Senate Intelligence Committee Hearing Before the Annual Assessment of Security Threats to the United States

February 2, 2000

Related Library Documents: 

SEN. SHELBY: The committee will come to order.

This is the committee's first hearing of the 21st century. And I want to join with the committee's new vice chairman, Senator Bryan, in welcoming our witnesses, as well as the American public, for this annual assessment of the threats facing our nation. We have asked our witnesses to focus on those conditions throughout the world that have fostered, or will foster, threats and challenges to the security of the United States.

We will be concentrating this morning in an open session, and again this afternoon in a closed session, on conventional as well as unconventional threats, including threats posed by the proliferation of weapons of mass destruction and high-technology state-sponsored and nonstate- terrorists. This hearing is intended to form the backdrop, not only for the committee's annual budget authorization process but also for a comprehensive review of the capabilities of the intelligence community and the adequacy of the resources being dedicated to this very important work.

The dynamic change and uncertainty that characterized the latter part of the '90s will likely continue through the first decade of the new century because what one of our witnesses calls the engines of turmoil remain largely in place. These "engines of turmoil" include significant transitions in key states and regions throughout the world, the continued existence of rogue states and terrorist groups, rapid technological development and proliferation, continuing international criminal activity, and reactions to a perception of U.S. political, economic, military and social dominance. Together, these factors foster a complex, dynamic and dangerous global security environment that will spawn crises affecting American interests.

If we are to contain, manage and respond appropriately to these threats, we need to understand this challenging new security environment in the first year of the 21st century. And nowhere will these challenges be more evident than in the asymmetrical threats to our homeland, in the strategic nuclear missile threats from China and Russia, as well as rogue threats, and in the threats posed to U.S. interests around the world by large regionally ambitious military powers.

While this hearing is designed to address critical threats to our nation's security, another matter has come to the public's attention and is one that Direct Tenet, I believe, should address in more detail. That matter is the conduct of Mr. Tenet's predecessor, John Deutch, and the conduct of senior CIA officials in investigating, failing to investigate, or possibly impeding the investigation of Mr. Dutch's (sic) handling or mishandling of classified information.

These are matters, I believe, of the utmost importance. The American people have a keen interest in the performance of senior officials charged with upholding our laws and policies with respect to the protection of classified information, the disclosure of which would constitute a serious and immediate threat to our national security.

Therefore, I hope that you will take this opportunity to explain, Mr. Tenet, to the American public today the actions of your predecessor, the investigations into those actions, the actions of other CIA officials with respect to this investigation, and your own actions in this regard.

With that in mind, the committee is very pleased to welcome back the director of Central Intelligence, Mr. George Tenet.

We're also pleased to welcome two individuals to their first public appearance before this committee: the relatively new director of the Defense Intelligence Agency, Vice Admiral Thomas Wilson, and the new assistant secretary of State for Intelligence and Research, Ambassador Stapleton Roy.

If there's no objection, we've asked Secretary Roy and Admiral Wilson to submit their statements for the record, and it will be so ordered.

Director Tenet will then present his oral testimony, after which I will open the floor for members' questions. In the interest of time, I would ask that members submit any opening statements for the record, other than Senator Bryan, so that all members will have ample opportunity to ask questions.

But before calling on you, Director Tenet, let me turn to my colleague and my new vice chairman, Senator Bryan.



A Senator from Nevada, and
Vice Chairman, Senate Select Intelligence Committee


SEN. RICHARD BRYAN (D-NV): Thank you very much, Mr. Chairman. As you have observed, this is my first roll call with you as the new vice chairman of this committee, and I look forward to working with you and other colleagues in the committee in a bipartisan way in discharging our oversight responsibilities with respect to the intelligence community.

Let me first commend you for the timely manner in which you're scheduling the committee's annual worldwide threat hearing. As we both know, because this is an election year, our time schedule will be compressed. And so I think it's most important that we get off as quickly as we can at the beginning of the year and the timing of this hearing, which was rescheduled through circumstances beyond your control or my control, indicate the manner in which we tend to approach this responsibility.

The committee's annual worldwide threat hearing is one of the committee's most important. It's indispensable in helping members frame the committee's approach to intelligence issues in the year ahead.

But it's important for another reason. Because this is an open hearing, the American people themselves will have an opportunity to assess the seriousness of the threats that face our country, and reach their own conclusions.

Mr. Chairman, our nation faces numerous threats, albeit qualitatively different than those that we faced during the Cold War. Rather than the singularly focused threat of the former Soviet Union, we now face a host of so-called transnational issues and threats.

As the term implies, these threats are not confined to specific countries, but rather cross international borders.

Mr. Chairman, as you and I observed firsthand during our recent visit to eight African nations, the terrible effects of one of those transnational threats, in this case terrorism, can be deadly. In both Kenya and Tanzania, we visited the remains of our embassies, both of which were the object of viciously destructive terrorist attacks in 1998. Over the last several years, you, Mr. Chairman, have placed a proper emphasis on the transnational threats, such as terrorism, weapons proliferation and narcotics. And I very much look forward to working with you on these and other issues during the course of the year.

Mr. Chairman, with your indulgence, I'd like to touch on one more issue, one which you appropriately raised, and I'd like to associate myself with your comments in terms of the recent issue that has come to light with respect to DCI John Deutch's handling of classified information and the misuse of government computers as reported in the February 1st edition of the New York Times.

I must say that I find this issue extremely troubling. Not only are the specifics of the case very disturbing; so, too, is the manner and timing in which this committee was notified. I look forward to hearing any comments that the DCI may have on this issue today, and I am particularly anxious to see the results of the accountability panel's inquiry into this matter as soon as that panel has completed its work.

I would also be very interested in whether or not there have been any morale problems as a consequence of that, because one of the obvious concerns raised is whether there is a dual standard in dealing with a former DCI and other employees of the agency who might have been guilty of similar activity.

And finally, I would like to applaud the efforts of the CIA inspector general, Britt Snyder. His investigative report produced on this matter is both comprehensive and balanced. And agian, Mr. Chairman, I look forward to working with you today and throughout the rest of the year on issues affecting the intelligence community.

Thank you.

SEN. SHELBY: (Inaudible) -- proceed as you wish.



Director, Central Intelligence Agency


MR. TENET: Thank you, Mr. Chairman.

I appreciate the opportunity to discuss with the committee our assessment of the threats facing the United States, but before so doing, I want to make some brief comments about recent news articles concerning a highly sensitive, classified report by the CIA's inspector general. The report, which was provided to the committee in August of 1999, was critical of an internal investigation of former director Deutch's mishandling of classified information. You and Senator Kerrey have communicated directly with me about your insistence that classified material be properly handled and that you will defend any employee of the intelligence community who bring instances of mishandling to your attention.

You have also asked me to provide you with the results of the accountability determination when it is completed, and I will certainly do so.

The inspector general's report was thorough and its conclusions and recommendations were sound. The IG report did not conclude that anyone intentionally impeded the security investigation relating to DCI Deutch. Had the inspector general any evidence to that effect, he would have been obliged to refer the matter to the Department of Justice. He did not do so.

At the conclusion of the inspector general's investigation last August, when all of the relevant facts were available to me, I made the decision to suspend the security clearances of my predecessor, John Deutch. My action, and his response, were made public at that time. As the IG report documents, the internal investigation took too long to complete. The process certainly was not perfect, Mr. Chairman, and I fully accept that finding. Yet once the facts were put forward by the inspector general, I did take decisive action. That said, let me discuss the matters which continue to concern me and you -- threats to our national security.

Mr. Chairman, as we face a new century, we face a new world -- a world where technology, especially information technology, develops and spreads at lightning speed and becomes obsolete just as fast; a world of increasing economic integration, where a U.S. company designs a product in Des Moines, makes it in Bombay and sells it in Sydney; a world where nation-states remain the most important and powerful players, but where multinational corporations, nongovernment organizations, and even individuals can have a dramatic impact.

This new world harbors the residual effects of the Cold War, which had frozen many traditional ethnic hatreds and conflicts within the global competition between the two superpowers. Over the past 10 years, they began to thaw in Africa, the Caucasus and the Balkans, and we continue to see the results today. It is against this backdrop that I want to describe the realities of our national security environment in the first year of the 21st century, where technology has enabled, driven, or magnified the threat to us; where age-old resentments threaten to spill over into open violence, and where growing perception of our so-called hegemony has become a lightening rod for the disaffected. Moreover, this environment of rapid change makes us even more vulnerable to sudden surprise.

Mr. Chairman, let me first talk to you about the proliferation of the weapons of mass destruction. The picture that I drew last year has become even more stark and worrisome. Transfers of enabling technologies to countries of proliferation concern have not abated. Many states in the next 10 years will find it easier to obtain weapons of mass destruction and the means to deliver them.

Let me underline three aspects of this important problem. First, the missile threat to the United States from states other than Russia or China, is steadily emerging. The threat to U.S. interests and forces overseas is here and now.

Second, the development of missiles and weapons of mass destruction in South Asia has led to more advanced systems, and both sides have begun to establish the doctrine and tactics to use these weapons. Third, some countries we have earlier considered exclusively as weapons technology importers may step up their roles as secondary suppliers, compounding the proliferation problem even further.

We are all familiar with Russian and Chinese capabilities to strike at military and civilian targets throughout the United States. To a large degree, we expect our mutual deterrent and diplomacy to help protect us from this as they have for much of the last century. Over the next 15 years, however, our cities will face ballistic missile threats from a wider variety of actors -- North Korea, probably Iran, and possibly Iraq. In some cases, this is because of indigenous technological development, and in other cases because of direct foreign assistance.

And while the missile arsenals of these countries will be fewer in number, constrained to smaller payloads and less reliable than those of the Russians and Chinese, they will still pose a lethal and less predictable threat. North Korea already has tested a space launch vehicle, the Taepo Dong I, which it could theoretically convert into an ICBM capable of delivering a small biological or chemical weapon to the United States, although with significant inaccuracies. Moreover, North Korea has the ability to test its Taepo Dong II this year. This missile may be capable of delivering a nuclear payload to the United States.

Most analysts believe that Iran, following the North Korean pattern, could test an ICBM capable of delivering a light payload to the united States in the next few years. Given that Iraq missile developments are continuing, we think that it, too, could develop an ICBM, especially with foreign assistance, sometime in the next decade. These countries calculate that the possession of ICBMs would enable them to complicate and increase the cost of U.S. planning and intervention, enhance deterrence, build prestige and improve their abilities to engage in coercive diplomacy.

As alarming as the long-range missile threat is, it should not overshadow the immediacy and seriousness of the threats that U.S. forces, interests and allies already face overseas from short and medium-range missiles. The proliferation of medium-range ballistic missiles, driven primarily by the North Korean Nodong sales, is significantly altering strategic balances in the Middle East and Asia.

Nowhere has the regional threat been more dramatically played out than in South Asia. Both Pakistan and India have intensified their missile and nuclear rivalry. Further nuclear testing is possible, and both states have begun to develop nuclear-use doctrines and contingency planning. This is a clear sign of maturing WMD programs.

Another sign that WMD programs are maturing is the emergence of secondary suppliers of weapons technology. While Russia, China and North Korea continue to be the main suppliers of ballistic missiles and related technology, long-standing recipients, such as Iran, might become suppliers in their own right as they develop domestic production capabilities. Other countries that today import missile- related technology, such as Syria and Iraq, also may emerge in the next few years as suppliers. Over the near term, we expect that most of their exports will be of shorter-range ballistic missiles-related equipment, components and technologies. But as their domestic infrastructures and expertise develop, they will be able to offer a broader range of technologies that could include longer-range missiles and related technology. Iran, in the next few years, may be able to supply not only complete Scuds, but also Shahab 3s, and related technology, and perhaps even more advanced technologies, if Tehran continues to achieve assistance from Russia, China and North Korea.

Mr. Chairman, the problem may not be limited to missile sales. We also remain very concerned that new or non-traditional nuclear suppliers could emerge from this same pool. This brings me to a new area of discussion that more than ever, we risk substantial surprise. This is not for a lack of effort on the part of the intelligence community, it results from significant effort on the part of proliferators. There are four main reasons: denial and deception; the growing availability of dual-use technology; the potential for surprise is exacerbated thirdly by growing capacity of these countries seeking WMD to import talent that can help them make dramatic leaps on things like new chemical and biological agents; finally, the accelerating pace of technological progress makes information and technology easier to obtain in more advanced forms than when the weapons were initially developed.

We are making progress on these problems, Mr. Chairman, but I must tell you the hill is getting steeper every year.

With regard to terrorism, since July of 1998, working with foreign governments worldwide, we have helped to render more than two dozen terrorists to justice. More than half were associates of Osama bin Laden's organization. These renditions have shattered terrorist cells and networks, thwarted terrorist plans, and in some cases even prevented attacks from occurring.

Although 1999 did not witness the dramatic terrorist attacks that punctuated 1998, our profile in the world -- thus our attraction as a terrorist target -- will not diminish any time soon.

We are learning more about our perpetrators every day. Bin Laden is still foremost among these terrorists because of the immediacy and seriousness of the threat he poses. Everything that we have learned recently confirms our conviction that he wants to strike further blows against the United States.

Despite some well-publicized disruptions, we still believe he could strike without additional warning. Indeed, bin Laden's organization and other terrorist groups are placing increased emphasis on developing surrogates to carry out attacks, in an effort to avoid detection.

For example, the Egyptian Islamic Jihad is linked closely to bin Laden's organization and his operatives located around the world, including in Europe, Yemen, Pakistan, Lebanon, and Afghanistan.

And now, Mr. Chairman, there is an intricate web of alliances among Sunni extremists worldwide, including North Africans, radical Palestinians, Pakistanis, and Central Asians. Some of these terrorists are actively sponsored by national governments that harbor great antipathy for the United States.

Iran, for one, remains the most active state sponsor. Although we have seen some moderating trends in Iranian domestic policy and even some public criticism of the security apparatus, the fact remains that the use of terrorism as a political tool by official Iranian organs has not changed since President Khatami took office in August of 1997.

Mr. Chairman, let me move on to narcotics. The problem we face has become considerably more global in scope and can be summed up like this:

Narcotics production is likely to rise dramatically in the next few years, and worldwide trafficking involves more diverse and sophisticated groups.

On the first point, coca cultivation in Peru and Bolivia has continued to decline, due largely to successful eradication efforts. But that will probably be offset to some extent by increases in Colombian cultivation.

More productive coca varieties, and more efficient processing, results in production of cocaine more than two and a half times that that was previously estimated.

There is some good news in Colombia. Under President Pastrana's leadership, Bogota is beginning to improve on its 1999 efforts. In November, Pastrana approved the first extradition of a Colombian drug trafficker to the United States since the passage of legislation in 1997.

On the other side of the world, a dramatic increase in opium and heroin production in Afghanistan is again a cause for concern. This year Afghanistan's farmers harvested a crop with the potential to produce 167 tons of heroin, making Afghanistan the world's largest producer of opium. Burma, which has had a serious drought, dropped to second place but will likely rebound quickly when the weather improves.

Explosive growth in Afghan opium production is being driven by the shared interests of traditional traffickers and the Taliban. And as with so many of these cross-national issues, Mr. Chairman, what concerns me most is the way the threats become intertwined. In this case, there is ample evidence that Islamic extremists, such as Osama bin Laden, uses profits from the drug trade to support their campaign of terrorism.

Mr. Chairman, my statement goes on to talk about information operations of organized crime, but let me move to regional issues in the interest of time. First, let me start with Russia.

As you know, we are now in the post-Yeltsin era, and difficult choices loom for the new president Russians will choose in exactly two months. He will face three fundamental questions:

First, will he keep Russia moving toward the consolidation of its new democracy, or will growing public sentiment in favor of a strong hand and a yearning for order tempt to slow him down or even reverse course?

Second, will he try to build a consensus on quickening the pace of economic reform and expanding efforts to integrate into global markets -- some Russian officials favor this -- or will he rely on heavy state intervention to advance economic goals?

Finally, will Moscow give priority to a cooperative relationship with the West, or will anti-U.S. sentiments continue to grow, leading to a Russia that is isolated, frustrated or hostile? This would increase the risk of unintended confrontation, which would be particularly dangerous as Russia increasingly relies on nuclear weapons for its defense, an emphasis reflected most recently in its new National Security Concept.

As these questions indicate, the new Russian president will inherit a country in which much has been accomplished but in which much still needs to be done to transform its economy, ensure that its democracy is deeply rooted, and establish a clear future direction for it in the world outside of Russia.

Russian polls indicate that Acting President Putin is the odds-on favorite to win the election, though I must tell you, Mr. Chairman, that two months can be an eternity in Russia's turbulent political scene. Putin appears tough and pragmatic, but it is far from clear what he would do as president. If he can continue to consolidate a lead in popular support, as president he may be able to gain political capital that he could choose to spend on moving Russia further along the path of economic recovery and democratic stability.

Former Premier Primakov is in the best position to challenge Putin, though he faces an uphill battle. He would need the backing of other groups, most importantly the communists. The communists, however, have shown their willingness to deal with Putin's party in a recent agreement that divided the Duma leadership positions between them. Such tactical alliances are likely to become more prevalent as parties seek to work out new power relationships in the post-Yeltsin era.

At least two factors will be pivotal in determining Russia's near-term trajectory. First, the conflict in Chechnya. Setbacks in the war could hurt Putin's presidential prospects unless he can deftly shift blame, while perceived successes there will help him remain the front runner. The economy. The devalued ruble, increased world oil prices and favorable trade balance, fueled by steeply reduced import levels, have allowed Russia to actually show some economic growth in the wake of the August '98 financial crash. Nonetheless, Russia faces an $8 billion in foreign debt coming due this year. Absent a new IMF deal to reschedule, Moscow would have to redirect recent gains for economic growth to pay it down or run the risk of default.

Over the longer term, the new Russian president must be able to stabilize the political situation sufficiently to address structural problems in the Russian economy. He must also be willing to take on the crime and corruption problem, both of which impede foreign investment.

In the foreign policy arena, U.S.-Russian relations will be tested on a number of fronts. Most immediately, Western criticism of the Chechen war has heightened Russian suspicions about U.S. and Western activity in neighboring areas, be it energy supply decisions involving the Caucasus in Central Asia, NATO's continuing role in the Balkans, or NATO's relations with Balkan states -- Baltic states. Moscow's ties to Iran will also continue to complicate U.S.-Russian relations, as will Russian objections to U.S. plans for national missile defense.

There are, nonetheless, some issues that could improve things and move them in a more positive direction. Putin and others have voiced support for finalizing the START II agreement and moving toward further arms cuts on START III. Similarly, many other Russian officials express a desire to more deeply integrate Russia into the world economy, be it through continued cooperation with the G-8, or prospective membership in the WTO.

One of my biggest concerns, regardless of the path that Russia chooses, remains the security of its nuclear weapons and materials. Russia's economic difficulties continue to weaken the reliability of nuclear personnel and Russia's system for security fissile material. We have no evidence that weapons are missing in Russia, but we remain concerned about reports of lax discipline, labor strikes, poor morale and criminal activities at nuclear storage facilities.

Mr. Chairman, let me move on to Iran. Change in Iran is inevitable. The election of President Khatami reflected the Iranian popular desire for change. He has used this mandate to put Iran on a path towards a more open society. This path will be volatile at times, as the factions struggle to control the pace and direction of political change. The key indicator, with that battle over changes heating, up came last July when student protests erupted in 18 Iranian cities for several days.

The coming year promises to be just as contentious, as Iran elects a new parliament in February. Many Iranians, particularly the large cohort of restive youth and students will judge the elections as a test of the regime's willingness to accommodate the popular demand for reform. If they witness a rigged election, it could begin to radicalize what has so far been a peaceful demand for change. Fair elections would probably yield a pro-reform majority, but opponents of change still exert heavy control over the candidate selection process.

Former President Rafsanjani's decision to run for the Majlis, apparently at the urging of conservatives, highlights the leadership's desire to bring the two factions back to the center. The conservatives are supportive of his candidacy because they believe a centrist Rafsanjani is a more trustworthy alternative to the reformers.

Even if elections produce a Majlis dominated by Khatami supporters, further progress on reform will remain erratic. Supreme Leader Khamenei and key institutions such as the Revolutionary Guard Corps and the large parastatal foundations will remain outside the authority of the Majlis and in a position to fight a stubborn, rear- guard action against political change.

Moreover, even as the Iranians digest the results of the Majlis's selections, the factions will begin preliminary maneuvering for the presidential election scheduled for mid-2001, which is almost certain to keep the domestic political scene unsettled. The factional maneuvering probably means that foreign policy options will still be calculated first to prevent damage to the various leaders' domestic positions. This will inhibit politically risky departures from established policy. This means that Iran's foreign policy next year will still exhibit considerable hostility to U.S. interests. This is most clearly demonstrated by Tehran's continued rejection of the Middle East peace process and its efforts to energize rejectionist Palestinian and Hezbollah operations aimed at thwarting a negotiated Arab-Israeli peace.

Iranian perceptions of increasing U.S. influence in the Caucasus, demonstrated most recently by the signing of the Baku-Ceyhan pipeline agreement, could similarly motive Iran to more aggressively seek to thwart what it regards as a U.S. effort to encircle it from the north.

Mr. Chairman, let me move to the Balkans, an important area. Signs of positive long-term change are beginning to emerge there as the influence of the Milosevic regime in the region wanes in the wake of the Kosovo conflict, and a new, more liberal government takes the reins of power in Croatia. Political alternatives to the dominate ethnic parties in Bosnia are also beginning to develop, capitalizing on the vulnerability of old-line leaders to charges of corruption and economic mismanagement. Despite this progress, there is still a long way to go before the Balkans move beyond the ethnic hatreds and depressed economies that have produced so much turmoil and tragedy.

Of the many threats to peace and stability in the year ahead, the greatest remains Slobodan Milosevic, the world's only sitting president indicted for crimes against humanity. Milosevic's hold on power has not been seriously shaken in the past few months. He retains control of the security forces, military commands, and an effective media machine. His inner circle remains loyal or at least cowed. The political opposition has not yet developed a strategy to capitalize on public anger with Milosevic.

Milosevic has two problems that could still force him from power -- the economy and the Montenegrin challenge.

The Serbian economy is in a virtual state of collapse, and Serbia is now the poorest country in Europe. Inflation and unemployment are rising, and the country is struggling to repair the damage to its infrastructure from NATO airstrikes. The average wage is only $48 a month, and even these salaries, typically, are several months in arrears. Basic subsistence is guaranteed only by unofficial economic activity and the traditional lifeline between urban dwellers and their relatives on the farms.

Milosevic's captive media are trying, with some success, to blame these troubles on the airstrikes and on international sanctions. Nonetheless, as time passes, our analysts believe that the people will increasingly hold Milosevic responsible. Moreover, a sudden unforeseen economic catastrophe, such as hyperinflation or a breakdown this winter of the patched-up electric grid, could lead to mass demonstrations that would pose a real threat.

For its part, Montenegro may be heading toward independence, and tensions are certainly escalating as Montenegrin President Djukanovic continues to take steps to break ties with the federal government. Milosevic wants to crush Djukanovic because he serves as an important symbol to the democratic opposition in Serbia and to the Serbian people that the regime can be successfully challenged. Djukanovic controls the largest independent media operation in Yugoslavia, which has strongly criticized the Milosevic regime over the past several years for the Kosovo conflict, political repression, and official corruption. Both Milosevic and Djukanovic will try to avoid serious confrontation for now, but a final showdown will be difficult to avoid.

Regarding Kosovo, the international presence has managed to restore a semblance of peace, but it is brittle. Large-scale interethnic violence has vanished, but the U.N. Mission in Kosovo and KFOR have been unable to stop daily small-scale attacks, mostly by Kosovar Albanians against ethnic Serbs. This chronic violence has caused most of the remaining 80(,000) to 100,000 Serbs to congregate in enclaves in northern and eastern Kosovo, and they are organizing self-defense forces.

The campaign to disarm the former Kosovo Liberation Army has had success, but both sides continue to cache small arms and other ordnance. There's even a chance that fighting between Belgrade security forces and ethnic Albanians will reignite, should Belgrade continue to harass and intimidate the Albanian minority in southern Serbia, and should Kosovo Albanian extremists attempt to launch an insurgency aimed at annexing southern Serbia into greater Kosovo.

Let me now turn to China, Mr. Chairman. The leadership there is continuing its bold 20-year-old effort to propel the nation's economy into the modern world, shedding the constraints of the old communist central command system. The economy is the engine by which China seeks world prestige, global economic clout and the funding for new military strength, thereby redressing what it often proclaims as 100 years of humiliation at the hands of Western powers. Domestically, it was the engine that Deng Xiaoping and his successors calculated would enable the party to deliver on its unspoken social contract with the Chinese people -- monopoly of political power in exchange for a strong China with a higher standard of living for its citizens.

But events conspired last year to tarnish Beijing's achievements, to remind people that China had not yet arrived as a modern world power, and to make the leadership generally ill at ease. China put on an impressive display of military might at its 50th anniversary parade in Beijing, but the leadership today sees a growing technological gap with the West. Inside China, the image of domestic tranquility was tarnished by last April's appearance of the Falun Gong religious sect, whose audacious surprise demonstration outside the leadership compound called into question the Community Party's ability to offer an ethos that still attracts the Chinese people.

Even the return of Macao in late December, the fall of another symbol of a divided China, was overshadowed by the actions of Taiwan President Lee Teng-Hui. Lee declared last July that his island's relations with the mainland should be conducted under the rubric of state-to-state rather than one-China. The statement has China deeply worried that Taiwan's return to Beijing is less than -- likely than before. Chinese leaders act as if they believe at a minimum a show of force is required if they are to preserve any hope of reunification. Because of this, we see a high potential for yet another military flare-up across the Taiwan Strait this year. The catalyst for these tensions is the Taiwan election on the 18th of March, which Beijing will be monitoring for signs that a new president will retreat from Lee's statements or further extend the political distance from reunification.

Although Beijing today still lacks the air and sealift capability to invade Taiwan, China has been increasing the size and sophistication of its forces arrayed along the strait, most notably by deploying short-range ballistic missiles. China should receive the first two Russian-built destroyers later this month.

And we expect the ships to join the East Sea Fleet, which regularly conducts operations near Taiwan.

In the coming year, we expect to see an uncertain Chinese leadership launching the nation deeper into the uncharted waters of economic reform, while trying to retain a tight grip on political control. But the question remains open, Mr. Chairman, whether in the long run a market economy and an authoritarian regime can -- coalesce equally.

Mr. Chairman, I want to talk about two more subjects, North Korea, and Indian and Pakistan, and we'll reserve the rest.

North Korea's propaganda declares 1999 the year of the great turnaround. This is not a view supported by my analysts. Indeed, we see a North Korea continuing to suffer from serious economic problems, and we see a population, perhaps now including the elite, that is losing confidence in the regime. Mr. Chairman, sudden radical and possibly dangerous change remains a real possibility in North Korea, and that change could come at any time.

The North Korean economy is in dire straits. Industrial operations remain low. The future outlook is clouded by industrial facilities that are nearly beyond repair after years of underinvestment, spare-parts shortages and poor maintenance.

This year's harvest is more than 1 million tons short of the minimum grain needs. International food aid has again been critical in meeting the population's minimum food needs.

Trade is also down. Exports to Japan, the North's most important market, fell by 17 percent. Trade with China, the North's largest source of imports, declined to $160 million, primarily because China delivered less grain.

Kim Jong Il does not appear to have an effective long-term strategy for reversing his country's economic fortunes. His inability to meet the basic needs of his people and reliance on coercion, makes his regime more brittle because even minor instances of defiance have greater potential to snowball into wider anti-regime actions.

Instead of real reform, North Korean strategy is to garner as much aid as possible from overseas, and the North has reenergized its global diplomacy to this end. It has agreed to diplomatic talks with Japan for the first time in several years. It has unprecedented commercial contacts with South Korea, including a tourism deal with a South Korean firm that will provide almost a billion dollars.

But Pyongyang's maneuvering room will be constrained by Kim's perception that openness threatens his control and by contradictions inherent in his overall strategy, a strategy based on hinting at concessions on every weapons program that he has increasingly come to depend on for leverage in the international arena. Squaring these circles will require more diplomatic agility than Kim has yet to demonstrate in either domestic and international arenas.

Finally, Mr. Chairman, let me talk about India and Pakistan.

Last spring the two countries narrowly averted a full-scale war in Kashmir, which could have escalated to the nuclear level. The military balance can be summarized easily; India enjoys advantages over Pakistan in most areas of conventional defense preparedness, including a decisive advantage in fighter aircraft and almost twice as many men under arms and a much larger economy.

Recent changes in the government of both countries add tensions to the picture. The October coup in Pakistan that brought General Musharraf to power, who served as the army chief during the Kargil conflict with India last summer, has reinforced New Delhi's inclination not to reopen the bilateral dialogue any time soon. Pakistanis are equally suspicious of India's newly elected coalition government, in which Hindu nationalists hold significant sway.

Clearly, the dispute over Kashmir remains as intractable as ever. We are particularly concerned that heavy fighting is continuing through the winter, unlike in the past, and probably will increase significantly in the spring.

New Delhi may opt to crack down hard on Kashmiri militants operating on the Indian side of the line of control, or even order military strikes against militant training camps inside Pakistan-held Kashmir.

Thus, Mr. Chairman, as -- we must head into this new year with continuing deep concerns about the antagonisms that persist in South Asia and their potential to fuel a wider and more dangerous conflict on the subcontinent.

Mr. Chairman, I know this has been a long briefing, and we skipped over many subjects, and we want to get to your questions. But before so doing, I would sum it up this way:

The fact that we are arguably the world's most powerful nation does not bestow invulnerability. In fact, it may make us a larger target for those who don't share our interests, our values, and our beliefs. We must take care to be on guard, watching our every step and looking far ahead. Let me assure you that our intelligence community is well prepared to do just that.

Thank you, Mr. Chairman. Thank you, Senator Bryan.

SEN. SHELBY: Director Tenet, it's been reported that former Director Deutch placed highly classified materials on his unclassified home computer, a computer that was connected to the Internet, but that as far as can be determined, no outsider gained access to this material. That's what we've been told.


SEN. SHELBY: Can you assure us that the classified files in Mr. Deutch's unclassified computer were not accessed from outside?

MR. TENET: Mr. Chairman, we cannot assure you of that fact.

SEN. SHELBY: That's right.

MR. TENET: All I can say is, we came to a judgment that said we cannot exclude that possibility. We have no evidence that suggests that that has occurred. But I cannot give you assurance --

SEN. SHELBY: You think you can't reassure us, can you?

MR. TENET: No, sir, I can't give you a definitive statement to say it absolutely didn't happen.

SEN. SHELBY: When evaluating the scope of information potentially compromised by Mr. Deutch to the material disclosed by Mr. Ames or Pollard, how would you rate it? In other words, was it sensitive, more sensitive, or less sensitive?

MR. TENET: Well, Mr. Chairman, we have to make a distinction between espionage cases --

SEN. SHELBY: I know.

MR. TENET: -- where people were intending to harm the United States --

SEN. SHELBY: I know that.

MR. TENET: -- and documents that you found on someone's computer who was working at home. I don't think there's any --

SEN. SHELBY: But we're talking about materials, classified materials.

MR. TENET: No, I understand that.


MR. TENET: In both the case of Ames and in the case of Pollard, we can document the fact --


MR. TENET: -- that a foreign power had direct access to significant material, including human assets. In this case, we can't tell you that any damage has occurred.

We don't exclude the possibility. I can't tell you it has or has not occurred. So I don't think that that's a fair comparison.

SEN. SHELBY: You can't confirm it and you can't deny it. Right.

MR. TENET: You can't, sir, but I wouldn't -- I can't put the Deutch case in the same context as Pollard or Ames. I don't think that's fair.


SEN. BRYAN: Mr. Chairman, I don't think you got an answer to your question. I don't think the chairman was impugning motives here.


SEN. BRYAN: He was asking as to the material itself.

SEN. SHELBY: No. That's right. The sensitivity of the --

SEN. BRYAN: (Inaudible.)

MR. TENET: Well, there was -- as you know, in the report -- and I don't want to go into it specifically in open session -- there was enormously sensitive material on this computer.

SEN. SHELBY: So there was --

MR. TENET: At the highest levels of classification.

SEN. SHELBY: Highest levels of classified information --

MR. TENET: Yes, sir.

SEN. SHELBY: -- were transferred to a unclassified --

MR. TENET: Well, sir, the distinction, again, and I think we should let the inspector general walk you through all this, but there's a distinction between the transfer and his sitting down at a computer and writing --

SEN. SHELBY: (Inaudible.) MR. TENET: He basically created all these documents, rather than transferring files, which is -- it's a distinction. There is a difference there.

SEN. SHELBY: But it was, as you just said, very sensitive material.

MR. TENET: Yes, sir.

SEN. SHELBY: Was Mr. Deutch ever asked to take a polygraph examination concerning the information he took to his home while director of CIA?

MR. TENET: Mr. Chairman, I'd prefer that you ask the inspector general and the investigators how they conducted their investigation, rather than me getting into how they did their business.

SEN. SHELBY: Okay. Senator Bryan brought this up earlier, and I believe this is about right. It took the CIA almost a year and a half to notify the Intelligence Committees after the material was discovered on Dr. Deutch's computers. Why did it take so long to notify this committee and why did it take so long to notify the Department of Justice?

MR. TENET: Well, sir, I don't have -- there's no excuse for that.


MR. TENET: That should have been done promptly, certainly by the spring of 1997 when internal reviews had been completed by both the -- by the Office of Personnel Security, which should have come to you. But my view is that when you have a case involving a director, the notification should have been prompt. And there's no excuse for that. And we should not have assumed that it happened, and it should have happened.

SEN. SHELBY: Director Tenet, why wasn't the FBI brought into the investigation of this early on?

MR. TENET: Well, Mr. Chairman, remember -- and the IG, again, should come talk to you about all these facts.

SEN. SHELBY: He's going to. He's going to come here.

MR. TENET: One of the things that he and our internal accountability board is looking at right now is that originally, in fact, a referral was not made to the Department of Justice; there was a legal judgment made not to refer the case. Well, we have to get underneath that.

As you know, subsequently, when we get to the 1998 time period, the IG did make a referral, the Justice Department did decline to prosecute, so that the Justice Department did have an opportunity to play in this case at a later date.

SEN. SHELBY: If you were faced with a similar set of facts today involving anyone at Langley, at the CIA, an employee, how would you react?

MR. TENET: Well certainly, Senator, I think I would have taken the same ultimate disciplinary action. It has to be the same for everybody. In fact, the action we took against the director was unprecedented in its scope because we believe that everybody has to be treated equally, whether at the top of the chain or the bottom of the chain, so that the men and women that work for us understand that there are not two standards. Everybody has a right to due process --

SEN. SHELBY: We understand that.

MR. TENET: -- and process is provided to everybody. But in essence, that would be my answer.

Obviously, there are lessons learned in how we did this, and we're looking at all those things as well.

SEN. SHELBY: Senator Bryan?

SEN. RICHARD BRYAN (D-NV): Thank you very much, Mr. Chairman.

Let me just pursue the chairman's questions for just a moment. I understand the state of the record. It's clear that there is no evidence -- repeat: no evidence that Mr. Deutch transferred any information to unauthorized personnel, and that is a distinction between the Aldrich and the Pollard matter, as you've made clear.

Nevertheless, you have characterized the information that was on the unclassified computer as "highly sensitive." And I take it we can get into that in more detail at a closed hearing.

MR. TENET: Yes, sir.

SEN. BRYAN: So I take it that this is not just something that people ought not to know about, but this is serious stuff. Is that a fair generalization?

MR. TENET: Yes, sir.

SEN. BRYAN: Very serious stuff. All right.

And so I guess my follow-up questions are twofold. Have you done a damage assessment?

MR. TENET: Well, sir, we've certainly -- I think we -- no, not in a formal way. We have basically fulfilled all the obligations the inspector general -- are in the process of fulfilling all the obligations the inspector general imposed on us.

In a formal sense, no, I have not done a damage assessment in terms of what the possibility would be.

SEN. BRYAN: I ask that question in the context that, as I understand it, because this information was on an unclassified computer, for purposes of our counterintelligence --

MR. TENET: Yes, sir.

SEN. BRYAN: -- we have to assume that information may have been compromised.

MR. TENET: Yes, sir.

SEN. BRYAN: If that is the case, then it seems to me that a damage assessment would be appropriate.

And the follow-on question to that, it seems to me, is: What actions have been taken in response to that assessment; that is to say, are we changing -- making any different responses because of the assumption that we'd have to make if for example --

MR. TENET: Well, I'd like to -- first, Senator, I think it's valid and legitimate to go do a damage assessment. In closed session, I'd like to walk you through --

SEN. BRYAN: Yeah. Okay.

MR. TENET: -- we can talk about some of the documents, and you'll see -- you'll get a full sense of the issue, I think, in closed session.


Let me ask you about the Accountability Review. Where are we on that, and when can we expect to get that?

MR. TENET: The executive director has completed that review as of yesterday, and he will forward it through the deputy director and then on to me. So I hope that we will provide that to you very quickly.

SEN. BRYAN: And can you give us the scope of the review? Obviously, it should include yourself, as well as others. And does it do that?

MR. TENET: Yes, sir. It goes through the entire chain of command, looks at everybody who touched this -- looks at their actions, looks at their judgments -- and will cover everybody.

SEN. BRYAN: And let me just say, the chairman raised the question -- I mean the delay, which you have acknowledged is inexcusable. What actions are going to be taken prospectively? The committee is entitled to receive this information as part of its oversight.

MR. TENET: Yes, sir.

SEN. BRYAN: And you would not deny that. What steps are being taken so that if something like this happens prospectively that the committee gets an earlier notification?

MR. TENET: Sir, you know that there is a notification process and policy in place that gives you everything almost as soon as I get it. And that's the standard; we need to move. There is no upside in not bringing you this information, and everybody understands that.

SEN. BRYAN: What happened though in this case?

MR. TENET: Well, that's another issue in terms of the accountability. I mean, there are multiple nodes that had a responsibility to move this information, and they understood that. And that's something that we are dealing with.

SEN. BRYAN: And let me say, as the new vice chairman, not only is the notification important, but the manner in which we are notified is important. To be presented with some information in this talking points during the course of a hearing is really not the kind of notification I think the committee is entitled to.

You have acknowledged, and we all understand, that this compromise is serious. It strikes me that, when we have that kind of compromise, that there needs to be a process by which the chairman and the vice chairman, and the staff directors, are requested to have a meeting with you or your authorized representative, to say, "Look, here's the situation."

And I would hope that we would have that commitment from you at --

MR. TENET: In fact, Senator, that's what we do today. Even on the most sensitive issues, you're provided written, detailed notifications. There are briefings. I think there is a process here that's working extremely well. Didn't work in this case as well as it needed to, but we have a process in place that we pay a lot of attention to, and I think the record's a good one.

SEN. BRYAN: Now, I think the other question that's raised publicly is how does the treatment in the Deutch case, with reference to referral to the Department of Justice for possible action -- the delay there seems to me to have been excessive. My understanding is that it is regarded as a very serious offense when information is handled, classified information as this. In hindsight, shouldn't that have been referred to the DOJ earlier for whatever determination they might have made?

MR. TENET: Well, sir, the inspector general feels so. But there was a legal judgment made. And I'm not a lawyer, but I understand there was a debate within the office of the general counsel about what the right way to proceed here was. There was a decision not to make the referral. That's something that we're looking at in our own accountability chain to understand why this decision was made that way. There was a subsequent decision to refer by the general counsel, and Justice declined a prosecution. So we're looking at all that and we'll come -- you know, the IG will have a view on that, and we will in terms of our accountability process as well.

SEN. BRYAN: But in hindsight, wouldn't it have been better to do so?

MR. TENET: Well, of course. In hindsight, of course.

SEN. BRYAN: I mean, because the thrust of what the article in the newspaper yesterday seems to suggest, in using the language of impeding, is that the process was deliberately slowed so that the time period for referral to independent counsel was allowed to expire. I'm not making that assertion.

MR. TENET: Right.

SEN. BRYAN: And I want to be clear. Nevertheless, the actions or the inactions do give some arguable -- MR. TENET: Yes.

SEN. BRYAN: -- credibility to that position. Could you respond to that?

MR. TENET: Sir, the thing that worries me is, is -- of course that there was no impeding, there was no intentional effort. The IG didn't find that. If he had, we would have had another Justice Department issue. The perception is being created that that's what happened. I think it was erroneously portrayed in the news piece. The fact is that this didn't work as quickly as it should have worked. We know that.

Now, when you have -- and we make no excuses. We were in a period of great transition. We were dealing with a former director. People were trying to do their best job. At the end of the day, we now know that we all could have done this better; the entire system could have performed better.

And we take a lot of pride in policing ourselves, you know. Some people say, "Can the CIA police itself?" Well, we take a lot of pride in our own internal accountability, in our professional responsibility, in conducting ourselves honorably and ensuring that this committee and the American people believe that. And anything that detracts from that is not good for me and not good for my people.

SEN. BRYAN: And I think the final observation that I would have is certainly the appearance is of a dual standard -- that is to say, that the DC -- former DCI, an individual who we all know, we respect his talents and abilities and his contributions -- nevertheless, you cannot escape the conclusion that had this been someone who was on a lower level in the hierarchy, that different treatment would be given. I think that's damaging to morale within the agency itself, because everybody ought to be held to the same standard of accountability. Would you agree with that?

MR. TENET: Well, in terms of process, everybody has a right to due process, and I never want to be in a situation where my employees at the lower ranks feel that the people higher up get any benefits or privileges.

I will say this: There have been analogous cases to Director Deutch's cases where we did not take the kind of action we took against this director. I believe stronger action was required, because as the leader of the organization, you're required to act and behave on the basis of higher standards. So when we look at punishment, I think that the statement to everybody ultimately is we took decisive, tough action against the former leader of the organization, and that has an impact as well -- in the positive, I believe.

SEN. BRYAN: So I take it your view would be that within the agency, the perception is that the treatment of Mr. Deutch was comparable to the treatment that others who might have been of guilty of similar classified violations would have received?

MR. TENET: Well, sir, I don't want to speak for them. I can't -- you know, I didn't take a poll after the action to find out what the constituency felt, but here's the message I want to leave for the men and women that I lead: There is one standard. People up and down the chain of command will get disciplined. This process -- we will ensure that a process is fair, not just for people at the top, but people at the bottom, and everybody gets the same treatment. And that's the message I want to leave them with. There are no distinctions between the top and the bottom, and we run a fair and honest institution when it comes to disciplining men and women.

SEN. BRYAN: So your own perspective would be that you have treated others or the agency has treated others in situations similar to Mr. Deutch in a comparable fashion?

MR. TENET: Yes, sir, although I do feel in his case we went the extra mile because of his leadership position.

SEN. BRYAN: Mr. Chairman, I thank you. And thank you very much, Mr. Tenet.

SEN. SHELBY: Director Tenet, is it troubling to you, as it is to me, that -- we know Mr. Deutch -- Dr. Deutch, we call him -- and we know that he's done a lot, served this nation in the Defense -- over at the Pentagon, and then the CIA and all of this. You know, he has an exemplary career. But isn't it troubling to you that someone at the CIA, especially a director, but anybody that would use an unclassified computer to do all these things, not inadvertently, not once, but continuously? I mean, you know, to a great extent. Isn't that troubling? You wouldn't do that, would you?

MR. TENET: Mr. Chairman --

SEN. SHELBY: Sir, would you do that?

MR. TENET: Well, my computer literacy is so low that I probably couldn't do it. (Laughter.) But in any event --

SEN. SHELBY: No, the question is -- I didn't ask you could you.

MR. TENET: Let me say something serious to you.

SEN. SHELBY: No, I said --

MR. TENET: No, I wouldn't do it, Mr. Chairman. And obviously, there's no education in the second kick of a mule and everybody's gotten the picture here. But let me say this to you. You know, we took -- I took a stern action against John. He's obviously my predecessor and my friend. He was sloppy in what he did. He worked around the clock. He didn't think about what he was doing. Nevertheless -- nevertheless, as director I believe he should have known better. And I think that the -- you know, in some way you have a salutary impact here because everybody understands -- we talk about computer security, we talk about electronic means of getting into our databases, and it is now shown that this is an important issue that we're all paying attention to. And, you know, one man's mistake is another man's stupidity. Of course it's troubling that we're in this situation. It's a tough situation for all of us to be in, and we took a tough action for it.

SEN. SHELBY: Was he polygraphed regarding any of this? Do you know?

MR. TENET: I don't, and I'd prefer that you talk to the investigators and the folks --

SEN. SHELBY: We will.

MR. TENET: Please.

SEN. SHELBY: If you don't know and you're not going to say.

MR. TENET: Let's talk about that later, if we could, sir.

SEN. SHELBY: Do you know if he has ever failed a polygraph test?

MR. TENET: I don't know that.

SEN. SHELBY: You don't. We'll get into it a little later in closed session.

MR. TENET: Okay.

SEN. SHELBY: To go back to the counterintelligence threat, the recent discovery of a Russian listening device inside the State Department and reports of PRC espionage against the Department of Energy's nuclear labs have served all of us as stark reminders of the continued counterintelligence threat to the U.S. government facilities and personnel.

The intelligence community is currently reviewing, as you well know, its counterintelligence postures for the 21st century in an exercise dubbed CI21. The Intelligence Committee will be holding closed hearings on CI21, as well as on the State Department bug.

But I think it's important here today to take the opportunity, while we're in open session, to outline the extent of this problem for the American people who have heard about it.

Director Tenet, which countries are most aggressively engaged in collection of intelligence against the United States? What are their primary targets -- political and diplomatic intelligence, military plans and defense and technology, economic and industrial secrets? And what extent have the traditional threats changed?

MR. TENET: Well, Mr. Chairman, let me --

SEN. SHELBY: You can talk about some of it here.

MR. TENET: Yeah. Let me say this; let me say this. There are a lot of countries involved in espionage against the United States -- traditional enemies, some friends.


MR. TENET: Different motivations. Why do they do it? One, they want to penetrate the United States government. Two, they want to get access to your trade secrets and your economic well-being. They want to access technology. They want to access what our private sector does for a living.

What we're trying to do in CI21 -- Louis Freeh and I are trying to design a system that basically allows us to understand what the most important threats are, and then allocate people and resources to work against these threats not just within the government, but also to engage the private sector in a way that it's never been engaged before, in creating something; so that, Mr. Chairman, we're not talking to you about counterintelligence when we have a case. When we have a case, it's too late; it means that something's already happened.

SEN. SHELBY: Something bad, generally.

MR. TENET: Something bad is generally happening. So the only good news here is there is an arrest, followed by the bad news of a damage investigation.

And what we would like to do is use the resources in the intelligence and law enforcement communities proactively, engage analysis and use analytical tools in a way we haven't done before and create something that's new. Now, Louis and I are going to brief this. He needs to brief the attorney general, I'm going to brief the national security adviser. I think the president has a keen interest in this. And then we will come forward and give you this new plan that we plan to undertake.

SEN. SHELBY: Sure. I think it's very important, and the timeliness couldn't be better.

MR. TENET: Yes, sir.

SEN. SHELBY: Admiral Wilson, do you have any comments on this threat and how you --



Director, Defense Intelligence Agency


ADM. WILSON: Well, I certainly agree with the threat. And in the world of information superiority being so important, protecting your own is too often undervalued compared to acquiring others'. So we would support aggressive moves in counterintelligence improvements.

SEN. SHELBY: Ambassador Roy, I know you are new on this job.

You served this country with distinction in your ambassadorial post.

But over in State, where you are dealing with intelligence and security there, isn't it troubling to you, the bug and the penetration somewhat, that was in the paper recently, about the State Department, out of Russia -- probably not shocking?



Assistant Secretary of State for Intelligence and Research


MR. ROY: It is troubling to me.

My experience has been that maintaining the alertness and the procedures that you need is difficult, because of the human factor, over time. And the protect secrets properly, you have to maintain the highest standards over time.

In that sense, I think that the recent cases have been useful because they have provided the additional impetus for all of us to tighten our procedures. That's what the State Department has been doing; I am confident that's what other members of the intelligence community have been doing.

In the case of the State Department, I think -- the damage assessments are under way -- and the probable damage is limited.

SEN. SHELBY: Admiral Wilson, what's your assessment of the performance of the Russian military recently, particularly the army in their current operation in Chechnya?

ADM. WILSON: Well, first of all, the Chechen situation will not be solved by military actions alone. It's been going on for centuries, and it won't be solved by military action.

The Russians do show a good ability to move forces to the region; however, they have taken a high percentage of their ready forces to do so. And, therefore, it impedes Russian military modernization to any extent that they could accomplish that in the economic environment that exists there.

They have used some of the same brute-force tactics that did not work well earlier in the '90s, in 1996 specifically -- of heavy bombardment of the city and then followed up with infantry and internal security forces, which are ill-prepared to conduct urban warfare, which is difficult for any military to conduct.

So the Russian military is not well-prepared for the situation that they were thrust into. It's a difficult situation for any military. They are taking losses, as are the Chechens. And it will not solve the problem, which will be around for a long time at the current pace.


Senator Bryan?

SEN. BRYAN: Thank you very much, Mr. Chairman.

Mr. Tenet, returning to you for a moment, I am sympathetic with the position that you find yourself in that when you do achieve success in breaking up terrorist cells or activity, it's not something that you can proclaim. Your failures are on the front page of the morning newspaper and the lead stories on television across the country. And I think it's fair to acknowledge that there have been, as you made oblique reference to in your presentation, that there have been successes that you've briefed the committee on, and we applaud those efforts and commend them.

Nevertheless, it appears to me that we may be just chipping around on the edge. My question, is there a broader, more systemic approach that we ought to be undertaking? And if we are doing that, to the extent that you can do so in an open session, would you care to respond to that?

MR. TENET: Let me handle those in the open, but then I'd like to talk about it in closed session at greater length.

There is -- I don't want you to think that there is not a systematic effort to look at a worldwide terrorist infrastructure and think about how you disrupt or make it more difficult for them to operate. Indeed, what we learned over the course of the last five -- in the five or six weeks leading up to the New Year celebrations on the basis of all the actions we took we learned that there's an infrastructure out there that is perhaps bigger than we anticipated. And we essentially have undertaken to systematically develop a strategic plan to attack this infrastructure. And I don't want to say more than that.

But we look at this not just from an event perspective. I come and tell you two dozen renditions that -- tactical in nature. There is a strategic outlook about how to do this, not just by ourselves, but in concert with our allies. Of course, in terms of the bigger picture, at the end of the day you've got to go back, go back and -- we won't go through what I said about the Middle East, but you've got to go back and look at the economics and demographics of the region of the world that basically is going to spawn, unless some changes are made, large numbers of unemployed men to whom bin Laden's message resonates, and people like him. So there are big systemic issues about economic opportunity and how you, you know --.

Chechnya is another example, for example. I mean, Afghanistan was the calling card in the '70s and '80s; Chechnya will become the calling card of this millennium in terms of where do terrorists go and train and act. So these conflicts, while we talk about them from the concept of the Chechens and the Russians, also turn into spawning grounds of the next generation of people who try their skills.

Now, that all involves a very intricate strategy that we need to think about. So, it's not just what the law enforcement and intelligence community does, it's how we look at a world and regions of the world where we can strategically use relationships that undermine the terrorist ability to operate.

SEN. BRYAN: So you're really suggesting to us that the Russian- Chechnyan conflict is, from our point of view, a potential source of a new generation of terrorists who will learn their craft --

MR. TENET: Yes, sir.

SEN. BRYAN: -- and that we may long after that conflict may subside -- assuming that it does, at least in its present form -- there may be some spin-off implications for us that can be very troubling.

MR. TENET: I think that you should expect that the opportunity the terrorists will take to inject themselves in this for Muslim reasons and reasons to aid the Chechens, many of whom are not terrorists, will create a cascading effect of people proving their mettle on a battleground that they will then come back and test against us in other places, yes, sir.

SEN. BRYAN: Changing the focus a little bit, Mr. Tenet, one of my first calls as the new vice chairman dealt with a fairly significant information systems breakdown. I want to speak somewhat obliquely here. My question is, what are we doing to prevent a recurrence of that? Are there other aspects in the intelligence community, not precisely of this same nature, that are in jeopardy of a breakdown or a failure of this magnitude? And thirdly, what, if anything, do you need from us in the Congress to address any of those concerns?

MR. TENET: First, let me say that Mike Hayden (sp) has it totally under control. He -- we did have a problem for a series of days. He did undertake the work-arounds. He did all the right things. He is in the middle of a lessons-learned. he believes there was no intelligence loss, that we've retrieved all that collection and processed it all. And we are now looking at an after-action with him.

The point I would make is -- we need to find out what happened. The point I would make is that we have an infrastructure that is functioning at near or over capacity constantly, and we need to ensure that we're making the right investments and that our leadership is looking at these things as carefully as they need to. And I think that we are.

But we're in an age where, you know, Mike Hayden (sp) runs an information system that's three or four times the size of any competitor in the world. And I think the men and women out there did a great job in getting us back up and running without missing a beat. And it was something that had us all concerned, but handled very well by General Hayden (sp) and the folks at NSA.

SEN. BRYAN: I hope that you will follow up on this and give us a report. I'm not -- you're making a critical judgment in terms of personnel and the way it was handled, but to have something of that magnitude occur for that length of time, had the situation globally been more --

MR. TENET: Yes, sir.

SEN. BRYAN: -- volatile, would have been extremely dangerous in terms of the lack of information that we were able to gather. And so I would hope that you would report back to us, once the after-action report is completed, what, if anything, we need to do to help you.

MR. TENET: Yes, sir.

SEN. BRYAN: This is not in a critical vein, but to help you in that.

MR. TENET: Right. We will do that.

SEN. BRYAN: Ambassador Wilson, if I might just -- or Admiral Wilson, if I might just ask you a question about the situation in Colombia, what is the status with the guerrilla action there and the government?

The DCI made reference to the situation in Colombia, but I don't really have a sense -- that was -- it's been a few years since I've been there and flew into the part of the country where a lot of the coca is being processed and some of the plants are grown. What -- give us your assessment. Are we winning? Are we losing? Are we holding our own? It looks like more and more of that country seems to have been taken over, in a de facto sense, at least, by the guerrilla movements --


SEN. BRYAN: -- even though the government itself tends to be more cooperative in terms of extraditions and other kinds of activity.

ADM. WILSON: Senator, I think that the government of Colombia and, specifically, their security force is enormously challenged in dealing with the insurgent threat in rural Colombia, which, of course, is fueled by narcotics and other criminal activity. They're trying hard and have made some improvements, but are still challenged by mobility and flexibility and command-and-control and intelligence shortfalls against a difficult adversary. The rebels, the insurgents, have used the demilitarized zones disproportionately to their advantage on the -- in the field of military activity, and so they continue to be a challenge for Colombian security forces.

The Colombian Army, while it appears able to protect urban -- you know, large cities and the urban environment -- is not able to control the countryside where the insurgents operate. So I think I wouldn't say that they are certainly not winning. They're trying very hard to hold their own against a very difficult situation, even as a political process the president tried to put together in reaching some type of peace agreement in the future with the insurgents.

SEN. BRYAN: Were you all involved, and if so, what role did you play in providing the intelligence data needed for the supplemental appropriation request for Colombia? Were you involved in that process from the intelligence point of view, in terms of what was needed?

ADM. WILSON: We did provide intelligence associated with that. Yes, sir.

SEN. BRYAN: And specifically, I mean, some areas that you felt ought to be included in terms of the -- ADM. WILSON: Yes.

SEN. BRYAN: You were?

ADM. WILSON: We did, as a community, participate in the exercise.

SEN. BRYAN: I appreciate that.

Let me yield back to the chairman.

SEN. SHELBY: Thank you, Senator Bryan.

Director Tenet, we all realize we're going into a closed hearing later this afternoon and we'll be able to get into just about everything there. But could you assess here today, to some extent, what's the status of Iran's nuclear weapons program?

MR. TENET: Well, we should talk about this behind closed doors.

SEN. SHELBY: Okay. Could you say here that Russia, the PRC and other people, other suppliers have given assistance to their nuclear program?

MR. TENET: Let me outline all of that for you behind closed doors.

SEN. SHELBY: Okay. What about North Korea. Do you believe that North Korea is continuing to work on its nuclear weapons program and related activities, or can you say here, or you'd rather get into that in a closed session too?

MR. TENET: Sounds good to me, Mr. Chairman. (Laughter.)

SEN. SHELBY: Okay, that's what you'd rather do.

Senator Bryan, do you have any other questions?

SEN. BRYAN: Well, we wouldn't want to neglect Ambassador Roy. Let me ask you, one of the perennial questions that comes up every year is the degree of cooperation we get with Mexico; whether we ought to recertify them for compliance. Give us your take. I mean, I must say that I don't see a lot of encouraging news there. Maybe we haven't focused on some of the areas that may give some cause for hope. But your analysis there, Mr. Ambassador, if I may.

MR. ROY: We think we're making progress in addressing a very difficult and complex issue. As you know, it was our success in attacking the narcotics routes through the Caribbean that resulted in the diversion of those routes to Mexico, and Mexico is now the principal route through which cocaine from South America enters the U.S. market.

We have worked with the Mexican government. They have set up special police forces. They are using new technology at border points to try to interdict actions. They have passed new laws which are designed to improve their ability to get rid of corrupt security officials. They have focused at senior government levels on the problem of dealing with corruption at the highest levels of the government, that are related to the narcotraffic. This has affected governors in Mexico.

So that on balance, we feel that we are working in the right direction with the Mexican government and are getting a positive spirit of cooperation from them.

SEN. BRYAN: Well, I hope so. I was in Mexico a few years ago, and one of the operations that we have there as part of the intelligence was kind of cited as one that we have very carefully screened everybody, and they had passed all of the litmus tests, and this was something that gave us great cause for hope.

I understand now that we have determined that we are going to abandon that particular effort because the corruption has been so pervasive.

It would appear to be 180 degrees from where we were a few years ago. I don't minimize the difficulty of the problem; I think its tremendous. But I mean -- progress -- I don't think that the American public, Mr. Ambassador, sees great results there. You know, the amount of narcotics that comes into the United States, I think, in no way has been abated. I am not suggesting we ought not to try to interdict that. And you are quite right; the supply route has changed, based upon some of the successes previously elsewhere in the Caribbean.

MR. ROY: Senator, our assessments of the issues you have just addressed are objective. When we see increases in the narcotics entering the United States, we say so. But at the same time, it would be our judgment that the problem would be much worse, if we had not been able to accomplish the progress in working with the Mexican government in addressing these types of problems that you refer you, that we have made.

But it is a constant, and indeed a growing, problem. As you know, our assessments of the amount of cocaine produced in South America have risen recently. So I would agree with your assessment that this is a growing threat to our well-being. It's not one that we can say we are winning the war against.

SEN. BRYAN: The last question: To what extent has Mexico's evolving pluralistic political structure, where they do have opposition parties who not only can challenge but actually can prevail -- to what extent is that a factor either that it helps or impedes this effort of trying to get greater cooperation from Mexico and to ferret out those elements that are part of this pervasive corruption that makes it so difficult for us -- (down there ?)? Is that a positive factor, a negative factor; I mean, politically, how does play in Mexico? And what role do the two parties take, the same or different, with respect to this issue of cooperation with the U.S.?

MR. ROY: It's a mixed picture. We welcome progress toward democratization. But our experience in other countries -- I have personal experience of my own in this respect -- is that the process of democratization brings new problems, even as it enables the countries to solve old problems.

And I think in the case of Mexico a more open political system there is not going to be an unmixed blessing in terms of the efficiency of our anti-narcotics operations. But I think it's an area where we can make progress as long as we understand the problem and devote the necessary attention and resources, which I think we are doing.

SEN. BRYAN: Gentlemen, thank you very much. I know we're going to get into more of these questions in closed session.

Mr. Chairman, thank you very much.

SEN. SHELBY: Thank you.

Well, we'll conclude this hearing. Thank you all: Admiral Wilson, Director Tenet, Ambassador Roy. (Gavels.)

Committee is adjourned.