August 26, 2010

For the most current version of this Note, see Background Notes A-Z.

PROFILE

Geography
Area: 1,566,500 sq. km. (604,103 sq. mi.); slightly larger than Alaska (land boundaries 8,114 km.).
Terrain: Almost 90% of land area is pasture or desert, of varying usefulness; 1% arable; 9% forested.
Climate: Continental, with little precipitation and sharp seasonal fluctuations.

People
Nationality: Noun and adjective--Mongolian(s).
Population (2009): 2.735 million.
Annual population growth rate (2009): 1.4%.
Health: Infant mortality rate (under one year)--19.4/1,000 (2008); 20/1,000 (2009). Life expectancy--67 yrs. (2008); 67.9 yrs. (2009).
Ethnic groups (2004): About 95% Mongol (predominantly Khalkha); 5% Turkic (largest group, Kazakh); Buriat.
Language: Mongolian.
Religions (2004): Buddhist Lamaism 50%, Muslim 4% (primarily in the southwest), shamanist and Christian 6%, and none 40%.
Education: Years compulsory--9 (provided free by the government). Literacy--98%.

Government
Type: Mixed parliamentary/presidential.
Independence: gained in 1921; in 1990, democratic reform begun and shift from dependence on the former Soviet Union declared.
Constitutions: 1960 and February 12, 1992.
Branches: Executive--power is divided between a president (elected by a popular election in May 2009) and prime minister (current cabinet nominated by the prime minister was approved in November 2009 following the appointment of a new prime minister; most cabinet members remained in place from the September 2008 government of the previous prime minister, who stepped aside due to health problems). Legislative--State Great Hural (parliament; 76 members elected in June 2008). Judicial--Constitutional Court is empowered to supervise the implementation of the constitution, makes judgment on the violation of its provisions, and solves disputes. Legal code based on Continental and Russian law. Legal education at Mongolian State University and private universities. Mongolia accepts International Court of Justice jurisdiction.
Political parties: 18 registered political parties.
Suffrage: Universal at 18.
Administrative subdivisions: 21 aimags (provinces) and one city (Ulaanbaatar).

Economy
GDP (2009 est.): 6.1 trillion Mongolian Tugruks/MNT (U.S. $4.2 billion at current exchange rates).
GDP growth (2009): -1.6%.
Per capita GDP (2009): approx. $1,551.
Natural resources: Coal (thermal and metallurgical), copper, molybdenum, silver, iron, phosphates, tin, nickel, zinc, wolfram, fluorspar, gold, uranium, and petroleum.
Agriculture (21.2% of 2009 GDP, livelihood for about 40% of population): Products--livestock and byproducts, hay fodder, vegetables.
Industry (30.5% of 2009 GDP, includes mining 22%, manufacturing 5.9%, and utilities (electricity, gas, and water) 2.6%: Types--minerals (primarily copper and gold), animal-derived products, building materials, food/beverage.
Trade: Total turnover of foreign trade for 2009 was $4.02 billion. Exports--$1.88 billion (U.S. dollar (USD) figures based on current USD/MNT exchange rate): minerals, livestock, animal products, and textiles. Markets--Asian countries (approx. 75.5%), European countries (approx. 15.81%), and countries of American continent (approx. 8.5%). Imports--$2.13 billion: machinery and equipment, fuels, food products, industrial consumer goods, chemicals, building equipment, vehicles, textiles. Suppliers--91 countries account for 93.2% of total imports, of which European countries (50.5%) and Asian countries (42.7%).
Aid received: From 1990-2008, official development assistance to Mongolia from bilateral and multilateral donors totaled over $3.698 billion. Received $185.94 million in official development assistance in 2008.
Fiscal year: Calendar year.

PEOPLE
Life in sparsely populated Mongolia has recently become more urbanized. Nearly half of the people live in urban centers, including the capital, Ulaanbaatar. Semi-nomadic life still predominates in the countryside, but settled agricultural communities are becoming more common. Mongolia's birth rate is estimated at 25.1 births per 1,000 people (2009 est.). About 58% of the total population is under age 30, 47.8% of whom are under 14.

Ethnic Mongols account for about 95% of Mongolia's population and consist of Khalkha and other groups, all distinguished primarily by dialects of the Mongol language. Mongol is an Altaic language--from the Altaic Mountains of Central Asia, a language family comprising the Turkic, Tungusic, and Mongolic subfamilies--and is related to Turkic (Uzbek, Turkish, and Kazakh), Korean, and, possibly, Japanese. Among ethnic Mongols, the Khalkha comprise 90% and the remaining 10% include Dorvod, Tuvan, and Buriat Mongols in the north and Dariganga Mongols in the east. Turkic speakers (Kazakhs, Turvins, and Khotans) constitute 5% of Mongolia's population, and the rest are Tungusic-speakers. Most Russians left the country following the withdrawal of economic aid and collapse of the Soviet Union in 1991.

Traditionally, Buddhist Lamaism was the predominant religion. However, it was suppressed under the communist regime until 1990, with only one showcase monastery allowed to remain. Since 1990, as liberalization began, Buddhism has enjoyed a resurgence. About 4 million ethnic Mongols live outside Mongolia; about 3.4 million live in China, mainly in the Inner Mongolia Autonomous Region, and some 500,000 live in Russia, primarily in Buryatia and Kalmykia.

HISTORY
In 1206 AD, a single Mongolian state was formed based on nomadic tribal groupings under the leadership of Chinggis ("Genghis") Khan. He and his immediate successors conquered nearly all of Asia and European Russia and sent armies as far as central Europe and Southeast Asia. Chinggis Khan's grandson Kublai Khan, who conquered China and established the Yuan dynasty (1279-1368 AD), gained fame in Europe through the writings of Marco Polo.

Although Mongol-led confederations sometimes exercised wide political power over their conquered territories, their strength declined rapidly after the Mongol dynasty in China was overthrown in 1368. The Manchus, a tribal group which conquered China in 1644 and formed the Qing dynasty, were able to bring Mongolia under Manchu control in 1691 as Outer Mongolia when the Khalkha Mongol nobles swore an oath of allegiance to the Manchu emperor. The Mongol rulers of Outer Mongolia enjoyed considerable autonomy under the Manchus, and all Chinese claims to Outer Mongolia following the establishment of the republic have rested on this oath. In 1727, Russia and Manchu China concluded the Treaty of Khiakta, delimiting the border between China and Mongolia that exists in large part today.

Outer Mongolia was a Chinese province (1691-1911), an autonomous state under Russian protection (1912-19), and again a Chinese province (1919-21). As Manchu authority in China waned, and as Russia and Japan confronted each other, Russia gave arms and diplomatic support to nationalists among the Mongol religious leaders and nobles. The Mongols accepted Russian aid and proclaimed their independence of Chinese rule in 1911, shortly after a successful Chinese revolt against the Manchus. By agreements signed in 1913 and 1915, the Russian Government forced the new Chinese Republican Government to accept Mongolian autonomy under continued Chinese control, presumably to discourage other foreign powers from approaching a newly independent Mongolian state that might seek support from as many foreign sources as possible.

The Russian revolution and civil war afforded Chinese warlords an opportunity to re-establish their rule in Outer Mongolia, and Chinese troops were dispatched there in 1919. Following Soviet military victories over White Russian forces in the early 1920s and the occupation of the Mongolian capital Urgoo in July 1921, Moscow again became the major outside influence on Mongolia. The Mongolian People's Republic was proclaimed on November 25, 1924.

Between 1925 and 1928, power under the communist regime was consolidated by the Mongolian People's Revolutionary Party (MPRP). The MPRP left gradually undermined rightist elements, seizing control of the party and the government. Several factors characterized the country during this period: The society was basically nomadic and illiterate; there was no industrial proletariat; the aristocracy and the religious establishment shared the country's wealth; there was widespread popular obedience to traditional authorities; the party lacked grassroots support; and the government had little organization or experience.

In an effort at swift socioeconomic reform, the leftist government applied extreme measures that attacked the two most dominant institutions in the country--the aristocracy and the religious establishment. Between 1932 and 1945, their excess zeal, intolerance, and inexperience led to anti-communist uprisings. In the late 1930s, purges directed at the religious institution resulted in the desecration of hundreds of Buddhist institutions and imprisonment of more than 10,000 people.

During World War II, because of a growing Japanese threat over the Mongolian-Manchurian border, the Soviet Union reversed the course of Mongolian socialism in favor of a new policy of economic gradualism and buildup of the national defense. The Soviet-Mongolian army defeated Japanese forces that had invaded eastern Mongolia in the summer of 1939, and a truce was signed setting up a commission to define the Mongolian-Manchurian border in the autumn of that year.

Following the war, the Soviet Union reasserted its influence in Mongolia. Secure in its relations with Moscow, the Mongolian Government shifted to postwar development, focusing on civilian enterprise. International ties were expanded, and Mongolia established relations with North Korea and the new communist governments in Eastern Europe. It also increased its participation in communist-sponsored conferences and international organizations. Mongolia became a member of the United Nations in 1961.

In the early 1960s, Mongolia attempted to maintain a neutral position amidst increasingly contentious Sino-Soviet polemics; this orientation changed in the middle of the decade. Mongolia and the Soviet Union signed an agreement in 1966 that introduced large-scale Soviet ground forces as part of Moscow's general buildup along the Sino-Soviet frontier.

During the period of Sino-Soviet tensions, relations between Mongolia and China deteriorated. In 1983, Mongolia systematically began expelling some of the 7,000 ethnic Chinese in Mongolia to China. Many of them had lived in Mongolia since the 1950s, when they were sent there to assist in construction projects.

Chronology of Mongolian History 1921-Present
March 13, 1921: Provisional People's Government declared independence of Mongolia.
May 31, 1924: U.S.S.R. signed agreement with Peking government, referring to Outer Mongolia as an "integral part of the Republic of China," whose "sovereignty" therein the Soviet Union promised to respect.
May-September 16, 1939: Large scale fighting took place between Japanese and Soviet-Mongolian forces along Khalkhyn Gol on Mongolia-Manchuria border, ending in defeat of the Japanese expeditionary force. Truce negotiated between U.S.S.R. and Japan.
October 6, 1949: Newly established People's Republic of China accepted recognition accorded Mongolia and agreed to establish diplomatic relations.
October 1961: Mongolia became a member of the United Nations.
January 27, 1987: Diplomatic relations established with the United States.
December 1989: First popular reform demonstrations. Mongolian Democratic Association organized.
January 1990: Large-scale demonstrations demanding democracy held in sub-zero weather.
March 2, 1990: Soviets and Mongolians announced that all Soviet troops would be withdrawn from Mongolia by 1992.
May 1990: Constitution amended to provide for multi-party system and new elections.
July 29, 1990: First democratic elections held.
September 3, 1990: First democratically elected People's Great Hural took office.
February 12, 1992: New constitution went into effect.
April 8, 1992: New election law passed.
June 28, 1992: Election for the first unicameral legislature (State Great Hural).
June 6, 1993: First direct presidential election.
June 30, 1996: Election resulted in peaceful transition of power from former communist party to coalition of democratic parties. From 1998-2000, four prime ministers and a series of cabinet changes. In early 2000, Democratic Coalition dissolved.
July 2, 2000: Election resulted in victory for the former communist Mongolian People's Revolutionary Party (MPRP); first-past-the-post electoral system enabled MPRP, with 52% of the popular vote, to win 95% of the parliamentary seats; formation of new government by Prime Minister N. Enkhbayar.
June 27, 2004: Motherland-Democracy Coalition formed in early 2004 to contest the parliamentary election. Election resulted in roughly 50/50 split of parliamentary seats between former communist party and democratic opposition and formation of new government by Prime Minister Ts. Elbegdorj (Democratic Party).
January 2006: MPRP ministers resigned from the government, and the government dissolved. A new coalition government was formed, led by the MPRP with the participation of four smaller parties.
October 2007: MPRP ousted its leader, Prime Minister M. Enkhbold, who resigned as Prime Minister. The new leader of the MPRP, Sanjaagiin Bayar, became Prime Minister and formed a new cabinet.
December 2007: Bayar's cabinet was approved.
July 1, 2008: Two days after parliamentary elections, and one day after the ruling MPRP claimed a landslide victory, a sizeable protest outside the MPRP headquarters turned violent. The MPRP headquarters was burned beyond repair and clashes between civilians and security forces left at least five people dead, 13 missing, hundreds injured and hundreds in police detention. President N. Enkhbayar declared a 4-day state of emergency, imposing a curfew, a ban on public gatherings, and a broadcast-news blackout (apart from the state broadcaster).
July and August 2008: Newly elected members of parliament from the opposition Democratic Party refused to take the oath of office, demanding, among other things, that the nine-member General Election Commission resign for alleged electoral irregularities.
May 2009: Former Prime Minister and Democratic Party legislator Tsakhiagiin Elbegdorj was elected as President of Mongolia in free and fair elections.
October-November 2009: Prime Minister Sanjaagiin Bayar resigned for health reasons, and Foreign Minister Sukhbaatariin Batbold was selected as Prime Minister. Prime Minister Batbold largely retained former Prime Minister Bayar's cabinet, with only a few changes.

GOVERNMENT AND POLITICAL CONDITIONS
Until 1990, the Mongolian Government was modeled on the Soviet system; only the communist party--the MPRP--officially was permitted to function. After some instability during the first 2 decades of communist rule in Mongolia, there was no significant popular unrest until December 1989. Collectivization of animal husbandry, introduction of agriculture, and the extension of fixed abodes were all carried out without perceptible popular opposition.

The birth of perestroika in the former Soviet Union and the democracy movement in Eastern Europe were mirrored in Mongolia. The dramatic shift toward reform started in early 1990 when the first organized opposition group, the Mongolian Democratic Union, appeared. In the face of extended street protests in subzero weather and popular demands for faster reform, the politburo of the MPRP resigned in March 1990. In May, the constitution was amended, deleting reference to the MPRP's role as the guiding force in the country, legalizing opposition parties, creating a standing legislative body, and establishing the office of president.

Mongolia's first multi-party elections for a People's Great Hural were held on July 29, 1990. The MPRP won 85% of the seats. The People's Great Hural first met on September 3 and elected a president (MPRP), vice president (SDP--Social Democrats), prime minister (MPRP), and 50 members to the Baga Hural (small Hural). The vice president also was chairman of the Baga Hural. In November 1991, the People's Great Hural began discussion on a new constitution, which entered into force February 12. In addition to establishing Mongolia as an independent, sovereign republic and guaranteeing a number of rights and freedoms, the new constitution restructured the legislative branch of government, creating a unicameral legislature, the State Great Hural (SGH).

The 1992 constitution provided that the president would be elected by popular vote rather than by the legislature as before. In June 1993, incumbent Punsalmaagiyn Ochirbat won the first popular presidential election running as the candidate of the democratic opposition. In May 2009, Tsakhiagiin Elbegdorj defeated Nambaryn Enkhbayar in the first instance in Mongolia of an incumbent losing a presidential election. This was also the first election as president of a Democratic Party candidate.

As the supreme government organ, the SGH is empowered to enact and amend laws, determine domestic and foreign policy, ratify international agreements, and declare a state of emergency. The SGH meets semiannually for 3-4 month sessions. SGH members elect a chairman and vice chairman who serve 4-year terms. SGH members are popularly elected by district to 4-year terms. The SGH sits for the full 4 years until a subsequent parliamentary election and cannot be dissolved.

The president is the head of state, commander in chief of the armed forces, and head of the National Security Council. He is popularly elected by a national majority for a 4-year term and limited to two terms. The constitution empowers the president to propose a prime minister, call for the government's dissolution in consultation with the SGH chairman, initiate legislation, veto all or parts of legislation (the SGH can override the veto with a two-thirds majority), and issue decrees, which become effective with the prime minister's signature. In the absence, incapacity, or resignation of the president, the SGH chairman exercises presidential power until inauguration of a newly elected president. The president may also declare a state of emergency if the SGH is in recess and cannot be summoned in a timely manner; the SGH may then, upon reconvening, revoke such a declaration of emergency within 7 days of its issuance.

The government, headed by the prime minister, has a 4-year term. The prime minister is nominated by the president and confirmed by the SGH. Under constitutional changes made in 2001, the president is required to nominate the prime ministerial candidate proposed by a party or coalition with a majority of members of the SGH. The prime minister chooses a cabinet, subject to SGH approval. Dissolution of the government occurs upon the prime minister's resignation, simultaneous resignation of half the cabinet, or after an SGH vote for dissolution.

Local hurals are elected by the 21 aimags (provinces) plus the capital, Ulaanbaatar. On the next lower administrative level, they are elected by provincial subdivisions and urban sub-districts in Ulaanbaatar and all aimags.

Political Parties
Mongolian People's Revolutionary Party
Democratic Party
Motherland-Mongolian Democratic New Socialist Party
National New Party
Civil Will Party
Mongolian People's Party
Mongolian Green Party
Mongolian Traditional United Party
Mongolian National Solidarity Party
Mongolian Liberal Democratic Party
Mongolian Republican Party
Mongolian Women's National United Party
Mongolian Liberal Party
Mongolian Social Democratic Party
Freedom Implementing Party
The Civil Movement Party
The Development Program Party
Mongolian Democratic Development Party

Legal System
The 1992 constitution empowered a General Council of Courts (GCC) to select all judges and protect their rights. The Supreme Court is the highest judicial body. Supreme Court justices are nominated by the GCC and confirmed by the president; the SGH must be made aware of the nominations but cannot block them. The Supreme Court is constitutionally empowered to examine all lower court decisions upon appeal and provide official interpretations on all laws except the constitution.

Specialized civil and criminal courts exist at all levels and are subject to Supreme Court supervision. Administrative courts exist at the province and city levels only and are also subject to Supreme Court supervision. Local authorities--district and city governors--ensure that these courts abide by presidential decrees and SGH decisions. At the apex of the judicial system is the Constitutional Court, which consists of nine members, including a chairman, appointed for 6-year terms, whose jurisdiction extends solely over the interpretation of the constitution.

Principal Government Officials
President--Tsakhiagiin Elbegdorj
Prime Minister--Sukhbaatariin Batbold

Mongolia maintains an embassy in the United States at 2833 M Street, NW, Washington, DC, 20007; tel. (202) 333-7117, fax (202) 298-9227, website - www.mongolianembassy.us/english.

ECONOMY
Economic activity in Mongolia has traditionally been based on herding and agriculture. Mongolia has extensive mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990-91 at the time of the dismantlement of the U.S.S.R., leading to a very deep recession. Economic growth returned due to reform embracing free-market economics and extensive privatization of the formerly state-run economy. Severe winters and summer droughts in 2000-2001 and 2001-2002 resulted in massive livestock die-off and anemic GDP growth of 1.1% in 2000 and 1% in 2001. This was compounded by falling prices for Mongolia's primary-sector exports and widespread opposition to privatization. Growth improved to 4% in 2002, 5% in 2003, 10.6% in 2004, 6.2% in 2005, and 7.5% in 2006. Because of a boom in the mining sector, Mongolia had high growth rates in 2007 and 2008 (9.9% and 8.9%, respectively). Due to the severe 2009-2010 winter, Mongolia lost 9.7 million animals, or 22% of total livestock. This immediately impacted meat prices, which increased twofold; GDP dropped 1.6% in 2009. A return to growth, however, appears likely for 2010.

Besides agriculture (21.2% of GDP), dominant industries in the composition of GDP are mining, trade and service, and transportation, storage, and communication. Mongolia's economy continues to be heavily influenced by its neighbors. For example, Mongolia purchases nearly all of its petroleum products from Russia. China is Mongolia's chief export partner and a main source of the "shadow," or "gray," economy. The gray--largely cash--economy is estimated to be at least one-third the size of the official economy, but actual size is difficult to quantify since the money does not pass through the hands of tax authorities or the banking sector. Remittances from Mongolians working abroad, both legally and illegally, constitute a sizeable portion. Money laundering is growing as an accompanying concern. Mongolia, which joined the World Trade Organization in 1997, is the only member of that organization to not be a participant in a regional trade organization. Mongolia seeks to expand its participation and integration into Asian regional economic and trade regimes.

Because of Mongolia's remoteness and natural beauty, the tourism sector has recently shown signs of rapid growth. Prior to the onset of the global economic crisis, spiking international commodity prices led to a surge of international interest in investing in Mongolia's minerals sector despite the absence of a policy environment firmly conducive to private investment. How effectively Mongolia mobilizes private international investment around its comparative advantages (mineral wealth, small population, and proximity to China and its burgeoning markets) will ultimately determine its success in sustaining rapid economic growth. Parliament passed a windfall profits tax on copper and gold that took effect in mid-2006, and tax reforms enacted on January 1, 2007 helped government revenues jump 33% in 2007. Meanwhile, major amendments to the minerals law allowed the government to take an equity stake in major new mines. However, in late 2007 and early 2008, Mongolia's parliament proved unwilling to move on major mining deals and consistently declined to reform mining laws that observers said substantially varied from best practices. Observers further called such deals and reforms crucial for the development of Mongolia's extractive industries. This failure frustrated many foreign and domestic investors and others who hoped to see Mongolia's promising mining sector grow rapidly. In 2009, sharp drops in commodity prices and the effects of the global financial crisis began to be felt in Mongolia's economy. The local currency dropped some 40% against the U.S. dollar, and two of the 16 commercial banks have since been taken into receivership, but a series of quick and effective moves, including a Stand-By Arrangement with the International Monetary Fund (IMF), helped maintained stability and has kicked off a broad discussion on fiscal and financial reforms.

In summer 2009 the government negotiated an “Investment Agreement” with Rio Tinto and Ivanhoe Mines to develop the Oyu Tolgoi copper and gold deposit. On August 25, 2009, parliament passed four laws--one repealing the windfall profits tax, one adjusting corporate tax structures to accommodate large-scale projects, and two involving infrastructure--necessary to allow the signing of the deal. The deal was concluded in a gala signing ceremony on October 6, 2009, and the agreement went into full legal force 6 months later, on April 6, 2010.

Environment
As a result of rapid urbanization and industrial growth policies under the communist regime, Mongolia's deteriorating environment has become a major concern. The burning of soft coal by individual home or "ger" (yurt in Russian) owners, power plants, and factories in Ulaanbaatar has resulted in severely polluted air. Across all of Mongolia, deforestation, overgrazed pastures, and efforts to increase grain and hay production by plowing up more virgin land have increased soil erosion from wind and rain. With the rapid growth of herds, overgrazing in selected areas also is a concern. Recent rapid and relatively unregulated growth in the mining sector for minerals (gold, coal, etc.) has become the focus of public debate. A great deal of public attention is being paid to non-transparency of the government process of awarding licenses, the equitable sharing of economic rents between foreign investors and the Government of Mongolia, and the potential impact on the environment. However, the real environmental concern is the sharp boom in the number of informal gold miners, who frequently illegally use mercury, which may lead to an epidemic of mercury poisoning. The government is also making significant efforts to introduce sustainable energy projects in an effort to reduce reliance upon Russian power plants.

FOREIGN RELATIONS
In the wake of the international socialist economic system's collapse and the disintegration of the former Soviet Union, Mongolians began to pursue an independent and nonaligned foreign policy. Mongolia is landlocked between Russia and China and seeks cordial relations with both nations. At the same time, Mongolia has sought to advance its regional and global relations. Ties with Japan and South Korea are particularly strong. Japan has historically been the largest bilateral aid donor to Mongolia, although the ongoing $285 million U.S.-Mongolia Millennium Challenge Compact will put the United States in the top spot until it sunsets in 2013. Mongolia has also made efforts to steadily boost ties with European countries. China is now the largest foreign investor in Mongolia.

As part of its aim to establish a more balanced nonaligned foreign policy, Mongolia has sought to take a more active role in the United Nations and other international organizations, and has pursued a more active role in Asian and northeast Asian affairs. Mongolia became a full participant in the ASEAN Regional Forum (ARF) in July 1998 and a full member of the Pacific Economic Cooperation Council in April 2000. Mongolia is currently seeking to join the Asia-Pacific Economic Cooperation forum (APEC). Mongolia is an observer in the Shanghai Cooperation Organization (SCO), but has stated it does not intend to seek membership. Nonetheless, in 2009 the SCO-financed Durgun Hydropower Station came online. Mongolia, which has diplomatic relations with both North and South Korea, has also sought to play a supporting role in the Six-Party talks. In late 2007, Mongolia hosted a closed meeting between two Six-Party members, North Korea and Japan. Mongolia has also offered to help organize and to host a northeast Asian regional security mechanism. Mongolia is a founding member of the Asia-Pacific Democracy Partnership (APDP) and hosted the group's planning meeting in Ulaanbaatar on July 1, 2008. Mongolia sent four technical experts to the ASEAN Regional Forum’s May 2009 disaster relief exercise in the Philippines. Mongolia also hosted a regional workshop of the Comprehensive Nuclear Test Ban Treaty Organization in March 2010 and becomes the Chair of the Board of Governors of the International Atomic Energy Agency in September 2010.

Mongolian relations with China began to improve in the mid-1980s when consular agreements were reached and cross-border trade contacts expanded. In May 1990, a Mongolian head of state visited China for the first time in 28 years. The cornerstone of the Mongolian-Chinese relationship is a 1994 Treaty of Friendship and Cooperation, which codifies mutual respect for the independence and territorial integrity of both sides. China has objected strongly to visits since 1990 of the Dalai Lama; during the 2002 visit, China briefly disrupted railroad links for "technical" reasons. There are regular high-level visits and expanding trade ties. President Hu Jintao visited Mongolia in 2003 (his first international visit as China's President). President Bagabandi visited China in 2004, President Enkhbayar visited in 2008, and Prime Minister Bayar met Premier Wen Jiabao in Beijing in April 2009. Premier Wen visited Ulaanbaatar in June 2010 to open a new cultural center, announce new educational scholarships for Mongolians, and discuss cooperation on infrastructure projects.

After the disintegration of the former Soviet Union, Mongolia developed relations with the new independent states. Links with Russia and other republics were essential to contribute to stabilization of the Mongolian economy. In 1991, Mongolia and Russia concluded both a Joint Declaration of Cooperation and a bilateral trade agreement. This was followed by a 1993 Treaty of Friendship and Cooperation establishing a new basis of equality in the relationship. Mongolian President Bagabandi visited Moscow in 1999, and Russian President Vladimir Putin visited Mongolia in 2000 in order to sign the 25-point Ulaanbaatar Declaration, reaffirming Mongol-Russian friendship and cooperation on numerous economic and political issues. In December 2003, Mongolia believed it had settled the Soviet-era debt it owed to Russia with a negotiated payment of $250 million. However, in 2009 the Russian Government stated that hundreds of millions of dollars in debts remained unpaid. The two governments are said to be negotiating a resolution to this. In July 2006, Prime Minister Fradkov visited Mongolia with a large business delegation. The Mongolian and Russian Governments continue to jointly own the railroad and the large Erdenet copper mine. Prime Minister Bayar visited Moscow in April 2008, and the following month President Enkhbayar met President Medvedev in Moscow. Prime Minister Putin visited Ulaanbaatar 2 weeks prior to the Mongolian presidential election in May 2009, and President Medvedev visited Mongolia in August 2009 to commemorate the 70th anniversary of the Battle of Khalkhin Gol, a combined Soviet-Mongolian victory over Imperial Japan in one of the opening salvos of World War II. After nearly 2 decades of inactivity, Russia is renewing military ties with the Mongolian armed forces through military education and training exchange programs, as well as joint exercises focused on the repair of Mongolia’s Soviet-built equipment. In May 2010, President Elbegdorj visited Moscow to celebrate the anniversary of the end of World War II.

U.S.-MONGOLIAN RELATIONS
The U.S. Government recognized Mongolia in January 1987 and established its first embassy in Ulaanbaatar in June 1988. It formally opened in September 1988. The first U.S. ambassador to Mongolia, Richard L. Williams, was not a resident there. Joseph E. Lake, the first resident ambassador, arrived in July 1990. Secretary of State James A. Baker, III visited Mongolia in August 1990, and again in July 1991. Mongolia accredited its first ambassador to the United States in March 1989. Secretary of State Madeline Albright visited Mongolia in May 1998, and Prime Minister Enkhbayar visited Washington in November 2001. Deputy Secretary of State Richard L. Armitage visited Mongolia in January 2004, and President Bagabandi came to Washington for a meeting with President George W. Bush in July 2004. President Bush, Mrs. Bush, and Secretary of State Condoleezza Rice visited Mongolia in November 2005. Defense Secretary Donald Rumsfeld visited in October 2005 and Speaker of the House of Representatives Dennis Hastert visited Mongolia in August 2005. Agriculture Secretary Mike Johanns led a presidential delegation in July 2006 in conjunction with Mongolia's celebration of its 800th anniversary. President Enkhbayar visited the White House in October 2007 and the two Presidents signed the Millennium Challenge Compact for Mongolia (see below). House Minority Leader John Boehner visited Mongolia in August 2009.

The United States has sought to assist Mongolia's movement toward democracy and market-oriented reform and to expand relations with Mongolia primarily in the cultural and economic fields. In 1989 and 1990, a cultural accord, Peace Corps accord, consular convention, and Overseas Private Investment Corporation (OPIC) agreement were signed. A trade agreement was signed in January 1991 and a bilateral investment treaty in 1994. Mongolia was granted permanent normal trade relations (NTR) status and generalized system of preferences (GSP) eligibility in June 1999. In July 2004, the U.S. signed a Trade and Investment Framework Agreement with Mongolia to promote economic reform and more foreign investment. In July 2007, six members of the U.S. House of Representatives visited Mongolia to inaugurate an exchange program between lawmakers of the two countries. The return visit came in August 2007, with five members of the Mongolian parliament traveling to the U.S. Similar exchanges of lawmakers and staff members have continued. The House Democracy Partnership (HDP), under which members of the U.S. Congress and staff directly assist their parliamentary counterparts in newly democratic countries, is an increasingly prominent means of engagement. In total, 25 Mongolian members of parliament have visited Washington and Macedonia on this program. Several congressional delegations have also traveled to Ulaanbaatar, including that led by House Minority Leader John Boehner in August 2009. Six staffers from the Mongolian parliament also visited Washington during this time. Members of parliament involved have risen in prominence and spearheaded reforms.

The U.S. Agency for International Development (USAID) in Mongolia provides targeted bilateral development assistance in two strategic program areas: economic growth and good governance. These activities are conducted with an eye toward assisting Mongolia in managing the expected windfall and the accompanying challenges of its burgeoning mining sector. Between 1991 and 2010, USAID grant assistance to Mongolia totaled $204 million. The FY 2010 economic growth program budget of $6.4 million targets the legal and regulatory environment in the energy, trade, and business sectors to develop a business-enabling environment, strengthen Mongolia’s banks and financial markets, facilitate trade, and encourage private sector-led growth. The program also emphasizes building a national consensus among stakeholders on the future of the mining sector. A $1.5 million clean energy earmark added in FY 2010 will target reduction of greenhouse gas emissions in Mongolia. USAID good governance programming continues to focus on anti-corruption activities that include assistance to the independent agency monitoring corruption, building citizen awareness of corruption issues, and improving judicial processes of commercial adjudication. Governance programming in FY 2010 is $1 million. In January 2010, the United States signed a $10 million cash transfer for budget support to the Government of Mongolia through USAID to mitigate the negative effects of the global financial crisis. The FY 2009 global financial crisis supplemental will help the government meet its deficit reduction targets and ensure essential social safety net transfers to those hardest hit by the economic crisis. An additional $2 million of supplemental funds provided technical assistance through the Treasury Department’s Office of Technical Assistance (OTA) directly to Mongolia's Central Bank to address essential banking and financial sector reforms. Both the budget support and technical assistance are designed to complement the IMF's continuing Stand-By Arrangement with Mongolia. Development Credit Authority ($2 million) guarantees will be used to mobilize and leverage financing to maintain and generate employment across targeted sectors by promoting lower collateral requirements and longer-term loans. A second $2 million tranche of FY 2009 global financial crisis supplemental funding was authorized recently to continue technical assistance to the country’s financial sector.

In most years since 1993, the United States Department of Agriculture has provided food aid to Mongolia under the Food for Progress and 416(b) programs. The monetized proceeds of the food aid ($5 million in 2008) are used to support programs bolstering entrepreneurship, herder livelihood diversification, and better veterinary services.

The United States has also supported defense reform and an increased capacity by Mongolia's armed forces to participate in international peacekeeping operations. Mongolia contributed small numbers of troops to coalition operations in Iraq and Afghanistan beginning in 2003, gaining experience that enabled it to deploy armed peacekeepers to both UN and NATO peacekeeping missions. Mongolia committed to sending additional rotations of troops (up to 300) to Afghanistan on site security and artillery training missions in late 2009 and also committed to supplying an 800-man peacekeeping battalion to Chad in late 2009 or early 2010. With U.S. Department of Defense assistance and cooperation, Mongolia and the U.S. jointly have hosted "Khaan Quest," the Asian region's premier annual peacekeeping exercise, since 2006. The number of participating countries has grown each year.

The Peace Corps has approximately 140 volunteers in Mongolia. They are engaged primarily in English teaching and teacher training activities. At the request of the Government of Mongolia, the Peace Corps has developed programs in the areas of public health, small business development, and youth development. In 2005 and 2006 Mongolian Government officials, including then-President Enkhbayar and then-Prime Minister Elbegdorj, requested significant increases in the number of volunteers (“PCVs”) serving in country. On August 20, 2010, the largest group of PCVs to serve in Mongolia, numbering 72, took the oath of service. This is the 21st PCV group to serve in Mongolia.

Mongolia was one of the first countries eligible for the new Millennium Challenge Account initiative that began in 2004, administered by the Millennium Challenge Corporation (MCC). MCC's program focuses on providing grant support to countries that perform above the median in their income peer group on key indicators in three broad policy categories: ruling justly, investing in people, and encouraging economic freedom. MCC-eligible countries propose projects that will significantly reduce poverty in their countries through stimulating economic growth. On October 22, 2007, at a White House signing ceremony, President Bush and President Enkhbayar signed a Millennium Challenge Compact for Mongolia that called for $285 million to be spent on four projects over a 5-year period beginning in September 2008. The Compact will support efforts to broaden and deepen economic development in Mongolia. The original focus of the Compact was on four key areas: rail modernization, property rights, vocational education, and health. In April 2009, the Government of Mongolia requested the termination of the rail modernization project, citing circumstances beyond its control due to the lack of cooperation of the 50% Russian owners of the Mongolian railway. The government proposed areas for reallocation of the rail project funds, and additional funding for the other three projects as well as a new road/bridge construction project and an energy and environment project were approved by the MCC board in late 2009 and finalized in a formal Amendment to the Compact in January 2010, which the Mongolian parliament ratified in February 2010. Implementing MCC projects in Mongolia will enable key institutions and infrastructure to better support the country's burgeoning urbanized, market-based economy and help Mongolians to increase their incomes by becoming healthier and better trained, by using their land assets more productively, and by increasing their capacity to trade with the world.

Principal U.S. Embassy Official
Ambassador--Jonathan S. Addleton

The U.S. Embassy is located in Micro District 11, Big Ring Road, Ulaanbaatar; tel. [976] (1) 329-095 and 329-606, fax 320-776. Consular and commercial information are available at the embassy's web site: http://mongolia.usembassy.gov.

Investment Climate Statements are available at http://www.state.gov/e/eb/ifd/, and Country Commercial Guides can be found at http://www.export.gov/mrktresearch/index.asp.

[This is a mobile copy of Mongolia (08/26/10)]