FP’s Situation Report, presented by Lockheed Martin: Russian economy struggles under sanctions and low oil prices; Putin’s power is at risk; Taliban strikes at the heart of Pakistan’s military establishment; and much more.
By David Francis and Sabine Muscat The Russian economy is in free fall, drowning under the weight of Western sanctions and sinking oil prices. President Barack Obama has long urged for patience to allow the weight of economic sanctions to hit Russia. Now, with the help of historically low oil prices, Russia finds itself in ...
By David Francis and Sabine Muscat
The Russian economy is in free fall, drowning under the weight of Western sanctions and sinking oil prices. President Barack Obama has long urged for patience to allow the weight of economic sanctions to hit Russia. Now, with the help of historically low oil prices, Russia finds itself in its most severe economic crisis since the 1998, when Moscow defaulted on its debt. The Russian ruble is tanking against the dollar. There are new warnings that economic growth in Russia in 2015 will be even worse than expected. Now, with Obama promising a new round of economic penalties later this week, the Russian economy is staring into the abyss.
FP’s Keith Johnson and Jamila Trindle: “[L]ike the high-pressure chemical cocktail that U.S. oil companies use to split open shale rock, which has fueled the oil boom that has crippled Russia’s earnings, Western sanctions have blasted open the existing fault lines in corporate Russia, leading to a series of nasty knock-on effects with potentially catastrophic consequences. In particular, sanctions targeting state-owned oil giant Rosneft, one of the largest oil companies in the world and also one of the most indebted, are at the heart of the current crisis.” More here.
The collapse of the Russian economy marks the collapse of President Vladimir Putin’s power source. As Putin took Crimea and sent Russian troops to eastern Ukraine, many in the West speculated that he was trying to upend Western Europe and U.S. post-Cold War order. He made NATO look irrelevant. He seemed immune from any of the punishments levied by the West. Putin spoke about Russia reclaiming lands along its borders. However, Putin has unwittingly undermined the economic foundation he used to seize power in Russia.
Bloomberg’s Henry Meyer and Ilya Arkhipov: ”The president took over from an ailing Boris Yeltsin in 1999 with pledges to banish the chaos that characterized his nation’s post-communist transition, including the government’s 1998 devaluation and default. While he oversaw economic growth and wage increases in all but one of his years as leader, the collapse in oil prices coupled with U.S. and European sanctions present him with the biggest challenge of his presidency.… The ruble meltdown and accompanying economic slump marks the collapse of Putin’s oil-fueled economic system of the past 15 years.” More here.
More on Russia below.
Pakistan reels after the Taliban strikes at the heart of Pakistan’s military establishment in a school attack that left at least 141 people dead. The details of Tuesday’s Taliban attack are grim. Students were gathered in the auditorium of the Army Public School on Warsak Road in Peshawar and executed. Teachers and students were shot and set on fire. Pakistani officials launched air strikes in response to the attacks and are promising more. The attack continues the Taliban’s fight against modernity by disrupting the education of Pakistan’s students.
FP’s Elias Groll: The attack “is only likely to exacerbate what is a crisis in Pakistani education, which has been strained by the twin pressures of sectarian politics and militant attacks, leaving the country’s economy lagging significantly behind that of neighboring India. According to a 2014 International Crisis Group (ICG) report on Pakistan’s education system, more than 9 million Pakistani children receive neither primary nor secondary education. Pakistan has the second-highest number of out-of-school children in the world, and 22 percent of Pakistani children legally mandated to be in school are not. Literacy rates are stagnant.” More here.
More on Pakistan below.
Welcome to Wednesday’s edition of the Situation Report.
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Who’s Where When Today
8:00 a.m. 38 North hosts its monthly press breakfast at the Bernstein-Offit Building. 10:00 a.m. Beth McCormick, director of the Defense Technology Security Administration, speaks at the Hudson Institute on “Securing Defense Technology in a Globalized Marketplace.” 11:00 a.m. The American Enterprise Institute hosts a conversation with Victoria Nuland, assistant secretary for Europe and Eurasian Affairs at the State Department, on “The Ukranian Revolution a Year Later.” 12:00 p.m. U.N. Secretary-General Ban Ki-moon holds his year-end press conference. 1:00 p.m. Philip Dunne, U.K. minister for Defense Equipment, Support, and Technology, speaks at the Atlantic Council on “Securing Operational Superiority Through Defense Innovation: A U.K. Perspective.” 2:30 p.m. Federal Reserve Chair Janet Yellen gives a press conference on the Fed’s interest rate decision.
What’s Moving Markets
The New York Times’ Neil Irwin on Russia’s vicious cycle: “Russia is stuck in a vicious cycle in which falling oil prices worsen its financial position, which causes a loss of confidence in the ruble. A falling ruble causes high inflation and makes businesses reluctant to invest, and the central bank’s interest rate increase to combat the falling ruble will have a side effect of worsening the economy further.” More here.
Bloomberg’s Simon Kennedy on China and the United States reversing economic roles: “The US is accelerating and China is cooling, marking a reversal of trends that followed the financial crisis. As a result, oil is slumping as American supply rises and Chinese demand falls; capital is fleeing emerging markets; the dollar is surging and the influence of the BRICs is on the wane.” More here.
Reuters’s Lesley Wroughton on a possible end to sanctions: “Russia has made constructive moves in recent days towards reducing tensions in Ukraine, U.S. Secretary of State John Kerry said on Tuesday, and he raised the possibility that Washington could lift sanctions if Moscow keeps taking positive steps.” More here.
Reuters reports a German court orders an autopsy of Putin critic Andreas Schockenhoff. “‘We don’t know the cause of his death,’ Karl-Josef Diehl from the state prosecutor’s office in Ravensburg told Reuters. ‘In order to determine the exact cause of death and to counter all doubts and speculation, including any related to his previous work, like his role as the government’s coordinator for Russia, an autopsy was requested and approved by the court.’” More here.
China’s Global Times calls for Chinese solidarity with Russia against the West: “While it might play a key role, China has to keep a clear mind when giving a helping hand to Russia. China-Russia cooperation is no longer ideology-based but driven by common interests. Although it has the capability to offer help to Russia at critical moments, China does not have to act in a proactive manner.” More here.
The New York Times’ Ihsanullah Tipu Mehsud: “Prime Minister Nawaz Sharif of Pakistan lifted a moratorium on the death penalty Wednesday as the government declared three days of official mourning and grappled with the aftermath of an attack on a school by the Pakistani Taliban that killed 145 people.” More here.
Bloomberg’s Josh Rogin and Eli Lake on the United States in Pakistan’s war: “[T]he attack may also push President Barack Obama to renew the counter-terrorism partnership with Pakistan that has deteriorated since the U.S. killing of Osama bin Laden in 2011.” More here.
FP’s David Rothkopf on the Taliban’s futility: “Jihadis are waging the most futile war possible. Perhaps that explains the senseless desperation behind their brutality. They are not battling America or the West or regimes that seek to end their violence. Rather, their enemy is the future.” More here.
The Guardian’s Jon Boone and Ewen MacAskill on Pakistan’s response to the attacks: “The Pakistan military has taken punitive action against Taliban militants by launching massive air strikes against its border region strongholds in retaliation for the Peshawar school massacre.” More here.
Deutsche Welle’s Shamil Shams on how the school attack exposes the failure of Pakistan’s anti-terrorism strategy. “Maqsood Ahmad Jan, an analyst based in Charsadda near Peshawar, says that despite the ongoing military operation in North Waziristan — close to the Afghan border — the Taliban still have the capacity to launch large attacks.” More here.
Time magazine’s Naina Bajekal on where the fight against the Pakistani Taliban is headed: “The question of whether the attack is a desperate comeback from a militant group under pressure or the first step in a new phase of the Taliban’s war against Pakistan remains to be seen.” More here.
The Sydney Morning Herald’s Megan Levy with more details on the gunman: “Iranian police had requested the extradition of Man Haron Monis, the gunman who was shot dead in the Martin Place siege, 14 years ago but Australian authorities would not hand him over, Iran’s police chief has claimed in comments to reporters.” More here.
The Wall Street Journal’s Rob Taylor on the limitations of Australia’s anti-terror laws: “As flower tributes piled up outside the Sydney cafe where two hostages and a gunman died after lengthy siege, Australians confronted a new challenge — how to prevent such ‘lone-wolf’ attacks while maintaining the country’s cherished freedoms.” More here.
Bloomberg’s Josh Rogin on doubts about a lone wolf in Canada: “Several weeks after the Ottawa attack, Canada’s top law-enforcement official now says that gunman was not only inspired by Islamic State, he may have been in direct contact with the group.” More here.
McClatchy’s Mousab Alhamadee: “The Assad regime sustained a major setback in northern Syria this week with the loss of two major military bases, and the big winner in the battle was al Qaida’s Syrian affiliate, the Nusra Front.” More here.
The Washington Post’s Dan Lamothe on the A-10’s use against the Islamic State: “It marks the first time the use of the pugnacious plane against the militant group has been confirmed, although U.S. military officials disclosed last month that they had deployed the A-10 in support of the mission in Iraq and Syria.” More here.
The Diplomat‘s Prashanth Parameswaran on growing fears of Islamic State activity in Indonesia and Malaysia: “Officials from Indonesia and Malaysia, Southeast Asia’s two Muslim-majority states, have expressed concern that the threat from the Islamic State (IS) movement in Syria and Iraq could be growing in their countries in spite of initial measures taken to counter the movement’s appeal.” More here.
FP’s Siobhán O’Grady on lavish spending in Afghanistan: “The top American watchdog for Afghanistan’s reconstruction is investigating whether a Pentagon task force charged with juicing Afghanistan’s moribund economy misspent millions of taxpayer dollars on lavish overseas travel and complicated development projects that did little to create new jobs or spur new growth in the country.” More here.
The New York Times’ Joseph Goldstein: “A new report by European Union election observers on Tuesday supports some of the most stark estimates of systematic electoral fraud in the Afghan presidential runoff election in June.” More here.
Reuters’s Radu-Sorin Marinas and Christian Lowe on Romania’s role in the CIA program: “The lawyer for a man tortured by the CIA said Romania’s authorities should acknowledge the role they played after a U.S. Senate report pointed to Romania as the site of the secret CIA jail where the man was interrogated.” More here.
Reuters on the mood of nuclear talks with the West: “Iran said on Tuesday bilateral nuclear talks with the United states were proceeding in a good atmosphere despite lingering gaps over key issues such as Tehran’s uranium enrichment capacity and how fast economic sanctions should be lifted.” More here.
The BBC on attacks in Yemen: “At least 25 people, among them 15 children, have been killed in twin car bomb attack[s] in the central Yemeni province of Bayda, reports say.” More here.
Writing for Foreign Policy, Elisa Massimino on growing anti-Semitism in Europe: “Several factors, including the intensifying violence in the Israeli-Palestinian conflict, have contributed to the resurgence of anti-Semitism across Europe. But perhaps none is as toxic or frightening as the ascendance of far-right political parties.” More here.
The Washington Post’s Carol Morello and William Booth on the U.S. response to Palestine’s U.N. bid for statehood: “The Obama administration has not yet decided how to respond to a Palestinian-led effort, supported by much of Europe, to advance a U.N. resolution that would demand an end to the Israeli occupation of Palestinian territory in less than two years, Secretary of State John F. Kerry said Tuesday.” More here.
The Pharmaceutical Journal on disappointing Ebola drugs: “Lack of evidence for seven investigational drugs being developed for the treatment of Ebola virus disease means it is impossible to make any conclusions about their safety or efficacy, according to the findings of an interim review by the European Medicines Agency.” More here.
The Guardian‘s Justin McCurry on Japan’s re-elected prime minister Shinzo Abe angering China by planning changes to Japan’s pacifist constitution: “Abe, a conservative, has made no secret of his desire to remove what he regards as unfair constraints on Japan’s military, seven decades after its surrender at the end of a war that saw it occupy neighbours including China and attack countries further afield in the Pacific.” More here.
FP’s John Hudson on Rajiv Shah: “After five years of heading the United States Agency for International Development, one of the Obama administration’s most charismatic and well-liked bureaucrats is leaving his job next month, Foreign Policy has learned.” More here.
FP’s John Hudson on an open door for Obama appointees: “Republicans are ripping Texas Sen. Ted Cruz for inadvertently helping Barack Obama’s administration push through the controversial nominations of a number of key foreign-policy nominees.” More here.
Diego G. Rodriguez named assistant director in charge of the FBI’s New York Field Office.
David Gordon, former director of Policy Planning for the U.S. Department of State, joins the Center for New American Security as adjunct senior fellow.
And finally, is there life on Mars? More here.