Overnight Defense: Iran's spy claim adds to tensions with US | Trump, lawmakers get two-year budget deal | Trump claims he could win Afghan war in a week

Overnight Defense: Iran's spy claim adds to tensions with US | Trump, lawmakers get two-year budget deal | Trump claims he could win Afghan war in a week
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Happy Monday and welcome to Overnight Defense. I'm Rebecca Kheel, and here's your nightly guide to the latest developments at the Pentagon, on Capitol Hill and beyond. CLICK HERE to subscribe to the newsletter.


THE TOPLINE: Iran claimed to bust a CIA spy ring Monday, kicking already high U.S.-Iran tensions up a notch.

Regional experts said Monday that it's hard to gauge the credibility of Iran's announcement.

Regardless, they added, Iran's flexing of its security apparatus represents the latest in a back-and-forth of escalating U.S.-Iran tensions, coming on the heels of Iran's seizure of a British-flagged oil tanker.

Iran's claims: On Monday, the Iranian Intelligence Ministry announced the arrests of 17 Iranian citizens, alleging they had been recruited by the CIA to collect information on the facilities where they worked in exchange for U.S. visas or jobs in America.


Iranian officials said some of the 17 have already been sentenced to death, without specifying exactly how many. Others, they said, have flipped and are now working with Iran against America.

US response: U.S. officials dismissed Iran's announcement as a lie. On Twitter, Trump called Iran's allegation "totally false," adding that it was "just more lies and propaganda" from a country that is "a total mess!"

In an interview on Fox News, Secretary of State Mike PompeoMichael (Mike) Richard PompeoFive takeaways from ex-ambassador's dramatic testimony Pompeo: No US response ruled out in Hong Kong Ousted ambassador describes State Department in 'crisis' in dramatic impeachment testimony MORE declined to discuss specifics of the situation, but similarly called out Iran's "long history of lying."

"It's part of the nature of the ayatollah to lie to the world," Pompeo said on "Fox and Friends." "I would take with a significant grain of salt any Iranian assertion about actions that they've taken."

Later Monday, Trump also indicated his window for talks is narrowing.

"If they want to make a deal, frankly it's getting harder for me to want to make a deal with Iran because they've behaved very badly," Trump told reporters Monday afternoon at the White House. "They're saying bad things, and I'll tell you it could go either way, very easily. Very easily. And I'm okay either way it goes."

The tanker: Fitting into the continuum of the months-long U.S.-Iran faceoff is also Iran's Friday seizure of a British-flagged oil tanker.

Iran is detaining the Stena Impero, which the Islamic Revolutionary Guard Corps boarded while it was transiting the Strait of Hormuz.

Asked Monday about the U.S. role in securing the Impero's release, Pompeo said it "falls to the United Kingdom to take care of their ships."

Britain announced its own plan Monday to form a European-led maritime security initiative.

In an address to Parliament, U.K. Foreign Secretary Jeremy Hunt said the effort would "complement" the U.S. plan, but that "it will not be part of the U.S. maximum pressure policy on Iran because we remain committed to preserving the Iran nuclear agreement."

"If Iran continues on this dangerous path, they must accept the price will be a larger Western military presence in the waters along their coastline, not because we wish to increase tensions but simply because freedom of navigation is a principle which Britain and its allies will always defend," Hunt added.


BUDGET DEAL REACHED: Congress and the White House have reached a two-year budget deal after days of furious negotiating.

Trump announced the agreement Monday with a tweet backing the deal.

"I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellOn The Money: Trump asks Supreme Court to block Dem subpoena for financial records | Kudlow 'very optimistic' for new NAFTA deal | House passes Ex-Im Bank bill opposed by Trump, McConnell Top House Democrats ask for review of DHS appointments Warren promises gradual move toward 'Medicare for All' in first 100 days MORE, Senate Minority Leader Chuck SchumerCharles (Chuck) Ellis SchumerOvernight Health Care: Trump officials making changes to drug pricing proposal | House panel advances flavored e-cig ban | Senators press FDA tobacco chief on vaping ban Chad Wolf becomes acting DHS secretary Schumer blocks drug pricing measure during Senate fight, seeking larger action MORE, Speaker of the House Nancy PelosiNancy PelosiPelosi: Trump tweets on Yovanovitch show his 'insecurity as an imposter' On The Money: Trump asks Supreme Court to block Dem subpoena for financial records | Kudlow 'very optimistic' for new NAFTA deal | House passes Ex-Im Bank bill opposed by Trump, McConnell Overnight Defense: Ex-Ukraine ambassador offers dramatic day of testimony | Talks of 'crisis' at State Department | Trump tweets criticism of envoy during hearing | Dems warn against 'witness intimidation' | Trump defends his 'freedom of speech' MORE, and House Minority Leader Kevin McCarthyKevin Owen McCarthyHarris introduces bill to prevent California wildfires McCarthy says views on impeachment won't change even if Taylor's testimony is confirmed House Republicans call impeachment hearing 'boring,' dismiss Taylor testimony as hearsay MORE - on a two-year Budget and Debt Ceiling, with no poison pills," Trump tweeted Monday evening.

The agreement, spearheaded by House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill's Morning Report — Public impeachment drama resumes today On The Money: Trump appeals to Supreme Court to keep tax returns from NY prosecutors | Pelosi says deal on new NAFTA 'imminent' | Mnuchin downplays shutdown threat | Trump hits Fed after Walmart boasts strong earnings Lawmakers aim for agreement on top-line spending by next week MORE, sets the top-line numbers for overall defense and non-defense spending for the 2020 and 2021 fiscal years. It would also suspend the debt ceiling through July 2021.

It also includes enough sweeteners for both sides to cherry pick what they'll claim victory on, including a bump in defense spending, considered a top priority for Republicans, and domestic priorities touted by Democrats.

How much for defense?: Trump didn't offer any details in his tweets on what the spending levels would be for the next two fiscal years.

Trump had requested $750 billion in defense spending and $567 billion in non-defense. But the agreement is expected to be significantly different, with defense spending closer to $735 billion and non-defense spending significantly higher.

Background: Across-the-board cuts known as sequestration wouldn't kick in for another few months. But Congress was still under pressure to reach a budget agreement before leaving town for the August recess in order to have a package on which attach the debt ceiling.

The debt limit was exceeded earlier this year, but the Treasury Department has been taking steps known as "extraordinary measures" to prevent the government from going over its borrowing limit.

Mnuchin, though, warned Congress earlier this month that Treasury could run out of cash in early September before Congress returns from recess.


TRUMP'S AFGHAN WAR CLAIM: Trump said Monday he could end the war in Afghanistan "in a week," but that doing so would cause millions of deaths.

"I could win that war in a week. I just don't want to kill 10 million people," Trump said during a White House meeting with Pakistani Prime Minister Imran Khan.

The president added that Afghanistan would be "wiped off the face of the earth" in 10 days if he chose to bring a quick end to the nation's longest war, which he called "ridiculous" and said has helped turn the U.S. into the world's "policemen."

"I don't want to go that route," Trump said.

Pakistan's role: Trump also said Pakistan could help play a role in stabilizing Afghanistan after a possible U.S. pullout and suggested he could restore hundreds of millions of dollars in military aid to Pakistan "depending on what we work out."

"I think Pakistan is going to help us out," the president said. "Basically we're policemen right now and we don't want to be policemen."

Trump cut off military aid to Pakistan last year after the U.S. accused the South Asian country of not doing enough to combat terrorist groups.

A senior administration official said the aid would be restored "on certain items if Pakistan meets our security concerns," both by fighting extremist groups in Afghanistan as well as within its own borders.



The Senate Armed Services Committee will hold a business meeting to consider pending nominations at 9:30 a.m. https://bit.ly/2Mm2Qjg



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