National Security Concept of Mongolia has explicitly declared the nation to have a "balanced relationship" with its two neighbors, giving them a top priority in foreign relation (National Security Concept of Mongolia 2007). The document has also interpreted the meaning of the "balanced relationship" in that it includes "non-involvement and neutrality …to the disputes between the two neighbors unless the disputes affect the vital national interest of Mongolia (National Security Concept of Mongolia 2007)."
Balanced relationship was a word to refer to softer and more flexible policy than neutrality. Legal context of this word includes neutrality, which is conditioned by three major factors: first, scope of actors - Russia and China; second, intensity of conflict –dispute; and third, condition that is not affecting Mongolia's vital interest. By this, Mongolia has avoided the Swiss model of "strict neutrality," which required "some degree of political and economic weight, none of which Mongolia possessed" (Galsanjamts.S 1999, 14).
But in regional security context, Mongolian neutrality turns out to be a very complicated understanding. Neutrality is a certain commitment to self limitation (Lake 2001, 23), but Ulaanbaatar's' self limitation between the two neighbors further extends to region. In every regional issue ranging from Central Asia to Northeast Asia, both Russia and China have attached interests, in which are usually not conflicting, yet frequently different. Mongolia independently makes its decision and side whoever it deemed right or necessary if the issue does not directly affect the neighbors' interests. Mongolian Armed Forces' contribution to OFI has clearly demonstrated the example of this case. Ulaanbaatar, however, refrains from the issue if the neighbors' interests are seriously attached. The case of Six Party Talks evidently demonstrates this scenario, where Ulaanbaatar has deliberately abstained to take a part although there were strong internal pressure and discussion of joining the process, which have had a high possibility to become a regional multilateral security dialogue if it could have successfully concluded.
The latter case explains Mongolia's de facto neutrality in the regional security as a logical extension of its balanced relationship with the two neighbors. This de facto neutrality, which came from "smallness" of the nation, provides a good opportunity of neutral mediation of any regional security issue.
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