Economic Corridor “China — Mongolia — Russia”: Infrastructure in Focus

The China-Mongolia-Russia Economic Corridor program means a conceptualization of the entire spectrum of trilateral cooperation. The initially approved list of 32 joint projects does not imply projects with specific volumes and deadlines—it’s just about prospective avenues for cooperation, which are subject to thorough elaboration, as well as preparation of project documentation and approval by the parties. Among the key priorities is an inter-connected development of transport infrastructure and a closer collaboration in cross-border transportation flows.

A radical change in the global geopolitical situation since February 2022 has become a challenge for the China-Mongolia-Russia Economic Corridor. The intensifying confrontation between Russia and the West imposes a new reality for interaction, with China becoming increasingly active in promoting alternative transport routes.

Under these circumstances, Mongolia is trying to pursue a weighted policy based on the balance of power between the two “perpetual neighbors” (Russia and China) and on maintaining partnerships with the United States, the European Union, Japan, South Korea and other countries under the “third neighbor” strategy.

Amid the unprecedented sanctions pressure from the West, Russia is making a pivot to the East: its interest in infrastructure opportunities keeps growing, and the steps toward the economic corridor are more tangible. Work on the project of upgrading the Central Railway Corridor is accelerating: by the end of 2023, the relevant agencies of Russia, Mongolia and China will have completed the feasibility study, with practical implementation getting underway in 2024.

Proper maintenance of international freight flows and capitalizing on them are priority interests of Russia’s border regions within the economic corridor. China’s experience in positioning its regions, especially the Inner Mongolia Autonomous Region, in the development of the economic corridor is quite interesting in this context. With that in mind, the Russian regions are in need of a more meaningful content, in addition to transit opportunities — after all, installing an economic corridor is aimed at consolidating economic activities.

With logistical flows redirected, Russia’s interest in the opportunities of east-bound transport routes, including transit via Mongolia to China and on to other destinations in Asia, has dramatically increased. Alongside with the crucial infrastructure—the functional Trans-Mongolian Railway [1]—other potential transit links could be in high demand. Enhancing cross-border infrastructure connectivity between Russia, Mongolia and China is an issue that has been discussed for many years, the main impetus being the China-propelled Belt and Road Initiative. Much of the projected infrastructure underpins the China-Mongolia Economic Corridor Program, jointly adopted in 2016 and aimed at competitive integration with global logistics routes and regional development. Despite low activity in practical delivery of the projects, the parties are still keen on cooperation, the best evidence being regular meetings between the heads of Russia, Mongolia and China that traditionally take place on the sidelines of the SCO summit. At their last Samarkand meeting in September 2022, the parties agreed on a five-year extension of the Program.

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The China-Mongolia-Russia Economic Corridor program means a conceptualization of the entire spectrum of trilateral cooperation. The initially approved list of 32 joint projects does not imply projects with specific volumes and deadlines—it’s just about prospective avenues for cooperation, which are subject to thorough elaboration, as well as preparation of project documentation and approval by the parties. Among the key priorities is an inter-connected development of transport infrastructure and a closer collaboration in cross-border transportation flows. In 2018, out of thirteen projects related to transport infrastructure, two were prioritized: namely, the comprehensive modernization of the Central Railway Corridor (Ulan-Ude — Naushki — Ulan-Bator — Erlian — Beijing — Tianjin) and the development of transit haulage along the AN-3 route of the Asian Highway Network (Ulan-Ude — Kyakhta — Ulan-Bator — Erlian — Tianjin).

The need for a comprehensive modernization of the Central Railway Corridor—constructing the second track and electrifying the existing Trans-Mongolian Railway—is long overdue, but there has been a certain supineness in addressing the problem, even in spite of the priority attached to this project. Meanwhile, freight transportation by rail has been steadily growing in recent years against the favorable background of the global trend for cargo containerization, although it is still way behind the transit via Kazakhstan. The Mongolian route accounts for some 9% of container freight turnover (estimated at 71,100 TEU containers in 2021) in Eurasian rail traffic passing through Russia. Currently, 60 routes of container trains between China and Europe run through the Central Railway Corridor. Further growth in the appeal of the Mongolian direction within the transcontinental carriage system is capped by capacity limitations of the main line, and it thus requires infrastructural transformations. While modernization of the Central Railway Corridor still requires a feasibility study, the expediency of building rail corridors in the Eastern (Borzya — Solovyevsk — Choibalsan — Huut — Bichigt — Zuun-Khatavch — Chifeng — Chaoyang — Jinzhou/Panjin) and Western (Kuragino — Kyzyl — Tsagan-Tolgoi — Kobdo — Takeshken — Hami-Urumchi area) flanks is a matter of debate.

Road transit via Mongolia awaits a full-fledged launch. The obstacles are many, including the level of road infrastructure development, difficulties in building logistics chains, and the limited capacity of border checkpoints. The AN-3 section of the highway between Darkhan and Ulan Bator is undergoing a protracted overhaul, with full commissioning not expected until late 2023.

Physical barriers to automotive transit through Mongolia are further exacerbated by institutional hassles. Although Russia, Mongolia and China signed an Intergovernmental Agreement on International Road Transport along the Asian Highway Network in 2016, China lifted restrictions on the use of the Transport International Route system only in 2019. However, the launch of international road transport, officially announced by a joint commission of transport authorities, never took place as the COVID-19 pandemic entered its adjustments. Practical testing of the motorway transit is still hampered by anti-COVID restrictions imposed at highway checkpoints, which remain in effect on the Mongolian-Chinese border.

In the meantime, the issue of natural gas transportation from Russia to China via Mongolia has unexpectedly gained traction. Although the pipeline construction is not included in the list of projects under the Economic Corridor Program, substantial work has been done by the three parties. In 2019, Gazprom was instructed to consider the option of constructing the Power of Siberia 2 gas pipeline via Mongolia. In 2021, a special purpose company named Soyuz Vostok was founded, while works on the feasibility study of the project kicked off, and the year of the pipeline construction getting underway was announced — 2024. In January 2022, the results of the study on the trunk gas pipeline construction and operation were approved, paving the way for relevant design and survey works organized. Thus, the project is taking on clearer features, bringing new elements into the landscape of the cross-border infrastructure of the three nations.

A Renaissance of Mongolia’s infrastructure

Although all three nations are interested in the economic corridor, and a functional corridor is especially important for Mongolia as it directly affects the country’s socioeconomic development. [2] Infrastructural transformations are now critical for Mongolia, since the country is landlocked and the efficiency of its foreign trade is highly dependent on transport and logistics, including that at the borders with its neighbors, Russia and (especially) China. The planned renovation of infrastructure is not only aimed at promoting transit through Mongolia—the transformation implemented or planned is largely mandated by the need to transport the mineral resources developed over the past two decades. The large-scale development of coal, copper, gold, and other minerals for export to China generates new elements of infrastructure: roads, power lines, and border checkpoints. [3]

Russian–Chinese Dialogue: The 2022 Model. RIAC, Institute of Far Eastern Studies of the Russian Academy of Sciences and Institute of International Studies at Fudan University Report

Mongolia’s constraints in infrastructure connectivity were particularly painful and acute during the COVID-19 pandemic. First, the load on the Trans-Mongolian railroad increased. This was triggered by the diversion of cargoes from motor and air transport, but the explosive growth of container shipments along the China-Europe route had an even greater impact. Second, with the onset of the pandemic, the vulnerability of motor transport to ensure smooth trade became apparent. The suspension of motor road checkpoints on the Russian-Mongolian border, as well as on the Mongolian-Chinese border, inexorably led to traffic congestions in border regions and resulting complications in supply chains, which ultimately affected foreign trade of many countries. Restrictive measures at highway checkpoints had a negative impact on the transportation of key export items — mining products, primarily coal. Tough measures ranging from the quarantine of truck drivers and multistep sanitization of transportation vehicles to the complete closure of border checkpoints during the outbreaks of COVID-19 resulted in a dramatic decrease of coal exports. Whereas Mongolia had exported 36.6 million tons of coal to China in pre-pandemic 2019, this amount dropped to 28.7 million tons in 2020, and to 16.1 million tons in 2021. [4]

Under these circumstances, Mongolia decided to accelerate its plans for railway network development approved by the Great State Khural of Mongolia back in 2010. At that time, a total of 5,700 km of railroads were planned to be built in three phases, which implied a huge change from the existing 1,900 km of rails. Later in 2018, the decree was amended to increase the length of the planned railway lines to 6.6 thou km. Yet in 2021, construction began only on two sections, connecting the large coal deposit Tavan Tolgoi with the Trans-Mongolian Railway (Zuunbayan station) and, on the other side, with the Gashuunsukhait checkpoint on the Chinese border.

In December 2021, the Mongolian government unveiled its New Renaissance Policy (“shine sertiin bodlogo”) that marked an important step in the adjustment of economic policy in the face of global challenges. In a nutshell, the Policy of New Renaissance represents the first stage in the long-term Vision-2050 strategy (“Alsyn Kharaa-2050”), being designed for the period of 2021–2030. The Policy targets six key areas: development of border checkpoints, energy sector, manufacturing industries, cities and villages, green development and public administration.

The revitalization of border checkpoints (“boomtien sergelt”) is not limited, as it may seem at first sight, to pinpoint or one-off measures to improve the infrastructure and engineer the circulation of Mongolia’s trade flows with the outside world. Activities are much broader in scope as they involve the construction of the national railway network, increasing the capacity of the Trans-Mongolian railroad that connects border checkpoints with paved roads, creating free economic zones, etc. The planned infrastructure projects within the Policy of New Renaissance were presented by Mongolia’s Prime Minister Luvsannamsrayn Oyun-Erdene at the Eastern Economic Forum in September 2022.

Within the Policy of New Renaissance, Mongolia has set to a vigorous construction on the national railroad network. Three major projects have been commissioned in 2022: the sections Tavan-Tolgoi — Zuunbayan (414 km), Tavan-Tolgoi — Gashuunsukhait (267 km), and Zuunbayan — Khangi (226 km). While they started building the initial two sections as early as 2019, the construction of the railroad from Zuunbayan station to the Khangi checkpoint on the Chinese border only kickstarted in March 2022, with an ambitious timeline of six months for completing this leg.

The new section will diversify freight flows along the Trans-Mongolian Railway, relieving the load on the Zamyn-Uud-Erlian border checkpoint. Above all, the plan calls for iron ore shipments to be redirected from Darkhan and Selenge aimaks to Baotou, a major metallurgical center in northern China; the delivery route will in this way be shortened by 318 km. It will also be possible to export coal from Tavan Tolgoi along with other minerals from the deposits located along the built Tavan Tolgoi — Zuunbayan railroad in the direction of Zuunbayan — Khangi pass. In addition, the new Khangi-Mandal railway checkpoint at the Mongolian-Chinese border will cater to some of the imports.

The opening of a new strategically important route to the Chinese market is also of interest to Russia. Next in line for construction are the Artsuur — Nariinsukhait — Shivehuren (1,255 km) sections in the west and the Choibalsan — Huut — Bichigt (426 km) sections in the east.

It is obvious that the construction of railroads in Mongolia will fundamentally change the infrastructure of border checkpoints between the three countries, primarily on the Mongolian-Chinese border. [5] In addition to the only railway checkpoint between Zamyn-Ud and Erlian on the Mongolian-Chinese border, functioning since 1956, four new railroad checkpoints will be opened, primarily with a focus on mineral transportation. Three of them (Gashuunsukhait — Gantsmod, Shivahuren — Sehe and Bichigt — ZunKhatavch) have already been formally agreed upon. In 2020, these checkpoints were included in the Agreement on the Mongolian-Chinese Border Checkpoints and Their Regimens. In general, Mongolia, as a link between Russia and China, facilitates conditions for a prospective kickoff of railway corridors outlined in the Economic Corridor Program.

Interests tailored to a new reality

A radical change in the global geopolitical situation since February 2022 has become a challenge for the China-Mongolia-Russia Economic Corridor. The intensifying confrontation between Russia and the West imposes a new reality for interaction, with China becoming increasingly active in promoting alternative transport routes.

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Under these circumstances, Mongolia is trying to pursue a weighted policy based on the balance of power between the two “perpetual neighbors” (Russia and China) and on maintaining partnerships with the United States, the European Union, Japan, South Korea and other countries under the “third neighbor” strategy. [6]

Nevertheless, the outcome of the November 28, 2022 meeting between Mongolian President Uhnaagiin Khurlsukh and Chinese President Xi Jinping in Beijing was revealing. In a joint statement, the two sides unanimously agreed to work with the Russian side to step up efforts towards promoting the construction of the China-Mongolia-Russia Economic Corridor, to accelerate the feasibility study for modernization of the Central Railway Corridor, and to push for the gas transit pipeline project.

Amid the unprecedented sanctions pressure from the West, Russia is making a pivot to the East: its interest in infrastructure opportunities keeps growing, and the steps toward the economic corridor are more tangible. Work on the project of upgrading the Central Railway Corridor is accelerating: by the end of 2023, the relevant agencies of Russia, Mongolia and China will have completed the feasibility study, with practical implementation getting underway in 2024.

Not only the above-mentioned project is taking on greater appeal—the development of the Eastern Railway Corridor as a link between Trans-Siberian Railroad, the railways of Northeast China via Trans-Baikal Territory (with a checkpoint in Soloviovsk) and eastern aimaks of Mongolia appears to be a very attractive choice. This route, whose feasibility had previously been questioned, is now taking real shape: Mongolia is preparing to build the missing Choibalsan — Huut — Bichigt section. This alternative route is geared towards transit container traffic and the export of Mongolian mineral resources. Besides, it opens up an opportunity for Russia to relieve freight traffic congestion in the East and to export coal, regardless of the high burden currently crippling its Far Eastern ports.

Prospects for the Western Railway Corridor (Kuragino — Kyzyl — Tsagan Tolgoi — Kobdo — Takeshken — Hami district — Urumqi) are more distant, though, since the construction of a railroad is required along almost the entire route with the exception of the final section on Chinese territory. In the spring of 2022, the Mongolian government approved new rail projects, including the construction of a 1,250 km plus leg from the Artsuur checkpoint in the western part of the border with Russia to the Nariinsukhait coal deposit in the south as well as the Shiwehuren checkpoint on the border with China. Following this announcement, Russian regions were preparing an appeal to the national leadership to resume the construction of the Kyzyl (Tuva Republic) — Kuragino (Krasnoyarsk Territory) railroad.

For now, the project with a possible option of extending the rail line to the Elegest coal mine and further to the Mongolian border is still under review. Meanwhile, in October 2022, a 745-kilometer portion of the AN-4 highway was commissioned in western Mongolia, passing through the Hovd and Bayan-Ulgiy aimaks and connecting the Russian regions of Western Siberia (through the Tashanta checkpoint in the Altai Republic) with the Chinese Xinjiang Uygur Autonomous Region.

For Russia, the Mongolian direction can become a reliable channel for national goods to reach international markets and to facilitate the import of necessary products, with a number of significant favorable factors at play. [7] This direction is characterized by the safety of the transport route, passing through conflict-free territories, as well as by a great potential for transit subject to infrastructural transformations. In addition, against the backdrop of rapidly growing Mongolian-Chinese trade (from USD 2.46 billion in 2010 to USD 10.16 billion in 2021), it is important for Russia and Mongolia to strengthen bilateral economic ties. [8] Although the trade volume is likely to reach an all-time high of more than USD 2 billion by the end of 2022, the potential for expanding the export-import potential is yet to be unlocked. Currently, the share of the Russian direction in Mongolia’s exports slightly exceeds 1%. For all that, supplies from Russia account for 28.5% of Mongolia’s imports and are substantial as far as some commodities are concerned: more than 90% of petroleum products, 27% of foodstuffs, and 30% of electric power. Business relations between Russia and Mongolia have intensified of late, including through the annual participation of representative Mongolian delegations in the Eastern Economic Forum. The search for new promising areas of interaction is underway, and the efforts of both sides are aimed at creating favorable conditions for the delivery of joint projects. Thus, in order to build new business contacts and mutually beneficial cooperation, a Russian-Mongolian Forum was held in Ulan-Ude in May 2022. In general, Russia’s interest in Mongolia keeps growing, although the Mongolian direction has admittedly received little attention in various Russian projects of promoting Eurasian integration. [9]

The much anticipated realignment of Russia’s foreign economic relations is already underway. In the long run, China will replace the EU as its main trading partner, while a stepwise pivot of trade flows to the East might be a significant factor in the development of Siberia and Russia’s Far East. Russia is diversifying its foreign trade and international haulage by developing relevant infrastructure in its eastern regions.

The Republics of Altai, Tuva, Buryatia as well as the Trans-Baikal Territory bordering Mongolia are in different conditions to be integrated into the emerging economic corridor China-Mongolia-Russia, including infrastructure capabilities and socioeconomic potential. In general, it is necessary to adapt the transport and logistics in the border regions to the new environment.

Proper maintenance of international freight flows and capitalizing on them along with robust intermediary foreign economic activity are the priority interests of border regions within the economic corridor. China’s experience in positioning its regions, especially the Inner Mongolia Autonomous Region, in the development of the economic corridor is quite interesting in this context. [10] With that in mind, the Russian regions are in need of a more meaningful content, in addition to transit opportunities — after all, installing an economic corridor is aimed at consolidating economic activities. This requires a gradual change in the investment focus: from investing in basic infrastructure, logistics solutions and urban development to the diversification of funding among production sectors. Only then will the China — Mongolia — Russia corridor be relevant as an economic corridor.

1. Trans-Mongolian Railway comes under the purview of Ulan-Bator Railroad, JSC (a co-owner of Russian Railways, Plc).

2. Davaasuren A., Ariunzhargal Ch. On the Problems of Forming the Russia – Mongolia – China Economic Corridor // Region: Economics and Sociology. 2021. No. 3 (111), p. 184-202. DOI: 10.15372/REG20210308

3. Namzhilova V.O., Batomunkuev V.S. Mongolian-Chinese Border: Transformations of Border Infrastructure and the Influence of Silk Road Economic Belt // Problems of the Far East. 2021. No. 1, p.21-32. DOI: 10.31857/S013128120013887-6

4. Dondokov Z.B.-D., Namzhilova V.O. China – Mongolia – Russia Economic Corridor: Building Infrastructural Connectivity under Global Challenges // ECO. 2022. No. 12, p. 52-71. DOI: 10.30680/ECO0131-7652-2022-12-52-71

5. Namzhilova V.O. Infrastructure Landscape in Cross-Border Areas of Russia, Mongolia and China: Transformations and Guideposts // Asia and Africa Today. – 2022. – No. 11, p. 13-20. DOI: 10.31857/S032150750020155-2

6. Rodionov V.A., Ayushieva I.G. Third Neighbor of Mongolia as the Political-Ideological Concept // The Herald of Tomsk State University. 2017. No. 420, p. 125-130. DOI: 10.17223/15617793/420/17

7. The National Interests of Russia and Mongolia in Russia – Mongolia – China Triangle: Problems, Contradictions and Scenarios / Compilers and editors in charge: Grayvoronovsky V.V. Kuzmin Y.V., Sukhodolov A.P. – Irkutsk. Razvitie Publishing House, 2021, 466 pages

8. Bezrukov L.A., Fartyshev A.N. Mongolian Foreign Trade Specificity: Risks for Russia // Global Economy and International Relations. 2022. No. 3, p. 101-109. DOI: 10.20542/0131–2227–2022–66–3–101–109

9. Larin V.L. New architecture of Pacific Asia in the 21st century: opportunities and challenges for Mongolia and Pacific Asia. The Mongolian Journal of International Affairs. 2021. Vol. 22. Pp. 42-53. DOI: https://doi.org/10.5564/mjia.v22i1.1770

10. 中蒙俄经济走廊建设重点问题研究 [Studying the Key Problems in Building the China – Mongolia – Russia Economic Corridor]. Beijing:人民出版社, 2016. 421 с