FP’s Situation Report, presented by Lockheed Martin: Kurdish fighters advance against the Islamic State; North Korea could go back on U.S. terror list; Russians pay the price for Putin; and much more.

By David Francis and Sabine Muscat

Iraqi Kurdish fighters are driving back the Islamic State in Sinjar. U.S. involvement in the fight against the Islamic State began at Mt. Sinjar last summer, where members of Iraq’s minority Yazidi group were stranded. This weekend, the Peshmerga, backed by Christian and Yazidi militias, drove Islamic State fighters from Sinjar. This marks one of the successful counterattacks against the Islamic State and raises hopes that American military trainers on their way to Iraq can prepare an effective fighting force.

The Wall Street Journal’s Ali A. Nabhan and Matt Bradley: “The coordinated assault came nearly a week after American aircraft launched 47 airstrikes against Islamic State targets in the area — one of the most concentrated strikes since the U.S. started attacking the militants in Iraq in August. Aircraft from the U.S.-led coalition continued to pound Islamic State positions throughout the past week.” More here.

More on the Islamic State below.

President Barack Obama warns North Korea could be put back on the list of state sponsors of terrorism in response to the Sony cyberattack. Obama softened his rhetoric around the November attack, calling it an “act of cybervandalism” as opposed to an act of war. North Korea continues to insist that it wasn’t behind the attack. Now, as the president enlists China’s help against Pyongyang, Obama is considering naming North Korea a sponsor of terror.

The New York Times’ Amy Chozick: “North Korea was removed from the list six years ago, but it has again prompted the ire of the United States after the F.B.I. said extensive evidence linked the North Korean government to a cyberattack on Sony Pictures. The hacking of the studio’s computers, in response to a screwball comedy called ‘The Interview,’ about a plot to assassinate the North Korean leader, Kim Jong-un, started as the stuff of Hollywood gossip but quickly escalated into an assault on an important industry — and the right to freedom of expression.” More here.

More on North Korea below.

Russians are paying the price for President Vladimir Putin’s actions in eastern Ukraine. Last week, the Russian economy suffered its lowest point since the 1998 sovereign debt crisis. Putin remains defiant despite new sanctions from Europe and an American ban on trade with Crimea, the Ukrainian peninsula annexed by Moscow. As Russia’s people suffer, Putin is likely to hold onto his power as long as he has the support of the oligarchs.

The Washington Post’s Matt O’Brien: “In the bad old days, Russia’s facsimile of an economy would crash every time the price of oil did. The government would go broke, the currency would collapse, and ordinary people would see their standard of living evaporate. Now if all this sounds familiar, that’s because the bad old days never went away under Vladimir Putin. He just got lucky until now.” More here.

More on Russia below.

Welcome to Monday’s edition of the Situation Report.

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Who’s Where When Today

Secretary of Defense Chuck Hagel, Deputy Secretary of Defense Bob Work, and Chairman of the Joint Chiefs of Staff Army Gen. Martin E. Dempsey have no public or media events on their schedules.

What’s Moving Markets

The Economist predicts that a bumpy year for the world economy could pose challenges for the United States. “Bears will bet that a surging dollar coupled with euro-zone torpor and a few emerging-market crises will eventually prompt a downturn in America.” More here.

The Wall Street Journal’s Jay Solomon and Summer Said on Saudi Arabia’s oil strategy: “In early October, Saudi Arabia’s representative to OPEC surprised attendees at a New York seminar by revealing his government was content to let global energy prices slide.” More here.

EUobservers’s Nikolaj Nielsen reports on protests against a transatlantic trade agreement in Brussels. More here.

Islamic State

The Guardian’s Fazel Hawramy with more details from Mount Sinjar: “The US-led coalition air strikes, which began in early August, have intensified over the past 20 days after Kurdish ground forces began attacking Isis positions in Sinjar areas. On Saturday night on Mount Sinjar, the air strikes continued non-stop for more than 12 hours on Isis positions, some of which were visible from the mountain top. Peshmerga fighters there told the Guardian that the past two days had seen the most intensive bombing so far.” More here.

The Independent’s Adam Withnall on the first journalist to embed with the Islamic State: “Jürgen Todenhöfer, 74, is a renowned German journalist and publicist who travelled through Turkey to Mosul, the largest city occupied by Isis, after months of negotiations with the group’s leaders.” More here.

The BBC with an exclusive report from an Iraqi air base as the Islamic State was closing in: “The BBC’s Quentin Sommerville, the first Western journalist to make it to the facility since IS launched a nationwide offensive in June, found soldiers on the defensive as the militants close in.” More here.

U.S. News and World Report’s Paul D. Shinkman on supplies for the fight: “Since June, the U.S. military has been slowly stockpiling massive amounts of its gear coming out of Afghanistan at a depot in Kuwait adjacent to a bustling commercial port, in preparation for ultimately shipping it across the border into Iraq for an allied offensive against the Islamic State group.” More here.

North Korea

The New York Times‘ Jane Perlez on China’s growing frustration with North Korea: “When a retired Chinese general with impeccable Communist Party credentials recently wrote a scathing account of North Korea as a recalcitrant ally headed for collapse and unworthy of support, he exposed a roiling debate in China about how to deal with the country’s young leader, Kim Jong-un.” More here.

Writing for Foreign Policy, Blaine Harden on Kim Jong Un’s success: “An argument can be made that it is the single greatest foreign-policy achievement in North Korean history. So far at least, it is working out much better than the North’s 1950 invasion of South Korea, which resulted in a war that razed the country, killed millions, and gained nothing.” More here.  

The Washington Post’s Peter Holley on a requested joint investigation: “Threatening ‘serious consequences’ if the United States continues to accuse it of launching a cyberattack against Sony Pictures, North Korea on Saturday proposed a joint investigation into the assault on the entertainment company, according to news reports.” More here.

The New York Post’s Dana Sauchelli on Sony’s movie release plans: “Sony’s current plan for ‘The Interview’ is to release the controversial comedy for free on Crackle, the streaming service it owns, sources said Sunday.” More here.

The Daily Beast‘s Michael Daly reports from the North Korean-owned Chilbosan Hotel in the northern Chinese city of Shenyang, the alleged operations base of North Korean hackers. More here.

Russia

AFP’s Germain Moyon on coming economic pain in Russia: “Deep recession, skyrocketing prices and a fragile banking system: although the ruble seems to have stabilised after its abysmal drop this past week, Russia still faces the heavy consequences of the turbulence.” More here.

The Guardian’s Josh Halliday on the information war between Russian media and the BBC: “The BBC World Service is being financially outgunned by Russian and Chinese state-owned news channels, its former director Peter Horrocks has warned, amid high-level concerns that Britain and the US are losing a global ‘information war’ with the Kremlin.” More here.

Bloomberg’s Leonid Bershidsky on how Russia’s economic crisis is affecting the country’s billionaires: “Even though Russian billionaires are part of the international jet set, with homes throughout the world and yachts and planes that can take them anywhere at any moment, they are invested in Russia’s fate.” More here.

Cuba

The Wall Street Journal’s Carol E. Lee and William Mauldin on Congress and Cuba: “The shape of U.S.-Cuba relations for years to come hinges on the brewing fight that will determine how much of President Barack Obama’s executive action to normalize ties can be blocked by opponents in Congress.” More here.

Mumbai

The New York Times’ James Glanz, Sebastian Rotella, and David E. Sanger on the 2008 Mumbai terror attacks: “What happened next may rank among the most devastating near-misses in the history of spycraft. The intelligence agencies of the three nations did not pull together all the strands gathered by their high-tech surveillance and other tools, which might have allowed them to disrupt a terror strike so scarring that it is often called India’s 9/11.” More here.

Pakistan

The Express Tribune with details on the arrests of suspects in last week’s school attack: “Security forces on Sunday arrested 70 suspects and recovered arms and ammunition during a search operation in the area around Army Public School near Peshawar’s Warsak Road.” More here.

Pakistan Today reports on al Qaeda’s condemnation of the school massacre in Peshawar. More here.

Afghanistan

The Washington Post’s Sudarsan Raghavan with a glimpse into Afghanistan’s future: “No longer aided by U.S. forces and their air support, [an] Afghan battalion is struggling to hold on to its gains in a landscape where front lines are blurred and the enemy melds into the terrain. The force grapples with shortages of manpower and equipment and a population that has little faith in its ability.” More here.

The Daily Beast‘s Sami Yousafzai and Christopher Dickey on the Islamic State moving into Afghanistan: “A central figure in these dangerous wider developments is a soft-spoken scholar, journalist and poet, Sheikh Abdul Rahim Muslim Dost, who spent more than three years as a prisoner of the Americans at Guantanamo, then found himself imprisoned again by the Pakistanis. News reports in the region recently named him as the Islamic State-appointed governor or wali of Khorasan.” More here.

Reuters’s Matt Spetalnick on prisoners returned from Guantánamo to Afghanistan: “[I]n what one senior U.S. official described as an expression of growing confidence in the new Afghan president, Ashraf Ghani, who took over from Hamid Karzai in September, Washington pressed ahead with the transfer after he formally requested it.” More here.

The Associated Press on Taliban attacks: “Seven police officers were killed in a northern Afghanistan province after their checkpoint came under attack by insurgents, an Afghan official says.” More here.

Approval Ratings

The Military Times’ Stephen Losey reports on Obama’s military approval ratings: “According to a Military Times survey of almost 2,300 active-duty service members, Obama’s popularity — never high to begin with — has crumbled, falling from 35 percent in 2009 to just 15 percent this year, while his disapproval ratings have increased to 55 percent from 40 percent over that time.” More here.

Iran

AFP with Iran’s reactions to Cuba: “Iran has seized on Washington’s historic rapprochement with Cuba after five decades of Cold War standoff as proof that big power sanctions do not work.” More here.

Ebola

NPR’s Scott Neuman on the new death toll: “The number of people who have died from the worst-ever outbreak of Ebola has crossed the 7,000 mark, the World Health Organization reports, after it recorded another 392 deaths from its previous total of 6,900 earlier this week.” More here.

Nigeria

The Daily Trust’s Hamza Idris on videos of Boko Haram killings: “A new video released by the Boko Haram today shows how over 100 captives were summarily executed in Bama town of Borno State.” More here.

The Associated Press on the regional threat from Boko Haram: “Thousands of members of Nigeria’s home-grown Islamic extremist Boko Haram group strike across the border in Cameroon, with coordinated attacks on border towns, a troop convoy and a major barracks.” More here.

CIA

The Intercept‘s Glenn Greenwald and Peter Maass name Alfreda Bikowsky as a senior CIA official who reportedly played a major role in the CIA’s torture program. “The Intercept is naming Bikowsky over CIA objections because of her key role in misleading Congress about the agency’s use of torture, and her active participation in the torture program (including playing a direct part in the torture of at least one innocent detainee).” More here.

AFP on Wikileaks releasing a manual for CIA spies to keep their cover abroad: “The documents outline a number of strategies for agents to avoid secondary screening at airports and borders.” More here.

Military Bases

The Association of Defense Communities published a report on the state of defense installations across the country. “As DoD faces budget cuts and the looming threat of base closure or downsizing, state military affairs organizations have taken on an enhanced role as policymakers seek to coordinate a state-level strategy for their military installations.” More here.

Germany

Spiegel staff on the anti-Muslim movement in Germany: “Disenchanted German citizens and right-wing extremists are joining forces to form a protest movement to fight what they see as the Islamization of the West. Is this the end of the long-praised tolerance of postwar Germany?” More here.

Revolving Door

The Washington Post’s Sari Horwitz on Sally Yates: “The Obama administration plans in the coming days to nominate a U.S. attorney from Georgia to become the second-highest-ranking official in the Justice Department, according to U.S. officials.” More here.

And finally, here’s Foreign Policy’s last minute gift guide: “With Christmas bearing down on us like a giant train of retail profit, you may have someone left on your list who spent the year thinking just a little too much about the news. Trust us, we know the type.” More here.