"..State Department officials are content that the talks have not broken down already .."

Swoop:

"...The tensions between Washington and Beijing, on which we have reported earlier, continue to deepen. Treasury Secretary Geithner faced close scrutiny during his September 16th testimony on China’s currency policy. With the US economic recovery still anemic, political pressure is intensifying on the Administration to force a quick upward valuation of the Yuan. The problem for the Administration is that its ability to produce its desired outcome is very limited. The September 4th-7th visit to China by Larry Summers, Director of the National Economic Council, and Thomas Donilon, Deputy National Security Adviser, yielded meager results. Treasury contacts tell us that President Obama will seek to impress on his Chinese counterparts the need for action in advance of the November 13th-14th APEC summit in Japan. Privately, however, they do not expect much success. The prospect, therefore, is for continued uneasy relations between Washington and Beijing. This lack of traction is mirrored on Afghan policy. The White House will be conducting a major policy review in November at which the key factor will be the pace of withdrawal in 2011. On this issue there is a widening division of opinion between the military and civilian leaderships, with the former cautioning against what they see as a premature drawdown. Behind the scenes, expectations of success are modest. However, with the 2012 presidential campaign looming, political considerations will be in play. Obama will not wish to risk a public confrontation with his generals at so delicate a time. On the Middle East peace process expectations are, as we anticipated, equally modest. State Department officials are content that the talks have not broken down already. As the UN General Assembly convenes, the presence of Iranian president Ahmadinejad in New York will provoke some lively headlines. Our assessment, however, is that this is an issue on which the capacity for loose talk exceeds the risk of direct action. ..."