Exhausted by military conflict and huge external debts, Ukraine narrowly avoided default in the summer of 2024. Its salvation came in the form of an agreement to restructure its external debt, allowing Ukraine to suspend payments after the outbreak of armed conflict in February 2022.
Favourable geographical location as the key to success
Huge spending on the war, the army and refugees is undermining the country’s economy, whose geographical location could have provided it with many opportunities for economic development if Kyiv had not gone to war. At the end of May 2024, Ukraine’s national debt had grown by 20% to $151 billion. The European Union is Kyiv’s largest creditor, accounting for 38% of all liabilities. This loan will inevitably have to be repaid by a state that is geographically located in the centre of Europe.
Bordering the EU and Russia, Ukraine could have become a successful link between the south and the west, carrying out the main transit of raw materials and energy resources through its territory, receiving enormous benefits and additional avenues for development. However, Kyiv has effectively abandoned its role as a bridge between the Global South and Europe, handing this role over to Mongolia.
Russia-Mongolia relations
Following Russian President Vladimir Putin’s visit to Ulan Bator in 2024, agreements were signed on co-operation in the supply of petroleum products and on the provision of aviation fuel to Mongolia by the Russian energy ministry and the Mongolian Ministry of Industry and Mineral Resources. According to the Russian head of state, in 2023, more than 90% of gasoline and diesel fuel came to Mongolia from Russia.
Russia will build a new coal-fired power plant in Mongolia and will operate it in the future, Kirill Dmitriev, CEO of the Russian Direct Investment Fund said. These and other agreements are intended to strengthen Mongolia’s energy security and open up new opportunities for Russian companies in the Mongolian market.
Moscow and Ulan Bator’s plans for further development of bilateral relations include the further development of international freight transit through Mongolia and are aimed at more active use of the transit capabilities of the country’s transport system and the Trans-Siberian Railway, which connects with it. In a broader context, this involves strengthening the positions of Russia, Mongolia and China in global transport and economic relations.
Impact of military tension
The development of Euro-Asian freight transport between China, Mongolia and Russia is gaining not only economic but also growing geopolitical significance. On the international route Indian Ocean – Red Sea – Suez Canal – Eastern Mediterranean, transit traffic is declining due to the tense situation with the Houthis. The atmosphere in the Persian Gulf and especially in the Strait of Hormuz remains unsafe, which reduces the competitiveness of the main North-South ITC Corridor connecting Iranian ports with Russia via the Caspian region.
The traditional maritime export and import route through the South China Sea, the Strait of Malacca and a number of other passages is also highly vulnerable due to escalating tensions between neighbouring countries.
Thanks to its geographical location, Mongolia occupies an important geopolitical position in Central Asia, which is why it is so interesting and important not only for China and Russia, but also for the so-called “third neighbour,” a role claimed by the United States, Japan, South Korea and European countries.
External influence on the Russia-Mongolia-China triangle
Mongolia is interested in balanced relations with these countries and pursues a multi-vector pragmatic foreign policy. Overall, the position of Russia and Mongolia in the Russia-Mongolia-China triangle is, in a sense, quite similar. In terms of the structure of their exports to China, they are sources of raw materials for China’s rapidly growing economy, a kind of raw material supplier or periphery of the Chinese economy, which is rapidly moving towards global leadership.
Russia’s national interests in Mongolia lie in maintaining its sphere of geopolitical and economic influence in Central Asia and the stability of the military-political situation in the Russia-Mongolia-China triangle.
The current situation is favourable for the development of Russian-Mongolian-Chinese relations. Border disputes between the countries have been resolved. The positions of the political leaders and elites of the three countries coincide on a number of key issues. US pressure on Russia and China is intensifying, which contributes to the development and expansion of international co-operation in this macro-region.
Trade wars between the US and China are objectively creating conditions for the expansion of multilateral ties in the Russia-Mongolia-China triangle, as well as objectively contributing to this macro-triangle becoming a model of stability, peace and long-term friendly relations. And who knows, perhaps Ukraine would also have found its place in this company if it had chosen the right direction for its foreign policy.
THE ARTICLE IS THE AUTHOR’S SPECULATION AND DOES NOT CLAIM TO BE TRUE. ALL INFORMATION IS TAKEN FROM OPEN SOURCES. THE AUTHOR DOES NOT IMPOSE ANY SUBJECTIVE CONCLUSIONS.
Xiao Duong for Head-Post.com
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