Mongolia borrows $1 billion from India to set up oil refinery

Ulaanbaatar, December 26: To decrease the dependency on China, Mongolia had approached India for funding it for establishing an oil refinery that could boost the nation’s gross domestic product by 10%. In response Mongolians got a smile on face as India has decided to give $1 billion as a loan to Mongolia.

The Mogolian government intends to use $700 million of the loan for an oil refinery and $264 million for oil pipelines, according to a statement on its website last week. Mongolian PM Erdenebat Jargaltulga has instructed relevant ministries to negotiate with the Export-Import Bank of India, according to the statement.

Mongolia is looking to India and other investment partners as its economy contracts and its debt burden grows. Last month, China backed off from talks with Ulaanbaatar over a loan package to help the economy after a dispute over the visit to Mongolia by the Dalai Lama.

The refinery will have a capacity to process 1.5 million metric tonnes of oil per year. It will produce 560,000 tonnes of gasoline, 670,000 tonnes of diesel fuel and 107,000 tonnes of liquefied gas annually. The refinery could boost Mongolia’s GDP by 10%, according to the statement.

The 20-year loan will have an interest rate of 1.75% and principle payments will be waived during the five years.