FP’s Situation Report: Afghanistan reconstruction costs more than the U.S. Marshall Plan; Israel calls up 16,000 reservists; Derek Chollet tells staff he is leaving; Heavy flight restrictions still in place for the F-35; and a bit more.

By Kate Brannen with Nathaniel Sobel

What does $104 billion get you in Afghanistan? The world and most of Washington may be distracted from what’s going on in Afghanistan, but the special inspector general for Afghanistan reconstruction is not. A new report from his office shows that despite outspending the U.S. Marshall Plan to rebuild Europe after World War Two, the United States is not getting infrastructure that Afghans can sustain on their own. FP’s Elias Groll: "Instead, the funds have mainly bought empty buildings, malfunctioning power plants, and a corrupt government that will be wholly dependent on Western — read: American — aid well into the future."

Most of the money is for the Afghan security forces."… Of the $104 billion the United States has poured into Afghanistan since fiscal year 2002, some $62 billion has gone toward creating the Afghan army. (It should be noted that when comparing the U.S. reconstruction effort in Afghanistan with the Marshall Plan that in the aftermath of World War II, the United States did not have to stand up any European armies.) To save money, the size of that force is being reduced from 352,000 to 228,500 men. Even at that reduced size, the Afghan government takes in far less money than will be required to fund the army: an estimated $4.1 billion annually." More here.

Meanwhile, the audit of June’s election continues as Secretary of State John Kerry is urging Ashraf Ghani and Abdullah Abdullah to move forward with plans to form a unity government. It remains to be seen whether the two candidates will actually implement what they agreed to in private. The WaPo’s Karen DeYoung: "‘The time for politics is over," Kerry wrote in an op-ed published online Wednesday by Afghanistan’s TOLOnews in English as well as in Dari and Pashto, the two official Afghan languages. ‘The time for cooperation is at hand,’ he wrote …

"Kerry’s intervention came amid a crescendo of what a senior Obama administration official called ‘misinformation and background noise’ about the terms of the still-secret accord they reached in their July 12 emergency talks with him." More here.

Israel’s Prime Minister Benjamin Netanyahu says Israel will continue to destroy Hamas tunnels with or without a ceasefire. Meanwhile, U.N. Secretary-General Ban Ki-moon directly accused Israel of shelling a U.N. shelter for Palestinians. FP’s Colum Lynch: "In a scorching rebuke from the normally mild-mannered diplomat, Ban charged that Israel’s action constituted a ‘reprehensible’ assault on civilians and demanded that those responsible for the strike be held accountable. The shelling of the Jabalia Elementary Girls School marked the fifth time since the conflict began on July 8 that a U.N.-protected shelter has been hit with incoming fire, but the incident is the first time that Ban has directly blamed Israel. That leaves open the possibility that some of the other facilities were hit by Hamas rockets. Israeli officials have said the militant group stores weapons in U.N. facilities and uses them to fire rockets into the Jewish state." More here.

Israel announces it’s calling up 16,000 reservists, the WSJ’s Joshua Mitnick reports.

While Congress figures out how to pass $225 million in new Iron Dome funding before the August recess, DoD supplies Israel with new ammo. Stars and Stripes’ story: "As conflict continues between Israel and Hamas militants in Gaza, the Department of Defense has released arms to Israel from a weapons stockpile maintained within the borders of the close U.S. ally, defense officials confirmed Wednesday. The ammunition sale from the weapons stockpile, established in the 1990s for use by both countries in case of emergency, took place within the past week, following three weeks of battle between the Israeli military and Hamas militants in Gaza."

But according to a defense official it was not in response to an emergency request from Israel. "Instead, the United States elected to supply 120mm mortar shells and 40mm grenades from the stockpile because the arms were approaching the date they would require replacement, he said. Israel regularly buys such ammunition when the United States rotates its stocks, he said, and the United States would meanwhile send new ammunition to refresh the stockpile." More here.

Israel released a video of Special Forces soldiers raiding a Gaza house a day after Hamas uploaded a video of its soldiers attacking an Israeli military installation. Watch the new video on FP here.

Israel’s feeling little pressure from Arab countries to stop the fighting and that’s probably a big part of why no ceasefire deal has been reached. The NYT’s David D. Kirkpatrick: "After the military ouster of the Islamist government in Cairo last year, Egypt has led a new coalition of Arab states – including Jordan, Saudi Arabia and the United Arab Emirates – that has effectively lined up with Israel in its fight against Hamas, the Islamist movement that controls the Gaza Strip." More here.

In Iraq, the fight over oil is really a fight to keep the country together. But Baghdad’s attempt to keep the Kurds reliant on the central government could backfire. FP’s Keith Johnson: "The age-old dispute between Iraq’s Kurds and its central government has found the unlikeliest of new battlegrounds: a Texas courtroom. In a contentious lawsuit, Baghdad and its semi-autonomous northern region are waging a legal battle that’s nominally about the ownership of a million barrels of crude oil sitting in a tanker parked outside the Houston Ship Channel. The real issue, however, is the future of the Iraqi state.

"Simply put, the hard-pressed Kurds are desperate to sell their oil to replace revenue they used to receive from the central government. But Baghdad is doing everything in its dwindling power to prevent such self-sufficiency. Its legal threats have cast a pall of uncertainty over Kurdish oil, which is discouraging potential buyers around the world. And that is inexorably pushing the Kurds further away from reconciliation with the Shiite-led regime in Baghdad and closer to open independence." More here.

As a warning against backing the Islamic State, Shi’ite militia forces shot 15 Sunni Muslims in the head and then hung their bodies on display in a public square in Baquba, a town 40 miles northeast of Baghdad. Reuters’ Michael Georgy has the story here.

It looks like Hezbollah has joined the fight in Iraq. Reuters’ story: "A Hezbollah commander has died during a mission in Iraq, sources familiar with the incident said on Wednesday, indicating the Lebanese group that is already fighting in Syria’s civil war may be involved in a second conflict in the region. Hezbollah, an Iranian-backed Shi’ite Islamist group, has not previously announced any role in the conflict in Iraq … " More here.

The threat of Americans being trained in Syria to become terrorists and then returning to the United States is not hypothetical … It’s happened. Moner Mohammad Abusalha, "who grew up a basketball-obsessed teenager in a Florida gated-community," carried out a suicide attack in Syria in May. After his training, but before he blew himself up, Abusalha came home to the United States for several months. The NYT’s Michael S. Schmidt and Mark Mazzetti with the exclusive: "Mr. Abusalha, 22, chose to carry out his attack in Syria rather than in the United States, but the difficulty learning about his background, motivations and travels illustrates the problems law enforcement officials face in trying to identify the Westerners – including dozens of Americans – believed to have been trained by Islamic militants in Syria." More here.

For Al-Awsat, Yousef Al-Dayni writes about Islamic self-delusion: "…We are facing a number of major issues, but perhaps the biggest is our inability to even diagnose the problems facing us. We lack the ability to gauge the sheer magnitude of the threat that these extremist groups represent, particularly as they are now present all over the world. There is a collective departure from reality among Muslims today in favor of daydreams of the caliphate and eschatological musings. Islamic discourse today reflects the worst parts of our heritage in terms of myths, lies, hypocrisy and the political exploitation of religion." More here.

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Who’s Where When: Acting Deputy Assistant Secretary of the Navy for Energy Capt. James Goudreau speaks at the 17th Annual Renewable Energy and Energy Efficiency Expo and Forum at 10:15 a.m. at the Cannon House Office Building.

Obama plans to huddle with Hill leaders today to discuss national security and foreign affairs. House Speaker John Boehner and his House Republican colleagues are not expected to attend the White House meeting.  POLITICO’s John Bresnahan and Jake Sherman. "Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) will be in attendance, as will the top Democratic senators from the Armed Services, Foreign Relations, and Intelligence committees. Sens. Dick Durbin (D-Ill.) and John Cornyn (R-Texas), the party whips, are also expected to be there." More here.

Derek Chollet, the assistant secretary of defense for international security affairs, will be leaving the Pentagon in January. FP’s Kate Brannen: "After nearly six years serving in Barack Obama’s administration, Chollet told staff Wednesday, July 30, that it’s time for him to devote his energy to other endeavors, including his family. His departure is sure to spark speculation that Chollet, like other prominent Democratic national security officials, may be leaving to recharge his batteries before taking a senior post in a potential Hillary Clinton administration."

What’s next for Chollet? "I expect you’ll see him writing a book and lending his voice on any number of topics," a defense official told FP. "He’s got a lot of credibility."

And who might replace him when he leaves in January? Elissa Slotkin will likely be on the shortlist. She’ll be "returning in August as the principal deputy assistant secretary of defense for international security affairs. She had been performing the duties of the principal deputy undersecretary of defense for policy while Brian McKeon waited for the Senate to confirm him to that post, which it finally did on Monday." More on the staff changes in the International Security Affairs office here.

A new commander for JSOC. Fayetteville Observer’s Drew Brooks: "Army Lt. Gen. Raymond A. Thomas III took the helm of the Fort Bragg-based Joint Special Operations Command, officials announced in a two-paragraph statement. Thomas replaced Lt. Gen. Joseph L. Votel, who had served as JSOC commander since May 2011." More here.

The Veterans Affairs’ scandal prompted something rarely seen in Washington — bipartisan cooperation. FP’s John Hudson: "On Wednesday, the House overwhelmingly approved a $16.3 billion plan to overhaul the massive federal department, which has been dogged by allegations of mismanagement and neglect, including allowing veterans waiting for medical care to die. The bill passed by a vote of 420 to 5. The Senate is expected to follow suit before adjourning for the August recess." More here.

Russia warns that sanctions will backfire on the West. AFP’s Anna Smolchenko in Moscow with Anna Malpas in Donetsk: "A defiant Russia said Wednesday that Western sanctions over Ukraine would backfire on the United States and lead to energy price hikes in Europe after Brussels and Washington unveiled the toughest punitive measures against Moscow since the Cold War." More here.

Meanwhile, in the short-term, it’s unclear if sanctions can deter Putin. The WSJ’s Jay Solomon in Washington and Marcus Walker in Berlin: "The U.S. and Europe made good this week on their threats to start penalizing broader sections of Russia’s economy in a bid to force President Vladimir Putin to end his support for separatist rebels in Ukraine. But recent history of the use of financial sanctions by Washington and Brussels-including against Iran, North Korea and Syria-suggests that significantly more pervasive penalties, particularly against Moscow’s energy sector, would be needed to change the Kremlin’s calculations, said current and former U.S. officials and sanctions experts. Even then, it is uncertain whether Mr. Putin values Russia’s economy more than his influence over Ukraine." More here.

Watch the Ukrainian military’s latest recruitment videos on FP, here.

Andrew S. Bowen, writing for FP, predicts things will only get worse before they get better in eastern Ukraine: "There was little Ukraine could do to stop the ‘little green men‘ who invaded Crimea. By the time Kiev had realized what was going on, Russia’s most elite and best-trained Naval Infantry, Airborne, and Spetsnaz troops (including the new Senezh unit, which seized the Crimean parliament) had prevented Ukrainian reinforcements from entering Crimea. But the separatist militiamen in eastern Ukraine, despite being equipped, trained, and funded by Moscow, are a different story. There, Kiev retains a vast advantage in firepower, materiel, and troops, along with the implicit backing of the international community against an increasingly fragmented and uncoordinated separatist movement." More here.

As fighting in Libya rages, the West is worried about what happens next. The WaPo’s Karen DeYoung: "Combatants are broadly divided between Islamist and secular militias. And although the Americans and Europeans are not seen as direct targets of either, some U.S. counterterrorism officials are increasingly concerned that the Islamists could seek to align themselves with al-Qaeda affiliates or with the Islamic State organization that has seized wide swaths of territory in Syria and Iraq." More here.

A reporter’s dream: The White House accidentally emailed the AP the State Department’s preliminary proposed talking points on the Senate report on the CIA’s interrogation program. AP’s Ken Dilanian and Eileen Sullivan: "A Senate report on the CIA’s interrogation and detention practices after the 9/11 attacks concludes that the agency initially kept the secretary of state and some U.S. ambassadors in the dark about harsh techniques and secret prisons, according to a document circulating among White House staff.

"The still-classified report also says some ambassadors who were informed about interrogations of al-Qaida detainees at so-called black sites in their countries were instructed not to tell their superiors at the State Department, says the document … " More here.

The Air Force calls for cheaper and quicker weapons development. The NYT’s Helene Cooper: "In an acknowledgment that the military may be pricing itself out of business, the Air Force on Wednesday called for a shift away from big-ticket weapon systems that take decades to develop and a move toward what Defense Department officials are calling more ‘agile’ high-tech armaments that can be quickly adapted to meet a range of emerging threats."

Maj. Gen. David W. Allvin, a co-author of the Air Force’s new strategic forecast: "To boil this down, we have to buy things very differently and develop and employ our people differently … We have to behave more like an innovative 21st-century company." More here.

You might not have noticed, but the F-35 is still under some serious flight restrictions due to the June 23 engine fire. Defense News’ Aaron Mehta: "Despite ongoing restrictions on the fleet of F-35 Joint Strike Fighters, the US Air Force’s top general warned against being ‘alarmist’ when discussing the fifth-generation jet’s engine."

Air Force Chief of Staff Gen. Mark Welsh at a briefing yesterday at the Pentagon: "Pratt & Whitney has been making pretty darn good engines for single-engine airplanes for a long time for the United States Air Force … What we found in the program so far, with these almost 9,000 sorties so far, is this engine works pretty well, too. That day it didn’t, and we need to figure out why." More here.

Al Jazeera’s Jamie Tarabay interviews Phil Strub, DOD’s liaison to Hollywood, here.

Next week, Bergdahl will face questions about his disappearance. USA Today’s Jim Michaels: "Army Sgt. Bowe Bergdahl, who was released in a prisoner swap with the Taliban two months ago, will meet next week with the senior Army officer investigating the circumstances of his capture in Afghanistan, his lawyer said Wednesday. Bergdahl, who spent five years in captivity, plans to meet with Army Maj. Gen. Kenneth Dahl, the investigating officer, in San Antonio, where Bergdahl is stationed, according to lawyer Eugene Fidell." More here.

The men who captured one of the ‘Taliban 5? speak out about the Bergdahl swap. Alex Quade’s video for the Daily Caller, here.