Tuesday, February 14, 2023

Treasury’s war

From the SitRoom to the E-Ring, the inside scoop on defense, national security and foreign policy.
Feb 14, 2023 View in browser
 
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By Alexander Ward, Matt Berg and Lawrence Ukenye

Deputy Treasury Secretary Wally Adeyemo speaks at a news conference.

Deputy Treasury Secretary Wally Adeyemo will address the Council on Foreign Relations in Washington, D.C. on Feb. 21. | Anna Moneymaker/Getty Images

With help from Lara Seligman, Connor O'Brien and Daniel Lippman

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FIRST IN NATSEC DAILY –– The Treasury Department will put a greater focus on curbing Russia’s sanctions evasions in the second year of the war in Ukraine, Deputy Treasury Secretary WALLY ADEYEMO will say in a speech next week.

Adeyemo, who will address the Council on Foreign Relations in Washington, D.C. on Feb. 21, will provide an overview of the department’s involvement in the Biden administration’s efforts to undermine Russia and its plans for continuing to do so in the year ahead, according to a preview shared with NatSec Daily. He’ll make the case that the U.S. hampered Russia’s invasion plans, complicated its future economic prospects and can now further restrict Moscow’s access to assets in the 12 months ahead.

Treasury spokesperson MORGAN FINKELSTEIN exclusively outlined Adeyemo’s speech to us. In conjunction with more than 30 nations, he’ll say, Treasury imposed nearly 2,000 sanctions on Russia and the people and entities that aided its war effort. The goals for Year One were to make it harder for Moscow to build more military equipment and cut Russia’s access to foreign-provided weapons.

The result was a mixed bag. Russia’s economy did better than expected, Moscow continues to build cruise missiles and source drones from Iran. Critics have pointed to these and other developments to argue that the sanctions regime has failed to significantly curb Russia’s designs on Ukraine. Boosters of the sanctions design assert they were never meant to make Putin change his mind on the invasion. They were mostly about complicating his assault on its neighbor.

Despite the debate, Adeyemo will state that Putin is struggling to finance his war and is taking “drastic measures” to keep Russia’s economy afloat. He’ll move on to outline the department’s “strategic priority” in the war’s second year: “tightening the screws as Russia desperately tries to get around sanctions to get material it needs for the war.”

The deputy secretary will then outline how the U.S. will put a greater focus on curbing sanctions evasion by sharing intelligence with allies, identifying “red flags” alongside private-sector partners and up the pressure on “permissive companies and jurisdictions.”

Treasury Under Secretary for Terrorism and Financial Intelligence BRIAN NELSON recently traveled to the Gulf and Turkey in part to coordinate with allies and partners on “crack[ing] down on Russian attempts to evade the international sanctions and export controls imposed for its brutal war against Ukraine.” Russia is already leveraging its intelligence services to find ways to evade sanctions.

Adeyemo’s speech will be one of the many remarks made by senior Biden administration officials ahead of the one-year anniversary of the war in Ukraine. National Security Council spokesperson JOHN KIRBY will talk at Georgetown University Thursday, Vice President KAMALA HARRIS will address the Munich Security Conference this week, followed by President JOE BIDEN’s speech in Poland. It’s part of the executive’s victory lap for ably helping Kyiv repel Moscow in the war’s opening phases.

 

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The Inbox

DO THIS, NOT THAT: The U.S. is helping Ukrainians change the way they fight — relying less on artillery barrages and more on how the troops maneuver on the battlefield — as concerns mount over Western nations’ ability to replenish ammunition stocks, our own PAUL McLEARY reports.

Massive amounts of artillery have been used by both sides in the war, with thousands of shells smashing into the front lines daily. That has strained the ability of the U.S. and European countries to keep up.

Defense Secretary LLOYD AUSTIN, speaking to reporters after a meeting in Brussels with other NATO leaders, alluded to the growing concerns in Washington and elsewhere over stockpiles. He said Ukraine has “used a lot of artillery ammunition. We’re going to do everything we can, working with our international partners to ensure that we give them as much ammunition as quickly as possible.”

SAVE SOME FOR US: The United States is concerned that if it provides Ukraine with the much-wanted long-range missiles, it won’t have enough for itself, as Alex, Paul and LARA SELIGMAN reported late Monday.

In recent meetings at the Pentagon, U.S. officials told Kyiv’s representatives that it doesn’t have any Army Tactical Missile Systems to spare, said four people with knowledge of the talks. Transferring ATACMS to the battlefield in eastern Europe would dwindle America’s stockpiles and harm the U.S. military’s readiness for a future fight, the people said.

That worry, along with the administration’s existing concern that Ukraine would use the 190-mile range missiles to attack deep inside Russian territory and cross what the Kremlin has said is a red line, is why the U.S. isn’t shipping ATACMS to the frontlines any time soon.

The refusal to send the missiles comes as the Biden administration reassesses its abilities to provide aid as the war approaches the one-year mark. While the administration has said they’ll support Ukraine “as long as it takes,” the fact that there’s no end in sight to the conflict is causing officials to question how long the U.S. can help.

“We will continue to try to impress upon them that we can’t do anything and everything forever,” a senior administration official told The Washington Post’s YASMEEN ABUTALEB and JOHN HUDSON, referring to Ukraine’s leaders. “'As long as it takes’ pertains to the amount of conflict,” the official added. “It doesn’t pertain to the amount of assistance.”

NSC spokesperson Kirby pushed back on that anonymous quote, reiterating that the U.S. will support Ukraine — including with weapons — ”for as long as it takes.” However, he later added that “there’s never been a blank check” for Kyiv.

Now, the U.S. is considering other avenues to keep weapons shipments going to Ukraine. That includes sending thousands of seized weapons and more than a million rounds of ammunition, which were originally meant for Iran-backed fighters in Yemen, U.S. and European officials told the Wall Street Journal’s DION NISSENBAUM, GORDON LUBOLD and BENOIT FAUCON.

AIRCRAFT AT BORDER: Western intelligence shows that Russia is placing aircraft on the border with Ukraine, potentially signaling a more aggressive advance to come, the Financial Times’ FELICIA SCHWARTZ and HENRY FOY report.

Moscow has amassed fixed-wing and rotary aircraft, and DefSec Austin “was very clear that we have a short window of time to help the Ukrainians to prepare for an offensive and that they had some pretty specific needs” in conversations with the Ukraine Contact Group in Brussels Tuesday, according to a senior U.S. official.

“The Russian land forces are pretty depleted, so it’s the best indication that they will turn this into an air fight,” the administration aide added.

MISSILE KILLED U.S. AID WORKER: An American aid worker in Ukraine was killed in a targeted missile strike likely fired by Russian troops, a frame-by-frame analysis by The New York Times’ THOMAS GIBBONS-NEFF and MALACHY BROWNE found.

Paramedic PETE REED, a former U.S. Marine, had been tending to a wounded civilian in Bakhmut for about a minute in early February when a laser-guided antitank missile struck a white van beside them and exploded. Reed was killed, and a number of others were wounded.

It’s unclear if Russians knew the group was made up of aid workers, though one of the vans was clearly marked with a red cross. Bystanders originally attributed the incident to aimless Russian shelling.

AID TO SYRIA: Syria’s government agreed to open two new border crossings in the rebel-held northwestern region to help aid flow to areas devastated by last week’s earthquakes.

The agreement by Syrian leader BASHAR ASSAD, which opens crossings at Bab Al-Salam and Al Raée for an initial three-month period, was welcomed by U.N. Secretary-General ANTONIO GUTERRES. It’ll allow a significant boost in aid to the region, which has received little help in the past week.

While it’s great that there are additional paths for aid, “what we need to see immediately is a rapid scaleup of U.N. operations that we have not seen to date to take advantage of that window,” the Center for Strategic and International Studies’ NATASHA HALL told NatSec Daily. “We also need to see the ability for the U.N. or other actors to sustain that help and assistance… after those three months.”

IT’S TUESDAY: Thanks for tuning in to NatSec Daily. This space is reserved for the top U.S. and foreign officials, the lawmakers, the lobbyists, the experts and the people like you who care about how the natsec sausage gets made. Aim your tips and comments at award@politico.com and mberg@politico.com, and follow us on Twitter at @alexbward and @mattberg33.

While you’re at it, follow the rest of POLITICO’s national security team: @nahaltoosi, @woodruffbets, @politicoryan, @PhelimKine, @laraseligman, @connorobrienNH, @paulmcleary, @leehudson, @magmill95, @johnnysaks130, @ErinBanco and @Lawrence_Ukenye.

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2024

COUNT NIKKI IN: Former U.N. ambassador NIKKI HALEY has provided a sneak peek at the national security rhetoric she’ll espouse in her presidential run via a video announcing her candidacy.

In the video, she hones in on China, Iran and Russia in particular.

“I have seen evil. In China, they commit genocide. In Iran, they murder their own people for challenging the government,” Haley says, adding that “when a woman tells you about watching soldiers through her baby in a fire, it puts things in perspective.”

“China and Russia are on the march. They all think we can be bullied, kicked around. You should know this about me. I don't put up with bullies, and when you kick them back, it hurts them more if you're wearing heels.”

Keystrokes

CLOSE CALL: Russian hackers came dangerously close to taking control of a dozen U.S. gas and electric facilities offline during the early weeks of the war in Ukraine, our own MAGGIE MILLER reports.

The attack was the closest that U.S. infrastructure came to going completely offline, ROBERT LEE, a founder and CEO of Dragos, told reporters.

The U.S. warned that new malware, known as PIPEDREAM, was capable of accessing U.S. industrial control systems, highlighting how the nation’s domestic energy supply is vulnerable to cyber attacks. While the malware wasn’t used successfully, Lee believes that security agencies quickly moved on from the hacking effort, which could be problematic for safeguarding against future attacks.

The Complex

REDUCING DRAG: The Defense Innovation Unit is looking for commercial technology to help reduce fuel consumption of Air Force logistics aircraft, our friends over at Morning Defense (for Pros!) report.

Initial prototyping will begin with the C-17, C-130 and KC-135 cargo planes and tankers. Solutions must not alter aircraft tactics and procedures, per a notice. The goal is to provide better range and fuel efficiency without reducing load capacity.

DIU would also like for aircrew to install the solution and not require maintenance after implementation.

 

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On the Hill

THE TRUTH IS OUT THERE: Lawmakers left a classified briefing on Tuesday reiterating calls for more transparency from the White House on the objects shot down this week, our own MARIANNE LEVINE, DANIELLA DIAZ AND BURGESS EVERETT report.

Senators received their second classified briefing from the administration in less than a week on incursions into North American airspace — the first coming last week after the U.S downed a Chinese spy balloon that traversed U.S. airspace. For many, there's still little certainty.

“This is what I took away: This has been going on for years,” said Sen. JOHN KENNEDY (R-La.). “Number two, except for the China spy balloon, we don’t really know what they are. Number three, we don’t even know if we’ve caught all of them. Number four, what’s different right now is that we’ve shot some down. That’s the good news, I suppose.”

Senate Republicans nudged Biden to address the nation directly on the matter. Democrats aren’t going that far, though some indicated that the administration could be doing more.

“I pressed them on a few things. Just let people know about that," added Sen. DAN SULLIVAN (R-Alaska), over whose state an object was shot down. "It's not sources and methods. The American people are intelligent and mature. Let them know, and then make the decision….I think things get way over-classified way too much.”

HEAR YE, HEAR YE: The House Select Committee will hold its first hearing on Feb. 28 on "the Chinese Communist Party’s Threat to America,” RealClearPolitics’ PHILIP MELANCHTHON WEGMANN reports in his profile of Rep. MIKE GALLAGHER (R-Wis.).

Former senior officials from past administrations will testify about where and how the United States went wrong with dealing with China.

JAPAN AND KOREA CODEL: Rep. MARK TAKANO (D-Calif.) and FRENCH HILL (R-Ariz.) will lead a congressional delegation to Japan and South Korea during the upcoming recess, NatSec Daily has learned.

A total of five members of Congress will head to East Asia on a six-day program where they’ll meet bilaterally with Japanese Diet members in Tokyo and trilaterally in Seoul with legislators from Japan and the Korean National Assembly.

Energy, trade, infrastructure, trilateral relations and regional security will be the main subjects for the legislators.

Broadsides

‘ALL THE DETAILS’: JOHN BOLTON, DONALD TRUMP’s third national security adviser, will receive a briefing on the Chinese spy balloons on Wednesday, he told Alex.

Bolton said the session will take place at 4:30 p.m. at the Liberty Crossing Intelligence Campus in Virginia, and as of now, it’s unclear when the session will end. He didn’t disclose who specifically would conduct the briefing or whether he’ll be joined by Trump administration colleagues for the session.

He promised to “ask for all the details, top to bottom, on what the record indicates about Chinese or other aerial incursions during the Trump administration.”

“I want to know whether overflights during the Trump administration were detected or not detected. If they were detected, what were they assessed to be, and who made that assessment? How far up the chain of command did the information and assessments go?” he continued.

LAW OF WAR: Rep. SARA JACOBS (D-Calif.) and Sen. DICK DURBIN (D-Ill.) sent a letter on Tuesday to the Pentagon raising concerns about the Department of Defense’s Law of War Manual related to the law of armed conflict. DoD is reviewing the manual for the first time since 2016, and it will inform SecDef Austin’s overhaul of the Pentagon’s approach to mitigating civilian casualties.

Specifically, the lawmakers cited the manual’s approach to the presumption of civilian status; determining whether civilians directly participated in hostilities; use of human shields; and application of international human rights law.

“We are concerned that certain aspects of the manual undermine U.S. compliance with the law of armed conflict, put us out of step with many of our key allies and increase the risk of civilian harm by not accurately informing the judge advocates who advise commanders on the ground,” Jacobs and Durbin wrote in the letter, which was obtained exclusively by NatSec Daily.

LESS MILITARY MOOLAH: Fifty-nine groups, focusing on topics from national security to climate justice to faith, sent a letter urging the Biden administration to cut the military budget this year.

“We reject pouring our dollars into outdated ships, malfunctioning planes, or record-breaking contractor CEO salaries while everyday people remain hungry, unhoused, in need of adequate healthcare, or seeking a living wage,” the letter reads.

DEBRIEF: Win Without War has launched a weekly progressive foreign policy newsletter.

 

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Transitions

–– FIRST IN NATSEC DAILY: BENJAMIN MOSSBERG has been named deputy director of the Africa Center at the Atlantic Council, DANIEL LIPPMAN has learned. He most recently was senior policy adviser for Africa at the Treasury Department and worked for the State Department for 15 years.

–– FIRST IN NATSEC DAILY: KIMBERLY DONOVAN is starting at the Atlantic Council next week as the director of the Economic Statecraft Initiative within the GeoEconomics Center, Lippman has also learned. She most recently was acting associate director of the intelligence division of Treasury and FinCEN.

CHRISTINA PRYOR is now chief of the office of public affairs at the Drug Enforcement Administration. She most recently worked at the Brunswick Group and is also an alum of Skadden.

ELINA NOOR just started as a senior fellow in our Asia Program, where she will focus on developments in Southeast Asia. She previously was director of political-security affairs and deputy director of the D.C. office at the Asia Society Policy Institute.

CHRIS BROSE, Anduril Industries chief strategy officer, has joined the Hoover Institution as a visiting fellow.

WILL ROPER, former Air Force acquisition chief, is the founder and CEO of new digital engineering startup Istari.

KATIE ISAACSON has been promoted to be legislative associate at the American Legion.

JACOB HOCHBERG is now an associate staffer on the House Appropriations Subcommittee on Homeland Security. He continues as the chief of staff for Rep. HENRY CUELLAR (D-Texas).

What to Read

— ALEXANDER BURNS, POLITICO: The U.S., Owning a Powerhouse Microchip-making Industry? Fat Chance, Taiwan's Tech King Told Pelosi.

— EVAN A. FEIGENBAUM and ADAM SZUBIN, Foreign Affairs: What China Has Learned From the Ukraine War

— Defense Intelligence Agency: Iranian UAVs in Ukraine: A Visual Comparison

Tomorrow Today

— The International Institute for Strategic Studies, 6 a.m.: The Military Balance 2023 launch

— The Carnegie Endowment for International Peace, 8 a.m.: China-Russia Relations One Year into the Ukraine War

— Exchange Monitor, 8:30 a.m.: 15th Annual Nuclear Deterrence Summit

— Senate Armed Services Committee, 9:30 a.m.: Global Security and Challenges

— The Center for Strategic and International Studies, 10 a.m.: The War in Ukraine One Year On

— The American Bar Association's Senior Lawyers Division, 12 pm.: Human Rights Violations in Afghanistan

— The Carnegie Endowment for International Peace, 1 p.m.: Confronting Saddam Hussein

— The Center for Strategic and International Studies, 2 p.m.: Europe Awakened: An Assessment After a Year of War

— The Henry L. Stimson Center, 2 p.m.: Lesson from Ukraine for Maritime East Asia

— The United States Institute of Peace, 3 p.m.:The Fate of the ‘Asian Peace’”: A Conversation on Regional Stability in East Asia and the Pacific

Have a natsec-centric event coming up? Transitioning to a new defense-adjacent or foreign policy-focused gig? Shoot me an email at award@politico.com to be featured in the next edition of the newsletter.

Thanks to our editor, Heidi Vogt, who always says “I have seen evil” after working with us.

We also thank our producer, Kierra Frazier, who is the embodiment of goodness.

A message from Lockheed Martin:

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