Syria condemns ‘cowardly’ U.S. air strikes on Iran-backed militias

By John Davison and Maha El Dahan

BAGHDAD (Reuters) – Syria condemned U.S. air strikes against Iran-backed militias in the east of the country on Friday as a cowardly act and urged President Joe Biden not to follow “the law of the jungle”.

An Iraqi militia official close to Iran said the strikes killed one fighter and wounded four, but U.S. officials said they were limited in scope to show Biden’s administration will act firmly while trying to avoid a big regional escalation.

Washington and Tehran are seeking maximum leverage in attempts to return to the Iran nuclear deal.

“Syria condemns in the strongest terms the U.S. cowardly attack on areas in Deir al-Zor near the Syrian-Iraqi border,” the Syrian foreign ministry said in a statement.

“It (the U.S. administration) is supposed to stick to international legitimacy, not to the law of the jungle as (did) the previous administration.”

Russia, an ally of Syrian President Bashar al-Assad, also criticized the strikes and called for “unconditional respect of the sovereignty and territorial integrity of Syria.”

“What has happened is very dangerous and could lead to an escalation in the whole region,” a Russian parliamentarian, Vladimir Dzhabarov, was quoted as saying by RIA news agency.

The strikes, early on Friday Middle Eastern time, targeted militia sites on the Syrian side of the Iraqi-Syrian border, where groups backed by Iran control an important crossing for weapons, personnel and goods.

Western officials and some Iraqi officials accuse Iran-backed groups of involvement in deadly rocket attacks against U.S. sites and personnel in Iraq in the last month.

ATTACKS ON U.S. FORCES IN IRAQ

The Iraqi militia official close to Iran said Friday’s air strikes had hit positions of the Kataib Hezbollah paramilitary group along the border.

Local sources and a medical source in eastern Syria told Reuters at least 17 people had been killed, but gave no further details. That toll could not be confirmed.

In recent attacks, a non-American contractor was killed at a U.S. military based at Erbil International Airport in Kurdish-run northern Iraq on Feb. 15 and, in the days that followed, rockets were fired at a base hosting U.S. forces, and near the U.S. embassy in Baghdad.

Biden’s decision to strike only in Syria and not in Iraq gives Iraq’s government breathing room as it investigates the Erbil attack, which also wounded Americans.

Kataib Hezbollah has denied involvement in recent attacks against U.S. interests. Iran denies involvement in attacks on U.S. sites.

Several attacks, including the one on Erbil airport, have been claimed by little-known groups which some Iraqi and Western officials say are a front for established Iran-backed groups such as Kataib Hezbollah.

LIMITED RESPONSE

Pentagon spokesman John Kirby said in a statement on Thursday that U.S. forces had conducted air strikes against infrastructure used by Iranian-backed militant groups.

“President Biden will act to protect American and Coalition personnel. At the same time, we have acted in a deliberate manner that aims to de-escalate the overall situation in both eastern Syria and Iraq,” Kirby said.

He said the strikes destroyed multiple facilities at a border control point used by a number of Iranian-backed militant groups, including Kataib Hezbollah and Kataib Sayyid al-Shuhada.

A U.S. official, speaking on condition of anonymity, said the decision to carry out the strikes was meant to signal that, while the United States wanted to punish the militias, it did not want the situation to spiral into a bigger conflict.

The Iraqi military issued a statement saying it had not exchanged information with the United States over the targeting of locations in Syria, and that cooperation with the U.S.-led coalition in Iraq was limited to fighting Islamic State.

It was not clear how, or whether, the U.S. strikes might affect efforts to coax Iran back into negotiations about both sides resuming compliance with the 2015 nuclear deal.

(Reporting by John Davison, Amina Ismail, Baghdad newsroom, Maha El Dahan in Beirut, Kinda Makieh in Damascus, and Idrees Ali and Phil Stewart in Washington, and by Thomas Balmforth and Gabrielle Tétrault-Farber in Moscow, editing by Timothy Heritage)

First big suicide attack in Baghdad for three years kills at least 32

BAGHDAD (Reuters) – Two men blew themselves up in a crowded Baghdad market on Thursday, killing at least 32 people in Iraq’s first big suicide bombing for three years, authorities said, describing it as a possible sign of the reactivation of Islamic State.

Reuters journalists arriving after the blasts saw pools of blood and discarded shoes at the site, a clothing market in Tayaran Square in the center of the city. Health authorities said at least 110 people had been wounded.

“One (bomber) came, fell to the ground and started complaining ‘my stomach is hurting’ and he pressed the detonator in his hand. It exploded immediately. People were torn to pieces,” said a street vendor who did not give his name.

Suicide attacks, once an almost daily occurrence in the Iraqi capital, have halted in recent years since Islamic State fighters were defeated in 2017, part of an overall improvement in security that has brought normal life back to Baghdad.

“Daesh terrorist groups might be standing behind the attacks,” Civil Defense chief Major General Kadhim Salman told reporters, using an Arabic acronym for Islamic State.

A video taken from a rooftop and circulated on social media purported to show the second blast scattering people gathered in the area. Images shared online, which Reuters could not independently verify, showed several dead and wounded.

Thursday’s attack took place in the same market that was struck in the last big attack, in January, 2018, when at least 27 people were killed.

Prime Minister Mustafa al-Kadhimi held an urgent meeting with top security commanders to discuss Thursday’s suicide attacks, the premier’s office said in a brief statement. Iraqi security forces were deployed and key roads blocked to prevent possible further attacks.

Suicide attacks against civilian targets were a near-daily tactic of mainly Sunni Muslim insurgents during the U.S. occupation of Iraq after the invasion that toppled Saddam Hussein in 2003, and were later employed by Islamic State, whose fighters swept across a third of the country in 2014.

By 2017 the fighters had been driven from all territory they held, although they have continued to wage a low-level insurgency against Iraqi forces and attack officials mainly in northern areas.

(Reporting by Baghdad newsroom; Writing by Ahmed Rasheed and John Davison; Editing by Catherine Evans and Peter Graff)

Threat to evacuate U.S. diplomats from Iraq raises fear of war

By John Davison

BAGHDAD (Reuters) – Washington has made preparations to withdraw diplomats from Iraq after warning Baghdad it could shut its embassy, two Iraqi officials and two Western diplomats said, a step Iraqis fear could turn their country into a battle zone.

Any move by the United States to scale down its diplomatic presence in a country where it has up to 5,000 troops would be widely seen in the region as an escalation of its confrontation with Iran, which Washington blames for missile and bomb attacks.

That in turn would open the possibility of military action, with just weeks to go before an election in which President Donald Trump has campaigned on a hard line towards Tehran and its proxies.

Secretary of State Mike Pompeo threatened to close the embassy in a phone call a week ago to President Barham Salih, two Iraqi government sources said. The conversation was initially reported by an Iraqi news website.

By Sunday, Washington had begun preparations to withdraw diplomatic staff if such a decision is taken, those sources and the two Western diplomats said.

The concern among the Iraqis is that pulling out diplomats would be followed quickly by military action against forces Washington blamed for attacks.

Populist Iraqi cleric Moqtada al-Sadr, who commands a following of millions of Iraqis, issued a statement last week pleading for groups to avoid an escalation that would turn Iraq into a battleground.

One of the Western diplomats said the U.S. administration did not “want to be limited in their options” to weaken Iran or pro-Iranian militias in Iraq. Asked whether he expected Washington to respond with economic or military measures, the diplomat replied: “Strikes.”

The U.S. State Department, asked about plans to withdraw from Iraq, said: “We never comment on the Secretary’s private diplomatic conversations with foreign leaders … Iran-backed groups launching rockets at our Embassy are a danger not only to us but to the Government of Iraq.”

PERENNIAL RISK

In a region polarized between allies of Iran and the United States, Iraq is the rare exception: a country that has close ties with both. But that has left it open to a perennial risk of becoming a battle ground in a proxy war.

That risk was hammered home in January this year, when Washington killed Iran’s most important military commander, Qassem Soleimani, with a drone strike at Baghdad airport. Iran responded with missiles fired at U.S. bases in Iraq.

Since then, a new prime minister has taken power in Iraq, supported by the United States, while Tehran still maintains close links to powerful Shi’ite armed movements.

Rockets regularly fly across the Tigris towards the heavily fortified U.S. diplomatic compound, constructed to be the biggest U.S. embassy in the world in central Baghdad’s so-called Green Zone during the U.S. occupation after a 2003 invasion.

In recent weeks rocket attacks near the embassy have increased and roadside bombs targeted convoys carrying equipment to the U.S.-led military coalition. One roadside attack hit a British convoy in Baghdad, the first of its kind against Western diplomats in Iraq for years.

On Monday three children and two women were killed when two militia rockets hit a family home, the Iraqi military said. Police sources said Baghdad airport was the intended target.

Two Iraqi intelligence sources suggested plans to withdraw American diplomats were not yet in motion, and would depend on whether Iraqi security forces were able to do a better job of halting attacks. They said they had received orders to prevent attacks on U.S. sites, and had been told that U.S. evacuations would begin only if that effort failed.

DOUBLE-EDGED SWORD

Iraqis are concerned about the impact of November’s presidential election on the Trump administration’s decision-making.

While Trump has boasted of his hard line against Iran, he has also long promised to withdraw U.S. troops from engagements in the Middle East. The United States is already drawing down its force sent to help defeat Islamic State fighters in Iraq from 2014-2017.

Some Iraqi officials dismissed Pompeo’s threat to pull out diplomats as bluster, designed to scare armed groups into stopping attacks. But they said it could backfire by provoking the militias instead, if they sense an opportunity to push Washington to retreat.

“The American threat to close their embassy is merely a pressure tactic, but is a double-edged sword,” said Gati Rikabi, a member of Iraq’s parliamentary security committee.

He and another committee member said U.S. moves were designed to scare Iraqi leaders into supporting Prime Minister Mustafa al-Kadhimi, who has tried to check the power of Iran-aligned militia groups, with scant success.

HAWKS ON BOTH SIDES

The militias are under public pressure to rein in supporters who might provoke Washington. Since last year, public opinion in Iraq has turned sharply against political groups seen as fomenting violence on behalf of Iran.

Publicly, the powerful Iran-backed Shi’ite militia groups which control large factions in parliament have tried to distance themselves from attacks on Western targets.

U.S. officials say they think the Shi’ite militias or their Iranian backers have created splinter offshoots to carry out such attacks, allowing the main organizations to evade blame.

A senior figure in a Shi’ite Muslim political party said he thought Trump might want to pull out diplomats to keep them out of harm’s way and avoid an embarrassing pre-election incident.

Militia attacks were not necessarily under Tehran’s control, he said, noting that Iran’s foreign ministry had publicly called for a halt to attacks on diplomatic missions in Iraq.

“Iran wants to boot the Americans out, but not at any cost. It doesn’t want instability on its Western border,” the Shi’ite leader said. “Just like there are hawks in the U.S., there are hawks in Iran who have contact with the groups carrying out attacks, who aren’t necessarily following state policy.”

(Reporting by John Davison, additional reporting by Ahmed Rasheed; Editing by Peter Graff)

Rockets land near Baghdad airport after week of anti-U.S. attacks

GENEVA, Switzerland (Reuters) – Three rockets landed in the vicinity of Baghdad airport near a military base in the complex that houses U.S. forces, the Iraqi military said, after one of the busiest weeks of attacks against U.S. targets in Iraq for months.

The incident caused no casualties, the military said.

It followed at least five attacks directed at U.S. interests in Iraq this week, including four blasts against convoys carrying supplies to bases housing U.S. forces, a rocket attack on an air base north of Baghdad and a rocket attack near the U.S. Embassy in the capital.

Washington blames such attacks on Iranian-backed militia groups. Iran has not directly commented on the incidents but little-known groups believed to be connected to Iran-aligned militias have claimed some attacks.

Friday’s attack took place as Prime Minister Mustafa al-Kadhimi prepares to travel to the United States for talks about Iraq’s future strategic relationship with Washington.

It also comes after Israel and the United Arab Emirates, two regional opponents of Iran, announced they would normalize diplomatic ties, a move that some commentators say provides a fresh challenge to Iran’s power in the Middle East.

Iraq, where U.S.-Iran tensions have often spilled over into violence, seeks to avoid being drawn into any regional conflagration.

The Middle East came close to a full conflict in January after a U.S. drone strike killed the Iranian General Qassem Soleimani and Iraqi paramilitary chief Abu Mahdi al-Muhandis at Baghdad airport.

Iran-aligned militias have sworn to avenge their deaths.

The militias see Kadhimi as having firmly sided with the United States since he took office in May, after he ordered an arrest raid against one powerful Iran-aligned group and has indicated he wants to rein in the paramilitaries.

(Reporting by John Davison; Editing by Chris Reese and Angus MacSwan)

Explosions hit U.S. coalition supply convoys in Iraq: sources, military

BAGHDAD (Reuters) – At least two explosions have hit convoys supplying U.S.-led coalition forces in Iraq in the last 24 hours, security sources said, the first on Monday evening near the southern border with Kuwait and the second on Tuesday north of Baghdad.

The explosions, which caused no casualties but did some material damage, are the latest in a string of such incidents in recent weeks. An attack in southern Iraq on Sunday hit a convoy carrying supplies to coalition forces, the military said.

Several thousand U.S. forces are still based in Iraq, leading a coalition whose mission is to fight Sunni Muslim Islamic State militants.

Those forces are also a target for Iran-backed Shi’ite militias, which the United States blames for regular rocket attacks on bases hosting the coalition, and on other U.S. targets such as Washington’s embassy in Baghdad.

The militias have vowed to avenge the death of paramilitary commander Abu Mahdi al-Muhandis, who was killed alongside Iranian military mastermind Qassem Soleimani in a U.S. drone strike in Baghdad in January. Political forces aligned with the militias demand a full withdrawal of foreign troops from Iraq.

They also oppose Iraq’s Prime Minister Mustafa al-Kadhimi, who took office in May. He is viewed as being friendly with the United States and has challenged the power of Iran-aligned armed groups in Iraq.

MULTIPLE ATTACKS

Tuesday’s explosion near the Taji military base north of Baghdad caused a fire to a container on one vehicle, the Iraqi military said in a statement. There was no immediate claim of responsibility for the blast.

The explosion on Monday night near the Jraischan border crossing between Iraq and Kuwait targeted a convoy carrying equipment for U.S. forces, three sources from different branches of Iraq’s security services and military said.

The Iraqi military denied that incident took place.

Kuwait’s military on Twitter also denied any attack along its border with Iraq.

Vehicles are regularly loaded with military equipment at the crossing, the security sources said, and cargo is usually loaded or unloaded before entering or exiting Iraq.

Foreign companies are contracted by U.S. forces to provide security in the area, the Iraqi security sources said.

A little known Iraqi Shi’ite militia group by the name of Ashab al-Kahf claimed responsibility for the attack and published a video showing an explosion at a distance. It said it was able to destroy U.S. military equipment and large parts of the crossing.

(Reporting by Aref Mohammed, Baghdad newsroom, John Davison in Geneva; Additional reporting by Lisa Barington in Dubai; Writing by Ahmed Aboulenein; Editing by Grant McCool and Gareth Jones)

Pompeo to Iraq PM: U.S. will take action in self-defense if attacked

WASHINGTON (Reuters) – U.S. Secretary of State Mike Pompeo warned Iraq’s prime minister that the United States would take measures in self-defense if attacked, according to a statement on Monday after a rocket attack on an Iraqi base that houses U.S. troops helping fight Islamic State.

Pompeo spoke to Prime Minister Adel Abdul Mahdi on Sunday, a day after three American troops and several Iraqi forces were wounded in the second major rocket attack in the past week on an Iraqi base north of Baghdad, U.S. and Iraqi officials said, raising the stakes in an escalating cycle of attacks and reprisals.

He said Iraq’s government should defend the U.S.-led coalition helping it fight Islamic State, according to the statement from State Department spokeswoman Morgan Ortagus.

“Secretary Pompeo underscored that the groups responsible for these attacks must be held accountable. Secretary Pompeo noted that America will not tolerate attacks and threats to American lives and will take additional action as necessary in self-defense,” it said.

Iraq’s Joint Operations Command said 33 Katyusha rockets were launched near a section of the Taji base which houses U.S.-led coalition troops. It said the military found seven rocket launchers and 24 unused rockets in the nearby Abu Izam area.

The Iraqi military said several Iraqi air defense servicemen were critically wounded. Two of the three wounded U.S. troops are seriously injured and are being treated at a military hospital in Baghdad, the Pentagon said.

Longstanding antagonism between the United States and Iran has mostly played out on Iraqi soil in recent months.

Iranian-backed paramilitary groups have regularly rocketed and shelled bases in Iraq which host U.S. forces and the area around the U.S. Embassy in Baghdad.

The United States has in turn conducted several strikes inside Iraq, killing top Iranian general Qassem Soleimani and Kataib Hezbollah founder Abu Mahdi al-Muhandis in January.

(Reporting by Doina Chiacu; Editing by Alex Richardson and Andrea Ricci)

Supreme leader in tears as huge crowd mourns slain commander in Tehran

By Parisa Hafezi and Jeff Mason

DUBAI/WASHINGTON (Reuters) – Iran’s supreme leader wept in grief with hundreds of thousands of mourners thronging Tehran’s streets on Monday for the funeral of military commander Qassem Soleimani, killed by a U.S. drone on the orders of U.S. President Donald Trump.

As the coffins of General Qassem Soleimani and Iraqi militia leader Abu Mahdi al-Muhandis, who also died in Friday’s attack in Baghdad, were passed over the heads of mourners, Soleimani’s successor vowed to expel U.S. forces from the region in revenge.

The killing of Soleimani, the architect of Iran’s drive to extend its influence across the Middle East, has stoked concern around the globe that a broader regional conflict could erupt.

Trump has listed 52 Iranian targets, including cultural sites, that could be hit if Iran retaliates with attacks on Americans or U.S. assets, although U.S. officials sought to play down the president’s reference to cultural targets.

General Esmail Ghaani, the new commander of the Quds Force, the elite unit of Iran’s Revolutionary Guards charged with overseas operations, promised to “continue martyr Soleimani’s cause as firmly as before with the help of God, and in return for his martyrdom we aim to rid the region of America”.

“God the Almighty has promised to take martyr Soleimani’s revenge,” he told state television. “Certainly, actions will be taken.”

Other political and military leaders have made similar, unspecific threats. Iran, which lies at the mouth of the key Gulf oil shipping route, has a range of proxy forces in the region through which it could act.

The crowd in Tehran, which state media said numbered in the millions, recalled the masses that gathered in 1989 for the funeral of the Islamic Republic’s founder, Ayatollah Ruhollah Khomeini.

NATIONAL HERO

Soleimani was a national hero in Iran – even to many who do not consider themselves supporters of Iran’s clerical rulers.

Aerial footage showed people packing thoroughfares and side streets and chanting “Death to America!”, a welcome show of national unity for Tehran after anti-government protests in November in which many demonstrators were killed.

Iran’s demand that U.S. forces quit the region gained traction on Sunday when Iraq’s parliament backed the prime minister’s recommendation for foreign troops to be ordered out.

Iraq’s rival Shi’ite leaders, including ones opposed to Iranian influence, have united since Friday’s attack to call for the expulsion of U.S. troops, who number about 5,000.

Soleimani, widely seen as Iran’s second most powerful figure behind Khamenei, built a network of proxy forces that formed a crescent of influence – and a direct challenge to the United States and its regional allies led by Saudi Arabia – stretching from Lebanon through Syria and Iraq to Iran. Outside the crescent, Iran nurtured allied Palestinian and Yemeni groups.

He notably mobilized Shi’ite Muslim militia forces in Iraq that helped to crush Islamic State, the Sunni militant group that had seized control of swathes of Syria and Iraq in 2013-14.

Washington, however, blames Soleimani for attacks on U.S. forces and their allies.

Prayers at Soleimani’s funeral in Tehran, which moves to the general’s southern home city of Kerman on Tuesday, were led by Khamenei, who wept as he spoke.

His daughter Zeinab Soleimani told mourners the United States would face a “dark day” for her father’s death.

Ismail Haniyeh, leader of the Palestinian militant group Hamas, on his first trip to Iran since taking up his role in 2017, said “resistance against America” would continue.

NUCLEAR DEAL

Iran adding to tensions on Sunday by dropping all limitations on its uranium enrichment — another step back from commitments under a landmark deal with major powers in 2015 to curtail Iran’s nuclear program that Trump abandoned in 2018.

European Union foreign ministers plan to hold an emergency meeting on Friday to discuss ways to save the deal, two diplomats said. [nL8N29B3O7]

After quitting the deal, the United States imposed new sanctions on Iran, saying it wanted to halt Iranian oil exports, the main source of government revenues. Iran’s economy has been in freefall as the currency has plunged.

Trump’s adviser Kellyanne Conway said on Monday that Trump was still confident he could renegotiate a new nuclear agreement “if Iran wants to start behaving like a normal country”.

Tehran has said Washington must return to the existing nuclear pact and lift sanctions before any talks can take place.

Trump stood by remarks that cultural sites were potential targets, despite criticism from U.S. politicians that this amounted to a threat to commit war crimes.

“They’re allowed to kill our people. They’re allowed to torture and maim our people. They’re allowed to use roadside bombs and blow up our people. And we’re not allowed to touch their cultural sites? It doesn’t work that way,” Trump said.

Democratic critics of the Republican president have said Trump was reckless in authorizing the strike. Republicans in the U.S. Congress have generally backed his move.

Trump also threatened sanctions against Iraq and said Baghdad would have to pay Washington for an air base in Iraq if U.S. troops were required to leave.

It was not clear if Washington had advised its allies of its plans before killing Soleimani. Britain, which also has troops in Iraq, said it understood why the United States had acted but called for a de-escalation to avoid war.

(Reporting by Reuters reporters in Dubai Newsroom; Jeff Mason in Washington; Ahmed Aboulenein in Baghdad; Writing by Edmund Blair; Editing by Angus MacSwan and Kevin Liffey)

Oil, safe havens surge as U.S. strikes kill Iranian commander

By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) – Oil prices surged as much as $3 a barrel as gold, the yen and safe-haven bonds all rallied on Friday after the U.S. killing of Iran’s top military commander in an air strike in Iraq ratcheted up tensions between Washington and Tehran.

Traders were spooked after the death of Major General Qassem Soleimani, head of the elite Quds Force who was also one of Iran’s most influential figures, and by Iranian Supreme Leader Ayatollah Ali Khamenei’s vow of revenge.

Mideast-focused oil markets saw the most dramatic moves, with Brent oil futures leaping as much 4.5% to $69.20 a barrel. That was the highest since the attacks on Saudi crude facilities in September, though the impact hit almost every asset class.

Europe’s broad STOXX 600 index fell as much as 1% and shares on Wall Street almost the same as New Year optimism, which had pushed equity markets to new records, evaporated.

The yen rose half a percent against the dollar to a two-month high, the Swiss franc hit its highest against the euro since September and gold prices  climbed to a four-month peak, racing past the key $1,550 an ounce level.

“Geopolitics has come back to the table, and this is something that could have major cross-asset implications,” said Salman Ahmed, Lombard Odier’s chief investment strategist.

“What is critical is how it pans out in the next few days,” Ahmed said. “Whether it turns into a theme depends on Iran’s reaction and then the U.S. response.”

Iran promised harsh revenge. Soleimani’s Quds Force and its paramilitary proxies, ranging from Lebanon’s Hizbollah to the PMF in Iraq, have ample means to mount a response.

In September, U.S. officials blamed Iran for attacking the oil installations of Saudi Aramco, the state energy giant and the world’s largest oil exporter. Iran has denied responsibility for the strikes and accused Washington of war-mongering.

The Trump administration then did not respond, beyond heated rhetoric and threats, and markets settled down within a week after Brent surged 14.6%, its biggest one-day percentage gain since at least 1988.

The U.S. government and others on Friday urged their citizens in the region either to return home or to stay away from potential targets and public gatherings.

U.S. Secretary of State Mike Pompeo said in a round of TV interviews that the United States remained committed to de-escalation with Iran but that it had needed to defend itself.

“He (Soleimani) was actively plotting in the region to take actions – a big action as he described it – that would have put dozens if not hundreds of American lives at risk. We know it was imminent,” Pompeo told CNN.

MSCI’s gauge of stocks across the globe shed 0.43%, while its emerging markets index lost 0.32%.

On Wall Street, the Dow Jones Industrial Average  fell 210.81 points, or 0.73%, to 28,657.99. The S&P 500  lost 18.86 points, or 0.58%, to 3,238.99 and the Nasdaq Composite <.IXIC> dropped 58.26 points, or 0.64%, to 9,033.93.

The global gauge and Wall Street indices set record closing highs on Thursday, extending the year-end rally in equities.

Brent  hit a peak of $69.50 a barrel, its highest since mid-September, though it later traded up $2.40 to $68.65.

West Texas Intermediate  crude  rose $2.20 to $63.38 a barrel, after earlier spiking to $64.09 a barrel, its highest since April 2019.

SCRAMBLE TO SAFETY

Yields on German Bunds and U.S. Treasuries – the world’s benchmark government bonds that are typically seen as the safest assets – fell sharply.

 

The 10-year Bund  yield fell 7 basis points to a two-week low of -0.299%, while Bund futures  were up 0.51 percent, at 172.13 euros.

Benchmark 10-year Treasury notes rose 23/32 in price to yield 1.802%, from 1.882% late on Monday.

The dollar index fell 0.08%, with the euro up 0.06% to $1.1177. The Japanese yen  strengthened 0.59% versus the greenback at 107.94 per dollar.

The focus on geopolitics meant markets paid little attention to stronger-than-expected data from France, where inflation rose 1.6% year-on-year in December, beating analysts’ expectations for a 1.4% rise.

German inflation figures were also higher, although unemployment in Europe’s largest economy rose more than expected.

The U.S. manufacturing sector contracted in December by the most in more than a decade, with order volumes crashing to near an 11-year low and factory employment falling for a fifth straight month, the Institute for Supply Management said.

Investors also were looking forward to the minutes of the U.S. Federal Reserve’s Dec. 10-11 meeting due at 2 p.m. (1900 GMT).

(Reporting by Herbert Lash, additional reporting by Sujata Rao and Dhara Ranasinghe in London and Diptendu Lahiri in Bengaluru; Editing by Dan Grebler)

U.S. says it disrupted ‘imminent attack’ with killing of Iran commander

 

By Ahmed Rasheed and Ahmed Aboulenein

BAGHDAD (Reuters) – Iran promised harsh revenge on Friday after a U.S. air strike in Baghdad on Friday killed Qassem Soleimani, commander of Iran’s elite Quds Force and architect of its growing military influence in the Middle East.

Soleimani, a 62-year-old general, was regarded as the second most powerful figure in Iran after Supreme Leader Ayatollah Ali Khamenei.

FILE PHOTO: Combination photo of Iranian Revolutionary Guard Commander Qassem Soleimani (L) and Abu Mahdi al-Muhandis, a commander in the Popular Mobilization Forces. REUTERS/Stringer/Thaier al-Sudani

The overnight attack, authorized by President Donald Trump, was a dramatic escalation in a “shadow war” in the Middle East between Iran and the United States and its allies, principally Israel and Saudi Arabia.

U.S. Secretary of State Mike Pompeo said the strike aimed to disrupt an “imminent attack” that would have endangered Americans in the Middle East. Democratic critics said the Republican president had raised the risk of more violence in a dangerous region.

Pompeo, in interviews on Fox News and CNN, declined to discuss many details of the alleged threat but said it was “an intelligence based assessment” that drove the decision to target Soleimani.

In a tweet, Trump said Soleimani had “killed or badly wounded thousands of Americans over an extended period of time, and was plotting to kill many more”, but did not elaborate.

The attack also killed top Iraqi militia commander Abu Mahdi al-Muhandis, an adviser to Soleimani.

It followed a sharp increase in longrunning U.S.-Iranian hostilities last week when pro-Iranian militiamen attacked the U.S. embassy in Iraq following a U.S. air raid on the Kataib Hezbollah militia, founded by Muhandis.

Iraq’s prime minister said that with Friday’s attack Washington had violated a deal for keeping U.S. troops in his country.

CONCERN OVER ESCALATION

Israel put its army on high alert and U.S. allies in Europe including Britain, France and Germany voiced concerns about an escalation in tensions.

U.S. officials, speaking on condition of anonymity, said Soleimani was killed in a drone strike. Iran’s Revolutionary Guards said he died in an attack by U.S. helicopters.

The U.S. embassy in Baghdad urged all American citizens to depart Iraq immediately.

Dozens of U.S. citizens working for foreign oil companies in the southern city of Basra were leaving the country. Iraqi officials said the evacuations would not affect output and exports were unaffected.

Oil prices jumped more than $3 a barrel over concern about disruption to Middle East supplies.

Khamenei said harsh revenge awaited the “criminals” who killed Soleimani and said his death would double resistance against the United States and Israel.

In statements on state media, he called for three days of national mourning and appointed Soleimani’s deputy, Brigadier General Esmail Ghaani, to replace him as Quds Force head.

‘STICK OF DYNAMITE’

Trump critics called the operation reckless.

“President Trump just tossed a stick of dynamite into a tinderbox,” said former Vice President Joe Biden, a contender in this year’s U.S. presidential election.

As leader of the Quds Force, the foreign arm of the Guards, Soleimani had a key role in fighting in Syria and Iraq.

Over two decades he was at the forefront of projecting the Islamic Republic’s military influence across the Middle East, acquiring celebrity status at home and abroad.

President Hassan Rouhani said the assassination would make Iran more decisive in resisting the United States, while the Revolutionary Guards said anti-U.S. forces would exact revenge across the Muslim world.

Hundreds of Iranians marched toward Khamenei’s compound in central Tehran to convey their condolences.

“I am not a pro-regime person but I liked Soleimani. He was brave and he loved Iran, I am very sorry for our loss,” said housewife Mina Khosrozadeh in Tehran.

In Soleimani’s hometown, Kerman, people wearing black gathered in front of his father’s house, crying as they listened to a recitation of verses from the Koran.

“Heroes never die. It cannot be true. Qassem Soleimani will always be alive,” said Mohammad Reza Seraj, a teacher.

Iraqi Prime Minister Adel Abdul Mahdi condemned the killings as an act of aggression that breached Iraq’s sovereignty and would lead to war.

Israel has long seen Soleimani as a major threat and Prime Minister Benjamin Netanyahu defended the U.S. action. Israeli Army Radio said the military was on heightened alert.

Russia’s Ministry of Defense called the killing a “short-sighted” step that would lead to escalations in the region.

PREVIOUS ATTACKS

The slain commander’s Quds Force, along with paramilitary proxies from Lebanon’s Hezbollah to Iraq’s Popular Mobilisation Forces grouping of Iran-backed militias – battle-hardened militias armed with missiles – has ample means to respond.

In September, U.S. officials blamed Iran for a missile and drone attack on oil plants of Saudi energy giant Saudi Aramco. Washington also blamed Tehran for earlier raids on Gulf shipping.

Iran has denied responsibility for the strikes and accused Washington of warmongering by reimposing crippling sanctions on Iran’s main export, oil, in order to force Tehran to renegotiate a deal to freeze its nuclear activities.

Soleimani had survived several assassination attempts by Western, Israeli and Arab agencies over the past two decades.

The Quds Force, tasked with operating beyond Iran’s borders, shored up support for Syria’s President Bashar al-Assad when he looked close to defeat in the civil war raging since 2011 and also helped militias defeat Islamic State in Iraq.

Soleimani became head of the force in 1998, after which he quietly strengthened Iran’s ties with Hezbollah in Lebanon, Syria’s government and Shi’ite militia groups in Iraq.

(Reporting by Ahmed Rasheed and Ahmed Aboulenein; Additional reporting by Idrees Ali, Susan Heavey, Lisa Lambert and Mary Milliken in Washington, Parisa Hafezi and Michael Georgy in Dubai, Maha El Dahan in Baghdad, Stephen Farrell in Jerusalem, Polina Ivanova in Moscow; Writing by Samia Nakhoul and Frances Kerry; Editing by Robert Birsel, Raju Gopalakrishnan, Mike Collett-White, William Maclean)

Violent protests erupt around U.S. Embassy in Baghdad after U.S. air strikes

By Ahmed Rasheed

BAGHDAD (Reuters) – Protesters and militia fighters enraged by U.S. air strikes on Iraq staged a violent demonstration outside the U.S. Embassy in Baghdad on Tuesday, torching a security post and hurling stones as security forces and embassy guards hit back with stun grenades and tear gas.

Iraqi officials said the ambassador and other staff had been evacuated but this could not be confirmed with American officials.

In Washington, U.S. President Donald Trump accused Iran of orchestrating the violence and said Tehran would be held responsible.

The protesters and militiamen stormed and burned a security post at the entrance of the U.S. Embassy but did not breach the main compound, Reuters witnesses said.

They threw stones at the gate while others chanted, “No, no, America! No, no, Trump!”

Iraqi special forces were deployed around the main gate to prevent them entering the embassy. U.S.-trained and -equipped Iraqi Counter Terrorism forces later reinforced them.

Medical sources said 12 militiamen were wounded by the tear gas and stun grenades fired to disperse the crowd.

U.S. planes on Sunday had attacked bases belonging to an Iranian-backed militia – an action that risks drawing Iraq further into a proxy conflict between Washington and Tehran at a time when mass protests are challenging Iraq’s political system.

The attack on the Kataib Hezbollah militia was in response to the killing of a U.S. civilian contractor in a rocket attack on an Iraqi military base.

“Iran killed an American contractor, wounding many. We strongly responded, and always will,” Trump said in a tweet.

“Now Iran is orchestrating an attack on the U.S. Embassy in Iraq. They will be held fully responsible. In addition, we expect Iraq to use its forces to protect the Embassy, and so notified.”

Two Iraqi foreign ministry officials said the U.S. ambassador and other staff had left, but they did not say when.

The Washington Post reported that inside the embassy, U.S. diplomats and staffers were huddled in a fortified safe room, according to two reached by a messaging app.

A few hours into the protest, tear gas was fired in an attempt to disperse the crowd and some of the militias encouraged protesters through loudspeakers to leave.

“We have delivered our message, please leave the area to avoid bloodshed,” one announcement said.

Security guards inside the embassy also fired stun grenades at protesters outside the gates of the compound. Reuters correspondents heard at least seven loud bangs.

A Reuters witness saw blood on the face of one wounded militiamen and on the stomach of the other as their colleagues carried them away from the scene.

‘CLOSED IN THE NAME OF THE PEOPLE’

Iraqis have been taking to the streets in their thousands almost daily to condemn, among other things, militias such as Kataib Hezbollah and their Iranian patrons that support Iraqi Prime Minister Adel Abdul Mahdi’s government.

But on Tuesday, it was the militias who protested, spraying “Closed in the name of the people” on the gates of the U.S. Embassy and smashed the surveillance cameras around the building with bricks and stones.

Qais al-Khazali, leader of the Iranian-backed Asaib Ahl al-Haq militia, and many other senior leaders were among the protesters.

“Americans are unwanted in Iraq. They are a source of evil and we want them to leave,” Khazali told Reuters.

Khazali is one of the most feared and respected Shi’ite militia leaders in Iraq, and one of Iran’s most important allies.

Kataib Hezbollah is one of the smallest but most potent of the Iranian-backed militias. Its flags were hung on the fence surrounding the embassy.

Militia commander Jamal Jaafar Ibrahimi, also known as Abu Mahdi al-Mohandes, and Badr Organisation leader Hadi al-Amiri were also at the protest.

There are more than 5,000 U.S. troops in Iraq supporting local forces, though Iraq has rejected any long-term presence of additional U.S. forces that crossed its border during an American withdrawal from northern Syria.

Sunday’s air strikes killed at least 25 fighters and wounded 55.

(Reporting By Ahmed Rasheed, Maher Nazeh and Thaier al-Sudani; writing by Maha El Dahan; Editing by Angus MacSwan)