VZCZCXRO6575
RR RUEHLMC
DE RUEHUM #0011/01 0080658
ZNR UUUUU ZZH
R 080658Z JAN 08
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 1793
INFO RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 5934
RUEHMO/AMEMBASSY MOSCOW 2052
RUEHKO/AMEMBASSY TOKYO 2818
RUEHUL/AMEMBASSY SEOUL 3123
RHMFIUU/FAA NATIONAL HQ LONGMONT WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000011 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR, OPIC, AND EXIMBANK 
STATE FOR EAP/CM AND and INR/B 
USAID FOR ANE FOR D. WINSTON 
TOKYO AND BEIJING FOR FAA REP 
 
E.O. 12958: N/A 
TAGS: ELTN EAIR PREL ETRD SOCI MG
SUBJECT: Trains, Planes and Congressional Exchanges: Ambassador 
Calls on Minister for Roads, Transport and Tourism R. Rash 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (SBU) SUMMARY: On January 4, the Ambassador paid an initial 
courtesy call on new Minister of Roads, Transportation and Tourism 
¶R. Rash.  During the cordial hour-long meeting, Rash emphasized the 
importance of the rail sector to the country's economy and the 
Millennium Challenge Account (MCA) Compact's vital contribution to 
revivifying it.  Rash praised the superior quality of General 
Electric (GE) locomotives over their Russian counterparts while 
underscoring the railroad's urgent need to receive five locomotives 
as part of an agreement under the MCC compact. The Ambassador stood 
ready to assist and encouraged the GOM to expedite MCA 
implementation, particularly to sign key Procurement and Fiscal 
Agent Agreements that would enable preliminary funding to facilitate 
preparations to secure essential items like the much needed 
locomotives. The Ambassador also noted that bilateral relations were 
turning towards expansion of commercial ties, especially in the area 
of mining, where the USG was supporting the efforts of Rio Tinto and 
Peabody Energy to develop world class copper and coal deposits in 
the south Gobi. Rash also effusively reminisced about his 
participation in a parliamentary exchange delegation to Washington 
D.C. and Hawaii last year (House Democracy Action Commission, HDAC) 
and noted the Ministry plans to obtain Boeing aircraft for the 
Mongolian's national carrier MIAT, and to develop tourism in the 
South Gobi and Huvsgol Provinces.  END SUMMARY 
 
Workin' on the Railroad 
----------------------- 
 
¶2. (SBU) On January 4, the Ambassador paid an initial courtesy call 
on the newly appointed Minister of Roads, Transportation and 
Tourism, R. Dash.  In addition to his ministerial duties, Rash's 
portfolio also includes positions on MCA-Mongolia Board and the 
parliamentary working group on mining issues, both key areas of U.S. 
engagement with Mongolia.  During the meeting, Rash noted that he 
headed the Mongolian Rail Road (Mongolian acronym: MTZ) for over 15 
years and believed his current assignment was a show of trust by 
parliament for him to continue his oversight of a sector that is key 
to Mongolia's economic health. He reported that opinion within the 
railway was that American locomotive products were far superior to 
Russian ones. The railway's purchase of two (Dash -7 series) 
locomotives from GE was a good decision, he said, albeit a 
controversial one, because it meant rejecting equipment built by the 
railroad's Russian co-owners. MTZ was now working to complete the 
purchase 20 GE locomotive kits, with 10 already procured. (Note:  GE 
reps reported to post that it would like to finish the existing 
contract to which Rash referred, by selling six additional 
modernization kits during 4th quarter of 2008. Preliminarily, the 
railway has agreed to buy, but GE believes that Russians want to 
stop the contract. In addition, GE revealed that it is working to 
improve the technical conditions of modernized locomotives fleet by 
introducing service arrangement for the railway. Specifically, GE 
has proposed a 10-year deal that will cover scheduled maintenance 
activities and overhaul components supply. End Note.) 
 
¶3. (SBU) Rash was grateful for the MCA contribution to the railroad 
(Note: the MCC Compact will provide US$188 million to upgrading the 
rail system, the lifeline of Mongolia's international trade).  He 
pledged that, as a member of the MCA-Mongolia Board, implementation 
of the MCA rail project will be a priority for his ministry. He also 
said at least 30 locomotives would be needed to realize the rail 
sector's full potential but that the railroad urgently needed to 
obtain five locomotives right away under an agreement reached with 
MCC. 
 
Need for Speed: Equipment Purchases Depends 
on Rapid Formation of MCA-Mongolia 
------------------------------------------- 
 
¶4. (SBU) The Ambassador thanked Rash for his efforts in helping 
Mongolia reach the MCA Compact, and he said that as a member of the 
MCA-Mongolia board, Rash's leadership could help press for needed 
organizational efforts to speed up MCA implementation.  The 
 
ULAANBAATA 00000011  002 OF 002 
 
 
Ambassador agreed with Rash's assessment that five locomotives were 
urgently needed, not only because of the onset of the summer 
construction season, but also because it was important to show early 
and concrete results of the compact's implementation.  The Embassy 
would do all it could, he said, to push for delivery of the 
locomotives in the early part of 2008 but warned that progress 
depended on timely completion of the necessary Procurement and 
Fiscal Agent agreements, the absence of which would impede timely 
delivery.  He also noted that inflation risks eroding buying power. 
The Ambassador noted that Parliament still needed to ratify compact 
(expected later this week), the MCA board needed to be formed and a 
CEO chosen; he urged this be done quickly.  He added that an 
independent audit of MTZ's books was required to get funds moving. 
 
 
Parliamentary Exchange 
---------------------- 
 
¶5. (SBU) Rash recounted some of his experiences on his recent 
parliamentary exchange trip (House Democracy Action Commission or 
HDAC) to the U.S. that he said taught him a lot about the American 
political system. He was particularly impressed by how the two-party 
system was so well balanced.  The success of the Library of 
Congress' Congressional Research Service had encouraged the 
delegation to invest more resources for their own parliamentary 
research service. The Ambassador said he was grateful for the kind 
words about the congressional exchange program, noted that relations 
between our two countries had deepened over the past year thanks in 
part to such exchange programs and he looked forward to 
strengthening ties further through additional parliamentary 
exchanges.  Mongolia is highly respected in the U.S. as a true 
democracy with a functioning parliamentary system, he added. 
 
Mining Issues 
------------- 
 
¶6. (SBU) When Rash reminded the Ambassador that he was also a member 
of the parliamentary working group on mining issues,  the Ambassador 
remarked that the signing of the MCC compact was certainly a high 
point in bilateral relations, but that it was now important to focus 
on the development of our commercial relations, particularly in the 
area of mining.  He then noted that the Embassy was currently 
supporting Rio Tinto and Peabody Energy in their efforts to develop 
world class copper and coal deposits in the south Gobi. 
 
Interest in Boeing Aircraft 
--------------------------- 
 
¶7. (SBU) Rash revealed that the GOM was planning on obtaining new 
Boeing aircraft to enhance MIAT's fleet. (Note: MIAT, the national 
carrier, has been working to secure one Boeing 737 and maybe a 767 
as a replacement for the Airbus 310 it currently has under a lease 
that expires in 2010.)  He also said they were aiming to develop 
tourism in the southern Omnogovi and western Husvgol provinces, but 
admitted the major obstacle was the need to improve infrastructure. 
 
 
GOLDBECK