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      SRAP-00  SWCI-00  SNKP-00  PESU-00  SEEE-00  SANA-00    /001W
   
P 160526Z JUL 09
FM AMEMBASSY ULAANBAATAR
TO SECSTATE WASHDC PRIORITY 2935
INFO AMEMBASSY BEIJING PRIORITY 
AMEMBASSY MOSCOW PRIORITY 
AMEMBASSY SEOUL PRIORITY 
AMEMBASSY TOKYO PRIORITY 
SECDEF WASHINGTON DC PRIORITY
NSC WASHINGTON DC PRIORITY

C O N F I D E N T I A L ULAANBAATAR 000201 
 
 
STATE FOR EAP/CM AND FOR H (PASS TO LYNNEA SHANE AND JOHN 
LIS) 
 
E.O. 12958: DECL: 07/16/2019 
TAGS: PGOV PREL ECON EMIN EINV MG
SUBJECT: PRESIDENT, PRIME MINISTER, AND SPEAKER OF MONGOLIA 
COMMENT ON THE BILATERAL RELATIONSHIP DURING CODEL PRICE 
 
Classified By: Political Counselor Andrew Covington, Reasons 1.4 (b/d) 
 
¶1. (SBU) Summary: On June 29 and 30, Members of the 
Congressional Delegation headed by Rep. David Price of North 
Carolina met with Speaker Demberel, Prime Minister Bayar, and 
President Elbegdorj during the course of a day and a half of 
meetings with Mongolian parliamentarians.  In addition to 
discussing the work of the House Democracy Assistance 
Commission (HDAC), the meetings with top leaders focused on 
the process of passing mining legislation in Mongolia; 
elements of the bilateral relationship such as the Millennium 
Challenge Compact, military cooperation in Afghanistan, and 
the Fulbright program; Mongolia's relations with China, 
Russia, and the two Koreas; the environmental situation in 
Mongolia; and the efforts of the coalition government.  End 
Summary. 
 
----------------------- 
FOCUS OF THE DELEGATION 
----------------------- 
 
¶2. (SBU) CODEL Price came to Mongolia to further the work of 
the House Democracy Assistance Commission (HDAC), which Rep. 
Price chairs.  The HDAC has been involved with Mongolia for 
three years, both sending delegations to Ulaanbaatar and 
funding travel and training for Mongolian MPs and staffers in 
Washington.  The most recent tranches of Mongolian staffers 
traveled to the United States in late 2008 to learn from U.S. 
counterparts about budget analysis and committee operations. 
Rep. Price was joined by Rep. Buchanan (FL), Rep. Cooper 
(TN), Rep. Gingrey (GA), Rep. Etheridge (NC), and Rep. 
McDermott (WA). 
 
--------------------------------------------- ------ 
SPEAKER DEMBEREL SETS A POSITIVE TONE FOR THE VISIT 
--------------------------------------------- ------ 
 
¶3. (SBU) Speaker Demberel met with the Delegation on June 29 
at the head of the official agenda.  Demberel set a positive 
tone by thanking Members for the comprehensive bilateral 
partnership and reiterating Mongolia's regard for the United 
States as its "third neighbor."  Demberel reviewed the many 
parliamentary exchanges to date, including his own travel to 
the United States in recent years and noting also the 
productive June 9 meeting between Secretary Clinton and 
Foreign Minister Batbold.  Demberel expressed particular 
satisfaction with the person-to-person relationships and 
friendships that have resulted from our repeated exchanges. 
 
¶4. (SBU) Demberel expressed appreciation for MCC programs and 
for the recently passed Senate Resolution 192 on 
U.S.-Mongolian relations.  Demberel noted he wishes to expand 
our relationship in the areas of trade and economic 
cooperation.  Furthermore, he expressed appreciation for the 
many educational exchange opportunities with the United 
States and asked the Delegation to support the idea, as 
initially presented by Foreign Minister Batbold on June 9 to 
Secretary Clinton, that the number of these exchanges be 
increased through joint funding.  Demberel also thanked the 
International Republic Institute (IRI) for its support of 
Mongolia's transition to a parliamentary democracy. 
 
¶5. (SBU) Rep. Price expressed appreciation for the many 
interactions over the past three years since the HDAC first 
began its involvement in Mongolia.  The Delegation noted the 
progress the State Great Hural has made in expanding its 
legal department, creating a modern research service, passing 
ethics legislation, and enhancing the role of committees in 
the functioning of Parliament.  Rep. Price expressed 
gratitude for Mongolia's support in Afghanistan. 
 
¶6. (SBU) Speaker Demberel characterized the setup of the 
coalition government as of great significance, in that this 
satisfies the demands of ordinary people to develop Mongolia. 
 Demberel said the coalition wishes to take development to 
the next level, and the first step in doing so is to bring 
Mongolia's mineral resources into play.  He stated that 
Mongolia is not sure of the resources that are required for 
Mongolia to overcome the financial crisis, but that he would 
like our guidance in this regard. 
 
¶7. (SBU) Demberel noted in closing that the reputation of the 
Parliament is not very high, and that he appreciates our 
efforts to improve the situation. 
 
--------------------------------------------- ------ 
REMARKS BY PRIME MINISTER BAYAR ON THE RELATIONSHIP 
--------------------------------------------- ------ 
 
¶8. (SBU) PM Bayar reiterated Demberel's remarks about 
strengthening Mongolia's institutions of democracy and about 
how the relationship has grown in particular in the past two 
years, starting with the 2007 Declaration of Principles. 
Bayar also thanked the Delegation for Senate Resolution 192 
and expressed appreciation of our close inter-parliamentary 
ties. 
 
¶9. (SBU) Rep. Price also acknowledged that the relationship 
has developed, noting in particular Mongolian participation 
in Afghanistan, the MCC, and ongoing Transparency Agreement 
talks.  Rep. Price described the activities of this HDAC 
visit and its onward travel to Southeast Asia, and followed 
up with a question on the status of the mining law in 
Mongolia. 
 
------------------------------ 
PRIME MINISTER BAYAR ON MINING 
------------------------------ 
 
¶10. (SBU) Bayar said June 29 has been an important day, and 
that he had met with MPRP caucus leader Lundeejantsan and DP 
caucus leader Saikhanbileg to discuss the progress toward an 
agreement on the Oyu Tolgoi (OT) copper and gold mine in 
southern Mongolia.  Bayar said he was seeking real progress, 
that too much time had been wasted, and that "we are keeping 
our fingers crossed" to complete an agreement by July 10 (the 
day before the national Naadam festival begins).  He 
described the situation as "quite promising" and said 
Minerals and Energy Minister Zorigt (MPRP) had done a great 
job.  Bayar said the draft agreement was the best version of 
the deal and he hoped both caucuses can adopt it.  (Note: 
Caucus leaders Lundeejantsan and Saikhanbileg were sitting on 
either side of him at this meeting.  End Note.) 
 
¶11. (SBU) When asked if there would be an up-or-down vote, 
Bayar said he had discussed this with leading MPs, noting 
this would be the first time the Parliament would adopt such 
a document.  He commented that, in most countries the 
government can negotiate in accordance with the law, but that 
in Mongolia Parliament must make a final approval, leading to 
much back and forth between the GOM working group and 
Parliament.  Bayar said he believed this not to be a good 
form of governance, and that one goal must be to modify the 
situation. 
 
¶12. (SBU) Bayar warned there had been a resurgence in 
resource nationalism in Mongolia since the time following 
passage of the latest version of the minerals law in 2006, 
and that this resurgence presented a greater challenge for 
any mining agreements.  Bayar hoped that this summer would be 
the starting point for large projects like OT and Tavan 
Tolgoi (a world-class coking coal deposit in southern 
Mongolia).  Bayar noted that TT offers more room to maneuver 
in terms of partners that can be brought in. 
 
¶13. (C) Bayar stated that uranium is of interest in the 
mining sector, that he had traveled to Russia last year and 
this year to discuss the subject, and that Mongolia has had 
many official meetings with the IAEA, including a visit to 
Ulaanbaatar by Mohamed El Baradei in April 2009.  Bayar 
expressed that any uranium cooperation in Mongolia should be 
with more than two participants.  Bayar noted that Mongolia 
has two projects with the Russians and Japanese in eastern 
Mongolia: one in Dornod province and the other in Eastern 
Gobi province.  Bayar emphasized that Western Prospector (WP) 
had invested in the Dornod area and that the Chinese had 
recently purchased WP.  Bayar noted also the GOM is currently 
negotiating with the Chinese side.  As for the Eastern Gobi 
site, Areva (France) has been there since the 1990s and 
Kuwait was later brought in for the financing. 
 
¶14. (SBU) Bayar warned that the GOM will face criticism for 
the OT deal no matter how it is structured, so he said the 
parties and the new president must stand together to present 
the deal to the public and to explain why a deal that 
includes international best practices and standards is 
necessary. 
 
------------------------ 
BAYAR ON THE ENVIRONMENT 
------------------------ 
 
¶15. (SBU) In response to a question on mining affecting the 
environment, the PM said the top problem facing Mongolia at 
the moment is economic, but that the environmental protection 
element of the potential OT agreement is the best part of the 
document because Rio Tinto is well known for having a good 
record dealing with environmental issues.  The PM noted 
separately that the initial passage of OT would create 3,000 
jobs and lead to 15,000 more jobs in the next few years.  He 
also explained that there are 40,000 young Mongolians now 
earning up to $1,000 per month in South Korea, and that his 
goal is to offer this level of salary in Mongolia through the 
mining sector. 
 
¶16. (C) Regarding the TT coal mine, Bayar stated that China 
is the market.  He noted that the environment is of 
significant interest to Mongolians.  Bayar said when he was 
in China in April that he told authorities there he welcomed 
the involvement of the Shenhua company but would appreciate 
if Shenhua would come in with a U.S. partner -- one that has 
environmentally friendly standards.  Bayar stated that 
environmental protection laws were prepared well in Mongolia 
but that enforcement was a challenge.  He said to make any 
mining deal proper and environmentally friendly, we must have 
environmentally responsible companies invest.  Bayar followed 
this by stating that if Peabody Coal were to come on as an 
operator at TT, this would give the Mongolians the feeling 
that they were on the safe side. 
 
------------ 
BAYAR ON MCC 
------------ 
 
¶17. (SBU) In response to a question about how MCC rail money 
will now be used, the PM said there are several directions 
this may take, but that any spending should focus on 
improving ordinary people's lives.  Bayar noted in particular 
how the heating of the many gers in Ulaanbaatar in winter had 
produced air quality that is "simply awful."  Bayar 
reiterated that FM Batbold had discussed MCC funding with 
Secretary Clinton in Washington and said he would appreciate 
if the Members would support new, alternative projects in 
Mongolia. 
 
-------------- 
BAYAR ON CHINA 
-------------- 
 
¶18. (C) In response to a question on immigration from China, 
Bayar termed the immigration of Chinese laborers a foreign 
policy issue, stating that demographic pressure from China is 
clear.  Bayar noted, however, that Beijing does not have an 
aggressive policy toward Mongolia, but rather that there is a 
natural pressure of population, finance and investment.  The 
PM stated that the presence of Russia is a natural 
counterweight to China but that Russia alone is not enough to 
provide a proper balance.  Rather, Bayar stated Mongolia 
requires strong relations through its "Third Neighbor" policy 
with countries such as the United States, Europe, and 
democracies in Asia. 
 
---------------------------------------- 
REQUEST FOR DEMBEREL TO VISIT THE STATES 
---------------------------------------- 
 
¶19. (U) Bayar closed by reiterating that Speaker Demberel 
wishes to come to the United States in 2010 "with a huge 
delegation of both parties." 
 
---------------------------------------- 
REMARKS BY PRESIDENT ELBEGDORJ ON MINING 
---------------------------------------- 
 
¶20. (SBU) The Delegation's meeting with President Elbegdorj 
immediately followed the meeting with Bayar.  Discussion 
focused initially on HDAC programs with the State Great 
Hural.  Elbegdorj responded to a question on mining by 
describing the current situation.  He noted the Oyu Tolgoi 
(OT) copper and gold mine is the first mega-project in the 
country, and as such Mongolia did not want to make a mistake. 
 He stated that Mongolia wants to learn from the best 
practices available, that all parties in Mongolia were 
expressing their opinions in the formulation of the law, and 
that Mongolia is approaching the final stage toward reaching 
a full agreement.  Elbegdorj further noted the Mongolian side 
must consider the full range of labor, environmental, and 
corporate standards; that there are national security 
dimensions to such an agreement; and that Mongolia must 
retain good relations with its two big neighbors.  Elbegdorj 
stated that now is the time to find a good compromise, and 
that if Parliament can support one of the two proposals for 
an equity share arrangement, then an agreement would be 
forged. 
 
¶21. (SBU) Note:  Elbegdorj was referring to two alternate OT 
proposals: one that would contain an equity share of 34 
percent for the GOM and a second that had no equity share for 
the GOM but provided much higher tax revenues.  As of July 7, 
the party caucuses have agreed to and Standing Committees in 
Parliament are now discussing the first option with the 
equity share.  End Note. 
 
-------------------------------------------- 
ELBEGDORJ ON TRADE AND EDUCATIONAL EXCHANGES 
-------------------------------------------- 
 
¶22. (SBU) In response to a question from Rep. Buchanan, 
President Elbegdorj noted Mongolia's difficulties with 
unemployment and the level of skilled labor.  He welcomed 
expanded trade and educational exchange, noting Mongolia is 
ready to provide matching funds to expand the Fulbright 
program. 
 
------------------------ 
ELBEGDORJ ON AFGHANISTAN 
------------------------ 
 
¶23. (SBU) Elbegdorj stated he supports U.S. strategy in 
Afghanistan and reiterated the GOM's decision to contribute 
troops to the international effort.  He added in a 
constructive tone that he knows the United States must pay 
attention to its enemies, but hopes that we also pay 
attention to our friends, like Mongolia, as well. 
 
------------------------ 
ELBEGDORJ ON NORTH KOREA 
------------------------ 
 
¶24. (C) In response to questions from Reps. Gingrey and 
McDermott on how the U.S. should relate to the DPRK, 
Elbegdorj stated that Mongolia must keep open its channel 
with the DPRK, and that Mongolia can be a good partner for 
mediating, noting Mongolia's past hosting of talks between 
Japan and the DPRK on normalization of relations, held in 
2007 in parallel with the Six Party Talks.  Elbegdorj also 
noted that the DPRK has some interest in how Mongolia is 
making the transition from a planned to a market economy.  He 
also stated the DPRK is interested in what happened to 
Mongolia's former Communist leaders -- specifically that they 
are now living in modern Mongolian society.  Elbegdorj said 
he thinks the United States and the ROK have the capability 
to respond to the DPRK threat, thereby implying that he 
believes the DPRK has no intention to start a war.  He noted 
the DPRK is trying to attract the interest of the 
superpowers, and that Mongolians understand their game. 
 
¶25. (SBU) In closing, Elbegdorj noted the importance of 
democracy in Mongolia and its parallels with the events in 
Eastern Europe in 1989, the fact that he was the first 
Mongolian president from the Democratic Party, the need for 
Mongolia to fight corruption as he stated in his inaugural 
address, and the need for Mongolia to develop its capable 
population by training engineers, workers, and managers.  He 
discussed his opposition last year to the formation of the 
current coalition government, but tempered this by noting 
that now is a time of financial crisis and that if the 
coalition government cam make a good response to these 
difficulties, the coalition will have been worthwhile. 
 
 
MINTON