All three of the lobbying firms representing the Egyptian government in Washington, D.C., dropped Egypt as a client late Friday amid widespread criticism of the ruling military council's raid of U.S. NGOs in Cairo and its refusal to let American NGO workers leave the country.

The Livingston Group, run by former Rep. Bob Livingston (R-LA), the Moffett Group, run by former Rep. Toby Moffett (D-CT), and the Podesta Group, run by Tony Podesta, unanimously severed their combined $90,000 per month contract with the Egyptian government, Politico reported late Friday, quoting Livingston directly. The three firms had formed what is known as the PLM Group, a lobbying entity created to advocate on behalf of the regime of former President Hosni Mubarak, who was deposed in February 2011 after 18 days of massive street protests. According to the disclosure filings, Egypt has paid PLM more than $4 million since 2007.

The trio came under fire last week for circulating talking points defending Egypt's Dec. 29 raid of several NGOs working to train political parties in Egypt, including three organizations partially funded by the U.S. government. The groups had been working in Egypt for years without being technically registered with the government, but now stand accused of fomenting unrest against the Supreme Council of the Armed Forces (SCAF), which has been ruling the country since Mubarak's ouster.

"It is bad enough when the actions of American lobbyists conflict with U.S. national interests. It is far worse when their influence-peddling undermines American values, as the Egyptian government's lobbyists in Washington are doing in this instance," said Sens. John McCain (R-AZ) and Joe Lieberman (I-CT) in a Jan. 24 statement. McCain is the chairman of the board of the International Republican Institute (IRI), one of the groups that had their Cairo offices raided. The other two groups were the National Democratic Institute, whose board is chaired by former Secretary of State Madeleine Albright, and Freedom House.

The anger in Washington against the Egyptian government reached a boiling point when it was revealed Jan. 26 that U.S. Transportation Secretary Ray LaHood's son Sam LaHood, the head of IRI's Cairo office, had been barred from leaving Egypt by the government along with five other U.S. citizens.

"To have an American lobbyist lobbying for a government where these activities are taking place -- is there no shame in this town?" said Rep. Frank Wolf on Thursday.

On Friday, Sam LaHood told NPR that he and the other Americans trapped in Egypt could face criminal charges, lengthy trials, and years of prison time.

"If we are referred to trial," LaHood said. "The trial could last up to a year ... and the potential penalty is six months to five years in jail."

The lobbying groups buckled under the public pressure, recognizing that they couldn't influence the SCAF's actions in this case and that their association with the military council was harming their broader image. For years, these firms have been defending the Egyptian military's $1.3 billion annual aid package on Capitol Hill and lobbying for non-military aid to go through the government, and not directly to independent organizations as many democracy advocates urged.

The Cable reported that in late 2010, Bob Livingston personally called Sen. Roger Wicker (R-MS) to get him to kill a Senate resolution calling for greater respect for human rights and democracy in Egypt. Wicker placed a hold on the resolution and it died in the Senate.

Egypt's lobbyists were also responsible for negotiating an endowment the Egyptian government wanted from the Obama administration. But the Mubarak regime demanded the money be given with no annual Congressional oversight, and the negotiations broke down.

Congress did place new restrictions on military aid to Egypt in the most recent appropriations bill passed in December, as a way of pressing the SCAF to move faster toward handing over its executive powers to an elected government.

According to the legislation, Secretary of State Hillary Clinton must certify that the Egyptian government is living up to the 1979 Egypt-Israel peace treaty and that the SCAF is supporting the transition to civilian rule. Multiple congressional aides told The Cable Friday that the aid is now in serious jeopardy.

"Needless to say, this whole crisis is going to make it a lot more difficult for the secretary of state to meet the certification requirements to continue providing assistance to Egypt," one senior Senate aide told The Cable. "People up here are completely seized with this issue. They're putting their friends in a really awful spot."

Another senior Senate aide noted that the Obama administration is doing a lot of work behind the scenes to deescalate the crisis, which is threatening to do long-term harm to the official U.S.-Egypt relationship.

President Barack Obama brought up the raids in a call last week with SCAF leader Field Marshal Mohamed Hussein Tantawi, according to the White House. Clinton, U.S. Ambassador Anne Patterson, Deputy Secretary of State Bill Burns, National Security Advisor Tom Donilon, and Lahood have been working the phones hard, calling contacts in Egypt to send strong messages and implore them to change course. Assistant Secretary of State for Democracy, Labor, and Human Rights Michael Posner was in Egypt on Jan. 26 and met with high-level Egyptian officials.

"Since the NGO raids in late December, the Obama administration has repeatedly provided paths for the SCAF to deescalate this crisis. Instead they keep escalating -- doubling down on a bad bet that, in the end, will prove ruinous to them," the Senate aide said. "Three weeks ago no one in Congress thought there was a chance in hell that aid to the Egyptian military could ever come under serious threat. It is now an increasingly and shockingly real prospect."

Ironically, McCain and Lieberman had been among the U.S. leaders most supportive of the SCAF and its role in maintaining stability during Egypt's fragile transition.

Many in Washington believe that the SCAF is being heavily influenced on this issue by one civilian Egyptian official, Fayza Abul-Naga, the minister of international cooperation and a holdover from the Mubarak era. In a speech this week, she disavowed the SCAF's previous promises to return the NGOs' raided possessions and cease harassing them as she lashed out at the American NGO groups.

Lorne Craner, the president of IRI, said in an interview Friday with The Cable that there is bad blood between Abul-Naga's ministry and the NGO groups. "Some people say that the people who used to get the money, for example the minister of international cooperation, resent the fact that they are not getting all of the funding," Craner said.

Meanwhile, the Americans and several of their locally hired staffers are enduring hours-long interviews as they await a possible arrest, which would only escalate the crisis.

"Things have gone from bad to worse," Craner said. "You start to think about Americans getting arrested on the streets of Cairo and sitting in a cage in some Cairo court ... And these are our allies."

UPDATE: On Sunday the Egyptian Embassy in Washington issued a statement claiming they dumped the PLM Group, not the other way around:

The Government of Egypt had decided to terminate its contractual relationship with the PLM Group. This decision was transmitted to the Group's principals on January 27^th 2012 through an official letter, as the contract stipulates, that either party has the right to terminate the relation within a 60 days prior notice.

It is surprising that a distorted version of this fact is being circulated in some media outlets. It is equally disturbing that articles and media coverage of the issue were made without an attempt to contact the Egyptian Embassy to check the factual basis of the stories reported.

This Press Release attempts to clarify the situation in line with the official documents related to the matter including the letter of termination which was recently transmitted by the Embassy to the PLM Group. 

President Barack Obama's administration has been delaying its planned $53 million arms sale to Bahrain due to human rights concerns and congressional opposition, but this week administration officials told several congressional offices that they will move forward with a new and different package of arms sales -- without any formal notification to the public.

The congressional offices that led the charge to oppose the original Bahrain arms sales package are upset that the State Department has decided to move forward with the new package. The opposition to Bahrain arms sales is led by Sen. Ron Wyden (D-OR) and Rep. Jim McGovern (D-MA), and also includes Senate Foreign Relations Middle East and North Africa Subcommittee chairman Robert Casey (D-PA), Senate Majority Whip Richard Durbin (D-IL), and Sens. Robert Menendez (D-NJ), Benjamin Cardin (D-MD), and Marco Rubio (R-FL).

Wyden and Rep. Jim McGovern (D-MA) have each introduced a resolution in their respective chambers to prevent the U.S. government from going through with the original sale, which would have included 44 armored, high-mobility Humvees and over 300 advanced missiles.

The State Department has not released details of the new sale, and Congress has not been notified through the regular process, which requires posting the information on the Defense Security Cooperation Agency (DSCA) website. The State Department simply briefed a few congressional offices and is going ahead with the new sale, arguing it didn't meet the threshold that would require more formal notifications and a public explanation.

At today's State Department press briefing, The Cable asked spokeswoman Victoria Nuland about the new sale. She acknowledged the new package but didn't have any details handy.

Our congressional sources said that State is using a legal loophole to avoid formally notifying Congress and the public about the new arms sale. The administration can sell anything to anyone without formal notification if the sale is under $1 million. If the total package is over $1 million, State can treat each item as an individual sale, creating multiple sales of less than $1 million and avoiding the burden of notification, which would allow Congress to object and possibly block the deal.

We're further told that State is keeping the exact items in the sale secret, but is claiming they are for Bahrain's "external defense" and therefore couldn't be used against protesters. Of course, that's the same argument that State made about the first arms package, which was undercut by videos showing the Bahraini military using Humvees to suppress civilian protesters.

Regardless, congressional opponents to Bahrain arms sales are planning to fight back. Wyden is circulating a letter now to Secretary of State Hillary Clinton stating that Bahrain's government continues to commit human rights violations and should not be rewarded with U.S. arms sales.

"The Bahraini government has shown little progress in improving their human rights record over the last few months and in some ways, their record has gotten worse," Wyden told The Cable on Friday. "Protesters are still being hurt and killed, midnight arrests are still happening and the government continues to deny access to human rights monitors. The kingdom of Bahrain has not shown a true good faith effort to improve human rights in their country and the U.S. should not be rewarding them as if they have."

"Supplying arms to a regime that continues to persecute its citizens is not in the best interest of the United States," Wyden said. "When the government of Bahrain shows that it respects the human rights of its citizens it will become more stable and a better ally in the region; only then should arms sales from the U.S. resume."

That point was echoed by McGovern, who pledged to oppose any arms sales to Bahrain.

"The government of Bahrain continues to perpetrate serious human rights abuses and to deny independent monitors access to the country," McGovern told The Cable. "Until Bahrain takes more substantial and lasting steps to protect the rights of its own citizens, the United States should not reward its government with any military sales." 

A State Department official declined to give specifics of the new arms package to The Cable but said that Bahrain was moving in the right direction.

"We have seen some important initial steps from the Bahraini government in implementing the Bahrain Independent Commission of Inquiry's recommendations, but more needs to be done," the official said. "We urge the government of Bahrain to take action on the full range of recommendations that we believe will help lay the foundation for longer-term reform and reconciliation."

Cherif Bassiouni, the chair of the Bahrain Independent Commission of Inquiry that investigated the government crackdown on protests in 2011, recently said in an interview that the administration is not doing enough to pressure the Bahrain regime. "There is merit in naming and shaming and embarrassing, in pushing, in enlisting public opinion, domestic and international. This is not the style of Secretary Clinton or President Obama, and I'm not sure they are necessarily doing the right choice," he said.

Cole Bockenfeld, director of advocacy for the Project on Middle East Democracy (POMED), told The Cable on Friday that the new sale will be perceived by both the government of Bahrain and those in the opposition as a green light for the government to continue its repression.

"In the broader picture of the Arab Spring, this further erodes the credibility of U.S. rhetoric about democracy and human rights in the region," he said. "Rewarding regimes that repress peaceful dissent with arms sales simply does not square with the administration's rhetoric. The administration can no longer afford to endorse the status quo in Bahrain."

Maryam al-Khawaja, the head of the foreign relations office at the Bahrain Center for Human Rights, told The Cable on Friday that the sale of U.S. arms to the Bahraini regime sends the wrong message to the people of Bahrain, and the region in general.

"This message of ‘business as usual' will only strengthen the regime's belief that there will continue to be lack of consequences to their human rights violations internationally," she said. "At a time when the United States is already being criticized for practicing double standards when it comes to the so-called Arab spring, to the protesters in Bahrain, the U.S. selling any arms to the government of Bahrain is exactly like Russia selling arms to Syria. Bahrain has become the United States' test on how serious they are about standing against human rights violations, and they are failing miserably."

UPDATE: Late Friday evening, the State Department sent out a lenghty statement on the arms sales:

We are maintaining a pause on most security assistance for Bahrain pending further progress on reform. 

During the last two weeks, representatives from the State Department and Department of Defense briefed appropriate Congressional staff on our intention to release some previously notified equipment needed for Bahrain's external defense and support of Fifth Fleet operations.  This includes spare parts and maintenance of equipment.  None of these items can be used against protestors.

This isn't a new sale nor are we using a legal loophole.  The items that we briefed to Congress were notified and cleared by the Hill previously or are not large enough to require Congressional notification.  In fact, we've gone above and beyond what is legally or customarily required by consulting with Congressional staff on items that do not require Congressional notification. 

We have and will continue to use our security assistance to reinforce reforms in Bahrain.  We have seen some important initial steps from the Bahraini government in implementing the Bahrain Independent Commission of Inquiry's (BICI) recommendations, but more needs to be done.  We urge the government of Bahrain to take action on the full range of recommendations that we believe will help lay the foundation for longer-term reform and reconciliation.   

We will continue to consult extensively with Congress on this policy.

Almost two years ago, The Cable reported on the Pentagon investigation into the actions of former Afghanistan commander Gen. David Barno, who stands accused of abusing his position as head of the Near East South Asia Center (NESA) at the National Defense University (NDU).

The investigation is complete but the Pentagon won't release it, claiming it is under "legal review," angering lawmakers who have been following the issue.

Barno, who is currently a senior fellow at the Center for a New American Security, ran the NESA center at NDU from 2006 to 2009, following his retirement from the Army as a three-star general. He was the head of Combined Forces Command -- Afghanistan from 2003 to 2005.

A special unit of the Defense Department's Inspector General's office (IG) that focuses on senior officials opened an investigation into his leadership at NDU in 2008, following allegations that he presided over an office that misspent taxpayer funds, abused contractor employees and threatened them with termination, awarded jobs based on favoritism rather than merit, and created an overall atmosphere of fear and intimidation at the center.

Congressional efforts to get the Pentagon to share the results of its investigation have stretched on for years -- and so far have been stymied. In a series of letters between the IG's office and one of the lawmakers following the issue, obtained by The Cable, the IG's office claims that the investigation is under "legal review" and therefore the results can't be shared.

"I am concerned with recent news reports that the Director of the Near East South Asia Center, which is part of the taxpayer funded National Defense University, is alleged to have wasted taxpayer funds and hired government employees due to personal relationships and not merit," Sen. Tom Coburn (R-OK), wrote to Inspector General Gordon Heddell, in an April 9, 2010 letter.

Three days later, Assistant Inspector General John Crane wrote to Coburn to tell him the Office of Senior Official Investigations had initiated an investigation into Barno in December 2008, based on anonymous allegations.

"The fieldwork portion of this investigation has been completed and report is being prepared," Crane wrote on April 12, 2010.

In August 2010, Crane wrote to Coburn again to say the Barno investigation report was undergoing an "internal review," and the results would be provided to Coburn after a "final review" was completed. Crane again promised to give Coburn the report in a November 2010 letter.

By February 2011, Crane still had not handed over the report, but claimed in a new letter that the investigation had been reopened due to a new allegation -- but now was finished for real. He promised again to hand over the results as soon as possible.

In May 2011, Crane wrote Coburn yet again and said that the internal review was "taking longer than originally anticipated." The last letter came in August 2011, when Crane told Coburn that the investigation had been reopened to interview one of the accusers but now was under internal review again. "The final results of this investigation will be provided to you as soon as possible," Crane wrote. That was six months ago, and no further information has been provided to lawmakers or the public.

The IG's office and Barno did not respond to requests for comment. The Cable has filed a request under the Freedom of Information Act (FOIA) for all records related to the Barno investigation and that request is still pending.

The allegations against Barno were described to The Cable by four NESA employees who spoke on the condition of anonymity, out of fear of reprisal. In one example cited by all four employees, a senior staffer close to Barno discouraged the use of Arabic at the center, despite its mandate to engage people from Arabic-speaking countries, creating an abusive work environment. Another focus of the investigators, according to the employees, was Barno's appointment of his chief of operations Rosaline Cardarelli's husband, John Ballard, a former professor of strategic studies at the National War College, as the center's academic dean.

The NESA Center's 2008 alumni symposium, which was held in Prague, also was scrutinized by investigators. NESA employees estimated that more than $250,000 of NESA funds were spent on the trip, but few alumni attended and the reasons for choosing the Czech capital to host alumni from the Near East and South Asia were never clear.

Overall, all four employees reported an atmosphere at the center that was intimidating and unfriendly, where contractors were unable to collect money for overtime hours worked and feared termination if they complained, and where Barno's top staffers monitored email and phone calls of employees to the point of harassment.

"I've never seen a situation in which such a small agency is mismanaged so badly," one NESA employee with decades of government experience told The Cable at the time. "It is to me incredible that you can have, on one hand, such mismanagement and that no one is prepared, evidently, to do anything about it."

The resignation of President Barack Obama's chief of staff shows that the White House is unstable and its national security policies remain dangerous, a top surrogate for GOP presidential candidate Mitt Romney told The Cable today.

"This unexpected move of Bill Daley out points to a lack of stability," said former Senator Jim Talent in a Tuesday interview.

Talent, who is one of Romney's closest advisors on national security, also harshly criticized Obama's decision to revamp U.S. military strategy, which he announced at the Pentagon on Jan. 5. The new strategy review, released only weeks ahead of Obama's fiscal 2013 budget request, calls for a "smaller and leaner" military and backs off from previous strategy documents that mandated the U.S. military maintain the capability to fight two major wars at the same time.

"I think it's going to encourage provocative actions around the world," said Talent. "It's a signal that America's not going to continue exercising a leadership role, it's very dangerous. And you know that one of the amazing things about it is that it's explicitly a budget-driven decision, in other words there's no pretense that this is a change based on strategic analysis."

When announcing the new defense strategy, Obama said, "The tide of war is receding" -- but the Romney team doesn't see it that way at all.

"That sends the wrong message, it encourages other countries to believe that they can provoke and challenge us, and it will end up costing us more money," said Talent. "It's so much an explicit confession of bankruptcy in terms of defense policy, I almost don't know how to respond to it."

In fact, Talent said that Obama's strategic review is more damaging than the military cuts made by President Bill Clinton's administration following the end of the Cold War.

"That two-war standard was continued in the post-Cold War era by the Clinton administration and was deemed necessary in the 1990s -- and that was before the 9/11 attacks, that was before the rise of Chinese power, and that was before Russia reassumed a more aggressive posture," said Talent. "So if it was necessary according to President Clinton in the 1990s before those additional risks ... how could it not be necessary now?"

Talent laid some of the top foreign policy priorities in a Romney administration, framing them as areas where it was necessary to fix Obama's missteps. These include a new policy to prevent Iran from getting a nuclear weapon, the importance of channeling China in a direction of peaceful competition rather than aggression, the need to reestablish the strength of traditional allies, the need for the United States to play a larger leadership role in the international community, and the need to reverse Obama-era defense cuts and restore military strength.

"Governor Romney believes that the Obama administration has pursued a policy of weakness across the spectrum of areas," Talent said.

Former Defense Secretary Robert Gates championed a rebalancing of foreign policy funding away from the military, arguing that the United States should pool soldiers' and diplomats' shared resources to better manage projects in warzones. Now, after his departure, the first true test of that idea is going into effect.

Gates, who famously warned in 2008 of the "creeping militarization" of U.S. foreign policy, was talking about his idea for a new $2 billion pooled fund that State and Defense would share for security capacity building, stabilization, and conflict prevention in dangerous areas of the world, where both the military and the diplomatic core operate, until his departure this year.

The Obama administration acted on that idea this year by proposing a $50 million starter fund in its fiscal 2012 budget request which it called the Global Security Contingency Fund (GSCF), meant for responding to "urgent and emergent challenges." The idea is that approval to spend the money would require the approval of both secretaries, but the State Department would be more or less in charge.

"Secretary Gates called for pooled funding and this is the direct result of that and the first test of whether State and DOD can really work together on this kind of thing," a senior State Department official said in an interview with The Cable. "This is really an example of how State and DOD, rather than engage in bureaucratic gamesmanship, have decided to work together to solve these problems."

"For us, GSCF is the new model," the official said. "This is the model we think makes the most sense, particularly in budget-constrained times."

The new GSCF office will have a State Department official as a director, a Pentagon official as a deputy director, and will be located at the State Department, the official said. Nobody has been selected for the positions yet. The rough model for the office is the interagency "Pakistan cell," which manages various aspects of Pakistan funding now.

There's only one hitch: Congress. In the fiscal 2012 budget bill passed by Congress last week and signed by President Barack Obama, the $50 million to start GCSF was omitted. But Congress did give the administration the authority to start the project using funding from other accounts, including money earmarked for the Pakistani military.

Accordingly, GSCF will be funded this year by money appropriated to Foreign Military Financing (FMF) and what's called the Pakistani Counterinsurgency Capability Fund (PCCF), a pool of cash that is used to reimburse the Pakistani military for money it spends helping the United States fight Islamic extremists.

The PCCF program, meanwhile, is another ongoing saga in the jostling between State and DOD for control over money and power in countries where they both operate.

Originally housed at the Pentagon as the Pakistani Counterinsurgency Fund (PCF), the program was originally supposed to be transferred over to State in 2009. But at that time, State didn't have the capacity to manage it, so the transfer was delayed. In 2010, State finally took over the program, only to lose it again in 2011 during the last-minute budget slashing that accompanied the April 2011 deal to raise the debt ceiling. Now for 2012, the program is back at State again.

State will receive $850 million for PCCF in fiscal 2012, and this year State put the funding in its Overseas Contingency Operations (OCO) account. By placing the program in the OCO account, the money is not counted as part of State's regular budget and therefore is more protected from the budget-cutting knives on Capitol Hill. The Pentagon is still heavily involved: In order to get the money to the Pakistani military, State actually passes the funds through the Pentagon, which implements the program on the ground by doling out the cash to the Pakistani army.

Passing the PCCF funds though the Pentagon this year will subject them to new policy restrictions in the fiscal 2012 defense authorization bill that require the administration to certify that Pakistan is using the money to fight extremists, rather than to build up conventional forces opposite India.

"The administration did have concerns that [these new restrictions] would hinder the flexibility of the program, but the Congress, obviously concerned about the nature of our relationship with Pakistan, insisted on these requirements," the State Department official said.

But how do you certify the Pakistanis are spending the money as intended? "That's going to be the issue," the official said.

NATO forces deliberately attacked two Pakistani Army outposts and ignored established rules of cooperation in the Nov. 26 assault that resulted in the death of 24 Pakistani soldiers, a senior Pakistani defense official said today.

The attack sparked the latest rift in the sinking U.S.-Pakistan relationship. The Pakistani government shut down NATO's supply lines into Afghanistan in response to the attack, refused to attend the Bonn conference on Afghanistan reconstruction this month, and indicated it would undertake a full review of its security cooperation with NATO and the United States. The U.S. government and the Obama administration expressed private "condolences" for the attack, which is currently under investigation by NATO, but has refused to explicitly apologize.

A senior defense official at the Pakistani embassy in Washington invited a group of national security reporters on Thursday morning to give an extensive briefing on the events of Nov. 26 -- from the Pakistani point of view.

The official placed the blame squarely on NATO forces and said it was completely impossible that the killings were accidental.

"I have a story to tell and this is the story of those brave people who left us in the middle of a cold, November night on a barren mountain top," the official said, before going into intricate details of what he called the "Mohmand Incident," named after the region where the attack took place.

The attack started at about midnight, the official said, with a helicopter assault on the Pakistani outpost named "Volcano," a small bunker on a mountain ridge near the Afghanistan-Pakistan border. Pakistani soldiers at the neighboring "Boulder" outpost responded by firing at the helicopters, after which helicopters and fixed-wing NATO aircraft strafed both outposts, destroying them, the official said.

The Pakistani conclusion that this was a "deliberate" attack is based on the belief that these areas had been cleared of terrorist activity, that there was no indication of insurgent activity at the time, and  that there was no way to mistake the Pakistani outposts as terrorist encampments, the official argued.

"This was in plain view on a barren ridge, not a place terrorists would be inclined to use as a hideout," the official said.

Moreover, NATO and Pakistani officials had put in place an intricate system of operational information sharing that was completely violated, according to the official, which reinforced the Pakistani conclusion that the attack was intentional.

The official refused to speculate as to why NATO would deliberately attack and kill two dozen Pakistani soldiers, only saying that this was the official conclusion of the Pakistani military leadership.

The Pakistani official also claimed that the NATO official in charge at the nearby Pakistani-NATO coordination center had apologized for giving the Pakistani Army incomplete and incorrect information regarding where NATO forces were attacking. In fact, the official claimed that the apology came in the middle of the attack, but that the NATO airplanes kept attacking.

According to the official, NATO officials notified the Pakistani side of the operation just before it began, but gave Pakistan incorrect coordinates that indicated it was actually taking place nine miles to the north of the actual attack site. The Pakistanis asked NATO to delay the operation amid the confusion, the official said, but the NATO official in charge refused, only to apologize later as the attack was taking place.

About an hour into the attack, at approximately 1 a.m., NATO then told the Pakistani side the attack had stopped, the official said, but the Pakistanis later discovered it continued until about 2:15 a.m.

"This was at least one hour and 10 minutes beyond when our friends in NATO told us that the helicopters had pulled back," the official said. "The actual magnitude of this tragedy we knew only when day broke."

Well-established operating procedures should have dictated that the attack stop as soon as communications with the Pakistani forces in the area were established, but that didn't happen, the official said.

"We are supposed to share information about impending operations regardless of size.... And in case we are fired upon, the responsibility to take action is on the country from where the fire is originating," the official said. "It's not for the U.S. military to engage. NATO is supposed to pass on the information regarding the point of origin [of the fire]."

The official also rejected the idea that the NATO helicopters were responding to fire coming from the Pakistani side or chasing insurgents as part of some sort of hot pursuit.

"There was no prior firefight," the official said.

NATO is expected to release the results of its own investigation into the assault next week, and the Pakistani claims today could be an attempt to pre-empt that announcement by establishing its own narrative beforehand.

Either way, the fallout from the incident has already had a detrimental effect on Pakistani military and popular opinion toward cooperation with NATO and U.S. military forces.

"There is a sense of outrage," the official said. "It's there on the street, amongst the leadership -- political as well as military -- and among the rank and file of the military. The sheer magnitude of this thing is unbelievable."

The Cable has obtained the document at the center of the "memo-gate" controversy, sent allegedly from the highest echelons of Pakistani's civilian leadership to Adm. Michael Mullen in the wake of the killing of Osama bin Laden. The memo offered to reshape Pakistan's national security leadership, cleaning house of elements within the powerful military and intelligence agencies that have supported Islamic radicals and the Taliban, drastically altering Pakistani foreign policy -- and requesting U.S. help to avoid a military coup.

The Cable confirmed that the memo is authentic and that it was received by Mullen. The Pakistani Ambassador to the United States Husain Haqqani -- the rumored author of the memo -- has offered to resign over what has become a full-fledged scandal in Islamabad. The Cable spoke this evening to the man at the center of the controversy and the conduit of the memo, Pakistani-American businessman Mansoor Ijaz.

"Civilians cannot withstand much more of the hard pressure being delivered from the Army to succumb to wholesale changes," reads the memo, sent to Mullen via an unidentified U.S. interlocutor by Ijaz. "If civilians are forced from power, Pakistan becomes a sanctuary for UBL's [Osama bin Laden's] legacy and potentially the platform for far more rapid spread of al Qaeda's brand of fanaticism and terror. A unique window of opportunity exists for the civilians to gain the upper hand over army and intelligence directorates due to their complicity in the UBL matter."

The memo -- delivered just 9 days after the killing of bin Laden -- requests Mullen's help "in conveying a strong, urgent and direct message to [Pakistani Army Chief of Staff] Gen [Ashfaq Parvez] Kayani that delivers Washington's demand for him and [Inter-Services Intelligence chief] Gen [Ahmad Shuja] Pasha to end their brinkmanship aimed at bringing down the civilian apparatus."

"Should you be willing to do so, Washington's political/military backing would result in a revamp of the civilian government that, while weak at the top echelon in terms of strategic direction and implementation  (even though  mandated by  domestic political  forces),  in a wholesale manner replaces  the national security adviser and other  national security officials with trusted advisers  that include ex-military  and civilian leaders favorably viewed by Washington, each of whom have long and historical ties to the US military, political and intelligence communities," the memo states.

The memo offers a six-point plan for how Pakistan's national security leadership would be altered in favor of U.S. interests. President Asif Ali Zardari would start a formal "independent" inquiry to investigate the harboring of bin Laden and take suggestions from Washington on who would conduct that inquiry. The memo promised this inquiry would identify and punish the Pakistani officials responsible for harboring bin Laden.

The memo pledges that Pakistan would then hand over top al Qaeda and Taliban officials residing in Pakistan, including Ayman Al Zawahiri, Mullah Omar, and Sirajuddin Haqqani, or give U.S. military forces a "green light" to conduct the necessary operations to capture or kill them on Pakistani soil, with the support of Islamabad. "This commitment has the backing of the top echelon on the civilian side of our house," the memo states.

The memo also promises a new Pakistani national security leadership that would bring transparency and "discipline" to Pakistan's nuclear program, cut ties with Section S of the ISI, which is "charged with maintaining relations to the Taliban, Haqqani network" and other rogue elements, and work with the Indian government to punish the perpetrators of the 2008 terrorist attack in Mumbai.

Ijaz, who has a long and controversial record of acting as an unofficial messenger for the Pakistani and U.S. governments, has claimed repeatedly that the memo came from a senior Pakistani official close to Zardari and was given to Mullen through a U.S. interlocutor close to  the then-serving Joint Chiefs of Staff chairman.

Today, in an exclusive interview with The Cable, Ijaz alleged that Pakistan's U.S. ambassador, Husain Haqqani, was not only the author of the memo, but the "architect" of the entire plan to overthrow Pakistan's military and intelligence leadership, and was seeking U.S. help.

"Haqqani believed he and the president (Zardari) could redraft the architectural blueprint of how Pakistan should be governed in the future -- with civilians in command of the armed forces and intelligence services and the memorandum's content was geared in that direction," Ijaz said.

Over the past month, the rumors of the memo and its contents have ballooned into a huge political crisis in Pakistan. Islamabad's military leadership has pressed Zardari to start a full inquiry and the president has summoned Haqqani to the capital to explain himself. Haqqani offered to resign from his post on Wednesday, and told The Cable that he will travel to Pakistan on Friday.

On Wednesday, The Cable first reported that Mullen confirmed the existence of the secret memo delivered to him through an intermediary from Ijaz on May 10. On Nov. 8, Mullen's former spokesman Capt. John Kirby told The Cable that Mullen had no recollection of receiving the memo, but a week later, Kirby confirmed that Mullen had searched his records and discovered that he had indeed received the Ijaz memo -- but that he gave it no credibility and never acted on it.

Ijaz said Haqqani's proposal, as detailed in the memo and in a series of Blackberry Messenger conversations between Ijaz and Haqqani, included the establishment of a "new national security team" in which the ambassador would be National Security Advisor of Pakistan. An official with the initials "JK" would be the new foreign minister and an official with the initials "NB" would assume a new civilian post in charge of Pakistan's military and intelligence agencies.

Ijaz read out several alleged Blackberry Messenger conversations he alleges he had with Haqqani while planning the scheme and drafting the memo. The Cable was unable to verify the veracity of these conversations; as read out by Ijaz, they paint a picture of him and Haqqani devising a coded language worthy of a spy movie to discuss the memo while under possible surveillance.

For example, when Ijaz asked Haqqani to consider adding access by U.S. investigators to bin Laden's wives to the offer, the wives were referred to as "the three stooges," Ijaz said. Haqqani would use the words "my friend" or "boss" to refer to Zardari. "There was an orchestration to cover our tracks even at that moment because there was always a possibility this could get out," Ijaz said.

Once the memo was final, Ijaz said he approached three U.S. interlocutors, all of whom had served at the highest levels of the U.S. government. One of them was a current serving official, one was a former military official, and one was a former civilian government official, Ijaz said.

"All three of them expressed skepticism about the offers that were being made. Frankly, when you read it, you will see that these offers are sort of a sellout of Pakistan to the United States," Ijaz said.

Ijaz said the text of the memo proves Haqqani's involvement because it is full of detailed Pakistani government information that a mere businessman would never have had access to. Ijaz said, however, that he can't confirm whether Zardari had any direct knowledge of the memo or the promises contained therein. All the assurances that Zardari was involved and approved of the memo came from Haqqani, he said.

"I believe, with what we know today, that the president probably gave him a blanket power of attorney to conduct the stealth operation and never wanted to know the details, which he left to Haqqani happily," Ijaz said.

But why would Haqqani, who has extensive connections throughout the U.S. government, need to pass the memo through Ijaz? Haqqani and Zardari needed plausible deniability, said Ijaz, in case the issue blew up into a scandal.

And it has.

"Haqqani was likely the sole architect of the back-channel intervention and needed a plausibly deniable go-between to make it work. I fit that bill perfectly because he knew the Pakistanis, who have been assassinating my character and diminishing my person for decades, would have at me with glee if things went wrong ... if a leak occurred purposefully or accidentally," Ijaz said.

Why did Ijaz decide to reveal the existence of the memo in the first place, as he did in an Oct. 10 op-ed in the Financial Times, especially if he really is a secret go-between? Ijaz said it was his effort to defend Mullen from attacks in the Pakistani press after Mullen sharply criticized the ISI and its links to the Haqqani network in his harshly worded closing congressional testimony on Sept. 22.

"I felt very strongly about how Adm. Mullen was mistreated by the Pakistani press after he had testified in Congress and shed light on the harsh truth about Pakistan's intelligence service brinkmanship," Ijaz said. "So I felt it was necessary to set the record straight."

The whole story is mired in the web of relationships and dealings both Haqqani and Ijaz have had over the years in their roles as members of the Pakistani elite in Washington. Ijaz had considered Haqqani a friend and Haqqani had even spoken at one of the charity events Ijaz organized.

Ijaz said he respects Haqqani, believes his motives are patriotic, and sees him as a needed presence in the troubled U.S.-Pakistan relationship.

"Haqqani has had a reputation since he became ambassador as being more of America's ambassador to Pakistan than Pakistan's Ambassador to America, but that's an unfair charge," Ijaz said. "He is someone who is trying to help people there understand who we are and help people here understand what kind of a mess [Pakistan] is."

"In that sense, he's done a very credible job and it would be a loss for Pakistan to see him go," Ijaz said. "I still consider him a friend."

In a long statement given to The Cable over e-mail today, Haqqani flatly denied all of Ijaz's allegations:

I refuse to accept Mr Ijaz's claims and assertions. I did not write or deliver the memo he describes not did I authorize anyone including Mr Ijaz to do so.

I was in London and stayed at the Park Lane Intercontinental on the date in May mentioned in one of the alleged conversations but I was there to meet senior British govt officials, including Sir David Richards Chief Of General Staff and Mr Tobias Ellwood then parliamentary Secretary for Defense. These officials will confirm that threat of a coup was not on my mind at the time, the state of US-Pakistan relations was.

I fail to understand why Mr Ijaz claims on the one hand to have helped the civilian government by delivering his memo and on the other insists on trying to destroy democracy by driving a wedge between elected civilians and the military in Pakistan with his persistent claims. It is bizarre to say the least.

Mr Ijaz, whom I have known and communicated with off and on for ten years, once said to me he was richer and smarter than me so I should pay attention to him. Clearly he does not think about the consequences of his actions.

He may be the only so-called secret emissary in the world who likes so much publicity. He has yet to explain why, if all he says is correct, he wrote his Oct 10 oped and himself deliberately blew the cover off his own secret memo and mission.

Congressional Democrats on the budget-cutting "supercommittee" want to count $1 trillion that the United States will not spend fighting in Iraq and Afghanistan over the next 10 years as "savings," even though there was never a plan to extend the wars that long in the first place.

House Assistant Democratic leader and supercommittee member James Clyburn (D-SC) mentioned this plan on Fox News Sunday, describing it as part of the supercommittee's efforts to agree on $1.2 trillion in discretionary spending cuts over 10 years before its Nov. 23 deadline. Republicans have supported this idea in the past but as of yet, not within the context of the supercommittee's deliberations.

"We believe and the CBO believes that there is around $917 billion to be saved over the next 10 years from the overseas contingency account. And we ought to count that," Clyburn said.

The problem with Clyburn's idea is that the money he is referring to -- emergency spending for the wars in Iraq and Afghanistan -- was never budgeted to remain at current levels over the next ten years. The money can only be counted as "savings" when compared to CBO projections from last March, which were based on a mathematical formula -- not the actual future costs of the wars.

However, it never has been anybody's plan to maintain current troop levels in Iraq and Afghanistan over the next 10 years, so the "savings" are completely illusory.

The White House used this gimmick in September, when it released its $4.4 trillion plan to cut the deficit. The gimmick was also used by Senate Majority Leader Harry Reid (D-NV) in the plan he released last July to avert a debt-ceiling crisis. Paul Ryan's budget last April also included this savings in its deficit reduction calculation, which was supported by 235 House Republicans and 40 Senate Republicans.

Clyburn also said the supercommittee Democrats are interested in spending the war "savings."

"We ought to use that savings to plow it back in to fix Social Security, that will allow it to be sovereign for another 75 years, to plow it into job creation programs that would get people back to work, and paying taxes, and off of food stamps and off of unemployment," he said.

The wars in Iraq and Afghanistan -- which have cost more than $1 trillion since 2001, according to the Congressional Research Service -- were completely funded by off-budget borrowing and classified as "emergency spending," meaning that eliminating those costs does not actually return any money to the Treasury.

"Isn't that a classic Washington budget gimmick, to count savings on money that wasn't going to be spent anyway?" asked Fox host Chris Wallace.

Clyburn responded that these savings were more realistic than counting future economic growth as revenue, which is part of the Republican approach inside the supercommittee.

"It sounds to me like you guys have a lot of work to do in 10 days," Wallace said.  

On Oct. 10, Pakistani-American businessman Mansoor Ijaz dropped a bombshell: Pakistani President Asif Ali Zardari, he alleged, had offered to replace Pakistan's military and intelligence leadership and cut ties with militant groups in the wake of Osama bin Laden's killing in Abbottabad.

Ijaz also alleged in his op-ed in the Financial Times that Zardari communicated this offer by sending a top secret memo on May 10 through Ijaz himself, to be hand-delivered to Adm. Michael Mullen, then chairman of the Joint Chiefs of Staff and a key official managing the U.S.-Pakistan relationship. The details of the memo and the machinations Ijaz describes paint a picture of a Zardari government scrambling to save itself from an impending military coup following the raid on bin Laden's compound, and asking for U.S. support to prevent that coup before it started.

Mullen, now retired, denied this week having ever dealt with Ijaz in comments given to The Cable through his spokesman at the time, Capt. John Kirby.

"Adm. Mullen does not know Mr. Ijaz and has no recollection of receiving any correspondence from him," Kirby told The Cable. "I cannot say definitively that correspondence did not come from him -- the admiral received many missives as chairman from many people every day, some official, some not. But he does not recall one from this individual. And in any case, he did not take any action with respect to our relationship with Pakistan based on any such correspondence ... preferring to work at the relationship directly through [Pakistani Army Chief of Staff] Gen. [Ashfaq Parvez] Kayani and inside the interagency process."

Mullen's denial represents the first official U.S. comment on the Ijaz memo, which since Oct. 10 has mushroomed into a huge controversy in Pakistan. Several parts of Pakistan's civilian government denied that Ijaz's memorandum ever existed. On Oct. 30, Zardari spokesman Farhatullah Babar called Ijaz's op-ed a "fantasy article" and criticized the FT for running it in the first place.

"Mansoor Ijaz's allegation is nothing more than a desperate bid by an individual, whom recognition and credibility has eluded, to seek media attention through concocted stories," Babar said. "Why would the president of Pakistan choose a private person of questionable credentials to carry a letter to U.S. officials? Since when Mansoor has become a courier of messages of the president of Pakistan?"

On Oct. 31, Ijaz issued a long statement doubling down on his claims and threatened to reveal the "senior Pakistani official" that purportedly sent him on his mission. Ijaz quoted Gordon Gekko from the movie Wall Street: Money Never Sleeps, telling Zardari and his staff, "If you stop telling lies about me, I might just stop telling the truth about you."

The Pakistani press has given credence to Ijaz's story because it was published in the Financial Times. "The FT is not likely to publish something which it cannot substantiate if it was so required, so any number of denials and clarifications by our diplomats or the presidency will only be for domestic consumption and would mean nothing," wrote one prominent Pakistani commentator.

This is only the latest time that Ijaz has raised controversy concerning his alleged role as a secret international diplomat. In 1996, he was accused of trying to extort money from the Pakistani government in exchange for delivering votes in the U.S. House of Representatives on a Pakistan-related trade provision.

Ijaz, who runs the firm Crescent Investment Management LLC in New York, has been an interlocutor between U.S. officials and foreign government for years, amid constant accusations of financial conflicts of interest. He reportedly arranged meetings between U.S. officials and former Pakistani Prime Ministers Benazir Bhutto and Nawaz Sharif.

He also reportedly gave over $1 million to Democratic politicians in the 1990s and attended Christmas events at former President Bill Clinton's White House. Ijaz has ties to former CIA Director James Woolsey and his investment firm partner is Reagan administration official James Alan Abrahamson.

In the mid-1990s, Ijaz traveled to Sudan several times and claimed to be relaying messages from the Sudanese regime to the Clinton administration regarding intelligence on bin Laden, who was living there at the time. Ijaz has claimed that his work gave the United States a chance to kill the al Qaeda leader but that the Clinton administration dropped the ball. National Security Advisor Sandy Berger, who served under Clinton, has called Ijaz's allegations "ludicrous and irresponsible."

Then Assistant Secretary of State for African Affairs Susan Rice, now the U.S. ambassador to the United Nations, has previously acknowledged that Ijaz brought the Clinton administration offers of counterterrorism cooperation from Sudan but said that actual cooperation never materialized.

So why is Ijaz's story so popular in Pakistan, despite his long history of antagonizing the Pakistani government with such claims? According to Mehreen Zahra-Malik, who wrote about the Ijaz scandal on Oct. 29 in Pakistan's The News, it's all part of the culture of secrecy and conspiracy in Pakistani politics that the current civilian and military leadership in Islamabad has only continued to foster.

"When secrecy and conspiracy are part of the very system of government, a vicious cycle develops. Because truth is abhorrent, it must be concealed, and because it is concealed, it becomes ever more abhorrent. Having power then becomes about the very concealment of truth, and covering up the truth becomes the very imperative of power -- and the powerful," she wrote. "The end result: a population raised on a diet of conspiracy."

Attempts to reach Ijaz for comment were unsuccessful.

Former President George W. Bush's administration signed an agreement in 2008 to withdraw all troops from Iraq by the end of 2011, but policymakers in that administration always expected that agreement to be renegotiated to allow for an extension beyond that deadline, former Secretary of State Condoleezza Rice told The Cable.

When President Barack Obama announced on Oct. 21 that he would withdraw all U.S. troops from Iraq by Dec. 31, his top advisors contended that since the Bush administration had signed the 2008 Status of Forces Agreement (SOFA), both administrations believed that all troops should be withdrawn by the end of the year. This was part of the Obama administration's drive to de-emphasize their failed negotiations to renegotiate that agreement and frame the withdrawal as the fulfillment of a campaign promise to end the Iraq war.

"The security agreements negotiated and signed in 2008 by the Bush administration stipulated this date of December 31, 2008, as the end of the military presence. So that has been in law now or been in force now for several years," Deputy National Security Advisor Denis McDonough told reporters on Oct. 21. "So it's difficult to rebut the proposition that this was a known date."

Rice, speaking with The Cable to promote her new book No Higher Honor, said today that when the Bush administration signed the agreement, it was understood by both the U.S. and Iraqi governments that there would be follow-up negotiations aimed at extending the deadline -- a step that would be in both the U.S. and Iraqi interest.

"There was an expectation that we would negotiate something that looked like a residual force for our training with the Iraqis," Rice said. "Everybody believed it would be better if there was some kind of residual force."

Rice said the Iraqi government, despite SOFA's Jan. 2012 end date, was not only open to a new agreement that would include an extension for U.S. troops, but expected that a new agreement would eventually be signed.

"We certainly understood that the Iraqis preserved that option and everybody believed that option was going to be exercised," Rice said.

It's been widely reported that the negotiations between the Obama administration and the Iraqi government this year broke down over the issue of immunity for U.S. troops in post-2011 Iraq. The Obama administration had demanded that immunity be granted by the Iraqi Council of Representatives, the country's primary legislative body, which was unwilling to do so for political reasons.

Rice said that she didn't understand why the Obama administration was unable to reach an agreement on immunity with the Iraqis, considering that the previous SOFA granted immunity to U.S. soldiers and was passed overwhelmingly by the Iraqi parliament at the time.

"We did manage to negotiate an immunity clause that was acceptable to the Iraqis and acceptable to the Pentagon. I don't know what happened in these negotiations," Rice said.

Overall, Rice said that while the Iraqi Army is making progress, it still has flaws that U.S. forces could help remedy, and the wholesale withdrawal of U.S. troops from Iraq sends the wrong signal to the region.

"They continue to need help on the counterterrorism side and it would have been a good message to Iran [to keep some U.S. forces there]," Rice said. "That would have been a preferable option."

The Obama administration late Thursday formally announced the appointment of Mark Lippert as the next assistant secretary of defense for Asian and Pacific Affairs.

Lippert was one of President Barack Obama's earliest and closest advisors on foreign policy, having been with Obama since his days as a senator. He was a key figure in Obama's presidential campaign and served as chief of staff of the National Security Council (NSC), a position that had not existed in George W. Bush's administration but which Obama resurrected in 2009.

Lippert was pushed out of the White House after an internal struggle with then National Security Advisor Jim Jones, who blamed Lippert for a series of negative leaks to the press about Jones' mismanagement of the NSC.

"In July [2009], Jones laid out his case to Obama and others. All seemed to agree that it was rank insubordination. Obama promised to move on Lippert," Woodward wrote. "On October 1, the day of the McChrystal speech in London, the White House press secretary issued a three-paragraph statement that Lippert was returning to active duty in the Navy. The statement made it sound as though this had been Lippert's choice. ‘I was not surprised,' Obama said in the statement, ‘when he came and told me he had stepped forward for another mobilization, as Mark is passionate about the Navy.'"

Jones was later pushed out himself, after being blamed by top White House officials for a series of leaks to the press about the White House's top advisors, whom he called "the water bugs, the "Politburo," "the mafia," and the "campaign set," according to Bob Woodward's book Obama's Wars.

While serving overseas on multiple tours, Lipper was an intelligence officer for the Navy Seals and participated Navy Special Warfare missions in Africa.

The Lippert nomination was an open secret in Washington as early as April, but the nomination never came. The rumor was that Defense Secretary Robert Gates did not want Lippert, a close confidant of the White House clique, burrowed inside the Office of the Secretary of Defense. Now, with Gates gone, that obstacle has apparently been removed. The Cable reported in July that Lippert was never removed from the White House payroll system, although an administration official said he did not receive his White House pay and benefits while on active duty.

If confirmed, Lippert will succeed Gen. Chip Gregson, who resigned in April. Following a reorganization of the Pentagon's policy shop in 2009, Gregson's office was given a portfolio that includes China, Japan, North and South Korea, India, Afghanistan, and Pakistan. Gregson, who focused mostly on the Northeast Asia part of that portfolio, was known as a knowledgeable and competent official who nonetheless played a less prominent role in diplomacy than his State Department counterpart, Assistant Secretary of State Kurt Campbell.

Privately, administration sources told The Cable that Gregson ultimately could not keep pace with the ambitious political agenda set by the State Department, which is seen as the locus of administration power in much of Asia. He is said by these sources to have fallen somewhat out of favor with Undersecretary of Defense for Policy Michele Flournoy, a close confidant of Campbell's. Flournoy and Campbell founded the Center for a New American Security before entering the Obama administration.

Unlike Gregson, Lippert has no experience working in the Pentagon and no direct experience working on East Asian diplomacy. Chris Nelson of the Nelson Report, an insiders' newsletter on Asia policy, presented the administration's case for Lippert in his report on Thursday.

"During the Campaign, he was the principal liason (sic) between the Asia advisory team run by Jeff Bader, who became the Senior Director for Asia at the NSC, and the candidate; Second, his exhaustive, face-to-face involvement with the President, and senior NSC, State and DOD staff, on all Asia related matters during his year at the NSC," Nelson wrote, adding that Lippert "still has the deepest trust of Obama and his folks."

In April, it was reported by Nelson that when the Lippert nomination was first floated, Sens. John McCain (R-AZ) and Lindsey Graham (R-SC) objected, "due to Lippert's well-known opposition, while at the White House, to Obama's ‘surge' in Afghanistan." Neither McCain nor Graham has ever publicly expressed an objection to the Lippert nomination.

We've called around, and there aren't any Senate offices that are pledging to hold up the Lippert nomination -- yet. However, one senior Senate GOP aide told The Cable in July that "Mark Lippert's nomination to be assistant secretary of defense for Asia would be tremendous hold bait and an opportunity for the Senate to get a hearing on all of the president's China and Taiwan's policies."

The Asia policy shop in the Pentagon had been run by Principal Deputy Assistant Secretary of Defense Derek Mitchell, until he was tapped to become special representative and policy coordinator for Burma. Now the office is run by acting Assistant Secretary Peter Lavoy, who came over from the Office of the Director of National Intelligence.

The Obama administration's negotiations with the government of Iraq regarding a post-2011 U.S. troop presence are ongoing, but the prospects of reaching an agreement are dwindling fast, according to close observers of the process.

"I would just say that, despite some of the reports that you may have seen over the weekend, that no final decisions have been made," State Department spokesman Mark Toner told reporters today in response to several reports over the weekend that the negotiations to keep thousands of U.S. military personnel in Iraq past 2011 have broken down.

"At the present time I'm not discouraged because we're still in negotiations with the Iraqis," Defense Secretary Leon Panetta said Monday.

Discussions with the Iraqis have focused on the administration's demand that U.S. troops remaining in Iraq have immunity from Iraqi courts. In August, Iraqi Ambassador Samir Sumaida'ie told The Cable that a deal on immunity was in the works and that the Iraqis would formally request an extension of thousands of U.S. troops' presence "in our own sweet time."

But the current U.S.-Iraq bilateral agreements dictate that all U.S. troops must withdraw by the end of the year, and as time runs out, the chances of a deal on immunity are fading fast.

Ramzy Mardini, a scholar at the Institute for the Study of War who traveled to Iraq in July, said that the reason a deal isn't likely is because, though there is a consensus among Iraqi leaders of the necessity for a post-2011 U.S. military presence, State Department lawyers determined that the immunity is necessary and can only be ensured if the Iraqi parliament formally endorsed it.

That's impossible for an Iraqi legislature that is not strong enough to publicly support what many Iraqis will view as an extension of the American occupation, Mardini said, and the Obama administration won't budge from this condition.

"That's the red line for the U.S., and unfortunately that's the red line for the Iraqis as well," he said. "Now the talk has gone to a new phase where it doesn't seem that we're going to get the immunities that are needed, and that's a deal breaker for the U.S."

The Iraqi parliament is actually on holiday right now and returns to work Nov. 20. Upon returning, its next adjournment will be Dec. 5, so that constitutes the window of opportunity for a measure to offer immunity. But nobody thinks that is likely.

The Iraqi government has always wanted the immunity to be granted through a government-to- government memorandum of understanding. Iraqi Prime Minister Nouri al-Maliki told Al-Masar television station on Monday, "The immunity we had said is not possible, and from the beginning we have said that it can't get the approval from the parliament."

Officially, the U.S.-Iraq bilateral negotiations are led by U.S. Ambassador James Jeffrey and Army Gen. Lloyd Austin, the top U.S. commander in Iraq. But the key interlocutor on the immunity issue is Brett McGurk, who served on the National Security Council during the Bush and Obama administrations and was brought back in by Obama to renegotiate the Bush-era agreements.

For observers like Mardini, the entire episode is symbolic of the Iraqi government's fragility and its inability to make decisions, as well as of the Obama administration's failure to adequately transition from a military to a diplomatic strategy in Iraq.

"The Obama administration came into office with the wrong mindset in Iraq. From the get-go, it was a hands-off diplomatic approach," he said. "We had all our eggs in the military and security baskets, and when that's gone, there won't be much left to sustain. The reality on the ground is that the U.S. is at risk of losing its influence in Iraq."

Congress and the NGO community are gearing up to fight the Obama administration's plan to sell $53 million worth of weapons to Bahrain, which is proceeding on schedule despite that country's crackdown on protesters.

The State Department argued in its Sept. 14 notification to Congress that the proposed sale will contribute to U.S. national security "by helping to improve the security of a major non-NATO ally that has been, and continues to be, an important force for political stability and economic progress in the Middle East."

The administration is planning to sell Bahrain 44 armored, high-mobility Humvees and over 300 advanced missiles, 50 of which are bunker-buster missiles similar to those sold secretly to Israel in 2009.

"Bahrain will use the enhanced capability as a deterrent to regional threats and to strengthen its homeland defense," the notification reads.

But the government of Bahrain, led by King Hamad bin Isa Al Khalifa, has been engaged in a months-long struggle with a predominantly Shiite protest movement. Opposition groups claim that 30 protesters have been killed by the government and more than 1,000 have been arrested. The government also  called in a Saudi-led force in March that included dozens of tanks to bolster their position, effectively putting the country on lockdown.

Independent organizations such as Human Rights Watch have reported that the Bahrain government has used brutal tactics, including using masked thugs to sweep up lawyers and other activists in nighttime raids. Today, the government announced new trials for 20 medics whose long jail sentences provoked outrage in the international community.

"In Bahrain, steps have been taken toward reform and accountability, but more are required,"
President Obama said in his Sept. 21 speech at the U.N. "America is a close friend of Bahrain, and we will continue to call on the government and the main opposition bloc - the Wifaq - to pursue a meaningful dialogue that brings peaceful change that is responsive to the people."

The Obama administration has several interests in Bahrain, the fact that the U.S. Fifth Fleet is stationed there being chief among them. Bahrain is also a client state of Saudi Arabia and policymakers have voiced fears that a victory by the protest movement would strengthen Iranian influence in the country.

Regardless, a growing group of lawmakers and non-governmental organizations are gearing up to oppose the State Department's plan to sell weapons to Bahrain. Sen. Ron Wyden (D-OR) and Rep. Jim McGovern (D-MA) are circulating a resolution that would stop the sale from going through.

"Providing arms to a government that is actively committing human rights violations against peaceful protestors is at odds with United States foreign policy goals," Wyden told The Cable. "We should be promoting democracy and human rights in the region and not rewarding a regime that is jailing and in some cases killing those who choose to peacefully protest their government and anyone who supports them. This resolution will prevent the U.S. from providing the Kingdom of Bahrain with weaponry until they show a real commitment to respecting human rights."

"The Humvees are particularly worrisome for a regime that is quashing protests," said one Senate aide who works on the issue. "But the overall principle of selling arms to this regime as they use live ammunition to kill protesters is just awful and we're going to do what we can to try to stop it."

Other senior senators are just becoming aware of the issue, but their initial reactions are a mixture of concern and criticism of the Bahrain government.

"I'm cautious about empowering this regime now in Bahrain. The internal conflict in Bahrain needs to be settled," Sen. Lindsey Graham (R-SC) told The Cable.  "I'm not so sure I would go down that road right now [in terms of arms sales]."

"I didn't even we were doing that until you told me," Graham admitted, thanking your humble Cable guy for bringing the issue to his attention.

Sen. Joe Lieberman (I-CT) also seemed conflicted about the idea of selling more weapons to Bahrain but declined to outright oppose the idea.

"I'm troubled by what's happened in Bahrain, but Bahrain has been a wonderful ally and our 5th Fleet there is critical to the security of the whole region," he told The Cable. "I'd be hesitant to cut off sales, but it is awkward now."

Senate Foreign Relations Middle East Subcommittee chairman Bob Casey (D-PA) also said he was concerned about the violence against protesters in Bahrain but didn't want to commit to a position about the arms sales either way.

"We're looking at it, because we want to do everything we can to hold a country like that to high standards," Casey told The Cable.

The big question is what Senate Foreign Relations Committee chairman John Kerry (D-MA) thinks. Kerry's committee has first crack at any resolution to oppose the sale, and the resolution's backers want his support. But -- despite Kerry's denials that he is seeking the secretary of state job -- he rarely picks fights with the White House in public. His office did not answer requests for comments on the topic.

Human Rights First, an international human rights organization, wrote an open letter to Kerry last month calling on him to oppose further arms sales to Bahrain.

"Stopping this arms sale to a country currently abusing the rights of its citizens is in step with your long record of opposition to arming tyrants," the letter states. "Arms sales to Bahrain at this time would contradict the United States' twin interests of regional stability and peaceful reform. If the United States aspires to be a global human rights leader... it should not reward the current repression with weapons."

The Project on Middle East Democracy (POMED) also drafted a letter to Congress, signed by a dozen organizations including Human Rights Watch and Freedom House, urging Congress "to take immediate action to block a proposed arms sale to Bahrain until it ends abuses against peaceful protesters and takes meaningful steps toward political reform and accountability for recent and ongoing serious human rights violation."

Cole Bockenfeld, director of advocacy for POMED, told The Cable that the arms sale will have a devastating effect on U.S. credibility in the Arab world.

"The sale will unquestionably be perceived by both the government of Bahrain and those in the opposition as a green light for the government to continue its brutal repression," he said. "In the broader picture of the Arab Spring, this further erodes the credibility of U.S. rhetoric about democracy and human rights in the region."

UPDATE: Wyden introduced his resolution Thursday, a copy of which can be found here.

Top Obama administration officials have divided up responsibilities for applying pressure and offering an outstretched hand to the Pakistani government, in a new diplomatic strategy that some officials have dubbed "coercive diplomacy."

"The Obama administration is totally fed up and have decided to up the ante," said one official familiar with the new approach, explaining that inside the administration, "pressing for Pakistani behavior change is the new mantra."

Outgoing Joint Chiefs of Staff Chairman Adm. Mike Mullen, who has visited Pakistan 27 times since 2008, clearly assumed the role of "bad cop" when he testified on Sept. 22 that the U.S. government believes the Pakistan-based Haqqani network, with the help of Pakistani Inter-Services Intelligence (ISI), was responsible for the recent bombing of the U.S. embassy in Kabul. Mullen upped the ante further, saying the Haqqani network was a "veritable arm" of the ISI, a charge anonymous U.S. officials walked back on Tuesday.

Also heading up the "bad cop" team is new Defense Secretary Leon Panetta, who seemed to threaten increased U.S. military incursions into Pakistan on Sept. 16. An official familiar with the strategy said that even more threatening statements by Sen. Lindsey Graham (R-SC), who declared on Sept. 25 that there would be broad bipartisan support for U.S. military attack on Pakistan, were coordinated with the administration as part of their new campaign to apply pressure on Pakistan. The State Department is also considering whether to add the entire Haqqani network to its list of foreign terrorist organizations, but no decision has yet been made.

The administration may also be using the media as part of its new campaign to exert new pressure on Pakistan. On Monday, a story appeared in the New York Times with an excruciatingly detailed account of a 2007 ambush of American officials by Pakistani militants.

Meanwhile, Secretary of State Hillary Clinton is leading a parallel "good cop" effort with the Pakistani government. She has sought ways out of the current diplomatic crisis by increasing her personal engagement with her Pakistani counterparts, as evidenced by her three-and-a-half hour meeting with new Pakistani Foreign Minister Hina Rabbani Khar on Sept. 18 on the sidelines of the U.N. General Assembly.

According to one official inside the meeting, Clinton told Khar, "We want this relationship to work. Give us something to work with."

"The secretary's message was that, given the efforts of the Haqqani Network on the 13th of September [the day of the assault on the U.S. embassy in Kabul], that this was an issue that we had to deal with and that this is a threat to both Pakistan and the United States," a senior State Department official said about the meeting. "That part of the conversation concluded that joint efforts need to be made to end this threat from the Haqqanis, and that Pakistan and the United States ought to be working together on this and not separately."

Other U.S. officials inside that meeting included Special Representative for Afghanistan and Pakistan Marc Grossman and his deputy Dan Feldman. Afghan reconciliation was also a main topic of the meeting.

In her meeting with Khar, Clinton tried to find specific ways to address the threat of Pakistan-based extremists operating with impunity in Afghanistan.

"It is possible for the United States and Pakistan to work together to identify those interests that we have in common and then figure out how to act on them together," the State Department official said. "And I'd say that that if that could be the overriding philosophy or kind of headline that came out of this meeting, that'd be a very good thing for both sides."

After initially making some harsh statements against the U.S. Khar has now settled on a message that mixes her desire to defend Pakistani pride with the need to project the Pakistani civilian government's willingness to find a way out of the crisis.

Khar said this morning on NPR that the U.S. and Pakistan "need each other" and "are fighting against the same people" but "Pakistan's dignity must not be compromised."

Clinton's strategy is also reflective of the feeling of some inside the administration that the late Special Representative Richard Holbrooke's drive to transform the U.S.-Pakistan relationship from a "transactional" one to a "strategic" relationship is now a lost cause.

"The strategic relationship is over, we're back to transactional with Pakistan," one U.S. official recently told The Cable. "We can call it ‘long-term transactional' if we want, but that's the way it is now."

Amid all the tough talk, on-the-ground intelligence cooperation between the United States and Pakistan continues. CIA Director David Petraeus and ISI chief Ahmed Shuja Pasha met in Washington on Sept. 20 and put into force a new intelligence sharing agreement, an official briefed on the agreement said. Pasha also reportedly met with top White House officials at the residence of Pakistani Ambassador Husain Haqqani.

Inside Pakistan, there is speculation that the United States may be bluffing about its threat to increase military strikes inside Pakistan.  The Pakistani government is also grappling with a fervent anti-U.S. media and a realization that its control over the ISI, much less the Haqqani network, is ultimately limited. But U.S. aid to Pakistan will never be effective leverage in convincing Pakistani to change its basic approach to dealing with groups like the Haqqani network, the official said.

"Pakistan is unwilling to align its strategic vision with America's worldview," the official said. "Meanwhile, the mood toward Pakistan in Washington is the worst it's ever been."