AMBASSADOR AND FM BATBOLD DISCUSS AFGHANISTAN,

C O N F I D E N T I A L ULAANBAATAR 000046 STATE FOR EAP/CM; STATE PASS TO AGRICULTURE, USTR, AND MCC E.O. 12958: DECL: 02/17/2019 TAGS: PGOV PREL MARR ECON EAID EFIN MG SUBJECT: AMBASSADOR AND FM BATBOLD DISCUSS AFGHANISTAN, MCC, FISCAL CRUNCH, AND WHEAT MONETIZATION HOLDUP Classified By: Political Counselor Andrew Covington, Reasons 1.4 (b/d) ¶1. (C) Summary. Ambassador Minton discussed a range of key bilateral issues with Foreign Minister Batbold over lunch February 16. Topics included future Mongolian contributions in Afghanistan, Mongolia,s financial situation, the status of MCC implementation, post's wheat-based Food for Progress (FfP) initiative, cooperation on North Korea, the climate change conference Mongolia will host in August, and a possible trip by FM Batbold to Washington this summer. On Afghanistan, the Ambassador reassured the Mongolians that Secretary Gates will soon send a letter with a request for participation to Minister Bold, and that the United States has great appreciation for Mongolia,s willingness to reengage there. Regarding the budget, Batbold said Prime Minister Bayar wishes to maintain discussions with the IMF and include IMF assistance as part of Mongolia,s budget package. On MCC, Batbold confirmed that Bayar spoke to the Russians about the MCC rail audit requirement during his recent trip to Irkutsk. On wheat monetization, the Ambassador underscored the need resolve the present impasse and offered to clarify the terms under which the FfP may operate in Mongolia. End Summary. -------------- AFGHANISTAN -------------- ¶2. (C) The Ambassador told FM Batbold we are expecting Secretary of Defense Gates to send a letter to Defense Minister Bold requesting renewed Mongolian participation in Afghanistan (likely in the forms of continued artillery training and a site security company similar to Mongolia's mission in Iraq). The Ambassador expressed our appreciation for Mongolia's participation in Iraq, efforts to improve its peacekeeping capability, and willingness to reengage in Afghanistan. Batbold stated that Russian FM Lavrov told him in a recent conversation that Russia was "fairly open" on Afghanistan and wants to discuss the situation "with everybody" at a conference in Moscow planned for March. Batbold indicated Lavrov will ask NATO, the EU, the United States and Mongolia, among others to attend. -------------- MONGOLIA'S FINANCIAL STANDING -------------- ¶3. (SBU) Batbold came late to the lunch straight from a Cabinet meeting where Mongolia's budget crunch was the topic. Batbold said Prime Minister Bayar wants to maintain discussions with the IMF and use an IMF agreement not only to shore up GOM finances but also as a basis for soliciting further assistance from other donors to bridge the remaining budget gap. Batbold stated an understanding with the IMF (and the measures it would require of the GOM) would serve as the best way to coordinate (read: attract) other donor contributions. -------------- MCC RAIL AUDIT AND TVET LEGISLATION -------------- ¶4. (C) Batbold confirmed that Bayar spoke to Russian Railway Chairman Yakunin in Irkutsk about the MCC rail audit requirement. Batbold expressed gratitude for MCC assistance on the rail system and suggested that the Mongolian side needed to keep the Russian side better informed about MCC requirements (such as the audit) made of Ulaanbaatar Railways (UBTZ). (Note: The Mongolians have insisted all along that they would keep the Russians informed regarding MCC activities and requirements, but we have noticed some reluctance on the Mongolians' part to do so, probably due to concern stemming from the early days of MCC negotiations that the Russians would balk at one point or another. End Note.) The Ambassador reiterated that the MCC rail project, including the required audit, is in Russia's interest. ¶5. (SBU) Separately, the Ambassador expressed appreciation for the recent passage of Technical, Vocational and Educational Training (TVET) legislation during the ongoing extraordinary session of Parliament. This legislation was required (as a "condition precedent") to move forward on MCC's TVET program. -------------- WHEAT MONETIZATION AND FOOD FOR PROGRESS -------------- ¶6. (C) The Ambassador expressed his concern that the Finance ministry had yet to grant tax exempt status to shipments of wheat piling up on the rail line at the Russian border. (Note: These wheat shipments are to be monetized and the proceeds used to fund Mercy Corps programs in Mongolia through the Food for Progress initiative. The current shipment is loaded into over 300 rail cars. The Agriculture Ministry is now attempting to reassert control over the program. However, the ministry was not allowed such control under the original agreement due to concerns about corruption. End Note.) ¶7. (C) Batbold stated there is a misunderstanding among Mongolian politicians that the proceeds of the Food for Progress monetization are used mostly to pay salaries of expat administrators. The Ambassador replied that of course a small portion is required for administrative costs. Batbold indicated he himself has attempted to clear up this misunderstanding, but that the perception persists. ¶8. (C) The Ambassador offered to work to improve advance coordination of the program to improve transparency. He also offered to consider other commodoties such as soy and other crops in future shipments to Mongolia. The Ambassador underscored that, irrespective of any future agreement, if we cannot resolve the present wheat impasse, that the Department of Agriculture would likely discontinue the program in Mongolia. ¶9. (C) Comment: We are allowing Batbold some additional time to clear up the controversy and get the wheat off the tracks and to the millers duty free. If we do not see resolution, the Ambassador indicated he would have to take up the issue with the Prime Minister, noting the broader implications the impasse was having on our bilateral assistance program. End Comment. -------------- FM VISIT TO WASHINGTON -------------- ¶10. (C) The Ambassador and Batbold discussed the FM's interest in visiting Washington, possibly in June, but left the door open to other dates. -------------- CLIMATE CHANGE CONFERENCE IN UB -------------- ¶11. (C) Batbold confirmed that the GOM is looking to host a climate change conference in UB on August 26-27, but that the dates were not yet firm. He confirmed that President Enkhbayar spoke to former Vice President Al Gore about the latter's possible participation but could not confirm his attendance. -------------- COOPERATION ON NORTH KOREA -------------- ¶12. (C) Batbold reiterated that Mongolia wishes to leverage its diplomatic relations with the DPRK to assist whenever possible with the Six-Party Talks and the stabilization of the Korean peninsula. He recalled that during the time when he was Vice Minister of Foreign Affairs and Richard Armitage was Deputy Secretary, that D asked him to "keep the channel warm." Batbold stated this is still his intention. -------------- HDAC CODEL? -------------- ¶13. (C) The Ambassador told the FM that Rep. David Price of North Carolina may be leading a Congressional Delegation to Mongolia in May in connection with Price's chairmanship of the House Democracy Assistance Commission (HDAC),but that we cannot yet confirm the travel. The Ambassador indicated that, in any case, we should continue to build on the progress HDAC had made in Mongolia through training of legislators and staffers. -------------- TIFA AND CBRGI -------------- ¶14. (SBU) The Ambassador indicated that a transparency agreement was the key element our side must see to move forward with TIFA talks this spring. Assuming we can put together the agreement, the TIFA may be held as soon as April. Batbold said he was flexible as to whether the annual CBRGI (Consultation on Bilateral, Regional, and Global Issues) were held at the same time as TIFA or held separately. MINTON