PRIME MINISTER BAYAR STEPS DOWN, CITING HEALTH

C O N F I D E N T I A L ULAANBAATAR 000308

SIPDIS

STATE FOR EAP/CM AND S/ES

E.O. 12958: DECL: 2029 OCT 26
TAGS: PGOV PREL MG
SUBJECT: PRIME MINISTER BAYAR STEPS DOWN, CITING HEALTH

REF: Ulaanbaatar 293

CLASSIFICATION DRV DSCG 2005-1. REASONS 1.4 (B)(D)


1. (C) Summary: On October 26, Prime Minister Bayar announced
his resignation for health reasons. Because Bayar is
resigning for health reasons, he may be able to return to his
position once he has recovered, as long as his party
leadership and the government agree. Some observers are
terming this resignation a "leave of absence" in anticipation
of Bayar's eventual return. His resignation is unlikely to
change the composition of the coalition government that his
party shares with the Democratic Party (DP). Bayar's
politically astute ex-wife, Khulan, told us that excessive
pressure from the Russians related to a potential future
investment agreement for the world-class deposits of coal at
Tavan Tolgoi in far southern Mongolia also led Bayar to step
down, in light of his health condition. End Summary.


2. (SBU) On October 26, General Secretary Khurelsukh of the
Mongolian People's Revolutionary Party (MPRP) held a press
conference to announce the resignation of Prime Minister
Bayar. The resignation may take effect as early as Wednesday,
when the MPRP convenes to determine who the new PM will be and
whether to maintain a coalition government with the Democratic
Party (DP). The MPRP caucus is meeting informally at the time
of drafting to discuss the succession. GOM officials are not
yet certain if the new PM will carry the term "Interim" or
similar.


3. (SBU) Khurelsukh stated at the press conference that Bayar
sent a letter to the MPRP leadership requesting to resign for
health reasons. (Note: Press reports have speculated in
recent weeks that Bayar's recent medical treatments in Korea
have been for hepatitis C.) Because the Prime Minister is
resigning for health reasons, his resignation can be
considered a leave of absence, which opens the door to his
return as prime minister, so long as his successor and the
government agree to his return. After the press conference,
Khurelsukh told local news outlets that the MPRP Steering
Council is in favor of allowing the current coalition
government to stay in place beyond Bayar's resignation.


4. (SBU) No clear successor has yet emerged, but six names
have already surfaced from the MPRP's ongoing informal
discussions. They are:

- Sukhbaataryn BATBOLD, Foreign Minister and MP
- Nyamaa ENKHBOLD, Deputy Speaker and MP
- Miyegombo ENKHBOLD, Second Deputy Prime Minister and MP
- Chimed KHURELBAATAR, Budget and Standing Committee Chair and MP
- Tsend MUNKH-ORGIL, MP and former Justice Minister
- Nambaryn ENKHBAYAR, former President of Mongolia


5. (SBU) Of the six, Foreign Minister Batbold appears to have
the greatest support at this early stage. Certain members of
the Cabinet have suggested that the new PM should be selected
from among the remaining MPRP ministers, implying also that
the coalition government with the DP - and their own jobs -
should be preserved. Since Bayar has resigned for health
reasons, there is no requirement in the law that the Cabinet
resign. Moreover, if Batbold takes the PM position and Bayar
later wishes to return as the PM after a "leave of absence"
period, Batbold could return to the foreign minister position.
Furthermore, Vice Foreign Minister Bolor suddenly stood in for
FM Batbold at the recent UNGA meetings at a time when Bayar
was in Korea for medical treatment, indicating that the MPRP
may have been considering Batbold as a successor or fill-in
for Bayar as early as a month ago.


6. (SBU) BayarQs resignation comes after his two extended
visits to Seoul this summer and fall for medical treatment and
on the heels of the signing of the Oyu Tolgoi Investment
Agreement (OTIA); Ivanhoe Mines paid the initial allotment of
USD 100 million to the GOM per the investment agreement just
last week (see reftel). Post does not anticipate that this
change in leadership will affect the OTIA, which will be a
central element of BayarQs legacy as PM. Moreover, Bayar will
retain his position as Chairman of the MPRP and as a Member of
Parliament.

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Future of the Coalition Government
--------------

7. (SBU) Of the six potential successors, Enkhbayar or Munkh-
Orgil would be more likely to dispense with the DP coalition
and establish his own all MPRP-team, which would be possible
since the MPRP enjoys an absolute majority in Parliament with
46 of 76 seats. Enkhbayar has much personal political
rebuilding to do after his loss in the May presidential
election, and Munkh-Orgil is inclined to install a cadre of
technocrats from the younger wing of the MPRP. M. Enkhbold
owes his current position as Second Deputy Prime Minister to
the establishment of the coalition government and as such is
in a weak position to disassemble the coalition. The
remaining three contenders are favorably disposed toward the
coalition government.

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Another Option for Bayar
--------------


8. (SBU) Because Bayar will maintain his party chairmanship
and his seat in Parliament, he would be well positioned to
replace Speaker Demberel, who is the oldest MP and unlikely to
resist if the politically stronger Bayar insists. The Speaker
position requires a much less strenuous pace than that of
prime minister. Moreover, the Speaker position is in best way
for Bayar to maintain both power and visibility in
anticipation of his next opportunity to become prime minister
after the 2012 parliamentary elections, as well as to run for
president in 2013, assuming his health improves.

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Russian Pressure also a Factor
--------------


9. (C) Post has learned from Bayar's politically astute ex-
wife, Khulan, that Russian pressure, on top of Bayar's poor
health, was also a significant factor in his decision to
resign. Khulan said the Russians' pressure on Bayar has
increased significantly since the OTIA signing (she did not
specify what type of pressure this was),and that the Russians
were keen to position themselves well for any future
investment agreement related to the world-class deposits of
coal at the separate Tavan Tolgoi deposit in far southern
Mongolia. Moreover, Bayar would be challenged to cope with
such pressure because he will need to return to Korea once
every two months over the next year for additional medical
treatment. Bayar was Ambassador to Russia from 2001 to 2005.


10. (U) Post will report additional developments septel.
HILL