Russia and Mongolia: Forging Stronger Trade Relations

In December 2024, an interim trade agreement between the Eurasian Economic Union (EAEU) and Mongolia is expected to be signed, with the draft finalized in record time. This milestone reflects the growing business ties between Russia and Mongolia and the dialogue between their government agencies, as well as broader trends of Eurasian integration and Russia’s pivot to the East.

The need to revitalize trade and economic relations has long been at the forefront of official negotiations between Russia and Mongolia. Although Russia currently ranks as Mongolia’s second-largest foreign trade partner, it accounts for only 10.2% of Mongolia’s total foreign trade, with China’s share at 72.4%. While Russia’s role in Mongolia’s imports is large (25.8%), its share in exports is under 1%.

The main pressing issue is the significant imbalance in mutual trade. Russia’s trade turnover with Mongolia has fluctuated over time, but Russia consistently runs a large surplus—Russian exports currently make up 95% of the trade volume, while supplies from Mongolia account for just 5%. This trade gap is partly due to high customs duties, non-tariff barriers and stringent veterinary sanitary requirements for Mongolian livestock products, which have export potential.

The commodity structure of Russian exports to Mongolia is traditionally dominated by three main categories: petroleum products (accounting for over half of exports), engineering products and food products (each making up 10–20% of exports). At the same time, Russia supplies a quarter of Mongolia’s imports, with a strong presence in certain commodities: more than 90% of petroleum products, 27% of food products and 30% of electric power.

In general, the conditions for increasing Russian exports to Mongolia are quite favorable. On the one hand, businesses are provided with state support through the International Cooperation and Export national project, with regional offices of the Russian Export Center offering free consultations, transaction support, marketing research, and access to preferential loans and export insurance for interested companies. On the other hand, Mongolia pursues a fairly liberal trade policy, which avoids non-tariff barriers for Russian goods and services.

Russia and Mongolia began discussions on developing preferential trade cooperation within the EAEU several years ago. On September 24, 2024, the Council of the Eurasian Economic Commission (EEC) finally approved the draft interim trade agreement with Mongolia. Under the draft, the EAEU and Mongolia have each drawn up lists of tariff commitments covering 375 commodity items (based on the six-digit Harmonized System codes). For these products, “in no case a rate of a customs duty … shall be higher than the respective agreed bound rate,” set at 0%. This arrangement effectively means a full exemption from customs duties for a fairly wide range of goods.

The trade agreement is expected to help boost mutual trade, foster a more transparent and equitable trade environment and create new supply chains and cooperation projects in the Eurasian region. This aligns with the EAEU’s efforts to diversify its foreign ties and cultivate flexible, diverse formats of interaction that take into account the unique characteristics of Eurasian nations, the interests of Russia and its partners in the regional integration on the one hand, and third countries on the other.

The signing of the interim trade agreement within the Eurasian partnership framework comes amid a massive transformation of transport and logistics flows in the new geopolitical reality and rising interest in the Mongolian direction. Favorable conditions are now emerging for infrastructural connectivity in the region where Russian, Mongolian and Chinese borders meet.

Strengthening cross-border cooperation largely relies on Russian regions bordering Mongolia, and their role in forging stable ties and creating new logistics across Eurasia is growing. A major and long-awaited development came in October 2024 with the opening of the Kyakhta customs and logistics terminal on the Russia–Mongolia border in Buryatia. The facility offers customs services, as well as storage, transportation and sorting services for a broad range of products, with a daily capacity of over 300 vehicles. The implementation of transport and logistics solutions, coupled with the renovation of border checkpoints, will undoubtedly have a major impact not only on the local scale—bringing benefits to the regions involved—but also in enhancing trade and economic relations between Russia and Mongolia and promoting economic connectivity in Eurasia.

In December 2024, an interim trade agreement between the Eurasian Economic Union (EAEU) and Mongolia is expected to be signed, with the draft finalized in record time. This milestone reflects the growing business ties between Russia and Mongolia and the dialogue between their government agencies, as well as broader trends of Eurasian integration and Russia’s pivot to the East. This interim agreement with a limited set of trade preferences enables Mongolia and Russia to comfortably tackle pressing trade and economic issues, while allowing the EAEU to enhance its expertise in building economic connectivity in Eurasia.

Overview of Russian-Mongolian Trade

Ivan Timofeev:
Eurasia’s Security System: The Economic Aspect

The need to revitalize trade and economic relations has long been at the forefront of official negotiations between Russia and Mongolia. The negative impact of ruptured economic ties in the 1990s had lingered for decades and turned painful as Mongolia’s economic ties with China strengthened. Although Russia currently ranks as Mongolia’s second-largest foreign trade partner, it accounts for only 10.2% of Mongolia’s total foreign trade, with China’s share at 72.4%. While Russia’s role in Mongolia’s imports is large (25.8%), its share in exports is under 1%.

The main pressing issue is the significant imbalance in mutual trade. Russia’s trade turnover with Mongolia has fluctuated over time, but Russia consistently runs a large surplus—Russian exports currently make up 95% of the trade volume, while supplies from Mongolia account for just 5%. This trade gap is partly due to high customs duties, non-tariff barriers and stringent veterinary sanitary requirements for Mongolian livestock products, which have export potential. The historic highs seen in Russia-Mongolia trade in recent years (over $2 billion per year) are driven exclusively by increased Russian exports, including non-resource non-energy products.

The commodity structure of Russian exports to Mongolia is traditionally dominated by three main categories: petroleum products (accounting for over half of exports), engineering products and food products (each making up 10–20% of exports). At the same time, Russia supplies a quarter of Mongolia’s imports, with a strong presence in certain commodities: more than 90% of petroleum products, 27% of food products and 30% of electric power. Structural changes in Russian supplies to the Mongolian market reveal several trends: growth in food exports (such as confectionery, grain and dairy products, pork, eggs), wider export range and broader regional involvement. More than 70 Russian regions are currently involved in trade with Mongolia, including major suppliers of petroleum products (Samara, Kemerovo and Irkutsk regions), food and industrial goods (Republic of Buryatia, Moscow, Novosibirsk and Irkutsk regions). However, many Russian regions tend to trade in a limited number of items, while Buryatia leads in product variety, benefiting from established trade ties due to its border location and international transport infrastructure.

In general, the conditions for increasing Russian exports to Mongolia are quite favorable. On the one hand, businesses are provided with state support through the International Cooperation and Export national project, with regional offices of the Russian Export Center offering free consultations, transaction support, marketing research, and access to preferential loans and export insurance for interested companies. On the other hand, Mongolia pursues a fairly liberal trade policy, which avoids non-tariff barriers for Russian goods and services.

In contrast to business efforts focused on tapping into the Mongolian market, Russian imports of Mongolian goods have stagnated. Small Russian imports from Mongolia are mainly comprised of fluorspar for the aluminum industry (70–80% of imports) and textiles (up to 17%). The share of food products and agricultural stock has dwindled to a minimal 2–3% in recent years, a result of stringent requirements and periodic restrictions by agricultural watchdog Rosselkhoznadzor, which adds fuel to the already sensitive issue of access for Mongolian goods to the Russian market. Tariff and non-tariff barriers, especially for livestock products, are a point of contention that the Mongolian side frequently raises.

On the Interim Trade Agreement Between the EAEU and Mongolia

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

Russia and Mongolia began discussions on developing preferential trade cooperation within the EAEU several years ago. In 2020, a joint research group was formed to assess the possible effects of trade liberalization and explore ways to deepen trade and economic relations between the EAEU and Mongolia. At the 25th meeting of the Russia–Mongolia Intergovernmental Commission on Economic, Scientific and Technological Cooperation, held in October 2023 in Ulaanbaatar, the parties agreed to advance the development of the interim agreement. After six months of close consultations, a breakthrough was achieved—following the meeting of the Supreme Eurasian Economic Council, held in Moscow on May 8, 2024, the leaders of EAEU states supported the proposal to formally begin negotiations on the interim trade agreement with Mongolia.

On September 24, 2024, the Council of the Eurasian Economic Commission (EEC) finally approved the draft interim trade agreement aimed at “liberalizing and facilitating trade in goods,” “supporting economic and trade cooperation” and “encouraging expansion and diversification of trade.” Under the draft, the EAEU and Mongolia have each drawn up lists of tariff commitments covering 375 commodity items (based on the six-digit Harmonized System codes). For these products, “in no case a rate of a customs duty … shall be higher than the respective agreed bound rate,” set at 0%. This arrangement effectively means a full exemption from customs duties for a fairly wide range of goods. Mongolia, for example, agreed to preferences for nearly all key goods imported from the EAEU: confectionery and dairy products, petroleum products and petrochemicals, as well as motor vehicles. EAEU nations, in turn, agreed to provide Mongolia with the necessary preferences for agricultural exports, primarily meat and meat products, as well as light industry products such as cashmere and leather.

The interim trade agreement is set to be signed in December 2024, once the parties complete all necessary domestic procedures (the deadline is November 29, 2024). After expected ratification in 2025, the agreement will remain in effect for three years. Preliminary EEC estimates suggest that EAEU exports to Mongolia could increase by 10–15% ($200–300 million) over this period, while imports of Mongolian goods may double, adding $150 million. In terms of commodities, the highest increase in EAEU exports is projected for food products (vegetable oils, dairy products, beverages, alcohol) and certain industrial goods (petroleum products, chemical products, special machinery, etc.). For Mongolian exports, key growth areas include meat products (horse meat, cattle meat and canned goods), cashmere and certain types of clothing.

In general, the agreement is expected to help boost mutual trade, foster a more transparent and equitable trade environment and create new supply chains and cooperation projects in the Eurasian region. This aligns with the EAEU’s efforts to diversify its foreign ties and cultivate flexible, diverse formats of interaction that take into account the unique characteristics of Eurasian nations, the interests of Russia and its partners in the regional integration on the one hand, and third countries on the other. The interim trade agreement could also stimulate trade and economic cooperation between other EAEU member states and Mongolia. So far, their trade turnover is far below that of Russia. In 2023, Mongolia’s trade volume with Russia amounted to $2.4 billion, compared to $76.7 million with Kazakhstan, $32.9 million with Belarus, $8.5 million with Kyrgyzstan and $0.7 million with Armenia.

Expanding cooperation through the interim trade agreement between the EAEU and Mongolia is a strategic move and a significant step toward fostering stronger trade and economic ties, eliminating imbalances and unlocking new opportunities for win-win cooperation. This limited trade liberalization approach suits all parties, offering few commitments while enabling experimentation. However, achieving meaningful results requires more than just reducing tariff barriers—supporting businesses in meeting non-tariff requirements is necessary as well. It is also important to continue developing cooperation at all levels, including in business, to achieve enduring and mutually beneficial economic integration across Eurasia. There is also potential for expanding the range of goods eligible for preferential trade, along with a broader alignment between the EAEU and Mongolia. For now, the interim trade agreement is seen as the first stage of integration.

Foreign Trade Infrastructure

Ivan Zuenko:
Logistics as a Factor in Russia’s “East Policy”

The signing of the interim trade agreement within the Eurasian partnership framework comes amid a massive transformation of transport and logistics flows in the new geopolitical reality and rising interest in the Mongolian direction. Favorable conditions are now emerging for infrastructural connectivity in the region where Russian, Mongolian and Chinese borders meet. It is fair to say that the idea of establishing a China–Mongolia–Russia economic corridor has found a second wind, with the previously proposed projects now in the spotlight for all sides. While China has been steadily developing its border infrastructure over the past two decades, Mongolia is only starting the active phase of building rail and road networks as part of the New Recovery Policy adopted in late 2021. At the same time, Russia’s interest in eastern transport corridors has grown, including the transit route via Mongolia to China and further to other Asian markets.

With Russia’s stronger pivot to the East and Mongolia’s New Recovery Policy, there is a greater emphasis on border infrastructure and the need to develop crossing points. The long 3,500-kilometer border between Russia and Mongolia has 10 crossings. Passenger and cargo flows via these crossings vary considerably—established trade routes and peculiarities of transport network development have made the Kyakhta — Altanbulag (road) and Naushki — Sukhbaatar (rail) border crossings especially important. These critical border checkpoints handle not only the lion’s share of bilateral trade but also transit goods. Cargo flows through the crossings grow year after year, with 297,000 tonnes passing through the Kyakhta road border crossing and 7.8 million tonnes through the Naushki rail border crossing in 2023. Other border checkpoints mainly support local passenger and cargo movement. However, the Tashanta — Tsagaannuur crossing on the western part of the Russia-Mongolia border is expected to grow in importance after reconstruction. This crossing lies on the AH4 route of the Asian Highway Network, which links Russia’s regions in Western Siberia and Mongolia’s western aimags with China’s Xinjiang Uyghur Autonomous Region and further on to Pakistan.

Modernization of checkpoints on the border between Russia and Mongolia is proceeding in a fairly coordinated manner. The Russian Ministry of Transport has put five out of 10 active crossings on the Russia–Mongolia border on the list of priority checkpoints that support major traffic flows. These include the Kyakhta road border crossing, the Naushki rail border crossing, the Mondy two-way road border crossing in Buryatia, the Khandagayty road border crossing in the Republic of Tuva and the Tashanta road border crossing in the Republic of Altai [1]. Later, a presidential instruction added Verkhny Ulkhun and Solovyevsk, two other road border crossings in Zabaikalsky Krai, to the priority list. These checkpoints will undergo modernization to meet unified standards, which will significantly boost their capacity. Meanwhile, Mongolia is also making efforts to upgrade its transport and logistics network and border checkpoints, including those along the Russian border.

Strengthening cross-border cooperation largely relies on Russian regions bordering Mongolia, and their role in forging stable ties and creating new logistics across Eurasia is growing. A major and long-awaited development came in October 2024 with the opening of the Kyakhta customs and logistics terminal on the Russia–Mongolia border in Buryatia. The facility offers customs services, as well as storage, transportation and sorting services for a broad range of products, with a daily capacity of over 300 vehicles. The implementation of transport and logistics solutions, coupled with the renovation of border checkpoints, will undoubtedly have a major impact not only on the local scale—bringing benefits to the regions involved—but also in enhancing trade and economic relations between Russia and Mongolia and promoting economic connectivity in Eurasia.

1. A report by Rosgranstroy, the authority in charge of Russia’s border infrastructure, titled “On the Development of Checkpoints on the Russian–Mongolian Segment of the State Border” presented at the 15th meeting of the Subcommission on Regional and Border Cooperation of the Russia–Mongolia Intergovernmental Commission on Economic, Scientific and Technological Cooperation, dated April 4, 2023, Ulan-Ude, Republic of Buryatia.