India-Mongolia Sign MoUs to Boost Ties

Buddhist Diplomacy Meets Strategic Calculus: India-Mongolia Ink 10 MoUs

On October 15, 2025, Prime Minister Narendra Modi and Mongolian President Khurelsukh Ukhnaa formalized 10 Memoranda of Understanding (MoUs) during a high-profile summit in New Delhi. Among these agreements, a standout is India’s financial pledge to build Mongolia’s first oil refinery through a $1.7 billion line of credit, an unprecedented investment in Mongolia’s energy security. Just as striking is the cultural angle: India will digitize ancient Buddhist manuscripts housed at Mongolia’s famed Gandantegchinlen Monastery and dispatch a Sanskrit teacher to deepen historic ties rooted in Nalanda’s legacy.

Why This Breaks From the Pattern

India’s engagement with Mongolia has historically leaned on soft power—mainly cultural diplomacy rooted in Buddhist heritage. However, the refinery project signals a significant pivot: economic and strategic ambitions intertwining with cultural outreach. This is neither accidental nor routine. Mongolia’s rare earth mineral deposits (critical for EV batteries and tech hardware) align neatly with India’s green-energy transition goals. The refinery itself, though framed as a bilateral boost to Mongolia’s energy independence, ties Mongolia closer to India—indirectly counter-weighting China’s dominance in the region.

The introduction of gratis e-visas for Mongolian citizens further disrupts standard visa practices, prioritizing people-to-people ties in a way that complements economic cooperation. By contrast, India’s earlier Central Asia engagements (e.g., with Kazakhstan or Uzbekistan) focused on energy projects but left cultural and people-to-people mobility comparatively underdeveloped. This template—merging cultural, strategic, and civilian cooperation—could redefine India’s bilateral equation with smaller economies emerging from China’s shadow.

The Machinery Behind This Diplomacy

Two key institutions anchored these agreements: India’s Ministry of External Affairs and the Ladakh Autonomous Hill Development Council, Leh, which signed an MoU with Mongolia’s Arkhangai Province. This subnational linkage strengthens cultural diplomacy, particularly the Buddhist connection between Nalanda and Mongolia’s Gandan Monastery.

The refinery funding operates under India’s Development Cooperation Framework, executed through an Exim Bank line of credit. Here, the long-term financial commitment raises questions about repayment terms, interest rates, and the risks of creating debt dependency—a critique often leveled against Chinese infrastructure projects in Mongolia. Since India lacks the Asian Infrastructure Investment Bank’s institutional framework or China’s Belt and Road Initiative (BRI), execution entirely depends on bilateral commitment, a potential vulnerability.

Administrative oversight extends to multiple actors: India's Ministry of Petroleum and Natural Gas coordinates the refinery project, while the Archaeological Survey of India undertakes the restoration of Mongolia’s Bogd Khan Palace—an unusual breadth of actors for a single bilateral engagement.

What the Data Actually Says

While India’s $1.7 billion contribution to Mongolia’s refinery is headline-worthy, Mongolia’s broader economic dependency issues merit scrutiny. With 90% of Mongolian exports going to China and nearly 30% of its GDP linked to mining royalties from Chinese firms, India’s contribution barely dents Mongolia’s reliance on its southern neighbor. Moreover, Mongolia’s GDP (approximately $17 billion in 2025) indicates that this refinery funding accounts for nearly 10% of its economic output—an outsized influence compared to similar bilateral engagements like India’s support for Bhutan.

The cultural MoUs, although less financially quantified, reveal India’s preference for soft diplomacy. The digitization of Buddhist manuscripts ties both nations to a shared historical narrative but excludes Mongolia’s growing Christian minority (now nearing 4% of its population). This focus sustains an image of exclusive Buddhist-centric cooperation, which may alienate other demographics.

The Uncomfortable Questions

While the agreements frame India as an inclusive partner, two gaps stand out. First, the $1.7 billion refinery fund doesn’t address operational bottlenecks. This includes Mongolia’s energy infrastructure (which remains rudimentary), its dependence on Russian oil imports, and the logistical challenge of refining and exporting oil within a landlocked state. Will the project deliver feasible energy independence—or merely symbolic intervention?

Second, the political timing is delicate. With 2025 marking the 70th anniversary of India-Mongolia diplomatic relations, there is pressure to showcase deliverables. But does this anniversary-driven rush allow for institutional due diligence, especially across cross-sector coordination (soft power collaborations, defense promises, and mining exploration)? Bureaucratic execution across such diverse domains raises valid concerns, particularly where defense (joint exercises like "Nomadic Elephant") meets cultural outreach.

Comparative Anchor: Japan's Mongolia Strategy

Japan’s precedent offers relevant contrasts. In 2015, Japan signed a $300 million currency swap agreement with Mongolia alongside grants for skill development and AI integration across Mongolia's banking sector. While smaller than India’s refinery investment, Japan’s strategy diverged by avoiding extensive debt relationships through softer, non-infrastructure-centric aid models. Moreover, Japan paid more attention to project timelines—a chronic weakness in Indian aid programs, which often face prolonged delays. Is the Indian strategy scalable without incorporating Japan’s emphasis on transparent timelines?

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