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National

The storming of the U.S. embassy in Baghdad has launched one of the biggest foreign policy crises of the Trump presidency.

Driving the news: Trump tweeted on Tuesday afternoon, "Iran will be held fully responsible for lives lost, or damage incurred, at any of our facilities. They will pay a very BIG PRICE! This is not a Warning, it is a Threat. Happy New Year!"

Catch up quick: Outside the embassy, "thousands of protesters and militia fighters [were] chanting 'Death to America,' throwing rocks, covering the walls with graffiti and demanding that the United States withdraw" from Iraq, the N.Y. Times reports. "[M]any were members of Kataib Hezbollah," which is backed by Iran.

120 Marines were rushed to Baghdad today, the most since ISIS was at its peak.

Trump tweeted: "To those many millions of people in Iraq who want freedom and who don’t want to be dominated and controlled by Iran, this is your time!"

Why it matters: President Trump may feel compelled to do something because the world’s cameras are trained on scenes of American weakness.

Trump has privately talked about the weakness that he believes President Carter showed in response to the Iranian hostage crisis. 

On the other hand, Trump has, until his recent retaliatory air strikes, been reluctant to fight a proxy war against Iran inside Iraq. 

When Iran shot down a U.S. drone earlier this year, Trump was prepared to strike several Iranian targets, but at the last minute his more dovish instincts kicked in. It was only when Iranian proxies killed a U.S. contractor recently that Trump felt he had no choice but to strike back.

Between the lines: Unlike most of his national security team, Trump sees very little value in an American presence in Iraq — full stop. 

Some of his more dovish outside advisers have warned him that an escalating conflict with Iranian proxies could quickly blow out into a dangerous new war. 

The first theater could be Iraq, over which Iran wields extraordinary power. Iranian militias are well positioned to attack the roughly 5,000 U.S. military personnel still inside Iraq. 

The Iraqi security forces have shown themselves to be incompetent and cannot be relied upon to protect American troops in Iraq.

The big picture: If Trump strikes back hard against Iran, he may get a new Middle East war he never wanted. If he does nothing, he may show the Carter-esque weakness he has long derided. 

But there's another possibility that cannot be entirely dismissed. In an "Axios on HBO" interview two months ago in Baghdad, Iraqi President Barham Salih admitted this question was on his mind: what if Trump made a flip decision and totally withdrew American forces from Iraq? 

I asked Salih if he was prepared to wake up one day and read a tweet from Trump saying he was pulling out of Iraq. Salih said he of course had to prepare for that scenario.

The bottom line: Trump has long wanted out of Iraq and believes the American presence in Iraq is an unmitigated disaster that was the worst mistake in U.S. history. 

He said America should have taken Iraq’s oil — which would be illegal — and gotten the hell out. 

Go deeper: Israel hopes U.S. airstrikes signal hawkish shift on Iran proxies

Trump's New Year's crisis

Trump has privately talked about the weakness he believes Carter showed during the Iran hostage crisis.

Politics

Iraq

World

2024 will be an election year like no other, as President Biden seeks re-election amid economic uncertainty, two wars and questions about his age. His likely foe, former President Trump, faces felony charges and vows revenge on his political enemies. Meanwhile, Americans generally are dissatisfied with those choices and are divided over immigration, race, education and more.

Politics & Policy

Macro

Axios Macro

Wall Street had its biggest annual gain in six years — with the S&P 500 rising 29% and the Nasdaq Composite rising 35% in 2019. The Dow lagged behind other indices, but saw its biggest yearly gain since 2017. 

Why it matters: U.S. stocks rebounded from 2018's year-end meltdown to log impressive gains, despite uncertainty stemming from the trade war and a slowdown in economic growth. 

The big picture: The stellar performance of stocks wasn't just limited to the U.S. A gauge of global equities rose 24% this year, per Reuters — its best annual gain of the decade. 

The Stoxx Europe 600 rose 23% this year, the best yearly performance since 2009.

As the Wall Street Journal notes, the U.S. stock gains come despite "subpar growth in earnings in revenue this year. Earnings per share growth will be just 1.4%, according to FactSet data, down from 22% in 2018."

Between the lines: Tuesday's close — which saw the S&P and Nasdaq close up less than 1%, while the Dow gained 76 points — also marks the final trading day of the decade. Technology stocks played a big role in driving Wall Street's gains.

Apple and Microsoft were the biggest contributors to the S&P's gains both this year and over the past 10 years, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices. 

Go deeper: Why it was so hard for investors to lose money in 2019

Wall Street has its best year since 2013

The S&P 500 rose 29% in 2019 — despite trade war and economic uncertainty.

Business

Stock market

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Illinois Gov. JB Pritzker granted more than 11,000 pardons on Tuesday for minor, non-violent marijuana offenses, as the state prepares to legalize the drug on Jan. 1, AP reports.

The big picture: Illinois on Wednesday will become the 11th state to allow people 21 or older to buy and consume marijuana. State officials estimate that 116,000 people who were convicted for possessing 30 grams or less of marijuana are eligible for pardons.

Illinois lawmakers hope legalizing marijuana and pardoning past violators will reverse some of the damage caused by the war on drugs, especially for minority communities.

What they're saying: “We are ending the 50-year-long war on cannabis,” Pritzker said in a statement, according to AP.

“We are restoring rights to many tens of thousands of Illinoisans. We are bringing regulation and safety to a previously unsafe and illegal market. And we are creating a new industry that puts equity at its very core.”

Cannabis companies could be facing cash crisis

Colorado's latest marijuana law aims to attract more investment

Illinois governor pardons 11,000 pot convictions ahead of Jan. 1 legalization

State officials estimate that 116,000 people in total are eligible for pardons.

JB Pritzker, governor of the state of Illinois

Illinois Governor JB Pritzker on Dec. 3, 2018. Photo: Paul Natkin/Getty Images

Illinois

Sen. Susan Collins (R-Maine) told Maine Public Radio Tuesday that it was "inappropriate" for Senate Majority Leader Mitch McConnell (R-Ky). and Sen. Elizabeth Warren (D-Mass.) to "prejudge the evidence" in President Trump's forthcoming Senate impeachment trial.

What she's saying: "[E]ach of us will take an oath — an oath that I take very seriously to render impartial justice. ... There are senators on both sides of the aisle, who, to me, are not giving the appearance of and the reality of judging that's in an impartial way."

McConnell said earlier this month that he is "not an impartial juror" in the trial and branded it a "political process."

Why it matters: Collins is often seen as one of the GOP's most moderate senators, and is among a handful of potential Republican swing voters in the Senate trial.

The big picture: In the interview, she also said that she is "open to witnesses" despite McConnell's insistence against calling them.

She hedged on that position by stating that "it's premature to decide who should be called until we see the evidence that is presented and get the answers to the questions that we senators can submit through the Chief Justice to both sides."

She also criticized House Democrats for their handling of witnesses, calling their decision not to attempt to enforce subpoenas in court ahead of the House's impeachment vote "an odd way to operate."

Joe Biden says he won't testify in Trump impeachment trial

Pompeo to visit Ukraine this week with Senate impeachment trial looming

Sen. Roy Blunt: Impeachment trial is "not a trial in any classic sense"

Collins says it's "inappropriate" for McConnell, Warren to "prejudge" impeachment trial

"[E]ach of us will take an oath — an oath that I take very seriously to render impartial justice."

Susan Collins

Twenty years ago today, on New Year's Eve 1999, a political newcomer and former KGB operative named Vladimir Putin suddenly assumed the Russian presidency.

Part 1 of our "20 Years of Putin" special report focuses on his rise, his early years and his escalating antagonism with the West. It's based on conversations with Mikhail Khodorkovsky — the oligarch whose imprisonment in 2003 revealed Putin's ruthlessness to the world — three former U.S. ambassadors to Moscow, leading experts and former chiefs of the Pentagon and CIA. Read part 2.

There aren’t many people who could have stood between Vladimir Putin and the Russian presidency two decades ago. Mikhail Khodorkovsky was one of them.

The big picture: Once Russia’s richest man, Khodorkovsky and a handful of other powerful oligarchs loomed large in the chaotic decade that followed the collapse of the Soviet Union. 

His imprisonment in 2003 shocked the world and was the moment many gave up on the illusion of Putin as a Westward-looking modernizer.

Since being freed six years ago, Russia’s most-famous dissident-in-exile tells Axios his mission is now to prepare Russia for life after Putin. 

Khodorkovsky meets with Putin in 2002. Photo: Sovfoto/Universal Images Group via Getty Images

“I could have made it more complicated for him to reach power,” Khodorkovsky acknowledges with a slight shrug, glancing up at the high ceiling of the London townhouse from which he runs his Open Russia foundation. “But this would mean giving up everything else and just doing this job of making obstacles for him.”

Besides, Khodorkovsky says, he trusted then-President Boris Yeltsin, and Yeltsin had great faith in his hand-picked successor.

Like nearly all of those interviewed for this special report, Khodorkovsky saw something in Putin 20 years ago that was either never there or has long since evaporated.

“Of course, I was aware of Putin being from the KGB, and I was aware of his business in St. Petersburg,” Khodorkovsky continues, referring to Putin’s time working for Mayor Anatoly Sobchak. "That did not inspire me at all.”

But when Khodorkovsky met Putin, he became convinced this was “a very, very, democratic person,” intent on reform and Westernization.

Between the lines: Khodorkovsky says he hadn't realized what a "talented recruiter" Putin was.

"He’s able to be in your eyes what you want him to be," he continues. "It’s unfortunate, but the only thing I can say in my defense is that I wasn’t the only person who was deceived by him.”

Khodorkovsky ran afoul of Putin when, as CEO of oil giant Yukos, he pushed for greater transparency in Russian business. At first, he saw Putin as a potential ally.

“I had the impression at that time that the president is not taking any bribes,” he says. “People under him can take money, but he doesn’t need to. I was mistaken.”

Putin saw Khodorkovsky as "one of the leaders of the alternative path," he says. "So he decided to use me as an example to frighten everyone else. And he succeeded.”

Putin votes in Duma elections in 1999. Photo: Antoine GYORI/Sygma via Getty Images

Putin was a mid-level KGB officer in Dresden, East Germany, when the Berlin Wall fell in 1989.

Weeks later, in the tumult that preceded the collapse of the USSR, crowds stormed the local secret police headquarters and Putin spent a tense night waiting for orders from Moscow that never came.

He returned to Russia and became a close aide first to Sobchak in St. Petersburg and later to Yeltsin in Moscow.

He was little noticed in Russia or abroad until Yeltsin appointed him director of the KGB's successor, the FSB, in 1998.

A year later, he was prime minister. Four months after that — on New Year's Eve, 1999 — Yeltsin resigned, and Putin's rise was complete.

Michael McFaul, who served as U.S. ambassador to Russia under Barack Obama, crossed paths with Putin in St. Petersburg in the 1990s.

"My strongest memory was that he made no memory," McFaul says. “He made virtually no impression back then.”

"I met Putin several times without noticing him," says Anders Åslund, a Swedish economist who worked as an economic adviser in Russia in the early 1990s. "He was very much a person who did not want to be seen."

Nearly all accounts of Putin at that time describe a man who absorbed much and said little.

Behind the scenes: Former Defense Secretary Ash Carter was in several meetings with top Russian officials in the mid-1990s, when he was an assistant secretary of defense. 

Across the table was Yeltsin. Behind him, taking notes, was Putin.

“We had an intelligence assessment of him then that is not that different than the assessment you’d give now," Carter says. "His first loyalty was to the security services, who deplored the end of the Soviet Union."

Putin in a naval cap in 2000, shortly after becoming president. Photo: Laski Diffusion/Liaison/Getty

Even Putin's critics acknowledge that he has accomplished three central objectives: building a strong Russian state, re-establishing Russia as a global power, and maintaining his own grip on power.

Flashback: "I frankly lived the whole decade of the 1990s with the fear of a Russian civil war at the back of my mind," recalls Dmitri Trenin, a former Russian army officer and now director of Carnegie Moscow. "Right up until Putin’s coming to power."

“Russia was turning into a confederacy at best in the 1990s and people were speculating about the world without Russia ... that this big country that thought of itself as a great power with a global impact would cease to exist.”

“That was the domestic and international setting at the time when Putin was given the job of prime minister and then of president.”

"He immediately energized the entire country," Trenin says.

"They saw an infirm Yeltsin, ringed by a bunch of oligarchs, having ministers who were good for nothing."

Out of the political gridlock and ineptitude, Trenin says, emerged "a guy who is actually doing things, who is very practically minded and is not afraid to take responsibility onto himself."

The bottom line: "Within a couple of months of his appointment as prime minister, he became the figure on whom the last hopes of so many Russian people were pinned.”

Bush looks into Putin's soul in 2001. Photo: Alain BUU/Gamma-Rapho via Getty Images

20 Years of Putin: Tracing his rise from KGB to Kremlin

Part 1 of an Axios special report focuses on his rise, his early years and his escalating antagonism with the West.

Axios

Tuesday's top stories

Trump's New Year's crisis

Wall Street has its best year since 2013

Illinois governor pardons 11,000 pot convictions ahead of Jan. 1 legalization

Collins says it's "inappropriate" for McConnell, Warren to "prejudge" impeachment trial

20 Years of Putin: Tracing his rise from KGB to Kremlin

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U.S. to send "additional forces" after embassy in Baghdad attacked by protesters

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