Mongolia is in a uniquely precarious situation, geographically, demographically and economically. Landlocked and isolated in East Asia, it has the lowest population density of any sovereign nation in the world. Its 3 million people, in a country about the size of Alaska, are dwarfed by 133 million Russians to the north and 1.4 billion Chinese to the south. It also has one of the coldest climates in the world. While these factors greatly constrain Mongolia economically, it has the world's best cashmere, huge eco- and cultural tourism potential and — most critically — an enormous mineral resource endowment.

Mongolia in the 20th Century

Mongolia has a proud cultural history dating to the founding of the Mongol Empire (1206-1368). Its later occupation by China's Qing dynasty lasted from 1691 to 1911, when Mongolia deposed the local ruler and declared independence. The 1915 Treaty of Kyakhta briefly reestablished Chinese control, but Russia helped Mongolia finally expel the Chinese after the 1917 October Revolution.



The Soviet Red Army settled in, abolished the Mongolian monarchy in 1924, and used Mongolia as a buffer with China. Mongolia maintained good relations with both China and the Soviet Union until the Sino-Soviet schism of the 1950s. By 1968 the Soviets had six military divisions in Mongolia, which Russia kept there until December 1992.

After the Cold War

Russia's departure left Mongolia facing two major problems. The most immediate was a severe economic crisis. Russia had accounted for 40 percent of Mongolia's national income, all of its gasoline, 90 percent of its imported machinery and half of its consumer goods. As Russia withdrew, Mongolia's economy effectively collapsed.

The second problem was existential. For the first time, Mongolia was truly on its own. Although Beijing recognized its independence in 1945, China by some accounts still harbors latent territorial designs on Mongolia. Some see Mongolia as part of China's historical domain, and Mongolian elites are concerned that younger and more nationalistic Chinese could press for annexation. China's history with Inner Mongolia, Tibet, Hong Kong and Taiwan — as well as Mongolia itself — isn't reassuring.

Because of this, protecting its sovereignty and preserving its independence is Mongolia's top priority. Its strategy has been to walk a geopolitical tightrope tethered by two policies: a "good neighbor" policy with Russia and China, and a "third neighbor" policy to build ties to other countries — especially the United States, Japan, South Korea, India, Germany, the United Kingdom, Australia and Canada.