the CMEA cooperation states. And it was not only about the exchange of goods, but also about the mutual exchange of services, supplies of raw materials, components, etc.
In addition, it is important to consider that in the current circumstances, our countries have increased their foreign trade activities with other regions.
Russia – with the states of the West, and Mongolia – with the states of the Asia-Pacific region, including the states of North-East Asia.
Another important reason is logistics barriers that negatively affect the export of goods from Mongolia to the states of the Eurasian Economic Union (EAEU). Thus, since the 90s of the last century, Mongolian goods have been subject to duties introduced by the Union. And of course, we cannot overlook issues with customs authorities, which cause delays in paperwork and unreasonably long delivery times.
At the same time, I would like to emphasize that the Mongolian government has a great desire to further strengthen foreign economic relations with the EAEU states and actively participate in Eurasian economic integration.
Although, it must be admitted, the the technical and technological export potential of Mongolia is not yet so great and our goods are generally uncompetitive in the EAEU markets, nevertheless, our state has something to offer for the development of economic integration and inclusion in large-scale international production projects.
Today, Mongolia has established trade and economic relations with only two EAEU states – with Russia and with Kazakhstan. We supply finished products to these markets: mainly cashmere products, woolen carpets, clothing and shoes. Unfortunately, these volumes are a tiny share of Mongolia’s foreign trade turnover. There is great potential for development in this direction, including the creation of joint ventures within the framework of Eurasian cooperation in the broad sense of this term.
I am convinced that a free trade agreement would be a significant incentive for a multiple increase in trade turnover with the EAEU countries (and our research confirms this). I must make a disclaimer: any international documents of Mongolia are based on the unshakable principle of Mongolian foreign policy, which states that our country adheres to the principles of non-alignment in connection with the concept of the ‘third neighbourhood’ in the concept of Mongolia’s foreign policy.
But this does not in the least prevent us from signing an agreement on free duty free trade, which would be an absolute benefit for both parties.
The first steps to develop such a document have already been taken in October 2023. At the 25th anniversary meeting in Ulaanbaatar of the Intergovernmental Russian-Mongolian Commission on Trade, Economic, Scientific and Technical Cooperation, our states agreed to develop a memorandum to maintain bilateral cooperation in the economy and a temporary free trade agreement on a limited range of goods with access to full agreement.
In addition, the meeting discussed the conclusion of a free trade agreement with other EAEU states. As a result of the meeting, six agreements were also signed in the customs and educational spheres, and agreements were reached in the fields of economics, finance, transport, energy, industry, agriculture, mining and mineral exploration.
Another crucial aspect is to reconsider the structure of economic relation between our states for their further successful development. All these years we have been talking mainly about the purchase and sale of raw materials, without paying due attention to the mutual supply of finished industrial products, as well as the creation of joint ventures, which seems to me the most promising in the context of strengthening Eurasian integration.
Russia, which plays a vital role both in the EAEU and in global processes in general, is capable of playing a major role in the development of the economic component of integration, attracting the potential of other countries for further mutually beneficial economic growth.
In fact, by creating joint ventures with Mongolia, it is possible to develop the construction of low-power nuclear power plants, enterprises for processing livestock raw materials, and work in the logistics sector. I am also referring to new modern trans-regional transport arteries – railways and roads, pipelines and so on.
Besides, a project to build a gas pipeline through the territory of Mongolia along the Ulaanbaatar railway is currently being discussed.
When discussing the relations between Mongolia and Russia, it is crucial to consider them within the context of Eurasian economic integration. The concept of integration should be considered in a broader sense, encompassing not only relations between neighbouring states but also issues of interaction with China, Korea, countries of Southeast Asia, the Arab world, etc. This approach gives more opportunities.
The idea of serious integration on mutually respectful principles also fits into the global processes that we observe today.
There is growing confidence that the new world order should not be unipolar, that there should not be a hegemon who single-handedly dictates its terms. The unipolar world must change towards a multipolar model, and the development of
Eurasian integration is precisely a movement in this direction.
In April 2024, Moscow will host the World Forum ‘New Era, New Ways’, which is organized by the International Organization of Eurasian Cooperation (IOEC). I hope that the forum will focus on industrial as well as transport and logistics integration, the development of scientific, business, and economic ties. An equally important global issue today is promoting mutual understanding among people from different countries. Historically, the Mongolian people have great respect for the peoples of Russia, but we cannot ignore the fact that, due to various processes, we have recently started to drift apart and these are concerning signals.
After the transition to a market economy, Mongolia’s foreign economic policy became multipolar. The differentiation occurred due to the fact that all CMEA countries built and conducted foreign economic policies differently. Since then,
Mongolia has significantly changed its foreign policy; it is also based on multipolar vectors of development. Today, Mongolia has trade and economic relations with more than one hundred countries of the world.
Relations between Russia and Mongolia in a market economy had to be built virtually from scratch. Since 1993, the states have adopted five fundamental documents that govern joint work.
In particular, the fifth agreement on friendly relations and comprehensive strategic partnership was signed on September 3, 2019.
Despite the obvious opportunities and serious economic potential for development of relations between Russia and Mongolia, the trade turnover between our states after the 1990s tends to decrease.
For example, according to statistics, in 2022 the foreign trade turnover between our states amounted to $2.7 billion, of which exports from Mongolia to Russia amounted to $93.4 million, and from Russia to Mongolia – about $2.6 billion.
There are several reasons behind this imbalance, and they are primarily related to the breakdown of integration economic relationships, which we still cannot restore in any way. I am referring to those successful and well-established production, technological, trade and other chains that have been established within the framework of the CMEA cooperation states. And it was not only about the exchange of goods, but also about the mutual exchange of services, supplies of raw materials, components, etc.
In addition, it is important to consider that in the current circumstances, our countries have increased their foreign trade activities with other regions.
Russia – with the states of the West, and Mongolia – with the states of the Asia-Pacific region, including the states of North-East Asia.
Another important reason is logistics barriers that negatively affect the export of goods from Mongolia to the states of the Eurasian Economic Union (EAEU). Thus, since the 90s of the last century, Mongolian goods have been subject to duties introduced by the Union. And of course, we cannot overlook issues with customs authorities, which cause delays in paperwork and unreasonably long delivery times.
At the same time, I would like to emphasize that the Mongolian government has a great desire to further strengthen foreign economic relations with the EAEU states and actively participate in Eurasian economic integration.
Although, it must be admitted, the the technical and technological export potential of Mongolia is not yet so great and our goods are generally uncompetitive in the EAEU markets, nevertheless, our state has something to offer for the development of economic integration and inclusion in large-scale international production projects.
Today, Mongolia has established trade and economic relations with only two EAEU states – with Russia and with Kazakhstan. We supply finished products to these markets: mainly cashmere products, woolen carpets, clothing and shoes. Unfortunately, these volumes are a tiny share of Mongolia’s foreign trade turnover. There is great potential for development in this direction, including the creation of joint ventures within the framework of Eurasian cooperation in the broad sense of this term.
I am convinced that a free trade agreement would be a significant incentive for a multiple increase in trade turnover with the EAEU countries (and our research confirms this). I must make a disclaimer: any international documents of Mongolia are based on the unshakable principle of Mongolian foreign policy, which states that our country adheres to the principles of non-alignment in connection with the concept of the ‘third neighbourhood’ in the concept of Mongolia’s foreign policy.
But this does not in the least prevent us from signing an agreement on free duty free trade, which would be an absolute benefit for both parties.
The first steps to develop such a document have already been taken in October 2023. At the 25th anniversary meeting in Ulaanbaatar of the Intergovernmental Russian-Mongolian Commission on Trade, Economic, Scientific and Technical Cooperation, our states agreed to develop a memorandum to maintain bilateral cooperation in the economy and a temporary free trade agreement on a limited range of goods with access to full agreement.
In addition, the meeting discussed the conclusion of a free trade agreement with other EAEU states. As a result of the meeting, six agreements were also signed in the customs and educational spheres, and agreements were reached in the fields of economics, finance, transport, energy, industry, agriculture, mining and mineral exploration.
Another crucial aspect is to reconsider the structure of economic relation between our states for their further successful development. All these years we have been talking mainly about the purchase and sale of raw materials, without paying due attention to the mutual supply of finished industrial products, as well as the creation of joint ventures, which seems to me the most promising in the context of strengthening Eurasian integration.
Russia, which plays a vital role both in the EAEU and in global processes in general, is capable of playing a major role in the development of the economic component of integration, attracting the potential of other countries for further mutually beneficial economic growth.
In fact, by creating joint ventures with Mongolia, it is possible to develop the construction of low-power nuclear power plants, enterprises for processing livestock raw materials, and work in the logistics sector. I am also referring to new modern trans-regional transport arteries – railways and roads, pipelines and so on.
Besides, a project to build a gas pipeline through the territory of Mongolia along the Ulaanbaatar railway is currently being discussed.
When discussing the relations between Mongolia and Russia, it is crucial to consider them within the context of Eurasian economic integration. The concept of integration should be considered in a broader sense, encompassing not only relations between neighbouring states but also issues of interaction with China, Korea, countries of Southeast Asia, the Arab world, etc. This approach gives more opportunities.
The idea of serious integration on mutually respectful principles also fits into the global processes that we observe today.
There is growing confidence that the new world order should not be unipolar, that there should not be a hegemon who single-handedly dictates its terms. The unipolar world must change towards a multipolar model, and the development of
Eurasian integration is precisely a movement in this direction.
In April 2024, Moscow will host the World Forum ‘New Era, New Ways’, which is organized by the International Organization of Eurasian Cooperation (IOEC). I hope that the forum will focus on industrial as well as transport and logistics integration, the development of scientific, business, and economic ties. An equally important global issue today is promoting mutual understanding among people from different countries. Historically, the Mongolian people have great respect for the peoples of Russia, but we cannot ignore the fact that, due to various processes, we have recently started to drift apart and these are concerning signals.