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UNCLAS SECTION 01 OF 03 ULAANBAATAR 000310 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PREF MARR EAID KMCA MG IZ KN
SUBJECT: Scope Paper and Issues for Assistant Secretary Hill's June 
14-18 Visit to Mongolia 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) SCOPE:  Assistant Secretary Hill's visit to Mongolia 
fulfills the dual purposes of:  1) reinforcing the strong 
U.S.-Mongolia relationship and, 2) attendance at the Asia Society's 
June 15-18 Williamsburg conference (the conference is covered in a 
separate memo).  This visit fulfills a long-standing invitation by 
the Government of Mongolia (GOM) that was made when A/S Hill visited 
as part of the November 2005 POTUS delegation. 
 
¶2. (SBU) MEETINGS:  Separate meetings have been requested for A/S 
Hill on Friday, June 15, with President Enkhbayar (over lunch hosted 
by the Ambassador, also attended by Foreign Minister Enkhbold), 
Prime Minister Enkhbold, State Great Hural (parliament) Speaker 
Nyamdorj, and Minister of Defense Sonompil.  A/S Hill will likely 
first meet President Enkhbayar at the dinner hosted by the President 
for the Asia Society the evening of June 15.  A television interview 
with a U.S.-affiliated TV station and a meeting with the local press 
is planned for the final evening of A/S Hill's stay.  The issues 
below will likely be the main points of conversation with official 
interlocutors and the press.  Ambassador Minton returns to Mongolia 
on June 4, and we are seeking calls on the leadership before your 
visit to review his consultations in Washington and do spadework on 
these issues before you arrive. 
 
------- 
ISSUES 
------- 
 
Iraq Rotation 
------------- 
 
¶2.  (SBU) The National Security Council (President, Speaker and 
Prime Minister) likely will meet next month to consider sending an 
8th rotation of 100 plus troops to Iraq.  The 3-month extension of 
the 7th rotation -- hastily arranged after President Bush's March 5 
phone call to President Enkhbayar -- will run out July 1.  Your role 
may be to thank the Mongolians for a decision before the visit to 
dispatch the 8th rotation, but it is as likely to be to urge them to 
continue to play their vital force protection role for troops at 
Camp Echo - Polish now, but possibly Georgian in the near future. 
You will also have an opportunity to personally thank Mongolian 
troops that have served in coalition efforts in Iraq and 
Afghanistan. 
 
Millennium Challenge Account Compact 
------------------------------------ 
 
¶3.  (SBU) Bilateral work on the compact has been proceeding well, 
and a Mongolian team likely will go to Washington in July to 
finalize the language of the agreement.  This is a dramatic change 
from only five months ago, when two and a half years of inconclusive 
discussions on projects had led to deep frustration on both sides. 
The rapid progress means that this will mostly be a "happy news" 
item in official discussions, but there will be some latent angst 
about the process and the transformation and shrinkage of the 
compact projects from the $300 million total proposed by the 
Government of Mongolia in October 2005 to somewhat more than half 
that figure.  The remaining projects are railroad, vocational 
education and preventive health projects, with the $129 million 
railroad project dominating the compact.  President Enkhbayar very 
much hopes to sign the compact during his proposed October trip to 
Washington, but this likely depends on Congress providing MCC with 
its FY 2008 funding in time.  We've emphasized this point to the 
government repeatedly. 
 
North Korea 
----------- 
 
¶4.  (SBU) President Enkhbayar is due to visit South Korea from May 
28-30.  On good terms with both Koreas, Mongolia will be intensely 
interested in Assistant Secretary Hill's perspective on the Six 
Party Talks. Mongolia has repeatedly offered to participate in the 
peace process (7PT?) and sees itself as a model for North Korea's 
peaceful transformation from communism.  Mongolia has said the right 
things after past North Korean provocations, condemning the nuclear 
test, for example.  Mongolia has been extremely cooperative on DPRK 
money-laundering and counterfeiting issues, but its poor law 
enforcement and regulatory effectiveness has led to concern that 
North Korea might turn to Mongolia as a convenient place for illegal 
acts -- one reason the Embassy has advocated U.S. technical 
assistance to Mongolia's fledgling anti-money laundering unit. 
 
ULAANBAATA 00000310  002 OF 003 
 
 
Mongolia should be praised for the discreet but accommodating 
assistance it provides for resettlement of North Korean refugees to 
South Korea and other countries.  Mongolian officials will stress 
they treat this as a "humanitarian issue" and some may seek 
additional U.S. funding to support refugees. 
 
The Neighbors: Between the Bear and the Dragon 
--------------------------------------------- -- 
 
¶5.  (SBU) Assistant Secretary Hill's interlocutors will be 
interested in U.S. views of China and Russia, and in turn should be 
probed for their own perspectives.  Mongolia's quest for "third 
neighbors" like the United States is explained by its unenviable 
geographic disadvantage as a landlocked state surrounded by these 
two Great Powers.  Mongolia is careful to maintain balanced, good 
relations with both nations, but there is a deep wariness about the 
Chinese and the dangers of economic domination by their former 
occupier.  Russian depravities during the Soviet period appear to be 
excused because of gratitude that Russia enabled Mongolia to escape 
Chinese clutches in 1921 and its construction of hospitals, schools, 
road, airports, etc. -- but there are bitter memories over the very 
deep economic recession in the 1990s when the Russians abruptly cut 
off subsidies.  Both Russia and China have noticed Mongolia's world 
class deposits of minerals like copper and coal, and their companies 
are clamoring for privileged access to new mines. 
 
Rising U.S. Investment Interest 
------------------------------- 
 
¶6.  (SBU) U.S. companies have also noticed Mongolia's minerals -- 
and Mongolia may see big advantages in having non-neighbors develop 
its economy, and in the better mining practices of Western firms. 
U.S. coal giant Peabody has official advocacy support from the 
Commerce Department for a role in the development of the Tavan 
Tolgoi coal deposit.  Phelps Dodge is partnering with the Mongolian 
government to explore for new copper deposits near Erdenet, Fluor is 
the contractor developing Rio Tinto/Ivanhoe's Oyu Tolgoi copper/gold 
mine, and the local Caterpillar distributor's business may boom as 
new mines get developed.  It should be noted, however, that mining 
companies' assessment of Mongolia declined sharply in 2006, due to 
passage of a confiscatory "windfall profits tax" on copper and gold 
and amendments to the mining law that envisaged the government 
taking a 34-50% equity share in major new mining projects.  Investor 
confidence has recovered somewhat after the government and Rio 
Tinto/Ivanhoe reached a tentative deal on Oyu Tolgoi in April, but 
remains fragile. 
 
¶7.  (SBU) For its part, Mongolia is enamored of concluding an FTA 
with the United States, and formally asked USTR in March to agree by 
the end of 2007 to a roadmap toward an eventual FTA.  Mongolia is 
convinced that an "FTA lite" could be concluded with them on the 
basis of their political ties with the U.S., skipping over the messy 
business of meeting usual U.S. benchmarks for FTA readiness. 
Assistant USTR Tim Stratford told them in March that, for a variety 
of reasons, a bilateral FTA wasn't possible, but committed to 
finding some concrete step the U.S. and Mongolia could take toward 
freer trade and investment.  USTR has identified a possible step and 
is vetting it internally.  The step may be unveiled to the 
Mongolians shortly before Assistant Secretary Hill arrives. 
 
¶8.  (SBU) We suggest that A/S Hill endorse USTR's concrete step, and 
note our support for Peabody's involvement in the Tavan Tolgoi coal 
project. 
 
Peace Corps:  Give Us More! 
--------------------------- 
 
¶9.  (SBU) Mongolia has one complaint about the Peace Corps: there 
aren't enough Volunteers here.  Instead of 100, Mongolia would 
prefer 1000.  As Prime Minister from 2000-2004 and as President, 
Enkhbayar has been particularly appreciative and supportive of Peace 
Corps activities in Mongolia, and vocal in asking for more 
Volunteers be sent.  The incoming Peace Corps Volunteer classes in 
2006 and again this year will set new highs.  After his April visit 
here, Peace Corps Director Tschetter committed to a gradually 
increasing number of Volunteers, with each new class being about 10% 
larger than its predecessor. 
 
Deliverables for President Enkhbayar's Trip 
------------------------------------------- 
 
¶10.  (SBU) Both the President and the Foreign Minister will likely 
 
ULAANBAATA 00000310  003 OF 003 
 
 
focus heavily on the agenda for Enkhbayar's notional October trip. 
As to timing, it is unlikely that the White House will have firm 
dates until much later in the summer.  From Enkhbayar's standpoint, 
having won the internal Mongolian government struggle over who would 
take the honors, signing the MCA Compact is a nearly essential part 
of a successful trip. 
 
¶11.  (SBU) There is a good selection of other potential 
deliverables.  A problematic one is MFA's desire that the trip 
include signing of the "Comprehensive Partnership Framework 
Agreement" (CPFA) it proposed during DAS Christensen's visit here in 
January.  Not only are some of the contents nonstarters -- like 
reference to an FTA -- the document is meant to be legally binding, 
despite our warnings that this would be much more difficult for the 
U.S. and not of any apparent advantage in a document which would be 
largely declaratory statements of intentions to work together more 
closely.  Rather than carp at or edit down the Mongolian draft CPFA, 
however, we suggest that, with the NSC's concurrence, Assistant 
Secretary Hill suggest instead that the two sides should work toward 
 
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a good presidential Joint Statement over the next few months. 
 
¶12.  (SBU) There are also a mix of other issues which have a good 
chance of being ready by October, with work by both sides. 
-- In early June, the U.S. and Mongolia will also discuss revisions 
to a draft agreement on military cooperation, which will reaffirm 
the commitment to work together as Mongolia reorients its military 
toward international peacekeeping operations. 
-- The U.S. has told Mongolia through the UN that we are interested 
in assisting them to be able to meet UN Security Council Resolution 
1540, on the control of WMD.  This would be done as part of the 
Department of Energy's "Second Line of Defense" program.  A draft 
MOU on the cooperation is undergoing interagency clearance on the 
Mongolian side, and a U.S. team would visit to discuss the program 
after the Mongolian side is ready to commit to the MOU. 
-- The Mongolian government also has approved negotiating a PSI ship 
boarding agreement with the U.S., and the GOM is coordinating 
interagency positions on the U.S. draft before asking a U.S. team to 
visit.  MFA interlocutors express confidence the agreement could be 
ready before October. 
-- On a unilateral note, INL has earmarked $670,000 in FY 2008 for a 
new program of law enforcement assistance.  An INL officer will 
visit next month to investigate possible focuses.  Reference to this 
new assistance could be made in October. 
 
¶13.  (SBU) Finally, we think it would be useful for Under Secretary 
Dobriansky to visit Mongolia, hopefully before President Enkhbayar 
comes to Washington.  The breadth of U.S. and Mongolian cooperation 
in the areas in her portfolio -- Community of Democracies Convening 
Group, democracy/human rights, refugees, trafficking in persons, 
HIV/AIDs, etc. -- illustrate that the truth of the "comprehensive 
partnership" description for the relationship.  A visit by the Under 
Secretary would be a unique opportunity to work these issues and to 
 
SIPDIS 
highlight cooperation shortly before President Enkhbayar's U.S. 
visit.  Stating Under Secretary Dobriansky's intention to visit 
Mongolia would be a useful step during the A/S Hill visit. 
 
Goldbeck