Third annual U.S.-Mongolia Consultations on Bilateral

UNCLAS SECTION 01 OF 04 ULAANBAATAR 000112

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR, USTDA, OPIC AND EXIMBANK
USAID FOR ANE FOR D. WINSTON

E.O. 12958: N/A
TAGS: PREL EAID ETRD MASS MARR PREF MG
SUBJECT: Third annual U.S.-Mongolia Consultations on Bilateral
Regional, and Global Issues (CBRGI)

REF: A) Ulaanbaatar 56, B) Ulaanbaatar 089


1. (SBU) SUMMARY: The Ministry of Foreign Affairs and the United
States State Department held the third annual U.S.-Mongolia
Consultations on Bilateral, Regional, and Global Issues (CBRGI) on
January 29 at Mongolia's Ministry of Foreign Affairs. EAP Deputy
Assistant Secretary Thomas Christensen headed the American
delegation while the Mongolia side was chaired by MFA State
Secretary Kh. Bekhbat. Bekhbat highlighted good bilateral

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relations, noted Mongolia's hope for a visit to the U.S. this year
by President Enkhbayar or Prime Minister Enkhbold, and noted that
Vice President Cheney has an open invitation to visit Mongolia. He
conveyed the text of MFA's draft "Comprehensive Partnership
Framework Agreement," which Mongolia hopes to sign during a
high-level Mongolian visit to the U.S. Bekhbat said that Mongolia
hopes for agreement this year on a roadmap to a Free Trade Agreement
(FTA). He said that Mongolia is ready to discuss a PSI shipboarding
agreement with the U.S. While the length of time to reach an MCA
Compact had produced frustrations, Bekhbat said, Mongolia looked
forward to signing a Compact later this year. DAS Christensen also
met separately with the Foreign Minister and the Vice Defense
Minister, during which he conveyed the USG's request that Mongolia
provide a full 8th rotation of forces for Iraq (ref A). While urging
Mongolia to reconsider its decision to significantly reduce its
deployment to Iraq, DAS Christensen attempted to disabuse Mongolian
officials of the notion that MCA delays were related to Mongolian
decisions on the Iraq deployment. END SUMMARY.

MFA Presentation
--------------


2. (SBU) MFA State Secretary Bekhbat opened CBRGI talks January 29
by commenting that in depth bilateral consultations were an
excellent way to mark 20 years of diplomatic relations between the
U.S. and Mongolia. He noted that 2006 had been an eventful year for
Mongolia, with the country's 800th anniversary producing a series of
high level visitors from other countries, including U.S. Agriculture
Secretary Johanns leading a delegation representing President Bush.

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Despite political controversies in parliament and on the streets,
Mongolia had strong economic growth, had reformed the tax structure,
and promoted e-government efforts. There had been macroeconomic
stability and a budget surplus. Parliament had passed a number of
significant laws, including the tax reform, which would boost the
growth of legal taxpayers. Mongolia hoped that this economic
success would continue.


3. (SBU) With respect to bilateral issues, Bekhbat continued, the
last several years have seen unprecedented growth in bilateral
relations. Today, the U.S. is an important partner in Mongolia's
efforts to increase democracy and the market economy. For Mongolia,
which is surrounded by two large countries -- Russia and China -- it
is vitally important to have the continued support of the United
States as a "third neighbor," to provide a counterbalance to these
countries and to preserve Mongolia's sovereignty. Mongolia highly
values its relations with the U.S., which have grown into a
"comprehensive partnership." Bekhbat described Mongolia's plans for
a series of events to mark the 20th year of diplomatic relations
with the U.S., which had been kicked off with a seminar and a
reception hosted by MFA three days earlier.


3. (SBU) Bekhbat commented that Mongolia saw the number of
important bilateral visits during the last several years as an
indicator of the quality and level of bilateral relations. In 2007,
Mongolia hopes to have an official visit by its President or Prime
Minister to the United States, perhaps in conjunction with the
signing of a Millennium Challenge Account Compact. Mongolia also
hoped to receive high-level U.S. delegations; Vice President Cheney,
he noted, has a standing invitation, and a visit by him would give
further impetus to bilateral ties. Mongolia looked forward to a
visit by EAP A/S Hill.


4. (SBU) The State Secretary stated that Mongolia considered it
crucial to conclude a "Comprehensive Partnership Framework
Agreement." MFA staff had prepared a 5-page version of such an
agreement, he said, and he passed the draft CPFA to DAS Christensen.
Mongolia hopes to conclude this agreement during an upcoming
high-level visit to the U.S., Bekhbat said.


5. (SBU) Another important issue, Bekhbat said, is an expansion of

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trade and investment relations with the U.S. It is very important
to the Mongolian government, and to Mongolia generally, to conclude
an FTA with the U.S. Mongolia views FTAs as "democracy translated
into the language of economy." The U.S. is a champion of free
trade, and Mongolia hoped that it could count on U.S. support for an
FTA. The Trade and Investment Framework Agreement (TIFA) talks
(tentatively set for early March) play a vital role leading to an
FTA. By later this year, Mongolia hoped for agreement on a roadmap
to an FTA.


6. (SBU) Bekhbat noted that Mongolia had been selected as eligible
for MCA assistance for four years in a row. Personally, he said,
there had been some frustrations at the lack of a Compact. Thus, he
looked forward with some optimism to a Compact. Noting that MCA
Managing Director for Eurasia Frances Reid would visit later in the
week, he said that Mongolia's hope is that the visit will expedite
the Compact and result in an early signing.


7. (SBU) Bekhbat noted the Foreign Minister's recent letter to
Secretary Rice on educational exchanges. The visit of Mongolia's

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Education Minister to the U.S. this year was likely to add more
substance to cooperation on education.


8. (SBU) Bekhbat said that Mongolia attaches importance to
cooperation with the U.S. to promote the interests of Mongolian
nationals living in the U.S. Mongolia intends to issue
identification cards to Mongolian living in the U.S., and to
establish a Mongolian cultural center to offer cultural activities.
Mongolia would be grateful if the U.S. could support these efforts.


9. (SBU) Bekhbat said that Mongolia also attaches great importance
to bilateral cooperation in the military field. For three years,
the Khaan Quest exercise had been successful, and Mongolia had been
pleased to see the exercise expand in scale in 2006. With U.S.
support, the Five Hills training center has been renovated, and the
exercise turned into a major regional event.


10. (SBU) The State Secretary noted that Mongolia had been
consistently supportive of U.S. efforts against international
terrorism, including close cooperation on peacekeeping operations in
Iraq and Afghanistan. Mongolia's decision to deploy troop to Iraq
and Afghanistan had not been easy for a small nation given the
well-known position of its two great neighbors. Mongolia had
decided not to send another full rotation of troops to Iraq after
the current 7th rotation, and to send staff officers or a military
training team depending on the outcome of consultations with the
U.S. and Coalition forces.


11. (SBU) Bekhbat stated that Mongolia is keen to take part in
regional integration efforts, and this process would play a critical
role in Mongolia's national security. Thus, Mongolia hopes for U.S.
support for APEC member status when the moratorium on new members
expires this year. Mongolia believes that U.S. support will be
important in view of the position of some member economies.


12. (SBU) With respect to the Korean peninsula, Bekhbat said,
Mongolia believes it should be free of nuclear weapons, and supports
the Six Party Talks on this issue. Although Mongolia is not a party
to those talks, it will seek the opportunity to make contributions
to calming the North Korea situation and to make contribution to the
peaceful resolution of the North Korean nuclear problem, based on
its friendly relations with countries of the region, including the
two Koreas.


13. (SBU) Bekhbat noted that Mongolia had adopted in November 2005
a National Plan of Action on trafficking in persons and the sexual
exploitation of women and children. While the government lacks
resources, it has been working closely with NGOs with experience in
this field.


14. (SBU) Bekhbat affirmed Mongolian support for the Proliferation
Security Initiative (PSI). It had considered the issue of a
shipboarding agreement, and decided to support conclusion of the
pact. The government consulted with the Standing Committee on
Foreign Relations of the parliament, and the government has given a
green light to negotiations.


15. (SBU) With respect to an Open Skies Agreement, Bekhbat said,
Mongolia is not yet in a position to conclude an agreement at this

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time, mainly because of the pending privatization process for MIAT.

U.S. Presentation
--------------


16. (SBU) DAS Christensen opened his remarks by stating it was an
honor to be in Mongolia to celebrate the 20th anniversary of the
establishment of relations between our two countries and just as
Mongolia was ending its own celebrations for the 800th year of the
establishment of the great Mongolian state. The "third neighbor"
status of the U.S. is very important to the U.S. and to President
Bush. The President has fond memories of his visit in 2005.


17. (SBU) DAS Christensen praised bilateral cooperation on a range
of issues, especially on promoting democracy around the world.
Mongolia's deployments to Iraq and Afghanistan are good examples of
this. The deployments to Iraq in support of Polish troops at Camp
Echo are both militarily and politically useful. It is instructive
and inspirational to see Poland and Mongolia, two young democracies,
contributing to a new Iraq. (See Ref A.) Through the Global Peace
Support Operations Initiative (GPOI),he noted, the U.S. was pleased
to have provided support for the Khaan Quest exercise in 2006. He
noted that Mongolia's willingness to have Khaan Quest 2007 again be
the regional capstone event was vital after the military coup in
Thailand made staging the exercises there impossible this year.


18. (SBU) As an academic himself, DAS Christensen said, he is
particularly happy to note the doubling of funding for Mongolia's
Fulbright program and noted that there were currently some 1,400
Mongolian exchange students in the U.S. The Peace Corps program
epitomized the strong bond of cooperation between the two countries,
with over a hundred Peace Corps volunteers in Mongolia.


19. (SBU) DAS Christensen thanked the GOM for its cooperation on
refugees. The treatment of North Korean refugees is very important
to the U.S., and the U.S. is appreciative of the depth of
cooperation and discretion which Mongolia has exhibited.


20. (SBU) With respect to the TIFA process, DAS Christensen noted,
Assistant USTR Tim Stratford hoped to visit in March to lead the
U.S. delegation. While there is hope that the two sides can move in
the direction of an FTA, this will take time and effort. The TIFA
process, rather than a burden, will benefit the both sides.


21. (SBU) Concerning the MCA Compact, Christensen expressed the
hope that the Frances Reid visit would be helpful in moving forward
toward a Compact. He noted the recent letter from Secretary Rice
stating our hope for a Compact to be signed this year. Personally,
he understood the frustrations, but there is a reason for the
process, which helps ensure a positive agenda for the recipient
countries. (See ref B.)


22. (SBU) DAS Christensen expressed appreciation for Mongolia's
readiness to move forward with a PSI ship boarding agreement. With
regard to North Korea, he said, one thing Mongolia could do is to
join the international community in implementing UNSCR 1718 to
ensure that money is not going to proliferators.


23. (SBU) Finally, with respect to the Comprehensive Partnership
Agreement draft, he said that the U.S. looks forward to studying the
draft and engaging with MFA. The U.S. supported a Statement of
Principles, he noted.


24. (SBU) Ambassador Minton commented that, in addition to
government-to-government engagement, people-people and private
sector engagement is important. Some 140 U.S. companies are now
active in Mongolia, but there is room for further development of
business relations, including the engagement of large U.S. companies
like Peabody in the development of Mongolia's mineral resources.
Not only would this be beneficial for the people of both countries,
these large companies operated under the strictures of U.S. law, and
helped foster an appreciation of international business standards
and would bring to Mongolia state-of-the-art technology in the
development of resources. The Ambassador also expressed pleasure at
the decision of the Asia Society to hold a large conference here
this June.

Other Discussion
--------------

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25. (SBU) MFA Counselor Seseer noted that, regarding the refugee
topic, there are really two separate issues. The first is
Mongolia's policy with respect to acceding to the UN Convention on
Refugees and its additional protocol. Mongolia is working on this
issue, and the Ministers for Foreign Affairs and Justice and Home
Affairs would soon submit it to Mongolia's National Security
Council. Another issue concerned North Korean citizens who crossed
the border into Mongolia. On this matter, Mongolia's ministries
worked closely with counterparts, and dealt with it in accordance
with international humanitarian standards. He added that this is a
complicated issue because of Mongolia's geographic situation, and
that the issue bears on its relations with the two Koreas and
neighboring countries.


26. (SBU) D. Zorigt, Director of the Ministry of Industry and
Trade's Policy Coordination and Strategic Planning Department, added
that the upcoming TIFA talks would be the third such round.
Mongolia hopes for a clearer sense of a roadmap toward an FTA. It
is important for Mongolia to understand that the process is moving
toward an FTA and is not indefinite, but that the two sides are
making a good faith effort.


27. (U) The afternoon session consisted of 10-20 minute
presentations, delivered by representatives from the Ministry of
Industry and Trade, the Ministry of Defense, the Ministry of Roads,
Transport and Tourism; and the Ministry of Finance. Copies of the
Power Point presentations were later emailed by MFA to the embassy
and EAP/CM deskoff.


28. (SBU) During these presentations, MoIT's Zorigt again urged the
U.S. to take concrete steps towards signing an FTA with Mongolia,
saying it would increase the competitiveness of Mongolian products,
increase the potential for more Foreign Direct Investment into
Mongolia and its access to know-how, help balance out the country's
trade flows (currently over 80% of exports head to China),and would
be a clear sign of the U.S.'s political support for a young
democracy in an area of the world otherwise unfriendly to democratic
principles. O. Erdembilig from the Ministry of Finance spoke about
the USAID program in Mongolia over the past 15 years describing it
as "the right kind of aid" and noted that U.S. assistance to
Mongolia (12% of total) was second only to Japan (47%). USAID
helped to build democratic institutions and good governance, enabled
private sector development, supported competitive industries, and
expanded economic opportunities for marginalized Mongolians.
However, he said, decreasing allocation of USAID Mongolia grant
resources is a deep concern. The briefing by Kh. Boldbat from the
Ministry of Defense highlighted Mongolia's provision of 894 troops
in seven rotations to Iraq as well as 95 military trainers in six
rotations to Afghanistan. Also of note were the recent visits of
high level US military officials to Mongolia, and U.S. contributions
to Mongolia's military training and education and peace support
operations capacity-building. A representative from the Ministry of
Road, Transport and Tourism focused his presentation on the state of
Mongolia's infrastructure, especially the railroad, and the
assistance an MCC Compact could bring to its development. He also
touched on Mongolian plans to develop its tourism industry by
building tourist infrastructure that met international standards and
increase the number of American tourists from its current annual
figure of just under 3,000.

Goldbeck