Beneath Mongolia’s barren landscape lies an extraordinary treasure worth more than a trillion dollars—one of the richest copper deposits in the world. It was supposed to be a groundbreaking achievement of modern technology. Instead, it has become a geopolitical battleground, caught between a global mining giant and a political establishment so close to the United States that it claimed Mongolia’s sovereignty was at risk due to China’s high demand for copper.
When Rio Tinto, the British-Australian mining giant and the world’s second-largest metals company, began digging beneath the sands of Mongolia’s Gobi Desert, the project was envisioned as a showcase of twenty-first-century mining: vast underground networks, advanced automation, and a long-term wager on the world’s green transition. Instead, Oyu Tolgoi has come to represent something more complex — a demonstration of how political geography can reshape even the most sophisticated industrial ventures. To see the mine, its operations, and the surrounding landscape, watch my video on YouTube.
A trillion-dollar promise buried in sand
More than a kilometre beneath the Gobi Desert lies one of the richest known copper deposits on Earth. Oyu Tolgoi — “Turquoise Hill” in Mongolian — contains an estimated 30 million tonnes of copper, along with significant reserves of gold and silver. At current prices, its total value could exceed US$1 trillion over the mine’s lifetime.
Rio Tinto, through its subsidiary Turquoise Hill Resources, began developing the site in partnership with the Mongolian government in the late 2000s. By 2025, total investment had surpassed US$15 billion, making Oyu Tolgoi one of the world’s largest mining undertakings.
Reaching the ore was an engineering feat in itself. The deposit lies roughly 1,300 metres underground — about the height of four Eiffel Towers stacked vertically. To access it, Rio Tinto built shafts, tunnels, ventilation systems, a power grid, roads, housing, and processing facilities — effectively constructing a city beneath the desert. Summer temperatures exceed 40°C; winters plunge below –30°C. Every piece of machinery must travel thousands of kilometres over land.
Yet for all the technical achievement, the project’s true challenges have unfolded above ground.
Geography meets geopolitics
At first glance, Oyu Tolgoi seemed perfectly positioned for profit. Mongolia borders China, which consumes nearly half the world’s copper — essential for electric vehicles, wind turbines, and high-speed rail. Proximity promised short transport routes, low logistics costs, and a ready market.
But Mongolia’s leaders have long resisted this simple economic logic. Wedged between China and Russia, the country has adopted a so-called “Third Neighbor Policy,” cultivating relationships with powerful states such as the United States and Japan — countries that do not have friendly ties with Mongolia’s immediate neighbours, potentially generating tension.
This is where the crisis emerges. Mongolia urgently needs revenue from the mine, yet its leaders claim that deepening reliance on China risks turning the country into an economic satellite, even though China remains the only viable market for its copper. Ironically, China has shown little inclination to pressure Mongolia into speeding up the project or selling copper to Chinese buyers — a reality that undermines Ulaanbaatar’s warnings and suggests that its mining strategy may be both misjudged and self-destructive.
In the steppes of Mongolia, author Felix Abt visits local herdsmen whose living standards could rise if the nearby mining project begins to flourish.
In the steppes of Mongolia, author Felix Abt visits local herdsmen whose living standards could rise if the nearby mining project begins to flourish.
This precarious situation has shaped the fate of Oyu Tolgoi. While Mongolia urgently needs the revenue from the mine—mining accounts for almost a quarter of GDP—it refuses to become “dependent on Beijing.” Decisions that make economic sense therefore often conflict with the political instincts of the Mongolian elite. 
Policy friction in Ulaanbaatar
In 2018, Mongolia moved to tighten national control over strategic projects. It required Oyu Tolgoi to source electricity domestically instead of relying indefinitely on imports from China. The government also pushed for more domestic processing of copper concentrate before export, hoping to retain more value within Mongolia.
These measures reflected what many citizens viewed as economic nationalism, yet they carried steep costs. Building power plants in the Gobi requires billions of dollars; constructing a smelter demands water and infrastructure the desert simply lacks. What began as a US$5.3 billion underground expansion ballooned far beyond its initial budget and schedule.
Tensions over financing, transparency, and cost overruns triggered repeated disputes between Rio Tinto and the Mongolian government. The conflict culminated in a 2022 restructuring: Mongolia waived certain debt claims, Rio Tinto increased its financial commitments, and the government gained greater oversight. In 2023, Rio Tinto acquired full ownership of Turquoise Hill, raising its stake in Oyu Tolgoi to 66%, with the remaining 34% held by state-owned Erdenes Oyu Tolgoi.
The project remains essential for both sides — but on terms that are continuously being renegotiated.
A landlocked reality
Mongolia’s geography makes independence costly. The country is completely landlocked, with more than 85% of its exports going to China, mainly coal, copper, and other raw materials. Alternatives via Russia are severely limited by Western sanctions and limited infrastructure.
Efforts to build new rail routes into Central Asia or develop domestic smelting capacity face high capital requirements and scarce water. For now, nearly all of Oyu Tolgoi’s output is supposed to travel south to China for processing. Despite recurring political rhetoric about diversification, the physical trade map remains stubbornly one-directional.
This dependence illustrates the constraints of sovereignty when logistics are dictated by geography. Mongolia’s leaders may wish to lessen reliance on Beijing, but in practice, the country’s economic and physical networks bind it closely to China.
The broader lesson for global business
Oyu Tolgoi’s struggles reflect a broader global shift. The era when companies could treat geopolitics as a secondary consideration is over. From critical minerals to semiconductors, major industrial projects are now shaped as much by national strategy as by global supply chains — and by the sanctions regimes enforced by the United States and its allies.
Rio Tinto’s experience shows that mastering engineering is no longer sufficient. Understanding domestic politics, public sentiment, and international alignments is now just as essential as technical competence. For investors, the Mongolian case highlights how resource nationalism and strategic diversification can be both legitimate political objectives and significant commercial obstacles.
A future still in flux
Rio Tinto’s 2024 annual report shows consolidated copper production from Oyu Tolgoi of 697 kt in 2024, up from 620 kt in 2023, demonstrating the mine’s increasing operational strength. However, recent public reports do not name Chinese smelters or other buyers for 2023–2024 shipments, nor do they provide audited contracts confirming sales to Chinese customers. Although the mine is operational, the overall economic situation remains unclear and its long-term potential is far from being fully realized.
In the heart of the desert, the copper stands as a symbol of future prosperity. Yet beneath the surface, it continues to fuel a deeper contest over power, American geopolitical influence, and the unforgiving constraints of geography. By late 2025, Oyu Tolgoi’s underground production had begun to ramp up, and long-term demand — driven by the global green transition — remained stable. Rio Tinto continues negotiating with Ulaanbaatar over infrastructure, taxation, and power supply. Mongolia, for its part, faces a self-imposed dilemma: how to satisfy foreign geopolitical partners without jeopardizing economic growth.
In the Gobi Desert, the copper still gleams below ground. But above it, the real struggle is over influence, autonomy, and trust — and over who ultimately benefits when global ambition confronts the unyielding realities of geography, the sheer pull of demand from Mongolia’s immediate neighbours, and the absence of viable alternatives beyond them.
BY
Felix Abt
Felix Abt is a Vietnam-based entrepreneur, author (felixabt.substack.com) and travel blogger (youtube.com/@lixplore)

Published Date:2025-11-16