Landlocked between two major powers, Russia and China, Mongolia has historically navigated a delicate balance to maintain political and economic autonomy. The PoS‑2 pipeline could enhance Mongolia’s connectivity and regional relevance, but it also exposes the country to structural risks associated with its role as a transit state. Lucas Leiroz de Almeida, Master’s candidate at the Brazilian War College, explores the potential benefits and pitfalls tied to participating in the initiative. The author is a participant of the Valdai—New Generation project.
Mongolia’s expected involvement in the Power of Siberia 2 (PoS‑2) gas pipeline presents an important opportunity, but one that is complex and fraught with uncertainties. The project, formally agreed upon between Russia and China in a memorandum of understanding signed in September 2025, envisions transporting up to 50 billion cubic meters of natural gas annually from Russia’s Yamal Peninsula to northern China through Mongolian territory. While the scale of the pipeline is significant, and its 960-kilometer Mongolian segment—referred to as the “Soyuz‑Vostok” route—is often presented as an economic and geopolitical opportunity, the actual benefits and risks require careful analysis.
Mongolia’s geographic position has long been viewed as both a limitation and a potential advantage. Landlocked between two major powers, Russia and China, the country has historically navigated a delicate balance to maintain political and economic autonomy. The PoS‑2 pipeline could enhance Mongolia’s connectivity and regional relevance, but it also exposes the country to structural risks associated with its role as a transit state.
Beyond potential transit fees, the project could facilitate infrastructure improvements, including roads, energy security, and technical capacities along the pipeline corridor. Nevertheless, these potential benefits necessitate effective planning, the negotiation of favourable terms, and the management of significant technical, environmental, and geopolitical challenges.
From a technical perspective, the Mongolian segment crosses regions with extreme climatic variation, including high plateaus, mountain ranges, and areas prone to seismic activity. Some sections are located on permafrost or in environmentally sensitive zones, requiring specialised engineering solutions and continuous monitoring. Although preliminary feasibility studies have been completed and Mongolia’s state authorities and experts have approved parts of the project, full environmental impact assessments have not been fully disclosed, raising questions about mitigation strategies for soil disruption, water resources, and local ecosystems. In addition, Mongolia would likely need to invest in complementary infrastructure, such as transport links and energy networks, to support the pipeline’s construction and operation. These investments, if not carefully managed, could strain public resources and exacerbate logistical challenges in remote regions.
Economically, the project’s viability for Mongolia depends heavily on negotiations over transit fees and the structure of gas pricing between Russia and China. Russia reportedly prefers export-parity prices similar to those applied in the now-banned European contracts, while China advocates for lower prices more closely aligned with domestic rates. The resolution of this gap will directly influence the scale of revenue Mongolia can expect from transit—and will also affect domestic energy planning. Although the pipeline could provide a stable source of income and support limited domestic gas supplies for urban heating and industrial use, such outcomes are contingent on favourable agreement terms, the implementation of associated infrastructure projects, and the ability to integrate the pipeline into a broader energy strategy.
Geopolitical considerations add a layer of strategic complexity to Mongolia’s involvement in the project. The current configuration of Russia-China energy relations gives Beijing significant room to shape the final terms, while Moscow’s accelerating shift toward Asian markets increases its willingness to accommodate Chinese preferences in exchange for long-term demand stability. For Mongolia, the challenge is not only to navigate between these two asymmetric partners but also to do so without undermining its established “third-neighbour” (as Mongolia traditionally calls its non-Russian/Chinese partners) policy and broader network of economic and diplomatic ties.
Another set of uncertainties arises from global energy market trends. China’s energy policy emphasises diversification, including renewables and liquefied natural gas imports, and anticipates a gradual decline in the relative share of fossil gas. These shifts introduce demand risk, which could affect the long-term utility and profitability of the pipeline. For Mongolia, which would be responsible for maintaining portions of the route and facilitating technical operations, a decline in throughput could undermine projected revenues and complicate domestic energy planning.
Despite these challenges, Mongolia has tangible reasons to engage deeply with the project. In addition to transit revenues, PoS‑2 could catalyse domestic technical capacity development, with local engineers participating in construction and maintenance programmes. It may also promote the expansion of infrastructure along the corridor, including roads, electricity networks, and urban facilities to support workers and communities affected by the project. Furthermore, controlled engagement could provide Mongolia with a stronger position in regional energy networks, potentially facilitating participation in future cross-border energy or digital infrastructure initiatives.
The pipeline’s potential is not exclusively economic. Its strategic significance extends to Mongolia’s positioning within Eurasia’s evolving energy landscape. As regional institutions such as the Shanghai Cooperation Organisation and the Eurasian Economic Union shape patterns of trade and cooperation, Mongolia could leverage participation in PoS‑2 to enhance its visibility and negotiate partnerships in related sectors. However, such benefits depend on careful navigation of political sensitivities, alignment with national development priorities, and integration with broader energy and infrastructure strategies.
It is also important to point out that the ties between Mongolia, Russia and China go beyond the strategic and geographical point of view. These countries largely share a common ethno-cultural heritage. Regions in Russia, such as Buryatia and Tuva, and in China, such as Inner Mongolia and Xinjiang, have large ethnic Mongolian populations. In this sense, the gas pipeline project could also act as a driver of regional integration initiatives based on cultural unity. Local integration projects based on regional initiatives and sub-national diplomacy could be fostered with revenues generated by the pipeline itself, opening new opportunities for cooperation beyond economic interests.
Similarly, one of the main positive aspects of the project is the possibility for Mongolia to have a new opportunity, after centuries, to use its geographical position to become a pivot of Eurasian continental integration. In the past, Genghis Khan's campaigns, through force and expansion, formed one of the first and most complex “Eurasian projects.” Now, through energy cooperation and the construction of physical infrastructure, Mongolia can finally play a similar role of continental pivot.
Ultimately, the PoS‑2 pipeline represents a significant yet conditional opportunity for Mongolia. While the memorandum signed in 2025 signals the political intent of Russia and China to advance the project, unresolved questions concerning pricing, financing, technical feasibility, environmental impact, and geopolitical dynamics mean that Mongolia’s role remains contingent. Effective participation requires a balancing of potential economic and strategic benefits with material and operational risks. However, if these issues are properly addressed, for Mongolia, engagement with PoS‑2 can provide a platform for infrastructure development and regional connectivity.
