FP’s Situation Report: Murders the latest in a wave of violence in Israel; The United States struggles to choke off Islamic State’s oil revenue; Russia wants NATO assurances on Ukraine; and much more.

By David Francis with Sabine Muscat

The grisly murder of five rabbis in Jerusalem marks the latest attack in a wave of violence that Israeli leaders are struggling to contain. "It looked like a pogrom," an eyewitness to the scene told Yardena Schwartz, who wrote from Jerusalem for Foreign Policy. Three of the rabbis killed were U.S.-born, dual Israeli citizens. They fell victim to two Palestinians carrying meat cleavers, an ax and a gun. The attackers were killed in a shootout with police after exiting the synagogue in the Har Nof area of West Jerusalem.

More from Schwartz: "While today’s attack was the most gruesome to date, acts of violence like this are becoming elements of daily life in Israel. Whereas previous uprisings were marked by suicide bombings, galvanized by leaders and movements, the latest period of unrest has been characterized by lone wolf attacks. Over the course of the past two weeks, five Israelis have been killed by Palestinians, who stabbed their victims to death with a knife, or ran them over with a car." More here.

In a speech after the attack, Israel’s Prime Minister Benjamin Netanyahu accused Palestinian leaders of inciting violence and ordered the homes of those connected to the attack destroyed. President Obama condemned the killings. Slim hopes to revive the U.S.-backed peace process have been dashed.

More on Israel below.

The United States and its allies are ramping up efforts to strangle the Islamic State’s oil revenue — its main source of income. However, it’s not known how much the group is pumping and selling.

FP’s Keith Johnson: "It’s unclear how much the Islamic State is actually making from oil these days, how much the U.S.-led military campaign has hurt its funding, or how much money the group spends on operations, which include paying both its fighters and the civilians running schools, hospitals, and local governments in the areas it controls. The only thing clear is that American and allied diplomats and troops, as well as the United Nations, are focusing their diplomatic muscle and military might on cutting — and hopefully eliminating — the group’s ability to fund attacks and maintain the territories it controls through oil sales." More here.

There are lingering questions about whether the Treasury Department is doing enough to target Islamic State finances. But just as there are information gaps about the group’s ground capability, there are information gaps about how it conducts business. Until more is known, it could be difficult for the United States and its allies to take effective steps to prevent it from profiting from its illegal oil trade.

Has Russia offered a path to end the conflict in Ukraine? Russian President Vladimir Putin’s spokesman Dmitri Peskov said Putin wanted "a 100 percent guarantee that no one would think about Ukraine joining NATO." In September, as the conflict escalated, NATO officials suggested membership for Ukraine was possible if Kiev wanted to pursue it. Putin has long maintained that membership would be an unacceptable incursion into its historic sphere of influence.

From the BBC: "NATO has warned of a serious Russian military build-up in rebel-held territory in eastern Ukraine and on Russia’s side of the border. But Mr. Peskov countered by accusing NATO of breaking a historic promise by gradually approaching Russia’s borders. He said the alliance was ‘attempt[ing] to break the… balance of power.’" More here.

Putin and other Russian leaders contend NATO’s promise not to expand east was made during German reunification talks after the fall of the Berlin Wall (whether this promise was actually made is up for debate). Since then, the alliance has broken this alleged promised by expanding east to include former Soviet bloc states. However, plans to add Ukraine to the alliance stalled in 2008. Could Putin be offering NATO a way to end the conflict in Ukraine? Since the crisis began, the Russian president has been anything but easy to predict.

More on Ukraine and Russia below.

Welcome to Wednesday’s edition of the Situation Report.

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Who’s Where When Today

Lots of DoD officials are speaking at a Defense One summit today. Details here.

Secretary of State John Kerry has delayed a trip to Vienna. AFP has more here.

Vice President Joe Biden has left Washington for a five-day trip that includes talks with leaders in Ukraine.

What’s Moving Markets

Writing for Defense One, Secretary of Defense Chuck Hagel on DoD’s changing financial culture: "America’s long-term security will depend on whether we can address today’s crises while also planning and preparing for tomorrow’s threats. It will depend on whether we meet our nation’s challenges with disciplined choices and strategic vision." More here.

In the face of growing economic troubles in Japan, Prime Minister Shinzo Abe took a gamble on his political future by dissolving the lower house of parliament and calling a snap election for next month. The Washington Post‘s Anna Fifield reports, here.

Some economic experts warn Germany’s obsession with cutting deficits could push its economy into a "Japanese style deflationary environment that will kill growth for decades." Meera Selva, Lára Hilmarsdóttir and Gilbert Kreijger report for the global edition of Handelsblatt. More here.

FP’s Keith Johnson on the Senate — for now — killing the Keystone Pipeline: "Congress will get another chance in January, when Republicans will have control of the Senate. Incoming Senate Majority Leader Mitch McConnell (R-Ky.) has signaled that he will press for a Keystone vote early in the next Congress." More here.

Bloomberg’s Tony Capaccio on DoD’s plans to ignore sequestration: "The Pentagon expects to submit a five-year budget that will violate mandatory spending caps for the second consecutive year, according to the Defense Department’s comptroller." More here.

From Business Insider’s Linette Lopez, on Brazil’s national nightmare: "The country’s stock market has become a whipsaw, and its currency, the real, has hit a nine-year low…All of this is due to a far-reaching corruption scandal at one massive company, Petrobras." More here.

Israel

The New York Times‘ Isabel Kershner and Jodi Rudoren report that Israel is on edge after the attacks: "The 7 a.m. invasion of a synagogue complex that is the heart of community life in the ultra-Orthodox neighborhood of Har Nof, in West Jerusalem, was the deadliest attack on Israeli civilians in more than three years and the worst in the city since 2008, when eight students were slain at a yeshiva. It brought to 11 the number of Israelis — including a baby, a soldier and a border police officer — killed in the past month." More here.

Slim hopes for a U.S.-brokered peace deal are fading, reports the Washington Post‘s Carol Morello: "The dim prospect that U.S.-sponsored talks between Israelis and Palestinians could be resumed any time soon faded almost completely Tuesday." More here.

The Associated Press on the Israeli response to the attack: "In one of Israel’s first acts of retaliation, Prime Minister Benjamin Netanyahu ordered the demolitions of the homes of the attackers. But halting further violence could prove to be a tough challenge as police confront a new threat: Lightly armed assailants from annexed east Jerusalem who hold residency rights that allow them to move freely throughout the country." More here.

The New York Times‘ Jodi Rudoren on disturbing signs of celebration after the attack. "A cartoon of a bloody meat cleaver like the one used in the attack that killed four Orthodox Jews circulated on social media. Residents of the Gaza Strip paraded in the streets singing victory songs, giving out candy, waving flags." More here.

Haaretz‘s Amos Harel on what’s increasingly looking like a Holy War in the Middle East: "Tuesday’s attackers weren’t members of ISIS, but the rampage in the synagogue seemed to be inspired by the organization; it was a religious and ideological act, stemming from a deep hatred of Jews. It was an attack on a clearly religious target, carefully chosen for maximum shock value." More here.

The Wall Street Journal‘s Jacob Gershman on Israel’s plan to ease gun laws after the attacks: "How exactly the rules would be adjusted isn’t clear. But speaking from the scene of the attack, the security minister suggested the rules would relax carrying restrictions for private security guards and off-duty army officers, the AFP said." More here.

The Islamic State

Der Spiegel’s Mirco Keilberth, Juliane von Mittelstaedt and Christoph Reuter write about the expansion of the Islamic State across North Africa, using the town of Darna in Libya as an example. "Darna has become a colony of terror, and it is the first Islamic State enclave in North Africa. The conditions in Libya are perfect for the radical Islamists: a disintegrating state, a location that is strategically well situated and home to the largest oil reserves on the continent. Should the Islamic State (IS) manage to establish control over a significant portion of Libya, it could trigger the destabilization of the entire Arab world." More here.

Writing for Foreign Policy, Aaron David Miller on the consequences of Obama misunderstanding the Middle East: "The fact is that the Obama administration has consistently overestimated the receptivity of this region to positive change as well as their own capacity to do much about it. Being on the right side of history doesn’t always mean you’re on the smart or winning side." More here.

The Washington Post‘s Colby Itkowitz on the State Department trolling the Islamic State: "The U.S. government employees behind the ‘Think Again Turn Away’ Twitter account spend their day communicating directly with Islamist militants, pushing back against their campaigns to recruit fighters by spreading graphic images of brutalities they pin on the West." More here.

The Wall Street Journal‘s Matt Bradley: Four die in a suicide attack in the northern Iraqi city of Erbil. More here.

From Reuters’ Phil Stewart: U.S. forces already advising Iraqi forces in Anbar province. More here.

Russia

NATO sees a large Russian military buildup both inside Ukraine and along its border with Ukraine, Reuters reports. "Russia denies providing arms or troops to support a separatist pro-Russian rebellion in eastern Ukraine, which began after the removal of a Kremlin-oriented Ukrainian president by mass protests in February. A ceasefire was agreed in early September, but fighting flared again recently." More here.

Despite the shattered trust with Moscow, Germany wants to keep channels open for dialogue. Foreign Minister Frank-Walter Steinmeier traveled from Kiev to Moscow where he convened with his counterpart Sergey Lavrov and received a last-minute invitation to meet President Vladimir Putin. More from Carol J. Williams in the Los Angeles Times here.

From Slate’s Anne Applebaum, some background on the scant historical evidence of NATO’s promise not to expand east. Read it here.

The Hill’s Kristina Wong: McCain, Graham call for the United States to arm Ukrainians. More here.

Iran

Reuters‘ Fredrik Dahl and Parisa Hafezi say Iran will resist "excessive" demands in push for nuclear deal. "Iranian and Western officials have said next Monday’s self-imposed deadline is unlikely to be met, and an extension is the most likely outcome. They say it is possible to agree the outline of a future accord, but it would take months to work out the details." More here.

A nuclear deal with Iran is only possible if the West takes into account Iran’s strong yearning for national dignity, Iranian-American writer Hooman Majd writes in the Guardian. More here.

Afghanistan

Germany plans to keep 850 soldiers in Afghanistan after next year, about 250 more than originally planned. Deutsche Welle reports here.

The National Journal‘s Jordain Carney on corruption in Afghanistan getting worse. More here.

North Korea

The New York Times‘ Rick Gladstone on North Korean human rights violations: "United Nations members voted decisively on Tuesday for a groundbreaking resolution that condemns North Korea for human rights abuses and for the first time recommends the prosecution of its leaders for crimes against humanity at the International Criminal Court." More here.

Japan

Japanese citizens’ groups are gathering evidence and speaking up about a potentially dark chapter of the U.S. military presence in their country: the storage of Agent Orange and other chemical defoliants around the U.S. base in Okinawa during the Vietnam War. Kimberly Hughes reports in the Diplomat. More here.

Ebola

From MSNBC‘s Emma Margolin: "We are nowhere near out of the woods yet," President Obama said of the fight to stop the spread of Ebola in West Africa. More here.

Think Tanks

The number of terror attacks increased dramatically in 2013, according to the Global Terrorism Index. The Sydney based Institute for Economics and Peace presents its findings in an interactive map. More here.

Army Rangers

The Washington Post’s Dan Lamothe reports the Army has chosen 31 women for a potential Ranger School experiment. "The decision is deeply controversial among some rank-and-file troops, and follows a 2013 decision by the Pentagon to fully integrate women into the military." More here.

NSA Reform

The Huffington Post‘s Matt Sledge, on the Senate’s failure to pass NSA reform: "Senators voted 58 to 42 to advance debate on the USA Freedom Act, which is meant to end the NSA’s controversial domestic call tracking program." More here.

Revolving Door

Defense News‘ Aaron Mehta: "The National Defense Industrial Association (NDIA) announced today that retired U.S. Air Force Gen. Craig McKinley will take over as president and CEO on Jan. 1." More here.

Defense News’ John T. Bennett: GOP steering committee selects Rep. Thornberry as next House Armed Services chairman. More here.

And finally, FP’s Siddhartha Mahanta on the difficulties of suing companies that commit atrocities. More here.