Landlocked Mongolia has decided to pivot its trade towards Eurasia. In March 2025, the Eurasian Economic Union (EAEU) and Mongolia agreed on a draft proposal regarding a three-year trade agreement, according to the EAEU Trade Minister Andrey Slepnew.
The EAEU was formed in 2015, consisting of five former Soviet states — Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. Mongolia started the last rounds of talks on an interim free trade agreement with EAEU in 2024. Supporters of the agreement highlight its benefits to the Mongolian economy as it opens a US$14.5 billion market across the five EAEU countries for Mongolian cashmere, leather and wool exports. Some preliminary research suggests that Mongolia could add US$150 million worth of goods to the EAEU market, meanwhile EAEU countries could potentially increase their exports by US$200–300 million in the Mongolian market.
The trade agreement is the latest example of Mongolian efforts to reach regional markets beyond its biggest trading partner, China. While Mongolia’s trade turnover — exports plus imports — with China accounted for 72 per cent of total trade in 2023, the country has had limited trade with EAEU countries. That is, except for Russia, on which Mongolia depends for 85–90 per cent of its petroleum products, accounting for 32–34 per cent of total imports into Mongolia.
Increasing exports and expanding regional cooperation are thus part of Mongolia’s long-term development plan, Vision-2050, which was announced in 2020.
The agreement is also a step towards diversifying Mongolia’s economy beyond mining. The Mongolian Ministry of Economy and Development announced that the three-year trade agreement is expected to cover 375 goods from Mongolia to the EAEU and vice versa. Mongolia will export meat, meat-related products, animal leather, wool, cashmere and milk-based products to the EAEU market. EAEU countries are planning to export fruits, cosmetics, chemical products and manufacturing components. It is not clear yet whether there will be non-tariff barriers from participating economies, including Mongolia.
Mongolia has been a net exporter, running a trade surplus, since 2014. For Mongolia, 92.1 per cent of exports, 31.6 per cent of state revenue and 28.7 per cent of GDP came from its mining industry in 2023. The heavy dependence on mining makes the Mongolian economy vulnerable to market shocks, as exemplified in the 2015–16 debt crisis that was fuelled by a decline in key commodity prices in the mining sector.
Any move to strengthen non-mining industries and expand its trading networks beyond China are positive developments for Mongolia. The question is whether Mongolian non-mining products will be competitive in the EAEU’s market.
The majority of the 375 products named in the document are from agriculture. Despite employing the largest share — 18.4 per cent — of the workforce in the country, Mongolia’s agriculture sector accounted for only 7.5 per cent of national GDP in 2024. The export share of the industry is even lower. Non-mining products such as textiles, animal-origin products, vegetable-origin products and food products accounted for no more than 5.1 per cent of total exports in 2024.
Some studies argue that the core problem of the industry is the persistence of low-value products, but they also acknowledge that agriculture is key to economic diversification. Opening a larger market for Mongolian agricultural goods would strengthen the industry and potentially have a spillover effect of producing value-added goods.
Meanwhile, critics including the National Chamber of Commerce and Industry argue that the agreement lacks sufficient research and hurts domestic producers. For instance, an article by Bloomberg cited the Mongolian National University Business School’s research on the interim agreement with EAEU, which suggested a 6.1 per cent decline in GDP. Yet as the Business School Dean emphasised, this research was based on an initial proposed agreement between the two sides before the revisions announced later. There is still insufficient research on how the interim agreement potentially impacts small- and medium-sized businesses.
In terms of the country’s greater economic landscape, Mongolia has plans to transition towards value-added manufactured goods and could make manufacturing its industrial base. The coalition government planned to build various mineral processing projects in 2024, including a coke-chemical complex and a copper-processing complex. But these projects are likely to require significant investment and time to compete in the global market. The political paralysis caused by the June 2025 downfall of the coalition government may impede the country’s efforts to execute these long-term projects. Moreover, Mongolia’s relatively small population and landlocked location further present a challenge to advancing from primary goods production to manufacturing.
Still, the Mongolian government’s move to increase its trade volume with EAEU countries could be part of a greater discussion on regional cooperation beyond the 375 goods. Critics may argue that Russia disproportionately benefits from the agreement, or claim that the EAEU is Moscow’s ‘soft’ power tool. But the interim deal with its clear list of 375 items can help Mongolia expand its trading partners and make its agricultural industry competitive in the region. Plus, the Mongolian government has room to engage in non-tariff barriers through various policy measures to protect certain small- and medium-sized businesses.
Any move to strengthen non-mining sectors is beneficial for the country’s goal to diversify its economy. The government should continue its efforts to move beyond primary goods production, especially in the mining sector, by engaging in a greater number of trading partners in various sectors.
BY: Telmen Altanshagai is Policy Research Fellow at the Global Policy Institute.

Published Date:2025-06-29