FP’s Situation Report, presented by Lockheed Martin: Cold War-era deadlock between U.S. and Cuba is over; Russia searches for a Ukraine deal as its economy tumbles; Pakistan turns to Afghanistan for help after school attack; and much more.

By David Francis and Sabine Muscat

The Cold War-era deadlock between the United States and Cuba is over, marking a new age for U.S.-Cuban relations. The standoff began in 1962 with Soviet missiles pointed at the United States from Cuba. It ended yesterday when U.S. President Barack Obama and Cuban President Raúl Castro made simultaneous TV announcements that both sides wanted to normalize diplomatic relations for the first time in more than 50 years. The release of U.S. citizen Alan Gross, imprisoned for five years in Cuba after being arrested for spying, was seen as a main precondition for the unexpected breakthrough. While the U.S. embargo remains, the Obama administration has taken a number of steps to soften the economic sanctions against Cuba.

FP’s David Francis, John Hudson, and Yochi Dreazen: “The new agreement contains an array of far-reaching changes, including paving the way for the United States to open an embassy in Havana. A number of travel restrictions have been lifted, though tourism is still prohibited. U.S. debit cards will now work in Cuba, and U.S. financial institutions will be permitted to open accounts at Cuban institutions. As far as Cuban cigars go, U.S. travelers to Cuba will now be allowed to bring back $100 worth of tobacco products. The United States and Cuba have opened a formal channel of communication, and the State Department is reviewing Cuba’s designation as a state sponsor of terrorism. However, the president is not asking Congress to lift the formal embargo on Cuba, though the White House is open to considering it.” More here.

More on Cuba and the United States below.

Russia’s sinking economy could force Moscow into a Ukraine deal. The Bank of Russia eased accounting rules Wednesday to stop the ruble’s free fall. Russia’s currency rebounded slightly against the dollar, increasing by 9.4 percent, helping to pare its loss against the dollar to a still-devastating 47 percent this year. Moscow is far from out of the woods, as oil prices continue to drop and new U.S. sanctions against Russia’s energy sector take hold. Now, belligerent Russian President Vladimir Putin could be forced into a peace deal in Ukraine.

The New York Times’ Alison Smale: “On Sunday and again on Tuesday night — after days in which the ruble gyrated wildly, raising the possibility of a broader financial crisis that could saddle Mr. Putin with deeper economic and political problems — the Russian president spoke by phone with his Ukrainian, German and French counterparts. Statements released afterward in all four capitals talked of moving quickly to cement a cease-fire broadly observed since last week in eastern Ukraine.” More here.

More on Russia below.

In the wake of a barbaric terrorist attack on a school earlier this week that killed 148, Pakistan asks Afghanistan for assistance to fight the Taliban. Pakistan’s army and intelligence chiefs traveled to Kabul Wednesday to ask the Afghan government for help in locating those responsible for Monday’s school attack. The incident provides the two historic rivals with an avenue for cooperation.

The New York Times’ Ismail Khan and Azam Ahmed: “The two neighbors have for years had an uneasy relationship, and tensions have frequently flared over cross-border attacks by militants — although usually ones on Afghan soil by militants sheltering in Pakistan. In particular, the Pakistani military’s history of support for the Afghan Taliban has long been an irritant for Afghan officials.” More here.

More on Pakistan below.

Welcome to Thursday’s edition of the Situation Report.

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Who’s Where When Today

10:00 a.m. Combined Joint Task Force-Operation Inherent Resolve Commander Lt. Gen. James Terry conducts a briefing on the operation against the Islamic State. 12:00 p.m. Secretary of State John Kerry hosts a working lunch for Italian Ambassador to the United States Claudio Bisogniero. 12:00 p.m. Hudson Institute hosts a discussion on “The State and Future of Egypt’s Islamists.”  2:30 p.m. Middle East Institute hosts a discussion on “Today’s Middle East: A Snapshot of Regional Attitudes” 4:45 p.m. CSIS hosts a discussion on “Ambition and Uncertainty: China in the Age of Xi Jinping.”

What’s Moving Markets

Bloomberg’s Tony Capaccio on a subpoena against contractor Dyncorp: “As part of a sweeping probe into possible exploitation of foreign workers by recruiters, the Special Inspector General for Afghanistan Reconstruction’s office of special projects has requested documents from DynCorp, Fluor Corp. (FLR) and subcontractor Ecolog International FZE, based in Dubai.” More here.

The Wall Street Journal’s Jon Hilsenrath on the Fed cautiously preparing to raise interest rates in 2015: “The new statement said the Fed would be ‘patient’ before raising rates, adding that the overall outlook hadn’t much changed from earlier assurances that rates would stay low for a ‘considerable time.’” More here.

Bloomberg on the Chinese government’s aim to end reliance on foreign technology: “The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping…. The campaign could have lasting consequences for U.S. companies including Cisco Systems Inc., International Business Machines Corp., Intel Corp. and Hewlett-Packard Co.” More here.

Cuba

The Miami Herald’s Patricia Mazzei and Christina Veiga on a stunned Cuban community in Miami: “Shock reverberated through Miami, the heart of the exile community, where detractors lambasted the policy shift — and the Democratic president — for what they called a betrayal. A frenzy of reporters and politicians descended on Versailles Restaurant in Little Havana, a mecca of traditional anti-Castro sentiment. But only a small crowd had gathered in protest. Miami’s streets, into the early evening, remained quiet.” More here.

FP’s Elias Groll on the mysterious U.S. spy swapped for the remaining members of the Cuban Five: “Little is known about the Cuban who is now headed toward what will likely be a comfortable retirement in the United States. But what little U.S. officials disclosed on Wednesday make him one of the United States’ most important Cold War spies.” More here.  

The New York Times’ Ashley Parker and Jonathan Martin on the political fallout from the announcement: “For more than a generation, Republicans have offered a consistent hard-line anthem against the Communist nation, endearing themselves to the politically potent bloc of Cuban-Americans who have been crucial in deciding elections in the state. But those animosities have given way as younger voters with family ties to Cuba but no direct memories of the island under Fidel Castro have been more willing to support Democrats.” More here.

Writing for Foreign Policy, Daniel Altman cautions the diplomatic breakthrough is a small step toward reconciliation. “Not all of the details have been sorted out, and some Republicans are already lining up to block the president’s moves. But the White House has outlined the basic principles of the economic rapprochement negotiated in secret over the past year and a half. So far, there’s not much to crow about for either side.” More here.

Vatican Radio with more details on how Pope Francis helped broker the agreement: “[T]he Pope had written to both Cuban President Raul Castro and U.S. President Barack Obama, inviting them to ‘resolve humanitarian questions of common interest.’ The Holy See also met with delegations from both countries in the Vatican last October, providing what the statement calls ‘its good offices to facilitate a constructive dialogue.’” More here.

Russia

The New York Times’ Neil MacFarquhar and Andrew Roth on Putin’s address to his nation: “At his annual year-end news conference before 1,200 journalists, Mr. Putin said that initial moves to stabilize the ruble may have been too slow, but he promised quick action to avoid further economic damage. He also promised to maintain social welfare programs at their current level.” More here.

Bloomberg’s Eric Roston on questions about Russia’s response to its economic crisis: “Instead of denying that something that happened has happened, Putin’s strategy so far seems to be to look normal and busy preparing for [today’s] big press conference, and let potential dissidents be distracted by other important events.” More here.

Reuters’s Alessandra Prentice reports on more hints that Putin could be looking for a peace deal in Ukraine. “The cautiously-worded comments of the EU’s Federica Mogherini echoed those of U.S. Secretary of State John Kerry, who on Tuesday said Russia has made constructive moves recently towards reducing tensions in Ukraine.” More here.

Pakistan

The New York Times’ Ismail Khan on terror gripping Pakistan: “With flags at half-staff and businesses shuttered, Pakistanis seemed to be trapped between grief, anger and frustration, for once overcoming their divisions to unite in pain.” More here.

The Daily Beast’s Sami Yousafzai and Christopher Dickey on the Pakistani Taliban’s ultimate goal: “On May 1, 2010, a terrorist named Faisal Shahzad tried to set off a massive car bomb in New York City’s Times Square. It failed to explode, but U.S. officials knew they were lucky.” More here.

Writing for Foreign Policy, Arif Rafiq on why the Pakistani Taliban is desperate: “[T]he most startling revelation of the Peshawar attacks is that, strategically, the TTP stood to gain little from them. The group has been hammered both by the Pakistani military and defections from within its ranks.” More here.  

The Washington Post’s Pamela Constable and Tim Craig on Pakistan taking the fight outside its borders: “Prime Minister Nawaz Sharif, on a visit to Peshawar, vowed to pursue militants beyond Pakistan’s borders and said his government will not rest until every terrorist is killed.’” More here.

North Korea

The New York Times’ David E. Sanger and Nicole Perlroth on the United States concluding that North Korea is behind the Sony Pictures hack: “Senior administration officials, who would not speak on the record about the intelligence findings, said the White House was still debating whether to publicly accuse North Korea of what amounts to a cyberterrorism campaign. Sony’s decision to cancel release of ‘The Interview’ amounted to a capitulation to the threats sent out by hackers this week that they would launch attacks, perhaps on theaters themselves, if the movie was released.” More here.

The Daily Beast’s William Boot on the State Department’s approval of the film: “The Daily Beast has unearthed several emails that reveal at least two U.S. government officials screened a rough cut of the Kim Jong-Un assassination comedy The Interview in late June and gave the film — including a final scene that sees the dictator’s head explode — their blessing.” More here.

Islamic State

Deutsche Welle reports on German plans to send troops to train Kurds. “The Bundeswehr will provide various types of training in line with the peshmerga’s requests, including medical services, clearance of mines and telecommunications. The peshmerga will be responsible for the military protection of the armed German trainers.” More here.

Reuters reports on a new Kurdish offensive to retake Sinjar. “The peshmerga fighters made gains against IS throughout the day, the officials said, driving the militants out of at least eight sub-districts in the Zumar area, east of Sinjar.” More here.

Afghanistan

The Daily Beast’s Tim Mak reports the 9/11 mastermind might never face trial. “Khalid Sheikh Mohammed, who has acknowledged being the mastermind behind the 2001 attacks, still hasn’t been brought to trial. Instead, the military commission proceedings are bogged down in a pre-trial phase, as it has been for the past three years.” More here.

Torture Report

The Associated Press’s Edith M. Lederer reports U.N. chief wants report to spark global action. “U.N. Secretary General Ban Ki-moon called Wednesday for an international debate on stamping out torture in the wake of the recent U.S. Senate report detailing brutal CIA interrogations of terror detainees.” More here.

Iran

Christian Science Monitor’s Howard LaFranchi asks if Cuba hints of things to come with Iran: “Obama could take a similar historic step with Iran before leaving office — if diplomats can reach an accord on Iran’s nuclear program next year.” More here.

Yemen

The Associated Press reports on Shiite rebels in Yemen. “The rebels, known as Houthis, closed Hodeida port, the second largest in Yemen, and prevented its director from entering his office, a port official said.” More here.

Israel

From the BBC: “A top court of the European Union has annulled the bloc’s decision to keep the Palestinian Islamist movement Hamas on a list of terrorist groups.… Responding to the ruling Israeli Prime Minister Benjamin Netanyahu said Hamas was a ‘murderous terrorist organization’ which should be put back on the list immediately.” More here.

Ebola

Reuters’s Emma Farge on Ebola in Sierra Leone: “Ebola centres in Sierra Leone overflowed on Wednesday as health workers combed the streets of the capital Freetown for patients, after the government launched a major operation to contain the epidemic in West Africa’s worst-hit country.” More here.

Surveillance

The Washington Post’s Ellen Nakashima reports on overseas data collection: “A little-noticed provision in the Intelligence Authorization Act passed by Congress last week puts restrictions on spy agencies’ ability to keep communications collected overseas, but critics say it does not go far enough to protect Americans’ privacy.” More here.

Think Tanks

The Wilson Center publishes a report on how the United States and Europe can cooperate and manage competition in Asia. More here.

And finally, FP’s David Francis on how Obama’s Cuba deal could be a home run for Major League Baseball. More here.