EAP DAS KEITH'S APRIL 27-29 VISIT TO MONGOLIA

C O N F I D E N T I A L ULAANBAATAR 000434

SIPDIS

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STATE FOR S/CT, NP AND EAP/CM

E.O. 12958: DECL: 06/07/2016
TAGS: PREL EFIN PTER KCRM MG KN
SUBJECT: EAP DAS KEITH'S APRIL 27-29 VISIT TO MONGOLIA


Classified By: Poloff Patrick J. Freeman for reasons 1.4 (b) & (d)


1. (C) SUMMARY: During EAP DAS Keith,s meetings with
Government of Mongolia (GOM) officials on April 28, Keith
expressed appreciation for the GOM,s continuing support in
the war against terrorism and its participation in coalitions
in Iraq and Afghanistan. Keith reiterated the importance of
addressing key issues such as corruption and the need to
enact and enforce anti-money-laundering and anti-corruption
laws, especially as related to maintaining Millennium
Challenge Account eligibility. He put down markers with the
GOM regarding North Korean laborers, DPRK financial risks,
and cautioned against Mongolia,s flagging of DPRK vessels.
He urged the GOM to sign on to the Proliferation Security
Initiative and sought the GOM,s support for Guatemala over
Venezuela for a UNSC seat. Prime Minister Enkhbold told
Keith the GOM remains committed on the war against terrorism,
that it will pursue anti-corruption measures and legislation,
that it hopes to sign its MCC compact soon and that it also
seeks a Free Trade Agreement with the U.S. END SUMMARY.


2. (SBU) EAP DAS Jim Keith visited Mongolia April 27-29. In
addition to meeting with Government of Mongolia (GOM) and
other officials, Keith met April 28 with the country team,
the Embassy,s staff for a town hall meeting, and with Peace
Corps Mongolia management and volunteers. Keith also met
with party representatives and State Great Hural (Mongolia,s
Parliament) for an exchange of views.


3. (C) DAS Keith met with Defense Ministry State Secretary
Major General Borbaatar to express the USG,s appreciation
for Mongolia,s participation in coalitions in Iraq and
Afghanistan as well as in peacekeeping operations in Sierra
Leone and Kosovo. He stressed the two nations share a common
cause in the war against terrorism and he urged Mongolia to
stay the course, a view Borbaatar shared. Borbaatar
expressed thanks for U.S. support for Mongolia's military,
and Keith affirmed U.S. intent to continue to aid military
transformation. Keith noted that the U.S. hoped for
Mongolia's perspectives as an observer in the Shanghai
Cooperation Organization. Borbaatar noted that Mongolia's
main objective in the SCO is trade and industry, but noted
that Mongolian briefers had discussed their SCO observations
with the U.S. military last November. Keith also asked about
Mongolian military ties with the DPRK. Borbaatar responded
that there is no military cooperation with the DPRK. He
added that the DPRK had invited Mongolia's Chief of Staff to
visit, but that "political considerations" had precluded the
visit. He assured Keith that Mongolia would share any
insights it developed into the DPRK military.


4. (C) During DAS Keith,s call on Prime Minister Enkhbold,
the PM said he was pleased with the expansion of bilateral
relations over the years. The November 2005 POTUS visit had
opened a new page, he said, and the Joint Statement had
showed both sides were committed to further development of
relations. President Bush had declared in his speech that
U.S. is Mongolia's &third neighbor.& He noted that the
U.S. Millennium Challenge Corporation was now conducting due
diligence reviews of Mongolia,s proposals and that he had
recently met with MCC Country Director Hallmark. The PM
hoped both sides would exert efforts to expedite the process
to achieve a compact. The PM also reiterated Mongolia,s
interest in concluding a Free Trade Agreement (FTA) with the
U.S., adding that Mongolia attaches great importance to
establishing this agreement. He believes the 2004 Trade
Investment Framework Agreement serves as a useful channel
toward this goal. The PM noted that Mongolia remains
committed to working with U.S. in war on terrorism, and that
Mongolia had forces in coalitions in Iraq and Afghanistan.
Mongolia is still committed to cooperating with the U.S. in
this regard.


5. (C) Turning to domestic matters, the PM said the
&Government of National Unity8 had just started work, and
it had taken some actions to address social challenges as
well as promote economic growth and reduce unemployment.
Enkhbold said he wanted to create a favorable environment in
the civil service to fight bureaucracy and corruption. First
of all, anticorruption legislation needed to be adopted.
Establishing a legal environment to fight corruption was an
important step, but the GOM would not wait for new
legislation; it was already taking some steps to improve
civil service and free society from corruption. Capacity
building is another important goal, the PM said, using that
theme to reiterate the GOM,s request for additional U.S.
scholarships.


6. (C) DAS Keith noted that a lot of momentum in bilateral
relations had developed due to engagement by the two
nations, Presidents; both sides want to sustain this over
all the spectrum of subjects in the bilateral relationship.
Keith said that the USG sees the MCC process as an important
bilateral relations element, and private sector-led growth is
vital to Mongolia,s future. He expressed appreciation for
the PM,s emphasis on good government and passage of
anti-corruption and anti-money laundering legislation,
pointing to resolution of concerns about corruption as a key
factor. The USG wants Mongolia,s MCC projects to succeed,
which dispel doubts about Mongolia. Keith said the USG
realizes Mongolia is a democracy and that it faces
complicated pressures which can affect the environment for
international trade and investment. As Mongolia deals with
these pressures, the USG hopes Mongolia would look to the
strengths of the U.S. and take steps which will make it
easier for the U.S. to engage in the Mongolian economy,
through market
mechanisms. As a third neighbor, the U.S. wants to help
strengthen Mongolia's market orientation. For its part,
Keith said, the U.S. hopes to use the TIFA process to advance
specific issues and promote closer cooperation between the
two economies. The U.S. wants to advance people-to-people
relations and exchanges in academic and cultural areas and
the USG. The USG had begun discussion of a cultural
preservation agreement.


7. (C) In response, the PM said foreign direct investment
(FDI) is one of the key elements needed to ensure economic
growth. Thus, ensuring a stable business environment was
also a key factor. The GOM is committed, the PM said, to
attracting FDI and making sure it comes to Mongolia to stay.
Of course, there are many views and misunderstandings about
foreign investment, he opined, and the abiding principle
should be that of mutually beneficial cooperation and
benefit. The PM noted that his government had withdrawn the
draft mining legislation put forward by the previous
government, and would put forward its own draft. (COMMENT:
This latter was news. MPRP caucus leader Idevkhten said at
dinner that evening that the aim of the GOM,s new draft
would be to combine everyone's views -- the other two bills
which had been submitted, plus the protesters, views -- into
one bill, although he could not elaborate quite how this
would be done.)


8. (C) Over lunch with MFA Vice Minister Tsolmon, DAS Keith
noted EAP Assistant Secretary Hill wants to visit Mongolia,
but timing was uncertain. VFM mused that A/S Hill,s visit
might be a good time to sign the joint statement of
principles. DAS Keith thought perhaps the Ambassador should
sign, especially since A/S Hill visit timing remained
uncertain.


9. (C) VFM Tsolmon noted the then-Charge, had been in to
talk about Open Skies and the Proliferation Security
Initiative (PSI) shipboarding agreement. The VFM said MFA
was collecting opinions internally. Then-Charge noted MOJ
had shifted positions and now seemed on board with PSI. DAS
Keith underscored that the USG was looking very closely at
flags of convenience for North Korean ships; Mongolia should
ensure that it is doing due diligence with regard to such
registrations.


10. (C) On other topics, the VFM noted Mongolia was trying
its utmost to help MCC conduct its necessary due diligence.
DAS Keith underscored the importance of making real progress
in MCC discussions by the deadlines set if the process is to
be kept on schedule. He urged greater GOM transparency and
anti-corruption efforts were important both for MCC and to
create a good international investment environment.

11. (C) Following a general review of U.S. relations with
Russia, China, South and Central Asia -- the environment
around Mongolia -- DAS Keith said the USG is grateful for
Mongolia's humanitarian assistance to NK refugees, but the
USG is also concerned about the NK laborer situation.
Mongolia should pay close attention to the international
community,s concerns that North Korean laborers do not enjoy
protection according to international standards, and, in
particular, their pay is filtered through the government.
Mongolia should look carefully at the use of North Korean
laborers in its private sector. Then-Charge noted that
earlier that week the U.S. Secret Service had conducted
anti-counterfeiting and anti-money-laundering training. DAS
Keith stressed that passage of anti-money-laundering (AML)
legislation was important both in its own right, to protect
Mongolia,s financial system, and to MCC compact prospects.
Keith noted the problems of Banco Delta Asia, emphasizing
neither Mongolia nor the USG would want a repeat of that
experience in Mongolia. AML would facilitate Mongolia
increased integration into the international network of
international
organizations, banks, financial monitoring institutions.
Recently appointed MFA State Secretary State Secretary
Bekhbat commented that Mongolia is a small country and it
faces capacity problems and coordination problems in dealing
with nontraditional threats. Regarding North Korea, the GOM
intends to be cautious, he said, and the DPRK Embassy was
still angry about the recent temporary seizure of DPRK funds
entering Mongolia. VFM wondered about the status and
evolution of the six party talks in the Northeast Asia
security process, including Mongolia,s eventual
participation. DAS Keith gently threw cold water on this
idea as impractical. DAS Keith pressed the VFM to vote for
Guatemala over Venezuela for a UNSC seat. DG Jambaldorj
opined that Mongolia very close to making a decision, adding
that MFA had hoped for U.S. cosponsorship of Mongolia's ICNRD
resolution at the UN.


12. (U) DAS Keith cleared this message.
SLUTZ