The Senate is almost set to consider a three-bill spending package that includes all the funding for the State Department and foreign operations, but two senators are refusing to go along because of language related to Cuba.

The Senate was stalled on Monday evening as senators started debate on the energy and water appropriations bill, which Senate Democratic leaders want to combine with the State and foreign ops and financial services appropriations bills into a miniature omnibus measure that's affectionately known on the Hill as a "minibus." By packaging three bills together, the Senate hopes to be able to get more work done faster. However, two senators won't let that happen until their concerns about language allowing U.S. banks to do business in Cuba are addressed.

"There is concern among a group of senators on both sides of the aisle with longstanding concerns for human rights and democracy in Cuba with regard to the loosening of restrictions on Cuba in the financial services bill," a senior GOP Senate aide told The Cable Monday afternoon. "If that language was taken out, those senators would drop their objection to bringing up foreign ops for consideration."

Procedurally, Senate Majority Leader Harry Reid (D-NV) has already brought up the energy and water appropriations bill and wants to add the other two bills (state/foreign ops and financial services) as an amendment. But Reid needs unanimous consent in order to do that without a lengthy cloture process, and we're told by Senate sources that Sens. Robert Menendez (D-NJ) and Marco Rubio (R-FL) are objecting.

"Senator Rubio is objecting to a provision in the bill that would allow Cuba to become the only country on the State Department's State Sponsors of Terrorism list with a general exception for access to U.S.-based financial institutions," Rubio's spokesman Alex Conant told The Cable. "Under Cuban law, the Castro regime has a monopoly on all banking, commerce and trade, so this amendment would allow Cuba's totalitarian regime to directly open corresponding accounts in U.S.-based financial institutions, and vice versa."

The senators don't have any problem with the State and foreign ops section of the minibus, but Reid's attempt at adding both bills as one amendment has embroiled them in the dispute.

We're told by Senate sources that Reid plans to bring up the amendment containing both the State and foreign ops and financial services bills anyway and call for a unanimous consent vote, forcing any senators who object to show their cards. When the objections are made, Reid will be ready with a new amendment that doesn't contain the disputed Cuba provisions, which is likely to achieve unanimous consent.

After all this plays out, the real debate over the State and foreign ops appropriations bill can begin. When that happens, which will probably be late Monday evening or early Tuesday, senators will begin offering a host of amendments to the State and foreign ops bill.

Sen. Orin Hatch (R-UT) has introduced an amendment that would reinstate a ban on U.S. funding for foreign organizations that even discuss abortion. The amendment's language is a version of what has been known since 1984 as the Mexico City policy, named for the city where President Ronald Reagan first announced it. It's been a partisan ping-pong issue ever since: President Bill Clinton rescinded the policy in 1993, President George W. Bush reinstated it in 2001, and President Barack Obama rescinded it again in 2009. Republicans have since been trying to restore the policy under the Obama administration.

Sen. Jerry Moran (R-KS) introduced an amendment that would bar any funding for the administration to negotiate a United Nations arms trade treaty if it "restricts the Second Amendment rights of United States citizens."

Sen. Mark Kirk (R-IL) is expected to introduce an amendment to mandate sanctions on the Central Bank of Iran in response to the plot to assassinate the Saudi ambassador to the United States, and in light of a new International Atomic Energy Agency report, which states that Iran has made significant progress toward constructing a nuclear weapon.

And Sen. Dan Coats (R-IN) introduced an amendment late on Monday that would prevent the president from trying to get around a law barring U.S. funding for UNESCO. The United States automatically cut off contributions to UNESCO this month when the organization overwhelmingly voted to admit Palestine as a member.

"Despite our legal obligation to suspend funding ... there have been some discussions, some speculation, that it may be possible to find alternative ways to financially support U.N. agencies like UNESCO that have taken this step of admitting the Palestinians as a member," Coats said on the Senate floor late Monday.

"That would be a total mistake and I want to reiterate the fact that it would be a violation of the law. And so, therefore, I come to the floor today to introduce a bill that serves as an emphatic statement, restatement of that."

Several more amendments are expected on Tuesday in what should be a lively debate over foreign affairs funding, if and when the Senate gets around to it. Of course, the Senate action is just a precursor to the House-Senate conference over the bill, where all the final decisions are made behind closed doors.

The State Department is trying to convince Congress not to cut U.S. funding for the Palestinian Authority (PA), despite the fact that the Palestinians are defying the United States by seeking statehood at the United Nations and specialized U.N. agencies.

"Congress should be aware of the potential second and third order effects of cutting off assistance to Lebanon and the Palestinian Authority," Andrew Shapiro, assistant secretary of State for political-military affairs, told an audience at the Washington Institute for Near East Policy on Friday. "We must ask ourselves, if we are no longer their partner, who will fill the void? We must think about the other potential partners that could fill the space left behind, and that should give us pause."

When the State and Foreign Ops appropriations bill comes up  in the senate, probably next week, foreign aid will be scrutinized like never before by legislators eager to find budget cuts wherever they can. Leaders in both parties have also pledged to cut U.S. aid to the PA in order to punish the Palestinians for seeking statehood outside the peace process.

Just last week, lawmakers reacted angrily to the Palestinians' successful bid to join UNESCO, which triggered a law requiring the U.S. government to halt its contributions to the organization.

Senate Appropriations State and Foreign Ops subcommittee ranking Republican Lindsey Graham (R-SC) told The Cable on Nov. 1 that Congress is poised to cut off all U.S. funding for the PA, which totaled $550 million in fiscal 2011, despite the fact that he still thinks financial support for the PA is a good idea.

"I don't think that's in our near-term or long-term interest, but that's what's going to happen, that's where this thing is headed," Graham said.

The Cable asked Shapiro how the State Department planned to defend PA funding and what the prospects were for success.

"We are in discussions with Capitol Hill about the best way to provide support," Shapiro responded. "Hopefully we'll be able to reach an agreement with Capitol Hill that preserves our interests."

Shapiro also urged Congress not to place conditions on U.S. aid to Egypt, which includes billions in military and economic support funding each year.

"I know that the uncertainty of the Egyptian transition has prompted some in Congress to propose conditioning our military assistance to Egypt. The administration believes that putting conditions on our assistance to Egypt is the wrong approach," Shapiro said. "Now is not the time to add further uncertainty in the region or disrupt our relationship with Egypt. Conditioning our assistance to Egypt risks putting our relations in a contentious place at the worst possible moment."

He also addressed State Department funding of political training for parties in Egypt, even Islamic parties that may have anti-Western agendas.

"As these Arab countries are going into political transitions, a number of new people are coming into the political process, many of whom describe themselves as Islamists. But that doesn't necessarily mean that they are anti-democratic." Shapiro said. "We need to support an effort and structure to channel this energy that's coming into the political process into an understanding of what democracy means and the benefits of it, and our training on the ground is designed to do so."

The Cable also asked Shapiro to explain the State Department's latest thinking on the proposed $53 million arms sale to Bahrain, which is also facing stiff congressional opposition. State has said it will consider the report of an "independent" Bahraini human rights commission before moving forward with the sale. Shapiro said that U.S. policymakers will also consider the Bahrain government's response to the report.

"We have committed that we will not move forward with that sale until the report comes out and we are able to assess the reporting and the Bahraini government response," he said.

It's been almost one year since the Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR) has had a permanent leader ...  and Sen. Claire McCaskill (D-MO) is not happy about it.

SIGAR Arnie Fields resigned in January following over a year of bipartisan congressional criticism of his stewardship of the oversight office, which is responsible for finding waste, fraud, and abuse in the tens of billions of U.S. taxpayer dollars being spent to build Afghanistan. On Aug. 4, acting Special Inspector General Herbert Richardson, Fields's replacement, stepped down after only six months on the job, leaving that troubled office without a leader for the second time this year.

Now, three months later, there are no signs the White House is ready to name a new SIGAR. McCaskiill, who has been leading the drive to improve the office along with Sens. Tom Coburn (R-OK) and Susan Collins (R-ME), told The Cable in an interview on Tuesday that the vacancy is troubling and unacceptable.

"I am pushing as hard as I can to get a replacement named," McCaskill said. "Obviously I was very involved in getting General Fields out. I thought the interim [Richardson] was doing much better. I think it's unfortunate that he's gone and we need to get someone else in there."

McCaskill said that she asked the White House for an update on the status of a replacement late last month, and was led to believe a nomination was in the works. But none has materialized. So what's the reason for the inaction?

"I haven't gotten a good answer yet [from the White House]," McCaskill said.

A senior GOP senate aide told The Cable that senate staffs were informed a selection had been made but then that person turned down the job and now the administration is back to square one in looking for a candidate.

McCaskill added that while the auditing at SIGAR continues, the ongoing confusion atop the organization speaks to the need for a new, permanent special inspector general for all overseas contingency operations -- a proposal known as the Office of the Special Inspector General for Overseas Contingency Operations (SIGOCO), which was recommended by the Wartime Contracting Commission.

McCaskill said there is a need for a top oversight official who is "capable of going and looking wherever the U.S. military is operative."

The SIGOCO idea was first devised by Special Inspector General for Iraq Reconstruction (SIGIR) Stuart Bowen, who has been embroiled in a fight with the State Department over that agency's blocking of SIGIR inspectors from assessing the State's multi-billion dollar Iraqi police training program.

"SIGIR is perfectly free ... to audit the reconstruction activities in Iraq. They are not free to audit the base element of the State Department. That is within the jurisdiction of three other entities," Under Secretary of State for Management Patrick Kennedy told the Wartime Contracting Commission in a hearing last month.

Today, Newsweek reported that Bowen believes the Iraqi Army is not fully prepared to take over security in Iraq as U.S. forces withdraw this year.

"As we pull out of Iraq, the Iraqis will have a difficult time replacing the U.S. role in intelligence, logistics, and air defense," Bowen said. "Whether they can sustain themselves if called upon for significant field operations is a big question mark."

All the GOP presidential candidates agree on one thing: The United States should cut foreign assistance and international humanitarian assistance programs. Their only differences are over how much.

"The American people are suffering in our country right now. Why do we continue to send foreign aid to other countries when we need all the help we can get for ourselves?" asked a woman in the audience of Tuesday's GOP primary debate in Las Vegas.

Rick Perry started off the responses by calling for "a very serious discussion about defunding the United Nations." The crowd cheered and applauded.

Calling the Palestinian drive to seek member status at the United Nations in September a travesty, Perry said that was reason enough to stop contributing. "Why are we funding that organization?" he asked.

Mitt Romney said that defense-related portions of the foreign aid budget should be transferred to the Defense Department and humanitarian aid responsibilities should be ceded to the Chinese government.

"I happen to think it doesn't make a lot of sense for us to borrow money from the Chinese to go give it to another country for humanitarian aid. We ought to get the Chinese to take care of the people that are -- and think of that borrowed money," he said to applause from the crowd.

If either of the leading candidates were somewhat measured, Ron Paul was not. He said that foreign aid "should be the easiest thing to cut" because it's not explicitly authorized in the Constitution. "To me, foreign aid is taking money from poor people in this country and giving it to rich people in poor countries, and it becomes weapons of war, essentially, no matter how well motivated it is," he said.

Paul also said we should cut all foreign aid to Israel. Michele Bachmann disagreed, taking the opportunity to make the case that President Barack Obama is the first president to put "daylight" between the United States and Israel.

"That's heavily contributed to the current hostilities that we see in the Middle East region," she said, reprising her criticism of the entire Arab Spring.

The candidates also weighed in on defense spending. Bachmann was asked if defense spending should be on the table for cuts, and wavered somewhat, opening the door to cuts while saying that $500 billion in defense budget cuts that would be triggered if the congressional supercommittee can't come to a deal to find at least $1.2 trillion in cuts was too much.

Newt Gingrich, calling himself a "cheap hawk," said that the supercommittee was not qualified to make such decisions and said the defense budget should be driven by strategy and threats, not arbitrary numbers.

"The idea that you'll have a bunch [of] historically illiterate politicians who have no sophistication about national security trying to make a numerical decision about the size of the defense budget tells you everything you need to know about the bankruptcy of the current elite in this country -- in both parties," he said.

For FP Passport's compilation of the debate's foreign policy highlights, click here.

Reps. Gregory Meeks (D-NY) and Dan Burton (R-IN) have started a new congressional caucus to increase engagement with Russia and to push for action to promote Russia's bid to join the World Trade Organization.

Meeks and Burton, the chairs of the House Foreign Affairs Subcommittee on Europe and Eurasia, started the Congressional Russia Caucus last month after returning from a trip to Moscow. They are the only two members of the caucus, just yet, but they're canvassing for new members now. They plan to build connections with Russian officials, increase legislative exchanges with the Russian Duma, and advocate for the repeal of the Jackson-Vanik amendment, a 1974 U.S. law that prevents the United States from granting Russia Permanent Normal Trade Relations (PNTR) status.

"When you think about Russia, they are an important nation in an important part of the world. And we have to make sure we begin to work with them in a post-Cold War way," Meeks told The Cable in an interview on Tuesday.

Meeks said he has been coordinating with the Obama administration, which is supporting Russia's WTO bid as part of its overall effort to reset relations with Russia.

"The administration was very appreciative of us starting this caucus; they thought it was a good idea. They said they looked forward to working with us," Meeks said.

Both Meeks and Burton said they were encouraged to start the caucus after meeting with American businessmen and members of the American Chamber of Commerce in Moscow. Both denied they had benefited financially as a result of their efforts on behalf of the U.S.-Russia relationship.

"We want to engage Russians on economics and trade affairs," Burton said in a Tuesday interview with The Cable.  Regarding the repeal of Jackson-Vanik, Burton said, "That's something that the Congress has to do for the U.S. to get all the benefits of Russia joining the WTO. If that doesn't happen, Russia would be entitled to all its benefits [as a WTO member] but the U.S. would be disadvantaged."

Russia's accession to the WTO and the repeal of Jackson-Vanik "would be good for Russia and the world," Burton said.

Burton's position on Russian accession to the WTO and Jackson-Vanik puts him in direct opposition to his own committee chairwoman, Ileana Ros-Lehtinen (R-FL), who said in July that repeal of Jackson-Vanik was impossible. And she's no fan of Russia's once-and-future president, Vladimir Putin.

"Putin's present-day Russia is taking on a more Stalin-era appearance every day," Ros-Lehtinen said in July. "The administration must end its string of concessions to the regime in Moscow, which have not resulted in increased cooperation with the U.S. or an improvement in Russia's human rights record."

Meeks and Burton both also said that they could use the caucus to press Russia toward more progress on democratization, human rights, and respect for the rule of law.

"We do care about those things. What we're going to do is open a dialogue on all these things so we can move in the right direction," Burton said.

The State Department may be facing its toughest budget season ever, but there are still plenty of lawmakers who are ready to defend funding for diplomacy and development, according to Deputy Secretary of State Tom Nides.

Congress rejected, by a 20 to 78 vote, an attempt by Sen. Rand Paul (R-KY) last week to fund $6.9 billion in emergency disaster relief by taking the money out of the State Department's foreign assistance budget. Sens. John Kerry (D-MA), Patrick Leahy (D-VT), and Lindsey Graham (R-SC) all came to the State Department's defense.

"I think getting 78 votes against it was pretty darn good," Nides told The Cable in an interview. "We have bipartisan support. Clearly the great majority of the Senate thought it was not the right thing to do... Even in difficult times, people don't want to do things that would dramatically impact our national security."

Graham responded to Paul and defended foreign aid funding in a speech at the Council on Foreign Relations Sept. 16. Graham explained how he defends foreign aid to the man on the street, a man he called "Bubba."

"Here's what I'd tell ‘Bubba,' when he asked," Graham said. "I'd say, listen, I got it, pal. We're not going to write any more checks to dictators and let them waste your money. We're just not going to through money. But less than 1 percent of what we spend at the federal level is on foreign assistance."

Nides said that Graham has been "enormously helpful" in defending foreign assistance. "He fundamentally believes that the funding of State Department and USAID is critical to our national security. His argument is not that we should be funding these things just based on humanitarian grounds, as important as that may be."

The chairs of the Senate Foreign Relations Africa subcommittee, Sens. Chris Coons (D-DE) and Johnny Isakson (R-GA) have also emerged as advocates for foreign assistance funding. In a Sept. 19 letter to the chairs of the Senate Appropriations State and Foreign ops subcommittee, obtained by The Cable, they defended funding for development assistance and the USAID operations accounts, both of which are slashed in the House version of next year's appropriations bill.

"Development assistance is a reflection of our moral imperative to assist others in need, a critical demonstration of American leadership in the world," they wrote. "We are keenly aware of the budgetary pressures facing Congress... we are concerned that reductions to development assistance will undermine U.S. priorities in Africa and throughout the developing world."

Nides said that the House version of the State and Foreign Ops appropriations bill, which would give $39.6 billion in fiscal 2012 to international affairs funding, "would have dramatic impact on the operations of the State Department." The Senate version, which would provide about $44.6 billion, is "more reasonable," he said.

Nides said that the State Department and USAID have succeeded in being added to the national security discussion -- but that also places diplomacy and development funding in competition with national security accounts, including the defense budget.

"You've got to fund defense, but not at the cost of depleting your diplomacy and development. That would be shortsighted," he said.

The supercommittee that is working on discretionary budget cuts this fall must deal with caps on "security" spending, which bundles defense, diplomacy, and development funding into one big pool of money. And that could leave the U.S. diplomatic corps as the odd man out.

The State Department does have one very powerful friend who sits on that committee, Senate Foreign Relations Committee chairman John Kerry (D-MA). So does Nides think Kerry will use his supercommittee perch to come to State's defense?

"My assumption is that he'll do whatever he can to be supportive, but first and foremost he's going to have to do what's in the best interest of the American people," said Nides. "I think he will determine that that includes protecting our national security, and that includes funding for State and USAID."

The State Department has opened a brand-new office to manage U.S. policy toward countries attempting democratic transitions in the Middle East.

William Taylor, senior vice president for conflict management at the U.S. Institute of Peace, has moved over to Foggy Bottom to lead the new office, called the Middle East Transitions office, which began operations this week. His deputy is Tamara Cofman Wittes, who is now dual hatted, also continuing on deputy assistant secretary of state for Near Eastern Affairs. Taylor's chief of staff is Karen Volker, who until August was director of the Middle East Partnership Initiative (MEPI), which is now directed by Tom Vajda. MEPI also falls under Wittes' portfolio. Taylor reports up to Deputy Secretary of State Bill Burns and Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman.

In a Monday interview with The Cable, Taylor said his office will begin by leading State Department coordination on policy toward Egypt, Tunisia, and Libya, the three Middle East countries that are trying to make the shift from dictatorship to democracy.

"The idea is we want to focus energy and policy attention on how we support these three transition countries," he said. "The idea is to be sure this gets top-level attention in the department."

Taylor's office will have about 10 to 12 people, and he said he hopes to soon add a resident senior advisor from both USAID and the Pentagon. The office is meant to be permanent, and would expand its operations to cover countries like Syria and Yemen -- if and when those countries attempt a democratic transition.

Taylor's first job will be to lead an effort to develop support strategies for Egypt, Libya, and Tunisia. Then, his office will go about trying to implement those strategies by working within State, around the interagency process, and then with international financial institutions, non-governmental organizations, and stakeholders on the ground. Taylor said he will attend National Security Council meetings on issues related to his brief.

In President Barack Obama's May 19 speech on the Middle East, he promised to work on establishing enterprise funds for Egypt and Tunisia, which are accounts meant to support start up programs and activities abroad, and said that U.S. support for democracy will "be based on ensuring financial stability; promoting reform; and integrating competitive markets with each other and the global economy -- starting with Tunisia and Egypt."

Taylor said that the administration was still eager to pursue enterprise funds for these countries, but that legislation would be needed to get it done.

"We're looking at the possibly of enterprise funds model as a possible model for these transition countries but we're going to need a lot of support from Congress," he said, adding that State would also ask Congress for authorizations and appropriations to support the new transitions initiative at State. New funding for diplomatic initiatives is a tough sell in this tight fiscal environment, but transition funding does have some support in both parties.

Taylor was chosen for the job in part because he played a key role in a similar diplomatic effort following the collapse of the Soviet Union. In 1991, the State Department put together the Freedom Support Act Office, which managed relations with former members of the Soviet bloc.

That office was run by Ambassador Richard Armitage and reported up to Deputy Secretary of State Lawrence Eagleburger. Taylor worked for Armitage in that office and eventually became its director, a position he held until 2001. The Freedom Support Act Office was combined with the Support for East European Democracy (SEED) office and still exists today.

Taylor was U.S. ambassador to the Ukraine from 2006 to 2009, and before that served as Washington's envoy to the Mideast Quartet. In 2004 and 2005, he directed the Iraq Reconstruction Management Office in Baghdad, and from 2002 to 2003 he served in Kabul as coordinator of U.S. government and international assistance to Afghanistan.

It's generally expected that the United States will veto the Palestinian bid for full member status at the United Nations Security Council next month, but the Palestinian government thinks it has an ace up its sleeve -- a workaround option that would bypass the U.S. veto and allow it to secure U.N. recognition, says the PLO's top representative in Washington.

"The plan as of now is to go the United Nations to seek full member-state status for the State of Palestine," said Maen Rashid Areikat, PLO representative to the United States and head of the PLO mission in Washington, in a Tuesday interview with The Cable. That means submitting a request to U.N. Secretary General Ban Ki-moon, who will then turn that request over to the U.N. Security Council for a vote.

But the Security Council doesn't actually vote on the statehood question, only whether to refer the matter to the U.N. General Assembly. If and when the United States vetoes the idea of referring the Palestinian request to the General Assembly, that request dies. But the Palestinians aren't planning to stop there.

"We hope the United States will reconsider its position and not use its veto power against the Palestinian move at the United Nations," he said. "What happens after a veto? There are so many other options."

Areikat said one option under serious consideration was to invoke U.N. General Assembly Resolution 377, known as "Uniting for Peace," which was put forth by U.S. Secretary of State Dean Acheson in 1950 as a means of getting around an obstructionist Security Council, which at the time was unable to authorize a response to North Korea's attacks on South Korea because the Soviet Union was rejecting all related Security Council resolutions. Resolution 377 is meant to bypass the Security Council if it "fails to exercise its primary responsibility for the maintenance of international peace and security in any case where there appears to be a threat to the peace, breach of the peace, or act of aggression."

"What we could do is go to the Security Council and say that a member state of the Security Council, in this case the United States, has blocked our request and therefore we are seeking Security Council support to take the issue to the U.N. General Assembly, invoking Resolution 377," he said. "If that effort succeeds, we will be a non-member state at the United States, not a member state. That's the difference between the two."

Under Resolution 377, the Palestinians would only need nine out of 15 Security Council votes to refer their statehood request to the General Assembly, which can then address the matter immediately (if in session) or can call an emergency special session, as has been done 10 times since 1950, most recently in 1997, when it was convened to deal with the Israeli-Palestinian conflict.

The other option is for the Palestinian government to submit their request for full member status to the Security Council again, forcing the U.S. to veto it over and over.

"We can keep on going back to the Security Council again and again," Areikat said.

The Obama administration has been working hard to try to convince the Palestinians not to move forward at the United Nations. State Department Spokeswoman Victoria Nuland said at today's briefing that Secretary of State Hillary Clinton spoke with Palestinian President Mahmoud Abbas today. Also, the NSC's Dennis Ross and Acting Special Envoy David Hale were in the Middle East and met with Israeli Prime Minister Benjamin Netanyahu today. Hale, but not Ross, will meet with Abbas Wednesday.

The Clinton call was "to urge President Abbas to receive them and hear them with open ears and to continue to work hard with us to avoid a negative scenario in New York at the end of the month," Nuland said. "We will continue to oppose any one-sided actions at the U.N. And we're making that clear to both sides."

"We respect their position, we expect them to respect our position. It's not a secret that they are asking us not to go the United Nations. It's not a secret that we are telling them we have to go to the United Nations," Areikat said.

But he said the Palestinian leadership no longer had faith in the United States or the international community to set forth a process for peace negotiations that both the Israeli and Palestinian sides could agree to. It's been a year since President Barack Obama established Sept. 2011 as the deadline for setting forth a framework for a final settlement, but "nothing has really happened," Areikat said.

"We have been waiting for over a year for the international community and the United States to create a formula that will constitute a basis for resuming negotiations and what we've seen is a total rejection on the part of Prime Minister Netanyahu and the Israeli government to engage."

Prompted by The Cable, Areikat also responded to comments made in our interview with Israeli Ambassador Michael Oren last week, who said that if the Palestinians move forward with their statehood drive, all bilateral agreements between the Israelis and the Palestinians could be at risk, including the Oslo Accords.

"The agreement that Oren is accusing the Palestinians of violating is an agreement that Israel has rendered obsolete in the first place," he said, referring to the Oslo Accord specifically. "It's really shocking to hear that he is threatening to abandon the agreements with the PLO, which also provided certain stability to Israel and Israelis. I don't see how by abandoning the Oslo accords Israeli will be serving its own interests."

The State Department last week urged both sides to honor their existing agreements, despite the new diplomatic tussle. Areikat warned that the scuttling of standing agreements could have repercussions for Israel as well.

"If the Israelis want to take an action, there will be a reaction. If they want to throw away an agreement, it will also have an impact on them," he said.

Areikat also criticized leaders of the U.S. Congress, who is threatening to cut some or all of the $550 million in annual aid to the Palestinian government if it moves forward with the statehood push at the U.N., calling such an action "unwise and unconstructive."

"We definitely hope the U.S. Congress understands the fact that any steps taken to put pressure on the Palestinians is going to adversely affect U.S. interests and even the interests of Israel in the region," he said. "I hate to see members of Congress threatening to use financial support to try to influence Palestinian positions on this issue."

UPDATE: A State Department official confirms that Ross did end up meeting with Abbas Wednesday, along with Hale.

If the Palestinians go forward with their drive to seek recognition as a state at the U.N. General Assembly next month, all agreements governing Israeli-Palestinian and U.S.-Palestinian cooperation could become null and void, according to Israel's ambassador to the United States.

"We have a lot of agreements with the Palestinian Authority, we have no agreements with a ‘Government of Palestine,'" Israel's ambassador to the United States, Michael Oren, told The Cable in an exclusive interview on Tuesday. "It's just a fact, we have no agreements with a ‘Government of Palestine.' It puts us in a different realm."

Oren said that agreements covering all sorts of fields, such as import-export, water sharing, and Israel-Palestinian security forces cooperation, would become invalid if the Palestinians declare statehood unilaterally, based on a vote at the U.N. -- rather than by negotiating statehood with the government of Israel via the stalled peace process.

"It's not just our agreements with the Palestinian Authority, it's America's agreements with the Palestinian Authority (that are at risk)," Oren said. "America is a cosignatory to the Oslo Accord and this would seriously undermine it.... Unilateral steps would have legal, economic, and political ramifications for us and for America as a cosignatory."

The current strategy by the Obama administration is to continue to push the Middle East Quartet -- the United States, European Union, United Nations, and Russia -- to agree on a statement that would affirm the 1967 borders with agreed swaps and recognize Israel's identity as a Jewish state as the basis for moving forward with negotiations. The "Jewish state" clause was the roadblock that prevented the Quartet from agreeing to a statement during their meeting last month in Washington. But Oren said that effort won't solve the problem.

"There is no guarantee that even if the Quartet members succeed in putting out a common position on negotiations that that will in any way divert the Palestinians from their intention of declaring a Palestinian state unilaterally," Oren said.

Oren said that the U.S. and Israeli governments are coordinating on the issue in a "daily and intensive manner" and "we see very much eye to eye."

In fact, the Obama administration has said often that it opposes the Palestinian drive for a U.N. vote on statehood and sees no alternative to direct negotiations. The question is whether the Obama administration is doing everything it can to convince other countries not to support the U.N. vote.

"I think they understand what needs to be done," Oren said. "We're working for similar goals."

But when pressed Oren didn't say whether or not the Obama administration is doing everything it can on the diplomatic front.

Some pro-Israel supporters in Washington think the administration needs to do more. "The United States must begin a vigorous public effort to lobby other countries, large and small, to oppose the Palestinian effort and join President Barack Obama in pressuring the PA to call it off," former AIPAC spokesman Josh Block wrote in a recent op-ed.

Oren said the PA is planning to use the statehood declaration to prosecute never-ending "lawfare" against Israel in international forums, which will lessen the chances for a negotiated solution.

"We want to be able to negotiate but we won't be able to negotiate if they are attacking our legitimacy in every international court. We're not going to negotiate under fire and it's a mistake for the Palestinians to think that we would," Oren said.

The Israeli government is publicly supporting the creation of a Palestinian state, the Palestinian economy is growing steadily, and Israel is cooperating logistically every day with Palestinian security forces, Oren said, but that could all be lost.

"The Palestinians have achieved a tremendous amount over the last 18 years and all of that could be at risk," Oren said. "The Palestinians risk all that has been achieved if they go forward with this ... and that would be a great tragedy."

The recent debt ceiling debacle and Congress's threat to force a default has hurt America's standing and credibility as a world leader, Secretary of State Hillary Clinton said today.

Clinton and Defense Secretary Leon Panetta appeared at a joint event this morning at the National Defense University, moderated by the George Washington University's Frank Sesno. Their discussion focused on the future of the national security budget, but also touched on Afghanistan, Pakistan, Libya, Syria, and the fight inside Washington over America's fiscal future.

When asked directly about the recent debt debate, Clinton referred to her recent trip to Hong Kong, where she assured world leaders that the United States always eventually deal with its internal challenges -- after exhausting all other options. But she said the episode had a negative effect on U.S. international leadership.

"It does cast a pall over our ability to project the kind of security interests that are in America's interests," she said. "This is not about the Defense Department or the State Department or USAID. This is about the United States of America. And we need to have a responsible conversation about how we are going to prepare ourselves for the future."

She then went on to defend national security spending, particularly as it relates to diplomacy and development, linking it to the U.S. rivalry with China.

"We can't be abruptly pulling back or pulling out when we know we face some long-term challenges about how we're going to cope with what the rise of China means," Clinton argued.

Vice President Joe Biden is on his way to China this week and officials previewing the trip said he will  defend the debt deal during his visit there.

Clinton and Panetta's event seemed designed to project a unified front between the Obama administration's top foreign policy officials ahead of the looming budget battle, where caps in discretionary spending mandated in the debt deal could result in huge cuts for the State Department and USAID.

"We know we are going to have to put everything on the table. I'm not saying we should be exempt ... I'm just saying that as we look at everything that is on the table, we have to try to do a reasonable analysis of what our needs and interests are," Clinton said.

"If you go out to the American public and you say ‘what's the easiest thing to cut?' it's always foreign aid," Clinton said. "We understand that we have a case to make and there is a new way of looking at it."

Panetta expressed general support for a holistic approach toward a national security budget that includes defense, diplomacy, and development. But he didn't go as far as his predecessor, Robert Gates, in advocating a rebalancing of budget priorities away from the Pentagon and toward the State Department.

"Our national security is our Defense Department and our military power and also our State Department and our diplomatic power," Panetta said. "We all know we are going to have to be able to exercise some fiscal restraint as we go through our budgets.... What I hope this committee doesn't do is walk away from its responsibility to look at the entire federal budget."

Panetta also repeated the administration's claim that the debt deal would cut $350 billion from the defense budget, a claim disputed by experts and top lawmakers. Panetta then warned that if the 12-person "supercommittee" fails to strike a deal to cut $1.5 trillion in spending by Thanksgiving, triggering an automatic $600 billion in addition defense cuts, it "would have devastating effects on our national defense."

"It would result in hollowing out the force. It would terribly weaken our ability to respond to the threats in the world. But more importantly, it would break faith with the troops and with their families," Panetta said. "And a volunteer army is absolutely essential to our national defense. Any kind of cut like that would literally undercut our ability to put together the kind of strong national defense we have today."

Regarding the State Department's budget, Panetta didn't advocate increases, but he did say it was "absolutely essential to our national security."

Panetta refused to comment on reports that the Pakistani military gave the Chinese military access to a downed U.S. helicopter that was used in the mission to kill Osama bin Laden. He did say that they United States has no choice but to continue to work with Pakistan.

"They have relations with the Haqqanis... there's a relationship with the LeT [Lashkar-e-Taiba].  And yet, there is no choice but to maintain a relationship with Pakistan. Why? Because we are fighting a war there, we are fighting al Qaeda there, and they do give us some cooperation in that effort," he said.

Clinton referred to the last scene of the movie Charlie Wilson's War, in which lawmakers decided not to fund civilian programs for Afghanistan after supporting the Afghan military resistance to the Soviet invasion. She said the Pakistanis have a similar view of the United States "that needs to be respected."

"They are partners, but they don't always see the world the way we see the world, and they don't always cooperate with us on what we think -- and I'll be very blunt about this -- is in their interests.," she said.

Clinton also said it was not important whether the Obama administration actually insists that Syrian President Bashar al-Assad leaves power. There have been several reports that the administration was planning on announcing explicitly that the Syrian leader should leave, but then decided not to at the last minute.

"I'm not a big believer in arbitrary deadlines when you're dealing with a complicated situation," Clinton said. "It's not going to be any news if the United States says Assad needs to go... If Turkey says it, if King Abdullah says it, if other people say it, there is no way the Assad regime can ignore it."

Nobody, including the leaders of the Senate Armed Services Committee, could figure out exactly how the debt ceiling deal will actually impact defense budgets, so Office of Management and Budget (OMB) Director Jack Lew wrote a long blog post today trying to explain it as best he could.

In the explanation, he said that the national security budget will actually only be cut by $4 billion next year compared to this year, and that the money might not even come from the Pentagon budget. It will divided over the "security" budget, which includes the Defense Department, State, foreign aid, intelligence, the Department of Homeland Security, Veterans Affairs, and some Department of Energy programs,

As The Cable reported several times, there are no actual defense budget cuts guaranteed in the debt ceiling bill, despite the White House's claim that the deal puts the nation on track to "save" $350 billion in defense spending over the next ten years. Lew admitted that the $350 billion figure is based on comparisons to a CBO baseline projection, not the current budget, and he also admitted that actual cuts will be determined years from now by the administration and future Congresses.

"Under baseline estimates, [the debt deal] would cut approximately $420 billion over 10 years," from security spending, Lew wrote. "Assuming roughly proportional cuts, we project that of that $420 billion, $350 billion would be from the budget category of defense, and approximately $330 billion of that would be specifically from the Department of Defense."

But wait, that's only if you compare the "cuts" to the CBO baseline, which assumes that defense spending will go up 2 percent each year. So how much would the debt deal cut from the "security" budget compared to the fiscal 2011 budget?

"The agreement reduces discretionary security spending in FY 2012 by $4 billion as measured from FY 2011, and then only increases that reduced amount by $2 billion in FY 2013," Lew wrote.

After that, the spending caps don't make any distinctions between "security" and "non-security" budget accounts, so the "savings" are anyone's guess. If you compare the White House's "projection" of security savings to its April fiscal framework, which called for $400 billion in security savings over 12 years, it appears pretty much consistent. If you compare the security savings projection to the long-term budget plan the administration published in February, "this new path will save some $600 billion, including about $500 billion from national defense," Lew said.

Of course, that February budget plan is no longer seen by anybody as a potential option, especially since the White House itself replaced it in April with the new "fiscal framework" Lew mentioned. It's like your boss promising you a raise, then taking away the promise of the raise, and then telling you, "Look how much money we saved!"

The second part of the debt ceiling bill promises that another $600 billion in projected defense cuts will automatically go into effect unless the new Congressional "supercommittee" agrees on $1.5 billion in new cuts next year, which isn't likely. But Lew is warning that this is only a threat the administration doesn't actually want to implement those cuts.

"Make no mistake: the sequester is not meant to be policy. Rather, it is meant to be an unpalatable option that all parties want to avoid," Lew wrote.

But if for some reason Congress can't compromise in the supercommittee, lawmakers can always spread those $600 billion of cuts over the 10 years in a way that will make it another Congress's headache several years into the future.

In the end, it all lies in the hands of Congress. "Of course, the precise funding levels and the specifics of how these cuts would be taken will have to be worked out by the administration and Congress over the next decade," Lew said.

Meanwhile, new Defense Secretary Leon Panetta sent out a message yesterday that he is fine with the defense "cuts" in the first part of the bill, because that's what the military was expecting anyway.

"The reductions in defense spending that will take place as a result of the debt ceiling agreement reached by Congress and the President are in line with what this Department's civilian and military leaders were anticipating, and I believe we can implement these reductions while maintaining the excellence of our military," Panetta wrote.

But he, like Lew, is warning that the $600 billion in "cuts" in the trigger mechanism are dangerous, and that Congress better learn how to compromise, and fast.

"This potential deep cut in defense spending is not meant as policy. Rather, it is designed to be unpalatable to spur responsible, balanced deficit reduction and avoid misguided cuts to our security," Panetta said. "Indeed, this outcome would be completely unacceptable to me as Secretary of Defense, the President, and to our nation's leaders."

The two heads of the Senate Armed Services Committee told The Cable today that even they have no idea how much the debt ceiling deal will cut from national defense, because the specifics of the cuts are still unknown.

Depending on which reports you read today, the bill to raise the debt ceiling and cut at least $2.1 trillion from the budget over the next decade, is either a huge win for the Pentagon or a dangerous cut to the military budget that will "sap American military might worldwide." The Cable reported yesterday that the White House's assertion that the bill puts the nation on track to save $350 billion in defense spending over 10 years was just a guess, considering that the bill doesn't say anything about "defense" cuts. The bill only sets caps on "security" spending, which includes Defense, State, USAID, intelligence, the Department of Homeland Security, the National Nuclear Security Administration, and the U.S. Department of Veterans Affairs.

Today, Sens. Carl Levin (D-MI) and John McCain (R-AZ) both told The Cable that the actual effect of the debt deal on the Pentagon will be determined by budget and appropriations lawmakers in both chambers after Congress returns from its one-month summer recess.

"I don't know where the White House gets the $350 billion number from," said Levin, confirming that the deal only sets caps for the "security" budget and then only for the first two years. Levin said he does expect "significant" cuts to the military budget, but that he has to wait for allocations to come from Senate budget leaders to determine how much the Pentagon will get in fiscal 2012.

When Levin gets that figure, he will then have to rewrite the fiscal 2012 defense authorization bill to adjust for the new allocations. He is also waiting for the appropriators to weigh in, he said. And while there's little chance the Senate will actually pass an appropriations bill before the fiscal year ends on Sept. 30, it will nevertheless be lawmakers who decide exactly what gets cut and by how much.

"There will be a negative and deep effect on the military if the cuts happen," Levin said, but added that the amount of defense cuts is currently "unknown."

If the new joint committee established to agree on an additional $1.2 trillion of cuts fails to come to terms, the bill mandates that $600 billion in cuts come directly from the "defense" account. But that's a fight for another day, Levin said.

When asked how much the debt deal cuts the Pentagon budget, McCain said, "I'm not sure."

"There are some reductions but it's my understanding they were spread out over a number of accounts," he said.

Multiple Hill sources told The Cable that it was House Armed Services Committee chairman Buck McKeon (R-CA) who led the push for the cuts to be spread over several "security" accounts, rather than focusing them solely on defense. McKeon convened a meeting of disgruntled committee members Monday morning, and then met with House Speaker John Boehner (R-OH) on Monday afternoon to urge lawmakers to protect the defense budget.

By spreading the initial cuts over security agencies, defense hawks hope to minimize the impact of any cuts on the Pentagon. Ironically, their strategy hinges on embracing the concept what heretofore has been the Obama administration's definition of "security," which includes diplomacy, intelligence, veterans affairs, homeland security, and foreign aid. Republicans have traditionally defined "security" as only defense, intelligence, and the Department of Homeland Security.

An administration official told The Cable on Monday that the administration calculates that the bill will save $420 billion over 10 years in overall security spending, with $350 billion of that coming from defense and the rest spread out over other agencies. But the administration official admitted those specifics are not in the bill.

That $420 billion is a replacement for the $400 billion in security spending cuts that Obama called for only a couple of months ago, so military spending expectations in the defense industry probably won't change much. But there are no details on that plan either, so it's impossible to know what the effects will be.

Winslow Wheeler, head of the Strauss Military Reform Project at the Center for Defense Information, said that the whole notion of the cuts is misleading anyway, because the numbers are being compared projections that were inaccurate in the first place.

"There will be reductions ... but the actual figure is also masked by the fact that the debt deal is compared to a ten year CBO ‘baseline,' which is [the fiscal] 2011 spending levels adjusted according to arcane rules and inflated by a highly unreliable projection of long term future inflation," he said.

"The debt deal kicks the defense budget can down the road for this and future Congresses. People should not read precision and certainty into a political deal specifically designed to be uncertain and indistinct."

The House will mark up a funding bill for the State Department and foreign operations Wednesday that would cut the international affairs budget by billions and restrict U.S. involvement in a host of international organizations.

The House Appropriations State and Foreign Ops subcommittee, led by Rep. Kay Granger (R-TX), unveiled its fiscal 2012 appropriations bill today in advance of tomorrow's markup. The bill would provide State and USAID with $39.6 billion in discretionary funding next year, which is 18 percent, or $8.6 billion, below the fiscal 2011 level. The fiscal 2011 level, which was reached as part of a deal to avoid a government shutdown in April, was already $8 billion less than originally requested by the Obama administration. The State Department did move about $3.5 billion from its regular budget to a new "Overseas Contingency Operations" account for the wars in Iraq and Afghanistan, so the apples-to-apples reduction is closer to $5 billion.

Democrats on the committee and NGO leaders reacted with frustration at the bill's cuts to dozens of State Department and foreign assistance programs, as well as its proposal to slash USAID operating expenses by more than a third.

"I am disappointed that the 2012 State and Foreign Operations Appropriations Act funds priorities that are critical to our national security and global leadership at inadequate levels, and includes divisive and partisan policy riders that are counter-productive to effective diplomacy and development," said subcommittee ranking Democrat Nita Lowey (D-NY) in a statement today. "At a time when the demands we place on our diplomatic and development workforce are increasing, it is short-sighted to downsize the Department of State and USAID."

House Appropriations Committee ranking Democrat Norm Dicks (D-WA) blamed the Republican leadership for not giving Granger enough total funds picture to properly support the development programs.

"Once again the Republican leadership has presented us with a completely inadequate subcommittee allocation that will reduce our influence overseas and damage the security of our nation," he said. "Core program funding in this bill... would mean layoffs at both the State Department and USAID."

The State and Foreign Operations appropriations bill usually enjoys wide bipartisan support, but this year will be an exception. House Democratic aides said that the bill was crafted in a way to satisfy GOP political priorities and without much consideration for comity or consensus across the aisle.

"The decision was apparently made that this would be a Republican bill," one House Democratic aide said.

For employees at State and USAID, the cuts could be particularly biting. The bill cuts the $1.35 billion USAID operations budget to around $900 million and would eliminate what's known as "localization pay" for diplomats abroad, which would immediately bring down their salaries.

"We're starting to see the kinds of cuts that will affect the ability of agencies to implement important tools of our foreign assistance and our foreign policy," said Mark Green, a former U.S. Ambassador to Tanzania and currently senior director at the U.S. Global Leadership Coalition. "We understand that every part of the government is on the table, but what we're looking at here is a very small part of the budget taking significant cuts."

The administration had requested $51.2 billion for State and USAID for fiscal 2012, but nobody is even discussing that number anymore, because the current debt crisis negotiations promise to change the amounts of funding available for all discretionary accounts.

The fluid fiscal situation also spells uncertainty for Granger's bill, which could probably pass on the House floor but would face resistance in the Democrat-controlled Senate. But due to the debt crisis, the Senate isn't planning to start work on appropriations bills until at least September, which doesn't leave a lot of time to work with the House to come up with a compromise before the fiscal year begins on Oct. 1.

The policy riders in the bill include a reinstatement of the Mexico City Policy, which would ban federal funding for organizations that promote abortion. This was also added to the House Foreign Affairs Committee's fiscal 2012 authorization bill, though that piece of legislation isn't expected to become law either.

The bill would defund U.S. contributions to the U.N. Human Rights Council, cap U.S contributions to U.N. peacekeeping at 25 percent of the overall peacekeeping budget (which would put the United States in arrears), blocks U.S. contributions to the U.N. Population Fund, cut funding for programs meant to address climate change, restrict 30 percent of U.S. future contributions to the United Nations until it publishes all of its internal financial audits online (which isn't likely), and rescinds already appropriated funds for the International Monetary Fund.

In a letter sent on Monday to Granger and Lowey, the U.S. Chamber of Commerce urged the committee not to cut funding for multilateral financial institutions or democracy-promotion programs abroad, both of which face cuts in the bill.

"The International Affairs budget and these agencies play a vital enabling role for U.S. companies to tap foreign markets and create jobs and prosperity at home," the Chamber wrote. "Although it represents less than 1.5% of the total federal budget, the International Affairs budget is critical to creating jobs, saving lives, protecting U.S. diplomats and embassies abroad, and fighting terrorism and the spread of weapons of mass destruction."

The committee recommended funding the Overseas Contingency Operations account at $7.6 billion, which is technically $1.1 billion less than requested, but that is because about $1 billion of Pakistan counterinsurgency funding was transferred back to the Pentagon's jurisdiction.

"This bill reforms and refocuses the way we spend our foreign aid. We have established tough oversight and accountability measures that will make sure my constituents' tax dollars are not wasted overseas while making sure we support our national security priorities and key allies," Granger said in a statement. "In this difficult geopolitical and economic climate, the American people deserve policies that are based on our principles."

The House Foreign Affairs Committee just spent two full days and nights marking up a State Department and foreign operations authorization bill in an effort that the committee's ranking Democrat says was a "waste of time" for a bill that has no chance of becoming law.

"There's no doubt that this was a bad bill as it started, and even though we knew it could get worse, we could not imagine it would get as bad as it did," Rep. Howard Berman (D-CA), said in a Friday interview with The Cable.

Berman said that the original draft of the bill, which included sweeping restrictions on foreign aid to countries around the world, was bad enough. But the over 100 amendments introduced by GOP congressmen sent an even more harmful signal to the world, he said -- namely, that the United States wanted to disengage from international forums and punish countries that don't always agree with the U.S. government.

"The thinking [on the GOP side] is, ‘something happens I don't like, and the way to deal with it is I throw a tantrum.' It's a series of tantrums," Berman said. "It's an absence of a notion between what we're doing and what the consequences of what we're doing are. It's operating from a gut instinct and them not using their heads."

What's more, since the bill has so many provisions and amendments that would undo the Obama administration's foreign policy, it's destined to fail in the Democrat-led Senate, much less be signed by the president.

"This bill's never going to be law. We spent from morning until late night, two straight days and hundreds of hours surrounding that markup, dealing with amendments and language on something that will have no impact on U.S. foreign policy because it will never come close to becoming law," Berman said.

He compared it to his time as a student in the Young Democrats movement in college, when the group would have spirited policy debates and issue resolutions just for the sake of theater and practice. "At the end of the day it was just a piece of paper, and that's what this is," he said.

But unlike the Young Democrats of the 1960s, the HFAC markup in 2011 does have a real and negative effect on U.S. power and influence, Berman said, because those watching the debate assume it has real implications.

"It was a waste of time, but people around the world in other countries and other governments don't know that it's a total waste of time and will never become law and they think this is where U.S. policy is heading and they are going to react," he said.

"So even the act of doing this hurt American interests, because it creates anger and hostility and makes all the things we need to do more difficult."

Berman highlighted an amendment to the bill sponsored by Western Hemisphere subcommittee chairman Connie Mack (R-FL) that would withdraw all U.S. contributions to the Organization of American States, calling it a "very extreme position."

Berman also criticized another amendment that would prohibit assistance to countries that vote against America at the United Nations a majority of the time on any and all votes, pointing out that amendment would prevent the United States from sending aid to Jordan -- despite the fact that Jordan is among the most pro-Western Arab countries and a supporter of Middle East peace.

"Passing an amendment to prohibits any assistance in any country where any government votes against us at the U.N. more than 50 percent of the time... whose interest is that serving?" Berman said. 

The U.N. amendment would also make aid to Pakistan would be impossible because Pakistan would fall into that category. But Berman pointed out that directly contradicted the committee's message when the committee voted39-5 not to cut off all assistance to Pakistan, rejecting an amendment by Rep. Dana Rohrabacher.

"Faced with an opportunity to cut off all economic aid to Pakistan, they rejected it on an overwhelmingly vote. But in three other amendments that the majority supported, they cut off all aid to Pakistan," he said.

The bill also would impose a ban on funding for international organizations that offer abortion counseling to clients, a version of what's known as the Mexico City Policy. Berman called it the "Mexico City Policy on steroids," because it does not allow exemptions for HIV/AIDS funding.

Some of the bill's provisions that Berman thought most counterproductive were more local. For example, the bill would eliminate USAID's new budget office.

"We want a more efficient and focused development assistance, we want better controls, so let's make sure that the agency that's in charge of this can't function," said Berman, characterizing the provision as "going back to the goal of incapacitating USAID."

A spokesman for HFAC Chairwoman Ileana Ros-Lehtinen (R-FL) said she was unavailable for an interview on Friday due to her travel schedule.