India Builds Mongolia's First Oil Refinery — and Deepens Ties With a Landlocked Neighbour

India's top diplomat arrived in Mongolia's capital, Ulaanbaatar, on June 22 for a two-day official visit. External Affairs Minister (EAM) S. Jaishankar — the minister responsible for India's foreign policy and international relations — met President Khurelsukh Ukhnaa, Foreign Minister Battsetseg Batmunkh, and other senior Mongolian officials. He described the talks as "very warm, very productive, very open."

To understand why this visit matters, a little background helps. India and Mongolia established formal diplomatic ties 70 years ago, in 1955. Over the decades, the two countries have built a friendship rooted in shared Buddhist traditions, democratic values, and people-to-people connections. They officially became "Strategic Partners" — a formal diplomatic status meaning they agree to work closely on security, trade, and other important areas. They even call themselves "spiritual siblings," reflecting deep civilisational bonds through Buddhism.

The visit was not a one-off event. It followed a 10-year strategic roadmap — essentially a long-term plan of action — agreed upon in 2025 when Mongolian President Khurelsukh made a state visit to New Delhi. Jaishankar's trip to Ulaanbaatar was partly meant to check how well both sides are putting that roadmap into practice.

The centrepiece of the visit was a tour of the Mongol Oil Refinery project in Dornogovi Province, a region in southern Mongolia. India is funding and building this refinery — Mongolia's first-ever greenfield oil refinery, meaning it is being built entirely from scratch on new land, rather than upgrading an existing facility. India is financing this through a USD 1.7 billion line of credit, which is a loan arrangement where India gives Mongolia access to funds specifically to pay for this project. Once complete, this refinery is expected to become Mongolia's second-largest foreign investment project, after the massive Oyu Tolgoi copper and gold mine run by mining giant Rio Tinto.

Beyond the refinery, both countries reviewed progress on several other India-supported projects: an ICT centre (a facility for information and communication technology training), a school, and several Quick Impact projects — small, fast-moving development initiatives designed to show visible results quickly. Jaishankar also expressed India's interest in buying coking coal — a specific type of coal used to make steel — from Mongolia. India's steel industry is growing rapidly and needs a steady supply, making Mongolia's mining resources strategically useful.

Defence cooperation is quietly growing too. India set up a defence attaché — a military diplomat posted to a foreign country — in Ulaanbaatar in 2025. India has also participated in Mongolia's Khaan Quest multinational peacekeeping exercise since 2006, while Mongolia joins India's Nomadic Elephant counterterrorism drill. These joint military exercises help both armies train together and build trust.

Culture and soft power — the ability to influence other countries through shared values and culture rather than military force — also featured prominently. Jaishankar visited the Gandantegchinlen Monastery, a major Buddhist site in Ulaanbaatar. Both countries had earlier agreed to digitise one million ancient Buddhist manuscripts stored there, preserving them for future generations. Mongolia also participates in the International Solar Alliance — an India-led global initiative to promote solar energy — and the International Big Cat Alliance, another India-led effort to protect endangered big cats like tigers and snow leopards.

Looking ahead, both sides are exploring new areas of cooperation, with English-language skill development being one example. After Ulaanbaatar, Jaishankar flew to Seoul, South Korea, for further talks — suggesting that the Mongolia visit was one leg of a wider diplomatic push across the Indo-Pacific, the broad region stretching from the Indian Ocean to the Pacific Ocean that has become central to global power competition.