Identifier
Created
Classification
Origin
07ULAANBAATAR475
2007-08-22 06:23:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ulaanbaatar
Cable title:
Mongolia's Railroad Woes: Construction, Other Materials
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UNCLAS SECTION 01 OF 02 ULAANBAATAR 000475
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EAP/CM, EAP/EX, AND EB/TRA
STATE PASS USTR, EXIM, OPIC, AND EPA
STATE PASS AID/ANE D. WINSTON
MILLENNIUM CHALLENGE CORP WASHDC FOR F. REID
TREASURY PASS USEDS TO IMF, WORLD BANK
MANILA AND LONDON FOR USEDS TO ADB, EBRD
E.O. 12958: N/A
TAGS: ELTN ETRD PREL PGOV MG
SUBJECT: Mongolia's Railroad Woes: Construction, Other Materials
Stack Up at Chinese Border for Lack of Locomotives, Rail Cars
Ref: Ulaanbaatar 0394
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION
UNCLAS SECTION 01 OF 02 ULAANBAATAR 000475
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EAP/CM, EAP/EX, AND EB/TRA
STATE PASS USTR, EXIM, OPIC, AND EPA
STATE PASS AID/ANE D. WINSTON
MILLENNIUM CHALLENGE CORP WASHDC FOR F. REID
TREASURY PASS USEDS TO IMF, WORLD BANK
MANILA AND LONDON FOR USEDS TO ADB, EBRD
E.O. 12958: N/A
TAGS: ELTN ETRD PREL PGOV MG
SUBJECT: Mongolia's Railroad Woes: Construction, Other Materials
Stack Up at Chinese Border for Lack of Locomotives, Rail Cars
Ref: Ulaanbaatar 0394
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION
1. (SBU) Chairman of the Railway Authority of Mongolia Davaadorjiin
Ganbold (protect) told the DCM August 17 that greatly increased
traffic plus a shortage of locomotives and rail cars (wagons) had
resulted, over the past few months, in an ominous peak backlog of
some 800 rail cars at the border between Mongolia and China. (China
uses narrow gauge while Mongolia and Russia use wide gauge tracks,
requiring a shift of cargo or changing of wheels.) Mongolia's
railway has been feverishly working down the backlog, which remains
at around 600 cars as of last week. He complains that breakdowns by
Mongolia's aging fleet of Russian locomotives have contributed to
the problem, but growth in demand is the cause of the problem.
2. (SBU) Ganbold said he was concerned because China had grown
impatient at Mongolia's inability to drawdown the backlog and last
week issued instructions that no more cargos were to leave the port
of Tianjin until Mongolia trimmed the backlog significantly.
Adding to Ganbold's woes, warehouse costs in Tianjin are mounting,
increasing already high transportation costs. However, Ganbold
reassured the DCM that consumer goods and other non-construction
materials shipments would continue unabated and unaffected.
3. (SBU) Regarding growth in rail demand, Ganbold noted that
Mongolia's railway was operating at about 40% greater capacity this
year than last, having eked out what efficiencies it could, but
shipments, primarily of construction materials to feed Ulaanbaatar's
burgeoning construction boom (reftel),were up 40% last year and had
doubled - repeat doubled - this year. He observed that last year's
long, warm autumn had allowed construction to continue into November
and early December; weather is an unknown variable in this
equation.
4. (SBU) Ganbold noted there had been a slight lightening of loads
from Russia following Russia's recent implementation of an export
tax on timber, but he expected the China market would soon factor
this into prices, and volumes would return to previous levels and
then follow recent expansion trends. He also predicted a new oil
contract between Russia and China would replace the lapsed Yukos
deal, bringing back that important and substantial (and lucrative)
trade, but adding pressure to the railway's capacity. Ganbold added
that he and the railway's management had earlier predicted a backlog
would emerge this year, and, in his view, this simply underscored
the importance of the hopefully-soon-to-be-signed Millennium
Challenge Account compact's railway enhancement project. (Note: The
Yukos transshipment of petroleum through Mongolia yield US$6 million
to the railroad monthly. The loss of the Yukos oil revenues hit the
railroad at a crucial moment. Just as trade was expanding, the
railroad was deprived of a key source of revenue that would have
allowed the railroad to pay for needed upgrades and expansion of its
systems to take advantage of the growth of shipping through, to, and
from Mongolia.)
5. (SBU) COMMENT: Earlier this summer we had heard of problems at
the Mongolia/China border crossing point, and, reflecting this, some
products disappeared from the shelves in Ulaanbaatar's department
stores. The products have since reappeared, albeit in smaller
volumes and some with slightly higher prices. Construction on the
Hilton Hotel (adjacent to the compound which houses most Embassy
staff),for example, has virtually come to a standstill, as its
ULAANBAATA 00000475 002 OF 002
materials are stuck at the border, according to the
manager/investor. Ganbold's comments that other shipments, such as
staff household effects, cars, and goods for Embassy operations,
would not be affected were reassuring, but post will carefully
monitor this situation. END COMMENT.
MINTON
3
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EAP/CM, EAP/EX, AND EB/TRA
STATE PASS USTR, EXIM, OPIC, AND EPA
STATE PASS AID/ANE D. WINSTON
MILLENNIUM CHALLENGE CORP WASHDC FOR F. REID
TREASURY PASS USEDS TO IMF, WORLD BANK
MANILA AND LONDON FOR USEDS TO ADB, EBRD
E.O. 12958: N/A
TAGS: ELTN ETRD PREL PGOV MG
SUBJECT: Mongolia's Railroad Woes: Construction, Other Materials
Stack Up at Chinese Border for Lack of Locomotives, Rail Cars
Ref: Ulaanbaatar 0394
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION
1. (SBU) Chairman of the Railway Authority of Mongolia Davaadorjiin
Ganbold (protect) told the DCM August 17 that greatly increased
traffic plus a shortage of locomotives and rail cars (wagons) had
resulted, over the past few months, in an ominous peak backlog of
some 800 rail cars at the border between Mongolia and China. (China
uses narrow gauge while Mongolia and Russia use wide gauge tracks,
requiring a shift of cargo or changing of wheels.) Mongolia's
railway has been feverishly working down the backlog, which remains
at around 600 cars as of last week. He complains that breakdowns by
Mongolia's aging fleet of Russian locomotives have contributed to
the problem, but growth in demand is the cause of the problem.
2. (SBU) Ganbold said he was concerned because China had grown
impatient at Mongolia's inability to drawdown the backlog and last
week issued instructions that no more cargos were to leave the port
of Tianjin until Mongolia trimmed the backlog significantly.
Adding to Ganbold's woes, warehouse costs in Tianjin are mounting,
increasing already high transportation costs. However, Ganbold
reassured the DCM that consumer goods and other non-construction
materials shipments would continue unabated and unaffected.
3. (SBU) Regarding growth in rail demand, Ganbold noted that
Mongolia's railway was operating at about 40% greater capacity this
year than last, having eked out what efficiencies it could, but
shipments, primarily of construction materials to feed Ulaanbaatar's
burgeoning construction boom (reftel),were up 40% last year and had
doubled - repeat doubled - this year. He observed that last year's
long, warm autumn had allowed construction to continue into November
and early December; weather is an unknown variable in this
equation.
4. (SBU) Ganbold noted there had been a slight lightening of loads
from Russia following Russia's recent implementation of an export
tax on timber, but he expected the China market would soon factor
this into prices, and volumes would return to previous levels and
then follow recent expansion trends. He also predicted a new oil
contract between Russia and China would replace the lapsed Yukos
deal, bringing back that important and substantial (and lucrative)
trade, but adding pressure to the railway's capacity. Ganbold added
that he and the railway's management had earlier predicted a backlog
would emerge this year, and, in his view, this simply underscored
the importance of the hopefully-soon-to-be-signed Millennium
Challenge Account compact's railway enhancement project. (Note: The
Yukos transshipment of petroleum through Mongolia yield US$6 million
to the railroad monthly. The loss of the Yukos oil revenues hit the
railroad at a crucial moment. Just as trade was expanding, the
railroad was deprived of a key source of revenue that would have
allowed the railroad to pay for needed upgrades and expansion of its
systems to take advantage of the growth of shipping through, to, and
from Mongolia.)
5. (SBU) COMMENT: Earlier this summer we had heard of problems at
the Mongolia/China border crossing point, and, reflecting this, some
products disappeared from the shelves in Ulaanbaatar's department
stores. The products have since reappeared, albeit in smaller
volumes and some with slightly higher prices. Construction on the
Hilton Hotel (adjacent to the compound which houses most Embassy
staff),for example, has virtually come to a standstill, as its
ULAANBAATA 00000475 002 OF 002
materials are stuck at the border, according to the
manager/investor. Ganbold's comments that other shipments, such as
staff household effects, cars, and goods for Embassy operations,
would not be affected were reassuring, but post will carefully
monitor this situation. END COMMENT.
MINTON
3