SEN. SHELBY: The committee will come to order. Last year marks the 50th anniversary of the enactment of the national security act, the legislation that created the Central Intelligence Agency and established the national defense and intelligence structure for the Cold War era.

This year we approach an equally significant anniversary. November 1999 will mark the 10th anniversary of the fall of the Berlin Wall, the beginning of the end of the Cold War, and the beginning of the post-Cold War era. Today I believe it's fitting that the committee meet publicly at the beginning of a new session of Congress to hear the intelligence community's views regarding the nature and the extent of changing national security threats to the U.S.

The identification and analysis of these threats are crucial to defining and conducting our nation's foreign policy. Our intelligence on these threats provides the basis for our defense strategy and planning, informs our budget and procurement choices, and supports our military forces when they go into action.

To be useful, intelligence must be timely and of course accurate. Equally important, the intelligence community must call it as it sees it, recording the facts to policymakers without bias, even if the intelligence findings do not support a particular policy or decision. Everyday U.S. policymakers and military forces rely on intelligence community reports. By its very nature most of this information must be classified to protect the sources and methods from which it is derived. Today we meet in open session so that at a time of waning interest in international affairs the American people may learn about the very real threats that we face in the post-Cold War era. We look forward today to hearing from Director Tenet and other witnesses on the broad range of threats to U.S. national security.

Many of these issues we will discuss bear directly on critical policy choices facing the administration and the Congress today and in the near future, and raise a number of complex questions. For example, once again Iraq is refusing to allow U.N. inspectors full access to its weapons programs. How strong is Saddam Hussein within his own country that he can defy the international community? Is he in fact better off than he was before he instigated the current crisis over weapons inspections? What is the status of the Iraqi weapons programs? How quickly could these programs be expanded or revised if sanctions were removed? Is it true, as has been suggested in the press, that Iraq posted -- that Iraq tested biological and chemical weapons on human beings? Will Saddam Hussein ever comply with U.N. resolutions?

And on the other side of the Shatt al Arab we have Iran. Many of us saw Iranian President Khatemi's recent television interview. What did his remarks then and subsequently, and the response of his hard- line opponents, mean for U.S.-Iranian relations? Most critically, has the intelligence community seen any reduction in Iranian support for international terrorism or the slackening in Iran's pursuit of weapons of mass destruction since the election? How soon will Iran deploy new ballistic missiles capable to threaten Israel and other U.S. allies?

Iran of course is only one of a dozen or so countries which possess or are developing ballistic missile systems, and one of over two dozen nations that are developing these or other weapons of mass destruction. I am extremely concerned of the potential that such weapons will be used, or that someone somewhere will plausibly threaten to use such weapons against the U.S., our troops, our allies or our interests in the not-too-distant future. After all, it has already happened. The single greatest loss of life by American force in the Persian Gulf War came when an Iraqi Scud crashed into barracks in Saudi Arabia.

But how does the intelligence community assess the global ballistic missile threat to the United States, the greatest single threat to our national security.

The committee is looking forward to reviewing in the very near future the updated national intelligence estimate on this subject. But we hope the witnesses will provide us with a preview today.

The 1995 National Intelligence Estimate of ballistic missile threats in North America was the subject of extensive, and in my view largely justified criticism. What steps have been taken in the current intelligence estimation process to address those criticisms? In particular, I would be interested to hear how Iran's faster-than- expected progress in its missile program comports with the assumptions underlying both the 1995 National Intelligence Estimate and the planned update.

Of particular concern to this committee is the status of North Korea's missile and nuclear programs. How does the committee view the unfolding political, military and economic developments in North Korea? But on another front I would like to commend the intelligence community for its support for the arrest of a suspected war criminal in Bosnia last week. Although the matter did not receive the attention that I believe it deserved, I know that your efforts were critical to the success of that operation. But the tough question remains: What are the prospects for a meaningful peace in Bosnia? When, if ever, will conditions there permit the withdrawal of U.S. forces? What is the potential for a terrorist attack on U.S. troops deployed in Bosnia and the region?

And on the terrorism front I am pleased to note that the past year has yielded some significant successes, including the rendition and conviction of Mir Ama Kasi (sp), who killed two CIA employees outside the CIA headquarters in '93, and the recent sentences of Ramzi Yousef for his role in the World Trade Center bombings and his plot to blow up U.S. airliners.

However, numerous other terrorist threats remain -- in Bosnia, in the Middle East, and around the world. These include both traditional state-sponsored terrorist groups and other more independent actors such as Osama bin Laden. Furthermore, the murders of 19 U.S. servicemen in the Khobar Towers bombing have yet to be brought to justice. I hope Director Tenet and Deputy Director Bryant today will provide us a status report on that investigation, including the cooperation of the Saudi government, and any indications of whether the government of Iran should be held responsible. But turning now to one of our most significant foreign policy and intelligence challenges of the 21st century -- that is, China. I look forward to hearing the community's assessment of the status of China's proliferation of nuclear, missile, chemical, biological and advanced conventional weapon technologies to Iran, Pakistan and other countries.

But today we will also want to hear how China's extensive military modernization is complicating our ability to carry out military missions in support of key U.S. interests in the region, as well as the extent and purpose of China's nuclear force modernization.

Nearly a decade ago, after the end of the Cold War, the United States continues to face a serious counter-intelligence threat. We look forward to hearing from Deputy Director Bryant on the extent and the sources of this threat. In particular, we hope that the FBI will be able to share with the American public its findings to date with respect to allegations that the Chinese government has attempted to illegally influence the American political process.

We are also interested in the recent revelation that a former U.S. government physicist passed classified information to the Chinese government and other Chinese intelligence activities aimed at the United States.

While China poses new challenges for the U.S., Russia still remains the only nation with the power to destroy the United States with inter-continental ballistic missiles. The security of Russia's nuclear arsenal and the integrity of Russia's nuclear command and control systems are of vital importance. So too are Russian sales of missiles and other technologies of mass destruction to Iran and elsewhere.

We look forward today to hearing your assessments of the nature and extent of these programs. In addition to traditional threats of a massive nuclear threat, terrorism, espionage and the proliferation of advanced weaponry, we face new threats to our critical information infrastructure from hostile states, terrorist groups and organized crime. We will recall the enormous disruptions the Northeastern United States encountered, and caused by recent power outages. These disruptions were caused by an ice storm. But imagine if a computer- operator in Tehran or Pyongyang could create the same havoc and confusion, or worse with just a few keystrokes.

We look forward to hearing the intelligence community's current assessment of these threats. U.S. businesses today also face an unprecedented level of industrial and economic espionage. A recent report cited in the Los Angeles Times estimated that U.S. businesses lost $300 billion worth of information in 1997 alone. We look forward to hearing from Deputy Director Bryant on the extent of this threat, the countries involved, their methods, and what U.S. technologies are most at risk.

I spent some time outlining my concerns and raising questions regarding threats to the United States. It's time to hear from the real experts, our witnesses. And without our four witnesses will submit their written testimonies for the record. Director Tenet will begin by giving his statement. After Director Tenet's opening statement he will be joined -- I think he already is -- at the witness table by FBI Deputy Director Bob Bryant, Assistant Secretary of State for Intelligence and Research Phyllis Oakley, and Lieutenant General Patrick Hughes, director of the Defense Intelligence Agency. These witnesses will provide their perspectives on the current and projected threats to U.S. national security. They have all submitted written testimony to the committee, although not necessarily in a timely fashion. So they will be asked to give brief summaries of their written testimony.

We will then open the session to five minutes of questions from each member of the committee based on the order in which members have entered the hearing room.

At 2:30 this afternoon in the committee hearing room 219, the committee will meet in a closed session to discuss classified matters related to threats posed to the national security of the United States.

Director Tenet, Deputy Director Bryant, Assistant Secretary Oakley and General Hughes, I want to thank you all for appearing before us today. Today's hearing marks the first time that the FBI has been asked to participate in our annual threat hearing, and represents Mrs. Oakley's first appearance before our committee in her new capacity. We look forward to hearing your perspectives on these important issues.

Senator Kerrey?

SEN. BOB KERREY (D-NE): Thank you, Mr. Chairman. I first would just ask that my full statement be included in the record.

SEN. SHELBY: Without objection, it's so ordered.

SEN. KERREY: Mr. Chairman, I would tell you, as well as the public, that one of the questions that very often is asked is why -- and the chairman alluded to it -- why do we have an open hearing on threat assessment. And I believe it is important for us to do so in order to engage the American people in a discussion and a debate about what the threats are to this country, and to hear especially from the executive branch policymakers how you prioritize the threats to the people of the United States of America.

America, as a consequence of our leadership position in the world, sometimes gets called upon to do things that we perhaps would prefer not to do -- leaders always do get called upon to do things that they perhaps would prefer to fall to somebody else. We are an open society. We take sides in international conflicts. We are involved extensively in trade -- nearly a third of all the new jobs created in America today are created as a consequence of sales abroad. So there are lots of reasons for the United States of America to be engaged in the world, and lots of reasons as a consequence of us to be at risk. We are a target for a very many reasons. And as I see it your work has two parts. One, and most importantly, to provide accurate intelligence to the policymakers, particularly the commander in chief, so that their decisions are good, so that their decisions enable them to prevent a conflict. The best war we ever fight is the one we avoid as a consequence of getting there ahead of time, with diplomacy, preventing it from happening -- or to deter as a consequence of believing that somebody is not going to be able to be persuaded, or to organize a military effort, or to increasingly get to the bottom of some situation, such as Khobar Towers, where we have been under attack and we then have to find out who it was that has done something against the United States of America. So good intelligence can reduce the costs and increase the likelihood of success.

I had the pleasure of working with General Hughes prior to him taking over at DIA and the organization of the takeover authority of Bosnia. And unfortunately all America didn't have the opportunity to see the value of intelligence in making that operation a success. Back in the Ice Age, when I was in the Vietnam War -- and General Hughes has probably got similar experiences -- there were many things that we probably could have gotten done if we had similar kind of intelligence. Our war-fighters are much better prepared, much more able to get the job done, much more likely to be successful. There are things that America can do today. I know with pride the president has been nominated for a Nobel Peace Prize. I suspect that he, like I, would say that an awful lot of the success of that operation was due to the fact that we were able to get our war-fighters good intelligence, enabling us to say, "Here's what you have done, here's what you haven't done," and as a consequence get the warring parties to abide by the Dayton peace agreement.

The most difficult thing for us to do is to prioritize the threats, however. It's very easy to get -- sort of (drag ?) around in this town in the (dumb ?) current following the latest story, the latest news event -- especially the last week we have all sort of been in the black hole of conspiracy theories -- blah, blah, blah. And it is very important for you to come to us and orient us to the most important threats. And as I see them, as the chairman said, there is only one threat that can still take every citizen of the United States of America to their grave, and that's the nuclear weapon. And I for one would have preferred the president to have talked about that last night in the State of the Union, because I -- you know, it's been eight years since the Soviet Union fell apart; it's been seven years since August of 1991 when the coup was unsuccessful inside of Russia. We still don't have the Duma ratifying START II. I don't hear a vision of where we are going to go with nuclear weapons, the proliferation of nuclear weapons. It's clearly a major problem for us, and retargeting would be very easy for the Russians to do. It seems to me that if you look at the threats it can still take every single American down, and the cost of maintaining and the difficulty of maintaining with the nuclear test ban in place -- it seems to me that that ought to be at the top of the list, and we ought to be trying to figure out what it is, what is our strategy, what is our plan of attack to reduce that threat to the people of America.

As I said, proliferation of all things, all matters -- I was pleased at the president's very strong statement last night about Iraq -- he went right to (camera ?), right to Saddam Hussein, right to the people of Iraq saying that we are not going to give you the capacity to use weapons of mass destruction again -- we are going to prevent that from happening. However, we all know that until this dictatorship is gone it is not likely that we are going to feel safe and secure. It's likely you will see a repeat of this kind of behavior in the future.

I am pleased, Mr. Bryant, to have you here for the first time. As I look at the radar screen of threats to us, increasingly they're non-national threats. You can't negotiate with terrorists that aren't sent out by their government. Certainly we still have nations that are funding terrorism throughout the world, but increasingly we find, whether it's the kind of thing that the chairman is alluding to with information warfare or other kinds of terrorist activity, especially those associated with the movement of drugs into the United States of America -- these are not being run by governments. They may corrupt governments, they may make governments less stable, they may create problems for us in lots of ways. But these are non-national threats, and much more difficult to deal with as a consequence.

And I hope as well in your testimony, Mr. Bryant, Mr. Tenet, that you will talk to us a little bit about your plans to resolve the conflicts over this encryption legislation. It is tied up in -- (inaudible) -- number of committees up here that have some sort of jurisdiction. Everybody has got a point of view on it. Almost none of us understand the technology. It is a very important issue from the standpoint of U.S. economy, from the standpoint of U.S. values of openness and personal freedom. But I am also very much aware that if we want to make the American people continue to feel safe you and NSA and others that have the responsibility of accumulating intelligence have to be able to somehow deal with not just the complexity of signals, but increasingly encrypted signals that are impossible for us to break.

Next I would say this committee intends to hold a hearing on the legislation that has been introduced by Senator Helms and Senator Moynihan on secrecy. Not only ar the American people our customers from the standpoint of making them safer; they are our customers from the standpoint of informing them. And if they don't -- this is government of, by, for the people -- if they suspect that we're working information, as we did for a short time in our national reconnaissance office building, just to protect our own mistakes, it's likely that they'll suspect it and it's likely as a consequence they're not going to give us the support that we need to keep those secrets that are essential for the security of this country. So we have got to make certain that this classification system is done in a fashion that is -- that only applies to those things that are -- that rise to the level of national security, that are important in order to protect the safety and security of the American people, and not just there as a consequence of our desire to have the American people not see how occasionally we can make mistakes and be stupid and do things wrong. The American people cannot make good decisions unless they are informed.

As I said at the beginning, if the United States of America is going to lead, our people have to make good decisions. And increasingly they're having to make decisions with open-source information, and I believe that though it's very tricky ground, I think that the creation of NIMA (sp) gives us the opportunity to use images in an open fashion to help the American people make better decisions, and I hope, Mr. Tenet, that we are able to over the course of the next couple of years get the American people to understand that they are our customers -- their safety, their security and their capacity to make good decisions. And, Mr. Chairman, I appreciate this open hearing and look forward to testimony.

SEN. SHELBY: Senator Inhofe.

SEN. JAMES INHOFE (R-OK): Thank you very much. I think I caught everything that Senator Kerrey, and everything I can remember I do agree with. I am a little disturbed right now because this hearing is taking place at the same time -- at 10:00 we are having a Senate Armed Services Committee hearing on essentially the same thing, and I have no choice -- I have to be there.

But I was a little distressed last night in the hour and 20 minutes we never did hear anything about what's happened to our ability to defend ourselves, the nature of the threat that's out there, and I think that's far more critical than anything else that I heard last night.

And, Mr. Chairman, when you talked about the problems in Iraq and when are we going to -- are we seeing to see any cooperation from Saddam Hussein or when are we going to, I don't think we are. I think our head is in the sand if we think that we're going to get cooperation, that he's going to do anything that he doesn't have to do.

And as far as Iran is concerned, we do know there is a -- that Iran does have weapons of mass destruction. There's a communication and a transfer in trading of technology and systems between both China and Iran and Russia and Iran. And I really want to pursue this.

. . .

SEN. SHELBY: Okay. Director Tenet, you may proceed as you wish.

 

STATEMENT OF

GEORGE TENET
Director, Central Intelligence Agency

 

MR. TENET: Mr. Chairman, thank you very much. I'm pleased to be joined today by my distinguished colleagues. The world we face today composes a complexity and scope of problems that I believe is unprecedented for the United States.

SEN. SHELBY: Do you want to bring your mike up just a little bit?

MR. TENET: And the speed of technological change in the world magnifies these threats. I'm most concerned, Mr. Chairman, about the proliferation of weapons of mass destruction because of the direct threat this poses to the lives of Americans.

Despite some successes for U.S. policy and U.S. intelligence, technologies related to this threat continue to be available, and potentially hostile states are still developing and deploying WMD- related systems. Efforts to halt proliferation continue to be complicated, moreover, by the fact that most WMD programs are based on technologies and materials that have civil as well as military applications.

Finally, a growing trend toward indigenous production of WMD- related equipment has decreased the effectiveness of sanctions and other national and multinational tools designed to counter proliferation. Chinese and Russian assistance to proliferant countries requires particular attention, despite signs of progress.

My statement for the record provides the details, but some of the key points should be made here. With regard to China, its defense industries are under increasing pressure to become profit-making organizations, an imperative that can put them at odds with U.S. interests.

Conventional arms sales have lagged in recent years, encouraging Chinese defense industries to look to WMD technology-related sales, primarily to Pakistan and Iran, in order to recoup. There is no question that China has contributed to the WMD advances in these countries.

On the positive side, there have recently been some signs of improvement in China's proliferation behavior. China has recently enacted its first comprehensive laws governing nuclear technology exports. It also appears to have tightened down on its most worrisome nuclear transfers, and it recently renewed its pledge to halt sales of anti-ship cruise missiles to Iran.

But China's relations with some proliferant countries are long- standing and deep, Mr. Chairman. The jury is still out on whether the recent changes are broad enough in scope and whether they will hold over the longer term. As such, Chinese activities in this area will require continued close watching.

The Russian proliferation story is similar. On paper, Russia's export controls specifically regulate the transfer of missile-related technologies, as well as missile components. But the system has not worked well, and proliferant countries have taken advantage of these shortcomings.

Iran is one of those countries, Mr. Chairman. When I testified here a year ago, I said that Iran, which had received extensive missile assistance from North Korea, would probably have medium-range missiles capable of hitting Saudi Arabia and Israel in less than 10 years. Since I testified, Iran's success in gaining technology and material from Russian companies, combined with recent indigenous Iranian advances, means that it could have a medium-range missile much sooner than I assessed last year.

Following intense engagement with the United States, Russian officials have just taken some positive steps. Just last week, Prime Minister Chernomyrdin issued a broad decree prohibiting Russian companies from exporting items that would be used for developing WMD or their delivery systems, whether or not these items are on Russia's export control list. If enforced, this could be an important step in keeping Iran from getting the technology it needs to build missiles with much longer ranges.

Without minimizing the importance of Russia's response, Mr. Chairman, I must tell you that it is too soon to close the books on this matter. Russian action is what matters, and therefore, monitoring Russian proliferation behavior will have to be a very high priority for some time to come.

Likewise, Mr. Chairman, in focusing on Iran's acquisition of WMD technology, as we should, since it is one of the most active countries seeking materials, we cannot lose sight of other proliferants. My statement talks about Iraq, Syria and Libya.

Moving on to the very different transnational threat that Senator Baucus talked about, the recent financial troubles in Asia remind us that global markets are so interconnected and that economies and politics so intertwined that economic problems in one country can have far-reaching consequences for others.

At the root of this crisis is a confluence of economic, social and political factors. Soaring growth in financial systems that lacked adequate regulation led to a speculative boom. Lending decisions by banks and finance companies ignored fundamental economic risks. And when export growth began to slow regionally in 1995, corporate borrowers had trouble repaying loans.

Faced with high levels of short-term debt and limited foreign exchange reserves, Thailand first and then Indonesia and South Korea were forced to devalue their currencies. Because of the high level of economic integration and reaction of investors, the currency crisis spread rapidly to other countries in the region. The crisis has been difficult to resolve, in part because governments must take some politically risky steps like closing weak banks and shelving projects that will add to unemployment.

The current troubles in Asia will, of course, have economic costs for the United States. But the troubles also carry political risks. Social tensions, which we already see in Indonesia and other states in the region, are likely to increase as the prices go up for things like food, fuel, and as unemployment rises.

Turning to terrorism, Mr. Chairman, I must stress that the threat to U.S. interests and citizens worldwide remains high. Even though the number of international terrorist incidents in 1997 was about the same as 1996, U.S. citizens and facilities suffered more than 30 percent of the total number of terrorist attacks, up 25 percent from last year.

Moreover, there has been a trend toward increasing the lethality of attacks, especially against civilian targets. The most recent examples, of course, are the suicide bombings in Israel in 1996 and 1997 and the attacks on tourists in Luxor, Egypt last November.

Perhaps most worrisome, Mr. Chairman, is the fact that we have seen in the last year growing indications of terrorist interests in acquiring chemical, biological and nuclear weapons. In addition, a confluence of recent developments increases the risk that U.S. individuals or groups will attack U.S. interests.

Terrorist passions have probably been inflamed by events ranging from the U.S. government's designation of 30 terrorist groups to the conviction and sentencing of Mir Amal Kasi and Ramsi Ahmed Yousef, as well as the ongoing standoff with Iraq and frustration with the Middle East peace process.

. . .

Mr. Chairman, I want to talk about Iran, as you mentioned it in your opening statement. Among the countries, Iran in many respects represents the greatest challenge that we will in fact face over the next year. It appears to us that a genuine struggle is now underway between hard-line conservatives and more moderate elements represented by Iran's new president, Khatemi. And so the challenge is how to cope with a still dangerous state which some positive changes may be taking place, changes that could -- and I stress could -- lead to a less confrontational stance towards the United States.

Khatemi's strongest card is the electoral mandate, a 70 percent vote representing mostly youth and women, as well as ethnic and religious minorities in Iran. Since assuming office in August, he has made limited but real progress towards fulfilling his campaign pledges for political and social reforms. He gained approval for a new Cabinet, and puts his people in key posts, such as the Ministries of Foreign Affairs, Interior and Islamic Culture. Censorship is now less oppressive with previously banned periodicals reappearing, and socially controversial films being screened.

And against this backdrop there is even renewed debate about a central tenet of the revolution ruled by a supreme religious leader. Progress is likely to be fitful, however, and hard-line elements remain formidable obstacles. They still control the country's defense and security organizations for example, and therefore exert heavy influence on issues most vital to the United States. Statements by Khatemi and his foreign ministry suggest he is trying to play a more constructive role in the international community. It is simply too early to tell, however, whether this will lead to demonstrable changes in Iranian policies that matter most in the United States. We have seen no reduction in Iran's efforts to support Hezbollah, radical Palestinians and militant Islamic groups that engage in terrorism. Moreover, even as it attempts to improve its international image, Tehran is continuing to bolster its military capabilities. Iran is improving its ability potentially to interdict the flow of oil through the Strait of Hormuz. It has acquired -- (inaudible) -- submarines from Russia, and it is upgrading its anti-ship cruise missiles. As I noted earlier, Iran continues its efforts to acquire the capability to produce and deliver weapons of mass destruction.

. . .

SEN. SHELBY: Thank you, Director Tenet. I'll ask the other witnesses to briefly sum up their testimony, and take five minutes or less. As I said earlier, your written testimony will be made part of the record in its entirety.

Deputy Director Bryant of the FBI, we are glad to have you here. We understand that Judge Freeh, the director, is awaiting the imminent birth of his sixth son -- is that correct?

MR. BRYANT: Yes, it is. He is at home with his family, and I think his sixth son is due at any moment now, Mr. Chairman.

SEN. SHELBY: Well, we welcome you to the committee.

 

STATEMENT OF

ROBERT M. BRYANT
Deputy Director, Federal Bureau of Investigation

 

MR. BRYANT: I'll just take a few moments to summarize my statement, but I want to hit a few key points. The first issue I want to get into -- we've seen a lot of changes in the world in the last dozen years, many of them made a better world for us, but certainly we have great challenges ahead of us.

And before I get into specific threats, I just want to hit one issue and speak of encryption. This is a critical problem. It is here right now, and it is only going to get worse. Encryption has implications for our ability to combat every threat to national security that we see. Federal, state and local law enforcement official agree unanimously that the widespread use of robust non-key recovery encryption will ultimately devastate our ability to fight crime and prevent terrorism.

There are all kinds of views about this issue, but we see that this issue needs to be addressed very quickly, because it's going to harm all of our abilities to do what is legal, ethical, and for the best interests of the American people.

I guess I would just say on the summary of the national threat, from a long proportional perspective I would have to say the drug issue that faces the United States is a significant issue. We see it in all the investigations the FBI has. We see it in all corners of our investigations. And it's a great concern, whether it's methamphetamine, cocaine, heroin or whatever. There is just great concern for that issue and what we are going to do about it.

I guess the next issue I see is international terrorism. We certainly have -- the DCI's statement -- agreement. We have concerns of weapons of mass destruction and what they can do. The FBI currently has investigations directed towards these investigations. Certainly we have had help with legislation from this body that has been tremendously helpful. But I consider that a priority that could have devastating consequences for this great nation.

I guess the next issue that I would just go to would be the fact that the international terrorism organizations and terrorism generally -- the FBI looks at domestic terrorism by groups of individuals that are American citizens using violence to commit -- to change -- either social or political change. The domestic side is an issue. Certainly the international side, as Mr. Tenet -- the state sponsors -- certainly the organized federations, such as -- (inaudible) -- Hamas -- are areas of the world we're very concerned.

I guess the one issue I want to hit a little bit is the critical infrastructure protection. We have a society that is terribly dependent upon computers and may service -- their great service to this nation, has helped our economy, and we are probably world leaders in computer technology. But it's also a vulnerability, and it could be used and is being used by criminals, by terrorists, by intelligence services and certainly by military services, and we have to basically put in the infrastructure and vehicles to protect this great nation from that type of (a threat ?).

I guess I would just close and just say that certainly the espionage issues -- there has been publicity -- we have had numerous cases that have been prosecuted in the last year. This is a threat that has been here since the beginning of time, it's still here, and we --

SEN. SHELBY: (?) It's not getting any better though, is it?

MR. BRYANT: It's probably -- (inaudible) --

Just in passing, in the economic espionage -- Congress passed the economic espionage statute last year. This statute has brought about certainly a change in the way business is done, because our technology -- we now have laws that protect us. There are prosecutions going forward. And this has been a great benefit, and I can discuss this more in the question and answer.

The only thing I would add on the drug trafficking situation, there are foreign-based groups that are bringing vast amounts of drugs into this country, and ourselves, the intelligence community, with the DEA and Customs, and the whole government, is trying to develop strategies to best control this issue.

I guess I would just close and say on July the 26th, 1998, the FBI will celebrate its 90th birthday. The FBI has been a remarkable institution for many reasons, but not the least of which its ability to change and evolve and face growing threats. And we serve, you all, we serve the American people, but we see numerous threats that I've just enumerated, and I hope we are part of the solution. Thank you.

SEN. SHELBY: Our next witness will be the assistant secretary of state for intelligence and research, Phyllis Oakley.

Secretary Oakley?

 

STATEMENT OF

PHYLLIS OAKLEY
Assistant Secretary of State
for Intelligence and Research

 

MS. OAKLEY: Thank you, Chairman Shelby, Senator Kerrey, members of the committee. I appreciate this opportunity to present the views of the State Department's Bureau of Intelligence and Research, I&R. And I will certainly shorten my already short remarks. Let me just begin by saying that thanks to the effectiveness of American diplomacy, military readiness and intelligence capabilities, the dangers of nuclear attack, large-scale conventional military attack and other threats to our national (existence ?) are low. Most of our citizens are quite safe most of the time and in most places around the globe. Our world has become safer, but it certainly is not yet safe enough.

We must ensure that we do our utmost to preserve that safety, and in the State Department of course our focus is providing information as quickly and as efficiently as we can to support all of our diplomatic operations overseas.

The committee's call for an annual review, ranking of threats to our national security, serves, as I am sure you intended, as a useful prod to reconsider how best to deploy our intelligence resources. This year's fresh look at the array of threats we face produced the following observations.

First, although we did rank the threats in priority order, we continue to believe that all of the threats listed, from the proliferation of weapons of mass destruction to international terrorism. The behavior and intentions of specific countries, are sufficiently important to warrant attention from both the intelligence and policy communities.

Second, we converted the progress in certain areas, made it appropriate to rank threats differently than we had in 1997. Accordingly, the danger of proliferation of weapons of mass destruction joins terrorism at the top of our list. Iraq has moved up in the ranking of problems faced. And North Korea has been accorded a lower but still dangerous ranking.

Let me just make a few brief comments. Certainly we believe the spread of weapons of mass destruction continues to pose a serious threat to U.S. national interests, at home and abroad. Iraq's disruption of U.N. Special Commission inspectors underscores the need for continued vigilance. Political incentives and opportunities for WMD proliferation are greatest in the Persian Gulf and South Asia. North Korea, China and Russia are the principal targets of acquisition efforts by countries seeking WMD capability. The latter are also the most active purveyors of WMD-related equipment and technology.

I think I don't need to dwell on Iraq, and I'll certainly be happy to answer any questions that you have about that later.

We agree that Russia continues to pose special problems. And we cannot underestimate Russia's continuing capabilities.

And I think for us the greatest concern is this -- (word inaudible) -- of Russia's military industrial infrastructure and the prospect for unauthorized transfers of material, equipment, know-how and technologies.

For China, we certainly viewed that there have been positive steps regarding China as a producer of nuclear, chemical and missile- related equipment. However, we have -- there has been not been equivalent progress in other areas, particularly in the ballistic missile field.

Terrorism, we remain deeply concerned about it. Terrorism originating in the Middle East continues to pose the greatest danger to US citizens and interests. The region remains home to four of the seven officially designated state sponsors of terrorism -- Iran, Iraq, Syria and Libya. It's also the locus of violent opposition groups which regularly employ indiscriminate terrorism as part of their campaigns to overturn policies and regimes.

I think the last point I want to make is about the Asian financial crisis. It has -- I think we're all aware of the advantages to the United States of globalization. But the current financial crisis in Asia has highlighted a number of vulnerabilities that, while not on a par with traditional threats to the security of our nation, have a direct or indirect impact on American interests, though I certainly would say that it's too soon to know exactly how various sectors will be affected.

As I said at the outset, the world has become safer but it is not yet safe enough. Potential threats to the security of our nation and to individual Americans remain unacceptably high and require our continued vigilance, intellectual rigor and working together to reduce them.

Thank you.

SEN. SHELBY: Our next witness is Lieutenant General Patrick Hughes, director of the Defense Intelligence Agency. General Hughes.

 

STATEMENT OF

LIEUTENANT GENERAL PATRICK HUGHES
Director, Defense Intelligence Agency

 

GEN. HUGHES: Thank you very much for the opportunity to address you this morning, Mr. Chairman and members of the committee.

I remain convinced that the turmoil and uncertainty that have characterized the post-cold war world will last at least another decade. I say this because most of the underlying factors remain in place -- uneven economic and demographic development; disparities in wealth and resource distribution; continued ethnic, religious and cultural strife; broad, rapid technology advances and attendant proliferation of advanced weapons in certain regional and global security structures; international criminal activity with national security overtones; the continued existence of rogue, renegade and outlaw states; resistance to the rapid expansion of Western ideas and culture; natural disasters and environmental issues, and numerous other critical uncertainties.

These factors all bring great stress to the international order. No condition, circumstance or power is likely to emerge over the next 10 to 20 years which will somehow transcend them and lead to a more stable global order.

In fact, one of the more intriguing aspects of the post-cold war is that, while the global strategic threat to US interests has greatly diminished in comparison with the Soviet era, the residual transnational and regional threats are in many ways more complex and diverse and much more difficult to plan for.

This brings me to my next theme, a new security paradigm is evolving, one in which the United States faces a generalized global set of competitors and potential adversaries, the troubling proliferation of negative technologies, and the existence and emergence of numerous persistent small conflict situations and conditions.

US security policy planners and operators must carefully study these emerging circumstances in order to understand this evolving paradigm. The new global condition affects every aspect of the US military, including the planning and execution of current operations and the development of the strategy, organization and equipment that will shape and define our future forces.

The most important challenge facing defense intelligence is to discern from the general mix of global conditions more specific and useful characterizations of extant, emerging and potential threats and circumstances. We are doing this now. That sort of threat identification forms the basis for my next theme.

The United States is likely to remain the world's only superpower in terms of combined political, economic, technological, military and cultural strength for the next two decades. Despite our tremendous power and influence, however, threats and threatening conditions exist today and others will emerge over time.

We generally involve these extant both potential and emerging threats into either transnational or regional categories. Regarding transnational threats I am most concerned with the proliferation of nuclear, chemical and biological weapons, missiles and other key technologies which can be applied in decidedly negative ways.

Two aspects of this trend are particularly troubling: activities that would provide our adversaries with increased or enhanced capabilities for delivering weapons of mass destruction or conventional payloads inter-regionally and those that would allow a rogue nation or subnational group to surprise us with a covertly acquired or innovatively applied new technology.

Terrorism, narcotics trafficking, illicit weapons transfers and other international criminal activity, with national security overtones, pose direct daily threats to US citizens, property, resources and interests worldwide. The terrorist threat to the US will probably increase, both abroad and here at home, as various groups exploit technological advances in communications and transportation, forgery and counterfeiting, cover and concealment, and weapons and explosives. International drug cultivation, production, transport and use will remain a major source of instability and tension within producing, transit and target countries and between trafficking and consumer nations. A particular concern is the connection between drug trafficking and insurgency.

Regarding the most pressing regional threats, North Korea, Iraq and Iran remain generally hostile. Each retains the capability to directly attack US and allied interests with relatively little advance warning. These conditions require continued vigilance and the retention of demonstrable war-fighting and deterrent(?) capabilities.

Russia and China, two major powers undergoing likely and generally positive but challenging transitions will continue to demand our attention. While neither state is likely to pose a dramatically increased military threat over the next decade, both have significant military capabilities and the potential to threaten our vital interests.

Other regional issues and hot spots, to include the uncertain situation in Bosnia; tensions in the Aegean; ethnic, tribal and religious conflict throughout many parts of Africa; continued hostility between India and Pakistan; ongoing border disputes between several nations; and ethnic and political conflict in resource-rich Central Asia, all have the potential to erupt abruptly into larger conflicts that could result in requirements for US military involvement.

Finally, it is important to note that the rapid pace of military technology advancement, particularly in the areas of information and communications, will continue. Major technological breakthroughs in military capability are likely in the next two decades. Some aspects of our technological dominance, especially those with commercial and industrial applications, will be difficult to maintain. We can expect our adversaries to develop and apply newer innovative forms of asymmetric and asynchronous warfare as they seek to advance their interests, while avoiding direct military engagement with the United States on our terms.

A final thought. We are trying to maintain superiority and to use military capability in positive and constructive ways in an environment in which espionage and the selective public disclosure of US classified information is commonplace. Unless we make progress in preventing espionage and stopping the unauthorized public disclosure of classified information, we should anticipate a steady erosion in confidence in our abilities and the real loss of advantage to our adversaries.

Thank you very much, Mr. Chairman.

SEN. SHELBY: Thank you, General Hughes.

. . .

SEN. SHELBY: But there is nothing you can add to tell the American people today at this point?

MR. BRYANT: No, there is not. There is nothing I can add at this time.

SEN. SHELBY: Director Tenet, I know that as head of the CIA you are not charged with conducting the criminal investigation. Is there anything you can add today from a purely intelligence or counter- intelligence viewpoint to the American people as you await the outcome of the complete investigation?

MR. TENET: Sir, there is not anything I can add.

SEN. SHELBY: Members of this committee are very aware of China's record of reckless proliferation of the most dangerous and threatening weapons and technologies, which reportedly includes: helping Pakistan develop a nuclear weapons capability, providing Pakistan with M-11 missiles and a factory to build more such missiles; selling Iran anti- ship cruise missiles that threaten U.S. naval ships and personnel in the Persian Gulf, as well as the flow of oil from the region, selling Iran chemical and biological weapon related and missile related materials and equipment; assisting Iran's nuclear program and other destabilizing actions. In your discussion of China, I am surprised that you do not mention any of these matters which are hard facts -- things that have happened and have damaged and continue to damage U.S. interests, in your testimony. Instead you go into considerable depth on all of the things that the Chinese are reportedly ready to do or about to do to respond to our concerns about the past behavior.

I would like to turn to the issue of China's proliferation activities. Both Secretary Oakley the director identify the weapons of mass destruction as the most critical threats to U.S. national security. Secretary Oakley, I won't summarize all the points that have been here, but I think it's fair to say that this litany consists primarily of things that have not happened yet, and is generally phrased in terms of what China has, as admittedly agreed to do or committed to do. Of course China has committed to do or not to do a lot of things in the past with respect to the proliferation of weapons. And our experience with these commitments has been a positive one yet. Many of the transfers that I have described have violated international treaties and agreements. Many of these actions appear to have triggered the requirements for sanctions under U.S. law. Secretary Oakley, you concede that even though China appears to be -- that's your phrase -- living up to its May '96 pledge not to provide assistance to unsafeguarded nuclear facilities, it, quote, "has not made equivalent progress in other areas," while in another area, your words, "key loopholes remain." You also note correctly that while China has apparently taken itself out of the business of exporting ballistic missiles that this is not enough. The reason I understand that it is not enough is that China has reportedly sold an entire missile plant to Pakistan and so forth. In short, I believe that your statement is long on hope with all due respect, but ignores a bitter experience, a long experience.

This seems to be, to me and other members of the intelligence community, the administration's position with most issues relating to China. It's especially problematic today when the Congress has been asked to assent to the implementation of the 1985 U.S.-China nuclear cooperation agreement, which is based on the administration's conclusion that China has now -- now, Secretary Oakley -- decided to be a responsible world power and seize nuclear weapons related assistance to any states other than the five declared nuclear states. This conclusion is in turn based largely on the new Chinese commitments made at the recent summit, and its record of apparent but not unambiguous compliance with the May '96 pledge.

I hope -- I certainly hope that the Chinese change its views on the desirability of proliferation of weapons of mass destruction. And I know you do. I have not yet had the opportunity to read all of the agreements and the materials in support of the administration's decision that I understand have been submitted to Congress for its review. But I do know myself that the record to date, and therefore I tend to agree with Director Tenet's statement, quote, "that the jury is still out," on whether the changes in Chinese proliferation behavior are broad enough in scope and whether they will hold over the long term. Secretary Oakley, you are a very important member of that jury, so I'd like to ask you this: Given the long history that you are familiar with of Chinese proliferation activities, China's poor record in keeping previous commitments, the grudging last-minute nature of China's most recent promises, and a lack of a meaningful track record on most of these recent pledges, do you feel that the record supports a finding that China has changed its policies sufficiently to support implementation of the '85 agreement? And if so, why?

MS. OAKLEY: I think you're very --

SEN. SHELBY: I know that's a long --

MS. OAKLEY: It is, and it is a very important question. We have submitted various views in my written statement. I think that one has to understand the role of I&R in a question like this. We worked very closely with the rest of the intelligence community to prepare what we call a statement of facts or to present the facts on the situation. I think you've put your finger on it that often these are not as clear- cut as we would like, that there is ambiguity. Certainly the direction that China has taken --

SEN. SHELBY: Ambiguity plus a history, has in this.

MS. OAKLEY: Ambiguity and a history and what they said and various things like that. All those factors in the end have to be weighed by the people who make the decisions on whether they have abided by these agreements. If I may, I would like to discuss some of this --

SEN. SHELBY: In closed session.

MS. OAKLEY: -- very important question in closed session this afternoon.

SEN. SHELBY: That would be fine. Director Tenet, when you say, in your words, quote, "the jury is still out," what do you mean? What specific Chinese activities do you have in mind? What would you like to see before the jury? Would you like to discuss that later?

MR. TENET: Well, senator, I've submitted the classified testimony -- I think it goes through all of the facts in rather detail. But I think the point I made, the lead sentence to that sentence is, "The Chinese have enjoyed very deep relations with proliferant countries for a long time."

SEN. SHELBY: Like Pakistan.

MR. TENET: And that's something you have to weigh. So these relationships have to be watched very, very carefully. And as you'll see from the classified statement of facts, there is a mixed record -- there are some positive things and there are some negative things, and we can go through that this afternoon. And I --

SEN. SHELBY: But when any nation signs an agreement, agrees to something --

MR. TENET: It doesn't mean anything until it acts, senator.

SEN. SHELBY: Absolutely. But it should mean something, shouldn't it?

MR. TENET: When you sign an agreement you must abide by the agreement. And our job is then to prove to you that either one or the other is happening.

SEN. SHELBY: Absolutely. Getting into my last area of inquiry here, and concern, ballistic missile threat. The most critical threat that I understand faces the U.S. today is the threat of attack by ballistic missiles bearing nuclear, biological or chemical weapons. The intelligence community has no more serious responsibility than to monitor this threat. Today with more and more nations, many hostile to the U.S., that are seeking to develop ballistic missiles to deliver weapons of mass destruction and to -- I believe it's very important the community faces this to identify and to monitor these new threats, and to alert and support policymakers in their efforts to eliminate or counter those threats. The intelligence community is in the process of completing an update to the '95 National Intelligence Estimate of emerging missile threats in North America during the next 15 years. As we all know, the previous National Intelligence Estimate was the subject of a number of criticisms, many of which were in my view justified.

Some of the most important deficiencies of that, especially critical when the consequence of mistaken analysis are potentially so enormous, were a failure to explore possible alternative futures, a failure to identify key assumptions, and a failure to quantify the level of certainty of the judgments reached and a failure to fully address all of the strategic, political and psychological aspects of this complicated problem. For example, by excluding Alaska and Hawaii from certain key judgments, or by simplistic assumption as to the motives and likely courses of actions of hostile actors. We have talked about this in open session before, and closed. We have talked about it in the appropriations committee, the subcommittee on defense on which I serve, which Senator Stevens chairs and which Senator Inouye formerly the chairman is the ranking Democrat. They voiced their concerns before. Director Tenet, would you describe for the committee today how the intelligence community has addressed these and other deficiencies in preparing the current National Intelligence Estimate?

MR. TENET: What I would like to say to you, senator, is, one, I've seen a draft -- it has incorporated many of the challenges that you and Bob Gates laid down to us in reviewing our last draft. I believe it meets all those challenges. We are still working on it. We will be here early with it. It won't take till March to finish it. I think you will see a document that reflects all of the concerns that were raised with it. And it's very, very thorough and very, very deep in terms of this subject.

I think the thing that will jump out of you is, if there is a headline out of it for me, was the growing concern about the introduction and proliferation of medium-range ballistic missiles. Everyone focuses on longer-range missiles, but the proliferation of medium-range ballistic missiles and their impact on U.S. security I think is something that is heightened, and you will get a keen sense of that in this estimate, and I think it's something that you -- when you see the product I think you will agree that it has been very well done.

SEN. SHELBY: The history of ballistic missiles is largely, as everybody on this panel knows, is a history of unpleasant surprises. For example, Soviet missiles in Cuba, the Soviet ICBM build-up, Iraq's use of extended-range Scuds during the Iran-Iraq war, and the acceleration of Iran's missile program with extensive obvious Russian assistance. Have your analysts addressed the uncertainties and potential alternative futures inherent in analyzing this difficult intelligence target. For example, by the use of (red teams ?) how they address potential variations, such as the transfer of missile know-how and equipment from third countries; the substitution of lighter biological warheads for heavy first-generation nuclear devices; the effects of improvisation, corner-cutting and alternate technical paths; and the willingness of some leaders to do what we call the unexpected, including things that analysts with an American cultural background may find very illogical, or even crazy; or to marshal a nation's resources for high priority military goals.

General Hughes, I first want you to comment on that if you would. GEN. HUGHES: Well, I can look you in the eye and tell you that we have taken virtually all of the issues that you've mentioned into account. I do think that --

SEN. SHELBY: These are issues that should be taken into account.

GEN. HUGHES: They should be taken into account. However, there are gaps in our knowledge base that we have to continue to work on. It's particularly true in what I would call the key technology referred to generally as nanotechnology, the ability to put very complex objects in very small form, in very reduced weight in operational capabilities like missiles. That challenge, that technical challenge that is coming to us, is something we don't fully understand or have control over right now. We have a lot of work to do in the future and we maintain constant vigilance.

The last issue is I would like to characterize the three components of threat that we work with: capability, intent and will. I think we have a good understanding of the capability now and in the future that most countries who seek medium- and long-range ballistic missiles have. What we do need a better understanding of is their intent to use them and their will to use them in a given context. That's where most of the surprise actually has come from. We were not technically surprised about the capability in the past; we were surprised about the way in which or the circumstances in which this capability was put to use. We need to focus on t hat. And speaking for the military side of the intelligence community, and I -- if Director Tenet will allow me, because I know my colleagues in the CIA on this issue very well -- we work closely together -- we're well aware of the need to understand intent and will.

SEN. SHELBY: Secretary Oakley, do you have any comments?

MS. OAKLEY: I don't have any further comments. We of course will be cooperating with this estimate, as we do with others. We are not equipped to really assess the capability. We feel that our contribution is much stronger on the intent and will chapters, and we'll be working with them.

SEN. SHELBY: Director Tenet, how -- how important is it that this estimate be well done, in other words be comprehensive as analysts can make it.

MR. TENET: It is extremely important to me, sir, as it is to you.

SEN. SHELBY: We thank the panel for being here. We look forward to the closed hearing this afternoon.

The committee is adjourned.