Mongolia’s rationale behind accepting Russia as a dominant partner

The Mongolian Government plans to construct 1,100 km of railroad to connect Dalanzadgad, capital of the southernmost Omnogovi province to Choibalsan in Dornod province in northeastern Mongolia, both getting ready to become burgeoning industrial centers in an emerging resource-driven economy.

Southern Mongolia is home to massive deposits of copper, gold and coking coal, conveniently located only 80 kilometers from its border with China, which is the largest consumer of these commodities. Northeastern Mongolia possesses large reserves of uranium and oil, which are still being estimated, but are strategically located close to both China and Russia.
This represents a mixed blessing for the contemporary geo-economics of Mongolia. But this project also is an entirely mixed political puzzle. At first glance, constructing a railroad directly to China makes much more sense - it is economically feasible, cost- and time-effective in terms of transportation expenditure and immediate revenue. After all, as observed by Joshua Kucera in The Diplomat on March 19, this was the advice of mainstream international experts and financial institutions, the World Bank and the Asia Development Bank included.

However, Mongolia leaves this option for the future and meanwhile it will concentrate on expanding its domestic railroad infrastructure and connecting it to the Russian system. This decision seems to reflect a cohort of other-than-economic considerations - geopolitical calculations, aspirations for sustainable industrialization, and finally public opinion, which matters as the new electoral cycle unfolds.

Moscow’s influence and leverage in Mongolia’s railroad industry cannot be underestimated. Russia controls 50% of the state-owned Ulaanbaatar Tomor Zam (Railway) Company and used it to practically block an unrelated project to renovate the existing Trans-Mongolia railroad using the large portion of a USD285-million grant provided by the Millennium Challenge Account signed with the US.
This fact alone shows...

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