Fdd's overnight brief

Iran

France, Britain and Germany, defying threats from Washington, are this week executing their plans to set up a special-payments company to secure some trade with Iran and blunt the impact of U.S. sanctions. In the short term, the new company is expected to struggle to achieve even its initial goal of enabling Tehran to import vital food and drugs at affordable prices. – Wall Street Journal

Iran’s economy has been hobbled by banking sanctions that effectively stop foreign companies from doing business in the country. But transactions in Bitcoin, difficult to trace, could allow Iranians to make international payments while bypassing the American restrictions on banks. – New York Times

Iran’s president said on Wednesday the country was facing its toughest economic situation in 40 years, and the United States, not the government, was to blame. – Reuters

Two bombs exploded on Tuesday in front of a police station in the city of Zahedan in southeastern Iran, local officials told state media, causing minor injuries to three police officers. – Reuters

The governments of Syria and Iran have agreed steps that will allow bank transactions between the countries, officials said on Tuesday, a move aimed at boosting trade and investment as Damascus looks to its ally Tehran to help rebuild from war. – Reuters

The Central Bank of Iran has released an early draft of its regulations on cryptocurrencies, reversing a previous ban, but still imposing restrictions on the use of the digital currency inside the Islamic Republic. – Al Jazeera

Michael Rubin writes: The Iranian claim to have developed JDAMs appears exaggerated. While Iran did reportedly develop GPS-guided UAVs, a reverse image search of the photos included in the Mashregh News article depicting the supposed JDAM determined that they are more than a decade old and not originally published in Iran. While the excerpted article itself leaves room for doubt, the falsification of photos allegedly taken at the Kish Air Show suggest, in this case, that the announced advance is more ambition than reality. – American Enterprise Institute

Michael Rubin writes: The overall tenor of the interview suggests that the Basij sees itself as the cultural bulwark against the broader Iranian public, which does not share the Basij’s commitment to the principles upon which Revolutionary Leader Ruhollah Khomeini based the 1979 Islamic Revolution. […]Iran’s cybercrime law makes the distribution or promotion of any tool to bypass filtering programs illegal. While the Iranian government has widely interpreted the law to make VPNs illegal, the Basij may also seek legislative clarity to tighten what has been to date spotty enforcement. – American Enterprise Institute

Eli Lake writes: The assessment of the U.S. intelligence community today is that Iran continues to be an aggressor in the region, while it is more or less complying with the limits spelled out in the 2015 agreement. […]There is a lesson here for Trump — and his critics. Anyone worried about his North Korean diplomacy also needs to be honest about the shortcomings of Obama’s bargain with Iran. Trump himself, meanwhile, should be honest about what he’s trying to accomplish. Because if he really wants to rid North Korea of nuclear weapons, he needs to think first about how to rid North Korea of Kim Jong Un. – Bloomberg

Israel

A former Israeli military chief has emerged as a leading challenger to Prime Minister Benjamin Netanyahu, and is touting his security credentials to launch his political campaign ahead of April elections. On Tuesday, Benny Gantz formally launched his candidacy for Israel’s premiership and unveiled his newly formed party’s political platform. – Wall Street Journal

The government of the Palestinian Authority tendered its resignation on Tuesday, a move that reflected rising public discontent and the failure of efforts to reunite the West Bank, where the authority is based, and the Gaza Strip, controlled by the militant Islamist group Hamas. – New York Times

Palestinians in Hebron accused Israel on Tuesday of trying to rid the flashpoint city of witnesses to its actions in the occupied West Bank by ejecting a foreign observer force that helps safeguard residents. – Reuters

Amnesty International on Wednesday urged online travel sites to ban listings from Israeli settlements in the occupied West Bank. – Associated Press

Republicans added a provision to an otherwise bipartisan Syria sanctions bill that would let local and state governments cut ties with groups and businesses that advocate boycotting Israel. The new provision prompted complaints from some Democrats who say it would restrict free speech in an effort to politicize traditionally bipartisan support for Israel. – Bloomberg

The World Council of Churches plans to pull its observers from the West Bank city of Hebron fearing that they are no longer safe from “harassment” by Jewish residents of the city and the IDF. The announcement follows Israel’s decision to end the 22-year old observer mission, known as the Temporary International Presence in Hebron, which had 64 civilian participants from Norway, Sweden, Switzerland, Italy and Turkey that participated. – Jerusalem Post

Israel may have breached the Oslo Accords with its decision to oust international observers from Hebron, Norwegian Foreign Minister Ine Eriksen Soereide said on Tuesday. – Jerusalem Post

Middle East & North Africa

Egyptian security forces have arrested 54 people, including suspected members of the Muslim Brotherhood, for planning to hold protests and commit violence on the anniversary of the 2011 uprising, the Interior Ministry said on Tuesday.  – Reuters

The head of Libya’s national oil company has said he wants to set up a national force armed with surveillance to protect the country’s petroleum assets after repeated seizures of oil installations by militias. – The Guardian

Despite difficulties in securing high-level attendance from the European Union and the expected absence of Russia, US officials are in the final stages of preparing the Warsaw ministerial meeting on the Middle East in the Polish capital on February 13-14. Working groups and follow-up meetings will come out of Warsaw, and US officials insist now that it is “not an anti-Iran meeting or coalition-building exercise.” – The National

Emadeddin Badi writes: The U.S., U.K., and France have recently issued sanctions against militia leader Salah Badi, demonstrating that the international community will not tolerate acts of violence against the Libyan people. Salamé should build on this engagement by encouraging the UN and other Security Council members to adopt similar measures. This would allow international actors to demonstrate that they are objectively analyzing the situation, assessing actions that would help or hinder the political process, and avoid the appearance that they are imposing sanctions on the basis of political ideology. – Middle East Institute

China

Cabinet-level delegations from the U.S. and China will resume trade negotiations here Wednesday, but early indications are that the two sides remain sharply divided, suggesting a hard slog ahead for a deal to be cut before a March 1 deadline. – Wall Street Journal

Canada said Tuesday it received a formal request from the U.S. for the extradition of Huawei Technologies Co.’s chief financial officer, Meng Wanzhou. – Wall Street Journal

U.S. intelligence leaders said Tuesday they believe China currently poses the most dangerous and complex counterintelligence threat to the nation. – The Hill

Editorial: The indictment charges that Huawei misled the U.S. government and banks about business that violated Western sanctions against Iran. The legal proceedings against Ms. Meng, who is being held under house arrest in Canada pending an extradition request by the United States, should not be politicized in the current Sino-American trade dispute. If the charges in the indictments are true, then it is clear Huawei intentionally snubbed its nose at international norms and laws, which in turn means it could pose a potentially large national security risk to the West. – Washington Post

Emily Rauhala writes: U.S. moves against Huawei raise tough, long-term questions about Canada’s relationship with China. Trudeau campaigned on a promise to improve relations with the world’s second-largest economy, as part of a broader push to make Canada less dependent on trade with the United States. Nearly two months into the Meng dispute, with two Canadians in detention and one Canadian facing the death penalty, the mood in Canada seems to be shifting. With China in the headlines for the wrong reasons, Trudeau may find Canadians are less willing to engage the country, let alone do business with Huawei. – Washington Post

Thomas J. Duesterberg writes: The criminal charges help validate U.S. accusations that China systematically steals valuable technology and that its companies sell sensitive equipment to repressive regimes such as Iran. Although not unexpected, they come on the eve of high-level trade negotiations in Washington with China this week, and will probably slow down the Chinese effort to close a deal. – Hudson Institute

Alexis C. Madrigal writes: The current Huawei saga has all the trappings of a Cold War espionage thriller, but reengineered for our current moment. Instead of Russia, it’s China. Instead of arms, it’s mobile technology. Instead of Iran, it’s … no, it’s still Iran, actually. […]Even without American business, Huawei has grown tremendously in size and influence. American officials are working their hardest to keep Huawei out of its allies’ networks, but the company is “flourishing in Europe.” – The Atlantic

Joseph A. Bosco writes: It is time for a new presidential clarification to remove any doubt from the minds of Xi Jinping and his colleagues: Washington will intervene on Taiwan’s side against any form of Chinese Communist aggression. Otherwise, American strategic ambiguity seems certain to lead to Chinese strategic miscalculation. – Taiwan Insight

Russia

U.S. intelligence officials warned Tuesday of increased threats to national security from tighter cooperation between China and Russia, while also differing with President Trump in their analysis of North Korea’s nuclear intentions and the current danger posed by Islamic State. – Wall Street Journal

Donald Trump sat down with Vladimir Putin for several minutes of conversation at the end of an evening event at the G20 summit in Buenos Aires in November, with no translator or note-taker from the US side to record the dialogue between the leaders, according to people who had direct knowledge of the encounter or were briefed on it. – Financial Times

Graham T. Allison and Dimitri K. Simes write: The U.S. and Russia have grown more antagonistic in theaters from the Middle East to Eastern Europe. Meanwhile, the Washington foreign-policy establishment is increasingly in agreement that China is the primary strategic adversary of the U.S. as the two countries clash over trade and the South China Sea. It would be surprising if strategists in Beijing and Moscow did not recognize a common enemy. – Wall Street Journal

Venezuela

Venezuelan authorities moved to prohibit opposition leader and self-declared interim president Juan Guaidó from leaving the country and to freeze his bank accounts, prompting the United States, which a day earlier slapped sweeping sanctions on Venezuela’s state-run oil company, to say there would be “serious consequences” if Guaidó is harmed. – Washington Post

Russia extended its criticism of the U.S. stance on Venezuela on Tuesday, describing the latest sanctions against the government of President Nicolás Maduro as illegitimate, even as the Russian Finance Ministry acknowledged that its loans to Caracas were at risk because of the crisis. – Washington Post

The last time the U.S. slapped sanctions on a major oil-producing nation, Saudi Arabia backed a coordinated American effort to boost exports and keep global crude supplies in balance. But this time, as the Trump administration moves to embargo Venezuelan oil, the White House’s key Middle Eastern ally won’t be as eager to rush to its aid, say people familiar with the kingdom’s thinking. – Wall Street Journal

Reeling from American oil sanctions, President Nicolás Maduro’s government on Tuesday fought to keep its grip on Venezuela, opening an investigation into what it called the “violent acts” of the nation’s opposition leader, freezing his assets and barring him from leaving the country. – New York Times

Venezuelan President Nicolas Maduro accused Donald Trump of ordering neighboring Colombia’s government to kill him, but said he was open to the possibility of talks with the U.S. leader and his own domestic foes. – Reuters

The unusual arrival of a Russian passenger plane in Caracas has set social media abuzz with rumors about its mission after the Kremlin pledged to support its ally Venezuelan President Nicolas Maduro against a U.S.-backed effort to drive him from office. – Reuters

Following U.S. President Donald Trump’s recognition of Venezuelan opposition leader Juan Guaido as that country’s legitimate president, not President Nicolas Maduro, Hizbullah declared its support for Maduro, condemned the “attempted overthrow” that it said was orchestrated by the U.S., and sent an official delegation to the Venezuelan Embassy in Beirut to express its support for Maduro. – Middle East Media Research Institute

Anne Applebaum writes: Venezuela has not just suffered from ideology, it also has suffered from false ideology, from a “socialism” that gave up on health care and education, from a “populism” that put drug dealers in power, and from ordinary greed. The Venezuelan tragedy is the end game of a certain form of politics, the place where so many of today’s “illiberal democrats” may also eventually end up. – Washington Post

Edward Lucas writes: Symbolism is no match for action, though. The nuances of diplomatic recognition can support a policy, but are not a substitute for it. The hard-pressed Venezuelan opposition will be delighted that the United States and its allies are signaling support. But just like the captive nations during the cold war, they will be hoping for something more substantial. – Center for European Policy Analysis

Defense

U.S. defense executives expect the Pentagon to boost spending further, potentially ending months of uncertainty about the government’s plans that has spooked investors. Lockheed Martin Corp. and other contractors said Tuesday that the White House budget request for fiscal 2020 would likely be in line or surpass previous spending that had already generated record orders for combat jets, missile defense systems and space hardware. – Wall Street Journal

Lockheed Martin has been given assurances by top Pentagon leaders that the F-35 program will not be negatively impacted by a potential U.S. Air Force buy of Boeing’s F-15X, Lockheed CEO Marillyn Hewson said Tuesday. – Defense News

Large and medium-sized unmanned surface combatants under development by the U.S. Navy will likely have crews aboard, at least at first. – Defense News

Acting Defense Secretary Pat Shanahan has recommended that a new Space Force be established within the Air Force, making it a separate branch akin to the Marine Corps, which is part of the Navy but not a fully fledged military department. – Politico

Acting Secretary of Defense Patrick Shanahan has identified who he wants to lead U.S. Space Command, and work is underway on the confirmation process. – Defense News

The Abraham Lincoln Carrier Strike Group is underway for pre-deployment training after reaping the benefits of several high-end training opportunities in the last several months. – USNI News

Brian Katz writes: Simply put, policymakers must weigh the need to attack and degrade a terrorist group against the risk of long-term instability and potentially creating the conditions for the next iteration of the terrorist group to emerge. Policymakers may reasonably opt for the proxy approach, particularly if terrorist groups pose an immediate threat of regional chaos or external attacks but should be clear-eyed about the long-term risks and work to mitigate them. – Center for Strategic and International Studies