Finnish President Halonen begins historic visit to Mongolia

President Tarja Halonen begins an official visit to Mongolia on Tuesday, the first-ever visit by a high-level Finnish official to the country.
She will hold talks with Mongolian President Tsakhia Elbegdorj on Wednesday to discuss developing bilateral ties as well as issues of democracy and justice and current international questions.
President Elbegdorj visited Finland last autumn.
Halonen will also meet Mongolia’s prime minister, speaker of parliament and human rights commission officials, among others. She is accompanied by Minister of Foreign Trade Alexander Stubb as well as her husband Pentti Arajärvi.
They will visit the Gandan monastery and take part in a meeting of Finnish and Mongolian business executives. The Finnish delegation returns home on Thursday. (Finnish Radio)

Mongolia's Failed Uranium Mining Policy

Viewing cable 10ULAANBAATAR38, Mongolia's Failed Uranium Mining Policy

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Reference ID Created Released Classification Origin
10ULAANBAATAR38 2010-02-09 04:30 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ulaanbaatar
DE RUEHUM #0038/01 0400430
R 090430Z FEB 10
E.O. 12958: N/A 
SUBJECT: Mongolia's Failed Uranium Mining Policy 
Ref: 07 UB 238 
ULAANBAATA 00000038  001.2 OF 005 
¶1. (SBU) SUMMARY:  On February 1, 2010, Canadian uranium exploration 
company Khan Resources (KR) announced its intent to accept an offer 
from the Chinese National Nuclear Corporation (CNNC) to buy 
controlling interest in KR through the purchase of shares.  If 
consummated, CNNC's buyout would give this Chinese state-owned 
company ownership of Mongolia's two key uranium deposits. This turn 
of events has caught the government of Mongolia (GOM) flat footed, 
because the GOM assumed a recently passed 2009 law regarding uranium 
resources and nuclear power gave it total control over these assets. 
 However, the law, which was passed in an exceptionally 
non-transparent fashion, actually weakened GOM control over these 
assets, leaving Mongolia with few options to balance Chinese 
state-owned interests. From Post's perspective, this statutory and 
policy debacle clearly shows the urgent need to continue to push for 
more transparency and public review of the legislative and 
regulatory process.  END SUMMARY. 
--------------------------------------------- - 
A New Nuclear Energy Law Trims Investor Rights 
--------------------------------------------- - 
¶2. (SBU) Passed in early summer 2009 with no public comment or 
stakeholder review, Mongolia's Nuclear Energy Law severely 
restricted private development of uranium deposits within Mongolia. 
In fall 2009, Mongolian People's Revolutionary Party (MPRP) and 
Democratic Party (DP) Members of Parliament publicly discussed the 
legislative process applied to the Law before mining industry forum. 
MP's O. Chuluunbat and E. Bat-Uul explained that a small group of 
nuclear and national security experts under the direct guidance of 
then-Prime Minister Bayar controlled the drafting process.  These 
MPs reported, and separate sources confirmed, that Bayar and senior 
Mongolian political leaders from both parties explicitly instructed 
their respective MPs to pass the draft quickly with a minimum of 
debate and review.  Senior political leaders argued to Parliament 
that national security concerns related to the mining of uranium and 
nuclear power required immediate passage, and that the MPs needed to 
trust that Mongolia's national security and nuclear experts 
effectively crafted a bill that protected national interests. 
Consequently, within a week of introduction, Parliament passed a 
bill that most members did not even bother to read.  The two MPs 
opined that they and many others would not have passed the bill if 
they had scrutinized it more thoroughly, and would not give senior 
leaders such an easy pass again. 
¶3. (SBU) Four provisions have particularly concerned current rights 
holders of uranium assets, which include two American-involved 
firms, Peabody Energy and Dennison Mines: 
-- Immediately revokes all current uranium exploration and mining 
licenses and then requires all holders to register these licenses 
with the Nuclear Regulatory Agency(NRA), for a fee. 
-- Requires investors to accept that the Mongolian state has an 
absolute right to take -- without compensation -- at least 51 
percent of the company that will develop the mine (as opposed to 
just the deposit) as a condition for being allowed to develop any 
uranium property. 
-- Creates a uranium-specific licensing and regulatory regime 
independent of the existing regulatory and legal framework for 
developing mineral and metal resources.  Prior to the Uranium Law, 
exploration licenses gave their respective holders the rights to 
discover and develop any and all mineral and metal resources 
discovered within that license area.  (This did not include 
petroleum resources, which are governed separately.)  According to 
GOM officials, this new provision means that the state can issue a 
distinct license for uranium exploration on a property otherwise 
ULAANBAATA 00000038  002.2 OF 005 
dedicated to other mineral and metals exploration. 
-- Requires firms to obtain GOM approval for sales and purchases of 
shares in uranium exploration and mining firms on both domestic and 
foreign exchanges. 
--------------------------------------------- -- 
Policy Aims Driving Adoption of the Nuclear Law 
--------------------------------------------- -- 
¶4. (SBU) Our contacts have been exceptionally frank about what the 
GOM intended to accomplish with this law.  Uranium (and other 
mineral and hydrocarbon resources for that matter) is first and 
foremost viewed as a tool to balance Mongolia's political relations 
among Russia, China, and "third neighbors" (as the GOM puts it) such 
as the United States. Under this policy, revenues from mining, rule 
of law, or best practices, are secondary or even tertiary 
considerations. Mineral assets are not allocated based on what 
company can best develop the resource for the benefit of 
shareholders and the Mongolian people; rather, they become part of a 
strategic calculation. Thus, uranium to Russia, copper to western 
Rio Tinto, coal to U.S Peabody Energy, and some share of each to 
China keeps key nations involved in Mongolia without letting one 
single country dominate, balancing relations while also securing 
Mongolia's sovereignty. From this perspective, the law's intent is 
to stop firms from developing and disposing uranium assets in ways 
that might upset the balance that the GOM seeks to achieve among its 
first, second and third neighbors. 
¶5. (SBU) The GOM's second goal was to create a value-added nuclear 
power sector within Mongolia. As explained to emboffs, value-added 
industrial activities does not mean a well-planned set of 
developments based on either regional or international market 
conditions and costs of production; rather, the GOM wants a massive, 
world-class uranium-processing industrial development that involves 
the  latest in nuclear technology.  Because such structures embody 
the highest hallmarks of development, anything less diminishes 
Mongolia in the eyes of other states and in the eyes of Mongolians 
themselves -- or so our sources claim, without providing any proof 
that the Mongolian public at large shares in this vision. 
¶6. (SBU) In the case of uranium, the GOM claims, without much 
technical proof, that Mongolia holds at least 10 percent of the 
world's undiscovered uranium.  The government argues that so vast a 
"supply" justifies GOM demands that value-added processing go beyond 
the "mere" concentration of ore into yellow cake (uranium oxide) as 
a precondition for access to Mongolia's assumed extensive uranium 
resources.  This value-added vision ranges from advanced nuclear 
research facilities to nuclear power plants to enrichment facilities 
-- all costing untold billions of dollars.  In this respect, the law 
would allow the state to strip private firms, such as Canadian 
exploration junior partner Khan Resources (KR), of their rights 
because these companies are not committed to such high-end 
processing; those rights would instead be invested in players from 
Russia, France, China, or the U.S. that, at least theoretically, are 
more likely to be in a position to help Mongolia pursue its 
uranium-based ambitions. 
¶7.  (SBU) COMMENT: Long-time observers of Mongolia's uranium assets 
consistently criticize these "value-addled" ambitions, arguing that 
the GOM has never subjected them to any independent analysis. 
Mongolia claims that it has 10 percent of the world's untapped 
uranium.  However, all experts point to proven reserves that 
consistently hover around one percent, which might be increased to 
three percent with more expensive and financially risky exploration, 
exploration that Western firms are unlikely to do under current law. 
 Privately, most observers dismiss the notion that Mongolia can or 
should consider power plants and processing facilities anytime soon. 
 Setting aside the fact that Mongolia woefully lacks any capacity, 
ULAANBAATA 00000038  003.2 OF 005 
the economics of power plants and enrichment facilities are so 
daunting that even well-endowed uranium states such as Kazakhstan 
and Australia have declined to establish them. See reftel for 
current description of Mongolia's uranium resources.  END COMMENT) 
¶8. (SBU) The GOM has sought to achieve these policy aims by 
controlling the sale of both exploration and mining licenses and of 
companies holding Mongolian uranium assets. The law forces companies 
and other entities to surrender control over both the rights to the 
deposit and the operational entity that would mine.  The GOM has 
taken this additional step on operational entities to prevent one 
firm from selling itself to another firm, thus circumventing control 
over the selling and transfer of licenses themselves.  In an effort 
to limit further the ability to transfer these assets, the law also 
empowers the GOM to control share sales on any foreign or domestic 
stock exchange.  In fact, as written, the law seems to require any 
company owning Mongolian uranium assets to seek GOM approval 
whenever it sells more than seven percent of the shares of any 
company that a respective firm might hold whether that sale is 
related to Mongolian uranium assets or not. Just how the GOM would 
enforce such a provision has yet to be spelled out in the 
regulations. (NOTE: This latter provision came in response to the 
Chinese National Nuclear Corporation's (CNNC) purchase of 
outstanding shares of a Canadian uranium firm in spring 2009, which 
circumvented existing laws regarding the disposition of exploration 
and mining licenses.  END NOTE.) 
Russian Uranium Ambitions in Mongolia 
¶9.  (SBU) Mongolian policy aims were directly and indirectly 
influenced by apparent Russian interest in gaining control over key 
Mongolian uranium resources.  Our Mongolian interlocutors candidly 
described Russian involvement with the law. Most of the Mongolian 
technical experts advising senior leaders received their nuclear 
energy training in Russia or were the protgs of Russian trained 
experts.  For this reason, it surprised no one when these advisors 
and the GOM turned to Russia for support and models for Mongolia's 
nascent uranium mining and nuclear power sectors.  As our contacts 
related, the Russians were generous: promising support to develop 
research and training facilities; mining operations; basic 
processing of ore; and, down the road, nuclear power generation and 
fuel enrichment.  In return for fulfilling Mongolia's isotope 
dreams, Russia asked Mongolia to expropriate the mining rights from 
KR and others in eastern Mongolia and vest them in a new state-owned 
company jointly owned by Russia and Mongolia, but managed and 
controlled by Russia.  The Russians had hoped to complete this 
process by August 2009, just in time for President Medvedev to sign 
a new cooperative agreement with Mongolia during his visit. (NOTE: 
Russia explored Mongolia's uranium resources from the 1960s through 
the late 1980s and is well aware that Mongolia's eastern province of 
Dornod holds the best of Mongolia's limited uranium resources. END 
¶10.  (SBU) As explained to us, from Russia's perspective, gifting 
expertise and material upon Mongolia would have the benefit of 
fencing out western and Chinese interlopers, making  the nearby 
Chinese in particular beholden to Russia for their nuclear supplies. 
 While Mongolia might ordinarily prefer not to have its third 
neighbors disengage, it might accept their departure if doing so 
hindered China. 
Intended Consequences of a Bad Law: 
Western Investment Driven Away 
¶11.  (SBU) From the perspective of private western firms, the new 
ULAANBAATA 00000038  004.2 OF 005 
uranium law has been both a disappointment and a disaster.  Faced 
with a blatantly expropriatory law, firms engaged in costly and 
highly speculative exploration activities saw their share values 
collapse and investment resources dry up.  Consequently, these 
companies have been forced to sell out to larger firms, mostly 
state-owned entities from France and China, to recoup a part of 
their investments.  More broadly, Mongolia has taken a hit among 
international investors, who continue to shy away from investing 
here because they fear that expropriation in the uranium sector sets 
a precedent for other sectors. 
¶12. (SBU) However, the GOM has expressed no particular concern about 
these departures and the corresponding damage to its commercial 
credibility.  On the contrary, it rather appears to express 
satisfaction that uranium assets are slowly but surely being 
acquired by state-owned or multi-national entities able (if not 
necessarily willing) to promote value-added processing and seemingly 
willing to suffer through the indignities of the law.  This group 
includes France's Areva and China's CNNC as well as Peabody Energy 
from the U.S.  Ironically, Russia seems to have become 
the odd man out. 
--------------------------------------------- -- 
Russia Rebuffed: An Example of a Hoisted Petard 
--------------------------------------------- -- 
¶13. (SBU) The negative impact on Russian ambitions in Mongolia's 
uranium sector has surprised most observers, particularly as it was 
the Russians who initially seemed to have motivated much of the 
legislation that was later used to deny them their prize.  By all 
reports, including from some of those who participated in the August 
2009 sessions involving senior Russian officials, the Russians 
pressed for strict terms for their investment.  They demanded 
exclusive control over all entities mining uranium in northeastern 
Mongolia, not arguing for 50/50 ownership but insisting on 51 
percent for Russian and 49 percent for Mongolia.  Nuclear power 
plants and enrichment facilities were off the table.  Russia would 
mine the raw uranium ore, ship it to facilities in the Russian Far 
East, process it, and pay the Mongolians a royalty and a share of 
the profits.  As for nuclear research and training faculties, that 
was also off the table, although Mongolians were offered the 
opportunity to study and train in Russia. 
¶14. (SBU) The Mongolians rejected Russia's offer, noting that the 
new law strictly prohibited Mongolia's entering into such an 
arrangement.  The Mongolians then insisted on the original Russian 
offer for in-country research, processing, and power facilities, 
adding that the Russians would have to accept 49 percent and pay for 
everything.  The Mongolian response floored the Russians, who had 
not anticipated that Mongolia would apply this law to them.  Some 
Western observers thought the Russians might punish the Mongolians 
by cutting power or petroleum.  However, the Russians apparently 
took no major or even minor punitive actions.  At this point, the 
Russians have been left with their current holdings in two ongoing 
uranium exploration projects retained from the socialist era and no 
obvious, easy entry into other projects. 
Unintended Consequence of a Bad Law: 
China Trumps Mongolia 
¶15. (SBU) While Mongolia was generally satisfied that the new law 
would constrain Western and Russian ambitions, it apparently did not 
anticipate China's response.  Much of the law was specifically aimed 
at halting firms from "flipping" Mongolian uranium assets by selling 
licenses, companies, and shares. For their part, the Chinese 
appeared to respond by simply ignoring it. In the case of KR, the 
CNNC decided to acquire KR's shares without consulting the GOM.  KR, 
ULAANBAATA 00000038  005.2 OF 005 
a Canadian company, has the right to sell shares in Canada on the 
Toronto Exchange or those privately held; CNNC has the right to buy 
these shares from any exchange or venue where they are legally 
tendered -- and in these circumstances Mongolian law and policy is 
irrelevant.  At this point, CNNC is well on its way to owning the 
very uranium holdings that the Russians craved and that the 
Mongolian government wanted to make the heart of their ambitious 
nuclear infrastructure. 
¶16. (SBU) So far,   the GOM has not yet responded publicly. 
However, given the long-held GOM concern about its southern 
neighbor, the GOM is very likely gnashing its teeth, wondering how 
the Chinese outmaneuvered both the GOM and Russian attempts to gain 
control over these uranium assets.  For their part, the Chinese have 
been neither subtle nor mysterious; CNNC has acted like any business 
in terms of seizing an opportunity.  Seeing distressed but valuable 
assets, it made an attractive offer to owners who had for too long 
suffered nothing but losses at the hands of the GOM. However, unlike 
a private business, the CNNC, having gotten the uranium rights 
within its grasp, will fall back on its relationship with the 
Chinese state, tacitly daring the Mongolians to deny them their 
¶17. (SBU) Ironically, all of the GOM's regulatory sleights of hand 
and statutory stratagems were aimed at keeping uranium assets under 
Mongolian control.  Such aims would certainly have been easier if 
pliable, privately owned Western firms sensitive to local laws and 
policy goals were developing the properties.  However, it is these 
firms that have now been driven away.  Nor can the Mongolians simply 
turn to the Russians, who having been rebuffed, may not be eager to 
save Mongolia from its hasty and poorly conceived policy on terms 
that Mongolia can easily accept.  Inadvertently, the GOM is faced 
with a situation in which a Chinese state-owned firm holds the high 
ground on Mongolia's choicest uranium assets.  In every respect, GOM 
policy has failed to achieve what its original sponsors had hoped. 
¶18. (SBU) From post's perspective, one of the most encouraging 
aspects of this statutory and policy debacle is the very public 
nature of the attacks against both the process of passing this law 
and its implementation. Normally discreet when discussing disputes 
and irritations, our sources have been very open about their disdain 
for this law. Members of Parliament, bureaucrats from the Nuclear 
Regulatory Agency, Minerals and Energy officials, and the mining 
industry representatives joined in open debates in print and other 
fora, analyzing in detail the failings of this law and its negative 
implications for both Mongolia's national security and its 
investment climate.  Largely reflecting the assessment provided in 
this cable, the practical effect of this discussion within Mongolia 
is to clearly underscore the urgent need to continue to push for 
more transparency and public review of the legislative and 
regulatory process.  Viewed from a more long term perspective, it 
also underscores the importance of what post, USTR and the GOM have 
been undertaking in our mutual effort to negotiate a transparency 
agreement between the U.S. and Mongolia.  END COMMENT. 

CIDA: Minister Oda Visits Mongolia

ULAANBAATAR, MONGOLIA, Aug 28, 2011 (MARKETWIRE via COMTEX) -- The Honourable Beverley J. Oda, Minister of International Cooperation has completed a fact-finding trip to Mongolia today, aimed at building greater cooperation between Canada and Mongolia. During her visit, Minister Oda met with senior government officials, including Prime Minister Sukhbaatar Batbold, Minister of Foreign Affairs and Trade, Gombojav Zandanshatar, Minister of Social Welfare and Labour, Tugsjargal Gandi, and Dashdorj Zorigt, Minister of Mineral Resources and Energy.
"The warm welcome I received during my visit demonstrated that Canada and Mongolia will continue to build on our growing relationship. We had productive discussions on how Canada might further assist Mongolia to strengthen its democratic governance and economic growth," Minister Oda said.
"We welcome the desire of the Mongolian government to model their future development on Canada," stated Minister Oda. "Their recognition that our shared values can contribute greatly to a prosperous and democratic future for the Mongolian people."
Canada and Mongolia examined ways to strengthen governance leading to improvements towards an open, accountable and transparent public service. Despite the high levels of literacy and primary education in Mongolia, a larger technical and skilled workforce was identified as a primary need to help Mongolian women and men secure long term employment in the country's growing open market economy.
The Government of Canada will also continue to support development initiatives in Mongolia through its long-term support to multilateral and global organizations, including the World Bank, the Asian Development Bank, and the Global Fund to Fight AIDS, Tuberculosis and Malaria.
In 2009 - 2010, the Government of Canada contributed $11.34 million toward development assistance initiatives in Mongolia.
Mongolia is a lower-middle income country dependent on the export of its natural resources that represents 22.4 percent of its GDP. Half of Mongolia's population of 2.8 million lives in and around the capital of Ulaanbaatar. The remainder of the population is widely dispersed throughout the desert regions of the country.
Mongolia has made significant progress in its move to a market-based economy following the end of communism and the introduction of democracy in 1990. The country held its first parliamentary elections in 1990 and its first direct presidential election in 1993.
Despite economic and political reforms, 22.4 percent of Mongolia's population continues to live below the poverty line of $1.25 per day. Mongolia ranks 100 out of 169 countries on the United Nations Development Programme Human Development Index. More than 40 percent of the workforce is engaged in the declining agricultural sector, while the rapidly growing mining sector relies heavily on foreign workers. Despite high literacy rates, at 97 percent, many Mongolian women and men lack the relevant skills to secure jobs in this vital industry.
Mongolia's rate of maternal mortality is 46 per 100,000 live births. The under-five mortality rate is 43.3 deaths per 1,000 live births and life expectancy at birth is 67 years.
Mongolia's extensive reserves of copper, gold, oil, and coal are its primary source of export revenue. In 2010, mineral exports accounted for 81 percent of Mongolia's export revenue.
For further information on Canada's current development projects in Mongolia visit the Canadian International Development Agency's Project Browser. ( )
        Justin Broekema
        Press Secretary to the Minister of International Cooperation
        Media Relations Office
        Canadian International Development Agency (CIDA)

SOURCE: Canadian International Development Agency - CIDA

Steelmakers hunting for coking coal in Mongolia

By Zhang Qi (China Daily)


BEIJING - Chinese steelmakers are scrambling to buy coking coal mines in Mongolia, China's largest supplier of the fuel.
China is the world's biggest steel producer and needs the coke to keep its blast furnaces in operation.
State-owned steel makers, including Baosteel Group Corp and Jinan Iron & Steel Group Corp, are eyeing projects in Mongolia, which has vast quantities of untapped minerals, according to sources familiar with the situation.
Xinjiang Bayi Iron and Steel Co Ltd, a subsidiary of Baosteel, has a 10-year contract for supply of coking coal from Mongolia Energy Corp Ltd (MEC). Baosteel has also expressed an interest in buying a stake in MEC's coking coal project in the Khovd province in western Mongolia, the sources said.
In July, Jinan Iron & Steel and the Aluminum Corporation of China (Chinalco) signed contracts with Mongolia's State-owned operator, Erdenes Tavan Tolgoi LLC for coal supplies worth $250 million from deposits in the East Tsankhi area.
The sources said that both Jinan Iron & Steel and Chinalco are also looking to purchase mines in East Tsankhi.
"Mongolia has rich untapped reserves and the location is very attractive for Chinese companies," said Huang Shengchu, president of the China Coal Information Institute.
The Tavan Tolgoi deposit, which is only 270 kilometers from the Chinese border, is considered the world's largest untapped source of coking coal. Mongolia's National Mining Association expects coal production to increase to 60 million tons by 2015 from 22.5 million tons in 2010.
Tavan Tolgoi (TT) holds an estimated reserve of 6.4 billion tons of coal, including large amounts of coking coal.
While the Mongolian government will control of TT's East Tsankhi block, it announced in July that it had selected a consortium of Chinese, US and Russian companies to develop the West Tsankhi block.
Shenhua Group Corp Ltd, China's largest mining company by output, will have a 40 percent stake in the coalfield with the largest US coal producer Peabody Energy Corp holding 24 percent. The Russian Railway-led consortium will have a stake of 18 percent, and the Mongolians will hold the remainder.
However, the situation has been thrown into uncertainty after Mongolia's President Tsakhia Elbegdorj said on Aug 20 that the country was rethinking development plans for the mine in the light of negative public opinion.
Huang said the uncertainty over the West Tsankhi project will not deter China from seeking coking coal in Mongolia. Although China is currently more than 90 percent self-sufficient in the fuel, it will become increasingly dependent on imported resources, especially from nearby Mongolia, as a result of rising demand and the government's policy of protecting domestic supplies.

Source:China Daily



Macmahon Holdings Named Preferred Contractor On Tavan Tolgoi

SYDNEY -(Dow Jones)- Australian construction group MacMahon Holdings Ltd. (MAH.AU) has been awarded a preferred contractor status for part of Mongolia's massive Tavan Tolgoi mining project, in a joint venture with Germany'sBBM Operta Group, the company said Thursday.
The joint venture would start mining up to 15 million tons a year of coal from the project from the first quarter of 2012. State-owned Erdenes Tavan Tolgoi JSC owns the eastern part of Tavan Tolgoi, while the western blocs are being developed by a consortium of China'sShenhua Group, Peabody Energy Corp. (BTU), and a sub-consortium of Russian miners.
The massive Tavan Tolgoi project has an estimated 6.4 billion metric tons of coal reserves, making it the world's second-largest coal deposit after the Shengli field in China, according to data provider Raw Materials Group. It also has large quantities of coking coal, an essential ingredient in steelmaking.
MacMahon said contractual details will be finalized over the next few months.
Chief Executive Nick Bowen said the project award was an important foothold in Mongolia's burgeoning coal mining sector.
"The progression of the Tavan Togloi project now provides a solid foundation for MacMahon in its efforts to establish a long-term business in one of the world's largest emerging mining regions," he said.
No value for the contract was given. Contractors with preferred bidder status have been chosen as the most suitable candidate for a project, but haven't actually completed contracts with their clients.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@

Source:Dow Jones Newswires 

South Korea, Mongolia To Firm Up Bilateral Ties

(RTTNews) - South Korea and Mongolia have agreed to ramp up bilateral cooperation in resources and energy sector while enhancing their ties to a "comprehensive partnership," the official Yonhap news agency reported on Monday.
The two sides agreed on the symbolic commitment at summit-level talks between visiting South Korean President Lee Myung-bak and his Mongolian counterpart Tsakhia Elbegdorj in the capital Ulan Bator.
Lee who addressed a joint news conference after talks with Elbegdorj lauded Mongolia's democratization and vaulting economic growth. Referring to the Central Asian country's huge mineral resources, the South Korean leader described it as a nation with unlimited potential.
"In today's summit, President Elbegdorj and I agreed to elevate the relations between the two countries to a comprehensive partnership and strengthen high-level cooperation between the two countries, including summit talks. Endowed with the world's 10th largest reserves of resources, Mongolia is considered a country of limitless potential," he said.
A memorandum of understanding (MOU) was signed by the two sides seeking greater cooperation in natural resource development, electricity, renewable energy and other areas. Also, two MOUs on joint explorations for uranium ore and other earth materials as well as on bilateral cooperation in the medical sector were signed on the occasion. It was also agreed to set up a joint panel to discuss resources and energy cooperation.
Besides, the two countries signed agreements for increasing South Korean investments in Mongolia's infrastructure and construction sectors, expanding air travel links and simplification of travel procedures for bilateral visits.

The Mongolian leader on his part hailed South Korea's support for efforts to strengthen democracy and development in his country.
A joint statement issued following summit-level talks, unveiled an action plan for bilateral cooperation. Lee also called on Mongolian Prime Minister Sukhbaatar Batbold and Parliament Speaker Damdin Demberel.
Bilateral trade between the two countries, which established formal diplomatic ties in 1990, was worth $230 million in 2010, making South Korea, Mongolia's fourth-largest trading partner.


Ivanhoe shares rally after good news on Mongolian project

BRENDA BOUW - The Globe and Mail
Shares of Ivanhoe Mines Ltd. soared 20 per cent Tuesday, far past its base metal peers, a day after the Vancouver-based company said gold and silver would account for about half of revenues at its Oyu Tolgoi project, which is set to begin production at the end of next year.
Ivanhoe also received a rating and target price increase from TD Securities on Tuesday following the recent release of its second-quarter update which said the promising project in Mongolia would be built within its $4.5-million pre-production budget.
TD raised its rating from “hold” to “speculative buy” and increased its 12-month target price to $30 from $28.
“An investment in Ivanhoe Mines provides exposure to one of the world’s largest copper-gold deposits that is being built and managed by Rio Tinto PLC,” analyst Craig Miller said in a note. “The possibility for a corporate transaction remains; and the recent weakness in the base metal mining equities provides an attractive buying opportunity, in our view.”
Mining promoter Robert Friedland, chief executive officer of Ivanhoe, said while copper will be the main metal produced at Oyu Tolgoi, “gold and silver are major contributors” to the project.
“The recent sharp increases in gold and silver prices have reinforced the importance of having a multi-commodity deposit such as Oyu Tolgoi,” he said in a release on Monday.
While Ivanhoe’s statement regarding the project’s gold and silver content wasn’t a surprise, analysts say it appears to have caught investor attention alongside gold’s recent record-breaking run. Silver has also been on a tear recently, rising nearly 40 per cent so far this year.
Gold hit a record $1,913.50 (U.S.) an ounce in London on Tuesday and settled down at $1,861.30 on the Comex in New York. Silver, which has more than doubled in price in the last 12 months, fell about 2 per cent, to $42.33 an ounce in New York.
While Ivanhoe’s shares rallied on Tuesday, they’re still off a 52-week high of $30.28 reached in December.

Official: U.S. in Early Talks About Int'l Nuclear Leasing Arrangementsn with Mongolia

Department of Energy officials have spent weeks trying to knock down reports that they have been interested in building a nuclear waste repository in Mongolia.
Now, the Obama administration is going a step further, disclosing that what DOE hopes to do is "lease" uranium from other countries, then return the spent fuel to the originating country.
A senior Obama administration official told Greenwire earlier this month that the government is in preliminary talks with several countries, including Mongolia, Japan and the United Arab Emirates, about setting up commercial nuclear fuel leasing arrangements.
In one example of how a fuel leasing arrangement could work, countries with uranium reserves could mine, enrich and fabricate the material and lease it to reactor companies abroad. Spent nuclear fuel would then be sent back to the originating country, the official said.
Discussions have not touched upon what those countries would do with the waste, the official said, but the United States hopes to prevent proliferation by providing alternatives to domestic enrichment and reprocessing capabilities.
Other countries and international entities have also been working to create "fuel banks" -- reserves of nuclear fuel for countries facing fuel supply disruptions -- the official said. So far, the International Atomic Energy Agency (IAEA) and Russia have taken firm steps to set up international fuel banks, and Kazakhstan has volunteered to host the IAEA fuel bank, said Mark Hibbs, a nuclear energy analyst with the Carnegie Endowment for International Peace. Last week, the United States announced plans to set up a fuel bank using excess uranium from the country's nuclear weapons program (E&ENews PM, Aug. 18).
But Hibbs said there have been considerable differences of opinion within the Obama administration on how to move forward with nuclear fuel leasing.
"Some of the differences have to do with how the U.S. would implement the conditions for the supply of sensitive nuclear technology to new nuclear countries," Hibbs said.
The United States' participation in or sponsorship of any complex nuclear fuel leasing program involving fuel supply, enrichment and storage of spent fuel with foreign countries depends on the resolution of a struggle between Congress and the executive branch on what America will require in future nuclear cooperation agreements, he said.
Countries of interest
The United States currently has nuclear cooperation agreements under Section 123 of the U.S. Atomic Energy Act with Japan and the United Arab Emirates, but not Mongolia, according to federal officials. Such agreements are required for significant transfers of nuclear material, equipment or components from the United States to another nation and work in conjunction with nonproliferation efforts.
U.S. companies can sell advanced nuclear information and technology, such as reactors, to the United Arab Emirates. The United Arab Emirates -- which agreed not to enrich uranium or reprocess used fuel under the 123 agreement -- hopes to develop its nuclear industry in coming decades and signed an agreement in February with South Korea for the construction of four nuclear reactors by 2020 (ClimateWire, Feb. 25).
Japan, on the other hand, already has a large nuclear fleet and is seeking ways to dispose of its nuclear waste, said Edwin Lyman, a senior scientist with the Union of Concerned Scientists.
Some communities in Japan are wary of expanding dry cask storage of nuclear waste because such facilities could become permanent, Lyman said. The country could build more dry storage facilities, but the question is whether Japan has the political will to find a domestic permanent geologic repository, he added. Japan is also struggling to defuse a nuclear disaster that erupted at its Fukushima Daiichi nuclear complex after the plant was struck by an earthquake and tsunami on March 11, triggering explosions, radioactive leaks and multiple evacuations.
Reports that the United States was in discussions to build a nuclear waste repository in Mongolia started swirling after Richard Stratford, director of the State Department's Nuclear Energy, Safety and Security Office, told the Carnegie International Nuclear Policy Conference on March 29 that the United States was in discussions about building an "international storage depot" for spent nuclear fuel in Mongolia (Greenwire, May 9).
Stratford said U.S. officials were discussing forging a 123 agreement with Mongolia that could involve building an international nuclear waste repository of some type. The U.S. Embassy in Mongolia later denied Stratford's statement, and DOE said the United States cannot negotiate commercial deals or tell another government whether or not to take spent nuclear fuel.
Although the United States does not have a nuclear cooperation agreement with Mongolia, the two countries signed a memorandum of understanding last year to cooperate on civil nuclear technology, including security, nonproliferation and waste management.
The land-locked developing country in central Asia bordering Russia and China has a parliamentary government and limited economic development because of its harsh climate, scattered population and expanses of unproductive land, according to the IAEA. Mongolia's economy has traditionally been based on herding and agriculture, but foreign investors are attracted to the country's large deposits of copper, gold, coal, uranium, tin and tungsten, according to the Central Intelligence Agency. Half of the country's total external trade is with China, the CIA has reported.
The United States would need to establish an agreement with Mongolia if countries with U.S.-obligated fuel were to ship nuclear waste there, Lyman has said (Greenwire, May 9).
Lyman said there has been no indication that nuclear fuel leasing arrangements being discussed would involve spent nuclear fuel from American reactors but added that if another country is willing to accept foreign waste, it might prompt officials and other experts to take a fresh look at the option.
Hibbs said the commercial nuclear fuel leasing arrangements the administration official discussed seem to be consistent with what some U.S. officials want to see for the International Framework for Nuclear Energy Cooperation (IFNEC), formerly the Global Nuclear Energy Partnership.
The Obama administration scrapped parts of GNEP, which was part of the George W. Bush administration's efforts to accelerate research and development on the reprocessing of spent nuclear fuel in reactors (ClimateWire, Dec. 24, 2009). The partnership was seeking to create "cradle-to-grave fuel services" under a regulated market for enriched uranium, which would allow a few large countries to supply smaller ones with enriched uranium to burn in reactors, sparing them the billions of dollars needed to build facilities for uranium processing and disposal (Greenwire, Oct. 26, 2010).
But Hibbs also acknowledged that preliminary talks with Mongolia, which was not part of the original GNEP partnership, add a new dimension. Mongolia is now an observer country in IFNEC, he added.
Potential challenges
Hibbs said involving Mongolia in such a nuclear fuel leasing program might be logical because the country has uranium reserves and relatively few resources to further its economic development but added that there are serious questions about how Mongolia could contribute to such international leasing arrangements because the country has no "nuclear expertise."
"It's not clear how transparent its corporate and political governance structure is; all these questions would have to be resolved before any project like that could go forward," Hibbs said.
The United States also recently made an agreement together with the nuclear supply countries that would "discourage the transfer of enrichment technology or reprocessing technology to Mongolia," Hibbs said.
The United States and 45 other countries in the Nuclear Suppliers Group -- a multinational organization of nuclear supplier countries seeking to limit proliferation of nuclear weapons -- agreed to new global terms of trade for uranium enrichment and spent fuel reprocessing in June.
The new guidelines require countries that want to obtain nuclear technology to meet a raft of requirements, including full compliance with the Nuclear Nonproliferation Treaty, being cited by international nuclear regulators for safeguard deficits, complying with a safeguard agreement with the IAEA and adhering to international nuclear safety norms.
Disagreements within the federal government and Congress could also pose challenges for new nuclear cooperation agreements.
Some lawmakers want increased congressional oversight of the international arrangements, especially if risky politics are involved.
Congress currently has little oversight because the agreements automatically go into effect unless the opposition can secure veto-proof majorities in the Senate and House (Greenwire, March 17).
House Foreign Affairs Chairwoman Ileana Ros-Lehtinen (R-Fla.) introduced a bill in late March that would amend the Atomic Energy Act of 1954 to impose stricter standards on international 123 agreements that govern U.S. exports of commercial nuclear technology, facilities, materials and services.
Under the legislation, cooperation agreements would be required to get an affirmative vote from Congress before going into effect and to strengthen nonproliferation agreements within those contracts in the future. Countries that enter into such agreements with the United States would have to forgo enrichment or reprocessing of nuclear material and assist in preventing state sponsors of terrorism from acquiring or developing weapons.
The legislation -- and its counterpart in the Senate -- would also require Congress to approve 123 agreements, and the United States would be required to demand the return of nuclear material and equipment from countries that withdraw from the Treaty on the Non-Proliferation of Nuclear Weapons.
Ros-Lehtinen has said such oversight is crucial to preventing another nuclear crisis on par with Japan's crisis that erupted at the Fukushima Daiichi nuclear complex after the plant was struck by an earthquake and tsunami in March.
Gene Aloise, the Government Accountability Office's director of natural resources and environment, said in March that countries could simply enter into an agreement elsewhere if they dislike standards that the United States floats (Greenwire, March 17).
Copyright 2011 E&E Publishing. All Rights Reserved.

Source:New York Times

Overseas energy deals 'require caution, states Chinese newspaper

'Rethink' in Mongolia provides an example of potential pitfalls
BEIJING - Experts warned that Chinese energy companies must conduct better risk assessments and strengthen communication with local governments when they explore overseas markets, after Mongolian President Tsakhia Elbegdorj said the country was rethinking development plans for the Tavan Tolgoi coal mine.
Elbegdorj said on Aug 20 that because of the pressure of domestic public opinion, he could not support an earlier plan that gave Chinese company Shenhua Group Corp Ltd the largest share of the coal development project, according to Kyodo News service.
In early July, the Mongolian government announced that Shenhua, China's largest mining company by output, would have a 40 percent stake in developing the Tavan Tolgoi coalfield.
US-based Peabody Energy Corp was awarded 24 percent.
Shenhua declined to comment on that announcement at the time, and it also refused to comment on Tuesday on Elbegdorj's statement.
An insider at Peabody who asked to remain anonymous said that the Mongolian government faced a tough question of dividing the shares in the world's largest untapped coal mine. The insider said that none of the bidders, including Shenhua and Peabody, were satisfied with the initial results because they all wanted larger stakes.
"Mongolia has to balance the benefits of each party, which is hard. Considering the political issues, they have to ensure the neighboring countries' profits, which has put them under huge pressure," the insider said.
The person also said that Peabody might get a larger stake as the project's shareholding structure was "re-planned".
However, one Chinese expert believes that Shenhua will still be the strongest competitor for the mine's development.
"The Mongolian government may reduce Shenhua's share, which almost is a definite result, but how much the percentage is to be reduced depends on future negotiations," said Sun Hongbo, a researcher at the Chinese Academy of Social Sciences.
However, he said the result won't affect Shenhua's international strategy, which was based on increasing domestic demand for coal.
A securities analyst who covers the coal industry said on condition of anonymity that there wouldn't be any direct influence on Shenhua's market performance because it usually takes five years to develop an overseas coal project.
He said Shenhua's recent share performance in Shanghai and Hong Kong might be a reaction to its interim results, rather than the Mongolian coal deal.
Sun said Mongolia wanted to maximize profits from the coal project, so it had to lessen the dependence on any individual country.
Thus, it is possible that Mongolia may give larger shares to South Korea and Japan.
He said Chinese energy companies needed to evaluate the risks of foreign resources projects before making any investment and prepare for possible losses.
Further, companies must liaise more closely with the communities where they do business, such as by cooperating closely with the local government, providing local employment and responding appropriately to local public opinion, said Sun.
"Otherwise, it is hard for a foreign company to develop well in another country," he added.
The Tavan Tolgoi coal deposit, in Mongolia's south Gobi region, has estimated reserves of 6 billion tons. The western side of the field, which is close to Mongolia's border with China, has about 1.2 billion tons of reserves, of which 68 percent is high-quality coking coal.
The field has an estimated production life of more than 30 years with output of 15 million tons annually.

Source: China Daily

Posco to reportedly build Mongolian plant

By Seoul Bureau
SEOUL (MarketWatch) -- South Korean steel maker POSCO will build a coal-gasification plant in Mongolia next year in a 50-50 joint venture with a Mongolian company, the Seoul Economic Daily reported Tuesday, without citing sources.
The report comes a day after the Ministry of Knowledge Economy said Posco signed an Memorandum of Understanding with a Mongolian company for cooperation in the commercialization of energy resources.
Despite the MOU being signed, no detailed plans have yet been decided, a Posco spokesman told Dow Jones Newswires.
Newspaper website:

Source:Dow Jones Newswire

Remarks by Vice President Biden and Mongolian Prime Minister Batbold

PRIME MINISTER BATBOLD: (As translated.)  First of all, I’m grateful to the United States Vice President Biden for accepting my invitation to pay an official visit to Mongolia.  And I am pleased to welcome Your Excellency and your delegation to Mongolia.
This visit is significant as it coincides with a series of important anniversaries in the history of Mongolia.  Next year, we will celebrate the 25th anniversary of bilateral relations.
Your visit is the expression of the fact that U.S. recognizes Mongolia’s irreversible choice to develop democracy and the will of the Mongolian people and to uphold legal forces to uphold democracy.  We are grateful to the United States for the continued support and the economic assistance.
It gives me great pleasure to note that we had a very productive meeting with Vice President Biden.  We have discussed the issues related to furthering our bilateral cooperation in the spirit of the comprehensive partnership, based on our common values and shared interests.  We have noted with satisfaction the progress achieved in our relations and affirmed our commitment to advance these relations.
Mongolia has started chair the Community of Democracies from this July.  I discussed this issue before, when I was a foreign minister with State Secretary Clinton, and today, I had the opportunity to discuss this issue with Vice President Biden, as well.  I would like to highlight that Mongolia is ready to share its experiences in promoting democratic values and culture.
The successful implementation of Millennium Challenge Corporation projects will significantly reduce poverty, increase transportation -- the Mongolian side has expressed its interest in launching talks in the MCC second compact agreement.
We have discussed the possibilities to develop and enrich trade and economic relations with the United States and attract more United States investments to Mongolia.  We are grateful that Vice President Biden reaffirmed the continued support of the part of the United States for implementation of democratic reforms and strengthening market economy in Mongolia.  During the meeting, we have discussed possibilities to conclude a transparency agreement in near future.
The signing of the memorandum of understanding between MIAT Mongolian Airlines and the U.S. Trade and Development Agency aimed at developing civil aviation sector and improving MIAT training and capacity basis would make an important contribution to the development of the bilateral economic cooperation.
Moreover, we have exchanged our views on other fields of our bilateral cooperation, particularly cooperation in the field of education.  The Mongolian side has requested the United States side to explore the possibilities to increase the number of scholarships for Mongolian students.  This year alone 16 Mongolian students were selected to study in the United States through Fulbright Scholarship Program.
I expressed our special gratitude on behalf of the people of Mongolia for the U.S. decision to provide $695,000 grant from the Fund for Cultural Preservation.
We have touched on many issues, particularly in the fruitful views of our bilateral consultation mechanisms.  We have also discussed our cooperation in peacekeeping operations.  The U.S. side has expressed its appreciation for Mongolia’s contribution to the peacekeeping activities.
Mr. Vice President, there is a proverb saying that an old friend is the best friend.  Therefore, the visit of the U.S. Vice President to Mongolia after 67 years is certainly an old friend’s visit for us.  I welcome you again and wish you a pleasant stay in Mongolia.
Thank you for your attention.
VICE PRESIDENT BIDEN:  Well, Mr. Prime Minister, thank you for the invitation.  And it’s an honor to be here.  I’ve been looking forward to this.  I also want to thank your President, as well as the Mongolian people for their generous hospitality.   I only have one regret that I’m not able to stay longer and see more of your country.  I hope you’ll invite me back.
I am particularly pleased to make this visit, following your President’s meeting this June with President Obama at the White House.
Our nation does have a shared history that goes back at least 100 years.  In 1923, a fellow named Roy Chapman Andrews, a naturalist and a explorer, and the Director of the Smithsonian National Museum of Natural History in Washington traveled to Mongolia to excavate a site in the Gobi Desert he called the Flaming Cliffs.
That expedition captured the world’s imagination by discovering a treasure trove of fossils, including the largest mammal to ever walk the Earth and the first dinosaur eggs ever found intact.  But in the last 20 years, Mongolia has captured the imagination of the world by its remarkable transition to democracy: five presidential elections, five democratically conducted parliamentary elections.  And it’s truly remarkable, the progress you’ve made since 1991.
So although we go back 100 years, quite frankly, we’ve grown much closer since the Mongolian people began to embrace democracy 22 years ago.
That journey started with a small demonstration of -- on Human Rights Day in 1989, then it blossomed into a movement that inspired thousands of Mongolians.  And it led to the country’s first free elections, and eventually ended -- that eventually ended decades of one-party rule.
I guess the translator opposes one-party rule.  (Laughter.)  I’m only kidding.  I shouldn’t joke.  I shouldn’t joke.
Today Mongolia is not just a shining example for other nations in transition but it’s an emerging leader in the worldwide democratic movement, a responsible actor on the world stage, and a close friend and partner of the United States.  And none of that is an exaggeration.  It is literal.
In July, as you referenced, Mongolia assumed the chairmanship of the Community of Democracies —- a coalition of democratic countries dedicated to promoting democracy around the world.  And Mongolia’s term as chairman will culminate with a Democratic Summit held in 2013 right here in your capital.
I also want you and your colleagues to know that Americans admire and appreciate Mongolia’s contributions to international peace and security.  In the past decade alone, Mongolia’s army -— whose proud martial tradition dates to Ghengis Khan -— has been deployed as US [sic] peacekeepers and observers in Sierra Leone, Chad, Darfur, Kosovo, Western Sahara and many other countries.
And Mongolian soldiers have also served with the International Coalition Forces in Iraq and are now serving in Afghanistan -- in Afghanistan, where the Mongolian troop contributions will soon increase to nearly 400 military personnel.
During his June visit -- during his June visit to Washington, your President laid a wreath in the Arlington National Cemetery, and he met with wounded American soldiers at Army Reed Medical Center [sic].  And Americans noticed that gesture.  For not every visiting world leader takes the time to do that.  President Obama and I genuinely and greatly appreciate it.
Now the United States and Mongolia are also developing closer economic relations.  As we discussed in our bilateral meeting, to enhance these economic ties, we are mutually working toward a transparency agreement that would make Mongolia an even more attractive destination for America and foreign investment.
I would just like to flatly state the United States remains strongly committed to helping the Mongolian people build a better future.  That is why over the last 20 years USAID has provided more than $200 million in grant assistance to Mongolia, with programs that seek to bolster democracy and economic growth.
And as you pointed out, that's why we have committed another $285 million through the Millennium Challenge Corporation compact.  That assistance is focused on a critical set of issues including combating corruption through training programs at all levels of government, improving rule of law by developing checks and balances at all levels of government, vocational training to prepare Mongolians for better jobs and improving infrastructure to make the country’s critical north-south corridor more accessible.
I hope that you and the people of Mongolia will take my visit here today -— and President Obama’s meeting with your President earlier this summer -— as signs of how impressed we are by the progress you’ve already made.
These reciprocal visits are also signs of how important this relationship is to the United States.  As I told you earlier, we are very proud to be considered a “third neighbor.” And, like any good neighbor should, we’ll continue to do our part to support Mongolia’s political and economic development.  And, Mr. Prime Minister, we look forward to even closer ties in the years to come.
And I want to thank you again for the hospitality.
2:53 P.M. (Local)

Biden Names Mongolia Horse, Cheers Democracy on Way to Tokyo

Vice President Joe Biden took a detour through Mongolia today en route from China to Japan to show support for the country’s nascent democracy and thank the government for sending troops to Afghanistan and Iraq.
“In the last 20 years, Mongolia has captured the imagination of the world by its remarkable transition to democracy,” Biden said after meeting Prime Minister Sukhbaatar Batbold in Ulan Bator. Mongolia is “an emerging leader in a worldwide democratic movement.”
While the Alaska-sized nation with fewer than 3 million people has an economy smaller than Apple Inc. (AAPL)’s annual sales of iPod music players, its location between Russia and China, untapped mineral wealth and ties to North Korea give it added importance. Biden said the U.S. was “very proud to be considered a third neighbor” for the landlocked country.
The trip is “part of a broader policy in Central Asia to try and show that the U.S. has a presence there, that it’s not merely a Russian or Chinese backyard,” said Jeff Bader, who was senior director for Asia affairs at the National Security Council until April and is now a visiting scholar with the John L. Thornton China Center at the Brookings Institution.
After his remarks, Biden went into a ceremonial ger, commonly referred to as a yurt, with President Tsakhia Elbegdorj. He later attended a demonstration of traditional Mongolian sports including wrestling, trying his hand at archery and naming a horse chosen in his honor “Celtic.”

Diversifying Trade

Mongolia’s transition to democracy took place in 1990 after seven decades as a Soviet satellite. The collapse of the Soviet Union left the country increasingly dependent on China.
Batbold today said he wants to increase trade with the U.S. and attract more investments from the country to Mongolia.
U.S. exports to Mongolia were $164.7 million in the six months to June, according to the U.S. Census Bureau, led by mining and related equipment and vehicles. Imports were $9.1 million. More than 90 percent of Mongolia’s exports go to Northeast Asia, according to data compiled by Bloomberg.
Mongolia is trying to seek a “balance of interests” in its relations with neighbors like Russia and China and Western countries, Batbold said in a June 17 interview.
Mongolia’s economy grew 28 percent last year to $6.8 billion in current prices, driven by surging investment in mining projects to tap demand from China and resource-poor Asian countries such as Japan and South Korea. Cupertino, California- based Apple’s sales of iPods were $8.3 billion.

Coal Output

Coal production in Mongolia doubled last year to become the nation’s top export earner. St. Louis-based Peabody Energy Corp. (BTU) was among bidders picked to develop Mongolia’s Tavan Tolgoi deposit, potentially the world’s largest untapped reserve of coal used to make steel. The country also has substantial deposits of other resources, including copper, gold and uranium, according to the U.S. Geological Survey.
South Korean President Lee Myung Bak, who was also in Ulan Bator today, signed an initial agreement with Mongolia to expand cooperation on developing energy resources, the Korean Ministry of Knowledge Economy said in an e-mailed statement.
Mongolia was among the first countries to send troops to the Iraq war and its troops have been deployed in Afghanistan since 2003. Still, the government also maintains ties with North Korea, which Batbold said offers a possible export route to the Pacific Ocean for the country’s mineral wealth.

North Korea’s Intentions

One possible purpose of the vice president’s trip is to glean information on North Korea’s intentions, said Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York.
The U.S. maintains sanctions on North Korea in addition to United Nations trade restrictions imposed to force the regime of Kim Jong Il to return to talks over its nuclear weapons programs. Kim will meet this week with Russian President Dmitry Medvedev in the Siberian city of Ulan-Ude, about 420 kilometers (260 miles) from Ulan Bator.
Biden left China this morning and will later head for Japan as the final leg of his three-nation tour of Asia. The vice president has been repeating a message of reassurance to the Chinese that their investment in U.S. Treasuries is safe.
To contact the reporter on this story: Kate Andersen Brower in Washington at
To contact the editor responsible for this story: Peter Hirschberg at

Biden names horse, praises Mongolia's democracy

ULAN BATOR, Mongolia (AP) — U.S. Vice President Joe Biden tried his hand at archery, watched a wrestling match and named a horse during a brief visit Monday in Mongolia, which he called a shining example of democratic development.
Biden praised Mongolia for successfully carrying out presidential and parliamentary elections after making a peaceful transition to democracy in the early 1990s. The small, landlocked country had been a Soviet satellite for decades.
"In the last 20 years Mongolia has captured the imagination of the world by its remarkable transition to democracy," Biden said.
Later in the day, Biden sat under a traditional Mongolian tent with Prime Minister Sukhbaatar Batbold and other officials as they watched performances in traditional dance and throat singing performances.
He tried his hand at using a traditional bow and arrow and watched a wrestling competition. As he presented an award to the hefty winner, Biden struck a wrestling pose, eliciting laughter. Biden was also presented with a Mongolian horse, which he named "Celtic" in remembrance of his Irish roots, though the horse bucked as the vice president tried to get near.
Biden also praised Mongolia's military contribution in Afghanistan and Iraq after meeting Prime Minister Sukhbaatar Batbold and President Tsakhia Elbegdorj.
Mongolia is eager to develop its mineral wealth but needs outside help, with companies from neighbors China and Russia, as well as from the United States, Australia, Japan and Canada looking to develop projects.
Last month, Mongolia picked U.S. mining giant Peabody Energy, China's Shenhua Group and a Russian-Mongolian consortium to jointly develop the keenly sought Tavan Tolgoi coking coal deposit in the Gobi Desert.
The companies have agreed to build a 600-megawatt power station, coal-to-liquid fuel and coking fuel plants as well as north and southbound railways for the project, according to a government statement.
Tavan Tolgoi in the southern Gobi desert is one of several big projects Mongolia has been debating as it strives to protect local interests while tapping foreign expertise needed to develop the resources. One-third of the country's 2.7 million people live in poverty.
While Biden received a warm welcome, there was a small group opposed to his visit and his motorcade was greeted by protesters holding posters saying "Yankees keep your hands off Mongolia" and "Hi Joe, No Nuclear Waste, Go Home."
There have been reports in the capital of secret discussions between the Mongolian, Japanese and U.S. governments on storing nuclear waste in Mongolia. The Mongolian government has denied the rumors.
Biden was to stay six hours in Mongolia after arriving from China. The final stop on his Asian tour is Tokyo.


South Korean President Lee to meet Mongolian president Elbegdorj today

By Kang Hyun-kyung

ULAN BATOR ― President Lee Myung-bak will hold talks with his Mongolian counterpart Tsakhia Elbegdorj in Ulan Bator Monday, a day after arriving in the capital city.

Lee will discuss ways to strengthen bilateral ties in energy, health, agriculture, development cooperation and human exchange with the Mongolian leader.

At the summit, Lee and Elbegdorj are expected to adopt a Korea-Mongolia Joint Statement and a mid-term action plan to bolster bilateral cooperation.

The Korea-Mongolia summit is Lee’s first stop on his five-day trip to resource-rich Central Asia. The Korean president will also visit Uzbekistan and Kazakhstan.

Joining Lee’s Central Asia trip are Minister of Foreign Affairs and Trade Kim Sung-hwan and several Korean business leaders.

Korea is Mongolia’s fourth largest trading partner. About 1 percent of the Mongolian population works in the manufacturing sector as workers in Korea. They send remittances to their home country, which makes up nearly 10 percent of its gross domestic product.

“In terms of a trading volume, Mongolia is not a significant trading partner for Korea but it is an important country both strategically and culturally,” a high-ranking presidential official said, asking for anonymity.

Mongolia is one of the top 10 resource-rich nations in the world and demand for infrastructure building there is high.

After holding the summit with the Mongolian leader, Lee is set to have lunch with business leaders from the two nations, which will be followed by meetings with Korean nationals living there.

After wrapping up the Mongolia trip, Lee will head to Tashkent for a summit with Uzbekistan leader Islam Karimov, Tuesday.

The two leaders are expected to discuss ways to strengthen relations in energy, natural resources, finance and information technology. They are set to sign a non-binding accord aimed to bolster cooperation in health, medical service, information technology and the fabric industry.

Nearly 30,000 Uzbek workers are now employed in the manufacturing sector in Korea.

Several Korean energy firms are doing business in Uzbekistan.

The country has the largest ethnic Korean population in Central Asia.

After finishing the one-day trip to Uzbekistan, Lee will visit Astana Wednesday at the invitation of Kazakhstan leader Nursultan Nazarbayev.

The two leaders will hold talks a day after Lee’s arrival in the country. They will adopt a non-binding agreement aimed to work closely together in trade, investment, energy, natural resources, environment, health, information technology and agriculture. After the summit, Lee will attend a Korea-Kazakhstan business forum.

Lee returns to Seoul Friday. 

Source:Korea Times   

Border towns witness China-Mongolia trade boom

HOHHOT, Aug. 20 (Xinhua) -- The booming China-Mongolia border trade has given Erenhot, a Gobi town in north China's Inner Mongolia Autonomous Region, a more important regional status, as it's poised to host the China-Mongolia-Russia Economic and Trade Cooperation Fair at the end of the month.
The organizing committee said on Friday that over 200 firms from the three countries have registered to take part in the fair slated from Aug. 26 to 30, which will feature exhibits ranging from home appliances, construction and decoration materials to heavy machinery.
The city, with a population of 100,000, sits on the China-Mongolia-Russia railway and serves as China's largest land customs station with the Republic of Mongolia.
Bayaermen, a Mongolian businessman, has been doing business in Erenhot for six years and has thrived in the lucrative trade market.
"Three years ago, I was driving my jeep to Ulan Bator to trade small, China-made commodities, but eventually I shifted the business focus to construction materials, thanks to the regional development of the railway infrastructure," he said.
He said as the economic growth gathers speed, Mongolia's demand for China's construction materials increases.
Since 1998, China has been Ulan Bator's top trade partner and its largest source of foreign investment. Bilateral trade between the two countries jumped by 64 percent year-on-year to 3.9 billion U.S. dollars last year.
Erenhot isn't the only border town that has benefitted. Among a dozen other land ports on China's border with Mongolia, Ganqimaodu in Bayan Nur City has also witnessed fast urbanization, as it shifted from a small town to a bustling logistics distribution center in the past four years, mainly thanks to coal imports from Mongolia.
Trade via Ganqimaodu soared by 85.6 percent year-on-year in the first half year to 600 million U.S. dollars.

Source:Xinhua, Chinese news wire service

Envidity launches USD $ 1 Billion Coal Gasification Project in Mongolia

August 19, 2011, Ulaanbaatar - Retired US Army General Wesley Clark, Chairman of Envidity Inc., announces the commitment of funds to launch a US$1 billion Mongolian Underground Coal Gasification-Gas to Liquids project.
August 19, 2011, Ulaanbaatar - Retired US Army General Wesley Clark, Chairman of Envidity Inc., announces the commitment of funds to launch a US$1 billion Mongolian Underground Coal Gasification-Gas to Liquids project. The project will transform low-quality deeply-embedded, underground coal into high-quality fuel, and is a first step towards fuel independence for Mongolia. “Within two years of launching the Envidity project, domestic production of fuel from Mongolia’s coal reserves will begin”, General Clark announced. “With the Envidity project at full production, the Mongolian people will no longer need to line up at gas stations for a 20 liter quota of high-priced foreign supplied fuel. Mongolia will become a fuel exporter in the future” Clark continued. In August of last year, Envidity entered into an exclusive agreement with operator Live Energy Group LLC and Shine Shivee LLC, to transform economically stranded coal, that is over 150m deep in the strategic Shine Shivee license areas, into domestic fuel for Mongolia. On July 22 of this year Envidity exercised that option. Envidity’s project has been recognized and encouraged by Senior Mongolian Government officials as a viable way to tackle the issue of Mongolian fuel self-sufficiency given its potential to produce 1,000 barrels per day of synthetic diesel, that will satisfy 10% of local demand within 24 months, and 15,000 barrels per day within 60 months. Canadian and US government officials are closely following the project. “Prime Minister Batbold asked me in March 2010 during a meeting in Ulaanbaatar to help bring this kind of project to Mongolia. With the Envidity Project now ready for launch, I have kept my promise to the Prime Minister in bringing this patented UCG-GTL technology to Mongolia to allow domestic production of transport fuels. This is a key strategic project for Mongolia. I look forward to advancing this project with the Mongolian government, and trust that Prime Minister Batbold will underscore his commitment to this project.” Clark concluded. The project will provide Mongolia with the largest clean-energy technology transfer in its history, offering a source of clean and reasonably priced fuel and electricity for years to come. The project is expected to create 3,000 construction and 150 permanent higher salaried jobs for the Mongolian people. The project has the potential to establish over 7 commercial plants in the next 15 years and will bring as much as $7B in investment.

Hyundai Becomes Largest Passenger Car Seller In Mongolia

SEOUL, Aug 18 (Bernama) -- Hyundai Motor Co., South Korea's largest carmaker, said on Thursday that it has become the No 1 seller of passenger cars in Mongolia in the first half of the year. Yonhap news agency reported that Hyundai also has been selected by the Mongolian government to supply taxis to replace old vehicles, that have been cited for bad fuel economy and air pollution. Under the deal, the carmaker will supply 1,200 Avante compact cars that will further solidify Hyundai's control of the taxi market. At present, around 85 percent of all taxis in the country are made by the company. The company said that it has sold 583 new vehicles in Mongolia, outpacing Toyota Motor Co. and Nissan Motor Co., which sold 524 and 185 passenger cars, respectively, in the January to June period. In the first half, a total of 1,572 new cars were sold in the country, with sales likely to reach around 1,000 units in the second half, Hyundai said. Source: BERNAMA news agency

Mongolia to Build Refineries to Ease Chronic Fuel Shortages

By. Joao Peixe, Deputy Editor Mongolia, which is forced to import virtually all of its refined oil products and frequently faces chronic fuel shortages, is to begin building an oil refinery early next year in an effort to meet domestic demand and reduce dependence on neighboring Russia for energy supplies. Two months ago Mongolian President Tsakhia Elbegdorj proposed to build an oil refinery, emphasizing its importance for Mongolia, reported. Construction on the refinery began on 11 August in the southeastern city of Saishand in Dornogobi province in cooperation with Mon L Gas LLC. The Saishand refinery will process 5,000 tons of crude oil per year. The Mongolian government granted SODMONGOL a license to construct the facility in 2008. Mongolia’s domestic oil consumption is currently less than one million tons per year. At present Mongolia receives its fuel supplies from Russia, but since April imports have been curtailed because of Russia's soaring domestic demand. Accordingly, the Mongolian government eventually intends to construct a total of three refineries. The second will be located in Darkhan-Uul. Built with the cooperation of Mongol Seku LLC, the Darkhan-Uul refinery will have an annual processing capacity of 200,000 tons per year. The third, to be built in Zuunbayan in Dornogobi province, is slated to have an annual production capacity of 300,000 tons. By. Joao Peixe, Deputy Editor


THE WHITE HOUSE Office of the Vice President ___________________________________________________________ For Immediate Release August 15, 2011 National Security Advisor to the Vice President ANTony Blinken, National Security Staff Senior Director for Asian Affairs Daniel Russel, and Under Secretary for International Affairs at the Department of Treasury Lael Brainard IN A conference call with reporters to discuss Vice President Biden’s trip to China, Mongolia, and Japan Via Telephone 11:03 A.M. EDT MS. DUDLEY: Thank you very much. And thank you, everyone, for joining the call today. Our hope is to provide you all with a more detailed sense of the Vice President’s schedule and goals during his trip to China, Mongolia, and Japan. With us today, we have National Security Advisor to the Vice President Tony Blinken, Senior Director for Asian Affairs on the national security staff Danny Russel, and Undersecretary for International Affairs at the Department of Treasury Lael Brainard. This call will be on the record, and our speakers are happy to take questions after they give some brief opening statements at the top. We’d like to keep this call as focused on the Vice President’s trip as much as possible. So with that, I’m just going to go ahead and turn it over to Tony Blinken and let him kick it off. MR. BLINKEN: Amy, thanks very much and thanks to everyone for joining the call today. Let me run you through the big picture of the Vice President’s trip with some highlights from the schedule and then turn it over to Danny, and then to Lael, to go into more detail on some of the policy questions we’re looking at. This is the Vice President’s first trip to East Asia as Vice President. But, I think as many of you probably know, he traveled to Asia many times as a senator, including back in 1979 as part of the first Senate delegation to China after we normalized relations. This trip that starts tomorrow is part of the administration’s dedicated effort over the last two-and-a-half years to renew and intensify the U.S. role in Asia. We’ve pursued a consistent strategy set out by President Obama to expand our presence and our influence in the region. The Vice President’s trip is a reflection of our belief that the United States is a pacific power whose interests are inextricably linked with Asia’s economic security and political order. The trip begins with four days in China, Beijing, and the southwestern city of Chengdu. We then travel to Mongolia for a day, and finally to our close ally Japan for two days. The dates specifically are China, August 17 through 22; Mongolia, August 22nd; and Japan, August 22nd to the 24th. So let me just give you a quick preview of each part before I turn it over to Danny and to Lael. Let me start with China. This trip to China originated in President Hu Jintao’s state visit in January, when President Hu Jintao formally invited the Vice President to China and we in turn invited Vice President Xi to the United States. These reciprocal visits are mentioned in the January 2011 U.S.-China joint statement. One of the primary purposes of the trip is to get to know China’s future leadership, to build a relationship with Vice President Xi, and to discuss with him and other Chinese leaders the full breadth of issues in the U.S.-China relationship. Simply put, we’re investing in the future of the U.S.-China relationship. The schedule, very broadly -- there is obviously a lot more detail that will come out in the days ahead. But let me just give you the headlines from our three days in Beijing and one day in Chengdu. Day one in Beijing, we’ll have a welcoming ceremony. There will be two meetings with Vice President Xi and a meeting with the head of China’s National People’s Congress Wen Jiabao, and finally a formal banquet hosted by Vice President Xi in the evening. The second day, also in Beijing, will begin with a roundtable discussion with U.S. and Chinese business leaders. And we’ll be talking about the business communities’ experiences operating in each other’s countries -- the opportunities, the obstacles -- the role that governments can play to enhance cooperation and address some of the challenges that our business communities face. And then, in the afternoon, the Vice President meets with Premier Wen and with President Hu. Day three is both Beijing and Chengdu. The Vice President will spend some time with the embassy staff. And, of course, we have a new ambassador in China, Gary Locke. So he’ll be meeting with them. And we’ll be spending some time traveling to Chengdu in the afternoon. And then, day four in Chengdu, a quick word about that. Given the growth and urbanization of China’s western provinces and also U.S. investment there and the fact that no U.S. leader has visited there, we decided to travel to Chengdu in Sichuan Province. In Chengdu, the Vice President will give a speech on U.S.-China relations at Sichuan University. He’ll meet with senior provincial officials from Sichuan. He then travels to Dujiangyan City, jointly with Vice President Xi. They’ll visit a high school that was rebuilt following the 2008 earthquake. And then, in the evening, we expect the Vice President and Vice President Xi to have an informal dinner at a local restaurant in Chengdu. That then brings us to Mongolia, something we are very excited about. This is, on one level, a truly historic visit. I’m sure many of you will recall the last visit of a Vice President to Mongolia. That was in 1944, when FDR’s Vice President Henry Wallace toured Asia and included a stop in Mongolia. Mongolia offers an important example of a successful transition to a strong democracy and a partner with whom we’re expanding cooperation in a broad variety of diplomatic, economic, and defense areas. Like China, this visit to Mongolia is a reflection of our broader effort to engage emerging powers as a way to build a secure, prosperous, and democratic Asia. I think many of you know the Mongolian President Elbegdorj was here not too long ago. He met with President Obama in the Oval Office in June. And this trip builds on that important visit. So we arrive in Ulaanbaatar on the morning of August 22nd. The Vice President meets with the Prime Minister and then with the President. And the Mongolians are going to host a cultural display of traditional Mongolian sports for us. I’m told that may include archery, wrestling, and horse racing. And we’re looking forward to that. And, finally, Japan. The Vice President will be in Japan for two days. He is visiting Japan to underscore that the U.S.-Japan alliance is strong. And, of course, Japan is an ally, but also a friend. And the U.S. stands with and supports Japan and the Japanese people as they recover from the March earthquake, tsunami, and nuclear emergency. So while he is in Japan, the Vice President will meet with Prime Minister Kan. He is going to visit the northeastern city of Sendai, where American forces took the lead in reopening the airport after the earthquake. And it also -- he is going to have an opportunity to thank American military and civilian personnel for the remarkable support and assistance they provided during Japan’s so-called “triple disaster” earlier this year. So that’s a broad overview of the trip and stops. Let me turn it over to Danny Russel to go into more detail on the policy, and then to Lael Brainard. Danny. MR. RUSSEL: Okay, thanks Tony. And let me pick up on some of the points that you made, hopefully without being duplicative. Namely that the visit by the Vice President to these three important Asian countries is of course timely, but it really also needs to be seen in context in the continuum of our policy approach to Asia. You’ll see that the schedule and the substantive agenda for the meetings exemplifies that approach that’s been taken by the Obama administration since day one, since we’ve been investing heavily in the Asia-Pacific region. And our policy approach has been built on strengthening U.S. alliances and expanding our cooperation with emerging powers, and also working together in the effort to help to develop regional institutions in the Asia-Pacific region. I also want to mention that the Vice President’s trip beginning tomorrow kicks off a very busy diplomatic calendar for our Asia policy that extends through the fall, when President Obama will host APEC in Honolulu in November and then will also attend the East Asia Summit in Bali, Indonesia. So planning for the upcoming meetings will I’m sure be very much on the Vice President’s mind when he is in Beijing and in Tokyo. On China, I guess I would start by reminding everyone that President Obama has met with President Hu Jintao already nine times and with Premier Wen Jiabao three times since 2009. It seems likely that our two presidents will have meetings at some of the upcoming major multilateral events this fall. And, as Tony mentioned, the Vice President’s trip and Vice President’s Xi Jinping’s reciprocal visit to follow are part of the continuum of interactions between the leaders of our two countries. I think what’s particularly important is that this will be the first time that a very senior U.S. official has spent a substantial amount of time with Vice President Xi Jinping. They have met and begun developing a relationship. But I think this visit provides an opportunity for the Vice President to talk extensively with Vice President Xi about the breadth of issues in our bilateral relationship and in the region. And, as Tony said, it’s an example of our investing in the future of the U.S.-China relationship. The context, as I’ve said, for this meeting between the two vice presidents is that we make a point of sustaining regular and high-level contacts with Chinese leaders as a way to ensure that we’re able to speak directly and speak authoritatively about the entire spectrum of issues that we are working together on. And what makes the visit timely is that both of our countries are trying to tackle a range of security and economic issues -- North Korea and Iran’s nuclear weapons programs of course; bilateral and global economic issues, which Lael will speak to; the security architecture in East Asia; stability and security in South Asia and Afghanistan and Pakistan. These are the sorts of issues that we should expect the Vice President to discuss with Vice President Xi, as well as other members of China’s senior leadership during the trip. Naturally, there are issues that the Chinese themselves typically raise like Taiwan and Tibet. And there are issues that every senior official who meets with Chinese leaders is going to raise, like human rights. I think the key point with regard to the Vice President’s meetings is that they are part of the continuum, and they continue and expand the ongoing and the constructive dialogue that President Obama has been conducting since he and Vice President Biden came into office. Now, to Mongolia -- Mongolia is taking over this year the chairmanship of the Community of Democracies. And one of the points that the President made when he hosted President Elbegdorj in the Oval Office in June is that Mongolia has an activist approach to strengthening democratic principles throughout the world. And it’s particularly credible and influential, given the tremendous strides that Mongolia itself has made since the end of the Cold War. So the Vice President’s trip to Mongolia is clearly a strong expression of support for Mongolia’s growing democracy. And the trip reflects also the tremendous strides that we’ve made together in diplomatic and security cooperation. On the diplomatic side, Mongolia has been working with us on a raft of important issues -- non-proliferation, peacekeeping, on human rights. On the defense and security side, Mongolia is making substantial contributions of troops to the operations both in Iraq and Afghanistan. So there is a lot of good work and a lot to talk about. The third stop, Japan, is sig nificant I think in two respects. One is as pertains to Japan’s recovery and reconstruction after the March triple disaster. And I think the other significant element in the Vice President’s visit to Tokyo and Sendai is underscoring the tremendous strength and great importance of the U.S.-Japan alliance. The President and the Vice President recognize that the U.S. economy and the global economy has a big stake in Japan’s full and fast recovery. So this trip I think offers the Vice President the opportunity to see for himself the great strides that the Japanese are making, and in many areas with the help of U.S. companies and certainly with the full support of the U.S. government. I know the President and the Vice President are confident Japan will emerge stronger than before, and the sooner that happens, obviously the better, given Japan’s role in regional security and global trade and finance and so on. There’s a lot going on at this particular time, so in addition to economic issues, certainly the Vice President will be discussing security issues in Northeast Asia, particularly regarding North Korea and issues such as stability in Afghanistan where Japan is making an immense contribution. Of course, there are alliance coordination issues and there are bilateral issues to touch on. But I think fundamentally, given the strength of the U.S.-Japan relationship, the Vice President’s visit serves to demonstrate how much we care about our friends. So why don’t I stop there and turn it over to Secretary Brainard. MS. BRAINARD: The economic side of the trip obviously is very important. The trip provides an opportunity for Vice President Biden to advance American economic interests in the dynamic region in Asia broadly. Of course, our trade and investment ties with China in particular are growing rapidly in both directions and we expect this to continue to be a vitally important trade investment relationship in terms of our broader jobs and exports agenda. If you look over the past year, U.S. exports to China have grown faster than to the rest of the world and have now topped $100 billion over the last year. And, of course, those experts are supporting hundreds of thousands of American jobs in a whole variety of sectors ranging from high-tech to soy beans, from aircraft to autos. We’ve also seen a very rapid expansion of Chinese foreign direct investment into the U.S. market. It more than doubled over the last year to $6 billion, which is also part of the President and the Vice President’s national jobs and exports strategy. The Vice President will be carrying the message that we need to continue to work to level the playing field for American workers and American businesses. We’ve made quite a bit of progress over the last year, but we’re going to need to continue working on that front. If you look at the exchange rate, we’ve seen appreciation since China moved to allow its exchange rates to resume flexibility in June of 2010. We’ve seen nearly 7 percent bilateral appreciation against the dollar in nominal terms. Of course, that is even greater if you adjust for the faster rate of inflation in China relative to the United States. We’re going to keep pushing on that front. The exchange rate remains substantially undervalued, but we have seen some important progress there to date. Through the President’s visit with President Hu in January through the JCCT, through the Strategic and Economic Dialogue we’ve also made some progress. China has removed discriminatory procurement policies and it has agreed to strengthen enforcement of intellectual property rights in a number of very important ways. But, of course, those agendas are a work in progress. We’re going to continue pushing on that. Both China and the United States have tremendous mutual interest in seeing a stronger global economic recovery. And China has a very important role to play in that process. China needs to reorient its economic strategy away from a traditional reliance on net export-led growth to a domestic demand-led growth strategy. And that’s something that we’ve been working together I think very effectively in the G20 and in the Strategic and Economic Dialogue and in the President’s and Vice President’s dealings with Chinese senior leadership. And so, the Vice President is going to continue pushing on that front. And he will also have an opportunity to discuss some of the vital trade issues with the business community. Those are very important commitments made in the JCCT and the S&ED and in the President’s visit to continue to improve the protection of intellectual property and to continue to open their markets to U.S. exports. I think it’s important to stress that we each have challenges. China has the challenges of moving from an export-led to a domestic demand-led economy. They have challenges associated with an aging workforce. They have challenges of moving from technology adopters to technology originators. And, as you know, we are also taking on our fiscal and growth challenges with that very important deal that the Vice President was so critical in securing two weeks ago. And so, we’re both working very hard to address our respective challenges in a way that I think will be good for our citizens and good mutually for growth in each other’s economies and good for the world economy. So with that, let me turn it back over to Tony. MR. BLINKEN: Great. Amy, I think we’re ready to take any questions. MS. DUDLEY: Yes, I think we’re ready for questions. Q Yes, thanks for doing this call. I want to ask you a little bit -- you mentioned that human rights would be something that would be discussed. Vice President Xi, just a month ago, was in Tibet and was talking a little bit about how -- worried about the separatism, as he puts it, from the Dalai Lama’s group. What’s your message going to be on human rights and specifically on Tibet considering -- particularly if it involves Vice President Xi in Tibet? MR. RUSSEL: Hi, Danny here. Let me take that. As you know, the President just met with the Dalai Lama at the White House last month. And so our position on Tibet is consistent and clear. And as we always do, I think the Vice President can be expected to reinforce the message to the Chinese that there is great value in their renewing their dialogue with the representatives of the Dalai Lama, with the goal of peacefully resolving differences. More broadly, the protection of human rights globally is a central part of President Obama’s foreign policy in China as it is elsewhere. And, as we do consistently, we will raise our concerns about the human rights situation throughout China. We do this directly and privately with Chinese leaders and policy makers. And, as the Vice President did during the S&ED -- the Security and Economic Dialogue in Washington in May -- we’ll also make our views known publicly as well. Q Hi, thanks for doing the call. Obviously, the trip is coming after the prolonged debt debate here. And we saw some of China’s warnings since then about getting our fiscal house in order. How much -- I guess, can you go into a little bit of what we might expect to hear from the Vice President in terms of his message to the Chinese about our fiscal situation? MR. BLINKEN: Lael, do you want to start? MS. BRAINARD: Yes, thanks. I think the -- obviously, the Vice President will be in a good position to talk about the very strong deficit reduction package that we concluded here recently. Obviously, the United States has the capacity, the will, and the commitment to tackle our major fiscal and economic challenges. The agreement that was reached, the Budget Control Act that was signed on August 2nd, is a major step in this direction both enacting $900 billion in deficit reduction right up front through discretionary spending caps, followed by a process for cutting an additional $1.5 trillion through the bipartisan committee whose members have now been named. But as you’ve seen in the last week, there continues to be extremely strong investor demand for U.S. Treasury securities, recognizing that this market continues to be the deepest, most liquid in the world and I think recognition widely in China and around the world that the U.S. economy remains the most flexible, the most innovative. And, again, as China moves forward to address its challenges, as we move forward to address our challenges, we have very strong mutual interests. And I expect that those are the issues that the Vice President is going to want to raise with the Chinese just as they want to move forward in creating a more hospitable environment. To become a more innovative economy, they’re going to need to start addressing some of the fundamental problems that our companies have been encountering in their market for some time -- protection of intellectual property, trying to dismantle a set of financial controls that tend to channel cheaper credit to state-owned enterprises and starve both their more innovative firms’ capital and also create an un-level playing field for our firms. So I think as we move forward on addressing our fiscal challenges, Chinese policy makers know that they can no longer count on the U.S. consumer to provide that demand to the global economy. They’ve got tremendous capacity to help bolster global growth by switching to a domestic demand-led growth strategy. And there’s tremendous opportunity for U.S. companies to assist them in doing that and to help create jobs here at home. Q Thank you very much. Secretary Clinton has promised Senator Cornyn that the decision on F-16 sales would be made by October 1st. Are you concerned at all that any F-16 sales announcement might have an impact on Vice President Xi Jinping’s reciprocal visit to the United States or even President Hu’s trip to Hawaii for the APEC summit, so much so that Vice President Biden will try to explain to the Chinese why the U.S. has to do what is required by law to do? Thank you. MR. RUSSEL: Hi, Danny here. I'll take that. Well, I think it’s important to make clear that on the issue of Taiwan that the Vice President has no plans to raise the Taiwan issue, certainly not arms sales during his trip. He is not going to China to address that issue. He is going, as we described, to address the broad spectrum of security, economic, political issues that we and China have to work together on. Now, it would not be surprising at all for the Chinese interlocutors to raise Taiwan, as they typically do, and convey their views and their concerns. Our China policy is unchanged. It’s based on the three U.S.-China communiqués. And our policy towards Taiwan is based on the Taiwan Relations Act, and there is no change in that. We take our obligations under the Taiwan Relations Act very seriously and we don’t negotiate these issues with China. I think that the fact of the matter is that there has been considerable progress in cross-Strait dialogue to reduce tensions. And this is something that’s in everyone’s interest and something that we hope will continue. We think that our policy and the Taiwan Relations Act supports an environment that is conducive to the improved relations across the Taiwan Strait and that at the same time U.S.-China relations will continue to flourish. Q Hi. Thanks for doing the call. Which U.S. and Chinese business leaders will be at the meeting with the Vice President in Beijing on the second day of the trip? And then, also will the issue of cyber theft and phone hacking come up in the wake of the McAfee study last week? MR. BLINKEN: In terms of the business leaders and representatives, we’ll get you a list. I don’t have that at hand, but we’ll get you a list and put that out in the next day or so. MR. RUSSEL: Tony, just on the second part of the question, I won’t comment on a specific report, but I will say that cyberspace is global and both the U.S. and China are major users of cyberspace, and we therefore both have real vulnerabilities. And, as a result, we began under the Strategic and Economic Dialogue, conversations with the Chinese, which we can discuss cyber security issues and enhance our understanding of our respective systems in order to promote cooperation in addressing both incidents and in system protections. Q Hi, thanks very much. Just a quick follow up question first for Danny. Can you comment on the report regarding Taiwan today that the United States refused its request for 66 new Lockheed Martin F-16s? And then, a follow up for Ms. Brainard as well, do you feel as though the Vice President will have to defend the U.S. and its position on debt and deficit? I know you mentioned the recent deal, but does this feel in that sense that the Vice President will have to really do a sales pitch while he is there? Thank you. MR. RUSSEL: Right. No, I won’t comment specifically on a particular story other than to say, as I did, that we take our obligations under the Taiwan Relations Act very seriously. That’s manifest in the Obama administration’s decision to conclude an arms sale to Taiwan last year. And this really isn’t what the Vice President’s trip is about. The Vice President’s trip is about deepening our relationships and our cooperative efforts in Asia. MS. BRAINARD: Yes, I think on the economic front I think the Vice President, of course, is going to want to share with foreign leaders in all three countries the plan that President Obama, Vice President Biden have worked on both to address the deficit, the long-run deficit in the Budget Control Act, but also to help support U.S. recovery, which is very important around the world. China has a huge interest in strong growth in the United States. And, again, there are a lot of strengths of the U.S. economy that I think China is quite interested in helping to learn about. And just if you look at the very strong rate of foreign direct investment into the U.S. economy over the last year, you’ll see tremendous Chinese interest in the many strengths across a whole variety of sectors that the U.S. has. So, again, Chinese leaders are confronting a set of challenges there having to do with demographics, having to do with a need to move from various labor-intensive, very capital-intensive, export-oriented growth to growth that is supported by domestic consumption; to growth that is much more innovation, intensive; and growth that requires the much more sophisticated financial markets. And so, there’s a lot of strengths that U.S. companies, the U.S. economic model, can now bring to bear as Chinese leaders think about their own domestic growth challenges. MR. BLINKEN: Let me just add a quick footnote to that. This is Tony. I think you’ve got to also put this in a broader context, and I know the Vice President will want to do that as well. As President Obama recently reminded the American people, and I’m sure the Vice President will have an opportunity to do that on his trip, and I quote -- this is from something the President said last week -- “For all the challenges we face, we continue to have the best universities, some of the most productive workers, the most innovative companies, the most adventurous entrepreneurs on earth.” And, as Lael suggested, it’s the many strengths of our economy that have helped our country withstand economic and financial challenges over the years; strengthen the economy’s institutions, flexibility, the ability to innovate, the ability to give Americans, as well as those who come to the United States, an opportunity to pursue a prosperous future. So that broader context will certainly be part of the Vice President’s trip. Q Hi. Yes, I was just curious about more specifics on the Vice President’s Japan portion of the trip, especially the particular date that he will be visiting Sendai. MR. BLINKEN: So for the Japan piece, he will be in Japan for two days. And he’ll be there -- arriving on the 22nd, and he will be in Sendai on the 23rd. Q Thank you. Could you elaborate a little bit on the currency issue, such as the Vice President is going to talk to China on the value of the dollar and also the appreciation of the RMB? And also, one question for Mr. Blinken -- to this speech that the Vice President is going to give in Chengdu, what are some of the key issues that he is going to discuss relative to the U.S. and China relations? Thank you. MS. DUDLEY: I think this is going to be our last question. MS. BRAINARD: If you reflect on how the world is growing right now, obviously it is critically important for the continued sustainability and greater balance in global growth for the emerging markets that have capacity, that have untapped domestic demand to be able to play a greater role as consumers in some of the advanced economies including the U.S. build back their balanced sheets. And that is a widely acknowledged shared challenge that if we do it successfully, it would be good for all of us. In China, in the 12th Five Year Plan, Chinese leaders have obviously agreed with the need for China to chart a economic course that is much more domestic demand-led. A critical part of the adjustment mechanism in the global economy is for China to allow its exchange rate to move more quickly. And I think Chinese leaders have acknowledged that. They recognized that this is important in China that the -- the exchange rate to absorb more of the adjustment. It really takes the pressure off of inflation, and so you would see less inflationary pressures as well. So it’s something that we think is very important for global growth. It’s of course critically important for U.S. exports and jobs. But we think it’s also directly in the interests of Chinese goals to lessen inflationary pressures. We’ve seen some appreciation of the exchange rate. As I’ve said, we’ve seen the exchange rate appreciating on a bilateral basis, nearly 7 percent now. And if you take into account inflation, it’s been somewhat faster. But we’re not satisfied with that rate of appreciation. We know that it remains substantially undervalued. And the Vice President will want to put special emphasis on that, because it’s important for China, it’s important for other emerging markets, and it’s important for U.S. jobs and exports. MR. BLINKEN: And on the speech, I’m going to let the speech mostly speak for itself in a few days time. But just very broadly, as I mentioned at the top, the Vice President has been engaged with China for more than 30 years. And he was in China in 1979, as part of the first delegation of U.S. senators after relations were normalized. He met with then Vice Premier Deng Xiaoping. And he of course has been back since and has been very engaged. So he has a vantage point to really speak about the broad sweep of the relationship over the past few decades. How China has evolved, how the relationship has evolved, the work that we’re doing together cooperatively across an incredibly broad range of issues -- security, economic, and others -- and also some aspects of our competition, because we also have a competitive relationship, but one that need not be zero sum, where one side’s gain is the other’s loss. And I think one aspect of the speech that -- one issue that he is likely to emphasize in the speech as well are some of the challenges of building an innovation economy in the 21st century. But the bottom line on the speech and indeed on the trip I think -- and this will be reflected in what the Vice President says -- is that for President Obama, for the Vice President, the bottom line is that it’s two great powers and global actors in this century. China and the United States face many similar challenges and share many common responsibilities. And the Vice President and President have the conviction that the more we can act on those challenges and on those responsibilities together, the more our people and the world will benefit. And that’s the larger message of the speech in Chengdu. Thanks very much. MS. DUDLEY: All right. Thanks, everyone, for getting on the call today. If you do have any follow up questions, feel free to direct to me or my colleagues in the Vice President’s press office. Look forward to updates on the trip and thank you everyone, again. END 11:43 A.M. EDT Source:White House

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