The Cable

U.S. Issues More Russia Sanctions Threats; Markets Yawn

The Obama administration's threat to further sanction Russia because of its meddling in Ukraine risks going stale, even as NATO warns that Moscow is not backing off.

NATO Secretary-General Anders Fogh Rasmussen said on Thursday, June 19, that Russia had moved a few thousand more troops to its border with eastern Ukraine despite withdrawing many of its more than 40,000 soldiers late last month.

"I consider this a very regrettable step backward, and it seems that Russia keeps the option to intervene further," Rasmussen said, according to the Associated Press.

"If Russia is unwilling to reverse course, the United States and the international community is prepared to impose additional cost," U.S. Treasury Secretary Jacob Lew said on Thursday in Berlin, where he was meeting with German Finance Minister Wolfgang Schäuble.

But as the Obama administration's focus diverted to Iraq and fissures deepen between U.S. and European leaders on sanctions, the threat doesn't carry the same weight it did when the United States was ramping up sanctions against Russian President Vladimir Putin's advisors in March. The markets now look ready to welcome Russia back, and analysts say that after hearing idle threats for months, investors are tuning them out. The ruble has already rebounded, as has the Russian stock market. At its low point in March, the ruble had sunk 10 percent against the dollar for the year. Now it's down only 4 percent since the beginning of the year.

"Investors simply no longer believe this line from the U.S. -- rhetoric and actions have not matched, and such commentary is not seen as being very credible now," said Tim Ash, head of emerging-markets research at Standard Bank.

Washington froze the assets of 45 people, including some of Putin's closest allies, and 19 banks and companies in an attempt to pressure Putin to reverse his annexation of Crimea and de-escalate violence in eastern Ukraine. Treasury officials have pointed to Russia's falling currency as evidence that the sanctions were working. But any signs of progress have since disappeared, with key indicators showing that Western sanctions have had little impact on Russia's currency or stock market.

Perhaps more importantly, the sanctions haven't cowed Moscow. The Obama administration, NATO, and Ukrainian authorities say small numbers of Russian tanks, weapons, and troops continue to periodically cross into Ukraine.

"The sanctions have still completely failed in their primary political purpose in terms of changing Russia's course," said Steven Pifer, a former U.S. ambassador to Ukraine and a senior fellow at the Brookings Institution. "If the Russians conclude that it's all talk, they're not going to respond the way we want them to."


The Cable

Iraq Asks U.S. for Airstrikes Against al Qaeda Splinter Group

The Iraqi government has formally asked the United States to deploy airstrikes against a militant group that is occupying a growing section of northern and central Iraq and moving closer to Baghdad. The request comes as militants belonging to the Islamic State in Iraq and al-Sham (ISIS) seized Iraq's biggest oil refinery on Wednesday. But it also comes as Barack Obama's administration raised doubts about the value of kinetic strikes in a conflict plagued by deep sectarian divisions throughout the country.

"We have a request from the Iraqi government for air power," said Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff, at a Senate panel on Wednesday, June 18. But "it's not as easy as looking at an iPhone video of a convoy and then striking it.… These forces are very intermingled."

Dempsey's skepticism about airstrikes corresponds with what senior administration officials told the New York Times and Wall Street Journal on Tuesday: That the United States lacks the information needed to hit ISIS targets in a way that would swing the momentum on the battlefield. Fears remain that U.S. military strikes could result in civilian casualties in Sunni-populated areas, a prospect that would further exacerbate the sectarian tensions with Iraq's Shiite-led government.

"I happen to believe, and I think the president has said it, that a political solution is the only viable solution," Defense Secretary Chuck Hagel said at Wednesday's hearing before an appropriations subcommittee.

At the moment, Iraq's government forces are struggling to thwart ISIS advances in Diyala and Salahaddin provinces, following the takeover of Mosul, the country's second-largest city, last week.

On Wednesday, Prime Minister Nouri al-Maliki urged Iraqis of all religious and ethnic sects to join forces in defeating the Sunni-led terrorist group.

"We all belong to one country and one religion," said the Shiite strongman. "Don't listen to those talking about Sunnis and Shiites.… From Samara, we will start the battle to vanquish terrorism."

But Maliki's rhetoric of inclusion is seen as just that in Washington, where frustration over his chauvinistic sectarian leadership is at an all-time high.

"One of the reasons I believe that Iraq is in this situation is that the current government never fulfilled the commitments it made to bring together a unity, power-sharing government with the Sunnis, the Shiites, and the Kurds," said Hagel. "And I think that's probably generally accepted."

Sen. Dianne Feinstein, the chairman of the Senate Intelligence Committee, agreed. "I think that most of us that have followed this are really convinced that the Maliki government, candidly, has got to go if you want any reconciliation," she said. "If you want a Shiite-Sunni war, that's where we're going, in my view, right now."

Publicly, the administration has ruled out the possibility of American combat troops on the ground. However, officials are reportedly considering sending U.S. special operations forces to Iraq to offer Baghdad intelligence and battlefield advice.

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