Few countries in the world face a geopolitical predicament as unique as Mongolia. Occupying a vast territory of more than 1.5 million square kilometres but home to only around 3.5 million inhabitants, Mongolia is wedged between two great powers: Russia to the north and China to the south. This geographical reality has shaped Mongolian foreign policy for centuries and continues to determine the country’s strategic choices today. Since the democratic transition of the early 1990s, Mongolia has sought to preserve its sovereignty through a delicate balancing act between its two neighbours while simultaneously cultivating ties with distant partners under its famous ‘Third Neighbour Policy’.

The historical memory of the Mongol Empire remains central to Mongolia’s national identity. In the 13th century, the empire established by Genghis Khan and his descendants stretched from the Eastern border of the Kingdom of Hungary to the Pacific Ocean, making it the largest contiguous land empire in history. Its capital, Karakorum, located in the Orkhon Valley, in the centre of contemporary Mongolia, served as a cosmopolitan centre attracting people, merchants and diplomats from across Eurasia. It was famous for its religious tolerance, allowing the erection of places of worship for Buddhists, Christians, and Muslims, beyond the local cults of the Mongols.

The decline and finally the dissolution of the empire transformed Mongolia from the centre of power into a peripheral region caught between larger states in the upcoming centuries. During the 17th and 18th centuries, the Qing dynasty gradually incorporated the Mongol territories into its empire. Following the collapse of the Qing dynasty in 1911, Outer Mongolia declared independence, although its status remained contested for decades.

After that, Russia and, later on, the Soviet Union emerged as Mongolia’s principal protector during the 20th century. The Mongolian People’s Republic became one of Moscow’s closest allies, serving as a strategic buffer between the USSR and China. Following the collapse of communism, Mongolia embarked on a peaceful democratic transition in 1990 and adopted a multi-party political system and market economy. Yet while the political system changed dramatically, geography remained unchanged.

‘The decline and finally the dissolution of the empire transformed Mongolia from the centre of power into a peripheral region caught between larger states’

Mongolia’s geopolitical dilemma is simple but profound. To the south lies China, with a population exceeding 1.4 billion. To the north lies Russia, with approximately 140 million inhabitants. Mongolia’s population is tiny in comparison, and its economy remains heavily dependent on trade with its neighbours.

The country’s economy is built largely on mineral exports. Coal, copper, gold and rare earth elements constitute the backbone of Mongolian exports. The giant Oyu Tolgoi copper mine, operated by the mining company Rio Tinto, has become one of the world’s most significant mining projects. Coal exports from the Tavan Tolgoi deposits similarly provide substantial state revenue.

This resource-based economic model has reinforced Mongolia’s dependence on China. In recent years, Mongolia’s foreign trade reached approximately USD 25 billion, with China accounting for more than 90 per cent of Mongolian exports and around 40 per cent of imports—a rare exception in which China runs a trade deficit.

China’s importance stems not only from its enormous market but also from geography. Most Mongolian coal and copper exports travel south across the border to Chinese industrial centres. Beijing has invested heavily in border infrastructure, rail links and logistics facilities, making itself indispensable to Mongolia’s export economy. Not surprisingly, it launched the China–Mongolia–Russia Corridor (CMRC) as part of the Belt and Road Initiative to strengthen ties and facilitate transport in the region.

Russia, meanwhile, remains crucial in a different way. Although trade volumes are considerably smaller than with China, Mongolia depends heavily on Russian fuel and energy supplies. Much of Mongolia’s petroleum products originate in Russia, creating a strategic vulnerability that became especially apparent after the outbreak of the Russo–Ukraine war. Relations with Russia remain rooted in historical memory. Russian and Soviet assistance was instrumental in preserving Mongolian independence during the 20th century, and many Mongolians continue to view Russia favourably. At the same time, Mongolia has been careful not to become politically subordinate to Moscow. The Russian invasion of Ukraine placed Ulaanbaatar in a particularly uncomfortable position. Mongolia avoided openly condemning Russia but also refrained from endorsing the invasion. It consistently attempted to maintain neutrality while preserving relations with Western partners.

Consequently, Mongolia faces the challenge of avoiding excessive dependence on either neighbour. Economic logic pulls it towards China, while historical ties and energy dependence connect it to Russia. Since the early 1990s, Mongolian governments have pursued a strategy of ‘equidistance’ between Moscow and Beijing. This balancing act was visible in Mongolia’s diplomatic activity during the past decade. The country has simultaneously welcomed Chinese investment, maintained defence ties with Russia and expanded cooperation with Western democracies.

Recognizing the limitations imposed by geography, Mongolia developed its ‘Third Neighbour’ policy after the democratic transition. The concept emerged in the early 1990s and refers to building strong partnerships with countries beyond Russia and China. The policy seeks to diversify Mongolia’s diplomatic, economic and security relationships by engaging with the United States, Japan, South Korea, India, the European Union, Canada and Australia. The underlying objective is straightforward: the broader Mongolia’s international network, the less vulnerable it becomes to pressure from its two immediate neighbours.

Among Mongolia’s most important third neighbours is Japan, one of the country’s largest providers of development assistance. South Korea has become an increasingly important economic partner, while the United States regularly conducts military cooperation and joint exercises with Mongolian forces.

‘The broader Mongolia’s international network, the less vulnerable it becomes to pressure from its two immediate neighbours’

Recent years have produced several notable examples of the policy in action. Mongolia has strengthened cooperation with France in uranium mining and intensified engagement with the European Union and other member states, such as Hungary, as well as Indo-Pacific partners, positioning itself as a democratic actor in a region increasingly marked by geopolitical competition.

Although Mongolia is not a Turkic state, it maintains increasingly close relations with the Turkic countries of Central Asia and Türkiye. Historical connections between Turkic and Mongolic peoples run deep. The Eurasian steppe has long served as a zone of interaction among nomadic civilizations. Modern Mongolia has therefore sought to strengthen ties with Kazakhstan, Kyrgyzstan, Uzbekistan and Türkiye. Kazakhstan is particularly important because it hosts a large ethnic Kazakh population in western Mongolia.

In March 2025, the Organization of Turkic States’ Secretary-General made an official working visit to Ulaanbaatar—the first in the organization’s history. The meetings held in the Mongolian capital explored potential cooperation in different fields, ranging from energy to tourism.

Despite the considerable geographical distance, relations between Mongolia and Hungary are exceptionally friendly. The two countries established diplomatic relations on 28 April 1950, making 2025 the 75th anniversary of ties that were maintained and gradually deepened.

Hungary’s historical and scholarly interest in the Eurasian steppe has contributed to sustained engagement with Mongolia. Academic cooperation is particularly strong, with Hungarian researchers making important contributions to Mongolian and Inner Asian studies.

Educational relations have become one of the pillars of bilateral cooperation. Through the Stipendium Hungaricum scholarship programme, approximately 200 Mongolian students are able to study at Hungarian universities each year. These students represent an important bridge between the two societies and contribute to the long-term development of bilateral relations.

Labour mobility has emerged as another growing area of cooperation. In recent years, several thousand Mongolian guest workers have arrived in Hungary, helping to address labour shortages in certain sectors of the Hungarian economy. This trend has added a practical economic dimension to the traditionally cordial political relationship.

For Hungary, Mongolia also represents a valuable partner in Asia and an example of a successful democratic transition in the post-socialist world. For Mongolia, Hungary serves as a gateway to Europe and an important educational and cultural partner within the European Union.

Mongolia’s foreign policy is fundamentally shaped by geography. Situated between Russia and China, it cannot escape the influence of either neighbour. Yet rather than accepting dependency, Mongolia has developed a sophisticated strategy of balancing. It maintains pragmatic relations with both Moscow and Beijing while simultaneously cultivating a wide network of partners through its Third Neighbour policy.

The country’s challenge in the coming decades will be to preserve this strategic autonomy amid intensifying great-power competition. As global demand for critical minerals increases and geopolitical rivalries deepen across Eurasia, Mongolia’s importance is likely to grow. The success of its balancing strategy may therefore become one of the most interesting geopolitical stories of contemporary Asia.

Published Date:2026-06-29