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OO RUEHWEB

DE RUEHUM #0320/01 1160806
ZNR UUUUU ZZH
O 260806Z APR 06
FM AMEMBASSY ULAANBAATAR
TO RUEHKO/AMEMBASSY TOKYO IMMEDIATE 2065
INFO RUEHC/SECSTATE WASHDC PRIORITY 9807
RUEHUL/AMEMBASSY SEOUL 2198

UNCLAS ULAANBAATAR 000320 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TOKYO please pass to Senior Advisor Keith from Charge 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM ECON MG
SUBJECT: Briefer for EAP Senior Advisor Keith 
 
Sensitive But Unclassified -- Not for Internet 
Distribution 
 
¶1.  We look forward to your visit, which will provide a 
good opportunity to both review the relationship and 
push selected issues. 
 
Background on Post 
------------------ 
 
¶2.  (U) Briefings during the Friday country team will 
provide you with background supplementing this 
scenesetter.  The one area which time does not permit 
you an event is our important aid program.  For a 
second year in a row, the program (all ESF) has been 
funded at $7.5 million; this is down from the steady 
$10 million rate that had provided continuity. 
Mongolia and other MCC-eligible countries have been 
"taxed" 25% of their previous allocations -- even 
though a compact has yet to be signed and there will be 
no program overlap between USAID and MCC.  Moreover, 
without continued sustained efforts to push forward 
economic policy reforms and combat growing corruption - 
two hallmarks of the USAID program - it will be 
difficult to ensure the conditions that are necessary 
to successfully implement an MCC compact.  USAID 
currently provides economic policy advice which 
supports macroeconomic policy reforms, competitiveness, 
and growth; promotes microenterprise development in 
rural and peri-urban areas; supports judicial reform; 
bolsters parliament and the political participation of 
women; fights trafficking in persons; and aids the 
fight against corruption. 
 
¶3.  (U) The mission itself is in generally high spirits 
after getting good reviews for last year's 
extraordinary string of visits: Peace Corps Director in 
July; Speaker Hastert in August; Secretary Rumsfeld in 
October; and the President and First Lady and Secretary 
Rice in November.  By removing one major problem and 
effective bar to assignment of families, the new 
housing compound into which American personnel moved in 
2003 continues to pay benefits in morale and 
recruitment.  While the embassy building itself has 
benefited from the "wellness" program, managing the 
growth of personnel and agencies continues to require a 
shell game as we add onto and reconfigure the existing 
space (we will soon have added six new American 
positions in the last year, even before MCC comes in). 
We have asked for more State staff, including an entry- 
level econ/political officer for "transformational 
diplomacy" purposes, a second OMS (for the soon-to-be- 
combined Econ/Pol Section plus backup for our sole FO 
OMS), and a financial officer. 
 
¶4.  (U) At the embassy town hall, we suggest you: 
 
-- Acknowledge the Foreign Service National 
Association, which is currently led by Ms. Bulgan (the 
political assistant). 
 
-- Thank personnel for their hard work every day, and 
on the high-level visits during the last year. 
 
-- Offer some comments from a Washington perspective. 
 
Coffee with donors 
------------------ 
 
¶5.  (U) Invitees include the World Bank, ADB, IMF, 
UNDP, and Japan and German aid agency representatives; 
these are the largest donors to Mongolia.  While you 
may want to ask them for a brief listing of their most 
important projects, the idea of this meeting is for you 
to get the views of these key foreign representatives 
on Mongolia's economic and political situation, 
including the prospects for progress against 
corruption. 
 
Meeting with military 
--------------------- 
 
¶6.  (SBU) Major General Borbaatar is the Ministry of 
Defense's State Secretary (senior civil servant).  The 
military-military relationship is a thriving element of 
our bilateral relationship.  Although we take pleasure 
in this, we think it advisable that these defense ties 
(notably Mongolia's continued participation in Iraq and 
Afghanistan coalitions) not appear to dominate other 
bilateral news -- and therefore, for instance, have 
advised that a military-military agreement not/not be 
the first done under the aegis of the proposed 
bilateral comprehensive partnership agreement. 
 
¶7.  (U) Mongolia's ongoing military transformation is a 
success story for U.S. aid.  Mongolia's aim over the 
next half decade is to create a full brigade of 
soldiers capable of taking part in UN peacekeeping 
operations.  This approach should spur transformation 
of the remainder of the approximately 11,000 military. 
Mongolia already has perhaps two companies toward the 
brigade goal.  In early May, the joint military 
transformation planners will meet to work out the 
details of how to spend the $15 million in aid the U.S. 
announced last July ($11 million from the Coalition 
Solidarity Fund, and $4.5 million from the Global Peace 
Support Operations Initiative).  We have requested FMF 
levels go up from the current $1 million to $10 million 
in FY 2008 and 2009. 
 
¶8.  (U) The small but increasing U.S. investments in 
the Mongolian military since the mid 1990s have yielded 
payoffs.  Mongolia is on its sixth deployment of troops 
to Iraq since 2003 (100 soldiers, down from 150 because 
of a changed mission), its fifth rotation of artillery 
trainers are in Afghanistan (13 soldiers), 50 troops 
have recently returned from a three-month mission in 
Kosovo, and 250 soldiers are currently guarding the UN 
war crimes court in Sierra Leone (Mongolia's first 
armed UN mission).  We and Mongolia are planning for 
the multilateral Khaan Quest peacekeeping exercise in 
August provided funding comes through by the end of 
May; otherwise this high-visibility exercise could be 
cancelled with concomitant embarrassment and political 
repercussions. 
 
¶9.  (U) Suggested points: 
 
-- Reaffirm U.S. commitment to assist with Mongolia's 
military transformation and expand capacity to take 
part in peacekeeping operations. 
 
-- Express U.S. appreciation for Mongolia's 
contributions to OIF and OEF. 
 
-- Note its UN participation such as in Bosnia and 
Sierra Leone. 
 
-- Invite the State Secretary to review Mongolia's 
military transformation plans and the "lessons learned" 
from the recent spate of peacekeeping missions. 
 
MFA Lunch 
--------- 
 
¶10.  (SBU) Foreign Minister Enkhbold is traveling in 
his constituency on Friday, but VFM Tsolmon will attend 
as will newly appointed State Secretary Bekbat. 
Tsolmon headed the Mongolian delegation to the CBRGI 
 
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discussion in Washington in February.  Items for 
discussion: 
 
-- Guatemala UNSC bid.  After repeated recent 
discussions, MFA is very familiar with the U.S. desire 
for Mongolia to declare its support now, rather than 
wait until August.  On Tuesday, we learned that 
Mongolia is trying to get Guatemala to agree to a 
mutual support deal, which is part of discussions on 
formal establishment of diplomatic relations: Mongolia 
for Guatemala in 2006, Guatemala for Mongolia in 2008 
(Mongolia will face off vs. Iran).  It does not want to 
"give away" its support to Guatemala, given the long 
odds MFA sees for its own 2008 campaign. 
 
-- Status of principles/comprehensive partnership 
agreement.  Our proposal on the table is that the 
bilateral declaration of principles would be signed 
here in May, between the Ambassador and (likely) the 
Foreign Minister.  The principles would provide the 
foundation upon which separate sectoral pillar 
agreements would rest, although the MFA reps continue 
to press for a larger framework agreement beyond the 
declaration of principles.  A possible first "pillar" 
agreement could be one in the cultural area, 
incorporating cultural preservation and fleshed out 
with a pending preservation project. 
 
-- While talk about a visit to the U.S. this summer by 
Foreign Minister N. Enkhbold seems to have died down, 
MFA appears to be under strong pressure to have Prime 
Minister Enkhbold visit this fall (perhaps around UNGA) 
and "sign something" as a visible achievement: the 
framework agreement, an MCC compact (we've explained 
that MCC compacts are usually signed in the recipient 
capital, and Mongolia's would not be ready until year's 
end, most likely).  We've also noted that -- however 
Mongolia chooses to describe the visit itself -- a stop 
in Washington by PM Enkhbold will not be an "official" 
visit in U.S. eyes, and we make no guarantees on any 
meetings.  To salve this message, we've noted that 
former President Bagabandi paid such "unofficial" 
visits to Washington before he finally got his official 
one in July 2004. 
 
-- Due largely to the 800th anniversary celebrations, 
this will be another big year for high-level visitors 
here (including possibly Chirac and Japanese, Dutch, 
and British royals).  South Korean President Roh will 
visit Mongolia in May.  In turn, Tsolmon may ask you 
for any news on who will head a U.S. delegation. 
 
-- We suggest you also ask how Mongolia see its 
relations with Russia and China developing.   The 
President's planned spring visit to Moscow has been 
postponed till autumn, we hear, and frictions between 
Mongolia and Russia have grown in recent months. 
 
Meeting with Prime Minister Enkhbold 
------------------------------------ 
 
¶11.  (SBU) Enkhbold has been Prime Minister since late 
January, after being nominally an MPRP backbencher 
since October 2005.  Prior to that, he was mayor of the 
capital and head of the Ulaanbaatar MPRP since 1998 
(both politically important positions, given that 
nearly 40% of the country's population resides here). 
He has been head of the MPRP since June 2005, when he 
narrowly won an MPRP vote, after winning Enkhbayar's 
endorsement to succeed him as party head (which also 
positioned him as a likely future PM).  Corruption 
rumors about Enkhbold (and about his payoffs to 
Enkhbayar) are recurrent, many centering around the 
process of granting land titles in the capital.  His 
background has not really provided any exposure to 
international issues, although he seemed on top of his 
brief in the Ambassador's initial courtesy call. 
 
¶12.  (SBU) Visible achievements of the three month-old 
"government of national unity" have been modest, after 
a budget-busting early decision to sharply hike 
government salaries, pensions, and child stipends.  The 
government suffers from being an ad hoc temporary 
alliance of the MPRP (with 38 parliament seats itself, 
or exactly half) and four other much smaller parties 
(with perhaps 10 MPs).  Politically, everyone's main 
task is to position themselves for the parliamentary 
elections in June 2008, which loom ever larger.  Policy 
coherence and Cabinet discipline are in doubt. 
Although Enkhbold benefits from the MPRP's numerical 
dominance and greater discipline, he has far less firm 
control of the MPRP than did Enkhbayar (the 
constitutionally nonpartisan president remains an 
influence behind the scenes). 
 
¶13.  (SBU) Policy fluctuations have been greatest on 
the mining sector, although many top MPRP leaders 
realize the importance of a business environment which 
attracts Western investment -- but, as with likeminded 
politicians from other parties, believe it would be 
political suicide and ineffective to try to publicly 
debunk populist sentiment upset that Mongolians remain 
poor while foreign companies profit from high mineral 
prices.  After Minister for Industry and Trade 
Jargalsaikhan (Republican Party) made remarks in 
February which sometimes seemed to suggest the 
government should take over 51% of the equity in 
"strategic" foreign mining concessions, Enkhbold 
established a working group chaired by the Deputy Prime 
Minister to review government policy.  In the last few 
days, he met with protest leaders who had erected gers 
on Sukhbaatar Square in early April, amongst whose 
concerns was distribution of profits from.  He agreed 
to establish joint working groups with them to review 
the legality of concessions granted foreign mining 
companies, and these have started to meet.  Enkhbold 
does deserve credit for a generally restrained police 
response to the protests (though police did demolish 
one ger to the north of Government House on the evening 
of April 25), and for the lack of the large-scale MPRP- 
sponsored counterdemonstrations (a few small ones were 
held) which would have produced an ugly and volatile 
atmosphere. 
 
¶14.  (SBU) With the Prime Minister, we suggest that 
you: 
 
-- Stress the U.S. determination to maintain and build 
upon the strong bilateral relationship in the wake of 
President Bush's visit. 
 
-- Express congratulations on Mongolia's 800th 
anniversary, and state that we are in the process of 
deciding on a U.S. delegation. 
 
-- Note that Assistant Secretary Hill hopes to visit in 
the next few months. 
 
-- Be prepared to candidly discuss the Prime Minister's 
possible visit to the U.S. this fall, if he raises it. 
 
-- Reiterate our support for Mongolia's continued 
economic and political transformation. 
 
-- Convey our hope that the ongoing due diligence on 
proposed MCC projects will enable the signing of a 
Compact, in Ulaanbaatar, late in the year. 
 
-- Comment that the U.S. government, as illustrated by 
President Bush's remarks last November, hopes for 
stronger anti-corruption steps, which will also be 
important in the MCC review. 
 
-- Note that MCC countries must undergo a review to see 
whether they continue to remain eligible, and that such 
a review will be conducted in October.  Note that MCC 
is particularly concerned about Mongolia's falling 
corruption score, a hard hurdle to MCC assistance. 
 
-- Urge that the State Great Hural (SGH) pass effective 
anti-corruption, ethics, and anti-money-laundering 
legislation in its current session, as the first 
installment on Mongolia's implementations of its 
obligations under the UN Convention Against Corruption. 
Ask the Prime Minister for his assessment of the 
likelihood of progress against corruption in the next 
two years. 
 
-- Urge that the SGH pass anti-money laundering 
legislation, which has been delayed for the past two 
years.  (Note: Mongolia is due for review by the Asia 
Pacific Group this fall and recent banking scandals 
have increased international financial sector concern 
as the reliability of Mongolia's banking sector.  There 
have also been attempts by DPRK banks to develop 
correspondent banking relationships in Mongolia in the 
wake of the Banco Delta Asia scandal in Macau.) 
 
-- Urge that Mongolia substantially revise the State 
Secrets Act and abolish criminal libel provisions, 
 
SIPDIS 
steps which would boost transparency and help fight 
corruption. 
 
-- Note our understanding that MFA is preparing for the 
Cabinet a briefing paper on the PSI ship boarding 
agreement which the U.S. has proposed, and state our 
hope we can negotiate and sign an agreement in coming 
months.  (Note: MFA has told us it favors such a 
negotiation, although the Ministry of Roads, Transport 
and Tourism opposes, ostensibly for "sovereignty" 
reasons, but likely for fear it will cut into its ship 
registry revenues.  Despite being landlocked, Mongolia 
has a growing registry of 700 ships -- administered 
minimally by a Singapore firm -- which troublingly 
includes some North Korean vessels.) 
 
-- Note that Washington is watching closely the 
Guatemala-Venezuela UNSC battle, and that we hope for 
positive news soon from MFA. 
 
-- Express gratitude for Mongolia's humanitarian policy 
toward North Korean asylum seekers, but urge that 
Mongolian stop permitting North Korean contract 
laborers because of concerns that they should be 
regarded as forced labor.  (Note: There are about 200 
such workers, primarily in the construction industry, 
with some proposals to bring more in.  The ILO has 
privately told the government it regards them as forced 
laborers because they are likely not genuinely free to 
leave their jobs if they wished to do so.) 
 
Economic Roundtable 
------------------- 
 
¶15.  (U) The foreign and Mongolian businessmen at the 
roundtable will be able to provide a picture of the 
Mongolian economy.  Given the importance of the mining 
issue to the companies and to the Mongolian economy, 
much discussion will center on that subject.  High 
world prices and expanded output were the key reasons 
why Mongolia's economy grew 10% in 2004 and 6% last 
year.  Mongolia's textile production, exports, and 
related employment have fallen with the demise of the 
Multi-Fiber Agreement and will likely decline further 
when temporary safeguards with China lapse. 
 
¶16.  (SBU) There is no U.S. mining company directly 
invested here; however, American equity in most of the 
western firms active in Mongolia fuels much of the 
exploration in Mongolia.  In addition, American mining 
equipment and other durable goods (Ford, CAT and John 
Deere are examples) have significant market share in 
Mongolia.  The embassy (like the World Bank and other 
donors) has taken the neutral line that Mongolia needs 
to be careful to create a business environment that 
encourages investment and spurs growth. Even if no bad 
policies are enacted, the danger for Mongolia is that 
the populist rhetoric will scare off foreign direct 
investment, and poison the ability of Western firms to 
raise the essential loans or equity.  That may leave 
the field to Russian and Chinese firms with deep 
pockets. Cynics note that, even though domination 
(especially Chinese) by the neighbors of mining would 
be seen as inimical to Mongolia's national interests, 
such firms are also more likely to be willing to pay 
bribes or agree to whatever non-commercial terms the 
Mongolian propose, because these non-market Russian and 
Chinese players know they will recover those costs by 
transfer pricing schemes for shipping or power supply. 
 
Political Observer Roundtable 
----------------------------- 
 
¶17.  (SBU) This event will provide an opportunity for 
observers to share insights into Mongolia's political 
scene, and the chances for greater transparency, 
accountability, and action against corruption. 
 
-- Mr. L. Sumati is Mongolia's foremost pollster and 
the Transparency International representative.  He 
recently finished a poll on citizens' attitudes and 
experiences with corruption, and is now at work on his 
twice-a-year political opinions survey. 
 
-- Mr. P. Erdenejargal is the Executive Director of the 
Open Society Forum. 
 
-- Ms. Kh. Khulan is a former Eisenhower Fellow who is 
the Coordinator of Mongolia's follow-up efforts on the 
International Conference of New and Restored 
Democracies (ICNRD), including efforts to develop 
democratic governance indicators. 
 
-- Mr. Urnukh is the Acting Director of IRI, and Mr. 
William Foerderer is the representative of The Asia 
Foundation.  IRI is implementing the USAID program of 
assistance to parliament and support for women's 
political participation, while TAF implements the 
embassy's anti-corruption and anti-trafficking efforts. 
 
Peace Corps Drinks 
------------------ 
 
¶18.  (U) This event will give you an opportunity to mix 
with a group of volunteers who work in the Ulaanbaatar 
area, or who happen to be in town, as well as to meet 
several Peace Corps/Mongolia staff members. This is the 
15th year of the Peace Corps program in Mongolia and, 
for the second year in a row, the June training class 
will be the largest in the program's history as a 
direct result of requests from the Mongolian government 
to Peace Corps officials.  There are currently 88 
volunteers in Mongolia.  The new June class will 
include 60 persons.  Most volunteers are involved in 
English language instruction, but are often active in a 
variety of other projects on the side, including 
efforts to combat trafficking in persons and assist in 
website development.  Volunteers serve across Mongolia, 
though the prohibition on flying on MIAT domestically 
has meant they no longer serve in every aimag 
(province). 
 
Political Dinner 
---------------- 
 
¶19.  (U) This dinner will provide you an opportunity to 
mix with a diverse group of Mongolian politicians, from 
the MPRP parliamentary caucus head and the new party 
chief for Ulaanbaatar, to former Democratic Party PM 
Amarjargal and Ms. S. Oyun, the impressive leader of 
the Civic Will Party.  Most of the guests speak English 
well.  You should know that a staffdel will visit 
Mongolia May 8-12 to discuss a possible program under 
the House Democracy Assistance Commission (HDAC).  This 
is an outgrowth of Speaker Hastert's visit last August. 
One possible area of assistance might be to provide 
Congressional expertise supporting expansion of the 
State Great Hural's research capabilities. 
 
¶20.  (U) Possible subjects for discussion include: 
 
-- MCC.  Ms. Oyun is a member of Mongolia's National 
Commission, and all guests will have an interest. 
 
-- The prospects for action against corruption 
 
-- The debate over foreign mining investment 
 
-- The political dynamics in the State Great Hural. 
 
¶21.  (SBU) With respect to the latter topic, the SGH 
session that began April 5 is the first since the 
formation of the new government.  The Shadow Cabinet, 
which should combine the Democratic Party and Ms. 
Oyun's Civic Will Party, is still on the drawing 
boards.  The parliamentary Democratic Party is 
fractious.  During January's political maneuverings, 
four of the party's then 28 MPs voted to dissolve the 
Elbegdorj government (three were later expelled from 
the party), and another 17 (including dinner guest 
Amarjargal) signed a letter offering to join in the new 
government against party wishes.  A Democratic Party 
MP's death in late March will lead to a by-election 
(perhaps in June) which may be hotly contested. 
 
¶22.  (U) As the notes suggest, Friday will be a very 
full day; but one affording you both the opportunity to 
press key U.S. agenda points with the government and 
the opportunity to hear from a variety of actors and 
observers.  We look forward to seeing you Thursday 
evening. 
 
Goldbeck