Preface

Mongolia is rich in oil resources, yet it faces the issue of "fuel shortage" due to its weak industrial foundation.

Lacking appropriate oil processing facilities, Mongolia can only export crude oil to China for processing.

However, China's processing capacity has long been consumed by its own needs, not only failing to meet its own demands but also having to import from abroad.

This implies that Mongolia's significant share of "crude oil" may ultimately be divided among China's foreign "import partners."

Should Mongolia lose China as a "processing plant," it would face an awkward situation where its crude oil has nowhere to go and becomes "unsellable."

However, Mongolia is not willing to "give in" and has decided to build a "refinery" so that it can process crude oil and enjoy the profits from rising oil prices.

Initially, Mongolia sought cooperation with China, but now, with Mongolia suddenly making this request to China, it appears as if "China does not lack oil," plunging Mongolia into an "embarrassing situation."

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In order to "sustain livelihoods," Mongolia turned to seek help from India, deciding to collaborate with India to construct its first domestic refinery.

To build a refinery, Mongolia must first request resources from China.Mongolia and China have been establishing cooperative relations for a considerable amount of time.

Mongolia supplies more than 60% of its oil to China in the form of crude oil, making it a major part of China's oil imports.

Due to the lack of refineries in Mongolia, the crude oil can only be processed by Chinese refineries.

Over the past decade, Mongolia has been trying to reduce its dependence on China by increasing its own refining capacity.

However, the development of Mongolia's refining capacity has been hindered by many factors, resulting in its crude oil ultimately being processed by China.

But now, Mongolia has decided to change the status quo and start building refineries domestically, ending the export of crude oil to China in pursuit of self-sufficiency.

Mongolia will undoubtedly usher in a new era of "fuel independence".

Because Mongolia has very rich oil reserves domestically, which are mainly distributed in the southeast of Zamyn-Uud.

However, Mongolia's total oil production has not reached expectations, only 5.5 million tons.

This also means that, although Mongolia has abundant oil reserves, the production is seriously insufficient, which is inseparable from the country's not too backward level of technology and infrastructure.To translate the given text into English:

If one wishes to convert oil reserves into actual oil production, it requires the "patience and strength" to build large-scale oil facilities.

Mongolia hopes to achieve "self-sufficiency in oil" one day, hence there are rumors that Mongolia will build a refinery within its borders in 2023.

This news has not been confirmed, but Mongolian officials have stated that Mongolia's oil facilities still need to export crude oil to China to maintain its national interests.

However, given the current situation, when the relationship between China and Mongolia reaches a certain stage, Mongolia will show a desire for China to cooperate in the energy sector.

When the relationship between China and Mongolia reaches a certain stage, Mongolia's attitude will change again, showing a preference for the West.

In 2019, Mongolia had already started seeking foreign investment to build a large-scale refinery, proposing that this project requires an investment of $4 billion in funds, as well as support, and has expressed an intention to seek help from Western countries.

It is precisely because Mongolia exports crude oil to China in this process that the relationship between China and Mongolia becomes unstable.

But now, Mongolia has taken the lead in approaching India, hoping that India can provide financial support to help Mongolia build a refinery.

Mongolia-India cooperation.

In 2020, Mongolia had already invited India's GSK Energy Company to "jointly build and develop" a large-scale refinery in Ulaanbaatar.In December 2022, India and Mongolia officially announced to the outside world that they would build a large-scale oil refinery in Mongolia and have already conducted preliminary discussions. They have made the decision to establish a joint venture company to proceed with the next steps of implementation.

Because an agreement has been reached between Mongolia and India, Mongolia will "jointly build and develop" an oil refinery in the Zamyn-Uud area.

Mongolia's new oil refinery will be supported by the strength of the China-India cooperation company and will be the largest oil refinery construction project in Mongolia's history.

The construction of this project will greatly enhance Mongolia's energy "security" and may increase the annual processing capacity to 1.5 million tons.

This also means that Mongolia will no longer need to export crude oil to China in the future, nor will it be subject to China's transit requirements.

It should be noted that China's domestic oil refineries are no longer "short of oil" and have turned their attention to foreign crude oil to obtain higher-quality petroleum.

That is why Mongolia took the initiative to seek cooperation with India, in order to help India open up the "Northeast Asian market". India not only builds an oil refinery in Mongolia but also actively participates in the construction of other infrastructure and mining development in Mongolia.

As a result, India will also gain the benefits promised by Mongolia to a certain extent.

Moreover, India will also obtain a reliable energy export market in this project.

Due to Western countries imposing sanctions on Russia, Russia's energy cannot be exported normally, and many countries have begun to turn to India for more imports.India itself is facing an "oil shortage," and to meet domestic consumption needs, it has to import more oil from abroad.

Therefore, India also hopes to obtain a reliable source of income through the construction of the Mongolian oil refinery.

This is not only the first time Mongolia has built an oil refinery in its own country, but also the first large-scale enterprise built by India in Mongolia.

The Indian media also described the implementation of this project as a "historic progress."

Since Mongolia has to purchase equipment from abroad and introduce technology, this has caused a significant transportation cost.

Due to the extremely unsuitable environment around Mongolia for land transportation, it is necessary for neighboring countries such as China to provide railway transportation channels.

Ulaanbaatar believes that the oil refinery is a key step in improving Mongolia's energy security and also a step towards making Mongolia's economy more independent.

They plan to complete the construction of the oil refinery in 2026 and start using it.

Mongolia wants to build an "oil road," but it has taken a "crooked path."

Mongolia is located between China and Russia, with an extremely important geographical position.This significant geographical location makes Mongolia extremely important for the "balanced" development between China and Russia.

Moreover, Mongolia can leverage its geographical position to act as a "bridge" between China and Russia, playing a role of "mutual benefit."

However, Mongolia does not seem to think so.

It appears that Mongolia has always been accommodating the relationship between China and Russia, causing the "struggle" between China and Russia to affect Mongolia's interests.

As a "passer-by" between China and Russia, Mongolia also faces challenges in cooperation between the West and Europe.

Mongolia hopes to become a "model" among developing countries by building refineries and to engage in broader economic cooperation with India.

But Mongolia seems unaware that Mongolia's "Dongjia" also has a "mother-in-law's home." No matter who Mongolia turns to for help, there is a limited "passage," which is China.

Mongolia will not have a smooth sail; instead, it must learn how to better cooperate with neighboring countries like China to ensure its own interests.

Mongolia should not be "single-mindedly" seeking its own interests but should better utilize its "geographical location" to build "oil roads" and follow the "right path."

ConclusionNowadays, as Mongolia shifts its focus from China to India, it naturally stands to gain some benefits. However, in the long run, this could also have a certain impact on the relationship between China and Russia. Nevertheless, Mongolia continues to walk a tightrope between the two countries, and how to balance the relationship with both sides is also an important issue that Mongolia needs to face. Otherwise, once it loses balance, it will easily tilt and suffer losses.