August Report: Mongolia - Perfect Partner
for Diversification

Mongolia - Perfect Partner for Diversification

With political shocks and the following supply chain disruptions, European countries’ aims of diversifying trading partners have gained a lot of momentum. Since most economies have adopted the goal of becoming climate-neutral, avoiding dependencies in this transformation remains challenging. With the current level of carbon-free technology, very specific materials are put in the spotlight. Only certain countries offer the materials needed for a carbon-free economy, which limits the choice of trading partners. Mongolia is one of few countries offering a high volume and diversity of invaluable raw materials and critical minerals, making it a lucrative partner to diversify European supply chains.

Mongolia’s Intensifying Relationship with European Countries

Mongolia’s importance recently regained media attention when German President Steinmeier visited the country in early 2024 to conclude the strategic partnership between Mongolia and Germany. In 2022 French President Macron visited Mongolia which was its first French presidential visit, showcasing Mongolia’s growing importance. The EU and Mongolia have both frequently mentioned mutual interest in intensifying the relationship. Additionally, it must be mentioned that Germany concluded an agreement for cooperation in the raw material sector in 2011, which can now be seen as a decision with strategic foresight.

Which Raw Materials Make Mongolia Attractive?

When looking closely at Mongolia’s raw materials and their possible usages, foreign interest becomes clearer. For example, its high amounts of copper are a necessary element to build today’s electric vehicles and other electrically powered devices. High occurrences of lithium, mainly used for batteries, are essential in an economy that will face an increasing turn towards electric energy. Also, many of the 17 different rare earth elements can be found in Mongolia, which are necessary for all kinds of technology. Their most important usages are in the fields of catalysing, magnetism, and luminescence, which for example makes them necessary for modern military technology. Fluorite and tungsten are both invaluable for today’s chemical industry, and the latter also finds frequent usage in the steel industry due to its enormous stability. Mongolia’s high occurrence of zinc is important for many industrial sectors, however, mainly to ensure sustainable production of steel.

Why Mongolia Matters Geopolitically

Besides its resources, Mongolia’s location weighs significantly. China and Russia are Mongolia’s biggest trading partners by far, as it is located between the two countries, often described as 'sandwiched'. Mongolia is keen to diversify its economic dependence on China and Russia, showing that diversification efforts between Mongolia and European countries are mutual. To the EU and its members, intensified connections to Mongolia are useful to gain influence in a region that is mostly dominated by China and Russia. Not responding to Mongolia’s reach towards diversification would be a serious mistake.

In a diversified “patchwork” of partners, Mongolia can play an invaluable part in providing European countries with important materials for their path towards climate neutrality. Furthermore, a strong partnership with the East Asian country can bring strategic leverage in a region where European influence is limited.