FP’s Situation Report: The Pentagon hasn’t punished anyone accused of retaliating against soldiers who reported possible sex crimes; Hagel denies tensions with the White House; Islamists in Chechnya upstage Putin; and much more.

By David Francis and Sabine Muscat

The Defense Department finds those who retaliate against soldiers reporting assaults have not been punished. The long-awaited sexual assault report shows the number of cases of unwanted sexual contact decreased by 25 percent from 26,000 in 2012 to 19,000 cases in 2014. The total number of cases actually reported to authorities went up 8 percent from 2013 to 2014. But the report also found that 62 percent of soldiers who reported cases faced social retaliation from co-workers and peers, and the Pentagon has done nothing to punish those retaliators.

FP’s Gopal Ratnam: “The report raises new questions about the U.S. military’s ability to prevent and punish sexual violence within its ranks, a long-simmering debate that is virtually certain to flare up again in the coming days as senators begin weighing President Barack Obama’s nominee to become the next defense secretary. Obama will announce the nominee — widely expected to be former deputy defense secretary Ashton Carter — Friday at a White House event.” More here.  

With President Obama expected to nominate Ashton Carter today, Chuck Hagel denied tensions with the White House led to his exit. People close to Hagel said that he had become tired of White House officials trying to micromanage the Pentagon. Speaking publicly for the first time Thursday and without much elaboration, Hagel said he and the president agreed DoD needed fresh leadership.

The Washington Post’s Craig Whitlock: “At Thursday’s press conference at the Pentagon, Hagel downplayed reports of discord, saying ‘there were no major differences in any major area. Sure, there are always issues of style, and how you get things done, and are things moving fast enough, but this country, as I’ve said, is well served to have a president like President Obama.’ Still, Hagel steadfastly declined to elaborate on why he and Obama felt that new leadership was necessary, or to reveal details of his conversations with the president.” More here.

More on Carter and Hagel below.

Islamists in Chechnya upstage Russian President Vladimir Putin with a bold attack in Grozny. Just hours before Putin delivered his state-of-the-nation address, Islamist militants laid siege to the Chechen capital, a battle that ended with at least 20 people dead. The timing of the attack suggests it was meant to embarrass Putin before his biggest speech of the year; Putin rose to power after crushing a Chechen insurgency at the beginning of his presidency. Putin, who told the country Russia’s looming recession was the work of western currency “speculators,” also blamed the West for the attack, alleging the attack was designed to break up Russia.

The New York Times’ Andrew E. Kramer and Neil MacFarquhar: “There was some speculation among analysts and on social media that the assault was carried out by fighters linked to the Islamic State or other radical groups fighting in Syria. If so, it would be the first such attack inside Russia. Chechen fighters in Syria have threatened to carry out attacks in response to Moscow’s unalloyed support for the Syrian president, Bashar al-Assad.” More here.

More on Russia below.

Welcome to Friday’s edition of the Situation Report.

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Who’s Where When Today

10:10 a.m. President Barack Obama is expected to formally nominate Ashton Carter as new Secretary of Defense. 11:10 a.m. Obama and Vice President Joe Biden meet King Abdullah II of Jordan at the White House.

Secretary of Defense Chuck Hagel and Chairman of the Joint Chiefs of Staff Army Gen. Martin E. Dempsey are traveling.

What’s Moving Markets

The Wall Street Journal‘s Brian Blackstone on the European Central Bank disappointing investors by dragging its feet on the expected stimulus for the Eurozone: “ECB President Mario Draghi said Thursday that officials discussed purchases of government bonds, otherwise known as quantitative easing, a move that would mark a new chapter in the bank’s fight against excessively weak inflation. But he added they needed more time to gauge the effects of policies that they had already implemented while assessing how falling oil prices might affect the region’s already weak consumer prices.” More here.

The Financial Times’ Ed Crooks on U.S. oil reserves reaching the highest level since 1975 due to the boom in shale gas: “Rising reserves are an indication that higher US oil production, which has risen about 80 per cent since 2008, can be maintained in the longer term, although the recent slump in oil prices is expected to lead to cutbacks in activity and a slowdown in output growth over the coming months.” More here.

Bloomberg on the Tea Party getting ready to torpedo Obama’s trade agenda — one of the few possible areas of agreement with Republicans: “The effort, which has drawn interest from Democratic allies in U.S. labor unions, is aimed at killing legislation that would let the president submit trade deals for an up-or-down vote, called fast-track authority.” More here.

Sexual Assault Report

The Military Times’ Leo Shane III on lawmakers unimpressed with DoD’s sexual assault report: “New details of the scope of sexual assault in the military did little Thursday to change the political fight over how to address the problem.” More here.

Next Defense Secretary

FP’s David Rothkopf on why Carter might be doomed to fail: “[D]espite the fact that Carter is a worthy choice for the job (and it’s about time he was actually offered it), I can’t help but feel that there are several big reasons we should expect that all this will end in tears.” More here.

McClatchy’s Nancy A. Youssef and Anita Kumar report the selection process might hurt Carter. “The transition of power at the Pentagon this week under President Barack Obama has not made anyone look good.” More here.

Reuters’s Patricia Zengerle on Sen. John McCain (R-Ariz.) blocking Tony Blinken’s nomination as the country’s number two diplomat: “‘He’s totally unqualified,’ the Republican senator told Reuters.” More here.

Russia

FP’s David Francis on the House of Representatives condemning Putin: “The House condemnation came after Putin’s annual state-of-the-nation address Thursday in Moscow. With Russia’s economy headed toward recession, Putin urged Russians to stand firm, blaming the West and ‘speculators’ for waging economic war.” More here.

The Wall Street Journal’s Stephen Fidler on increased cooperation between NATO and the EU: “The EU’s new foreign-policy chief, Federica Mogherini, spent much of Tuesday at a NATO foreign ministers’ meeting. On Wednesday, NATO Secretary-General Jens Stoltenberg visited Donald Tusk, the newly installed president of the European Council, who is charged with guiding the collective agenda of EU governments.” More here.

Writing for Der Spiegel, Jurek Skrobala on the growing fear of Russia among cultural elites in Poland: “It is the fear that Europe is not reacting forcefully enough to the crisis in Ukraine, the fear that Putin will advance not only to the Donets River, but soon also to the banks of the Vistula. And it is the fear of Putin himself, who just a few days ago made reference to the ‘centuries old common history’ that connects Poles and Russians, words that sparked anxiety among the Polish media, because they match the rhetoric of the cold embrace that the Russian president has reserved for Ukraine.” More here.

EUobserver’s Valentina Pop reports European Commission chief Jean Claude Juncker “called Vladimir Putin’s bluff” on the South Stream pipeline, saying that the ball was in Putin’s court to go ahead with the project. “[W]ith the ongoing war in Ukraine, Putin may no longer feel the need to pressure Kiev with an alternative gas pipeline. And with the EU sanctions taking a toll on the Russian economy, funds are scarce for him to go ahead with the project.” More here.

The New York Times’ Michael R. Gordon: “Secretary of State John Kerry said Thursday that hundreds of Russian soldiers have been fighting and dying inside Ukraine, the first time that he has spoken so pointedly about the Russian military’s casualty toll in the east.” More here.

EurasiaNet’s Joshua Kucera on NATO officials setting up a training facility in Georgia: “The establishment of the joint training facility, announced in September, was the main component of the ‘substantial package’ that NATO had long promised Georgia for continuing to be a good ally.” More here.

Russia

The New York Times’ Neil MacFarquhar on Putin and Russian destiny: “Mr. Putin sought to portray himself as a leader with Russia’s glorious destiny firmly in hand, a viewpoint echoed by his supporters. His critics, however, called the speech way off the mark, if not delusional, with Mr. Putin acknowledging neither the scope of the problems nor his role in creating them.” More here.

Islamic State

The Washington Post’s Karen DeYoung: “President Obama and Congress agree on the need to pass a new legal authority for the fast-expanding U.S. war against the Islamic State. But with uncharacteristic mutual deference, each has been waiting for the other to propose it first.” More here.

The Wall Street Journal’s Julian E. Barnes, Adam Entous, and Carol E. Lee on the timing of the raid to free a U.S. hostage in Yemen: “[S]ome U.S. officials said they now believe delays in the planning and approval of the operation contributed to its failure to free journalist Luke Somers. Others said there was incomplete intelligence and that the Pentagon and White House moved quickly to approve the operation once it was presented.” More here.

Reuters’s Dominic Evans and Oliver Holmes on the Islamic State ceding little territory: “While they have lost towns on the edges of their Iraqi realm, especially in ethnically mixed areas where their hardline Sunni theology holds little appeal, they have consolidated power in parts of their Sunni Muslim heartland.” More here.

Afghanistan

The Washington Post’s Missy Ryan on the United States deciding to leave even more than the previously announced 9,800 troops in Afghanistan next year: “[B]ecause not all NATO nations will be able to meet targets for contributing troops to the approximately 12,000-strong training force by Jan. 1, the United States will keep a larger number of troops in the country, at least until early spring. More here.

Reuters’s Lesley Wroughton and Kylie MacLellan report on pledges by the United States and Britain to support Afghanistan’s government after foreign combat troops leave next year. More here.

The Los Angeles Times’ David Zucchino on the result of the investigation of the incident in which an Afghan policeman shot and killed a U.S. general in August: “The investigation by the International Security and Assistance Force in Afghanistan concluded that Rafiqullah was not part of any planned insurgent plot. It said he happened to encounter a team of high-ranking military officers as he returned from a security patrol.” More here.

McClatchy’s Jonathan S. Landay and Marisa Taylor on the investigation into Osama bin Laden’s death: “Two top officials in the Pentagon Inspector General’s Office bungled an investigation into allegations that former Defense Secretary Leon Panetta and other defense officials leaked classified information to Hollywood filmmakers, a senior Republican senator is charging.” More here.

Bloomberg’s Eltaf Najafizada and Kamran Haider on concerns about trenches along the Afghanistan-Pakistan border: “Afghanistan expressed “grave concerns” about trenches being dug by Pakistan along a disputed border, threatening President Mohammad Ashraf Ghani’s efforts to overcome mistrust between the terrorism-hit nations.” More here.

Defense Authorization

Military Times’ John T. Bennett on the defense authorization bill: “The House on Thursday easily passed a massive Pentagon policy bill, sending to the Senate a bill that would clear the military to spend $559.2 billion in fiscal 2015.” More here.

Cybersecurity

FP’s David Francis on a cybersecurity bill getting new life: “If passed, the bill would allow private companies to share cybersecurity data with the Department of Homeland Security. The bill also outlines Homeland Security’s role in American cybersecurity and would reauthorize the department’s authorities.” More here.

Iran

Al-Monitor’s Laura Rozen on the constructive role Russian Deputy Foreign Minister Sergey Ryabkov played in the nuclear talks with Iran despite tensions between Russia and the West. “The 54-year-old career diplomat has managed to maintain a constructive working rapport with US and European counterparts at the Iran negotiating table, despite the deep strains plaguing Moscow-West relations over Ukraine.” More here.

North Korea

The Christian Science Monitor’s Paul F. Roberts on the Sony hack: “While destructive hacks such as the one on Sony are atypical, they are not unknown. In fact, the attack on Sony shares many similarities with at least two other recent, destructive cyberattacks: from the methods used to carry out the strike to the software used to compromise Sony’s computer systems.” More here.

Revolving Door

Military Times reports Pentagon personnel chief Jessica Wright stepped down Thursday. “Wright, undersecretary of defense for personnel and readiness, is a retired major general and former commander of the Pennsylvania National Guard. She submitted her letter of resignation to President Obama and Hagel.” More here.

And finally, FP’s Elias Groll reports on a radical redesign for the dollar bill. More here.