Date of Publication:
11 August 2025
Monica WELLER
Edwin O. Reischauer Center for East Asian Studies, Johns Hopkins School of Advanced International Studies
Suggested Citation
(APA) Weller, M. (2025). Mongolia’s Diplomacy and Development: Small Power Balancing in a Divided World. EAYSA Anchor. https://eaysa.org/anchor-articles-mongolias-diplomacy-and-development-small-power-balancing-in-a-divided-world/.
(MLA) Weller, Monica. “Mongolia’s Diplomacy and Development: Small Power Balancing in a Divided World.” EAYSA Anchor, 2025, https://eaysa.org/anchor-articles-mongolias-diplomacy-and-development-small-power-balancing-in-a-divided-world.
(Harvard) Weller, M., 2025. Mongolia’s Diplomacy and Development: Small Power Balancing in a Divided World. EAYSA Anchor. Available at: https://eaysa.org/anchor-articles-mongolias-diplomacy-and-development-small-power-balancing-in-a-divided-world.
Abstract
Mongolia occupies a unique position as North Asia’s only democratic state. However, this is a precarious position, not only facing potential repercussions from its immediate neighbors of Russia and China but from internal issues, particularly government corruption. This article addresses the questions of how Mongolia maintains democracy amidst geopolitical pressures and internal stressors, as well as the impacts these have on democratic institutions through a series of case study analyses and expert interviews. Due to Mongolia’s historic domestic support of democracy, strong civil society, and the strategic geopolitical benefits of maintaining democracy, this article argues that Mongolia will continue to balance its development and relations with the larger international world through democratic institutions, despite the persistence of corruption within governance structures.
Keywords: Mongolia, democracy, development, North Asia, Northeast Asia, corruption, foreign investment, geopolitics, money laundering, U.S., China, Russia, international institutions
Introduction
How does a country maintain democracy amidst complex geopolitical pressures? While there is no one clear path to “true democracy”, Mongolia presents a nuanced example. As a former communist nation in Northeast Asia nestled between Russia and China, Mongolia has pursued a framework of democratic governance since the 1990s. While Mongolia still has substantial problems to resolve in order to better support its people and ensure democracy in the long run, the country remains classified as a democratic state. This can be seen in peaceful transfers of power since the 1990s, a fairly open society with a current Freedom House rating of 84/100 (Freedom House 2024), and a flourishing civil society made up of community organizations and advocacy groups. Using a democracy criteria model developed by Verena Fritz, Mongolia meets standards of democracy in three regards: 1) no societal or political force seeks to overthrow democratic standards, 2) those in power follow constitutional rules, and 3) citizens support democracy despite economic or political crises (Fritz 2007).
With this model in mind, a more pointed question to ask might be how Mongolia manages to maintain its democracy despite being surrounded by two of the world’s largest authoritarian regimes, and what implications this has on democratic governance. Several factors should be considered in Mongolia’s transition to a democratic state. Despite being a historically nomadic country, Mongolia has a long history of civil society, and experienced a peaceful transition of power from a Soviet-aligned communist system to a free-market democracy in the early 1990s. At the time of transition there was also no major ethnic strife or displacement of people, despite Mongolia’s sizeable Kazakh minority. Additionally, given Mongolia’s geopolitical location in North Asia, it has received substantial foreign aid and foreign investment in comparison to its size. It does not clearly fit into the Central Asian bloc, nor does it adhere to the other high-income countries of Northeast Asia, ensuring that it has relatively more foreign investment per capita than other similar countries.
Mongolia’s status as a democracy is also a strategic foreign policy position. By differentiating itself from its authoritarian neighbors China and Russia as a democracy, Mongolia pitches itself as a bastion of democracy to its “third neighbors” – democratic countries such as the U.S., the European Union, Japan, and South Korea. Thus, functioning as a democracy allows Mongolia to have greater leverage as a small country, balancing against its neighbors to retain autonomy while still working within a functional regional framework to develop its economy and investments.
While Mongolia faces a series of challenges to upholding its democratic institutions – government corruption furthered through patronage networks, the “resource curse” and a lack of economic diversification outside of mining, and waning external development assistance – the geopolitical advantages in maintaining democratic frameworks as well as genuine support among Mongolians for democracy ensure that the country will maintain its status as the sole democracy of North Asia..
Literature Review
There has been extensive literature on Mongolia’s democracy, but many of the more comprehensive overviews focus on the formation of Mongolia’s democracy and of its status as a unique extant post-Soviet democratic state. In comparison, the centering of the role geopolitics plays in ensuring the survival of Mongolia’s democracy is often assumed rather than laid out explicitly and further examined.
For example, Steven Fish (Fish 1998) and Morris Rossabi (Rossabi 2005) have written about Mongolia extensively, providing in-depth analysis of the factors that led Mongolia to pursue democracy. At the witness level, Mongolian politicians have also written about Mongolia’s democratic transition in the 1990s. This is clear when pulling from the memoirs of Mongolia’s last communist leader, party general secretary Jambyn Batmönkh, when he stated that “we few Mongols have not yet come to the point where we will make each other’s noses bleed,” particularly in the aftermath of the 1989 Tiananmen Square crackdown on student protestors (Tsedev 2024). Former Mongolian President Elbegdorj’s statements following his rise to power as a young pro-democracy activist in the early 1990s second this, noting that pro-democracy protests were overwhelmingly peaceful (Fukuyama 2024).
More recent works cite other reasons for Mongolia’s democratic continuity. Dr. Alicia Campi’s 2019 Mongolia’s Foreign Policy lays out an overview of the ways in which Mongolia has strategically balanced power between its two immediate neighbors of Russia and China and its broader “third neighbor” policy to pull above its weight in advancing its national interests (Campi 2019). Another recent book highlighting the role of civil society is Aubrey Menard’s Young Mongols, which argues that it is youth engagement and civil society organizations that provided not only the basis for democracy in Mongolia, but its durability (Menard 2020).
In contrast, Verena Fritz provides a framework for the problems inherent within Mongolia’s democratic framework, listing three important drivers of corruption – foreign aid, privatization, and natural resource extraction (Fritz 2007). This fits into larger discussions about the relationship between democracy and corruption. While theoretically democracy should reduce corruption by holding actors more accountable, this is not always the case. Instead, McMann et al. (2019) argue that corruption and democracy have an inverted curvilinear relationship: corruption is low at high levels of democracy as well as low when democracy is absent, but it tends to be high at modest levels of democracy. However, this study also indicates that the presence of democratic components can mitigate and reduce corruption.
In a broader sense, Mongolia fits the structural models of a democratic state. While at times weak, and increasingly leaning toward a pro-presidential model, Mongolia’s government framework is a semi-presidential governance model that maintains a parliament and prime minister in addition to a president. According to a pivotal 1993 study on parliamentarianism versus presidentialism by Alfred Stepan and Cindy Skach, it is Mongolia’s parliament and limitations on presidential power that have supported the country in maintaining democratic institutions by limiting the powers of the president (Stepan and Skach 1993). Likewise, Luckham et al. argue that the existence of both democratic institutions and democratic politics among the people create a greater likelihood of a successful democratic state, both of which Mongolia maintains (Luckham, Kaldor, and Goetz 2000).
However, many of these publications assume that Mongolia will maintain the same relations, investment, and support from its “third country” neighbors, including the United States, the European Union, Japan, and the Republic of Korea. While engagement of Mongolia in the larger global framework continues, the reduction in outside development support may change the emphasis that Mongolian leadership and the larger Mongolian public puts into maintaining democratic frameworks. Given the existing literature on Mongolia, it is critical to address both how the country can maintain democracy in tense geopolitical situations as well as how internal stressors, such as corruption, impact existing democratic institutions.
Data and Methodology
This report draws from multiple case studies as well as 10 individual interviews and panel discussions with key stakeholders and experts in the U.S., Japanese, and Mongolian diplomatic and development communities. The majority of interviews were conducted between June 2024 and October 2024 onsite in Ulaanbaatar, with some conducted virtually through video calls. This report also draws heavily from the findings produced by NGOs and international multilateral institutions on the status of political institutions in Mongolia in addition to analyzing the surveys provided by the Sant Maral Foundation. However, the scope of this report is limited, and based primarily on the reinterpretation of previous case studies in addition to new evidence garnered based on changing political events.
Findings
Mongolia has existed as a democratic state since 1990. One of the factors that initially set Mongolia apart from other former communist states was its peaceful transition of power. The former communist politburo stepped down and allowed democratic structures to take place. This avoided the risk of bloodshed amongst Mongolians, thereby establishing a precedent for peaceful transitions of power (Tsedev 2024). This came in the aftermath of the Chinese crackdown on dissent in 1989 at Tiananmen Square, but also seemed to be a sincere effort to abide to the will of the people in the face of historical protests led by students and pro-democracy activists. In the words of a U.S. State Department official, “Mongolia is trying to be a democracy, [with a] sincere effort to be a democracy even if its efforts aren’t perfect.”
This embrace of democratic governance remains a critical balancing act for Mongolia, as it is geopolitically constrained between its two powerful neighbors – China and Russia – that control the vast majority of its economic output and much of its energy supply. China alone accounted for 91% of Mongolian exports and 41% of Mongolian imports in 2023, and Mongolia remains dependent on Russia for 20% of its electricity and the majority of its fuel supply (Blackwood 2025).
In order to provide itself more room to conduct independent foreign policy, Mongolia utilizes a “Third Neighbor” strategy to invite more diverse political engagement. Originally coined by former U.S. Secretary of State James Baker in August 1990 (Campi 2019), the “Third Neighbor” policy has come to signify Mongolia’s larger connections to the world and play a key role in Mongolia’s foreign policy strategy. According to Mongolist Dr. Julian Dierkes, this connectivity extends to international institutions, with Mongolia’s involvement in United Nations peacekeeping operations making “Mongolia visible in a way internationally that is out of proportion to its significance.”
On the other hand, Mongolia’s simultaneous rapid integration into free market structures as the Soviet Union collapsed led to nearly ten years of deep economic downturn despite foreign direct investment and humanitarian aid. While the economy of Mongolia has increased significantly since this time, the disintegration of many local industries and outsourcing of manufacturing under privatization in the 1990s has led to a cyclical “bust and boom” economic structure based primarily on mining. The mining sector accounts for over 25% of Mongolia’s gross domestic product (GDP) (Blackwood 2025), which has led to irregular real GDP growth, ranging from the lows of -2.1% real GDP growth in 2009 to 17.3% real GDP growth in 2011 (IMF 2024). However, as noted by a U.S. State Department official, there are few other areas to invest in, creating a challenging investment environment. While copper smelting and cashmere production offer opportunities for industrialization, Mongolia’s limited manufacturing capacity against China’s absolute advantage renders the situation moot, perpetuating its reliance on mining. Additionally, foreign investors are concerned about Mongolia’s unpredictability, and “don’t trust that the legal system will be upheld,” with a lack of legal recourse and enforcement agencies.
This emphasis on mining has also exposed Mongolia democracy to one of its biggest stressors: corruption. Corruption has long been an issue and vulnerability of Mongolia. It is built into the political system, as political parties are primarily driven by patronage networks and business investments rather than political ideals (Campbell et al. 2025). This can be depicted in two recent corruption scandals within Mongolia (see Appendices A and B) regarding government officials’ misuse of funds and bribery perpetuated through public institutions.
On the other hand, despite these clear public concerns of corruption being noted and acted upon by government officials, resulting in 2023 and 2024 being declared “Years to Fight Corruption” (Lkhaajav 2024), there has been a lack of meaningful change targeting high-level corruption in the government. While major public protests have taken place against these acts of corruption, the Mongolian government has instead used its role to facilitate crackdowns on dissent through enforcing criminal penalties for “spreading false information” on NGOs, journalists, and individuals critical of the government (U.S. Department of State 2023). When questioned about government pushback against anti-corruption activists, a Mongolian Ministry of Foreign Affairs official refuted this claim, stating support for protestors and the need for government accountability.
That is not to say no positive actions are taking place. While high-level corruption remains a major issue, in 2020 the government launched E-Mongolia, an online platform to provide government services directly to citizens that reduced the prevalence of lower-level public service bribery (Lkhaajav 2024). Likewise, Mongolia was put on the “grey list” of the Financial Action Task Force (FATF) in 2017 for its failure to tackle activities related to money laundering, combating terrorism, and illegal financing issues. However, the country was removed from the list in 2020 by fulfilling six of the fifteen insufficiently implemented tasks (out of a total of 40 recommendations) and ultimately became the first country in Asia to fully comply with all 40 FATF recommendations in 2023 (Enkhbat 2023).
There is a sincere desire among Mongolians to maintain and strengthen their democracy. Analyzing the results of the 2024 survey results conducted by the Sant Maral foundation (Sant Maral Foundation 2024), 79% of Mongolians responded that a democratic system was “good” or “rather good”. At the same time, 39.4% of respondents thought that a presidential form of state was more suitable for Mongolia. This is in contrast to the literature suggesting that presidential states are more likely to regress on democratic traits (Stepan and Skach 1993), but is a natural response for a citizenry frustrated with their government and seeking out a strong leader to offer simple and effective solutions.
Similarly, there remains a strong trust in Russia among Mongolians. In the 2024 survey, 69.3% thought that Russia was the best partner for Mongolia, with China garnering 33%, and 28.1% in favor of Japan, followed by South Korea, the U.S. and European countries. While another question, “If Mongolia face[s] a major crisis, from which country will it be able to get support?”, also saw Russia as the top pick at 41.4% in the nationwide results, the second choice was international institutions, such as the United Nations, at 28.1%.
This aligns with Mongolia’s political actions. Russian President Vladimir Putin conducted a visit to Mongolia in September 2024, the first such foreign visit of President Putin following the International Criminal Court’s (ICC) March 2023 arrest warrant of the Russian president for war crimes concerning the abductions of children from Ukraine (Corder and Casert 2023). While the ICC issued a press release finding that Mongolia, an ICC member state, failed to fulfil its member obligations by not arresting Putin, broad support for the international community at large remains. This is evident in Mongolia’s engagement in the operations of multilateral institutions, with Mongolia being the 23rd largest contributor of troops of UN peacekeeping operations as of 2021, despite only having a population of 3.3 million people (Blackwood 2025).
Despite the public’s trust of Russia, the largest development assistance projects in Mongolia arise from international financial institutions, with the World Bank group and the Asian Development Bank (ADB) as the most substantive development lenders and financiers of Mongolia. As of the 2022 financial year, the World Bank lending commitments to Mongolia approximated US$151 million with a focus on supporting economic growth through the mining sector and economic diversification (World Bank Group 2021). Likewise, the ADB had a total of US$203.98 million in funding commitments for the 2022 financial year, with a push toward pursuing fewer-but-larger projects and more cost-sharing arrangements going forward. While much of this was in sovereign funds, these represent large global investments in the country, at the cost of incurring long-term debt to Mongolia. In comparison, the country-level investment in Mongolia was much more modest. The government of Japan provided approximately US$14.9 million in 2022 to Mongolia for technical cooperation and grant aid (JICA 2023), whereas the U.S. provided an estimated US$12.5 million in 2023 (Blackwood 2025). However, whereas Japan provided grants due to Mongolia’s previous inability to pay back loans, the future of U.S. investment and aid is at risk.
While the U.S. has previously served as Mongolia’s “north star” (Campbell et al. 2025), guiding the country symbolically toward democracy, the future of U.S. support remains elusive. With the Trump administration’s dismantlement of the U.S. Agency for International Development (USAID) much of the development cooperation between the two remains at risk. While the biggest U.S. development investment project – a five-year, US$350 million compact to build critical water infrastructure in Ulaanbaatar – is through the Millenium Challenge Corporation (MCC), most of the agency’s programs are at risk as well (Blackwood 2025). In reference to potential funding cuts of the MCC project, Mongolian government officials at the Embassy of Mongolia in the United States said that “if the project is not completed by the U.S., the Mongolian government will not have enough funds to complete the project on their own and will need to seek out other partners,” i.e. China or Russia. Together with potential new economic barriers in the form of 10% tariffs on Mongolian goods to the U.S., in addition to the indirect fallout of high tariffs on all Chinese goods to the U.S., Mongolia may be forced to further distance itself economically from the United States. This in turn may undermine relations with the U.S. as a whole, driving Mongolia closer to Russia and China if further “third neighbor” support fails to materialize.
Conclusion
Mongolia remains a state with democratic ideals despite its geographical and political constraints. While underdevelopment and corruption remain major issues and have the potential to undermine Mongolia’s democracy, the state continues to maintain democratic elements with elections, the ability of citizens to protest government actions, and the government itself changing to abide with the international rule of law. Mongolia’s status in the world remains a precarious balancing act, with its economic ties to China, political endorsement of Russia, engagement in international organizations, and relationship to the U.S. unresolved. However, Mongolians, despite their concerns of the current government, have a vested interest in maintaining democracy, and thus the democratic framework of Mongolia is likely to endure, if still fragile and in-progress.
Acknowledgement
Thank you to Dr. Kent Calder and the Reischauer Center for supporting me in pursuing my research, Dr. Alicia Campi for her kindness and passion, and Harriet Downer for granting me the space to grow and thrive.
Biographical Note of the Author
Monica Weller is an independent scholar focused on Northeast Asia and development policy. She currently serves as a Program Officer at the Japan International Cooperation Agency in Washington, DC. She received her MA from Johns Hopkins SAIS in Japan Studies and International Economics with a focus on Conflict Management in 2022. Monica received a Fulbright award in 2018, serving at Khovd State University in western Mongolia. She previously interned with the U.S. State Department and conducted research as a Policy Research Fellow at the Reischauer Center for East Asian Studies. Her research interests include international development policy, Japanese foreign policy, and public policy reform with a focus on women’s political inclusion.
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Appendices
Appendix A: Development Bank of Mongolia
The state-run Development Bank of Mongolia (DMB) has supported long-term project loans for enterprises since its founding in 2012. Despite the intended investments in vital infrastructure projects, there have been many cases where government officials took out loans through the DMB and then did not use the money for the intended enterprises. In most cases, this was done through a nominally private sector actor (typically a close family member of a government official) securing funds for a project, and then simply not investing the funds in the project or failing to secure enough revenue from the projects to pay back the loan. While many actors are now being prosecuted for this with more than 460 lawsuits in action, the scandal took government money out the economic system for years, with the Development Bank grappling with a bond repayment of approximately US$800 million due at the end of 2023 (Chultemsuren and Aldar 2023). The delay in response can be seen as a failure of Mongolia’s weak judiciary system, and its subservience to the legislative and executive powers.
Appendix B: Coal Theft
In 2022, allegations surfaced that coal was being illegally transported across the Chinese border with high-ranking Mongolian officials and business leaders implicated in money laundering by providing Chinese clients with under the table rates. According to some estimates, the loss to the Mongolian economy was as high as US$11 billion (Dashpurev 2024), with the accused actors using the government funds to buy construction materials and invest in real estate holdings at the cost of the Mongolian economy. One of the reasons that those accused were able to conduct the scheme is due to the designation of coal deposits as an issue of “national security.” This allowed the government to manage all procurement of coal under closed competition and withhold information on the sale of coal, which in turn allowed the coal to be undervalued. In response to major protests in which thousands gathered to protest the money laundering allegations (Al Jazeera 2022), eight criminal cases were launched, with the former CEO of the state-owned coal company charged, and the Mongolian government amended its criminal laws in December 2022 to address corruption in strategic minerals.
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