FP’s Situation Report, presented by Lockheed Martin: The Internet goes down in North Korea; U.S. needs a cybersecurity overhaul; Congress demands anti-terror results from Pakistan; and much more.

By David Francis with Sabine Muscat

The Internet goes down in North Korea. After the United States implicated Pyongyang in the hack of Sony Pictures, rumors about Internet connectivity problems in North Korea began to circulate. Yesterday, after President Barack Obama promised a “proportional response” to the alleged cyberattack, someone turned off the Internet in North Korea. While an attack is suspected, it is not yet known if this is the work of U.S. hackers or others working independently. If it is the doing of U.S. government hackers, it sends a strong signal to North Korea’s elite, the primary users of the Internet.

The Washington Post’s Cecilia Kang, Drew Harwell, and Brian Fung: “On Monday, a State Department official issued a somewhat coy nondenial when asked about U.S. involvement in North Korea’s blackout. The official wouldn’t comment on how the government plans to avenge North Korea’s alleged attack on Sony but added, ‘as we implement our responses, some will be seen, some will not be seen.’ The mystery behind North Korea’s outage highlights a paradox of modern cyberwarfare: As attacks become more prominent, the combatants — and their motives — are becoming harder to identify.” More here.

A forceful response to the Sony cyberattack would be part of a broader overhaul of the U.S. cybersecurity strategy. The Sony attack and the subsequent response draws attention to the need for a rethink about how the U.S. government and companies approach cybersecurity. Despite years of lip service, the United States lacks a definitive position on how to respond to cyberattacks. Obama now needs to show North Korea and other hackers that these kinds of attacks against American interests are unacceptable.

FP’s David Rothkopf: “[T]he Sony hack demonstrates the urgency with which the United States must develop policies that send a clear signal to would-be attackers that they will pay a high price for seeking to strike the United States and that the U.S. government is relentlessly committed to protecting our assets and making it increasingly difficult for future attacks to succeed.… [T]he absence of effective deterrents could well usher in an era of permanent conflict in which countless adversaries chip away at each other, sometimes with little effect, sometimes with invisible but substantial economic or social costs, sometimes producing calamity and the loss of life.” More here.

More on North Korea below.

Congress, demanding results, is delaying a $300 million reimbursement to Pakistan for its anti-terror efforts. In the days since the brutal school attack in Peshawar, Pakistan has reinstated executions, made a number of arrests, and reached out to Afghanistan for assistance. However, Congress — which has already given Pakistan $11 billion over the past 11 years to reimburse the government for its anti-terror efforts — is not convinced that Pakistan is doing enough and is demanding the money be used more effectively.

FP’s Gopal Ratnam: “Of the $1 billion available as reimbursement to Pakistan under the coalition support funds — used since September 2011 to pay partners for aiding American counterterrorism efforts — Congress has specified that a third of the money will be payable only if the Pentagon certifies that Islamabad’s military operations in North Waziristan make the region inhospitable for the Haqqani network. Congressional aides say that they want to hold back the roughly $300 million to ensure that North Waziristan doesn’t go back to being a stronghold for the group once Pakistan completes its current military operations.” More here.

Welcome to Tuesday’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.

President Obama is in Hawaii on vacation.

What’s Moving Markets

FP’s Keith Johnson reports on uncertainty in the oil market. “The fundamental mismatch between supply and demand that drove the recent plunge is still in place, even though oil prices zigged upward Friday to $56 in New York and $62 in London.” More here.

The Financial Times’ Arash Massoudi on global mergers and acquisitions at the highest level since the financial crisis: “In the busiest period since 2007, megadeals returned with a vengeance, as historically low borrowing rates, buoyant capital markets and inflated share prices prompted big transactions with the potential to remake industries — particularly in pharmaceuticals, technology and media.” More here.

Nikkei Asian Review on multinational corporations getting caught up in China’s anti-corruption fight: “President Xi Jinping’s fight against corruption has fanned out from the ‘oil clique’ to autos, steel and other industries. And for multinationals, this only adds to the risk of operating in China.” More here.

North Korea

The Guardian’s Justin McCurry with details on a cyberattack in South Korea: “South Korea’s nuclear plant operator has said its computer systems have been breached, raising fears that hackers, including those with possible North Korean links, could shift their focus to key infrastructure.” More here.

Voice of America on North Korea and the United Nations: “The U.N. Security Council took up the issue of North Korea’s bleak human rights situation for the first time Monday, a groundbreaking step toward possibly holding the country and leader Kim Jong Un accountable for alleged crimes against humanity.” More here.  

FP’s David Francis on how The Interview could be released: “One brave company has publicly offered to stream the film, but it’s not one that Sony might want to work with.” More here.

Bloomberg’s Sam Kim on Kim Jong Un’s global reach: “While North Korea has kept Western defense officials guessing for years about a nuclear program that it may or may not ever use, the regime’s ability to wage cyber war adds a new dimension to its standing abroad.” More here.

China Daily’s Zhang Yunbi and Chen Weihua on China’s careful position in the U.S. spat with North Korea: “As Washington continues to lobby China to put more pressure on Pyongyang, Beijing clearly stated its opposition to any form of cyber attack but has yet to make a final judgment regarding the hacking of US-based Sony Pictures Entertainment.” More here.

Writing for Foreign Policy, Micah Zenko argues North Korea is not a state sponsor of terrorism. More here.

Pakistan

Newsweek’s Polly Mosendz on 500 planned executions: “So far, six militants have been hanged and hundreds face execution in the coming weeks. Five of those killed were involved in the 2003 assassination attempt of Pervez Musharraf, the former president. The sixth militant had attacked army headquarters in 2009.” More here.

Star and Stripes’ Carlo Munoz on attacks in Pakistan: “The police chief in Afghanistan’s southern province of Kandahar has ordered his forces to attack Pakistani-based Tehrik-i-Taliban insurgents inside Pakistan, adding fuel to rising tensions along the countries’ shared border.” More here.

Al Jazeera’s Renee Lewis on protests after the school attacks: “Protesters have descended on a controversial mosque in Pakistan’s capital, Islamabad, vowing to reclaim the space after its Taliban-aligned cleric refused to condemn the attack on a school in Peshawar last week that left 148 people, including more than 100 children, dead.” More here.

Guantánamo

FP’s John Hudson on a leadership change: “After 18 months on the job, President Barack Obama’s point man for closing the U.S. prison in Guantanamo Bay is stepping down, Foreign Policy has learned. The departure comes amid the Obama administration’s renewed push to try and close the controversial facility after a lengthy series of delays and false starts.” More here.

Islamic State

The New York Times’ Tim Arango on Iraq’s struggle to form a national identity: “Even as the new government is scrambling to defeat the militants of the Islamic State, also known as ISIS or ISIL, it faces an underlying challenge that may be tougher: promoting a new sense of national identity that, even if it cannot transcend the differences between Sunni and Shiite, Arab and Kurd, at least basically holds them together as countrymen.” More here.

Reuters’s Suleiman Al-Khalidi on plans to train Iraqi troops: “Jordan will begin training the first group of army troops from neighboring Iraq in the next few weeks as part of the international effort to fight Islamic State, the Iraqi defense minister said on Monday.” More here.

Russia

Bloomberg’s Yuliya Fedorinova and Anna Andrianova on Russian efforts to save its banks: “The Deposits Security Agency will take control of National Bank Trust, one of the country’s top 15 lenders by retail savings, while the central bank selects an investor to help shore up the company, the Bank of Russia said in a statement today.” More here.

The BBC on an impending crisis: “Russia’s former finance minister has warned the country is entering a ‘full blown economic crisis’ and will enter recession next year.” More here.

Reuters on peace talks: “A fresh round of peace talks involving Russia, Ukraine and the Organization for Security and Cooperation in Europe will be held in the Belarussian capital on Dec. 24 and 26, Ukrainian President Petro Poroshenko said in a statement on Monday.” More here.

Cuba

Writing for Foreign Policy, Suzanne Nossel on the hard work ahead: “[T]hough the Obama administration was right to change tacks in its effort to advance basic freedoms and wellbeing in Cuba, normalization of relations needs to be the beginning, rather than the end, of that process.” More here.

Afghanistan

The New York Times’ Rod Nordland on fighting in Afghanistan: “In a large swath of the Taliban heartland in southern Afghanistan, government centers are facing a long-dormant concern this winter: Four years after the American troop surge helped make such places relatively secure, they are back under threat from the insurgents.” More here.

Torture Report

Writing for Foreign Policy, Stephen M. Walt on how Obama can solve his torture problems: “I have a suggestion: pardon them all. But I don’t just mean the Bush-era officials who ordered, justified, conducted, or tried to conceal these crimes. In addition, Obama should also pardon the whistleblowers and dissidents who broke the law while trying to expose these (and other) government excesses.” More here.

Terrorism

The BBC on terror concerns in France: “The French authorities are reluctant to say anything to encourage the idea that there is any kind of pattern behind the three attacks.” More here.

Newsweek’s Lucy Draper reports the weekend attacks highlight a growing terror threat to Europe. More here.

The Australian’s Jared Owens covers Prime Minister Tony Abbott’s warning of increased “terrorism chatter” after the Sydney siege. More here.

Iran

The Wall Street Journal’s Benoît Faucon and Bill Spindle on Iran’s economy: “Plummeting oil prices and the failure so far to conclude a nuclear agreement are dealing a double blow to Iran’s economy just as it was starting to recover.” More here.

The Guardian’s Lauren Gambino with details on detained Washington Post reporter Jason Rezaian: “For five months, Washington Post journalist Jason Rezaian has slept on the concrete floor of his cell, waking each morning to relive the nightmare that is solitary confinement in one of Iran’s most notorious prisons.” More here.

China

Writing for the Diplomat, Matthew F. Ferraro makes the case for stronger U.S. ties to the tiny Himalayan kingdom Bhutan: “A Bhutan under Chinese sway would threaten India. But even more, as a matter of precedent, the U.S. cannot allow China to alter the territorial status quo of the countries on its periphery, much as Russia has in Ukraine, and China itself has in the South China Sea.” More here.

Germany

AFP on the biggest anti-Muslim street protest in the past weeks: “A record 17,000 people have joined the latest in a string of demonstrations against Islam in Dresden, eastern Germany, celebrating the rise of their far-right populist movement by singing Christmas carols.” More here.

Ebola

The Guardian’s Sarah Boseley on treatment controversy: “Ebola patients at a treatment centre in Sierra Leone have been given a heart drug that is untested against the virus in animals and humans, a move that has been deemed reckless by one senior scientist and has prompted UK medical staff at the centre to leave.” More here.

Nigeria

Al Jazeera on fresh attacks in northern Nigeria: “At least 27 people have been killed and 60 wounded following two bomb attacks at a market and bus station in northeast Nigeria.” More here.

Bergdahl

The Army Times’ Andrew Tilghman: “The Army’s decision Monday to forward the investigation of Army Sgt. Bowe Bergdahl for possible court-martial means the former prisoner of war will remain on active duty and in legal limbo for months to come.” More here.

Military Suicide Prevention Bills

The Washington Post’s Dan Lamothe on two suicide prevention bills: “The Hunt and Sexton bills tackle the problem from different angles. While the Sexton bill focuses primarily on suicide in the active-duty military, the Hunt bill calls for independent evaluations of all mental health-care and suicide-prevention programs in the VA and the Defense Department, a student loan repayment program that would offer up to $120,000 per year to recruit psychiatrists who commit to working for the VA, and a program that would take back unneeded prescription drugs from patients at VA facilities.” More here.  

And finally, FP’s Siobhán O’Grady on Israel’s festival of drones: “Nothing says holiday spirit quite like a member of the Israel Defense Forces balancing a drone in one hand and lighting menorah candles with the other, right?” More here.