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Cablegate: Prc/Mongolia: Economic and Commercial Ties Still

VZCZCXRO7238
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3351 3500351
ZNR UUUUU ZZH
P 160351Z DEC 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 7241
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHMO/AMEMBASSY MOSCOW PRIORITY 9461
RUEHUM/AMEMBASSY ULAANBAATAR PRIORITY 3659
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY

UNCLAS BEIJING 003351

SENSITIVE
SIPDIS

DEPARTMENT FOR EAP/K, EAP/CM, INR

E.O. 12958: N/A
TAGS: CH EAID ECON EMIN ETRD MG PREL
SUBJECT: PRC/MONGOLIA: ECONOMIC AND COMMERCIAL TIES STILL
GROWING

1. (SBU) In a December 3 meeting with Econoffs, Mongolian
Commercial and Economic Counselor Nyamtseren Enkhtaivan noted
that Chinese-Mongolian trade was increasing "quite well," and
that generally the bilateral relationship had progressed
quickly over the past 60 years. For instance, bilateral
trade had increased 30 to 40 percent each year for the past
11 years, and was nearly USD 3 billion in 2008, up from USD
1.4 billion in 2006. Enkhtaivan predicted the financial
crisis would decrease trade to about USD 2 billion this year,
but went on to note that China remained Mongolia's largest
investor, with 3,000 enterprises and USD 1.3 billion invested
in mining, infrastructure, light industry, and services.

2. (SBU) Enkhtaivan noted that China has provided USD 250
million in development aid over the past three years and that
the two countries are still discussing a possible USD 3
billion commercial loan. China and Mongolia signed a
framework agreement on the loan in late 2008, and more
recently the Mongolians presented a list of 18 projects which
the loan would finance. The Chinese government would lend
the money to the Mongolian government, which would then
direct financing to businesses. Although he was unwilling to
specify the exact projects or their timelines, he said they
would primarily be in the mining, infrastructure, and energy
sectors.

3. (SBU) When asked about the massive Tavan Tolgoi coal mine
in the Gobi Desert, which U.S. firm Peabody and others are
interested in developing, Enkhtaivan noted that he had spoken
with China's Shenhua Group, which he said had been designated
by Beijing as the lead Chinese company for the project.
(Note: Peabody-Beijing has met regularly with Shenhua to
explore a possible joint venture, although Shenhua reportedly
prefers operating the project independently or, at a minimum,
as the lead investor. Enkhtaivan added that he had met with
Peabody as well. End Note.) Once on the subject of Shenhua,
he did say that one of the 18 commercial loan projects would
include Shenhua, though he did not specify the role Shenhua
would play or if it was tied directly to a Tavan Tolgoi
conditionality.

4. (SBU) Although Enkhtaivan told Econoffs that Chinese
companies were not interested in mining uranium in Mongolia,
he did note that China National Uranium Corporation had
recently bought almost 80 percent of Western Prospector's
shares. (Note: Western Prospector was a Canadian-registered
minerals exploration firm with active U.S. interests--a U.S.
equity firm continues to own approximately 20
percent--currently well-established in Mongolia. End Note.)
He also said that Mongolia is still in discussions with China
State Grid regarding development of a 4 GW power complex at
Shivee Ovoo, also in the Gobi. Nearly all power produced
there would be for export into the Chinese market. He also
clarified that the railway China had proposed to build from
its border with Mongolia would run to the Nariin Sukhait coal
mine, about 60 kilometers from the border. He noted
construction would begin in 2010, and that the two countries
continued to hold budget discussions on the project.

5. This cable was written in conjunction with Embassy
Ulaanbaatar, whose Econoff was TDY in Beijing and
participated in this meeting.
GOLDBERG

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