R 230740Z DEC 08
FM AMEMBASSY ULAANBAATAR
TO SECSTATE WASHDC 2630
INFO CHINA POSTS COLLECTIVE
AMEMBASSY TOKYO
AMEMBASSY MOSCOW
AMEMBASSY OTTAWA
AMEMBASSY CANBERRA
AMEMBASSY ASTANA
NATIONAL SECURITY COUNCIL WASHINGTON DC
DEPT OF COMMERCE WASHINGTON DC
DEPT OF ENERGY WASHINGTON DC
SECDEF WASHINGTON DC

UNCLAS ULAANBAATAR 000555 
 
 
SENSITIVE 
 
STATE FOR T/MARC HUMPHREY 
COMMERCE FOR SARAH LOPP 
 
E.O. 12958: N/A 
TAGS: ENRG TRGY BEXP BTIO PGOV MG
SUBJECT: NUCLEAR ENERGY OVERVIEW FOR MONGOLIA 
 
Sensitive but Unclassified - Not for Internet distribution. 
Contains proprietary and confidential business information. 
 
REF: STATE 127423 
 
¶1. (SBU) SUMMARY.  Mongolia's nuclear sector is at a primitive stage 
of development, although GOM officials hope that as-yet unproven 
reserves can spur rapid sector growth.  An undeveloped legal and 
regulatory framework makes it difficult for businesses interested in 
Mongolia's uranium reserves, although several state-owned 
enterprises (primarily from Canada, Russia, China, and Kazakhstan) 
remain interested in the sector.  To progress, however, the 
government will have to clarify the roles and responsibilities of 
various entities with responsibility for varied parts of the mining 
and power sector.  END SUMMARY. 
 
OVERVIEW OF CIVIL NUCLEAR POWER PROGRAM 
--------------------------------------- 
 
¶2. (SBU) As requested reftel, this cable reviews civil nuclear 
energy in Mongolia.  Primary sources of information include Nuclear 
Energy Agency of Mongolia (NRA) Vice Chair Prof. S. Enkhbat; Advisor 
to the Minister of Fuel, Energy, and Minerals S. Otgonbat; Mineral 
Resources Authority of Mongolia Cadastral Office Head Ts. Bat-Orgil; 
and various lawyers and business representatives associated with 
uranium exploration in Mongolia. 
 
¶3. (SBU) Dr. Enkhbat of the NRA provided the most complete overview 
of the sector.  More specifically, he highlighted that the nuclear 
sector is at a primitive state.  Mongolia does not have a civilian 
nuclear power program or related facilities; it absolutely lacks a 
nuclear-related manufacturing base; and due to minimal nuclear 
energy research activity in Mongolia, the nuclear-trained workforce 
is small, consisting of at most a score of poorly trained 
technicians and experts.  Dr. Enkhbat, however, explained to Emboffs 
that the GOM intends to develop facilities by leveraging what he and 
others in the GOM hope are substantial uranium reserves.  Assuming 
that estimates of the size of Mongolia's uranium resources prove 
out, the NRA, Ministry of Fuel, Energy, and Minerals, and other key 
government entities intend to offer access to reserves in return for 
the extractor assisting Mongolia's development of a civilian Nuclear 
industry.  This would likely include enrichment of uranium and power 
generation.  At the moment, the most likely extractors/partners 
would be a state-owned enterprise (SOE) from Canada, China, 
Kazakhstan, or Russia. 
 
¶4. (SBU) Russia's state-owned Rosatom (an SOE) has explicitly 
expressed an interest in assisting Mongolia achieve some of these 
goals if it can obtain exclusive rights both to Mongolia's existing 
uranium deposits and to explore and develop future resources. 
Arrangements have not progressed beyond a memorandum of 
understanding to simply explore these possibilities.  Dr. Enkhbat 
said that he believes Russia's request is a bit too ambitious, and 
he hopes that France's SOE Areva or Canada's Cameco could be induced 
to assist in the development of Mongolia's nuclear power industry 
for less generous (for the SOE) terms than the Russians are 
seeking. 
 
¶5. (SBU) Attorneys and miners active in Mongolia's uranium 
exploration sector have shared with us their doubts regarding the 
GOM's nuclear ambitions, saying that their contacts from Russia, 
France, and Canada do not echo GOM optimism regarding the sector's 
development.  While initial processing of uranium into "safe" yellow 
cake (uranium oxide) is in the cards, sources tell us that none of 
these foreign entities have serious plans to build nuclear plants 
and associated nuclear-related facilities in Mongolia given the 
current low estimates of Mongolia's uranium holdings, a shaky legal 
and regulatory framework, and substandard infrastructure. 
 
¶6. (U) The 2006 amendments to Mongolia's Minerals Law passed in 2006 
dramatically altered the environment for extracting uranium.  The 
revised law specifically singled out uranium as a "strategic" 
mineral, meaning the state holds the right to acquire up to 50 
percent equity.  Uranium exploration firms are not particularly 
comfortable with this provision, but generally agree that if the GOM 
compensates them for what share of equity it takes, they will comply 
without too much struggle.  (NOTE: The GOM's policy on uranium, much 
like its policy on other mining activities, is intended to ensure 
that Mongolia benefits from resource extraction.  As a result, this 
equity debate extends to mining of other mineral resources, 
 
including but not limited to copper, gold, and coal.  END NOTE.) 
 
¶7. (SBU) One impediment to the development of uranium resources is 
the GOM's disorganized approach to regulating the extraction and 
production of nuclear products.  For example, while the Ministry of 
Minerals and Energy is responsible for mining, extraction, and 
processing for power generation and production, some argue that the 
NRA has the authority to administer all aspects of nuclear power in 
Mongolia, from exploration to power production.  Business and 
government representatives note that this lack of clarity makes it 
difficult to make firm, long-term decisions regarding the sector. 
 
¶8. (SBU) Dr. Enkhbat lamented the sorry state of training among 
those within the GOM that might be tasked with regulating uranium 
mining and processing and, ultimately, power generation.  The 
Ministry of Nature and Environment and the State Special Inspection 
Agency are formally charged with regulatory responsibility but are 
just beginning consider their roles in this specific sector.  On the 
environmental side, the legal and regulatory framework has a long 
way to go to be able to effectively administer this part of the 
mining sector.  Laws and rules remain obsolete or nonexistent, and 
the Mongolians routinely ask for guidance on how they can regulate 
this and other complex mining operations with their low resource 
base.  The Mongolian National Security Council (President, Prime 
Minister, and Speaker of Parliament) have a say in the debate as 
well.  As a result, any potential miner and processor would have to 
knock on many doors and undoubtedly need to mediate conflicts among 
each GOM entity that wants to add a bit of uranium to its portfolio. 
 There seems no inherent impediment for untying this bureaucrat 
tangle, just attention from senior GOM politicos to order it done. 
 
¶9. (U) To post's knowledge Mongolia has not enacted specific nuclear 
third party liability legislation. 
 
OPPORTUNITIES FOR U.S. INDUSTRY 
------------------------------- 
 
10.(U) Mongolia has no current or anticipated nuclear-related 
tenders. 
 
11.(U) There are no nuclear sector opportunities foreseen for U.S. 
industry. 
 
FOREIGN COMPETITORS 
------------------- 
 
12.(U) There is no significant engagement by nuclear supplier 
countries in Mongolia. 
 
MINTON 
 
 
NNNN 
 



End Cable Text 
 
Marc A Humphrey  02/02/2009 04:29:57 PM  From  DB/Inbox:  Search Results