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. Last Updated: 07/27/2016

Caution Pays Off in Mongolia

ULAN BATOR, Mongolia -- Mongolia has more livestock than people, and one-third of the population lives below the poverty line. But what it lacks in might, the country makes up for in geography.

Sandwiched between Russia and China, Mongolia punches above its weight diplomatically, as its giant neighbors covet its mineral resources and Washington courts it as a beacon of democracy in Central Asia.

"For Mongolia, when it threw off the yoke of Soviet neo-colonialism in the early 1990s, they had to develop their own foreign policy and security policy for the first time in their modern history," said Robert Karniol, Asia-Pacific editor for Jane's Defense Weekly.

"They understood very well the central concern of being effectively a powerless state wedged between two giants."

The result is Mongolia's "Third Neighbor" policy, a careful tightrope in which it seeks engagement with everyone to avoid offending anyone.

Mongolia signed a friendship treaty with North Korea, a diplomatic pariah, in 2002, but it is also a darling of the United States for contributing troops to Iraq and Afghanistan and for its democratic governance in a region full of strongmen.

The country best known for its grasslands and nomads was ruled as a one-party state for much of the last century.

But last year U.S. Defense Secretary Donald Rumsfeld and President George W. Bush visited -- the first by a U.S. president.

"In his speech, he noted democracy was a real event in Mongolia," Mongolian Prime Minister Miyeegombiin Enkhbold said of the visit.

But while Mongolia wins accolades in Washington, its trickier gambit is balancing China and Russia, two powerful neighbors that flank its borders and have in the past controlled its territory.

"China and Russia are in great competition for Mongolia's natural resources," said Stephen Noerper, a Mongolia specialist and head of the Institute of International Education's Scholar Relief Fund.

While it may be casting a wary eye at its neighbor to the south -- which ruled it during the Manchu dynasty until the early 20th century -- Mongolia also knows its tiny $1.5 billion economy is growing on the back of China's boom.

Mongolian President Nambariin Enkhbayar made his first state visit abroad to China, and the country is Mongolia's biggest export market.

"They realize that despite the old animosities of centuries past, China is the name of the game," Noerper said.

For now, Mongolia's policy of being friendly with everyone and in bed with no one seems to be paying dividends.

In August, Mongolia will host Khan Quest, the biggest multinational military training exercise in Asia, involving more than 10 countries.

Mongolia's geography -- landlocked, windswept and cold -- no longer seems like such a burden.