National Security

Heads Won’t Roll

Obama’s talking tough about the VA scandal, so why isn’t he firing anyone?


President Obama attempted to calm the storm quickly enveloping his handling of a growing Veterans Affairs scandal, laying out a logical approach to getting to the bottom of what has gone wrong - seeking reviews, promising to hold individual staffers accountable, and ordering the department's head, the embattled Eric Shinseki, to give him an initial report next week. The one thing he didn't do was fire Shinseki or anyone else, and that no heads are rolling means he did little to quiet administration critics - and may have instead created new ones.

The president on Wednesday defended Shinseki, a retired four-star general who has led the VA since 2009, as a "great soldier" who would lead the review into the crisis pertaining to allegations of falsified records and "cooking the books," as Obama said, at a number of VA healthcare centers. Obama ordered Shinseki to return to him next week with preliminary results of the review of the problem and vowed punishment would come "once we know the facts."

But Obama dodged questions about whether Shinseki should resign or had offered to.

"Nobody cares about our veterans more than Ric Shinseki," Obama said in his first press conference devoted to the VA scandal -- which centers around allegations that 40 veterans died at a hospital in Phoenix while waiting for care - since it first exploded late last month.

"If you asked me how do I think Ric Shinseki has performed overall, he has put his heart and soul into this thing."

But Obama's dutiful respect for the investigatory process on the records scandal is seen by some critics as being overly focused on the issue at hand, and not the broader one that has frustrated critics for several years. And his remarks Wednesday did little to stop the calls for Shinseki to step down or for Obama himself to take ownership of a problem he made a feature of in his 2008 campaign.

Now the Democratic dam supporting Shinseki may be beginning to burst. Two Democratic lawmakers from Georgia, first John Barrow and then David Scott, called for Shinseki to resign after hearing Obama speak.

"While I don't think a change in leadership will immediately solve the serious problems that plague the VA, I do think it's time to give someone else an opportunity to lead the agency and begin the rebuilding process to ensure these issues never happen again," Barrow said in a statement.

Obama seems to have lost the room on veterans issues, even among some groups which have applauded some of the recent accomplishments by the VA. And for a White House already focused on the real prospect of losing Democratic control of the Senate in the upcoming mid-term elections, the scandal risks handing the GOP another political cudgel to use against the administration and its allies this fall.

"He did nothing to quell the growing nationwide VA controversy," Paul Rieckhoff, the head of Iraq and Afghanistan Veterans of America, said in a statement issued shortly after Obama spoke. Rieckhoff, a respected leader in the veterans community who has worked closely with the administration in the past, called Obama's remarks a "tremendous disappointment," but stopped short of asking Shinseki to resign. "His long-overdue remarks gave outraged IAVA members no reason to believe anything will change at the VA anytime soon. The public trust with the VA and Secretary Shinseki is broken."

And there was more anger from more predictable quarters. Republican Sen. John McCain of Arizona, a frequent administration critic, said that Obama's remarks were "wholly insufficient" in addressing the broader problems at the VA, which he termed "fundamental and systemic."

McCain said in a statement, "We need answers, leadership and accountability, none of which we've seen from the Obama Administration to date."

No one ever thought that the problems at the VA - from reducing the backlog of veterans' disability claims to creating enough capacity there to handle the influx of millions of Iraq and Afghanistan veterans, could be fixed overnight. But Shinseki, the recipient of two Purple Hearts during tours in Vietnam, was seen at the time as the perfect man for the job. His profile appealed to the Obama White House in 2009 as someone who would speak truth to power. The general is best known for telling a Congressional panel in the run-up to the Iraq War in early 2003 that the U.S. would need far more troops than what then-Defense Secretary Donald Rumsfeld was planning to send.

But despite Shinseki's appealing narrative, his tenure at the VA has been spotty. While he's reduced the backlog of veteran claims as well as attempted to address veteran unemployment rates and homelessness, he has largely failed in the public terrain, passing on media appearances and generally working behind the scenes when most observers agree a higher public profile is called for.

That has led to a growing push for his resignation. Democrats on Capitol Hill have generally been mum on the issue and retired senior officers typically decline to get involved in what amounts to a politically-charged issue for the Obama White House.

Still, there are others who are quick to defend Shinseki for his handling of the records scandal. Former Senator Max Cleland, who himself ran the VA under then-President Jimmy Carter, wrote in Politico this week that "we veterans need facts, not a firing."

And Norton Schwartz, the retired four-star general and former Chief of Staff of the Air Force, said Shinseki is "no slouch" and will not be timid in making changes if the allegations about false records are found to be true. "My view knowing him as I do is that he is a man of high ethics and standards, and I can only imagine that he is just pained by this because he is also a man of obligation," Schwartz said in an interview.

Removing Shinseki might be the wrong thing to do at this point, he said. It could be hard for the White House to find a new VA chief in its second term, and changing horses midstream could do more damage than good.

"The dilemma here is, do you want a symbolic action or one that gives you the best opportunity for a remedy," he said. "I'm inclined to do the latter."

Obama appeared before reporters at the White House just as the records scandal widened. The number of VA medical facilities now under investigations over complaints that records were falsified or because of long waiting lists has more than doubled in the last week. The VA's Inspector General said yesterday that 26 facilities are being examined nationwide. And now there are reports indicating that at least two individuals at the heart of the problems in Phoenix were given bonuses at the same time they were under investigation by the Inspector General.

Also Wednesday, the House is expected to vote on legislation that would give Shinseki more authority to demand accountability from his hospital directors and other executives in an effort that was in motion before the scandal broke. But the administration - including Shinseki - doesn't like the legislation because of fears that it would make it hard to attract good employees to the VA. "What I want to be sure of is that we are not causing folks who might want to come work for VA to choose not to do so," Shinseki said after a hearing last week. "We need their talent and we need their expertise. If people stop coming to VA because they think we're heavy-handed on everything, then veterans in the long run are the ones who suffer the impact of that."

Supporters of the administration's approach to fixing the problems at the VA point to how large a bureaucracy it is and how hard it is to change. But Sen. Mark Begich, the Democrat from Alaska and a member of the Senate's Veterans Affairs Committee, said in a brief interview with Foreign Policy that pushing the VA's massive bureaucracy to address its broader problems is possible. In Alaska, it has produced results and provided better access to medical services by reducing backlogs and wait times, he said. To Begich, it's not so much whether firing Shinseki would send a strong signal about how seriously the administration is taking the issue. There's only one way to do that, he said.

"Fix the problem."



Win McNamee/Getty


From Russia With Love (and a Discount)

After years of talks, Moscow and Beijing finally inked a $400 billion deal that will change the face of the global natural gas market.

After a marathon negotiating session that lasted until almost four in the morning, Russia and China inked one of the world's biggest energy deals Wednesday, a 30-year, $400 billion pact that will send natural gas from Siberia to energy-hungry China.

The successful conclusion of talks that began in the late 1990s, and which were nearly derailed Tuesday on the first day of Russian President Vladimir Putin's trip to China, presages a new era in global energy trade. The implications are potentially huge for Russia, for China and much of Asia, and also for Europe, still Russia's biggest energy consumer.

For Russia, the deal is a way to finally start selling more of its energy to Asia after decades spent supplying Europe with oil and natural gas. For China, the pact offers a way to meet part of its fast-growing demand for energy, especially energy that's cleaner than the dirty coal that has fueled three decades of growth. Europe, meanwhile, is watching the Sino-Russian bear hug with a mixture of relief and apprehension: While the deal potentially gives Russia a way to sidestep European and American pressure on Russia's energy exports in the wake of the Ukraine crisis, it also offers Europe hope of landing its own favorably-priced energy contracts in years to come.

The agreement reached Wednesday calls for Moscow to provide 38 billion cubic meters of natural gas per year to Beijing for three decades. Exact details of the landmark pact are still scanty; Russia's state-owned energy giant Gazprom has not revealed the price at which the contract was signed. But people close to the talks and in the industry said that China had secured a long-term supply of gas at about $350 per thousand cubic meters -- less than what Russia wanted to charge, and less than the $380 that it has traditionally charged European customers.

"Our Chinese friends drive a hard bargain as negotiators," Putin told reporters after the deal was clinched. "But we managed to settle on contract terms that are not just acceptable conditions but actually satisfy both sides."

The deal -- which Putin called a "historic event for Russia's gas sector" -- will lead to the massive development of gas fields in Russia's far east, requiring at least $50 billion in investment by Russian firms and, Putin said, perhaps $20 billion in Chinese investment.

Most importantly, the deal is the first major shift to Asia in terms of Russia's gas exports. It has sold modest amounts of oil to China for years, and is trying to ramp up its exports of liquefied natural gas to thirsty markets in Asia. But the China deal is a big step toward the eastern diversification of energy markets that the Kremlin laid out in 2010, and could pave the way to additional big future deals with South Korea, Japan, and India.

While the new Siberian gas fields will require heavy investment and years of development before they come online, the deal also offers Russia an alternative to its heavy reliance on Europe for gas exports. That means that, by the end of the decade, Russia will have more ability than ever to sidestep any U.S. or European efforts to use Moscow's reliance on revenue from its energy sales to Europe as a weapon. To date, at any rate, neither Washington nor Berlin has quite had the stomach to use Moscow's $100 million-a-day of European gas sales as a point of leverage in the standoff over Ukraine.

"Russia is the big psychological winner in my view," said Tim Boersma, a natural gas expert at the Brookings Institution.

Russia and Putin have perhaps more reason to celebrate than Gazprom does. The deal was delayed for years in large part because Gazprom wanted to replicate in Asia the kinds of profitable gas contracts it had in Europe; China simply refused. The reported price agreed upon in Shanghai would be about break even, or just under, for Gazprom. The China contract will diversify revenues, in other words, but not fatten profits. Gazprom shares briefly jumped Wednesday before giving up most of their gains.

"It's a political deal. Whether it's good for Gazprom and for cash flow is always a secondary priority" for the Kremlin, said one European diplomat who works on energy issues with Russia.

The pact seems to be a clearer victory for China, which locks up future supplies of natural gas at a reasonable price. That's important for several reasons. China's demand for natural gas is expected to skyrocket in coming years, in large part because the government wants to reduce the role that dirty coal has played in powering the economic miracle since 1978; coal-related pollution has become a political liability for Beijing.

Estimates of Chinese gas demand range widely, but analysts agree that gas consumption will double or triple in the next decade. Conservative estimates by the U.S. Energy Information Administration suggest developing countries in Asia will lead the world in gas demand growth between 2010 and 2040, and that China will account for more than 60 percent of that increase. Some companies with a dog in the fight, such as General Electric, which makes gas-fired turbines for the power sector, are even more bullish.

Importantly for China, the deal with Russia won't require a Faustian bargain. Unlike many small European countries who are nearly 100 percent dependent on Russia for their gas supplies, and thus vulnerable to blackmail and supply outages, China will likely only rely on Russia for 10 percent or so of its gas when the project is completed. Other possible supplies include piped gas from Central Asia and liquefied natural gas, or LNG, from Australia, Qatar, Canada, and perhaps even the United States.

If the Siberian fields are developed, and all the pipeline infrastructure is built, that should also offer some relief for other Asian countries, even those who are not directly buying gas from Russia. The availability for the first time of piped gas into northeast Asia will likely put downward pressure on the currently high prices for LNG in Asia, which are about 50 percent higher than in Europe. That's one reason Seoul and Tokyo were closely watching the progress of the Russia-China talks: As the world's biggest buyers of LNG, they could end up benefitting from the deal as well.

But what does Russia's pivot to Asia mean for Europe? In the short term, very little. Gas supplies for China in the first phase will come from new fields in Siberia, rather than from existing fields that pump gas for the European market. In other words, the China deal is a complement, rather than a substitute, for Gazprom's European business.

To be sure, Putin said after the signing that talks are beginning on a second deal with China to supply gas from western Siberian fields, and that Russia's ultimate goal is to link the mature gas fields in the west with the virgin fields in the east, "making it possible if need be to diversify supplies from west to east and east to west." But that will require years of work and billions of dollars of investment to make it a reality.

Until the initial Siberian fields and pipelines are built, Russia will still rely on the European market for the bulk of its gas revenues. That will start to change after 2020, but given the lower prices conditions that China appears to have secured, the Asian market will be less profitable for Gazprom than the European market has been.

Alexey Druzhinin - AFP - Getty