With Indian Help, Construction of Mongolia's First Oil Refinery to Begin in 2018

New Delhi (Sputnik) — Mongolia and India are expected to soon start the construction work at Mongolia's first oil refinery as the landlocked country hopes to eliminate its dependency on its

neighbors for energy needs. The Engineers India Limited (EIL) has developed the detailed project report (DPR) of the refinery while the Mongolian Oil Refinery will work as the focal agency

of the project. 

Furthermore, India has provided a line of credit, which includes a $700 million loan for the oil refinery and $264 million for oil pipelines. The loan was announced during Prime Minister

Narendra Modi's visit to the East Asian country in 2015. The 20-year loan will have an interest rate of 1.75 percent and principal payments will be waived during the first five years. 

The refinery will have a processing capacity of 1.5 million metric tons of oil per year and will annually produce 560,000 tons of gasoline and 670,000 tons of diesel fuel, as well as 107,000

tons of liquefied gas. The refinery could boost Mongolia's gross domestic product by 10 percent. Presently, Mongolia exports crude oil to China while importing petroleum products from the

Russian Federation. 

Mongolia is just recovering from a severe economic downturn caused by falling commodities prices, which, in turn, forced the country to renegotiate a $4.2 billion loan from Beijing.

After China Demurs, Mongolia Approaches India to Finance Oil Project19 December 2016, 13:58 GMTNew Delhi has been working on consolidating this new found strategic cooperation as evident

from the back to back high-profile visits of dignitaries between the countries scheduled for 2018. Rajnath Singh, India's minister of home affairs, is scheduled to visit Mongolia early next

year, which was originally slated for June this year, but had to be postponed as the minister suffered a bone fracture. Soon after that, Mongolian President Khaltmaa Battulga, a vocal critic

of China, will visit India. The Mongolian people had wholeheartedly supported Battulga in the election due to his advocacy for greater economic independence from China to which the country

exports 90 percent of its goods.

The Narendra Modi government hopes to cash in on this aspiration of the Mongolian public to divert the trade risk based on traditional bilateral connections. India was the first country

outside the then Socialist Bloc to establish diplomatic ties with Mongolia in 1955. India had also supported Mongolia in getting United Nations and Non-Aligned Movement (NAM) berths.