SEN. WARNER: Good morning, everyone. The Committee on the Armed Services meets today to receive the annual testimony on the current and future worldwide threats to the national security of our nation and indeed that of our allies.

The witnesses here today, a very distinguished panel. We have the director of national intelligence, Ambassador John Negroponte; General Michael Hayden, principal deputy director of national intelligence; and the director of the Defense Intelligence Agency, Lieutenant General Michael D. Maples. I join with the committee in welcoming this distinguished panel this morning. Ambassador Negroponte and General Hayden are the -- here the first director and principal deputy of national intelligence to appear at a worldwide threat hearing before this committee. And General Maples makes his first appearance before the committee, becoming the director of DI.

A key lesson of September the 11th, 2001, is that America's intelligence agencies must work together as a single unified intelligence enterprise. The Intelligence Reform and Terrorism Prevention Act of 2004 created the position of director of national intelligence, or DNI, to lead a unified intelligence community and serve as the principal adviser to the president on intelligence matters and indeed the co-equal branch of the Congress of the United States.

The DNI has broad authorities over the intelligence community. And Ambassador Negroponte, I for one believe you've led this effort and met the challenges of bringing together this new organization.

General Maples, I'm also a strong advocate for departmental intelligence organizations like the Defense Intelligence Agency. These organizations are structured and staffed to provide highly valued support to their primary customers: the secretary of Defense, chairman of the Joint Chiefs and the combatant commanders throughout the world, and other components of our military. Your products are used by the analysts, policymakers and commanders around the world, who do not have, understandably, the extensive infrastructure that you have in DIA, but you make your work product available to all.

Our nation looks to the national intelligence community for warning, clarity and reasoned estimates on a range of developing issues and potential challenges, not the least of which is the proliferation of weapons of mass destruction and the ever-growing number of nations who are participating more actively in the global world activities.

Your work is not easy. Even on the best of days, your mission requires courage, vigilance, foresight and taking a certain amount of plain, old-fashioned risk, to make your best judgment, to do it in a very truthful and forthright way.

During the time of transition in the intelligence community, our nation's demand for intelligence has never been greater during this various period, and I think, once again, your group, the three of you, are meeting those challenges.

The technologies for acquiring and analyzing the information on terrorists differ significantly from those used to evaluate the military capabilities of other countries. You must do both. At the same time, when advances in technology and increasing globalization complicate your work, you must do both. And while never forgetting that we are in the middle of a war, with soldiers and sailors and airmen and Marines in harm's way, you've got to make these analytical reports available to them.

We commend you, therefore, for your service. I thank you for the opportunity of having you before us this morning.

Now, there was some discussion about a limitation on time. You take such time as you feel necessary, Ambassador Negroponte and each of the witnesses. In consultation with my ranking member, I believe that we have a obligation to allocate almost 50-50 the time here in public session with that in classified session in 219, and consequently I ask the committee that we limit our questions to one round each, giving each member eight minutes, and then we will proceed to go into a closed session.

Now, on the matter of the ports, it's very actively being considered by the Congress in committee structure. I'm pleased to see that we're going to undertake this 45-day extensive examination, but I believe that while there were imperfections in the first CFIUS round, and the Congress will address those, this committee has forwarded two letters at the recommendation of Senator Levin and myself to the Treasury Department and to Senate counsel regarding the legal questions. I'll ask that those letters be made a part of today's record.

This committee had a briefing last week, regrettably while so many members were away in their respective states, but I believed it was imperative that we have the principal and presumably the most knowledgeable individuals come before the Congress and explain the CFIUS process that did take place, and that was done. I personally, and perhaps there were others, had the opportunity to go into the Intelligence Committee and receive the briefings, Ambassador Negroponte, of your very able deputy -- who I note is present here today, and I thank you for bringing him here. And that was a process by which your organization funneled that intelligence that you felt was appropriate into the CFIUS process. I would hope that we would take an opportunity just procedurally here in open session to describe that process and what was done, and then we can explore the substance when we go into 219.

I respect the concerns of many Americans about this transaction and the various statements and positions taken by colleagues, both in the House and here in the Senate.

But I have diligently over the past week tried to devote as much time as I can to studying this issue, and I feel, while there were flaws in the CFIUS process the first time around, the 45-day option -- an option any longer -- I presume they've filed the papers to avail themselves of it here today -- will, I think, bring such clarity as needed, and we hopefully can go forward as a nation with this transaction, assuming we do not discover in the next 45 days a basis for not doing so predicated on national security concerns.

I say that because I've had familiarity with the UAE for a number of years. I've been there several times, and it is astonishing to see the growth in the relationships between our countries since 9/11. It is true that there were certain serious matters prior to 9/11 involving individuals, financial transactions and the like. But nevertheless, since that period of time, our -- just -- our trade since 2003 to 2005 has gone to the point where we are now close to $10 billion trade with the UAE. Tens of thousands of these containers are going back and forth between our two countries.

And to think that a company with a record such as this one, having been given the highest recognition by their peer group by selecting them as the most capable company in 2005 to manage port terminal facilities, would put this investment of $6.8 billion towards these various port transactions -- roughly 10 percent of which only is here in the United States -- and would do anything less than to try to achieve the highest security levels regarding their operations, to protect their investment and indeed to maintain their reputation in the ports which they're affiliated -- because if they would do otherwise, this entire gigantic corporate spread of this company would be severely impacted.

I also point out that we've had well over 500 ship visits to UAE. It is the only port that can accept our large carriers. It's essential that those carriers on these extended operations avail themselves with portside dockage such that a lot of heavy equipment can be transferred backwards and forwards back off the ship and on the ship and so forth to enable it to continue on its missions.

We have extensive air operations there that are supporting Iraq and Afghanistan. And it's interesting -- the number of Americans who are in UAE is something like 15,000 individuals who are working there, Americans.

So I think when you look at the overall composition of our relationships, be they diplomatic, economic or military with this country, it shows a high degree of mutual trust. And I do hope that in the weeks to come we can convey that message to our colleagues here in Congress and more importantly to the American people who have legitimate concerns. There's neither one of us that do not have the pain in our hearts of 9/11, the loss of the men and women of the armed forces of our nation. But bear in mind that every day, the relationship between our two countries go on, it's in direct support of the fighting men who at this moment, in so many ways are in harm's way -- fighting men and women.

So let us be cautious as we proceed. But the bottom line, we will get to the determination one way or another, I'm confident. It's terribly important because this global world in which we exist, you cannot look in isolation at a business contract like this without considering the diplomatic ramifications, the economic ramifications with other nations who are contemplating transactions with the United States and, indeed, as I've said, the military ramifications. It's all together, not just one isolated proposed contractual relationship.

Senator Levin.

 

OPENING STATEMENT OF

CARL LEVIN
A Senator from Michigan, and
Ranking Member, Senate Armed Services Committee

 

SEN. CARL LEVIN (D-MI): Mr. Chairman, thank you. And first let me join you in welcoming our witnesses to the committee this morning and to this hearing on threats facing the United States. This committee, as you mentioned, Mr. Chairman, has a special responsibility to the men and women of our armed forces to be vigilant on intelligence programs because decisions on whether or not to use military force and the planning for military operations depends so heavily on intelligence.

This hearing will cover many critically important topics, such as North Korea and Iranian nuclear programs, and the situation in the Middle East. But the situation in Iraq has reached the boiling point, and we need to hear the views of our intelligence community on what might stop the current spiral of violence. An article from The New York Times in yesterday's online news entitled, "Baghdad Is Calm After Days of Sectarian Violence," went on to describe the so-called calm: a bomb exploding outside a Sunni mosque in eastern Baghdad, killing four worshipers and injuring 18; a mortar attack on a house near a prominent mosque in northern Baghdad, killing four civilians and injuring 17; the police finding nine bodies blind-folded and shot in the head south of the capital and another four bodies found in the north of the capital. That is what in the Baghdad area is called "calm," apparently.

I'll be interested in the views of our witnesses this morning on what the intelligence community believes it will take to convince the Iraqi leadership to make the necessary compromises to reach a national unity government and a unifying constitution. It is clearer than ever to me that we must act to change the current dynamic in Iraq, and that the only thing that can produce that change is a political settlement that is accepted by all the major groups. Does the intelligence community agree with that view?

Ambassador Khalilzad wisely took a small step in that direction recently when he told the Iraqi leadership, quote, "We cannot invest billions of dollars in security forces if those forces are not trusted by the Iraqi people." The ambassador, regrettably, stopped short of telling the Iraqis that not just our dollars but our continued presence itself is not unconditional, and that because defeat of the insurgency requires a government of national unity, if the Iraqi leaders don't soon agree on a government of national unity, we must reassess the value of our continued presence.

Last Saturday was the deadline set by their constitution for the Iraqi assembly to meet. They missed that critical deadline with apparently, and regrettably, no comment from us. The Iraqi leaders are feuding while Baghdad is burning.

Does the intelligence community agree that our clearly stating to Iraqi leaders that our continued presence is not unconditional and that whether Iraqis avoid all-out civil war and have a future as a nation is in their hands, and if they don't seize that opportunity, that we can't protect them or save them from themselves? Would that message to the Iraqis prompt them to make the necessary political compromises?

Director Negroponte, your accurate assessments on these matters are of critical importance to us and to the nation. I'd be interested, Director, in your reaction to an article in the March/April edition of Foreign Affairs, written by Paul Pillar, who served directly under the director of Central Intelligence as the former national intelligence officer for the Middle East.

And finally, on the subject that the chairman touched on, the transfer of port facilities in the emirates, let me just make a very brief comment. I'm glad there's going to be a formal investigation. It's what the law calls for. It should have happened before there was approval. The law is clear on this matter that if there is a security concern -- and obviously there was, the evidence of that is clear that there were many people who raised the concerns, including the Coast Guard, there were assurances that were obtained because of concerns -- it's obvious that the law required a 45-day investigation to be triggered.

For that investigation to be credible, the status quo needs to be maintained. You can't have a transfer of ownership between now and the beginning of a 45-day investigation and suggest that that transfer has no effect. It would have to be unraveled if the 45-day investigation suggested that the transaction should not be completed, and according to the law, our government would have to go to District Court in order to undo a transaction that had already taken place.

So I would hope that not only would the 45-day investigation begin promptly, but that also the status quo be maintained in terms of not transferring the ownership to the Dubai government during the 45- day investigation.

One of the most important goals in Congress in passing the Intelligence Reform and Terrorism Prevention Act of 2004 was to foster objective assessments and a willingness to speak truth to power. How our reforms are working, how they're being implemented is also a subject that I think we would all be interested in hearing from our witnesses this morning.

And again, Mr. Chairman, I want to thank you for convening us, and thank you -- thank all the witnesses for appearing before us.

SEN. WARNER: Thank you, Senator.

Mr. Ambassador, we welcome you.

 

STATEMENT OF

JOHN D. NEGROPONTE,
Director, National Intelligence

 

MR. NEGROPONTE: Chairman Warner, Ranking Member Levin, members of the committee, thank you for the opportunity for myself and my colleague, DIA Director Lieutenant General Michael Maples, and General Michael Hayden, my principal deputy, to testify before you today.

Let me begin with a straightforward statement of preoccupation. Terrorism is the preeminent threat to our citizens, to our homeland, to our interests and to our friends.

My intention, then, is to talk about terrorism and violent Islamic extremism in this brief statement, and thereafter limit myself to touching on four other important subjects: Iraq; weapons of mass destruction, particularly nuclear weapons as they relate to Iran and North Korea; political developments in Latin America; and lastly, China.

There are, of course many other topics of concern to the intelligence community. These will be covered -- they are covered in my statement for the record.

First, the global jihadist threat. Entrenched grievances, such as corruption and injustice, and the slow pace of economic, social and political change in most Muslim-majority nations continue to fuel the global jihadist movement. Global jihadists seek to overthrow regimes they regard as apostate, and to eliminate Western influence in the Muslim world, although most of their targets and victims are fellow Muslims.

The movement is diffuse and subsumes three very different types of groups and individuals. First and foremost, al Qaeda, a weakened but resourceful organization; second, other Sunni jihadist groups, some affiliated with al Qaeda, some not; and third, self-generating jihadist networks and cells.

Working closely with our allies and friends, we have killed or captured most of the leadership behind the 9/11 attacks. But my colleagues and I still view the global jihadist terrorist movement, which emerged from the Afghan-Soviet conflict in the 1980s but is today inspired and led by al Qaeda, as the preeminent threat to our citizens, to the homeland, to our interests, and to our friends.

The London and Madrid bombings demonstrated the extent to which European nations in particular are both vulnerable to terrorist attack and could be exploited operationally to facilitate attacks on us.

Unfortunately, al Qaeda will attempt high-impact attacks for as long as its central command structure is functioning and affiliated groups are capable of furthering its interests. Although an attack using conventional explosives continues to be the most probable scenario, al Qaeda remains interested in acquiring chemical, biological, radiological and nuclear materials or weapons.

Ultimately, more than the acts of global jihadists, the debate between Muslim extremists and moderates will influence the future terrorist environment, the domestic stability of key U.S. partners, and the foreign policies of Muslim governments. The global jihadists are adding urgency to a debate within Islam over how religion should shape government. Growing internal demands for reform around the world and in many Muslim countries also are stimulating this debate. In general, it appears that Muslims are becoming more aware of their Islamic identity, leading to growing political activism. But increased political activism does not necessarily signal a trend towards radicalization. Most Muslims reject the extremist message and the violent agendas of the global jihadists. Indeed, as people of all backgrounds endorse democratic principles of freedom, equality and the rule of law, they will be able to couple these principles with their religious beliefs, whatever they may be, to build better futures for their communities.

In the Islamic world, increased freedoms will serve as a counterweight to a jihadist movement that only promises more authoritarianism, isolation and economic stagnation.

The threat from extremism and anti-Western militancy is especially acute in Iraq. This is a difficult struggle. In looking at the year ahead, I'd like to offer a balance sheet approach. Let me begin with some of the challenges the pro-democracy Iraqis face before turning to encouraging developments.

Iraqi Sunni Arab disaffection is the primary enabler of the insurgency and is likely to remain high in 2006. In addition, the most extreme Sunni jihadists, such as those fighting with Zarqawi, will continue to attack Iraqis and coalition forces, regardless of positive political developments.

Iraqi security forces require better command and control to improve their effectiveness.

Although the Kurds and Shi'a were accommodating to the underrepresented Sunnis in 2005, their desire to protect core interests, such as regional autonomy and de-Ba'athification, could make further compromise more difficult. And prospects for economic development in 2006 are constrained by the unstable security situation, insufficient commitment to economic reform, and corruption.

But there are important encouraging developments in Iraq as well. The insurgents have failed to consolidate any gains from their attacks. To the contrary, they have not been able to establish any lasting territorial control. They were unable to disrupt either of the two national elections held last year, or the constitutional referendum. They have not developed a political strategy to attract popular support beyond their Sunni Arab base. And they have not shown the ability to coordinate nationwide operations.

In addition, Iraqi security forces are taking on more demanding missions, making incremental progress towards operational independence and becoming more capable of providing the stability Iraqis deserve and the economy needs in order to grow.

Despite obvious efforts by Zarqawi's organization to use attacks on Shi'a civilians to bait them into attacking their Sunni countrymen, the vast majority of Shi'a have shown restraint. And perhaps most importantly, large-scale Sunni participation in the last election has provided a first step towards diminishing Sunni support for the insurgency.

After global jihadist terrorism, the ongoing development of weapons of mass destruction constitutes the second major threat to the safety of our nation, to our deployed troops and our allies. We are most concerned about the threat and destabilizing effect of nuclear proliferation. We are also concerned about the threat from biological agents or even chemical agents, which would have psychological and possibly political effects far greater than their actual magnitude.

The time when a few states had monopolies over weapons of mass destruction is fading.

Technologies, often dual-use, move freely in our globalized economy, as do the scientific personnel who design them. It is more difficult for us to track efforts to acquire those widely available parts and production technologies. Yet the potential dangers of WMD proliferation are so grave that we must do everything possible to discover and disrupt it.

With respect to Iran's nuclear program, our concerns are shared by many nations, by the IAEA and of course, Iran's neighbors. These concerns have increased since last summer because Iran has ended the suspension of its nuclear activities. President Ahmadinejad has made numerous unacceptable statements since his election, hard-liners have regained control of all the major branches and institutions of government, and the government has become more effective at repressing the nascent shoots of personal freedom that had emerged earlier in the decade.

Iran conducted a clandestine uranium enrichment program for nearly two decades in violation of its IAEA safeguards agreement. And despite its claims to the contrary, we assess that Iran seeks nuclear weapons.

While Tehran probably does not yet have a nuclear weapon and probably has not yet produced or acquired the necessary fissile material, the danger that it will do so is a reason for immediate concern. Iran has the largest inventory of ballistic missiles in the Middle East, which Tehran views as an integral part of its strategy to deter and, if necessary, retaliate against forces in the region, including United States forces. The integration of nuclear weapons into Iran's ballistic systems would be destabilizing beyond the Middle East.

Like Iran, North Korea threatens international security, and is a located in a historically volatile region. Unlike Iran, North Korea claims to have nuclear weapons already -- a claim that we assess is probably true.

Pyongyang sees nuclear weapons as the best way to deter superior U.S. and South Korean forces, to ensure regime security as a lever for economic gain and as a source of prestige.

Accordingly, the North remains a major challenge to global nuclear nonproliferation regimes. We do not know the conditions under which the North would be willing to fully relinquish its nuclear weapons and its weapons programs, nor do we see signs of organized opposition to the regime among North Korea's political or military elite.

A gradual consolidation of democratic institutions is the dominant trend in most of Latin America, where by year's end, 10 countries will have held presidential elections. Committed democrats in countries like Brazil and Chile are promoting economic growth and poverty alleviation. And despite battling persistent insurgent and paramilitary forces, Colombia remains committed to a democratic path. Nonetheless, radical populist figures in some countries advocate statist economic policies, show little respect for democratic institutions and employ anti-U.S. rhetoric in trying to appeal to their constituencies.

In Venezuela, President Chavez, if he wins re-election later this year, appears ready to use his control of the legislature and other institutions to continue to stifle the opposition and reduce press freedom.

He is also spending considerable sums of money involving himself in the political and economic life of other countries in Latin America and elsewhere, this despite the very real economic development and social needs of his own country, a fact Venezuelans undoubtedly will notice. We expect Chavez to deepen his relationship with Castro and seek closer economic, military and diplomatic ties with Iran and North Korea.

In Bolivia, the victory of Evo Morales reflects the public's lack of faith in traditional political parties and institutions. Although since his election Morales appears to have moderated earlier promises to nationalize the hydrocarbons industry and cease coca eradication, his administration is sending mixed signals regarding its intentions.

We are also closely monitoring the presidential contests in Peru and Nicaragua.

Lastly, to address China, globalization is causing a shift of momentum and energy to greater Asia, where China has steadily expanding reach and may become a peer competitor to the United States at some point. Consistent high rates of economic growth, driven by exploding foreign trade, have increased Beijing's political influence abroad and fueled a military modernization program that has steadily increased Beijing's force projection capabilities.

Chinese foreign policy is currently focused on the country's immediate periphery, including Southeast Asia and Central Asia, where Beijing hopes to make economic inroads, to increase political influence and to prevent a backlash against its rise. China also has been reaching out to the opposition parties on Taiwan and making economic overtures designed to win favor with the Taiwan public, although Beijing still refuses to deal with the elected leader in Taipei.

Beijing also has expanded diplomatic and economic interaction with other major powers, especially Russia and the European Union, and begun to increase its presence in Africa and Latin America. China's military is vigorously pursuing a modernization program, a full suite of modern weapons and hardware for a large proportion of its overall force structure, designs for a more effective operational doctrine at the tactical and theater level, training reforms and wide-ranging improvements in logistics, administration, financial management, mobilization and other critical support functions.

Beijing's biggest challenge is to sustain growth sufficient to keep unemployment and rural discontent from rising to destabilizing levels and to maintain increases in living standards. To do this, China must solve a number of difficult economic and legal problems, improve the education system, reduce environmental degradation, and improve governance by combating corruption.

Indeed, China's rise may be hobbled by systemic problems and the Communist Party's resistance to the demands for political participation that economic growth generates. Beijing's determination to repress real or perceived challenges -- from dispossessed peasants to religious organizations -- could lead to serious instability at home and less effective policies abroad.

Senators, that concludes my prepared remarks, and I thank you very much for your attention.

SEN. WARNER: Thank you, Mr. Ambassador.

General Maples, do you have some prepared remarks? All statements will be admitted to the record in their entirety.

GEN. MAPLES: Thank you, Senator. I do have prepared remarks. I have prepared a statement to be entered into the record, as well, but I would like to highlight a few of the --

SEN. WARNER: Please proceed.

 

STATEMENT OF

LIEUTENANT GENERAL MICHAEL D. MAPLES,
Director, Defense Intelligence Agency

 

GEN. MAPLE: -- those comments.

First of all, Mr. Chairman, Mr. Vice Chairman, thank you very much for the honor and the opportunity to appear with the director of National Intelligence before this committee today.

It's also my privilege to lead the dedicated men and women of the Defense Intelligence Agency, outstanding military and civilian personnel who are deployed around the world in support of our warfighters, our defense planners and our national security policymakers.

I would also like to thank the committee for your support to Defense Intelligence, which I very much appreciate, as do all the members of the military.

Terrorism remains the most significant threat to our nation. Despite relative isolation and pressure from counterterrorism operations, the al Qaeda leadership continues to follow both centralized and decentralized approaches to ensure its viability. On the centralized track, the core leadership is attempting to maintain a level of control over strategic planning. On the decentralized track, they are embracing and encouraging actions conducted by like-minded groups that encompass the al-Qaeda associated network.

Other terrorist organizations pose a continuing threat to the United States, to our allies and to our interests. Lebanese Hezbollah remains a threat to U.S. interests, and the Revolutionary Armed Forces of Colombia, the FARC, is seeking to escalate terrorist operations, including those against U.S. personnel and facilities. Several terrorist groups, particularly al Qaeda, remain interested in chemical, biological, radiological and nuclear weapons.

Turning to Iraq, the insurgency in Iraq is complex and it remains resilient. Insurgent attacks remain focused in Sunni-dominated regions in the northern, central and western parts of Iraq. And improvised explosive devices, IEDs, remain the insurgents' preferred method of attack.

Sunni Arabs form the core of the insurgency. Insurgent leaders exploit Sunni Arab social, economic and historical grievances to recruit support. And the insurgents are willing to use family, tribal and professional relationships to advance their agenda.

A smaller number of Iraqi terrorists and foreign fighters contribute to insurgent ranks. Psychologically, this group has a disproportionate impact because of the more spectacular attacks that they conduct. Since last year, tribal and local insurgent dissatisfaction with foreign fighter presence and tactics appears to have grown. However, the tension is localized and has not disrupted the overall strength of the insurgency.

In Iraq, Abu Musaab al-Zarqawi and al Qaeda in Iraq remain the major terrorist threat. He has been able to collaborate with disparate Sunni extremist groups and has increasingly attracted Iraqis into his organization, replacing foreign fighters with Iraqi nationals in most of the leadership positions.

Coalition forces have significantly impacted al Qaeda in Iraq, killing and capturing several of Zarqawi's closest associates, constricting the flow of personnel, money, material, and degrading operations. Sunni Arab attitudes are changing as the elite increasingly embrace politics. However, the degree to which this will decrease insurgent violence is not yet clear. Even moderate Sunni Arab leaders see violence as a complement to their political platforms and are pursuing a dual-track policy of political engagement and armed resistance.

In Afghanistan, successful national and provincial legislative elections were held in September 2005. Afghanistan's efforts to disarm private militia groups have steadily progressed over the last year. the expansion of the Afghan National Army and police force has allowed the government to stop officially recognizing private militias as serving a legitimate security role.

The Taliban-dominated insurgency remains capable and resilient. In 2005, Taliban and other anti-coalition movement groups increased attacks by 20 percent. Insurgents also increased suicide attacks and more than doubled improvised explosive device attacks. We judge that the insurgency appears emboldened by perceived tactical successes and will be active this spring.

Pakistan remains key in the global war on terrorism.

The Pakistan military continues to conduct operations in the Federally Administered Tribal Areas and has increased their capabilities. Pakistani counterterrorism operations temporarily disrupted local safe havens and forced some Taliban and al Qaeda operatives into Afghanistan.

Weapons of mass destruction and the means to deliver them continue to mature in a number of countries. Behind global terrorism, they represent our most significant challenge. We believe North Korea continues to produce plutonium for its nuclear weapons. Because of its strong security, nationalistic and economic motivations for possessing nuclear weapons, we are uncertain whether the North Korean government can be persuaded to fully relinquish its program.

We believe Iran is committed to acquiring a nuclear weapon and is currently developing the infrastructure to produce highly enriched uranium and plutonium for that purpose.

One of China's top military priorities is to strengthen and modernize its strategic nuclear deterrent force by increasing its size, accuracy and survivability. The number of deployed Chinese nuclear-armed theater and strategic systems will increase in the next several years.

States with chemical and biological programs remain a threat to our deployed forces, to our homeland and to our national interests. Some states have produced and weaponized agents, where others have not advanced beyond research and development. We believe that Iran maintains offensive chemical and biological weapons capabilities in various stages of development. And we assess the Syrian government already has a stockpile of the nerve agent sarin and has apparently tried to develop a more toxic and persistent nerve agent.

Numerous countries continue to improve and expand their ballistic missile forces, presenting us with increasing challenges. China continues to expand and modernize all categories of its ballistic missile forces to increase survivability and warfighting capabilities, to enhance their deterrence value and to overcome ballistic missile defenses.

North Korea continues to invest in its ballistic missile forces for diplomatic advantage, foreign sales and to defend itself against attack.

The Iranian government is developing ballistic missiles capable of striking Tel Aviv, and reporting suggests that Iran is acquiring longer-range ballistic missiles capable of reaching Central Europe.

Turning to states of military significance, China's military modernization remains focused on developing or acquiring modern fighter aircraft, a blue-water navy and improved amphibious forces. The People's Liberation Army completed its plan to cut 200,000 soldiers from the army, likely freeing resources for other modernization efforts.

North Korean military forces remain capable of initiating an attack on the South, although they appear to be suffering from the country's economic decline.

Iran recently concluded an arms deal with Russia for approximately 30 short-range air defense systems, as well as other military hardware. When fully operational, these new systems will increase Iran's defensive capabilities and their ability to deny access to the Persian Gulf.

Finally, many transnational issues will increase in importance to our national security. The revolution in telecommunications and transportation associated with globalization is decreasing distances between nations and instantly connecting like-minded groups and individuals around the world. Numerous states, terrorists and hackers groups, criminal syndicates and individuals continue to pose a threat to our computer systems. The Chinese People's Liberation Army continually studies cyberwarfare and is striving toward is striving toward a doctrine on information warfare. Terrorist groups and extremists are also exploiting the Internet for intelligence collection and propaganda purposes.

The absence of effective, organized or responsible governments threatens our national security. Ungoverned or weakly governed states provide safe havens for terrorists, extremist groups and criminal organizations to operate. Criminal organizations and networks have become increasingly adept at exploiting the global diffusion of sophisticated information, financial and transportation networks.

They are involved in illicit transfers of arms and military technologies, narcotics trafficking, alien smuggling, and cyber- and financial crimes.

Let me conclude by stating that our nation is engaged in a long war against terrorism and violent extremism, and we are faced with a multitude of threats that can affect our national security. The Defense intelligence professionals will continue to provide information critical to our warfighters, Defense planners and national security policymakers.

Again, I would like to thank the committee for its support to Defense intelligence, and I look forward to your questions.

SEN. WARNER: Thank you very much.

General Hayden, do you have some opening remarks?

GEN. HAYDEN: No, I do not, Mr. Chairman.

SEN. WARNER: Thank you.

GEN. HAYDEN: Thank you.

SEN. WARNER: And we'll proceed with the questions. Colleagues, I estimate that with eight minutes each, it will take us almost an hour and a half to get through. But that should enable us to have sufficient time to have a very thorough and in-depth closed session. So we'll proceed.

Mr. Ambassador, the use of the word "civil war" in Iraq -- could you give us basically what you would establish as the criteria of the situation, transcending from the very high level of insurgents and killing and disruption today into what you would characterize as a civil war? What are the benchmarks that we should look for?

MR. NEGROPONTE: Well, I think the benchmarks, among others, Mr. Chairman, would involve a complete loss of central government security control, the disintegration or deterioration of the security forces of the country, and of the forces of disorder, such as unauthorized forces that might be bearing arms against the country, getting the upper hand in the situation.

I suppose the political mirror image of that would be some kind of cessation of the political process that was determined by Resolution 1546 three years ago, and which the Iraqis have carried out step by step, every step of the way, from transition to a -- from a Coalition Provisional Authority to a(n) interim government to a transitional government and now to a definitive government. I think if that process were to be severely disrupted, I think that would be another one of the indicators.

SEN. WARNER: How do you equate the three levels of really governance in that nation? And I don't order them in any particular preference, but there is the newly elected government, which is ever so slowly coming into being. As pointed out, I think, by Senator Levin, the assembly -- that is, the 275 elected representatives -- still haven't met yet. Is that correct?

MR. NEGROPONTE: That is correct.

SEN. WARNER: And therefore that process is indeterminate in how it goes along.

The next really level of governance and influence are the religious leaders. And of recent they have responded to this immediate crisis in the aftermath of the bombing of the -- regrettable bombing of the golden-domed mosque. Now that -- they have a great deal of influence, and they are exerting that influence, I think, to forestall any further disruption of a magnitude of the civil war.

And lastly is that tribal authority still has a great deal of influence. Sort of characterize the three levels, as you see them, and the degree of their influence.

MR. NEGROPONTE: Well, with respect to the first, of the government, you're right to point out that the new government has not been formed as yet, Mr. Chairman, but the old government still exists, of course, and is functioning and will function until such time as the new government is formulated.

I think that as important as that was the fact that in the course of this crisis of the past several days, the political leaders of the country, both in the government and outside of it, representing all of the different factions -- Shi'a, Sunni, Kurdish and others -- have come together, I think, in part as a result of the horrific events of the last week.

GEN. HAYDEN: Concur in that observation.

MR. NEGROPONTE: Secondly, with respect to the religious leadership of the country, I think that by and large, they have been a force for restraint. Certainly the Ayatollah Sistani, the leader of -- the grand Ayatollah of the Shi'a Movement in Iraq -- has played a moderating role, I think, throughout the course of the past three years, and I think he continued to play it during this crisis. So I think there also we've seen a constructive role played by the religious community.

As to the tribal elements, well, they are one of a number of other political factors that work in that country. I'm afraid I don't know specifically what role they may have played in this most recent crisis. But I think the government and the religious leaders maybe have been the most important.

SEN. WARNER: (Inaudible) -- a constructive role thus far.

General Maples, in the event -- do you concur with the current assessment that civil war is not there yet, but it is just beneath the surface?

GEN. MAPLES: Yes, sir, I do. I believe that the underlying conditions are present, but that we are not involved in a civil war at this time.

SEN. WARNER: What would be the role of our U.S. forces in the event that civil war were to erupt?

GEN. MAPLES: Sir, I -- that will be decided, of course, by the commanders on the --

SEN. WARNER: By the on-scene commanders?

GEN. MAPLES: Yes, sir.

SEN. WARNER: But clearly, you have some view as to what participation or non-participation the border nations might take.

Let's start with Iran. What are they likely to do? Would they seal their borders or begin to have a more porous and put in supplies needed for presumably the Shi'a faction?

GEN. MAPLES: Sir, we do believe that Iran is supporting the Shi'a currently. We would expect that that would probably continue, although we would assess that it is not in Iran's interest to see a full-scale civil war in Iraq, and that they would probably act to avoid that.

SEN. WARNER: And they're not likely to send any of their active forces in?

GEN. MAPLES: No, sir, we don't see that at all.

SEN. WARNER: What about Syria?

GEN. MAPLES: Sir, we don't see any movement on Syria's part, either, to send forces into Iraq.

SEN. WARNER: And Jordan?

GEN. MAPLES: No, sir.

SEN. WARNER: And Saudi Arabia?

GEN. MAPLES: Sir, we would not expect that.

SEN. WARNER: So if this escalates to the proportions of civil war, the bordering nations probably will do whatever is in their self- interest, but not likely to get heavily engaged. Is that correct?

GEN. MAPLES: Sir, I would concur with that.

SEN. WARNER: General Hayden, on the question of China, a nation has its right to establish that level of military strength to protect itself, its own national security. But in the judgment of many, including myself, I think that they are creating a military force far beyond what is needed to protect their own security interests, and it's most likely to try and project influence and perhaps even force elsewhere in the region. Do you have a view on that?

GEN. HAYDEN: Yes, sir, Senator. There are a variety of factors involved, and as you suggest, it's one of the most fascinating aspects at looking at Chinese actions. As we see the pieces, we then try to create parallax from those pieces back to what's generating each and every step. And I think you've laid it out fairly well -- I think there are multiple motivations. I mean, there are some very, very specific, concrete things they do across the Taiwan Straits that seem to us to be directly related to the circumstances there.

And there are, I think, and as the ambassador pointed out in his remarks, this expansion of influence regionally. In addition -- and this is the one that's toughest for us to measure -- there seem to be some things they're doing -- how to put it -- because they're doing it, that they have this perception there's almost a momentum in Chinese thinking that great powers -- and they clearly want to be viewed as a great power -- great powers need certain things, and they aren't necessarily tied to a specific military event, either proposed or expected, but simply become the trappings of -- I'll use the word their "global legitimacy." And our challenge is to try to shred out the motivation in terms of these different steps they're taking.

SEN. WARNER: Good. Thank you.

In the coming weeks, we're likely to see the Army Field Manual on interrogation is expected to be released. The Senate, of course, established through a vote, and the House joined us, the uniform standards will be set forth in this manual.

I'd like to have on the record, did both your organization, Ambassador Negroponte, and that of General Maples, have a voice in the formation of the Army Field Manual that will be released next week, and did you do it, of course, from the perspective of preserving the very valuable information that sometimes can be derived from incarceration of the adversaries?

MR. NEGROPONTE: I would concur with you, Senator, on the value of interrogating detainees and the contribution that they can make to our human intelligence. As to any input we might have had to the Army Field Manual, I'm not aware of a role on the part of the intelligence community in the development of that manual.

SEN. WARNER: All right. In the development.

And, General Maples?

GEN. MAPLES: Sir, we were -- the Defense Intelligence Agency was very involved in the development of the manual. After the manual was written by the Army it was staffed with the Defense Intelligence Agency. It was reviewed both by Defense HUMINT personnel, because the manual is a HUMINT operations manual. So both from the HUMINT Directorate and from the Defense HUMINT Management Office. And I personally read the entire manual and provided input to the final copy.

SEN. WARNER: All right.

But I'd go back to you, Ambassador Negroponte. You, in a sense, are the voice for the civilian side of the incarceration and interrogation process. I would assume General Maples looked at the military side. But it seems to me that those civilians who were involved in this very critical responsibility should receive some assurance that the -- it was looked at from their perspective. Maybe you might consider that before it's finally released.

Ambassador Negroponte, as you undoubtedly are aware, there's a very active consideration in the Congress of this port situation. And your organization has a sub-group called the Community Acquisition Risk Assessment Center. The head of that organization is present here today, and he came up to the Intelligence Committee and briefed a group of us here in the past week. I judge that that report was -- I somehow gained the impression that that report was the overall assessment of the intelligence community, be it the uniform side or the civilian side or all the parts were put together, and while we cannot in this fora state what those assessments were, I gained the impression that that was the final assessment on behalf of the intelligence community towards this CFIUS process. Could you take us through what your organization did?

MR. NEGROPONTE: Yes, Senator, I'd be pleased to do that. As you know, perhaps know from the briefing that you received earlier, the intelligence community is not per se a member of the CFIUS committee.

SEN. WARNER: That is correct.

MR. NEGROPONTE: But the CFIUS will task us with certain requirements and to look into what risks might occur as a result of a proposed acquisition. In this particular instance, the procedure that was followed was that our Community Acquisition Risk Center was asked on the 2nd of November to provide an assessment, which we then took a one-month period to do. And on the 5th of December, we submitted the results of our inquiry with regards to the DP World and the Dubai Ports Authority and Dubai Ports International, who are the companies involved in this transaction. We provided that assessment back to the CFIUS committee. So that was the process that was followed.

Now, there have, as well, been some other assessments, whether they related to port security or some other subject, done by other parts of the departments of the government, such as the Coast Guard, for example, which were provided to their department head. But that was done separately from this inquiry that we conducted.

SEN. WARNER: Well, I'll leave to Chairman Collins -- as a member of her committee, she very carefully probed those issues yesterday, and I'm sure she may have some questions on that point.

Did you, in your report, sort of make a final conclusion, and are you at liberty to feel that your organization discovered any factors which in your judgment would have affected the security of this country in an adverse way?

MR. NEGROPONTE: Yes, we did. And on the basis of our inquiry, we assessed that the threat to U.S. national security posed by DP World to be low. In other words -- and we didn't see any red flags come up during the course of our inquiry.

SEN. WARNER: I thank you very much, Mr. Ambassador.

Senator Levin.

SEN. LEVIN: The threat to our security, your overall assessment, from that transaction is "low"?

MR. NEGROPONTE: That was our -- that was our --

SEN. LEVIN: So it's not non-existent, it's just low?

MR. NEGROPONTE: Well, I think it's low, moderate and high. I mean, these --

SEN. LEVIN: There is no assessment, then, that there is no threat?

MR. NEGROPONTE: Well, there is no such thing, in our view, as zero risk.

SEN. LEVIN: So that you have three options: low, moderate or high?

MR. NEGROPONTE: I believe so, sir.

SEN. LEVIN: The Coast Guard report which the chairman referred to was dated after you submitted your intelligence assessment, is that correct?

MR. NEGROPONTE: That is correct.

SEN. LEVIN: So that you have no -- that was not presented to you; you didn't consider that?

MR. NEGROPONTE: That's correct.

SEN. LEVIN: I think there was a different impression that was given to the Governmental Affairs Committee yesterday, but I'm going to let our chairman comment on that because I'm not -- that's my recollection. I was there. But I think it would be better if -- her recollection may be a lot sharper on that issue.

MR. NEGROPONTE: It's my understanding, Senator, is we submitted our report on the 5th of December. The Coast Guard report was the 13th of December.

SEN. LEVIN: Yeah.

MR. NEGROPONTE: I would add, my understanding is that the Coast Guard did not interpose any objection to the transaction, and the Department of Homeland Security concurred in it, and that some steps were taken -- some adjustments were made, and there was a letter of assurance from the company back to us as a result of whatever issues might have been raised.

SEN. LEVIN: Right.

Mr. Director, your prepared -- well, let me start a different way. In your statement you said that there's a -- there will be a lag time, almost certainly, before we see a dampening effect on the insurgency, even if there is a broad inclusive national government that emerges in Iraq.

And I think that's a useful point.

What would be the effect on the insurgency if there's not a broad, inclusive national government?

MR. NEGROPONTE: Well, I think, first of all, it would be a pity and a lost opportunity as far as the democratic process in Iraq itself is concerned. As to what effect it might have, well, it would, I think, deprive us -- or deprive the political system in Iraq of the opportunity to involve some of the people who are bearing arms to -- or who may be inclined to bear arms against the government to participate in the political process.

So I think it would be -- it could have the effect of prolonging the insurgency.

SEN. LEVIN: Do you think that the failure to have a broad national government agreed to would contribute to insurgency?

MR. NEGROPONTE: I say it could.

SEN. LEVIN: Yeah, could it contribute to the --

MR. NEGROPONTE: I can't be absolutely certain, but I think the fact of not -- of the government not being adequately inclusive could have the effect of prolonging the insurgency. I'd be comfortable making that statement.

SEN. LEVIN: Do you think it's important, in terms of defeating the insurgency, that there be a broadly based national government?

MR. NEGROPONTE: I think it's important, yes, and I think it's important that the democratic and the political process that the Iraqis have set out for themselves continue to go forward.

SEN. LEVIN: And -- but basically you agree that it's important, in terms of defeating the insurgency, that there be such a broadly based national government? I want to start from there, if your answer's yes.

MR. NEGROPONTE: Yes. Yes.

SEN. LEVIN: And do you -- what do you assess to be the likelihood of such a broad-based agreement being reached? Is it likely? Is it iffy? Is it -- how would you assess it?

MR. NEGROPONTE: Well, I think one way of looking that at -- at that, Senator, is, I think the chances are better now than they might have been previously. When you think about it, a year ago, the Sunnis were boycotting the electoral process entirely. They were saying they had -- they didn't want to have anything to do with it. And then last fall a million more Sunni -- people in the Sunni regions of the country registered to vote, and they've now elected 55 representatives to the legislature, where previously they had none. So I would say -- as a matter of the political trend in Iraq, I'd say the chances are more likely now than they were a year ago.

SEN. LEVIN: And would you say they're likely, putting aside that trend?

MR. NEGROPONTE: Well, you're -- I don't have my crystal ball, but I can assure you that an enormous amount of effort is being devoted to that.

SEN. LEVIN: Would you agree with my statement that if the Iraqis do not seize the opportunity to put together a broadly based political agreement, that -- and if they don't seize that opportunity, that we cannot save them from themselves?

MR. NEGROPONTE: Well, I think you're trying to draw me to a conclusion here with a hypothetical question. I'd rather state it affirmatively. I think it's definitely in their interest to work as hard as they can to achieve an inclusive government.

SEN. LEVIN: Sure.

MR. NEGROPONTE: And I think it -- that deserves a great deal of effort.

SEN. LEVIN: The -- on the question of the -- I think that the chairman raised a question about whether or not you've been involved in the field manual. Is it not correct that under the McCain amendment that detainees in our custody, regardless of whose custody, whether -- what the source is, whether it's -- the Department of Defense is the source or it's the intelligence community is the source, that all detainees in our custody are subject to the Army Field Manual? Is that your understanding of the McCain amendment?

MR. NEGROPONTE: My -- well, first of all, let me say, Senator, that we -- it would be -- it is our full intention to comply with the law --

SEN. LEVIN: Yeah.

MR. NEGROPONTE: -- and with the McCain amendment --

SEN. LEVIN: All right. That answers the question.

MR. NEGROPONTE: -- and that we have to do it.

SEN. LEVIN: That's satisfactory. Because of time, let me go on. It's your intention to comply with it. That's fine.

The -- North Korea. You've given us assessment a couple years ago in the unclassified --

SEN. WARNER: Senator Levin, I think the senator -- I mean, the witness wanted to add a comment.

MR. NEGROPONTE: No, that's -- I think that's fine, Senator.

SEN. WARNER: All right. Thank you.

SEN. LEVIN: I think he's probably happy to stop there, too. (Laughter.)

You had given us a couple years ago an unclassified assessment that North Korea had one to two nuclear weapons. What is your current unclassified assessment as to the number of weapons that North -- nuclear weapons that North Korea has?

MR. NEGROPONTE: I think -- I don't think there's an answer to that question -- I don't think we have an answer to that question, Senator. We know that they've got a lot of fissile material. But trying to put a number on it I think would be very hard.

SEN. LEVIN: So you have not put a number.

MR. NEGROPONTE: I've been very reluctant to get into numbers because it means -- first of all, we assess that they probably have nuclear weapons as they claim that they do, but we don't know for a fact that they've got such weapons. So we're in the situation here of assessing that they have them. So to then say with precision the number they've got I think would be difficult to do with our level of knowledge.

SEN. LEVIN: All right.

MR. NEGROPONTE: It would merely be an extrapolation or a speculation on our part.

SEN. LEVIN: Well, you've given us that before, but you're not willing to give it to us now, and that's your answer.

Going back just to the port issue for a moment, there was an open press report back in December of 2002, right before the Iraq war, that said that the commander of the United States Navy's Fifth Fleet alleged that a Dubai-based shipping firm shipped materials from Dubai to Iraq that could be use for constructing high grade explosives. And that article quotes a U.S. Navy spokesperson as saying that the Navy had, quote, "photographic evidence that clearly proves that these chemicals were recently shipped into Iraq." My question to you is this: did the UAE officials and leaders look the other way when shipments of illicit cargo took place from the Emirates and Dubai prior to the war?

MR. NEGROPONTE: Did -- did UAE -- I was interrupted by --

SEN. LEVIN: Okay.

MR. NEGROPONTE: -- or distracted by --

SEN. WARNER: (Gavels.) Could I -- could I intervene without detracting from your time? The voice that you're hearing comes from a(n) internal system in the control of the security, and there has been a package located in some of the buildings. At this point there's no assessment that we in this room are under any risk.

I apologize for that background noise.

STAFF (?): It's been cleared. It's been cleared.

SEN. WARNER: It's been cleared. Thank you.

Senator Levin, go ahead.

SEN. LEVIN: Just -- my last question. Maybe I should repeat it?

MR. NEGROPONTE: Just -- if you wouldn't mind, Senator. I'm sorry.

SEN. LEVIN: Sure. There was an open newspaper report that quoted the commander of the U.S. Navy's Fifth Fleet saying that there was a shipping company in Dubai that shipped materials from Dubai to Iraq that could be used for constructing high grade explosives in Iraq, and quoted the U.S. Navy spokesman as saying that the Navy had photographic evidence that clearly proves that the chemicals were recently shipped into Iraq. My question to you is did the intelligence community make an assessment as to whether or not UAE officials and leaders looked the other way prior to the Iraq war -- this is now after 9/11, but prior to the Iraq war -- that they looked the other way as illicit cargoes under U.N. and our embargoes were shipped into Iraq? That's my question.

MR. NEGROPONTE: Yeah. And I -- I'm afraid I would just have to take that question, Senator, because I'm not --

SEN. LEVIN: Take -- I'm sorry?

MR. NEGROPONTE: I mean, if -- if I could provide you a response for the record --

SEN. LEVIN: Oh, sure.

MR. NEGROPONTE: -- because I am not familiar with that particular report.

SEN. LEVIN: Thank you. My time's up, thank you.

SEN. WARNER: Thank you very much.

Senator Inhofe?

SEN. JAMES M. INHOFE (R-OK): Thank you, Mr. Chairman.

I'm going to use my time to talk about one of my favorite subjects that everyone's ignored up until the last couple of weeks, that is, on this proposed sale of the P&O Port Company to Dubai Ports World.

I -- you know, I have to say, Mr. Chairman, that I am -- I'm opposed to this for a totally different reason than others are. For one thing, I don't see any threat there with the UAE. I don't see any threats with the corporation involved. It's part of the UAE. I don't see the threats there at all. But I think that there are any number of corporations from any number of countries that they could have chosen -- that CFIUS could have chosen that would not be controversial, allowing people to demagogue this thing as they're doing right now, criticizing the president. And so I just want to say that while I oppose it, I'm not opposed to it for national security reasons, just to -- I think he could have done it with somebody else and not subjected himself to that kind of criticism.

Now I would caution the Democrats not to get too excited about this because during the last administration, the UAE couldn't do anything wrong. Our doors were open. We were inviting them over. We sold $8 billion worth of F-16s, anti-aircraft and anti-ship missiles and other advanced weapons to the United Arab Emirates, and it even required a special waiver signed by the president to do it. Nonetheless, that was what was going on. And if you might remember, Mr. Chairman, the -- in the Afghanistan thing, when Osama bin Laden was actually found and targeted, we didn't go through with that because there were some UAE officials there, and we were afraid there might be some collateral damage to them.

So anyway, I just want to mention that we've had enough hypocrisy on that, but I would like to talk a little bit about CFIUS. In a way, I'm kind of glad this happened because I've been concerned -- you mentioned in your opening remarks, Mr. Chairman, that you've had time over the last week to study the CFIUS process. Well, I've had time over the last 12 years to study it, and I've been studying it and talking about it. Prior to a month ago, if you had asked almost any member of this body about CFIUS, they'd probably think you were talking about some communicable disease. But in fact, this is something that has been a problem for a long time ago.

There have been four times in the last 12 yeas where the proposed foreign acquisitions to -- in the United States have threatened our security.

In 1998, the Clinton administration turned over management of the 144-acre terminal at the former U.S. Naval Station in Long Beach to the Chinese ocean shipping company that was called COSCO. We remember that time and all the hysteria that took place to turn over to a company like that that had relationships in arms trading with Iran, Iraq, Syria, North Korea, Pakistan, Cuba and other countries and even contributed to, Mr. Chairman, to street gangs in Los Angeles.

Now, we went ahead and did this and turned it over, and I'm going to quote from the L.A. Times -- we were able to stop this turnover at that time -- I'll quote from the L.A. Times, this is in 1998: "The embattled COSCO deal came to an end Thursday night when congressional conferees submitted to Congress the 1998-1999 Defense Authorization Bill. Leading the effort to block COSCO from the facility were Senator James Inhofe and Representative Duncan Hunter of San Diego." And so CFIUS had said at that time, yes, they wanted to do it, but we were able to block it, and we won that one.

Now, that was just one battle.

Then my concern with the CFIUS process last April when we delivered -- I delivered four speeches on the floor on the Senate concerning China. And I appreciate very much, Ambassador, your bringing up some of your concerns about China. People seem not to be paying as much attention as they should.

And while examining the issue, I came across the disturbing purchase of China buying a U.S. company called Magnequench, and this all started in 1995. And we started talking about the threat that was out there. Magnequench has access to a type of a metal that is necessary for us to use in -- in some of the precision-guided munitions that we have. At that time, we talked about Magnequench and its international incorporated -- in 1995, the Chinese corporation bought Magnequench and a supplier of rare earth metals used in the guidance system of smart bombs.

Over 12 years the country has been moving piecemeal -- and this is what we said in 1995 -- to China from the United States different elements of this company, and they are now all located in China. And I would only say that this -- I'm quoting right now from a statement I made on the floor; this is April 4th of 2005, where we said that this is going to happen, and, in fact, this has happened. Now we're in a situation in the United States where we have no domestic supplier of rare earth metals such as are essential for precision-guided munitions. And I'd say it's a clear national security concern.

More recently, I was concerned with the China -- China's state- owned CNOOC, the attempt to buy out Unocal. We all remember that. And people were making a lot of concern about that at that time. But we stayed on that until finally, in spite of what CFIUS was recommending, and that -- they were recommending that the purchase take place, and that Unocal would be a part of the Chinese government -- we won that and CNOOC finally withdrew its application.

We also testified before the U.S.-China Commission on July 21st of '05. On July 21st of '05 we were concerned about the fact that our committee, Mr. Chairman, our committee, was concerned at that time about what was happening in China, so we developed the U.S.-China Economic and Security Review Commission. This is a bipartisan commission, and -- to submit to Congress on a(n) annual basis of the threats that are out there to our national security and our economic security. And the commission has been doing this. It's a bipartisan committee -- 12 members. Three were appointed, as I recall, by the speaker, three by the minority, three by the majority, and three by the minority of the Senate. These are two-year terms. And so, it has worked out real well.

Now, over the past several months I've been pointing out that the CFIUS process has ignored some major issues which threaten our national security. The -- not just the China Commission -- gave a list of reasons why we need to change the process, the structure of CFIUS, but the General Accounting -- the Government Accounting Office has recently issued a report on CFIUS that's right in line with this -- these recommendations.

So it's not just me. It's the U.S.-China Commission, the GAO. And because of the fact that we -- we actually had this, Mr. Chairman, in our defense authorization bill, but when that got stalled, our language got stalled. And so, I introduced it as a free-standing bill. It was assigned to the Banking Committee because the chairman of CFIUS is the secretary of the Treasury.

And so, you know, if you look at CFIUS, if you want to see if anyone out there thinks that they're going any kind of a job at all, I have to say that they have received over one -- 1,520 notifications and investigated only 24. I mean, 24 out of 1,500, Mr. Chairman. And of those investigated, only one acquisition has been stopped by the president. That was President George the First. So that's one out of 1,520, and it just shows that the thing isn't working.

So the bill that I introduced would reform the system. It would reform it consistent with the recommendations of the U.S.-China Commission. And I would only quote from this morning's editorial by the Rocky Mountain News. They said "The Bush administration should embrace a plan suggested last summer by Senator James Inhofe that would place the Pentagon, not the Treasury Department, in charge of all interagency reviews on foreign state-owned investments that could affect national security." And I would like to ask unanimous consent the entire --

SEN. WARNER: Without objection.

SEN. INHOFE: -- editorial would be entered in the record at this point.

So, in conclusion, I would only say that I have placed in the front of each member a synopsis of that bill, a history of that bill, and asking for cosponsors. I think now finally we're in a position where we'll be able to pass something we were not able to pass before.

So I've used my time, Mr. Chairman, but I do want to say that I hope that General Maples and General Hayden and others who are concerned with what has been going on -- this old argument of weapons of mass destruction, which has always been a thorny argument from the beginning, now that we have -- the information has been testified -- not before this committee, but certainly in closed session by this General Sada, where he had all kinds of evidence as to the individuals who transported the weapons out of Iraq into Syria, and I'm hoping that we'll be able to pursue that so that finally we can put that one to sleep -- when, in fact, the big problem with Iraq was never weapons of mass destruction.

x x destruction. They had terrorist training camps in places like Ramadi, Samarra and Salman Pak, and those are now dead on the vine.

Thank you, Mr. Chairman.

SEN. WARNER: Thank you, Senator. And I certainly acknowledge the important contribution that you have given towards the longevity of the CFIUS program. My reference to the study in the week, I was studying this one case --

SEN. INHOFE: Yes, I understand.

SEN. WARNER: -- and preparing for the committee briefing the other day.

Senator Kennedy.

SEN. EDWARD KENNEDY (D-MA): Thank you. Thank you very much, Mr. Chairman, and thank all of our panelists for their service to our country.

I thank you, Mr. Director, for your earlier comments covering a wide variety of different national security sort of challenges that we're facing. I'd like to come back and give focus and attention to what I think most Americans -- servicemen wherever they are are thinking about, and that is Iraq, and most families are thinking about it, Americans are thinking about what is happening now, the dangers of deterioration and civil conflict, what is going to happen to our servicemen and women, some 2,300 who have been killed there, the great majority, obviously, by offensive activities, but others killed in the region, all heroes, and some 16,000 wounded. And I think the Americans are looking for what are the real prospects over there. I know you gave some description in response to earlier questions.

We've had a recent Agency for International Development request for proposals already describe Iraq as a low-intensity civil war. That's the words that they use, the AID used it. General Sanchez said on January 7 -- told soldiers preparing to deploy in Iraq during a ceremony in Heidelberg the country's on the verge of civil war. General Maples in his testimony here talks about sectarian violence is increasing this morning.

Now, in the State of the Union, President Bush said: I'm confident in our plan for victory, I'm confident in the will of the Iraqi people; fellow citizens, we are in this fight to win, and we are winning. Those are the words of the president, "we are winning."

Even in your written testimony today, you mention about the lag time before we see a dampening effect on the insurgency. That's very different from the rosy statements by the president that we're winning; and the American people know the difference.

Did you tell the president we were winning?

MR. NEGROPONTE: Sir, I --

SEN. KENNEDY: I mean, did you ever use those words with him?

MR. NEGROPONTE: I, personally?

SEN. KENNEDY: Yes.

MR. NEGROPONTE: I mean, recalling conversations I've had with the president and other members of the administration, my view has always been that we are moving in the right direction, that we're making progress. I analyze it, usually, in terms of the political process there, the progress towards achieving their political timetable, on the one hand, and progress towards developing their army and their police forces, effective military and police forces. And I believe that progress has been made in both those areas. And I believe that, yes, things are moving in a positive direction in Iraq overall.

SEN. KENNEDY: Well, you're not using the words "we're winning" this morning, are you? (Pause.) Are you using -- are we winning the battle there? Would you use those as description of the circumstances in Iraq at this point?

MR. NEGROPONTE: I believe that if you take the overall situation in Iraq -- political and security situation -- that the kind of -- progress is being made, and if we continue to make that kind of progress, yes, we can win in Iraq.

SEN. KENNEDY: This headline here in The Washington Post is truly moving and has to be startling to all Americans -- total in Iraq -- "Deadly Surge: 1,300" "Morgue Count Eclipses Other Tallies Since Shrine Attack". The toll was more than three times higher than the figure previously reported by the U.S. military and the news media.

We have General Maples' testimony here: "Reporting indicates sectarian violence is increasing." This is this morning. "The elections appear to have heightened the tension and polarized sectarian divides." And then, on the next page, he continues, "The Sunni attitudes are changing as the elite increasingly embrace politics. However, the degree to which they will decrease insurgent violence is not yet clear." That would appear that we're even including the Sunnis into the government, at least according to General Maples, indicates that it doesn't appear that there'll be a decrease in the insurgent violence -- not really clear what's going to happen. Even if moderate Sunni Arab leaders see violence as a complement -- "Even moderate Sunni Arabs see violence as a complement to their political platforms and are pursuing a dual track."

And we have the report this morning, "The Sunnis" -- this is from Knight-Ridder -- "Sunnis in Iraq may be arming for Shi'ite militias. Sunni Muslims from all across central Iraq, alarmed by how easily the Muslim fighters had attacked their mosque during the last week clashes, are sending weapons and preparing to dispatch their own fighters to the Iraqi capital in case of further violence." We're just looking for an assessment, Mr. Director, as to what in the world is happening, and what your own assessment is of what's going to happen in these next days and next weeks.

General Maples, can you help me out?

GEN. MAPLES: Sir, I will stand by the assessments that I provided. I do believe that this last week has been a very significant week in Iraq. The level of sectarian violence increased significantly on the ground based on the bombings of the mosque. And we saw exactly the deep divides that exist between the Shi'a and the Sunni in Iraq. I think we should take heart in the leaders who have come forward at this point, but we're also at a very tenuous situation right now, I believe. I think that more violence, were it to occur, were it to be stimulated by al Qaeda in Iraq, would have a very significant impact on the situation in Iraq. I believe that the Sunni population will continue to use violence as a means or a leverage to continue to represent their political interests. It has been heartening as well, though, to see Sunni leaders start to step forward to look for that national unity government and to participate in that. And I do think that that is a means to lessen the violence. Nevertheless, I think violence will remain with us for the time being.

SEN. KENNEDY: Well, there's -- we have to take our hats off to the courageous individuals who are trying to dampen down the violence, and all of us do.

What is your -- I'd like to -- in response to an earlier question, General, about if there were the development of a civil war, what our troops would do. And think in response to an earlier question, you said, well, that would be up to the commanders. Am I right --

GEN. MAPLES: Yes, sir.

SEN. KENNEDY: Don't -- what is the guidance now? What is the -- I'm trying to get ahead of the curve in case there is a real deterioration. What is the overall kind of framework? What are the -- what's the guidance that have given (sic) to our commanders? Can you tell us now?

GEN. MAPLES: Sir, I'm not aware of the guidance that's been provided to the commanders on the ground, sir.

SEN. KENNEDY: Well, when will that guidance -- if we see this kind of danger that you're describing now, wouldn't we anticipate that it'd be useful that our commanders would have some kind of guidance as (to) how they're going to proceed if there is going to be a deterioration, which you think is possible if there's increased activity by the al Qaeda and if the religious leaders are not able to continue to be the -- as brave and courageous and successful as they've been?

GEN. MAPLES: Sir, I'm sure the command (sic) is -- are taking those actions, and they are providing the guidance to the forces on the ground. I'm just not aware of what that is.

SEN. KENNEDY: So you -- let me move on, if I could, Mr. Director, to the issue on the NSA. And I know this is a(n) issue of sensitivity and importance. I'm asking if you would, please, if you could just answer the question. In -- the attorney general described the NSA -- this is the attorney in our Judiciary Committee -- attorney general described the NSA's surveillance program as military activities. So I wanted to just get your view about this program, whether it's considered a military operation. Is this considered a military operation? Are military involved in the apprehension or detention of any suspects?

And to the extent that you can comment on -- if you are able to, or maybe you want to do it later -- to the actions of the 4th Circuit, which have taken two cases now and have remanded those cases because of issues relating to tainted evidence that may very well be a part of the NSA program.

I'll put in greater detail, because I can't expect you -- that you might know about those cases, but maybe you do, or maybe General Hayden can comment on it. Could you quickly, because my time has expired, comment?

MR. NEGROPONTE: If I could invite General Hayden. It's in --

SEN. KENNEDY: All right. General Hayden, if we could --

GEN. HAYDEN: Senator, I don't have any details on cases.

SEN. KENNEDY: Oh --

GEN. HAYDEN: So I'm sorry about that.

SEN. KENNEDY: I'll give you a written question on that.

GEN. HAYDEN: Okay. Thank you.

SEN. KENNEDY: And if you could just address those other issues --

GEN. HAYDEN: Yes, sir. I think you're talking military aspect of the activity --

SEN. KENNEDY: Military, and is there any action by the military in terms of the activities -- detention of any of the individuals, of any of the suspects?

GEN. HAYDEN: Yes, sir.

SEN. KENNEDY: Are they involved in any of that --

GEN. HAYDEN: No, certainly not inside the United States. This is fundamentally, though, a foreign intelligence program. And it could lead to information that would lead to action by U.S. armed forces abroad.

SEN. KENNEDY: Well, my question just was related to the aspects of it that are here in the United States.

GEN. HAYDEN: Yes, sir. Yes, sir. No, there would not. And -- but I need to make an additional point, because you asked: Was it a military activity?

SEN. KENNEDY: Okay.

GEN. HAYDEN: The way we are wired as a community, the authority to do what NSA does -- signals intelligence, which is legally defined as electronic surveillance for a foreign intelligence purpose -- all the authority of the U.S. government to do that activity is actually in the person of the secretary of Defense. Since President Truman, SIGINT, electronic surveillance for a foreign intelligence purpose, comes to the director of NSA through the secretary of Defense. So in that sense, it's an inherent -- inherently military activity.

SEN. WARNER: Thank you very much, Senator Kennedy.

SEN. KENNEDY: Thank you very much.

SEN. WARNER: Senator Collins.

SEN. SUSAN COLLINS (R-ME): Thank you.

Mr. Ambassador, I want to follow up on the statement that Senator Inhofe made about the composition of the Committee on Foreign Investment in the United States. Currently, there is no direct intelligence community representative on the committee. Is that correct?

MR. NEGROPONTE: That is correct.

SEN. COLLINS: Yet the purpose of this committee is to evaluate the national security implications of proposed transactions.

Moreover, the committee is not chaired by a DOD official. It's not chaired by a Department of Homeland Security official. It's chaired by a Treasury official. Is that correct also?

MR. NEGROPONTE: Correct. Yes, yes.

SEN. COLLINS: I know that the intelligence community provides a threat assessment to the committee to help guide its analysis. But do you think that the Intelligence Committee (sic) should actually be a named member of the committee? It's a pretty big committee. It has 12 members. It has the head of OMB on it, and yet it doesn't have a representative from the intelligence community.

Should we change the composition of the committee?

MR. NEGROPONTE: Well, I don't think I'm going to offer you an opinion on that. But I do think that whatever arrangement we have, whether we're on the committee or not, I think we should continue to be as plugged-in as possible, as connected as possible, to the process. Whether we are formally a member of the committee or not, I believe that we should participate in the process.

SEN. COLLINS: It seems strange to me that we have a lot of representation from various offices within the White House, for example, that don't have national security implications or responsibilities, and yet we don't have a seat at the table for the Intelligence Committee -- community, despite the fact that what we're really talking about here is an analysis of the intelligence in order to make a determination on national security. So I guess I want to press you a little further on this. Don't you think that a representative from the intelligence community should be a member of the committee? You think it would improve the process?

MR. NEGROPONTE: Well, I understand your question, and it may be something that the Treasury Department and others who set the policy on this may wish to consider going forward. But again, I would reiterate that I think the important point is our participation. And I certainly think that going forward you're going to see us continue to be very, very involved in providing and meeting whatever requirements are levied upon us by the committee.

SEN. COLLINS: Let me switch to another issue of great concern to me. As you know, the purpose of the Intelligence Reform and Terrorism Protection Act of 2004, which my friend from Connecticut and I authored, was to create a strong director of national intelligence who would be clearly the head of the intelligence community.

As you're well aware, the secretary of Defense last November issued a directive that outlined the authorities and responsibilities of the undersecretary of Defense for Intelligence with respect to the NSA, the NGA and the NRO, three critical intelligence agencies.

As General Hayden is well aware, during the debate on the intelligence reform bill, we spent a great deal of time arguing and debating the proper lines of authority for those three critical agencies. Because they are combat support agencies, we agreed that they should remain within the Pentagon, but we were very clear in the law and in the legislative history that the DNI played a very important role in directing the activities of those three agencies.

Some intelligence experts have viewed the November directive by the secretary of Defense as undermining the DNI's authority over those three critical intelligence agencies or at least creating confusion about the reporting relationships.

My first question for you on this is, did you express any concerns to the Department of Defense about this directive?

MR. NEGROPONTE: If I could answer your question broadly, first of all, Senator, you mentioned the NSA, you mentioned NGA, you mentioned the NRO. And as you say, they have a combat support role.

But there are a couple of very, very important areas where we in the DNI have the lead.

One is with respect to budget, as it affects -- because these are all agencies that are supported out of the national intelligence budget. So I think the budget formulation process is one very important aspect. The other is the intelligence requirements. We have what we call our national intelligence priorities framework, which I've taken a direct and personal interest in, and which is shaped under the leadership of the DNI, and which sets the collection priorities for these different institutions. So those are two ways in which we exercise the kind of authorities that were visualized for us by the law.

The third point I'd make is that under General Hayden's leadership we now have the program managers of the major intelligence agencies meeting under General Hayden's leadership on a weekly basis. And that's the NSA, the NGA, the NRO, the CIA --

GEN. MAPLES: And Joint also.

MR. NEGROPONTE: -- and the DIA -- General Maples is there -- and the FBI. So that's -- that's it. I was looking for the sixth. So I think there are a number of different ways in which we are exercising these authorities. But I might invite General Hayden to add, and particularly on this question of whether we commented on this order that you are referring to, Senator.

SEN. COLLINS: Let me just say I'm very aware of those authorities, because we fought very hard to get them in the law, as Senator Lieberman will attest and as General Hayden is well aware.

MR. NEGROPONTE: And I just want to assure you that we're exercising them. That's the real key point.

SEN. COLLINS: Right. But I'm concerned about the signal that's being sent by the DOD directive, and that's why I want to know what discussions occurred and whether you raised concerns.

MR. NEGROPONTE: Yes, ma'am. Steve and I and the -- Secretary Cambone and I worked on that for about three months. And there was a constant dialogue. I think those who have expressed concern are largely reacting to the fact of the document and what it might symbolize rather than what's really in the document. Secretary Cambone took every change that I offered and recommended inside the document. He had been building that charter for almost -- almost as long as he had in office. And I think it's unfortunately that they finally got done with it at that time, because it did have some symbolism, I think, that was probably unintended.

To just put a finer point on the five powers that you gave us, I actually think in terms -- not in spite of the DOD reg, but in many ways incorporated within it, the power you gave us with regard to finances is strong. Tasking is strong. Policy's strong. You gave us authority over classification and release, which remain strong, and this DOD directive does not affect. But one area that we're working on now -- and I don't mean to invite help, because I think we'll work our way through it quite well -- is the area of personnel. And what you have there are intelligence community personnel who are also in a cabinet level department. And we look at those people as intelligence people, and the secretary certainly looks upon those as DOD folks.

We are in the process of building what I would call case law inside your broad direction for us to create a Goldwater-Nichols-like approach to the intelligence community. Other than that one, I think the other four are really rock-solid, and we're working on the fifth.

SEN. COLLINS: Thank you.

SEN. WARNER: Thank you, Senator Collins.

Senator Lieberman.

SEN. JOSEPH I. LIEBERMAN (D-CT): Thanks, Mr. Chairman. Needless to say, I associate myself with Senator Collins' questions.

General Hayden, I know you weren't asking for help. But, you know, we are from the federal government, and we are -- (laughter) -- here to help.

GEN. HAYDEN: (Laughs.) I'm -- I'm glad to see you, sir. (Laughs.)

SEN. LIEBERMAN: Good to see you, General. And it's -- General Hayden was very important to many of us as we formulated the reform of the intelligence apparatus of our government in response to the 9/11 commission.

Thanks to the three of you.

I want to just focus first on the -- this UAE DPW acquisition of terminals arrangement. And I feel very strongly, as has been said here, the UAE has been a very good ally. The Dubai Ports World, from all that I know, has a very good reputation as a company. That doesn't mean they deserve a free pass when they come in to acquire terminals in the U.S. There is a law. But they certainly deserve a fair hearing.

I want to share with you, Ambassador Negroponte, my -- it's not quite a conclusion, but a worry that the existing apparatus for evaluating the acquisition by a foreign company of an American company, that the process of reviewing that is more technological focused -- technology focused than it is security focused; that it was set up -- and some of the origins have more to do with the acquisition of companies involved in technologies that might be used against the U.S. And this is a very different circumstance -- terminals at a port arousing great concern among the American people, members of Congress. This is not technology, obviously. The American people, members of Congress want to know is there some reason why the UAE DPW acquisition of these terminals in the U.S. will create an opening for terrorists to strike at us.

So give me your reaction to my concern that the office within CARC -- I forget what it stands for -- may have been traditionally more focused on technology concerns than security concerns as we know them and feel them here.

MR. NEGROPONTE: Well, I think that -- it's the Committee on Acquisitions -- the Community Acquisition Risk Center.

SEN. LIEBERMAN: Right.

MR. NEGROPONTE: I think that's -- the historical genesis that you mention I think may be correct, Senator. But they were also asked in this request to look at whether or not there were any general threats to national security perceived as a result of this proposed acquisition. So I think they took a somewhat broader look.

But -- and the other thing I would say is that going forward, I think clearly as a result of the attention that this issue has generated, we're going to take a hard look, and we are taking a hard look at the kind of support we are going to be providing to --

SEN. LIEBERMAN: That's very important for me to hear, and I think a lot of us to hear. My impression, having spent some time on this over the last week or so, as many of us have, is that investigation that was done the first time around could have been more aggressive from a security point of view. I don't know that it missed anything. But I hope that you will put your own hands on this and make sure in this second 45-day review, or the first 45-day review, that when you reach a conclusion that we can have total confidence that you've gone down every potential path to make sure that U.S. security will not be compromised by this transaction.

MR. NEGROPONTE: Well, you can be assured that I will take a personal interest in the matter, Senator.

SEN. LIEBERMAN: I appreciate that.

I want to go to Iraq for a moment. It's quite natural for people in Congress, and the American people, to ask whether we are winning in Iraq. But I must say, whenever I hear that question, I think of something I read long ago, maybe from Churchill, because he's usually the source of a lot of good insight in these matters, which is -- about war -- which is that war is a succession of catastrophes that ends in victory for one side.

And there's a lot of wisdom there, particularly if you believe in the cause for which you're fighting, which I do and I know you do.

We made the world safer by overthrowing Saddam Hussein. We are now in a different kind of -- a different phase of our involvement there, and it is, I believe, to create the security conditions under which the Iraqis can self-govern and self-protect to improve their security forces. And in doing that, we will have achieved an extraordinary victory in the war for the hearts and minds of the Islamic world because we will have a created a different model for governance, for life in the Arab world.

Now this is a very tough battle because not only are we facing terrorists, who I'll get to in a minute, we are facing a historic, sectarian polls in the country. But when you say there has been progress achieved, I agree with you. Three extraordinary elections, people turning out; a political leadership that really is striving to bring the country together, not to divide it -- there are plenty of forces that want to divide it -- facing a brutal enemy. And one might say that as the political leadership comes together, as the Sunnis have gone from zero to 55 in the National Iraqi Assembly, as the leaders begin to work on a coalition government, the enemy gets more desperate.

I mean, what an outrageous act to blow up a bomb in the mosque in Samarra, which is a holy site of Shi'a Islam. Just think of how any of us of other religions would feel if one of the holiest sites of our religion was attacked. In the midst of that, the Shi'a religious leaders and now the representatives of the four different groups in Iraq -- Shi'a, Sunni, Kurd and secular -- have really tried to pull together.

So I'm not kidding myself. This is a tough battle. I know you're not, either. I've talked a little bit about catastrophe leading to victory. I think we know what success would mean. But I want you to talk a little bit about what not winning would mean. What would the consequences of a civil war in Iraq be for Iraq and for the region?

And I might say just to put an exclamation on this -- when the terrorists blow up the mosque in Samarra, I don't view that as a defeat for us. I view it as another example of how outrageous and evil the opposition is and how important it is that we stick with the Iraqis, who are trying to create a united country.

So what are the consequences of civil war in Iraq?

MR. NEGROPONTE: Well, I think first -- clearly, the consequences for the people of Iraq would be catastrophic. And who knows where that would lead in terms of what kind of political evolution that it might lead to? But clearly it wouldn't -- it would jeopardize -- seriously jeopardize the political -- the democratic political process on which they're presently embarked, and one can only begin to imagine what the political outcomes would be.

The other point I would make is that if chaos were to descend upon Iraq or the forces of democracy were to be defeated in that country, then I think clearly this would have implications for the rest of the Middle East region and indeed the world.

SEN. LIEBERMAN: In what way?

MR. NEGROPONTE: Well, I just would recall the letter of the deputy, of bin Laden's deputy, Mr. Zawahiri, to Zarqawi back in July, when he talked about and reaffirmed their commitment to establishing a global caliphate, and they saw Iraq -- success in Iraq for them as just the first step towards then spreading their activities to the Levant and even to Western Europe and then, of course, to our own homeland. So I would see it as a serious setback, among other things, to the global war on terror.

SEN. LIEBERMAN: Isn't there a -- my last question -- isn't there a reasonable possibility, if not a probability, that if there was a civil war that broke out in Iraq, that the other regional powers would get involved, certainly Shi'a with Shi'a and Sunni with Sunni, that might lead to a larger conflict in the Middle East?

MR. NEGROPONTE: It's a possibility. General Maples was asked that question earlier, and I think he rightly said that the different neighboring countries initially might be reluctant to get involved. But I think depending on the course of events, I think that might well be a temptation. You might see some kind of eruption of conflict between the Sunni and the Shi'a worlds, for example, if this were to happen -- if that's what you're alluding to.

SEN. LIEBERMAN: I am, but I presume at least a more aggressive role by Shi'a nations -- like Iran -- in supporting the Shi'as, and Sunni nations -- like Saudi Arabia and Jordan -- in supporting the Sunnis who are there.

MR. NEGROPONTE: I think that's a possibility. And of course, we've got indications that Iran has already got quite close ties with some of the extremist elements -- Shi'a elements inside of Iraq.

SEN. LIEBERMAN: Thank you.

Thanks, Mr. Chairman.

SEN. WARNER: Thank you very much, Senator. Certainly it would leave a vast area for new base camps and training camps for terrorism if that were to happen.

Senator Cornyn.

SEN. JOHN CORNYN (R-TX): Thank you, Mr. Chairman.

SEN. WARNER: And then we'll proceed to the senator from New York right after that.

SEN. CORNYN: I appreciate each of you being here and your service to our nation.

Ambassador Negroponte, let me ask you first about Latin America. You alluded to that in some of your earlier remarks, and obviously we are engaged, it looks like, in a big debate about border security and immigration reform. And I think it's important that the American people know that not just the Border Patrol and the Department of Homeland Security are concerned about homeland security and protecting our borders from the threats that may come across those borders, but that all assets of the federal government are dedicated to that effort, and that we're using the same sort of tools that are available to our Department of Defense, in the Department of Homeland Security when it comes to intelligence gathering and that everyone in the intelligence community is providing input and making a contribution to that effort.

Do you see things that we can and should be doing that we are not currently doing with regard to protecting our southern border, in particular, from the possibility of exploitation by terrorists or someone bringing in weapons of mass destruction?

MR. NEGROPONTE: I don't, Senator. But I would also say that the lead for that kind of intelligence rests with the Department of Homeland Security and some of the other domestic agencies, although we do work extremely closely with the Mexican authorities. We have a very close liaison relationship with the authorities in Mexico directed very much at this question of our -- security of our border areas.

SEN. CORNYN: Well, I know because of your past service as ambassador to that country you have a lot of knowledge of -- about it. But I do -- I will share that concern with you that our various federal agencies are not as closely coordinated as they might be in terms of providing all national assets that could be used. This is obviously an international border, and we know that Mexico has a border security problem of its own, and that it is currently being used as a(n) international transit point for human smugglers. And obviously these are organized crime figures who are interested in making money, and they'll do it by transporting and trafficking drugs or people or weapons or -- or terrorists. And it's -- it is a very grave concern of mine, and I know it's shared by other members.

General Hayden, I'd like to turn to the NSA, your former service's head of the National Security Agency. And I don't want to talk to you about the law; that's what's happening over at the Judiciary Committee hearing, which I am missing, unfortunately, here. But I want to talk to you about technology and the challenge that we have gathering intelligence under a Foreign Intelligence Surveillance Act that was written in 1978 with the change in the way that we communicate, and in particular, with digital communication over the Internet and with the fact that the FISA process can be quite time- intensive and operate in more of less of a linear fashion.

If we, for example, find that there's communication that we want to surveil coming from a particular IP address, I understand that it can take up to five -- 15 days to prepare a request to the FISA court to authorize surveillance of that foreign intelligence. But, of course, in a digital world, where information is disaggregated and routed, then, through the most efficient means and then reassembled at the collection point but the -- by the recipient, I know multiple IP addresses can be involved. And if we have to get a separate FISA warrant for a serial sending of messages throughout the cyberspace, it may involve huge delays in time, which may threaten us and make us more vulnerable.

And would you speak to that perhaps more coherently and more cogently than I did?

GEN. HAYDEN: Actually, no, sir, you've laid it out very well. But I can offer an additional thought or two.

I know you visited some of the activities of the agencies, and because of that, I know you're aware that we -- that FISA does offer tremendous opportunities, tools for the agency to conduct its mission. But you're also correct in that many things have changed since 1978, and the way we communicate as a species is, number one, magnified many times over and over, almost, in fact, exponentially. And then the variety of ways -- the various ways that communications move has also changed a great deal.

In some ways -- in some ways one of the issues we have before us as a people, as we balance security and liberty, is the global telecommunications system and our enemies don't recognize borders the same way we do. And I'll underscore global telecommunications systems. Our laws do recognize borders, and should, and there should be different standards for activities conducted by an agency like NSA and, again, electronic surveillance for a foreign intelligence purpose when it involves inside or outside the borders of the United States. There should be distinct differences.

One of the issues that we faced as an agency, however, in the days and weeks after the attacks in September 2001, in some ways the changes in technologies have made the reach and impact of the statute written in 1978 beyond the intent of those who crafted it because they could not have known the changes in technologies that followed.

And that's about as far as I can go in an open session, sir.

SEN. CORNYN: But as a factual matter, is it true that if the FBI or some intelligence agency wanted to get a FISA warrant, and assuming it takes 15 days to do the paperwork, which I understand is similar to the thickness of a novel, to get information from a particular IP address, then they discover information there that it's been transmitted from another IP address and they have to go back and get another FISA warrant for that, that while technologically you might be able to hop from four or five IP addresses in a morning to get to the source of the information on a timely basis that might disrupt or otherwise deter a terrorist attack, that it could take you, under that hypothetical, let's say five hops, 75 days to get that same information.

Is that one of the practical problems we're confronted with?

GEN. HAYDEN: Yes, sir, it is. We talked about -- I've used the phrase "hot pursuit" and necessary agility, and so on, to describe what it is NSA is able to do under the president's authorization that's different than what it was under FISA.

I'd offer another view as well, maybe just to reinforce some of that point. As director during that period of time when this was in effect, I mean, we looked at this authorization more often than that 45-day cycle.

I mean, we understood this difficult question of security and liberty. And I could never in my own mind -- let me put it another way. Believe me, if we could have done this under the statute as it has been constructed and as it is now currently implemented, and still given the American people an even similar degree of safety, of course we would have. But it did not.

SEN. CORNYN: Well, my time has expired. But I just think it's important for my colleagues -- all the Congress to understand we have different levels of technical proficiency in the Congress. Some senators and congressmen use a lot of technology. Others probably never turn on their desktop on -- and their computer in their office. So I think it's important that we all understand the revolution in communication and technology that's been created with the advent of Internet communications and the importance of responding to that in a way that helps keep us safer. Thank you.

SEN. WARNER: Thank you very much, Senator. Excellent line of questions.

And I must say that I feel that we should have in this record the following from the general, because I've advocated this publicly and in the closed sessions: that given what the senator from Texas has said and your careful responses, is it not timely that Congress address such amendments and changes to that framework of laws, such that we bring up to date the ability of your organization and others to do the necessary surveillance to protect in the world of terrorism at this time?

GEN. HAYDEN: Sure, and again, I've said in other fora as well --

SEN. WARNER: Beg pardon?

GEN. HAYDEN: Well, I've said in other fora as well, when we have discussed that kind of issue, as long as it can be done in a way that would not reveal capabilities and our tactics and techniques and procedures to the enemy.

SEN. WARNER: Well, we've managed to do that heretofore with other amendments to the various intelligence laws. So I'm sure we can do it this time, because I did pose that question to you in other fora, and I know how, in your own heart, you think it's time that we address this issue.

Senator Clinton.

SEN. HILLARY RODHAM CLINTON (D-NY): Thank you very much, Mr. Chairman. And thank you for your last question and your response, General.

Ambassador Negroponte, I just want to try to close the loop a minute on the DPW purchase. Were you or your staff aware of the Coast Guard Intelligence Coordination Center assessment about the many intelligence gaps that made it very difficult to infer potential unknown threats, including operations, personnel and foreign influence, when you responded to the inquiry from CFIUS about the intelligence estimate?

MR. NEGROPONTE: As I said earlier, Senator, our report was submitted to the Department of the Treasury before the Coast Guard report. Ours was submitted on the 5th of December. The Coast Guard submitted its -- the date of its report is something like the 13th of December, if I'm not mistaken. So we were not aware of that specific report.

But I have -- and I spoke to Secretary Chertoff just this morning -- ascertained that the objections or the issues that the Coast Guard raised were resolved to their own satisfaction, because they ended up being supportive of this transaction, as was the Department of Homeland Security. And some -- a letter of assurance and some safeguards were built into the transaction as a result of some of the issues that were raised by the Coast Guard.

SEN. CLINTON: Mr. Ambassador, as part of the 45-day review, will you be conducting a national intelligence estimate of the UAE efforts to combat terrorism, domestically and internationally?

MR. NEGROPONTE: We have not been asked to do that, Senator, and I don't know whether we could conduct a national intelligence estimate in that period of time. But we will certainly participate in the 45- day review and address whatever questions we are tasked to address.

SEN. CLINTON: Would it be possible to expedite an NIE in response to a request from this committee if it were forthcoming?

MR. NEGROPONTE: Well, whether it'd be an NIE or some kind of an assessment -- an assessment of some kind, I'm certain we could provide it to the committee.

SEN. CLINTON: Mr. Chairman, it might be appropriate for you and Senator Levin to consider asking for such a request as part of the 45- day review, because we need to get this system operating more efficiently. And certainly, if the Coast Guard is making an intelligence estimate after the DNI submits an intelligence assessment, we need to get this better focused. And perhaps we could make such a request, and it might then have the affect of having everything channeled to the DNI, and getting whatever review results would be most beneficial to the final decision.

SEN. WARNER: Thank you. We will take that under advisement. My initial reaction is I think you've made a(n) important observation, and it's likely we'll do it. I mentioned earlier when the hearing started as a consequence of our previous briefing in which you were a very active participant last week, we put in a series of legal questions to the Treasury Department and legal counsel for the Senate on the various issues that you and Senator Levin raised.

SEN. CLINTON: Thank you, Mr. Chairman.

SEN. LEVIN: I wonder if you'd just yield on that request --

SEN. CLINTON: Certainly.

SEN. LEVIN: -- on that request, because I think this is an important request, and I would just --

SEN. WARNER: You'll take your full time after we opine here.

Yes.

SEN. LEVIN: Well, it won't be an opining, it'll just be a question. (Light laughter.)

I would -- I would assume that your request would ask them to go back in their assessment to pre-9/11 as to what the activities were of Dubai relative to joining the war on terrorism pre-Iraq, between 9/11 and the Iraq war, and post-Iraq war, because there's clearly very different aspects to their conduct and behavior, at least in everything I've read, in those periods. So I would assume that your request would include those periods. Is that a fair -- ?

SEN. CLINTON: Oh, that certainly is a fair assumption, Senator Levin.

SEN. LEVIN: I knew it would be. Thank you.

SEN. CLINTON: Well-stated, as always.

I would like to turn now back to North Korea and the development of nuclear weapons.

General Maples, last year your predecessor told me before this committee that North Korea had the ability to arm a missile with a nuclear device. Now, the ability to arm is one issue, and obviously an alarming one.

Another is whether it can be successfully delivered.

Does the DIA assess that North Korea has developed an Intercontinental Ballistic Missile capable of delivering a nuclear warhead to the United States? If not, how many more years before North Korea has that capability?

GEN. MAPLES: We assess that they are in the process of developing an Intercontinental Ballistic Missile that would be capable of delivering a nuclear warhead, but they have not done so yet, nor have they tested it.

SEN. CLINTON: Ambassador Negroponte, last year North Korean officials asserted that they have a nuclear weapons arsenal. They've also declared that they've reprocessed the 8,000 fuel rods that had been frozen from '94 to '03, which means that over the last four years, North Korea has potentially produced up to six more nuclear weapons on top of the one to two devices the intelligence community assessed they already had.

In addition, the reactor the North Koreans restarted over a year ago continues to produce plutonium, enough for about another nuclear device per year. And analysts have concluded that North Korea could have up to 12 nuclear weapons this year.

At the end of last year's hearings, Senator Levin asked -- or at the end of last year, Senator Levin asked you to produce a comprehensive national intelligence estimate on North Korea's nuclear and long-range missile programs because there had not been one for several years, and I thank you and your staff for completing that estimate and sending it to the committee. I now hope that we can update the 2002 unclassified estimate that North Korea has one to two weapons.

What is your unclassified intelligence estimate regarding the number of nuclear devices or weapons that North Korea currently possesses? Is it still one or two? Or is it a new range?

MR. NEGROPONTE: Senator, when I was asked this similar question earlier, I was reluctant to try and put a number on this. I think you're right to point out the fact that there is this fissile material and that it's being produced regularly. But since we don't know for an absolute fact that they have nuclear weapons, to then try and extrapolate from the fact that they have this fissile material as to exactly how many weapons they have, I think, is a difficult thing to do. But there's no question that there's a potential there for a number of weapons to be in their possession. I'm just reluctant to pinpoint a specific number because I don't want to convey the impression that we know for a fact that they have that many weapons.

SEN. CLINTON: Well, Mr. Ambassador, I think, though, that there's been enough discussion of this, and certainly there has been enough testimony that creates a range. Porter Goss testified as to a range that seemed to suggest it was more than one to two. And it seems timely that you would publish for the benefit of public debate an unclassified version of the new NIE on North Korea, and also publish a new update, since the last one was published four years ago, before North Korea withdrew from the agreed framework, to the unclassified estimate of the number of nuclear devices or weapons that North Korea possesses, because this is an ongoing debate, this is a serious security challenge, and I think the public deserves to have a base level of information on which to participate.

With respect to nuclear reactors, we know they currently operate a five-megawatt reactor, another 50-megawatt reactor has remained under construction for some time, and in November of last year, The Washington Post reported that during a trip to North Korea, American scientist Sig Hecker was told by the director of the unfinished 50- megawatt reactor, that construction was going to start soon, and implied it would be finished in a couple of years, an obviously very troubling development.

Can the intelligence community comment on whether North Korea has resumed construction of the 50-megawatt reactor?

MR. NEGROPONTE: I suspect we can, but I don't have the answer handy at the moment, Senator. And I'll submit a response for the record.

SEN. CLINTON: And finally, with respect to the six-party talks, it's been disappointing, certainly to me, I assume to others as well, that we have outsourced our policy with respect to North Korea to the six-party talks, which really means outsourcing it to China. I don't think that's a wise decision.

And let me ask General Maples, what are the military implications of the failure of the six-party talks to bring any halt, temporary or permanent, to North Korean nuclear activities?

GEN. MAPLES: Ma'am, we believe, of course, North Korea would continue on in the development of nuclear material and nuclear weapons, and that without the six-party talks, there would be little likelihood that they would give up their nuclear program.

SEN. CLINTON: I have no doubt that the six-party talks are to some extent useful, but I worry that the six-party talks have really devolved into the Chinese talks; and the Chinese have their own agenda. And I'm not sure that the six-party talks is the only route we should be following to deal with North Korea.

Thank you.

SEN. WARNER: Thank you very much, Senator.

Senator Bill Nelson?

SEN. BILL NELSON (D-FL): Thank you, Mr. Chairman.

General Maples, I'm going to ask you, when we go into closed session, about the latest on Scott Speicher.

But in the meantime, in the open session, just recently Venezuela is reported to have received the first of three Russian helicopters and is ordering a lot more. There's been a report out for some period of time of ordering 150,000 rifles and a whole bunch of MiGs, the more advanced MiGs. How concerned is our Defense Department about the increased militarization and the increased expansionism of Venezuela?

GEN. MAPLES: We are very concerned about the purchase of arms that we see going on in Venezuela right now. We do see increased capability that is being brought to them by the fact that they can finance arms purchases from oil production. We see their efforts, as you are aware, to purchase both aircraft and patrol boats that the department has taken an active interest in attempting to deny that purchase going through.

So Venezuela is seeking a number of capabilities both for their own defense, but also to give them greater capability that could operate elsewhere in South and Latin America and within the Gulf area.

SEN. BILL NELSON: Well, as you know about the cozy relationship between Venezuela and Cuba, and as a result of propping up Castro's regime, and then allowing Castro to send doctors and nurses, and so forth, all over Latin America, what is the daily dollar value of that assistance that Venezuela is providing to Castro?

MR. NEGROPONTE: Senator, I don't have an estimate at hand for what the daily dollar value is, although I think we could try to ascertain that. But I would say that it's clear that he is spending hundreds of millions, if not more, for his very extravagant foreign policy, and as I said in my prepared statement, at the expense of the Venezuelan people, because there is a great deal of property in that country, so that it cannot have escaped the notice of the Venezuelan people that he is pursuing these very, very expensive policies.

SEN. BILL NELSON: Do you want to handle in closed session the question about the tri-border region in South America and the potential infiltration of al Qaeda?

MR. NEGROPONTE: I'd be prepared to try and do that, yes.

SEN. BILL NELSON: Thank you.

Thank you, Mr. Chairman.

SEN. WARNER: Thank you very much, Senator.

Senator Levin, do you have a wrap-up question?

SEN. LEVIN: Just one question, following up on Ambassador Negroponte's assessment of the risk. Let me ask General Maples this same question. Has the DIA done an assessment of the risk of having a foreign government control port facilities in the United States?

GEN. MAPLES: Sir, we did an assessment on the technology risk and the risk associated with technology transfer, but not on the risk of a foreign government. There was a statement in the risk assessment that we provided that did address an issue that, in this particular instance, a foreign government that we did not have necessarily knowledge of in terms of acquiring the company would have access to our ports.

But specifically, it was related to the transfer of technology.

SEN. LEVIN: And what was the risk that you assessed relative -- see, you have not done an assessment of the risk of having a foreign government control port facilities.

GEN. MAPLES: Not per se. No, sir.

SEN. LEVIN: And the one -- the risk that you did assess, the technology risk --

GEN. MAPLES: It was the risk of technology transfer.

SEN. LEVIN: To --

GEN. MAPLES: And our assessment was low.

SEN. LEVIN: Okay. Would you double-check for me, for the committee, whether or not the DIA has done a risk assessment overall as to the --

GEN. MAPLES: Sir --

SEN. LEVIN: -- as to the transfer of port facilities to a foreign government's control? Would you double-check that and --

GEN. MAPLES: Sir, I will double-check. There was a statement in the technology risk assessment that we did that spoke to the fact that a foreign government would be controlling port operations in the United States. It was a part of the same assessment.

SEN. LEVIN: And what -- and --

GEN. MAPLES: And -- and it was raised to low to moderate risk based on that factor. But it was a single assessment related to technology transfer.

SEN. LEVIN: Okay. So if a foreign government controlled the facilities relative to that transfer, at that point the risk goes from low to low-to-moderate.

GEN. MAPLES: Yes, sir.

SEN. LEVIN: Ambassador Negroponte, have you seen that assessment?

MR. NEGROPONTE: Yes, I have.

SEN. LEVIN: Okay.

Thank you.

SEN. WARNER: Senator Lieberman asked a very good question about the consequences of a successful civil war in Iraq. And your responses were very forthcoming. I now think it's important to look at if the forces of a civil war were to erupt, as you pointed out, Ambassador Negroponte, the first thing that we would look to is the ability of the government to try and mount an effort to stop that civil war. And I think it's a consensus of opinion, certainly this senator feels strongly, that our forces should not be involved in the actual combat of that civil war. We would turn it over -- I say "We would turn it over" -- I think the government of Iraq, such as it is today, would have to look to their own forces that we have trained and equipped. We now have over a hundred battalions, half of which have been categorized and rated as fully capable, of leading in combat operations -- not totally independent, but nevertheless, leading. My question to you, General, is what is your assessment should a civil war, or the factors that would be judged as tantamount to a civil war, be present and there's general insurrection taking place in many areas, what capability does the trained force, an equipped force by the United States and coalition partners, have with regard to their ability to put it down at the direction, presumably, of the government, and, frankly, have the courage to stay with it?

Now, the one chapter in history which I bring up, as I remember following very well, as our forces invaded into Iraq, there came a time where the army of Saddam Hussein literally dissolved. They left their weapons, they left their positions, and they went back to their origins of their home, their tribes, and the like. Give us your assessment of what -- how hard this force would fight to try and restore law and order and enable the government to continue to govern.

GEN. MAPLES: Sir, I would assess that, in fact, the Iraqi security forces would fight very hard. I think that their leadership, their feeling of national pride, their desire to have a national and a strong Iraq, that they would support the national government and would fight very hard to try to control the situation. Of course --

SEN. WARNER: Even their fighting their own countrymen.

GEN. MAPLES: I believe so, yes. They, of course, do have both their own sectarian loyalties, they have their own tribal loyalties that they would have to overcome. But we're seeing very strong leadership within the Iraqi security forces. And we've seen them perform.

SEN. WARNER: That's encouraging.

Ambassador Negroponte, do you anything to add to that response?

MR. NEGROPONTE: Just that I think it's a lot better than it was a couple of years ago. When I arrived there, Senator, as ambassador to Iraq, there was -- there was hardly a national security force -- a few battalions at best. And now we've reached the numbers that you talk about. And I would -- the other point I would add is that I think their performance during this recent situation during the past week has been quite positive. They were able to enforce this nationwide curfew, and I think have been playing a strong role.

SEN. WARNER: Thank you very much.

SEN. BILL NELSON: Mr. Chairman, may I follow that by asking the ambassador, to what degree do you see this attempt at civil war continuing to play out?

MR. NEGROPONTE: Well, I mean, I think, first of all, as we were commenting earlier, I think that the political leadership of the country as well as the religious leadership is rising to this situation. I think the ambassador -- Ambassador Khalilzad used the phrase I saw quoted today about how they came up to the edge, the brink, and they realized they don't want to fall down that precipice. So I think they're struggling mightily to avoid that. So --

SEN. WARNER: Thank you very much.

MR. NEGROPONTE: -- I think that's important.

SEN. WARNER: The committee will resume --

SEN. LEVIN: I have a question of record. May I make a request for the record?

SEN. WARNER: Yes.

SEN. LEVIN: General, you made a very important statement that I'd like you to expand for the record, that when the government owns a port facility instead of a company, that the risk assessment goes from low to low-to-moderate. If you could expand that for the record, since that's a very significant statement, as to why you believe that's true, I'd appreciate it.

GEN. MAPLES: Yes, sir.

SEN. WARNER: The committee will resume in closed session in approximately 10 minutes in 219. (Gavels.) Had a very good hearing.

MR. NEGROPONTE: Thank you.