Who is in Line to Bailout Venezuela?


Venezuela Doesn’t Have Enough Money to Pay for Its Money

Bloomberg: Venezuela’s epic shortages are nothing new at this point. No diapers or car parts or aspirin — it’s all been well documented. But now the country is at risk of running out of money itself.

In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.

Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.

This article is based on interviews with a dozen industry executives, diplomats and former officials as well as internal company and central bank documents. All of the companies declined official comment; the central bank did not respond to numerous requests for interviews and comment.

Thronging Banks

The story began last year when the government of President Nicolas Maduro tried to tamp down a growing currency shortfall. Multi-million-dollar orders were placed with a slew of currency makers ahead of December elections and holidays, when Venezuelans throng banks to cash their bonuses.

At one point, instead of a public bidding process, the central bank called an emergency meeting and asked companies to produce as many bills as possible. The companies complied, only to find payments not fully forthcoming.

Last month, De La Rue, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed $71 million and would inform its shareholders if the money were not forthcoming. The letter was leaked to a Venezuelan news website and confirmed by Bloomberg News.

“It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker and former director of economic research at the central bank. Late last year, the central bank ordered more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year for an economy many times the size of Venezuela’s.

Related: Venezuela Orders Five-Day Weekends in Bid to Save Power Grid

World’s Highest Inflation

The currency crisis sheds light on the magnitude of the country’s financial woes and its limited ability to remedy them as oil — the mainstay of its economy — continues to flatline. Venezuela’s inflation, the world’s highest, is expected to rise this year to close to 500 percent, according to the International Monetary Fund.

The first signs of the currency shortage date back to 2014 when the government began increasing shipments of bank notes as wallet-busting wads of cash were already needed for simple transactions. Venezuelans spend hours waiting in line for consumer staples, lining up first at banks and cash machines, often carrying the loot in backpacks and gym bags to pay for dinner out.

Ahead of the 2015 congressional elections, the central bank tapped the U.K.’s De La Rue, France’s Oberthur Fiduciaire and Germany’s Giesecke & Devrient to bring in some 2.6 billion notes, according to bank documents and people familiar with the deals. Before the delivery was completed, the bank approached the companies directly for more.

De La Rue took the lion’s share of the 3-billion-note order and enlisted the Ottawa-based Canadian Bank Note Company to ensure it could meet a tight end-of-year deadline.

Sniper Cover

The cash arrived in dozens of 747 jets and chartered planes. Under cover of security forces and snipers, it was transferred to armored caravans where it was spirited to the central bank in dead of night.

While the cash was still arriving — at times, multiple planeloads a day — authorities set their sights on the year ahead. In late 2015, the central bank more than tripled its original order, offering tenders for some 10.2 billion bank notes, according to industry sources.

But currency companies were worried. According to company documents, De La Rue began experiencing delays in payment as early as June. Similarly, the bank was slow to pay Giesecke & Devrient and Oberthur Fiduciaire. So when the tender was offered, the government only received about 3.3 billion in bids, bank documents show.

“Initially, your eyes grow as big as dish plates,” said one person familiar with matter. “An order big enough to fill your factory for a year, but do you want to completely expose yourself to a country as risky as Venezuela?”

Further complicating matters is the sheer amount of bills needed for basic transactions. Venezuela’s largest bill, the 100-bolivar note, today barely pays for a loose cigarette at a street kiosk.

Related: Venezuela acquired 1,800 Russian antiaircraft missiles in ’09

Uncharted Territory

As early as 2013, the central bank commissioned studies for 200 and 500 bolivar notes, former monetary officials say. Despite repeated assurances, no new denominations have been ordered, pushing Venezuela into uncharted territory by its refusal to produce larger bills while not fully paying providers.

Companies are backing away. With its traditional partners now unenthusiastic about taking on new business, the central bank is in negotiations with others, including Russia’s Goznack, and has a contract with Boston-based Crane Currency, according to documents and industry sources.

Steve Hanke, a professor of applied economics at Johns Hopkins University, who has studied hyperinflation for decades, says that to maintain faith in the currency when prices spiral, governments often add zeros to bank notes rather than flood the market.

“It’s a very bad sign to see people running around with wheelbarrows full of money to buy a hot dog,” he said. “Even the cash economy starts breaking down.”

*****  Iran missile base in Venezuela, BusinessInsider

In part from Forbes: In Venezuela, Maduro´s government (based on the legacy of the late Hugo Chávez), has continued the policies of the previous administration by strengthening ties with Russia, China, and Iran, in opposition to US influence. An example of this has been Venezuela´s growing oil exports to the Asian giant, going from 50,000 barrels per day in 2006 to roughly 600,000 barrels per day sent to China in 2014. These growing exports have been part of a wider strategy aimed at reducing dependency on exports to the United States, as well as being used to back loans provided by China that now exceed $56 billion. China has also expanded its investments in Venezuela by acquiring and developing a plethora of companies, along with the signing of large military contracts to provide Venezuelan armed forces with aircraft, radars, armored vehicles, and helicopters.

 

China´s influence has also extended to more moderate governments in the region as in the cases of Ecuador and Argentina. In the case of the latter, Cristina Fernandez de Kirchner´s administration signed a treaty that included the establishing of a “space exploration site” in the Argentine Patagonia with very few public details on the purpose and functioning of these installations, which will be under complete control of Chinese government. Many security experts agree on the fact that not only is the agreement absolutely opaque on the intention of the site, but also that the presence of dual-purpose technologies allow the station to operate as an intelligence gathering platform. Argentina has also become a recipient of Chinese loans, and an important provider of commodities.

Returning to the Panama Summit, it becomes clear it has been successful for Obama´s foreign policy intentions because it achieved not only the “must-have” picture with Castro and the joint press conference, but also because it unveiled a new beginning in US relations with Latin America and the Caribbean. Also because at this juncture of the process it managed to avoid confrontation with Venezuela´s Maduro, just as his Bolivarian government begins to lose regional support. More from Forbes.

Russia China Just Teamed up, Against U.S.

China denies request for Hong Kong visit by U.S. carrier group: Pentagon

Reuters: China has denied a request for a U.S. carrier strike group led by the USS John C. Stennis to visit to Hong Kong, the U.S. Defense Department said on Friday, amid heightened tensions over China’s territorial claims in the South China Sea.

A Pentagon spokesman, Commander Bill Urban, said a U.S. warship, the USS Blue Ridge, was currently in Hong Kong on a port visit and the United States expected that to continue.

The Chinese government and its embassy in Washington did not immediately respond to requests for comment.

Urban said the request for the Hong Kong visit by the carrier and its accompanying vessels, which have been patrolling the South China Sea, was recently denied, despite a “long track record of successful port visits to Hong Kong.”

The Blue Ridge, the command ship of the U.S. Seventh Fleet, arrived in Hong Kong waters at 11:20 a.m. local time (0320 GMT) on Friday, according to the on-line log of the Hong Kong government’s Marine Department.

The nuclear-powered Stennis has been conducting patrols in the South China Sea, which China claims most of and where Beijing has sparked U.S. and regional concerns by building artificial islands to bolster its claims.

U.S. Defense Secretary Ash Carter visited the Stennis while it transited the South China Sea on April 15 to underscore U.S. concerns about the need to maintain freedom of navigation in the South China Sea in the face of Chinese moves.

A wide range of U.S. military vessels and aircraft have long routinely stopped in Hong Kong, a reflection of the “one country, two systems” formula under which Britain handed the global financial hub back to China in 1997.

The visits occasionally have been suspended in periods of heightened tensions, such as after a mid-air collision between a U.S. EP-3 surveillance plane and a Chinese plane off China’s Hainan island in 2001.

The USS Kitty Hawk aircraft carrier also was denied permission to enter Hong Kong over Thanksgiving in 2007 but was cleared to visit five months later.

The United States has stressed the importance of good relations with China’s military to avoid misunderstandings and Chinese military officers are invited routinely aboard U.S. ships during port visits, and are sometimes flown out to land on U.S. carriers at sea.

While there, he dismissed China’s characterization of a more robust U.S. military presence in the region as being the cause of heightened tensions. The United States has in turn accused China of militarizing its outposts in the South China Sea by building airstrips and other facilities.

Carter made a similar stop at the USS Theodore Roosevelt in November as it transited the South China Sea near Malaysia.

The Stennis has been on a routine deployment in the Western Pacific for more than three months, the carrier strike group’s commander, Rear Admiral Ronald Boxall, said earlier this month.

Russia, China in Agreement on North Korea, South China Sea

ABCNews: Denouncing what they see as outside interference in the South China Sea and Korean Peninsula, the foreign ministers of Russia and China voiced mutual support Friday as they seek to counter the influence of Washington and its allies, particularly in Asia.

Following talks in Beijing, Russia’s Sergey Lavrov and China’s Wang Yi expressed opposition to the U.S. deployment of an anti-missile system in South Korea and said non-claimants should not take sides in the dispute over maritime territorial claims in the South China Sea.

Despite endorsing United Nations Security Council sanctions against North Korea over its missile launches and nuclear tests, the two strongly criticized the proposed deployment of the Terminal High-Altitude Area Defense, or THAAD, system.

“Relevant countries shouldn’t use Pyongyang’s acts as a pretext to increase their military presence on the Korean Peninsula,” Lavrov told a joint news conference. “We believe the possible deployment of the THAAD anti-missile system won’t resolve this problem.”

Both Russia and China, North Korea’s now largely estranged ally, see the deployment as exceeding what is necessary to defend against any North Korean threat and would “directly affect strategic security of Russia and China,” Wang said.

That could “add fuel to the fire of an already tense situation and even possibly wreck the regional strategic balance,” Wang said.

Both men called for efforts to restart long-stalled six-nation talks on ending North Korea’s nuclear programs.

Their meeting came amid renewed tension on the Korean Peninsula, with South Korean officials saying the North attempted unsuccessfully to test-fire two suspected powerful intermediate-range missiles on Thursday.

It also comes ahead of a major North Korean ruling party meeting next week at which leader Kim Jong Un is believed to want to place his stamp more forcefully on a government he inherited after his dictator father’s death in late 2011.

On the South China Sea, which China claims almost entirely, Lavrov said outside parties shouldn’t interfere, a reference to the United States, which has challenged Beijing’s claims.

Wang said it was up to those countries directly involved to find a peaceful resolution through negotiations.

“International society, particularly countries from outside the South China Sea, should play a constructive function in maintaining peace and stability and not contribute to the situation becoming more chaotic,” Wang said.

Criticized over its aggressive tactics and construction of new islands with airfields, harbors and radar stations, China has sought to use Russia to bulk up its side of the argument against the U.S. and claimants such as the Philippines, which has brought a suit at the U.N. Court of Arbitration seeking a ruling on ownership over territories it claims.

China has refused to take part in the arbitration or recognize the court’s ruling.

Along with enlisting Russia’s support, China has given heavy publicity to what it calls a new consensus reached with Brunei, Cambodia and Laos — three members of the 10-country Association of Southeast Asian Nations — endorsing its stance that the South China Sea dispute should not be an issue for ASEAN as a whole.

That has renewed criticisms from some that China is applying divide-and-conquer tactics with its smaller neighbors and trying to drive a wedge through the organization. ASEAN members Brunei, Malaysia, Vietnam and the Philippines contest China’s claims, while Taiwan also claims much of the area.

While the U.S. says it takes no position on South China Sea sovereignty claims, it has worked to shore up the military capabilities of the Philippines, a treaty ally. Washington has also called on China to end its island-building projects and the U.S. Navy has repeatedly sailed and flown ships and planes nearby those structures, drawing sharp responses from the Chinese navy.

Wang and Lavrov both hailed two decades of warming ties between Moscow and Beijing, bitter Cold War rivals for a quarter century, who under Russian President Vladimir Putin have found common cause in challenging the West.

Russia has become a leading supplier of imported high-tech weaponry and resources such as oil and gas, while China is a major source of capital investment for projects in Russia.

Putin is scheduled to visit China in June.

Who Wins, Biden, Iran or al Sadr?

Do you wonder if Vice President Biden is meeting with al Sadr? Biden would never make a surprise visit to Iraq unless something quite serious was at issue.

   

NYT: After arriving at the American embassy by helicopter, Mr. Biden was driven to the nearby Government Palace to meet Mr. Abadi.

Mr. Biden last visited Iraq in November 2011, just weeks before the last American troops in Iraq were scheduled to leave. In a solemn ceremony, Mr. Biden saluted Iraqi troops, trained and equipped with billions of dollars from the United States, saying he hoped they would safeguard the country. More here.

US Vice President Biden in Iraq ‘to resolve political crisis’

DW: US Vice President Joe Biden arrived in Iraq on a surprise visit aimed at helping Iraqi leaders resolve a political crisis. It is hindering the country’s efforts to defeat the self-declared ‘Islamic State.’

Who is Muqtada al Sadr? Muqtada al-Sadr is of Iraqi and Iranian ancestry. After the fall of the Saddam government in 2003, Muqtada al-Sadr organized thousands of his supporters into a political movement, which includes a military wing known as the Jaysh al-Mahdi or Mahdi Army). The name refers to the Mahdi, a long-since disappeared Imam who is believed by Shi’a Muslims to be due to reappear when the end of time approaches. This group has periodically engaged in violent conflict with the United States and other Coalition forces.

Related: Mahdi Army

Barack Obama ordered all U.S. military presence out of Iraq and it was completed in 2011. Obama stated the country was sovereign and stable and for this reason there was no reason to maintain a ‘leave-behind’ force. All the while from 2010 forward and known full well by the Obama National Security Council:

CTC: On a more significant level, the revival of al-Sadr’s political fortunes are less about Iranian influence and more about his followers’ ability to cleverly exploit electoral politics to their advantage. The latest parliamentary elections provided such an opportunity, placing al-Sadr in the center of the political map. The key to the Sadrists’ electoral success was how they applied systematic polling methods such as databases with information on voters in all provinces and a cunning campaign strategy to win voters in the south.[16] Along with anti-establishment and populist tactics, such as the staged referendum as a way to discredit al-Maliki’s authority in the Shi`a urban centers, al-Sadr was able to present himself and his followers as the primary political force to defend the Shi`a population. Also, it is possible that al-Sadr exploited his close ties with General Qasim Soleimani of the IRGC, who also played a part in lobbying the Iraqi National Alliance to merge with the State of Law coalition to boost his political fortunes within the Shi`a bloc. This political move took away the chance for Iyad Allawi’s secular-Sunni front to form a government, which would have considerably diminished al-Sadr’s role as a key political figure.

In the aftermath of the elections, al-Sadr’s public call for the return of JAM reveals a sense of confidence with the backing of not only Iran, but also a large Shi`a electorate. For now, the Sadrists also have the respect of al-Maliki, who was forced to make considerable concessions with al-Sadr to remain in power. In this light, al-Sadr may now feel he has the political capital to legitimize the full restoration of JAM as part of Iraq’s security institutions, which could be controlled by Sadrists in the next government.

Al-Sadr appeals for solution to Iraq’s political crisis

BAGHDAD (AP) — An influential Iraqi Shiite cleric on Wednesday called on the United Nations and the Organization of Islamic Cooperation to help find a solution to the country’s simmering political crisis “even through holding early elections.”

Muqtada al-Sadr’s statement came a day after lawmakers failed to hold a session to vote on whether to keep or oust the parliament speaker, Salim al-Jabouri, threatening to prolong Iraq’s paralyzing political crisis amid the fight against Islamic State group that controls key areas in country’s north and west.

Al-Sadr ordered Sadrist lawmakers to withdraw from a parliament sit-in that demands the country’s top leadership — parliament speaker, prime minister and president — step down. But al-Sadr called on his followers to continue rallying in Bagdad’s Tahrir Square to pressure the parliament to vote on a new government after a recent Cabinet reshuffle.

“We call upon the Organization of Islamic Cooperation and the United Nations to interfere to get the Iraqi people out of their ordeal and to correct the political process even through holding early elections,” al-Sadr said in a handwritten statement issued online.

It is still unclear how the withdrawal of Sadrist lawmakers will affect the parliament sit-in which was started last week by dozens of lawmakers following delay on the vote on the Cabinet reshuffle. On Thursday, they chose eldest lawmaker, Adnan al-Janabi, as an interim speaker, but the move was rejected by the other camp, which argues the move was illegal because the needed quorum was not achieved.

Tuesday’s session was supposed to vote on whether or not to remove al-Jabouri, but it was adjourned when major political blocks walked away because they objected to al-Janabi presiding over the session.

Iraq is weathering its worst crisis in years with the Sunni extremist IS group still controlling key areas in the country’s north and west, including the second-largest city of Mosul. The country is also undergoing an acute economic crisis due to plummeting oil prices on the international market.

Bashir al Assad’s Alawite Sect Fissures, Talks Fail

A billboard sponsored by the chamber of commerce and industry shows pictures of Syrian President Bashar al-Assad (R) and his late father former president Hafez al-Assad in the coastal city of Latakia (17 March 2016) AFP, Syria’s Alawites are closely associated with Bashar al-Assad (R) and his late father Hafez (L) 

‘Muslim quality’

In part from BBC: The Alawites emerged in the 10th Century in neighbouring Iraq.

Little has been confirmed about their beliefs and practices since then because, according to the leaders, they had to be hidden to avoid persecution.

However, most sources say the name “Alawite” refers to their veneration of the first Shia imam, Ali, the son-in-law and cousin of the Prophet Muhammad.

Banners showing the founder of the Islamic Republic of Iran, Ayatollah Ruhollah Khomeini (L), and the current Supreme Leader of Iran, Ayatollah Ali Khamenei (R), are held up beside one of a Lebanese Hezbollah commander killed in Syria (C) at a funeral in Baalbek (1 January 2014) AFP: Shia power Iran and Lebanon’s Shia Hezbollah movement are assisting the Assad regime

For full comprehensive summary by the BBC, go here.

****

al-Arabiya: The most significant development coming from Syria in the last few days is not the killing of Al-Qaeda spokesperson in Idlib or the US-Russian chatter denying a plan to oust Bashar Al-Assad. It was a document leaked to the Western media and dubbed as the “declaration of identity reform” signaling signs of discontent from elders in the Alawite community towards the Syrian regime.

The news of the document is the most concrete evidence we have from Assad’s religious community since the beginning of the uprising in 2011, indicating that their patience is running out with the status-quo and they are openly seeking a third alternative. For such alternative to materialize, however, and for the Alawites to publicly start abandoning Assad, a political and security umbrella has to be extended from Russia and regional countries, guaranteeing their protection and role in a pluralistic future in a post-Assad Syria.

Alawite discontent

Syria’s Alawites have been both, the cornerstone for the regime’s survival and its Achilles’ heel. A 15% of Syria’s population (estimate of 3 million), the minority enjoys the lion’s share in the regime political and security hierarchy. Assad, the Chief of Staff of the Syrian Army, heads of the intelligence services are all from the powerful sect. When the state security proved not enough, a new militia was formed and allied with the regime and Iran to protect the Alawites along the coastline and in the mountain region over Latakia.

“The declaration from the Alawite leaders is a watershed moment in how the minority is publicly untying itself from Assad family, and attempting to pursue a pact of coexistence in Syria”, Joyce Karam.

The new declaration as leaked by European media, exposes fissures between the Alawites and the regime, and efforts to pursue a third option, instead of prolonging Assad’s military campaign, or getting overridden by extremist groups. According to the The Telegraph, the document authors “had been forced to act because of the extreme danger the sect was now facing” amid reports of enormous losses for the Alawites (a third of their young) in the 5-year-long war. In a political departure from the regime narrative, the declaration speaks of “a new relationship with Syria’s Sunni majority” while calling the regime as “totalitarian”, and the uprising “an initiative of noble anger”. The document also promotes a vision for secular, pluralist and democratic state of Syria.

By distancing themselves from the regime, the Alawite signatories are seeking a path that is not hostage to Assad’s strategy of war and outright military victories that could take years or lead to disintegration of Syria. From the beginning of the conflict, there were shy attempts from the Alawite community showing discontent with the Assad family and the war realities. In the last year the community has demonstrated in Latakia calling to execute Assad’s cousin, Suleiman, now serving a 20-year sentence in prison. In 2014, protests from members of the community broke out in Tartous and in Homs over the bombing of elementary schools and the failure of the security to protect their children.

Assurances from Region and Russia

The declaration from the Alawite leaders is a watershed moment in how the minority is publicly untying itself from Assad family, and attempting to pursue a pact of coexistence in Syria. However, and unless it’s met by political and security assurances from the West, the region and Russia, this momentum will not hold against a status quo of fear from extremism that forces Alawites to be more dependent on Assad and local militias.

For a minority whose roots are entrenched in the Levant and has survived the Mamluks, the Crusaders, and the Ottomans, it is only natural that its fate won’t be parallel and decided by the Assad family. It is the regime and not the family that holds higher priority for the Alawites, and even then, negotiating a new pact of governance is the most pragmatic and secure approach for the community’s future in Syria. The heavy toll of the war and the strong presence of Al-Qaeda’s Jabhat Nusra in Northern of the country are ominous signs of what could yet come if no political solution is achieved.

In that context, Russia’s intervention and establishing a presence in Khmeimim airbase in Latakia could make Moscow a key guarantor for the Alawites in a post-Assad Syria. Regional countries such as Saudi Arabia who helped assure the Lebanese Christians at the end of the civil war by brokering the Taif agreement, or Turkey who holds influence in Northern Syria could help in mediating between the Alawites and the opposition.

There is already plenty of buzz regionally of backchannel diplomacy to resolve the Syrian conflict, supervised by John Kerry and Sergei Lavrov, before U.S. President Barack Obama leaves office. There are also questions on recent reports of relieving Maher al-Assad of his duties in the Republican Guard, and what that could mean for the negotiations, for the Alawites and Moscow’s role.

The Alawite declaration this week from Syria, is a critical opportunity to start a conversation about the status of the minority in a post-Assad structure. Absent of guarantees in form of protection and political assurances, this paper will be shelved along a thick bundle of documents and goodwill gestures to resolve the conflict.

 USAToday

*****

WSJ: GENEVA—Talks aimed at ending the five-year war in Syria ground to a halt with the government and opposition divided over fundamental issues, including whether President Bashar al-Assad’s political fate even belongs on the agenda.

The regime insists that Mr. Assad remain in power, and the opposition demands that he step down. With an August United Nations deadline looming to form a new government and the peace process floundering, participants in the talks have floated alternatives aimed at breaking the deadlock that appease some parties but anger others.

Among the ideas are to transfer Mr. Assad’s powers to a handful of deputies; to form a new ruling council comprised of Syrian military officials and moderate rebel leaders; and to coalesce around a new Syrian leader who feuding camps could support.

None of the alternatives has gained traction, and each would face serious, possibly insurmountable, obstacles even if they garnered support in the Geneva talks. The discussions around them are a sign of the lengths to which negotiators are going in an effort to maintain some form of dialogue.

“Geneva is a process without content,” a senior Western diplomat said. Much more here.

General Dunford: No Fair Fight

Secretary Carter’s Opening Remarks

No Fair Fights for U.S. Troops, Chairman Says

DefenseDept: WASHINGTON, April 27, 2016 — The chairman of the Joint Chiefs of Staff repeated to the Senate Appropriations defense subcommittee what has become a mantra to him: he doesn’t believe the United States should ever send American service members into a fair fight.

“Rather, we have to maintain a joint force that has the capability and credibility to assure our allies and partners, deter aggression and overmatch any potential adversary,” Marine Corps Gen. Joe Dunford, who was joined by Defense Secretary Ash Carter, told the committee members.

Carter and Dunford provided testimony on Defense Department’s fiscal year 2017 budget request.

Improving current capabilities, restoring full-spectrum readiness and developing leaders for the future are key to maintaining the greatest advantage the U.S. military has over any rival — its people, the chairman said.

No Shortage of Challengers

The United States has no shortage of challengers from state adversaries to non-traditional foes. The five challenges the Defense Department’s fiscal year 2017 budget request focuses on are Russia, China, Iran, North Korea and violent extremism.

Russia, China, North Korea and Iran continue to invest in military capabilities that look for the soft spot in American defenses, Dunford said. “They are also advancing their interests through competition with a military dimension that falls short of traditional armed conflict and the threshold for a traditional military response,” he said.

The actions of Russia in Ukraine, China in the South China Sea and Iran throughout the Middle East are examples of the challenges the DoD must address, he said.

But the Islamic State of Iraq and the Levant and al-Qaida still pose dangers to the homeland, the American people and friends, allies and partners, the general said. “Given the opportunity, such extremist groups would fundamentally change our way of life,” he said.

Nuclear Capabilities

Added to these challenges is the priority to modernize the nuclear capabilities of the United States, Dunford said.

The nuclear triad underpins deterrence in the world, but new domains also must be considered, the chairman said. Space and cyberspace are now realms of combat, and the nation must develop and maintain credible capabilities in these realms as well, he said.

Underlying all these threats is the reality of the fiscal environment, Dunford added.

“Despite partial relief from Congress on sequester-level funding, the department has absorbed $800 billion in cuts and faces an additional $100 billion of sequestration-induced risk through fiscal 2021,” he said. “Absorbing significant cuts over the past five years has resulted in our under-investing in critical capabilities. Unless we reverse sequestration, we will be unable to execute the current defense strategy.”

Right Trajectory

Overall, he told the senators, DoD’s FY 17 budget request “puts us on the right trajectory, but it will require your support to ensure the joint force has the depth, flexibility, readiness and responsiveness that ensures our men and women will never face a fair fight.”

But, the chairman warned, a bow wave of requirements lie ahead, including those tied to the Ohio-class submarine replacement program, continued cyber and space investment programs and the B-21 long-range bomber program