How conflict abroad is re-shaping Mongolia’s operating environment

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Mongolia is a prime example of a country that is experiencing the significant effects of a distant conflict. The Russia-Ukraine war has escalated in 2026, especially with Ukraine demonstrating advanced long-range drone strike capabilities. Daily attacks in Russia have targeted vital infrastructure, including oil refineries, compromising Mongolia’s energy security.

What’s happening in Mongolia?

Mongolia has experienced countrywide fuel supply shortages in recent months. Prices are rising amid higher import costs, including to petrol and diesel, with the former increasing by approximately 550 Mongolian tugriks (£0.12) on 12 October. Long queues have been reported at petrol stations, including in Ulaanbaatar, causing hours-long delays. Some have closed altogether. Logistics and business operations have experienced notable disruption.

In response, the government has attempted to impose fuel rationing measures, punish stockpiling and introduce policies that reduce fuel consumption, such as alternating licence-plate schemes.

These steps have not improved the situation for Mongolians, and the public has grown increasingly restless. Hundreds of protesters gathered in Sukhbaatar Square and surrounding roads on 1st October to denounce the fuel shortages and rising prices.

What does this mean?

The Russia-Ukraine conflict is unlikely to reduce in intensity into early 2027. Russia has historically increased attacks on Ukraine during the winter months and there has been little diplomatic progress in ending the conflict. Ukraine is likely to respond to Russia’s pressure campaign with further long-range drone attacks, increasing the likelihood of longer-term disruption to fuel exports. Approximately 95% of Mongolia’s fuel imports are sourced from Russia, and while they have traditionally been viewed as a reliable partner, Mongolia is uniquely exposed to Moscow’s own defensive vulnerabilities.

Mongolia’s geography and operational environment is ill-suited to improving the fuel supply situation in the short term, informing the deteriorating trend. The country is vast and reliant on road travel for connectivity, especially via diesel-powered vehicles. The country lacks domestic refining capabilities and currently has limited means to quickly develop the required infrastructure for self-sufficiency; Mongolia’s first domestic oil refinery is under construction but not expected to be operational until 2028. Fuel reserves are inadequate. Electric and hybrid vehicles are likely to increase in popularity, but supporting infrastructure remains underdeveloped, and movement towards renewable energy is a longer-term transition. These structural conditions expose Mongolia to inflated import costs, economic decline, and the increasing likelihood of shortages into 2027.

The disruption has caused Mongolia to pivot towards new strategic partners and shift its reliance away from Moscow. The fuel situation has almost certainly forced the government to re-evaluate its supply chain exposure and dependency on Russia. Central Asian countries like Kyrgyzstan and Tajikistan are in similar situations and have also looked to alternative suppliers over recent months. While reliance on Russia is unlikely to change in the medium term, Mongolia is anticipated to gradually diversify its supplier base and reduce the severity of external shocks. The petroleum supply agreement with South Korea in late July demonstrates the need to improve energy security and reduce reliance on a single point of failure. Other countries are likely to take advantage by positioning themselves as more reliable suppliers, including China.

Fuel supply remains erratic despite strategic shifts, raising the risks of second-order effects. Travel and operational disruption are increasingly likely, including in Ulaanbaatar. Tourist numbers are expected to decline over concerns of fuel shortages, with the US Embassy in Mongolia advising citizens in August to defer non-essential travel. The protest activity in Ulaanbaatar in early October represents an uptick in public agitation that will likely continue to simmer over the short term. The government, already under pressure this year from grievances linked to the rising cost of living, governance, internal division and corruption, is vulnerable. Protest activity could morph into wider anti-government sentiment and larger demonstrations the longer the shortages persist. Unrest is unlikely, though there is precedent in Central Asia for fuel shortages or price increases to catalyse violent protest movements.

Mongolia’s fuel supply shortages reflect multiple themes that are analysed within Risk Radar 2027, including the importance of interconnected systems and establishing resilience across multiple risk functions. Launching end of October, register now for early access, to receive it upon launch.

Recommended actions

• Monitor developments in Mongolia closely over the coming months and anticipate operational disruption while fuel shortages persist.
• Ensure planned overland travel in Mongolia accounts for delays at petrol stations and persistent shortages, including around Ulaanbaatar.
• Check flight schedules and maintain flexible travel plans in case of jet fuel shortages affecting operations at Chinggis Khaan International Airport (UBN).
• Consider bypassing flashpoints in case protests are organised, such as Sukhbaatar Square in central Ulaanbaatar.
• Map supply chain dependencies and remain aware of the risks of overdependency on certain suppliers.