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India’s Mongolia Plan to Contain China

Sanghamitra Purohit
by Sanghamitra Purohit
31 December 2017
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Mongolia is all set to open its first Oil Refinery in 2018. The large-scale refinery has a massive capacity of 1.5 million metric tonnes of oil per year. It will annually produce 560,000 tonnes of gasoline, 107,000 tonnes of liquefied gas and 670,000 tonnes of diesel fuel. A report in Sputnik international has stated. The report further goes ahead to state the refinery alone would take Mongolia’s GDP ahead by 10%.

The most important thing is that it is financed by India.

The oil refinery has huge impacts for Mongolia. Not only economical but also in terms of international trade and foreign policy.

Mongolia is a sparsely populated country land locked between two giants Russia and China. As a result, much of its economy and foreign trade is controlled by the two nations. Its dependency on China can be understood by the fact that is exports almost all its crude oil to china. China is its largest trading partner and 90% of its overall exports go to China alone.

There had been increasing desire among the general populace to gain economic independence from their powerful neighbour and the recent election of Mr. Khaltmaa Battulga as president of Mongolia is a testimony to that. Mr. Battulga has been a fierce critic of china and its economic policies. He has widely advocated for his nations efforts to escape from the china dominated trade and economy.

Mr. Battulga ‘s rise to premiership comes after the Chinese economic sanctions on Mongolia in 2016. In 2016 following HE Dalai Lama‘ s visit to the  Mongolian Capital, Ulan Bator, China expressed its displeasure and flexed its economic muscles. China went ahead and imposed a blockade of food supply lines to Mongolia thereby pushing the country into a corner. Buddhist majority population wasn’t very pleased at this financial bullying.

The refinery is projected to be a massive industrial and economic boost for Mongolia. Following PM Modi’s visit to the country in 2015, India has opened a big credit line to Mongolia of about 1billion USD. Of it, 700 million USD will be utilised in the refinery and a further 264 million USD is for the development of oil pipelines in Mongolia. The loan is extended at an interest rate of 1.75 % and waives off the principal payments for the first five years in the 20-year long loan.

Engineers India Limited has prepared a detailed project report regarding this project and India is actively providing technical and developmental expertise for it. Set to open in 2018, the refinery will go a long way in not only powerful shot in the arm for Mongolia to free itself from the clutches of economic dependency on China, it will also further take India Mongolia partnership to a whole another level.

Modi was the first Indian prime minister ever to visit Mongolia. Sandwiched between Russia and China, this landlocked country was keen to open up to the world and break out of Chinese influence, economically and politically.

Mongolia was in a dire need of a “third neighbor” which PM Modi seemed to realize. It is an important piece in PM Modi’s game of containment of China. Vietnam, Philippines and Myanmar being the other important pieces.

With the country taking its first step away from China, the dynamics will definitely change, outsmarting the dragon in its own backyard.

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