India Builds Mongolia's First Oil Refinery — and Deepens Ties With a Landlocked Neighbour
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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 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", and 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 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, through a USD 1.7 billion line of credit. 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 school, and several Quick Impact projects. Jaishankar also expressed India's interest in buying coking coal 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 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 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 and the International Big Cat Alliance.
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.
Why it matters
Mongolia is a landlocked country sandwiched between Russia and China — two of India's most complicated neighbours. By building deep economic, cultural, and defence ties with Mongolia, India quietly expands its presence in a region where China's influence is dominant. The USD 1.7 billion oil refinery alone is transformative for Mongolia, which currently depends heavily on fuel imports, and it gives India a major economic foothold. Access to Mongolian coking coal could also ease India's growing demand for steel-making raw materials. More broadly, the visit fits into India's wider strategy of building partnerships across the Indo-Pacific to balance against Chinese influence and assert itself as a responsible, development-focused power — not just in South Asia, but across Asia as a whole.
Test yourself
1. Why did India's External Affairs Minister S. Jaishankar visit Mongolia in June?
2. How many years of diplomatic relations did India and Mongolia celebrate in 2025?
3. What is the value of India's line of credit for the Mongol Oil Refinery project?
4. What does the term 'greenfield oil refinery' mean?
5. Which project is currently Mongolia's largest foreign investment, ahead of the Indian oil refinery?
6. Why is India interested in importing coking coal from Mongolia?
7. In which year did India first participate in Mongolia's Khaan Quest peacekeeping exercise?
8. What was agreed regarding the Gandantegchinlen Monastery during President Khurelsukh's 2025 visit to India?
9. What is the International Solar Alliance?
10. Where did Jaishankar travel after his visit to Ulaanbaatar, Mongolia?
Your notes
Source: The Diplomat – Asia-Pacific