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Tillerson says he and Trump disagree over Iran nuclear deal

Tillerson says he and Trump disagree over Iran nuclear deal

By Yeganeh Torbati

WASHINGTON (Reuters) – U.S. Secretary of State Rex Tillerson acknowledged on Tuesday that he and President Donald Trump disagree over the 2015 Iran nuclear deal, and said the two men discuss how to use the international agreement to advance administration policies.

Trump at times vowed during the 2016 presidential election campaign to withdraw from the agreement, which was signed by the United States, Russia, China and three European powers to curb Iran’s nuclear program in return for lifting most Western sanctions.

Trump has preserved the deal for now, although he has made clear he did so reluctantly after being advised to do so by Tillerson.

“He and I have differences of views on things like JCPOA, and how we should use it,” Tillerson said at a State Department briefing, using the acronym for the deal, formally called the Joint Comprehensive Plan of Action (JCPOA).

Tillerson said that Washington could “tear it up and walk away” or stay in the deal and hold Iran accountable to its terms, which he said would require Iran to act as a “good neighbor.”

Critics say the deal falls short in addressing Iran’s support for foreign fighters in Iraq and Syria, arms shipments around the Middle East and ballistic missile tests.

The White House did not immediately respond to a request for comment on Tillerson’s remarks.

Trump said in an interview with the Wall Street Journal last month that he predicts Iran will be judged “noncompliant” with the Iran deal at the next deadline in October, and that he would have preferred to do so months ago.

Tillerson expressed a more nuanced view of the deal’s potential benefits on Tuesday.

“There are a lot of alternative means with which we use the agreement to advance our policies and the relationship with Iran, and that’s what the conversation generally is around with the president as well,” Tillerson said.

European officials would likely be reluctant to re-impose sanctions, especially the broader measures that helped drive Iran to negotiate over its nuclear program in the first place, he said.

New U.S. sanctions on Iran in July were a breach of the nuclear deal and Tehran had lodged a complaint with the body that oversees the pact’s implementation, a senior Iranian politician said.

Tillerson acknowledged that the United States is limited in how much it can pressure Iran on its own and said it was important to coordinate with the other parties to the agreement.

“The greatest pressure we can put to bear on Iran to change the behavior is a collective pressure,” he said.

(Reporting by Yeganeh Torbati; editing by Grant McCool)

Shunned from bond market, U.S. Virgin Islands faces cash crisis

Doctor Michelle Berkely (L) and Chief Financial Officer Tim Lessing of the Juan F. Luis Hospital and Medical Center, talk to Reuters in Christiansted, on the outskirts of St Croix, U.S. Virgin Islands June 29, 2017. Picture taken June 29, 2017. REUTERS/Alvin Baez

By Robin Respaut

ST. CROIX, V.I. (Reuters) – For a glimpse at the precarious financial health of this Caribbean island, visit its public hospital.

Pipes underneath the emergency room collapsed in May, causing waste water to back up through the drains. Now workers and visitors – even patients – use portable toilets set up on the sidewalk. The hospital doesn’t have the cash for new plumbing.

For years the U.S. Virgin Islands funded essential public services with help from Wall Street. Investors lined up to purchase its triple-tax-exempt bonds, a form of debt free from municipal, state and federal taxes.

Now the borrowing window has slammed shut. Trouble in neighboring Puerto Rico, which recently filed for a form of bankruptcy after a string of debt defaults, has investors worried that the U.S. Virgin Islands might be next.

With just over 100,000 inhabitants, the protectorate now owes north of $2 billion to bondholders and creditors. That’s the biggest per capita debt load of any U.S. territory or state – more than $19,000 for every man, woman and child scattered across the island chain of St. Croix, St. Thomas and St. John. The territory is on the hook for billions more in unfunded pension and healthcare obligations.

“We have a government that we can’t afford, and now all of it is converging,” said Holland Redfield, a former six-term U.S. Virgin Islands senator who hosts a radio talk show about politics in the territory. “We’re getting to the point where we may have a potential meltdown.”

Ratings agencies have downgraded the islands’ credit ratings deep into junk territory. With the U.S. Virgin Islands shut out of the credit markets after a failed January bond issue, officials are scrambling to stabilize its finances after years of taking on debt to plug yawning budget holes.

The government proposes to slash public spending by 10 percent. It recently hiked taxes on liquor, cigarettes, sugary drinks and vacation timeshares. And it has threatened to auction homes and businesses of property-tax deadbeats.

Governor Kenneth Mapp is quick to reassure bondholders that they get first crack at one of the territory’s largest funding sources: rum taxes. The money pays debt service before heading to government coffers, a protection called a lockbox.

The U.S. Virgin Islands has “never been late on a payment, much less defaulted on a bond or loan agreement,” Mapp said during his State of the Territory address in January.

But how these islands will recover from years of budget deficits and a severe liquidity crisis remains to be seen. The territory lost its single-largest private employer five years ago when a refinery shut down. Gross domestic product has declined by almost one-third since 2008. At times this year the government was operating with just two days’ cash on hand.

Locals live with pitted roads, crumbling schools, electricity outages and deteriorating medical care.

At the Juan F. Luis Hospital and Medical Center, plumbing troubles are just the beginning. Doctors have stopped performing some vital procedures, including implanting pacemakers and heart defibrillators, because the facility can’t pay suppliers for the devices, officials say.

“We have gone from bad to worse, and the patients are the ones who are suffering,” said Dr. Kendall Griffith, an interventional cardiologist who recently left the island to take a job in a Georgia hospital. “It’s forcing physicians to make hard decisions.”

FORGOTTEN ISLANDS

Before Puerto Rico imploded under $70 billion in debt and $50 billion of unfunded pension liabilities, few in Washington noticed troubles brewing in the other inhabited U.S. territories of American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands.

Residents of these places are U.S. citizens, but they can’t vote in presidential elections and their Washington delegates are non-voting figureheads. Despite high poverty rates and joblessness, the territories receive just a fraction of the federal funding allocated to U.S. states for entitlements such as Medicare and Medicaid.

To bridge the gap, some have turned to the bond market. Bond issues typically fund infrastructure and capital projects. But in the case of Puerto Rico and the U.S. Virgin Islands, officials increasingly relied on borrowed money to fund government operations.

Debt loads for both territories have grown to staggering proportions, now surpassing 50 percent of their respective GDPs. That’s higher than anywhere in the nation and sharply above the state median of 2.2 percent, Moody’s Investors Service found.

(For a graphic on U.S. territory debt, see: http://tmsnrt.rs/2h8TGIo)

Bond buyers for years whistled past the territories’ shaky finances, comforted in the knowledge that these governments couldn’t seek bankruptcy protections available to many municipalities.

“There was an idea that because of the lockbox structure and the fact that the territories did not have a path to bankruptcy, they had to pay you,” said Curtis Erickson, San Francisco-based managing director of Preston Hollow Capital, a municipal specialty finance company.

That all changed in 2016 when Congress passed legislation known as PROMESA giving Puerto Rico its first access to debt restructuring. The move sparked a ferocious battle among creditors to see who would shoulder the largest losses.

Investors quickly surmised the U.S. Virgin Islands might pursue the same strategy. In December, S&P Global Ratings downgraded the territory by a stunning seven notches to B from BBB+, putting it well below investment grade.

The U.S. Virgin Islands is adamant that S&P and other ratings agencies overreacted. The territory has been unfairly “tainted by Puerto Rico’s pending bankruptcy,” and has no intention of pursuing debt restructuring, said Lonnie Soury, a government spokesman.

In addition to tax hikes and budget cuts, he said the current administration is looking to do more with its tourism and horse racing industries to boost development.

BIG DEBTS, FEW OPTIONS

In the meantime, the U.S. Virgin Islands is trapped in a circle of hock that’s making it tough to maneuver.

The government and its two public hospitals, for example, owe a combined $28 million to the territory’s water and power authority, known as WAPA. In turn, WAPA owes about $44 million to two former fuel vendors.

Then there’s the $3.4 billion of unfunded liabilities for public pensions and retiree healthcare. The pension fund is 19.6 percent funded and projected to run out of money by 2023.

Pensioners can wait months before their annuities start, because the government is behind on its contributions. St. Croix resident Stephen Cohen, 67, said it took almost a year after he retired as a high school biology teacher before he received his first check in 2016.

“A lot of people are financially stressed,” Cohen said. “They didn’t realize how bad things would get.”

Territory officials can’t say how they will close a projected $100 million budget shortfall for this fiscal year. That’s on top of an accumulated net deficit of $4.4 billion, according to government financial records.

Back at Juan F. Luis Hospital, officials hope to move the emergency room into the cardiac wing so repairs can begin on the collapsed pipes.

The government has pledged $3 million for the job, but Tim Lessing, the facility’s chief financial officer, wonders if he’ll see it.

“The territory is in a tough position,” Lessing said. “Nobody’s buying the paper.”

(Editing by Marla Dickerson)

Trump administration sends conflicting signals on Russia sanctions

U.S. Vice President Mike Pence (L) arrives with Secretary of State Rex Tillerson (R) to attend a joint press conference held by U.S. President Donald Trump and Colombian President Juan Manuel Santos at the White House in Washington, U.S., May 18, 2017. REUTERS/Yuri Gripas

By Yeganeh Torbati

WASHINGTON (Reuters) – President Donald Trump grudgingly accepted new congressional sanctions on Russia, the top U.S. diplomat said on Tuesday, remarks in contrast with those of Vice President Mike Pence, who said the bill showed Trump and Congress speaking “with a unified voice.”

The U.S. Congress voted last week by overwhelming margins for sanctions to punish the Russian government over interference in the 2016 presidential election, annexation of Crimea and other perceived violations of international norms.

U.S. Secretary of State Rex Tillerson told reporters that he and Trump did not believe the new sanctions would “be helpful to our efforts” on diplomacy with Russia.

Trump has been clear that he wants to improve relations with Russia, a desire that has been hamstrung by findings of U.S. intelligence agencies that Russia interfered to help the Republican against Democrat Hillary Clinton. U.S. congressional panels and a special counsel are investigating. Moscow denies any meddling and Trump denies any collusion by his campaign.

Tillerson, who did business in Russia when he was chief executive of Exxon Mobil, has said repeatedly that the world’s two major nuclear powers cannot have such a bad relationship.

“The action by the Congress to put these sanctions in place and the way they did, neither the President nor I were very happy about that,” Tillerson said. “We were clear that we didn’t think it was going to be helpful to our efforts, but that’s the decision they made, they made it in a very overwhelming way. I think the president accepts that.”

Tillerson stopped short of saying definitively that Trump would sign the sanctions, saying only that “all indications are he will sign that bill.”

Vice President Mike Pence, at a press conference in Georgia with Prime Minister Giorgi Kvirikashvili, said unequivocally that “President Trump will sign the Russia sanctions bill soon.”

Pence acknowledged that the administration objected to earlier versions of the sanctions bill because it did not grant enough flexibility to the administration, but said it “improved significantly” in later versions.

“And let me say that in signing the sanction, our President and our Congress are speaking with a unified voice,” Pence said.

White House spokeswoman Sarah Sanders said on Tuesday the sanctions bill was under review and would be signed.

“There’s nothing holding him back,” Sanders said at a news briefing. Trump has until Aug. 9 to sign the bill, or veto it, or it will automatically become law.

In retaliation for the sanctions, Russian President Vladimir Putin said on Sunday that the U.S. diplomatic mission in Russia must reduce its staff by 755 people. Russia is also seizing two properties near Moscow used by American diplomats.

Tillerson said Putin probably believes his response was a symmetrical action to Washington seizing two Russian properties in the United States and expelling 35 diplomats last December.

“Of course it makes our lives more difficult,” he said.

Tillerson said he and Russian Foreign Minister Sergei Lavrov would meet in Manila on the margins of next weekend’s meetings of the Association of Southeast Asian Nations.

(Reporting by Yeganeh Torbati; additional reporting by Ayesha Rascoe and Patricia Zengerle; editing by Grant McCool)

U.S. senators to introduce bill to secure ‘internet of things’

A man takes part in a hacking contest during the Def Con hacker convention in Las Vegas, Nevada, U.S. on July 29, 2017. REUTERS/Steve Marcus

By Dustin Volz

SAN FRANCISCO (Reuters) – A bipartisan group of U.S. senators on Tuesday plans to introduce legislation seeking to address vulnerabilities in computing devices embedded in everyday objects – known in the tech industry as the “internet of things” – which experts have long warned poses a threat to global cyber security.

The new bill would require vendors that provide internet-connected equipment to the U.S. government to ensure their products are patchable and conform to industry security standards. It would also prohibit vendors from supplying devices that have unchangeable passwords or possess known security vulnerabilities.

Republicans Cory Gardner and Steve Daines and Democrats Mark Warner and Ron Wyden are sponsoring the legislation, which was drafted with input from technology experts at the Atlantic Council and Harvard University. A Senate aide who helped write the bill said that companion legislation in the House was expected soon.

“We’re trying to take the lightest touch possible,” Warner told Reuters in an interview. He added that the legislation was intended to remedy an “obvious market failure” that has left device manufacturers with little incentive to build with security in mind.

The legislation would allow federal agencies to ask the U.S. Office of Management and Budget for permission to buy some non-compliant devices if other controls, such as network segmentation, are in place.

It would also expand legal protections for cyber researchers working in “good faith” to hack equipment to find vulnerabilities so manufacturers can patch previously unknown flaws.

Security researchers have long said that the ballooning array of online devices including cars, household appliances, speakers and medical equipment are not adequately protected from hackers who might attempt to steal personal information or launch sophisticated cyber attacks.

Between 20 billion and 30 billion devices are expected to be connected to the internet by 2020, researchers estimate, with a large percentage of them insecure.

Though security for the internet of things has been a known problem for years, some manufacturers say they are not well equipped to produce cyber secure devices.

Hundreds of thousands of insecure webcams, digital records and other everyday devices were hijacked last October to support a major attack on internet infrastructure that temporarily knocked some web services offline, including Twitter, PayPal and Spotify.

The new legislation includes “reasonable security recommendations” that would be important to improve protection of federal government networks, said Ray O’Farrell, chief technology officer at cloud computing firm VMware.

(Reporting by Dustin Volz; Editing by Bill Rigby)

VP Pence says Russia’s stance must change before ties improve

U.S. Vice President Mike Pence delivers a speech during a meeting with U.S. troops taking part in NATO led joint military exercises Noble Partner 2017 at the Vaziani military base near Tbilisi, Georgia August 1, 2017. REUTERS/Irakli Gedenidze

By Margarita Antidze

TBILISI (Reuters) – U.S. Vice President Mike Pence said on Tuesday that relations with Russia would not improve until Moscow changed its stance on Ukraine and withdrew support for “regimes like Iran and Syria and North Korea”.

The U.S. Congress voted last week for new sanctions on Russia and, at a news conference in Georgia’s capital Tbilisi, Pence said the “lifting of sanctions will require Russia to reverse the actions that caused sanctions to be imposed in the first place”.

“Russia’s destabilizing activities in Ukraine, their support for rogue regimes like Iran and Syria and North Korea … their posture has to change,” he said at a joint news conference with Georgian Prime Minister Giorgi Kvirikashvili.

Pence said U.S. President Donald Trump would sign the new sanctions on Russia into law this week and said that Trump and Congress were “speaking with a unified voice”.

Keeping to previous U.S. administrations’ line, Pence also condemned Russia’s presence in Georgia.

Moscow, whose annexation of Crimea in 2014 prompted U.S. and EU sanctions, still has troops stationed in Georgia after a 2008 war over the breakaway region of South Ossetia, backing Georgia’s Abkhazia, a region also controlled by pro-Russian separatists.

Pence also said the U.S. was still behind Georgia’s application to become a member of NATO.

“We’ll continue to work closely with this prime minister and the government of Georgia broadly to advance the policies that will facilitate becoming a NATO member,” he said.

NATO promised Georgia membership in 2008, and three ex-Soviet Baltic nations – Estonia, Latvia and Lithuania – are already members. Pence has reassured them during this tour that Washington firmly backs NATO’s doctrine of collective defense.

In the Estonian capital of Tallinn on Monday, he assured them of U.S. support if they faced aggression from Russia.

Asked about Pence’s visit, Kremlin spokesman Dmitry Peskov said nations had the right to choose their partners.

“The only problem for us, is when this involves the expanding of various alliances and their infrastructure toward our borders. This is a cause of concern for us,” Peskov told reporters on a conference call.

During his visit, Pence attended Georgian-American military exercises, which began in Georgia on Sunday. About 2,800 soldiers from the United States, Britain, Germany, Turkey, Ukraine, Slovenia, Armenia and Georgia are taking part in the maneuvers, which will last for two weeks.

On Wednesday, Pence visits Montenegro, which joined NATO in June. The tiny Balkan nation won praise from Washington for joining despite pressure against the move from Russia.

(Writing by Dmitry Solovyov; Additional reporting by Dmitry Solovyov in Moscow; Editing by Maayan Lubell)

Iran accuses United States of breaching nuclear deal

FILE PHOTO: Iranian Parliament Speaker Ali Larijani speaks during a news conference in Beirut December 22, 2014. REUTERS/Mohamed Azakir/File Photo

By Bozorgmehr Sharafedin

LONDON (Reuters) – Iran believes new sanctions that the United States has imposed on it breach the nuclear deal it agreed in 2015 and has complained to a body that oversees the pact’s implementation, a senior politician said on Tuesday.

Under the Joint Comprehensive Plan of Action (JCPOA), signed by the United States, Russia, China and three European powers, Iran curbed its nuclear work in return for the lifting of most sanctions.

However, the U.S. Treasury imposed sanctions on six Iranian firms in late July for their role in the development of a ballistic missile program, after Tehran launched a rocket capable of putting a satellite into orbit.

The U.S. Senate voted on the same day to impose new sanctions on Iran, Russia and North Korea. The sanctions in that bill also target Iran’s missile programs as well as human rights abuses.

“Iran’s JCPOA supervisory body assessed the new U.S. sanctions and decided that they contradict parts of the nuclear deal,” Ali Larijani, the speaker of Iran’s parliament, was quoted as saying by the Tasnim news agency.

“Iran has complained to the (JCPOA) Commission for the breach of the deal by America,” he added, referring to the joint commission set up by the six world powers, Iran and the European Union to handle any complaints about the deal’s implementation.

If the commission is unable to resolve a dispute, parties can take their grievances to the U.N. Security Council.

U.S. President Donald Trump, who has called the agreement – negotiated by his predecessor Barack Obama – “the worst deal ever” last week told Iran to adhere to the terms of the nuclear accord or face “big, big problems”, although his administration has certified Iran as being in compliance with the it.

Iranian media said on Monday the government had agreed measures in response to the U.S. sanctions and that President Hassan Rouhani would announce them soon to relevant ministries.

Iran has previously accused the United States of defying the spirit of the nuclear deal or “showing bad faith”, but has not taken any formal action against Washington.

(Reporting by Bozorgmehr Sharafedin; Editing by Robin Pomeroy)

China hits back at Trump criticism over North Korea

Soldiers carry a PLA flag and Chinese national flags before the military parade to commemorate the 90th anniversary of the foundation of China's People's Liberation Army (PLA) at Zhurihe military base in Inner Mongolia Autonomous Region, China, July 30, 2017. REUTERS/Stringer

By Ben Blanchard and Elias Glenn

BEIJING (Reuters) – China hit back on Monday after U.S. President Donald Trump tweeted he was “very disappointed” in China following North Korea’s latest missile test, saying the problem did not arise in China and that all sides need to work for a solution.

China has become increasingly frustrated with American and Japanese criticism that it should do more to rein in Pyongyang. China is North Korea’s closest ally, but Beijing, too, is angry with its continued nuclear and missile tests.

North Korea said on Saturday it had conducted another successful test of an intercontinental ballistic missile that proved its ability to strike the U.S. mainland, drawing a sharp warning from Trump and a rebuke from China.

Video of the latest missile test appears to show it breaking up before landing, indicating Pyongyang may not yet have mastered re-entry technology needed for an operational nuclear-tipped missile, a think tank reported on Monday.

Japanese Prime Minister Shinzo Abe spoke with Trump on Monday and agreed on the need for more action on North Korea just hours after the U.S. Ambassador to the United Nations said Washington is “done talking about North Korea”.

A White House statement after the phone call said the two leaders “agreed that North Korea poses a grave and growing direct threat to the United States, Japan, the Republic of Korea, and other countries near and far”.

It said Trump “reaffirmed our ironclad commitment” to defend Japan and South Korea from any attack, “using the full range of United States capabilities”.

Trump tweeted on Saturday after the missile test that he was “very disappointed” in China and that Beijing profits from U.S. trade but had done “nothing” for the United States with regards to North Korea, something he would not allow to continue.

Asked by a reporter on Monday how he plans to deal with Pyongyang, Trump said at the start of a Cabinet meeting: “We’ll handle North Korea… It will be handled.”

China’s Foreign Ministry, in a statement sent to Reuters responding to Trump’s earlier tweets, said the North Korean nuclear issue did not arise because of China and that everyone needed to work together to seek a resolution.

Russia said on Monday the United States and other countries were trying “to shift responsibility for the situation to Russia and China” following the most recent missile test.

“We view as groundless attempts undertaken by the U.S. and a number of other countries to shift responsibility to Russia and China, almost blaming Moscow and Beijing for indulging the missile and nuclear ambitions of the DPRK (North Korea),” the Russian Foreign Ministry said in a statement.

At the United Nations in New York, China’s U.N. ambassador said on Monday it is primarily up to the United States and North Korea, not Beijing, to reduce tensions and work toward resuming talks to end Pyongyang’s nuclear weapon and missile programs.

The United States and North Korea “hold the primary responsibility to keep things moving, to start moving in the right direction, not China,” China’s U.N. Ambassador Liu Jieyi told a news conference to mark the end of Beijing’s presidency of the U.N. Security Council in July.

“No matter how capable China is, China’s efforts will not yield practical results because it depends on the two principal parties,” Liu said.

Chinese Vice Commerce Minister Qian Keming told a news conference there was no link between the North Korea issue and China-U.S. trade.

“We think the North Korea nuclear issue and China-U.S. trade are issues that are in two completely different domains. They aren’t related. They should not be discussed together,” Qian said.

China, with which North Korea does most of its trade, has repeatedly said it strictly follows U.N. resolutions on North Korea and has denounced unilateral U.S. sanctions as unhelpful.

Nikki Haley, U.S. Ambassador to the United Nations, said in a statement China must decide if it is willing to back imposing stronger U.N. sanctions on North Korea over Friday night’s long-range missile test, the North’s second this month.

Any new U.N. Security Council resolution “that does not significantly increase the international pressure on North Korea is of no value”, Haley said, adding that Japan and South Korea also needed to do more.

Abe told reporters after his conversation with Trump that repeated efforts by the international community to find a peaceful solution to the North Korean issue had yet to bear fruit in the face of Pyongyang’s unilateral “escalation”.

“International society, including Russia and China, need to take this seriously and increase pressure,” Abe said. He added Japan and the United States would take steps towards concrete action but did not give details.

Abe and Trump did not discuss military action against North Korea, nor what would constitute the crossing of a “red line” by Pyongyang, Deputy Chief Cabinet spokesman Koichi Hagiuda told reporters.

“Pyongyang is determined to develop its nuclear and missile program and does not care about military threats from the U.S. and South Korea,” state-run Chinese tabloid the Global Times said on Monday.

“How could Chinese sanctions change the situation?” said the paper, which is published by the ruling Communist Party’s official People’s Daily.

China wants both balanced trade with the United States and lasting peace on the Korean peninsula, its official Xinhua news agency added in a commentary.

“However, to realize these goals, Beijing needs a more cooperative partner in the White House, not one who piles blame on China for the United States’ failures,” it added.

The United States flew two supersonic B-1B bombers over the Korean peninsula in a show of force on Sunday in response to the missile test and the July 3 launch of the “Hwasong-14” rocket, the Pentagon said. The bombers took off from a U.S. air base in Guam and were joined by Japanese and South Korean fighter jets during the exercise.

“North Korea remains the most urgent threat to regional stability,” Pacific Air Forces commander General Terrence J. O’Shaughnessy said in a statement.

“If called upon, we are ready to respond with rapid, lethal, and overwhelming force at a time and place of our choosing.”

(Additional reporting by Chang-ran Kim in Tokyo, Christine Kim in Seoul, Michelle Nichols and Riham Alkousaa at the United Nations, Polina Devitt in Moscow and Steve Holland in Washington; Editing by Michael Perry and James Dalgleish)

Senate Democrats offer Republicans help on tax reform – with conditions

The United States Capitol is seen prior to an all night round of health care votes on Capitol Hill in Washington, U.S., July 27, 2017. REUTERS/Aaron P. Bernstein -The United States Capitol is seen prior to an all night round of health care votes on Capitol Hill in Washington, U.S., July 27, 2017. REUTERS/Aaron P. Bernstein -

By David Morgan

WASHINGTON (Reuters) – U.S. Senate Democrats offered to work with Republicans on a bipartisan tax reform package on Tuesday but only if it does not cut taxes for the wealthy, add to the federal deficit or allow Republicans to enact legislation on their own.

The conditional offer may not attract immediate response from Republicans. But it adds to growing signs of interest in bipartisan cooperation since the collapse of Republican healthcare legislation in the Senate last week.

In an Aug 1 letter to President Donald Trump and Republican leaders in the Senate, 45 lawmakers led by Senate Democratic leader Chuck Schumer said a bipartisan effort would raise wages for workers, grow jobs, promote investment and modernize the tax system for U.S. businesses.

“We are writing to express our interest in working with you on bipartisan tax reform,” said the letter, which then cited “prerequisites” for Democratic participation that Republicans would likely find hard to swallow.

Trump, along with Republicans in the Senate and House of Representatives, has called for major tax cuts for businesses and individuals, saying that lower tax rates would drive the economy and grow jobs.

Senator Orrin Hatch, Republican chairman of the tax-writing Senate Finance Committee, told Reuters on Monday that bipartisanship may be necessary to ensure that tax reform succeeds but blamed Democrats for slowing down the legislative process.

In Tuesday’s letter, Democrats said bipartisan tax reform should offer no relief for the wealthy, citing Treasury Secretary Steven Mnuchin’s assertion last November that there would be no absolute tax cut for the upper class.

“We hope you agree. Tax reform cannot be a cover story for delivering tax cuts to the wealthiest,” the Democrats said.

The Democrats also demanded that Republicans abandon their strategy of passing tax legislation in the Senate with a simple majority under a parliamentary procedure called reconciliation.

Republicans control the Senate by a slim 52-48 margin and say they need reconciliation to avoid a Democratic filibuster. They were unable to pass healthcare legislation last week, even with a simple majority.

Democrats also said they would not support deficit-financed tax cuts, which some Republicans view as a viable option.

Forty-three Senate Democrats and two independents signed the letter. Absent were the names of three Democrats facing reelection next year: Heidi Heitkamp of North Dakota, Joe Donnelly of Indiana and Joe Manchin of West Virginia.

(Reporting by David Morgan; Editing by Cynthia Osterman)

U.S. medic awarded Medal of Honor for Vietnam War heroism

U.S. President Donald Trump awards the Medal of Honor to James McCloughan, who served in the U.S. Army during the Vietnam War, during a ceremony at the White House in Washington, U.S. July 31, 2017. REUTERS/Joshua Roberts

By Ian Simpson

WASHINGTON (Reuters) – A 71-year-old former Army medic from Michigan who saved wounded comrades under fire during the Vietnam War was given the highest U.S. military award by President Donald Trump in a White House ceremony on Monday.

James McCloughan, a retired high school teacher and coach from South Haven, received the Medal of Honor for his valor in saving the lives of 10 members of his platoon at the Battle of Nui Yon Hill in May 1969.

“Jim, I know I speak for every person here when I say that I am in awe of your actions and your bravery,” Trump said before fastening the medal with its star and blue ribbon around the white-haired veteran’s neck.

It was Trump’s first award of the Medal of Honor since taking office in January.

Ten men from McCloughan’s unit attended the medal ceremony, including five he saved, the president said.

McCloughan was 23 and serving as an Americal Division medic when he returned to the battlefield multiple times over 48 hours of fighting to retrieve the wounded soldiers, despite being hit himself with grenade shrapnel and gunfire, his citation said.

He refused to be evacuated to treat his wounds and held a strobe light in an open area at night for a resupply air drop, it said. He also destroyed a North Vietnamese Army position with a grenade.

The Medal of Honor generally must be awarded within five years of the actions that justify it. A former platoon leader began campaigning in 2009 for McCloughan to get the award, resulting in an act of Congress in December to waive the time limit.

President Barack Obama signed the act, making McCloughan eligible for the medal before he left office.

McCloughan left the service with a rank of specialist five and returned to Michigan. He taught psychology and sociology at South Haven High School and coached football, wrestling and baseball.

He is a member of the Michigan High School Coaches Hall of Fame. South Haven is about 180 miles (290 km) west of Detroit.

(Editing by Jeffrey Benkoe and Steve Orlofsky)

Kremlin orders Washington to slash embassy staff in Russia

A general view shows the U.S. consulate in the far eastern city of Vladivostok, Russia, July 31, 2017.

By Maria Tsvetkova and Jack Stubbs

MOSCOW (Reuters) – The Kremlin has ordered the United States to cut about 60 percent of its diplomatic staff in Russia but many of those let go will be Russian citizens, tempering the impact of a measure adopted in retaliation for new U.S. sanctions.

The ultimatum issued by Russian President Vladimir Putin is a display to voters at home he is prepared to stand up to Washington, but is also carefully calibrated to avoid directly affecting the U.S. investment he needs, or burning his bridges with his U.S. opposite number Donald Trump.

All staff at the U.S. embassy in Moscow were on Monday summoned to an all-hands meeting where Ambassador John F. Tefft briefed employees on the Russian decision – the toughest diplomatic demarche between the two countries since the Cold War.

“The atmosphere was like a funeral,” said the person present, who spoke on condition of anonymity because he is not authorised to talk to the media.

Putin said on Sunday Russia was ordering the United States to cut 755 diplomatic staff by September. The move, he said, was in reaction to Congressional approval for a new round of sanctions against Moscow.

Kremlin spokesman Dmitry Peskov said on Monday that the 755

could include Russian citizens, a group who comprise the vast majority of the United States’ roughly 1,200 embassy and consulate staff in Russia.

The clarification from the Kremlin means that there will not necessarily be a mass expulsion of U.S. diplomats because the numbers to be cut can be made up from Russian staff.

Reducing their numbers will affect embassy and consular operations, but that step does not carry the same diplomatic impact as expelling U.S. diplomats from Russia.

Commenting on which diplomatic staff would have to go, Peskov told reporters on a conference call: “That’s the choice of the United States.”

He added: “(It’s) diplomats and technical employees. That is, we’re not talking purely about diplomats – obviously, there isn’t that number of diplomats – but about people with non-diplomatic status, and people hired locally, and Russian citizens who work there.”

A U.S. State Department official, speaking on condition of anonymity, called Russia’s action “a regrettable and uncalled-for act … We are assessing the impact of such a limitation and how we will respond to it”.

As of 2013, the U.S. mission in Russia, including the Moscow embassy and consulates in St Petersburg, Yekaterinburg and Vladivostok, employed 1,279 staff, according to a State Department Inspector General’s report that year. That included 934 “locally employed” staff and 301 U.S. “direct-hire” staff.

Forcing the United States to scale back its diplomatic presence will reinforce Putin’s reputation at home as a resolute defender of Russia’s interests. That will help burnish his image before next year’s presidential election, when he is expected to seek another term.

But the consequences of the Russian retaliation are not so stark that it would permanently alienate U.S. President Donald Trump, according to Alexander Baunov, a senior fellow at the Moscow Carnegie Center, a think tank.

By announcing his counter-measures before Trump signed the sanctions legislation into law, “Putin is sending a message that he is punishing Congress’s America, and not Trump’s America,” Baunov wrote in a Facebook post. “(Putin) has taken Trump out of the direct line of fire and spared his ego.”

Absent from the Russian retaliation were any measures that directly target U.S. investment in Russia. U.S. bluechip companies such as Ford, Citi and Boeing have projects in the country, bringing the kind of investment the Kremlin needs to lift a sluggish economic recovery.

 

COUNTER-MEASURES

The Russian measures were announced after the U.S. House of Representatives and the Senate overwhelmingly approved new sanctions on Russia. The White House said on Friday that Trump would sign the sanctions bill.

The new U.S. sanctions arose in part from conclusions by U.S. intelligence agencies that Russia meddled in the 2016 U.S. presidential election to help Trump win it, and to punish Russia further for its 2014 annexation of Crimea from Ukraine.

Moscow’s response included word that it would seize two U.S. diplomatic properties – a warehouse in southern Moscow and a complex on the outskirts of the city that embassy staff use for weekend recreation.

On Monday, a Reuters journalist saw five vehicles with diplomatic license plates, one of them a cargo truck, arrive at the recreation complex. The convoy was refused access, the journalist reported.

At the warehouse, a Reuters TV cameraman saw several trucks being loaded by workers in the uniforms of embassy employees.

In an interview broadcast on Russian state television on Sunday, Putin said he acted as there was no sign that relations between Russia and the United States were improving under Trump.

“We were waiting for quite a long time that maybe something would change for the better, were holding out hope that the situation would change somehow. But it appears that even if it changes someday it will not change soon,” Putin said.

Putin said Russia could take more measures against the United States, but not at the moment. “I am against it as of today,” he said in the interview with Vesti TV.

 

TOWN HALL MEETING

Embassy employees in Moscow were on Monday anxiously waiting to hear if they would keep their jobs.

The person who was present at the embassy meeting said Ambassador Tefft described the Russian decision as unfair.

The ambassador provided no details of where the staff cuts would fall, the witness said, but said Russian staff who were let go would have the right to apply for a special immigration visa to the United States.

“People asked what Russian staff should do now, since a lot of Russian people working for the embassy are blacklisted and cannot find a job in Russian companies,” said the person present.

“The ambassador said that by playing these diplomatic games, the Russian government first of all attacks its citizens, and the Russian government did not even know that the majority of people working at the embassy were Russians.”

An embassy spokeswoman confirmed the meeting had taken place, and the account of the ambassador’s remarks. She declined comment on which departments would be affected by the cuts.

One area likely to be hit by the staff cuts is the U.S. operation that issues visas to Russian citizens seeking to travel to the United States, according to a former U.S. ambassador to Moscow, Michael McFaul.

“If these cuts are real, Russians should expect to wait weeks if not months to get visas to come to U.S.,” McFaul wrote in a Twitter post on Sunday.

 

(Additional reporting by Polina Devitt, Dmitry Madorsky and Gennady Novik in Moscow and Yeganeh Torbati in Washington; writing by Christian Lowe; editing by Mark Heinrich)