The China-Mongolia-Russia Economic Corridor (CMREC) initiative, set for deployment in the latter half of the 2020s, represents a trilateral ambition to fortify regional economic integration and elevate transnational trade efficiency across Eurasia.

Based on data from local and international sources, alongside prior SpecialEurasia’s analyses, this report examines the corridor’s projected frameworks, its operational developments, and its geopolitical significance. T

The corridor, prioritised by Moscow, Beijing, and Ulan Bator, includes concessions on tariffs, an emphasis on national currency transactions, and substantial infrastructure investments, especially in transit and railway systems, to enable more direct East-West logistics routes.

Russia and China are leveraging Mongolia’s geographic importance and resource wealth to construct an intricate network, which might decrease dependence on traditional Western trade routes and financial systems, ultimately fostering a strategic pivot for regional economic influence.

China-Mongolia-Russia Economic Corridor (CMREC):

Background Information

Historically, the China-Mongolia-Russia Economic Corridor (CMREC) concept emerged in the 2010s, aligned with China’s Belt and Road Initiative (BRI) and Russia’s pivot towards Asia.

Trilateral engagement among these three countries has intensified in recent months. Notably, in November 2024, the meeting of Mongolian Prime Minister Luvsannamsrain Oyun-Erdene and Chinese Prime Minister Li Qiang cemented Beijing and Ulan Bator’s commitment to the CMREC. This development follows the success of prior multilateral dialogues, including the Islamabad summit in October.

The proposed economic corridor aims to achieve substantial operational integration between the three nations, facilitating joint initiatives in the areas of transit, resource management, and financial exchange. By adopting a collaborative structure, the goal is to reduce dollar-based transactions, expand transportation networks, and solidify regional collaborations, considering increasing geopolitical tensions and growing supply chain needs.

Geopolitical Scenario

The CMREC initiative underscores Moscow and Beijing’s dual objectives to achieve economic independence from Western markets while maintaining strategic control over critical East-West transit corridors. This multifaceted project relies on three crucial strategic mechanisms: tariff and trade concessions, infrastructure expansion, and resource-sharing agreements.

This economic corridor is part of Russia’s wider shift towards Asia, which is further strengthened by its growing partnership with China. Moscow-Beijing’s bilateral trade reached an all-time high of USD 240.1 billion in 2023, marking a 26.3% increase year-on-year. Projections show sustained growth, while China continues to increase direct investments into Russia, surpassing USD 11.5 billion and involving 83 projects worth nearly USD 200 billion. Moscow seeks to elevate similar trends with Ulan Bator, forecasting a trade increase to USD 2.5 billion by 2024, and expanding its investment footprint, particularly in Mongolian transport and mining sectors. Russian policymakers view these moves as integral to sustaining economic resilience amid Western sanctions and disruptions to traditional trade routes.

China, by contrast, perceives Mongolia’s intermediary position as pivotal in diversifying its connectivity options. Mongolia’s mineral wealth, geographic location, and limited infrastructure present opportunities for Chinese firms, particularly in high-demand sectors like coal, copper, and iron.

In recent years, the People’s Republic of China has escalated its strategic engagement with Mongolia through projects under the Steppe Road and Sustainable Development Vision 2050 frameworks. Bilateral trade with Mongolia in 2022 reached USD 5.99 billion in coal and USD 2.73 billion in copper exports. Beijing is leveraging Mongolian geophysical attributes for infrastructural expansions, particularly within the Erenhot Economic Cooperation Zone (ECZ) on the Mongolia-China border, set for completion by 2035, with projected trade flows of nearly USD 10 billion annually.

Risk Assessment

Short-Term Risks. In the immediate term, the trilateral corridor faces potential challenges arising from infrastructure inadequacies, currency fluctuation risks, and regional political dynamics. Switching to a national currency for trade might overload exchange systems without proper financial infrastructure, making barter and reciprocal payments difficult and potentially delaying transactions.

Medium-Term Risks. China’s growing economic influence in Mongolia’s mining and transit sectors could make the country more vulnerable in the next three to five years, as its reliance on Chinese resources increases. This dependency could weaken Ulan Bator’s “third neighbour” policy, aimed at balanced relations with countries besides China and Russia, like the US, Japan, and Central Asia. Strategic leverage exerted by Beijing, particularly if exacerbated by RMCEC’s success, could lessen Mongolia’s bargaining power in economic and political negotiations.

Long-Term Risks. Ulan Bator may face increased political pressure to align more closely with BRI, risking falling into a “debt trap” with Beijing. Mongolia’s crucial location for transit routes between Russia and China traps Ulan Bator into the Chinese and Russian geopolitical struggle, limiting its foreign policy independence. Such dynamics may inadvertently intensify US-China tensions over Mongolia’s strategic positioning, raising the risk of international contestation within Mongolian territory.

Key Indicators and Warning Signs

Increased Chinese infrastructure investment and bilateral trade agreements that emphasise transit dominance.

Adjustments in Mongolian foreign policy towards greater reliance on Russia and China, weakening third-party ties.

Escalating commitments to BRI-affiliated projects, specifically if Mongolia leverages Chinese financing in critical infrastructure and energy projects without alternative funding routes.

Conclusion

The CMREC is more than a logistical project; it represents a complex trilateral initiative aimed at regional economic and strategic alignment. The corridor’s influence extends beyond transportation, shaping geopolitical interactions in Northeast and Southeast Asia by redirecting resources and trade from traditional Western routes. Continued intelligence monitoring is crucial to assess the changing risks and policy shifts that Mongolia might undertake in response to its neighbours’ pressures.

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November 24, 2024