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.

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AFGHANISTAN
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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.

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MONGOLIA'S FINANCIAL STANDING
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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.

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MCC RAIL AUDIT AND TVET LEGISLATION
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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.


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WHEAT MONETIZATION AND FOOD FOR PROGRESS
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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.

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FM VISIT TO WASHINGTON
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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.

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CLIMATE CHANGE CONFERENCE IN UB
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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.

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COOPERATION ON NORTH KOREA
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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.

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HDAC CODEL?
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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.

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TIFA AND CBRGI
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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