Mongolia’s exports are 90%-dependent on natural resource extraction. In October 2023, during a state visit to France, Mongolian President Ukhnaa Khurelsukh signed a landmark agreement that paved the way for a $1.7bn investment by French government-owned Orano Mining.

The agreement allows Orano to establish Mongolia’s first uranium mining and processing venture. For Mongolia’s landlocked economy, mining partnerships are strategic tools for foreign policy endeavours.

Uranium has long been a critical mineral for the global energy system, fuelling vast amounts of reliable and low-carbon nuclear energy. As the world strives towards net-zero emissions targets, uranium is poised to enable unprecedented expansion of nuclear generation.

It is this global transition that is driving Mongolia’s ambition to emerge as a new leader in the uranium market, adding diversity to its already prosperous copper export capabilities. 

With deep and relatively untapped uranium reserves, Mongolia is attracting global investment interest and it has chosen the French nuclear industry as its first preferred partner to support its breaking into the market.

The World Nuclear Association notes that Mongolia’s uranium reserves are approximately 60,500 tonnes. Since the closure of the uranium mining town, Mardai, Mongolia has established uranium exploration agreements with China, Russia and the Czech Republic. But France will be the first to exploit and extract uranium from Mongolia.

To Mongolia, unlocking the potential of Mongolia’s substantial uranium resources bestows major benefits. It is diversification within the mining sector and its investors. 

Diversifying foreign investors is beneficial as a strategic tool to expand Mongolia’s third-neighbour foreign policy, where Mongolia seeks to develop its relations with countries other than China and Russia.

The economic benefits of the Orano agreement are substantial. According to the government, Ulaanbaatar is estimated to earn a total of $1bn in tax revenue across the forecasted 30-year lifetime of the mine. 

A significant portion of the revenue, approximately $47mn, will be designated as payment for Orano’s use of Mongolia’s mineral resources. As per the Environmental Protection Law of Mongolia, the state assumes ownership of natural resources and requires payment from non-government entities to use natural resources.

The project has been established by Badrakh Energy – a collaborative effort between Orano and the Mongolian state-owned enterprise MonAtom – and is expected to span a total of 47 years. Preparatory work is scheduled from 2024 to 2027, uranium production from 2028 to 2060, and subsequent rehabilitation activities from 2061 to 2070.

The chairman of Orano Group, Claude Imavuen, argued that “the position of Mongolia – geopolitically situated between Russia and China – and its rich natural resources” make Mongolia an important partner for France.

For France, uranium from Mongolia represents more than just a diversification of resources – it is a vital fresh reservoir that could fulfil forthcoming domestic and European Union demand for uranium. 

France derives about 70% of its electricity from nuclear energy and it has been active in pursuit of uranium in Mongolia and Central Asia, including Kazakhstan and Uzbekistan.

According to the World Nuclear Association’s 2021 Nuclear Fuel Report, demand for uranium is forecasted to increase by 27% by 2030. Anticipating an increase in global uranium demand, Mongolia is strategically positioning itself as a significant contributor to global climate efforts.

With global competition for critical minerals compounding the already tense geopolitics of the region, Mongolia continues to navigate a delicate path as it looks for partners to support its ambitious plans for economic growth. 

Mongolia’s foreign policy looks to become a vital link between Europe and Asia, especially during the global transition to renewable energy.

Bolor Lkhaajav is a researcher specializing in Mongolia, China, Russia, Japan, East Asia and the Americas.

This article was originally published here by East Asia Forum and is republished under a Creative Commons licence.