Mongolia sits in a strategically important place between Russia and China, and its economy has been growing largely from mineral exports to its giant neighbour China.

But the Mongolian authorities have been looking for ways to export more to other Asian countries, and the Russian president's visit on Tuesday was seen as a key opportunity to strengthen ties.

"Russia will never forget Mongolia's help and support when Russia was fighting against the Nazis," Putin said, joining in a celebration to mark the 80th anniversary of a battle fought by Mongolian and Russian soldiers against the invading Japanese army in 1939.

Mongolian President Khaltmaa Battulga and Putin signed a series of agreements including joint investment funds to finance Mongolia's infrastructure developments, with the Russian president loaning 100 billion rubles ($1.5 billion) in a gift for the battle anniversary.

Battulga said he planned to use the aid to build new railroads to the Chinese border to open one more channel for coal and mineral export.

Battulga also stated that Mongolia hopes to build its own terminal in a Russian port to facilitate exporting its natural resources through Russia.

While the two countries have $1.7 billion annually in two-way trade, around 95 percent of it is Mongolia buying oil from Russia.

Putin's visit comes after US Defense Secretary Mark Esper made a rare visit to Mongolia last month on an Asian tour aimed at shoring up partnerships to counter China's growing influence in the region.