The recent four-day state visit of Mongolia’s President Khurelsukh Ukhnaa to India opened a new phase in cooperation between India’s growing energy ambitions and Mongolia’s resource potential. As India and Mongolia celebrate the 70th anniversary of their diplomatic relations, the visit underscores the evolution of a relationship rooted in spiritual and cultural affinities into one shaped by resource strategy and geopolitical foresight.
From India’s perspective, Mongolia has emerged as a natural strategic partner—its “Third-Neighbor” foreign-policy orientation aligning with India’s ambition to build new bridges in Eurasia. For Mongolia, India delivers not only a technological and financial partnership but also a diversifier away from traditional dependencies.
At the heart of this shift is one flagship initiative: India’s largest foreign-development commitment to date—a $1.7 billion line of credit extended to Mongolia in 2018 to support the country’s first oil refinery project. When operational, the refinery—designed to process 1.5 million tons of crude per year (approximately 30,000 barrels per day)—is expected to satisfy some 50–66 percent of Mongolia’s domestic demand for refined petroleum products. This is transformative for a country that currently relies heavily on Russian imports.
But beneath this headline lies a broader agenda of resource diversification, critical minerals logistics, energy transition, and regional connectivity—and it is here that the real promise (and risk) lies.
Mongolia’s Coal and Oil Foundation
During the visit, the two governments signed 10 memoranda of understanding covering a spectrum of areas—from digital and cultural exchanges to geology and mineral resources cooperation. Among them was a landmark MoU on geology and mineral resources, which frames Mongolia as a potential export hub for India’s coking coal, copper, and other critical inputs for its steel and technology sectors.
That India is actively exploring Mongolian coking-coal imports is no surprise. India remains one of the world’s largest steel producers and relies on imported metallurgical coal; diversifying away from Australia and lowering supply-chain risk is a strategic imperative. Mongolia, by contrast, has over half of its exports by volume in coal and is eager for new markets beyond China—presenting a classic win-win. The main impediment: land-locked geography, which forces exports either through Russia or China—each presenting cost and geopolitical complexity.
On the refinery front, progress is clear: engineering teams are engaged; timelines have been announced; Mongolia is moving from ambition to execution. Yet the bigger value will emerge when India-Mongolia cooperation shifts from energy-security optics to integrated value-chains: refining becomes petrochemicals, mining becomes processing, connectivity becomes corridors.
Future Horizons of India-Mongolia Energy Cooperation
What could lie ahead? 
First: The refinery is just the opening act. The next step could involve downstream integration—the supply of refined products into Mongolia’s markets, export to neighboring Central Asian and Chinese demand centers, and eventual value-added petrochemicals. For India, exporting its engineering, project-execution, and training capability to Mongolia creates a long-term advantage in Eurasia.
Second: The critical minerals corridor. With India’s steel ambitions rising and uncertainty in coal and metal supply chains increasing, Mongolia offers an alternative source of high-grade coking coal and potentially rare-earth minerals. The stumbling block remains transport. If India and Mongolia (with Russia as a transit partner) can build cost-effective corridors, the two could pioneer a “Mongolia-India Raw Materials Bridge.”
Third: Leapfrogging renewables and green energy. Mongolia has huge solar and wind potential, and the country recently joined the International Solar Alliance, an intergovernmental organization headquartered in India. India brings technical depth, manufacturing ambition, and global green-energy diplomacy. A partnership here could position Mongolia not only as a domestic supplier, but also as an exporter of clean power or hydrogen derivatives—with India participating as investor, off‐taker, or market link. 
Fourth: Strategic connectivity and logistics. Neither Mongolia nor India is served by simply signing treaties. The deliverables will be physical: rail and port links, transit-clearance frameworks, joint infrastructure finance, customs-streamlining, and risk mitigation for extreme-climate operations. The landlocked challenge looms large; solving it will define whether ambition translates into delivery.
Fifth: Institutional and private-sector operationalization. MoUs are important, but success will depend on mobilizing Indian private-sector players, creating joint-venture vehicles, aligning financing frameworks (line-of-credit, multilateral, bilateral), adapting to Mongolia’s severe climate, short construction window, and ensuring that local capacity and regulatory regimes are robust, transparent, and trusted.
Challenges for India-Mongolia Cooperation
This pathway is far from smooth. Mongolia’s remote geography, its harsh climate, and the fact that everything must transit through another power (Russia or China) increase cost and risk. The refinery’s capacity (30,000 bpd) is modest by global standards, and while meaningful for Mongolia, it does not immediately elevate the country to a major regional energy hub. For India, the scale of trade remains small; Mongolia’s trade with India was negligible (less than 0.5 percent of total trade turnover in 2024) compared to its exposure to China (69.7 percent)—underscoring the significant ground that needs to be covered.
Furthermore, project-execution risk is real. Large infrastructure projects in remote areas have a track record of delays, budget overruns, and governance challenges. The mining operation faces scrutiny concerning its environmental and social impacts and requires Mongolia to stabilize its regulatory regime, particularly given frequent law amendments in the mining sector. Geopolitically, both sides must navigate the tug-of-war between Russia, China, and India over corridors, transit, and influence.
The Emerging Global South Energy Axis
For India, the India-Mongolia energy axis represents a subtle but meaningful shift: from “fuel-security for India only” to “mutual, strategic, Global South cooperation.” In other words, Mongolia is not just a customer or supplier—but a co-partner in building new regional supply-chains, new corridors and new resource-alliances. It speaks to a future where India is not simply plugged into global energy markets, but co-creating them.
For Mongolia, partnering with India offers more than a project or a loan: it diversifies partners, supports industrial development, provides access to global value chains, and serves as a hedge against over-dependence on any single neighbor. If the refinery and the raw-material deals bear fruit, Mongolia could re-position itself as a lynchpin in Eurasian energy and mineral networks.
The president’s visit has lit the lamp. The infrastructure deals, MoUs, and shared declarations provide a foundation. What remains now is the sprint from ambition to execution, from symbolism to structural change. If India and Mongolia can surmount the logistics, governance, and financing challenges, they could jointly script a new chapter in energy cooperation in Eurasia.
In short, this is not just a refinery or a coal deal. It’s a strategic platform for the next decade of energy transition and resource resilience in the Global South. To miss the moment would be to let a potentially game-changing partnership drift into another line on paper. Neither India nor Mongolia, with its strategic horizon, can afford that.
About the Authors: Piyush Verma and Telmen Altanshagai
Dr. Piyush Verma is a senior fellow at ORF America, where he leads the organization’s work on energy and climate policy. With over two decades of experience, his research and advisory portfolio sit at the intersection of technology, economics, society, governance, and geopolitics, advancing policy solutions for a just and sustainable energy transition. Dr. Verma holds a doctorate degree in Energy Technology and Policy from the University of Auckland, New Zealand; a master’s degree in Public Administration as an Edward S. Mason Fellow from the Harvard Kennedy School of Government.

Published Date:2025-11-25