SHELBY: The committee will come to order. I will submit my full statement that I have prepared for the record.

The purpose of the hearing, basically, is to provide a public forum for the discussion of national security threats by our nation's senior intelligence officials, provide a context for the committee's annual review of the intelligence community's budget.

We look forward today, Director Tenet, to hearing from our witnesses, you and others, on a number of issues, including the proliferation of ballistic missiles and other weapons of mass destruction; new and more threatening types of international terrorism; regional threats to U.S. interests, asymmetric threats designed to circumvent U.S. strengths and target our vulnerabilities; the evolving foreign counterintelligence threat; narcotics trafficking and international criminal organizations.

We also hope to explore the challenges posed by, among others, the proliferation of encryption technology, the increasing sophistication of denial and deception techniques, the need to modernize and to recapitalize the National Security Agency, and other shortfalls in intelligence funding.

I do want to welcome you again to the committee, and this is our first open meeting this year, our first meeting with Director Tenet. And we also want to welcome Admiral Tom Wilson, the director of the Defense Intelligence Agency, and Mr. Tom Singer, acting assistant secretary for state for intelligence and research.

We have a new vice chairman of the committee, he's not new on the committee, Senator Graham of Florida.

Senator Graham?

 

OPENING STATEMENT OF

BOB GRAHAM
A Senator from Florida, and
Vice Chairman, Senate Select Intelligence Committee

 

GRAHAM: Thank you very much, Mr. Chairman. I appreciate your scheduling this hearing so early in the 107th Congress. This has become an annual event. It provides the committee with an opportunity to see the big picture and to apply that vision as we pursue our detailed responsibilities and oversight budget and legislation.

I want to thank the distinguished panel of witnesses for appearing today and to help us commence with these issues that are so critical to the safety and welfare of the American people. I join the chairman in welcoming the new members of the committee with a return engagement from Senator DeWine. I encourage the new members never to hesitate to question traditional thinking. I know them all well enough to know that they will not hesitate.

Mr. Chairman, I also very much look forward to working with you. During my time on the committee, I've come to value the importance of the role of this committee, both in initiation and oversight. Mr. Chairman, you've provided leadership over the past four years on a wide range of critical intelligence issues, underscoring this committee's key role.

Mr. Chairman, I would like to say just a few words about what I see as the major challenge to the Intelligence Committee as we begin this new century.

We spent the last half of the last century focusing on Germany and Japan and then focusing on the former Soviet Union. We are now 12 years beyond the dismantling of the Berlin Wall. Half a generation has passed since we faced a monolithic threat to our national security that demanded the vast majority of our intelligence and security resources. We have moved from the fear of total annihilation by one superpower to piecemeal destruction at the hands of countless and unseen enemies. It is a moving target that may require a completely different approach to its neutralization.

And, of course, many of the old threats still exist as well. Although the Soviet Union no longer exists, Russia has emerged and remains a nuclear threat to the United States and our allies.

Some of our citizens may see the United States of America as overwhelmingly powerful, perhaps even invincible in today's world, but we are not. Our policy-makers face a mind-numbing range of decisions that must be made in order to protect our country. They need the best possible information our intelligence community can provide. Good intelligence is a force multiplier; it can save lives, it can head off conflict.

Unlike the Cold War in which diplomacy and intelligence were two arrows in our quiver, diplomacy will not help us in our fight against nonstate terrorists and proliferation of weapons of mass destruction. It is up to the intelligence community to identify and defeat these enemies. Our survival depends on your success.

We have encouraged the DCI to think outside the box in dealing with these new threats. I challenge him today to build a new box. Some of the old structures that we have relied upon to accomplish the intelligence mission are not capable of being pulled and stretched to meet new needs. They may have to be completely dismantled and rebuilt to enable us to succeed against the threats of today and the threats of tomorrow.

For this committee, we should put our energies into identifying the intelligence collection gaps and determining how to plug them. The committee plays a very special role in this regard. Unlike other congressional committees, which benefit in their oversight from a number of outside interest groups which keep a close eye on things, intelligence oversight is accomplished almost totally by this committee and our House counterpart.

GRAHAM: When it comes to the eyes and ears of intelligence oversight, we essentially are it.

In that regard, I believe strongly that we need to increase spending on intelligence. Good intelligence saves lives, helps us to avoid conflict. It is absolutely essential to sound policy-making. I believe the intelligence community can and must more effectively use the resources it already has, but I have no doubt that the community needs more. The amount of money necessary to confront the growing challenge of terrorism alone is evidence of the need for more resources.

It is my hope that the Bush administration, despite its recent announcement that it will cap current defense spending, at least for the time being, will seriously consider increasing spending for intelligence in fiscal year 2002. A dollar spent well on intelligence can save many fold the amount needed to be spent later on defense.

This committee plays a very special role. When it comes to this issue, we have a special responsibility to represent the interest of the intelligence community before those who will make these budgetary decisions.

Mr. Chairman, I wish to thank the witnesses for appearing today to help us get started with the issues which are so critical. This hearing will help us frame our agenda.

Mr. Tenet, continuity, as you know, is very important to a successful intelligence mission, and I look forward to continuing to work with you in the coming months. In reviewing your prepared statement, I was particularly interested in the analysis of issues related to Russia and China, and hope that you will expand upon them today.

Again, Mr. Chairman, thank you for calling this important hearing.

SHELBY: Director Tenet, I understand you will have an opening statement. Admiral Wilson and Secretary Singer will submit statements for the record.

You proceed as you wish.

 

STATEMENT OF

GEORGE J. TENET
Director, Central Intelligence Agency

 

TENET: Thank you, Mr. Chairman.

Mr. Chairman, as I reflect on this year on the threats to American security, what strikes me most forcefully is the accelerating pace of change in so many arenas that affect our national interests. Numerous examples come to mind: new communications technology that enables the efforts of terrorist and narcotraffickers as surely as it aids law enforcement and intelligence; rapid global population growth that will create new strains in parts of the world least able to cope; the weakening internal bonds in a number of states, whose cohesion can no longer be taken for granted; the accelerating growth and missile capabilities in so many parts of the world, to name just a few.

Never in my experience has American intelligence has to deal with such a dynamic set of concerns affecting such a broad range of U.S. interests. Never have we had to deal with such a high quotient of uncertainty. With so many things on our plate, it is always important to establish priorities.

For me the highest priority must invariably be on those things that threaten the lives of Americans or the physical security of the United States. With that in mind, let me turn to the challenges posed by international terrorism.

Mr. Chairman, we have made considerable progress on terrorism against U.S. interest and facilities, but it persists. The most dramatic and recent evidence, of course, is the loss of 17 of our men and women on the USS Cole at the hands of terrorist.

The threat from terrorism is real, immediate and evolving. State-sponsored terrorism appears to have declined over the past five years, but transnational groups with the decentralized leadership that makes them harder to identify and disrupt are emerging. We are seeing fewer centrally controlled operations and more acts initiated and executed at lower levels.

Terrorists are also becoming more operationally adept and more technically sophisticated in order to defeat counterterrorism measures. For example, as we have increased security around government and military facilities, terrorists are seeking out softer targets that provide opportunities for mass casualties.

TENET: Employing increasingly advanced devises and using strategies, such as simultaneous attacks, the number of people killed or injured in international terrorist attacks rose dramatically in the 1990s, despite a general decline in the number of incidents. Approximately 1/3 of those incidents involved American interests.

Osama bin Laden and his global network of lieutenants and associates remain the most immediate and serious threat. His organization is continuing to place emphasis on developing surrogates to carry out attacks in an effort to avoid detection, blame and retaliation. As a result, it is often difficult to attribute terrorist incidents to his group, the al Qaeda.

Beyond bin Laden, the terrorist threat to Israel and to participants in the Middle East peace negotiations has increased in the midst of continuing Palestinian-Israeli violence. Palestinian rejectionists, including the Hamas and the Palestinian Islamic Jihad, have stepped up violent attacks against Israeli interests since October. The terrorist threat to U.S. interest because of our friendship with Israel has also increased.

At the same time, Islamic militancy is expanding, and the worldwide pool of potential recruits for terrorist networks is growing. In Central Asia, the Middle East and South Asia, Islamic terrorist organizations are attracting new recruits, including under the banner of anti-Americanism.

Mr. Chairman, the other thing that is of concern is the fact that international terrorist networks have used the explosion of information technology to advance their capabilities. The same technologies that allow individual consumers in the United States to search out and buy books in Australia or India also enable terrorists to raise money, spread their dogma, find recruits and plan operations far afield.

Some groups are acquiring rudimentary cyber-attack tools. Many of the 29 officially designated terrorist organizations have a keen interest in unconventional weapons, chemical and biological capabilities.

Nevertheless, we and our allies have scored some important successes against terrorist groups and their plans, which I would like to discuss with you in closed session later today. Here in open session, let me assure you that the intelligence community has designed a robust counterterrorism program that has pre-empted, disrupted and defeated international terrorists and their activities. In most instances, we have kept terrorists off-balance, forcing them to worry about their own security and degrading their ability to plan and conduct operations.

Let me turn to proliferation, Mr. Chairman. A variety of states and groups continue to seek to acquire weapons of mass destruction and the means to deliver them. Let me discuss the continuing and growing threat posed by ICBMs.

We continue to face ballistic missile threats from a variety of actors beyond Russia and China, specifically North Korea, probably Iran and possibly Iraq. In some cases, their programs are the result of indigenous technological development, and in other cases, they are the beneficiaries of direct foreign assistance. And while these emerging programs involve fewer missiles with less accuracy, yield, survivability and reliability than those we faced during the Cold War, they still pose a threat to American interests.

For example, more than two years ago, North Korea tested a space- launch vehicle, the Taepo Dong-1, which it could theoretically convert into an ICBM. This missile could be capable of delivering a small biological or chemical weapon to the United States, although with significant targeting inaccuracies. Moreover, North Korea has retained the ability to test its follow-on Taepo Dong-2 missile, which could deliver a nuclear-sized payload to the United States.

Iran has one of the largest and most capable ballistic missile programs in the Middle East. It's public statements suggest that it plans to development longer-range rockets for use in a space-launch program. But Tehran could follow the North Korean pattern and test an ICBM capable of delivering a light payload to the United States in the next few years.

And given the likelihood that Iraq continues its missile- development work, we think that it, too, could develop an ICBM capability sometime in the next decade, assuming it received foreign assistance.

As worrying as the ICBM threat will be, Mr. Chairman, the threat to U.S. interests and forces from short-range and medium-range ballistic missiles is here and now.

TENET: The proliferation of MRBMs, driven largely though not exclusively by North Korean No-Dong sales, is altering strategic balances in the Middle East and Asia. These missiles include Iran's Shahab-3, Pakistan's Ghauri and the Indian Agni-2.

Mr. Chairman, we cannot underestimate the catalytic role that foreign assistance has played in advancing these missile and WMD programs shortening the development times and aiding production. The three major suppliers of missile or WMD-related technologies continue to be Russia, China and North Korea. Again, many details of their activities need to remain classified, but let me quickly summarize the areas of our greatest concern.

Russian state-run defense and nuclear industries are still strapped for funds. Moscow looks to them to acquire badly needed foreign exchange through exports. We remain concerned about the proliferation implication of such sales in several areas. Russian entities last year continued to supply a variety of ballistic-missile- related goods and technical know-how to countries such as Iran, India, China and Libya. Indeed, the transfer of ballistic-missile technology from Russia to Iran was substantial last year and in our judgment will continue to accelerate Iranian efforts to develop new missiles and to become self-sufficient in production.

Russia also remained a key supplier for a variety of civilian Iranian nuclear programs, which could be used to advance its weapons programs as well.

Russian entities are a significant source of dual use biotechnology, chemicals production technology and equipment for Iran. Russian biological and chemical expertise is sought by Iranians and others seeking information and training on BW and CW agent production processes.

Chinese missile-related technical assistance to foreign countries has also been significant over the years. Chinese help has enabled Pakistan to move quickly toward serial production of solid-propellant missiles.

In addition to Pakistan, firms in China provided missile-related items, raw materials or other help to several countries of proliferation concern, including Iran, North Korea and Libya.

Last November, the Chinese foreign ministry issued a statement that committed China not to assist other countries in the development of ballistic missiles that can be used to deliver nuclear weapons. Based on what we know about China's past proliferation behavior, Mr. Chairman, we are watching and analyzing carefully for any sign that Chinese entities may be acting against this commitment. We are worried, for example, that Pakistan's continued development of the two-stage Shahab-2 MRBM will require additional Chinese assistance.

On the nuclear front, Chinese entities have provided extensive support in the past to Pakistan's safeguarded and unsafeguarded nuclear programs. In May 1996, Beijing pledged that it would not provide assistance to unsafeguarded facilities in Pakistan. We cannot yet be certain, however, that all contacts have ended.

With regard to Iran, China confirmed the work associated with two nuclear projects would continue until the projects were completed. Again, as with Russian help, our concern is that Iran could use the expertise and technology it gets even if cooperation appears civilian for its weapons program.

With regard to North Korea, our main concern is Pyongyang's continued exports of ballistic-missile-related equipment and missile components, materials and technical expertise. North Korean customers are countries in the Middle East, South Asia and North Africa. Pyongyang attaches a high priority to the development and sale of ballistic-missile equipment and related technology because these sales are a major source of hard currency.

The missile and WMD proliferation problem continues to change in ways that make it harder to monitor and control, increasing the risks of substantial surprise. Among these developments are greater proficiency in the use of denial and deception and the growing availability of dual-use technologies, not just for missiles, but for chemical and biological agents as well.

There is also great potential for secondary proliferation, for maturing state-sponsored programs such as those in Pakistan, Iran and India. Add to this group the private companies, scientists and engineers in Russia, China and India who may be increasing their involvement in these activities taking advantage of weak or unenforceable national export controls and the growing availability of technologies. These trends have continued, and in some cases have accelerated over the past year.

TENET: Mr. Chairman, I want to reemphasize the concern I raised last year about our nation's vulnerability to attacks on our critical information infrastructure. No country in the world rivals the United States in its reliance, dependence and dominance of information systems. The great advantage we derive from this also presents us with unique vulnerabilities.

Indeed, computer-based information operations could provide our adversaries with an asymmetric response to U.S. military superiority by giving them the potential to degrade or circumvent our advantage in conventional military power. Attacks on our military, economic or telecommunications infrastructure can be launched from anywhere in the world, and they can be used to transport the problems of a distant conflict directly to America's heartland.

Likewise, our adversaries well-understand U.S. strategic dependence on access to space. Operations to disrupt, degrade or defeat space assets will be attractive options for those seeking to counter U.S. strategic military superiority. Moreover, we know that foreign countries are interested in or experimenting with technologies that could be used to develop counter-space capabilities. We must also view our space systems and capabilities as part of the same critical infrastructure needs that needs protections.

With regard to narcotics, Mr. Chairman, the growing diversification of trafficking organizations with smaller groups interacting with one another to transfer cocaine from source to market, and the diversification of routes and methods pose major challenges to our counter-drug programs.

Colombia, Bolivia and Peru continue to supply all the cocaine consumed worldwide, including the United States. Coca cultivation is down significantly in Bolivia and Peru. Colombia is the linchpin of the global cocaine industry, as it is home to the largest coca- growing, coca-processing and trafficking operations in the world.

With regard to heroin, nearly all of the world's opium production is concentrated in Afghanistan and Burma. Production in Afghanistan has been exploding, accounting for 72 percent of illicit global opium production in the year 2000.

The drug threat is increasingly intertwined with other threats. For example, the Taliban regime in Afghanistan, which allows bin Laden and other terrorists to operate on its territory, encourages and profits from the drug trade. Some Islamic extremists view drug trafficking as weapon against the West and a source of revenue to fund their operations.

No country has become more vulnerable to the ramifications of the drug trade than Colombia. President Pastrana is using the additional resources available to him under Plan Colombia to launch a major anti- drug effort that features measures to curb expanding coca cultivation. He's also cooperating with the United States on other important bilateral counternarcotics initiatives such as extradition.

The key impediment to President Pastrana's progress on drugs is the challenge from Colombia's largest insurgent group, the Revolutionary Armed Forces of Colombia, or the FARC, which earns millions of dollars from taxation and other involvement in drug trade.

Founded more than 35 years ago, it is committed to land reform. The FARC had developed into a well-funded, capable fighting force known more for its brutal tactics than its Marxist-Leninist-influenced political program.

The FARC vehemently opposes Plan Colombia for obvious reasons. It has gone so far as to threaten to walk away from the peace process with Bogota to protest the plan. It appears prepared to oppose the plan with force.

The FARC, for example, could push back on Pastrana by stepping up attacks against spraying interdiction operations.

U.S. involvement is also a key FARC worry. Indeed, in early October FARC leaders declared that U.S. soldiers located in combat areas are legitimate military targets.

The country's other major insurgent group, the National Liberation Army or the ELN, is also contributing to mounting instability. Together with the FARC, the ELN has stepped up its attacks on Colombia's economic infrastructure. This has soured the country's investment climate and complicated government efforts to promote economic recovery following a major recession in 1999.

Moreover, the insurgent violence has fueled a rapid growth of a illegal paramilitary groups, which are increasingly vying with the FARC and the ELN for control over drug-growing zones and other strategic areas of rural Colombia.

Like the FARC, paramilitaries rely heavily on narcotics revenue and have intensified their attacks against noncombatants in recent months.

TENET: Paramilitary massacres and insurgent kidnappings are likely to increase this year as both groups move to strengthen their financial operations and expand their areas of influence.

Mr. Chairman, let me turn to the Middle East. We are all aware of the violence between the Israelis and Palestinians and the uncertainty it has cast on the prospects for a near-term peace agreement. Let me take this time to look at the less obvious trends in the region, such as population pressures, growing public access to information and the limited prospects for economic development that will have a profound impact on the future of the Middle East.

The recent popular demonstrations in several Arab countries, including Egypt, Saudi Arabia, Oman and Jordan, in support of the Palestinian intifada, demonstrate the changing nature of activism in the Arab street. In many places in the Arab world, Mr. Chairman, average citizens are becoming increasingly restive and getting louder. Recent events show that the right catalyst, such as the outbreak of Israeli-Palestinian violence, can move people to act. Through access to the Internet and other means of communication, a restive public is increasingly capable of taking action without any identifiable leadership or organizational structure.

Balanced against an energized street is a new generation of leaders. These new leaders will have their mettle tested both by populations demanding change and by entrenched bureaucracies willing to fight hard to maintain the status quo.

Compounding the challenge for these leaders, Mr. Chairman, are the persistent economic problems throughout the region that prevent them from providing adequately for the economic welfare of many of their citizens.

Adding to this challenge is the challenge of demographics. Many of the countries in the Middle East still have population growth rates among the highest in the world, exceeding 3 percent. Job markets will be severely challenged to create openings for the large mass of young people entering the labor forces each year.

Mr. Chairman, the inability of traditional sources of income -- such as oil, foreign aid and worker remittances to fund an increasingly costly system of subsidies, education, health care and housing for rapidly growing populations -- has motivated governments to implement economic reforms. The question is whether these reforms will go far enough for the long term. Reform thus far has been deliberately gradual and slow to avoid making harsh economic choices that could lead to short-term spikes and high unemployment.

Let me speak for a moment about Iraq, Mr. Chairman. In Iraq, Saddam Hussein has grown more confident in his ability to hold on to power. He maintains a tight handle on the internal unrest, despite the erosion of his overall military capabilities. High oil prices and Saddam's use of the oil-for-food program have helped to manage domestic pressure. The program has helped to meet basic food and medicine needs of the population.

There are still important constraints on Saddam's power: The UN controls his oil revenues, his economic infrastructure is in long-term decline, and his ability to project power outside of Iraq's borders is severely limited, largely because of the effectiveness and enforcement of no-fly zones. His military is roughly have the size it was during the Gulf War and remains under a tight embargo. He has trouble efficiently moving forces and supplies, a direct result of sanctions. These difficulties were recently demonstrated by his deployment of troops to western Iraq, which were hindered by a shortage of spare parts and transport capability.

Despite these problems, we are likely to see greater assertiveness, largely on the diplomatic front over the next year. Saddam already senses improved prospects for better relations with other Arab states. One of his key goals is to sidestep the 10-year- old economic sanctions by making violations a routine occurrence for which he pays no penalty.

He has had some success in ending Iraq's international isolation. Since August, nearly 40 aircraft have flown to Baghdad without obtaining UN approval, further widening fissures in the UN air embargo. Moreover, several countries have begun to upgrade their diplomatic relations with Iraq.

Our most serious concern with Saddam Hussein must be the likelihood that he will seek renewed WMD capability, both for creditability and because every other strong regime in the region either has it or is pursuing it. For example, the Iraqis have rebuilt key portions of their chemical production infrastructure for industrial and commercial use. The plants he is rebuilding were used to make chemical weapons precursors before the Gulf War, and their capacity exceeds Iraq needs to satisfy its civilian requirements.

We have similar concerns about other dual-use research, development and production in biological weapons and ballistic missile fields.

TENET: Indeed, Saddam has rebuilt several critical missile production complexes.

Turning now to Iraq's neighbor, Iran, events in the past year have been discouraging for positive change in Iran. Several years of reformist gains in national elections and a strong populist current for political change all threaten the political and economic privilege that authoritarian interests have enjoyed for years under the Islamic republic. And they have begun to push back hard against the reforms.

Prospects for near-term political reform in the near term are fading. Opponents of reform have not only muzzled the open press, they have also arrested prominent activists and blunted the legislature's powers. Over the summer, supreme leader Khamenei ordered the new legislature not to ease press restrictions, a key reformist pursuit, that signaled the narrow borders within which he would allow the legislature to operate.

The reformist movement is still young, however, and it reflects on the deep sentiments of the Iranian people. Although frustrated and, in part, muzzled, the reformers have persisted in their demands for change. And the Iranian people will have another opportunity to demonstrate their support for reform in the presidential election scheduled for June.

Although Khamenei has not announced his candidacy and has voiced frustration with the limitations placed on his office, opinion polls published in Iran show him to remain, by far, the most popular potential candidate for president.

Despite Iran's uncertain domestic prospects, Mr. Chairman, it is clear that Khamenei's appeal and promise for reform, thus far, as well as the changing world economy, have contributed to a run of successes for Iran in the foreign policy arena over the past year. Some Western ambassadors have returned to Tehran, and Iranian relations with EU countries and Saudi Arabia are at their highest point since the revolution of 1979.

Higher oil prices have temporarily eased the government's need to address difficult and politically controversial economic problems. Iran's desire to end its isolation, however, has not resulted in a decline in its willingness to use terrorism to pursue strategic foreign policy goals. Tehran, in fact, has increased its support to terrorist groups opposed to peace negotiations over the past two years. Let me turn to North Korea, Mr. Chairman. Pyongyang's bold diplomatic outreach to the international community and engagement with South Korea reflect a significant change in strategy. The strategy is designed to assure the continued survival of Kim Jong Il by ending Pyongyang's political isolation and fixing the North's failing economy by attracting more aid.

We do not know how far Kim will go in opening the North, but I can report to you that we have not yet seen a significant diminution of the threat from North to American and South Korean interests. Pyongyang still believes that a strong military, capable of projecting power in the region, is an essential element of national power. Pyongyang's declared military-first policy requires massive investment in the armed forces, even at the expense of other national objectives.

North Korea maintains the world's fifth largest armed forces, consisting of over 1 million active-duty personnel with another 5 million in reserves. While allied forces still have the qualitative edge, the North Korean military appears, for now, to have halted its near decade-long slide in military capabilities. In addition to the North's longer-range missile threat to us, Pyongyang is also expanding its short- and medium-range missile inventory, putting our allies at risk.

On the economic front, there are few signs of real systemic or domestic reform. Kim has recently shown interest in practical measures to redress economic problems, most notably with his trip to Shanghai. To date, however, he has only tinkered with the economic system.

External assistance is essential to the recovery of North Korea's domestic economy. Only massive food aid deliveries since 1997 have enabled the country to escape a recurrence of famine from the middle of the last decade.

Industrial operations remain low. The economy is hampered by an industrial base that is falling to pieces, as well as shortages of materials and a lack of new investment. Chronic energy shortages pose the most significant challenge.

Aid and investment from the South bring with them increased foreign influences and outside information that will contradict the propaganda of the regime. Economic engagement can also spawn expectations for improvement that will outrace the rebuilding process.

The risk for Kim is that if he overestimates his control of the security services and loses elite support, or if societal stresses reach a critical point, his regime and personal grip on power could be weakened. As with other authoritarian regimes, sudden radical change remains a possibility in Korea.

TENET: Mr. Chairman, let me focus on China, whose drive for recognition as a great power is one of the toughest challenges we face.

Beijing's goal of becoming a key world player, and especially more powerful in East Asia, has come sharply into focus. It is pursuing these goals through an ambitious economic-reform agenda, military modernization, and a complex web of initiatives aimed at expanding China's international influence, especially relative to the United States.

Chinese leaders have used solid relations with Washington as vital to achieving their ambitions. It is a two-edged sword for them, Mr. Chairman. China's development remains heavily reliant on access to Western markets and technology. But they also view Washington as their primary obstacle, because they perceive the U.S. as bent on keeping China from becoming a great power.

Perhaps the toughest issue between Beijing and Washington remains Taiwan. While Beijing has stopped its saber-rattling, reducing the immediate tensions, the unprecedented developments on Taiwan have complicated cross-strait relations.

In the election last March, President Jiang ushered in a divided government. Profound mutual distrust makes it difficult to restart the on-again, off-again bilateral political dialogue.

In the longer term, Mr. Chairman, cross-strait relations can even be more volatile because of Beijing's military modernization program. China's military buildup is also aimed at deterring U.S. intervention in support of Taiwan. Russian arms are a key component of this buildup. Arms sales are only one element of a burgeoning Sino-Russian relationship. Moscow and Beijing plan to sign a friendship treaty later this year, highlighting common interests and willingness to cooperate diplomatically against U.S. policies that they see as unfriendly to their interests, especially national missile defense.

On China's domestic scene, the Chinese communist leadership wants to protect its legitimacy and authority against any and all domestic challenges. Over the next few years, however, Chinese leaders will have to manage a difficult balancing act between the requirements of reform and the requirements of staying in power. China's leaders regard their ability to sustain economic prosperity as the key to remaining in power. For that reason, they are eager to join the WTO.

Beijing views WTO accession as a lever to accelerate domestic economic reform, a catalyst for greater foreign investment and the way to force Chinese state-owned enterprises to compete more effectively with foreign countries. But Beijing may slow the pace of WTO-related reforms if the leadership perceives a rise in social unrest that can threaten regime stability.

Chinese leaders already see disturbing trends in this regard. The crack down on the Falun Gong, underground Christians and other spiritual and religious groups reflects growing alarm about the challenges to the party's legitimacy.

All of these challenges will test the unity of the leadership in Beijing during a critical period in the succession process. The 16th Communist Party Congress next year will be an extremely important event as it will portend a large-scale transfer of authority to the next generation of Communist Chinese leaders. The political jockeying has already begun, and Chinese leaders will view every domestic and foreign policy decision they face through the prism of the succession contests.

Mr. Chairman, yet another state driving full recognition as a great power is Russia. Let me be perfectly candid: There can be little doubt that President Putin wants to restore some aspects of the Soviet past, status as a great power, strong central authority, and a stable and predictable society, sometimes at the expense of neighboring states, or the civil rights of individual Russians.

For example, he has begun to reconstitute the upper house of parliament with an eye toward depriving regional governors of their ex officio membership by 2002. He has moved forcefully against Russian independent media, including one of Russia's most prominent oligarchs, Vladimir Gusinsky, pressing him to give up his independent television station and thereby minimize critical media.

Moscow may also be resurrecting the Soviet-era zero-sum approach to foreign policy. As I noted earlier, Moscow continues to value arms and technology sales as a major source of funds. It increasingly is using them as a tool to improve ties to its regional partners -- China, India and Iran. Moscow also sees these relationships as a way to limit U.S. influence globally.

At the same time, Putin is making efforts to check U.S. influence in the other former Soviet states and re-establish Russia as the premier power in the region. He has increased pressure on his neighbors to pay their energy debts. He is dragging his feet on treaty-mandated withdrawal of forces from Moldova and is using a range of pressure tactics against Georgia.

Putin has also increased funding for the military, although years of increases would be needed to deal with the backlog of problems that built up the armed forces under Yeltsin.

The war in Chechnya is eroding morale and the effectiveness of the military. Despite its overwhelming force, Moscow is in a military stalemate with the rebels facing constant guerrilla attacks. An end does not appear close. There are thousands of Russian casualties in Chechnya, and Russians forces have been cited for their brutality to the civilian population.

Increasingly, the Russian public disapproves of the war. Because Putin rode into office on a wave of popular support, resolution of the conflict is an issue of personal prestige for him.

Recently, he transferred command in Chechnya to the federal security service, demonstrating his affinity for the intelligence services from which he came.

Despite Putin's Soviet nostalgia, he knows Russia must embrace markets and integrate into the global economy, and he needs foreigners to invest, plus public expectations are rising. Putin is avoiding hard policy decisions because Russia enjoyed an economic upturn last year, buoyed by high oil prices and a cheap ruble. But Putin cannot count on these trends to last permanently. He must take on several challenges if Russia is to sustain economic growth and political stability over the long term.

Without debt restructuring, for example, he will face hard choices through 2003. Russia will owe nearly $48 billion spread over the next three years. Domestic and foreign investment is crucial. Moscow recently announced that capital flight last year increased to $25 billion. Putin will need to demonstrate his seriousness about reducing corruption and pushing ahead with corporate tax reform and measures to protect investors' rights.

Mr. Chairman, let me just close with South Asia. And we can talk about the rest.

At this point, Mr. Chairman, I must report that relations between India and Pakistan remain volatile, making the risks of war between the two nuclear-armed adversaries unacceptably high. The military balance in which India enjoys advantages over Pakistan in most areas of conventional defense preparedness remains the same. This includes a decisive advantage in fighter aircraft, almost twice as many men under arms, and a much larger economy to support defense expenditures. As a result, Pakistan relies heavily on its nuclear weapons for deterrence. Their deep-seated rivalry, frequent artillery exchanges in Kashmir, and short flight times for nuclear capable ballistic missiles and aircraft all contribute to an unstable nuclear deterrence.

If any issue has the potential to bring both sides to full-scale war, it is Kashmir. Kashmir is at the center of the dispute between the two countries. Nuclear deterrence and the likelihood that the conventional war would bog down both sides argue against a decision to go to war, but both sides seem quite willing to take risks over Kashmir, in particular. And this, along with their deep animosity and distrust, could lead to decisions to escalate tensions. The two states narrowly averted a full-scale war in Kashmir in 1999. The conflict that did occur undermined a fledgling peace process begun by the two prime ministers. Now for the first time since then, the two sides are finally taking tentative steps to reduce tension.

Recent statements by Indian and Pakistani leaders have left the door open for high level talks. Just last week, Vajpayee and Musharraf conversed by phone perhaps for the first time ever to discuss the earthquake disaster. The process is fragile, however. Neither side has yet to agree to direct, unconditional talks.

TENET: Tension can easily flair once winter ends or by New Delhi or Islamabad maneuvering for an edge in negotiations. Leadership changes in either country could also add to tensions.

Kashmiri separatist groups opposed to peace could also stoke problems. India has been trying to engage selected militants and separatists, but militant groups have kept up their attacks through India's most recent cease-fire. In addition, the Kashmir state government's decision to conduct local elections, the first in more than 20 years, will project violence for militants who see the move as designed to cement the status quo.

Pakistan's internal problems, especially the economy, complicate the situation and further threaten what maneuvering room Musharraf may have. Musharraf's domestic popularity has been threatened by a series of unpopular policies that he promulgated last year. At the same time, he is being forced to contend with increasingly active Islamic extremists.

Final word on proliferation. I told you I was worried about the proliferation development of missiles and weapons of mass destruction in South Asia. The competition predictably extends here, as well, and there is no sign that the situation has improved. We still believe there's a good prospect for another round of nuclear tests.

On the missile front, India decided to test another Agni MRBM last month, reflecting its determination to approve its nuclear weapons delivery capability. Pakistan may respond in-kind.

Mr. Chairman, there is more to talk about, but I'll think we'll end. We've talked about a lot. I appreciate the opportunity, and we stand ready to answer your questions.

SHELBY: Thank you. We also look forward, Director Tenet, to a closed hearing with you later today.

TENET: Yes, sir.

SHELBY: Director Tenet, you've described some of the uncertainties as to whether China has ceased various proliferation activities that the Chinese government has pledged to end. Leaving aside any legal or policy judgments, can you assure the committee this morning that, as a purely factual matter, China is no longer -- no longer, Mr. Director -- engaged in activities that its agreed to stop?

TENET: Mr. Chairman, I break it in two categories. In my testimony I was clear about, I'm concerned about contacts on the nuclear issue, particularly. And on the ballistic missile pledge, we continue to monitor it and we believe they continue to make good on those pledges.

The point I make to you is, proliferation behavior is deeply embedded. We need to watch these carefully. We need to watch for signs of changes.

So the snapshot today may be a different snapshot six months from now, but...

SHELBY: But you're not telling us this morning, are you, as I read your words, understand your words that China is no longer engaged in the activities it's agreed to stop. We know the history there.

TENET: Sir, I'm factually presenting what we know to be true, in telling you, I'm watching contacts. There are contacts in some areas that are still worrisome that we watch very, very carefully. So I'm not giving anybody a clean bill of health.

In the close session I'd like to walk through what this evidence means.

The signal is, people make pledges. On the ballistic missile side...

(CROSSTALK)

SHELBY: And some people don't keep them, do they?

TENET: ... appear to be good. On the nuclear side, I have to watch. And this is not something that you can take to the bank.

SHELBY: Admiral Wilson, do you have a comment on that?

WILSON: I think you started out, "Can we assure the committee that these are not going?" And my answer would be...

(CROSSTALK)

SHELBY: As director of defense intelligence, can you assure the committee that China is no longer -- no longer, Admiral -- engaged in activities that it's agreed to stop?

WILSON: I could not assure the committee of that.

SHELBY: Mr. Secretary? Secretary Singer, could you assure the committee this morning that China is no longer engaged in activities, such as proliferation and weapons of mass destruction and so forth? That is, agreed to stop.

SINGER: We cannot provide that assurance today.

SHELBY: OK.

(CROSSTALK) SINGER: We cannot provide that assurance.

SHELBY: You cannot assure the committee, and, in other words the American people.

Director Tenet, I want to go back to the National Security Act of 1947 we're all familiar with. Much of the organization structure of the Department of Defense and the intelligence community is derived from the National Security Act of 1947. Today's structure is a result of the Cold War rather than a view to the threats of the future. We talked about this in committee before.

SHELBY: Hypothetically, if you were drafting the National Security Act of 2001, how would you organize the intelligence community of the future, because we have to think of the future and learn from the past. Who would be in charge of intelligence for the U.S. and what would be that person's duties? I said hypothetical.

TENET: That's a big hypothetical question, Mr. Chairman.

SHELBY: But it's something that we have to look at.

TENET: Yes. I take Senator Graham's comments in his opening statement as well.

I don't know if we'd design it the same way if we had it to do all over again. I think that the requirement for a director of central intelligence as someone who sits on top of a process remains an absolute necessity. The collection stovepipes that we've created over the past number of years -- one of the principle things we need to do is enhance collaboration and the flow of information across these stovepipes to move information faster than we ever have before.

Now, in the modern world of Internet technology, routers and switches, I would be concerned about wire diagrams when first we didn't apply modern technology on how to move information, create an analytical synergy that we continually work on, before I destroyed buildings and boxes.

The other thing I would say that is absolutely required is the relationship -- and Admiral Wilson may want to talk about this -- the relationship between the national community and the tactical community has to be shored up in a very substantial there. There is synergy there. Investments on the national side must be mirrored by what we do to provide support to our commanders in the field and the intelligence that we provide...

SHELBY: Talking about strategic versus tactical?

TENET: Yes. And, in fact, it should be a distinction without a difference. But resources and planning between the DCI and the secretary of defense have to ensure that CINCs have indigenous assets at their capability, analytical power at their capability, that meet their unique needs, so that you don't have off-loading from one side to the other and tension in a world that is already resource- constrained and an overabundance of requirements for us to meet.

Some people have talked, Mr. Chairman, about the creation of a single collection agency, taking the imagery SIGINT, putting it together in one place.

SHELBY: What would be your view there?

TENET: I think you just can't create a bigger bureaucracy and a more difficult situation. My preference and the challenge I think you should bring to bear on us is: How do we apply the modern collaboration tools in the modern world to bring collection together? When we design processing and exploitation tools for SIGINT or imagery, your challenge should be design it for both. Your challenge should be bringing disciplines together harder and faster than we have thus far to compete in the movement of information the way the modern world moves information. We have to be as fast and as agile as commercial competitors are in the private sector of delivering you...

SHELBY: As fast or faster maybe?

TENET: Well, as fast, sir, because the truth is is that wisdom in sifting out of facts is still an art form that we have a comparative advantage in. But adopting the web, collaboration with information technology, moving information faster, breaking down stovepipes, those are all issues that don't go to wire diagrams, but really go to the heart of what we've been trying to do over the last three years in our own program.

SHELBY: What do you recommend specifically? I know my time's up.

TENET: The specific piece that I recommend, Mr. Chairman...

SHELBY: We're talking about -- we've got you in a hypothetical.

TENET: Well, it's hypothetical, but we're working on it today. We need to take modern web-based technology and...

SHELBY: Absolutely.

TENET: ... apply it to our business relentlessly.

It frees money for mission, it lashes up our analysts and collectors in ways that it hasn't done before, it is proven that we can overcome the security concerns that are involved in it, and we need to act like a modern corporation acts in terms of information flows. I think that's at the heart of it, but it's not just the intelligence business. It's how we communicate with our embassies and bases overseas, how we communicate with our military commanders.

The communications backbone for the national security infrastructure at-large is something no one pays attention to. The truth is we don't have the bandwidth we need, the truth is we haven't lashed up, and we don't move data in pipes the way we need to. We've got to put digital data imagery, diplomatic information in tubes that connect this world in ways -- the United States has to connect itself, if it's going to work more efficiently.

SHELBY: We're going to have to do this. I know Senator Graham has been generous with putting up with my time. Senator Graham, you can pursue what you want to.

GRAHAM: Thank you, Mr. Chairman. Mr. Chairman, I would like to defer until the end, when the Democratic senators have had an opportunity to question, so that our new members can put their questions now.

So if I could, I'd like to defer to Senator Rockefeller.

ROCKEFELLER: Thank you, Senator Graham.

First of all, I want to say that I thought all three of the written testimonies were absolutely superb and at a higher level than I'm accustomed to receiving in the other committees that I serve on and highly focused and very, very interesting.

ROCKEFELLER: If there's anything that can be said about Chinese history it's they've never -- over 5,000 years, they've never understood stability. There's never been a day of stability, there's never been a day of democracy, never been a day when there hasn't been either warlords or outside groups or somebody trying to disrupt.

So you come to this phenomenon recently of the Falun Gong, which we focus on and almost interpret what China will become or is becoming or what its fears and paranoias might be. But in fact, if they -- I guess they now estimate 2 million, down from 5 million, members. Does this show simply a traditional Chinese instinct which is made uncomfortable by disorder, which has a very long and a very well- deserved history? Or is this at play something between the older leaders and the emerging leaders to which you refer, which will become more apparent at the next party congress?

I'm just interested in the by-play of the religious movement and the contest for leadership.

TENET: I'm not a Chinese expert, but my take on all this, in trying to think through what all this means, Senator, is the Chinese people are searching for an ethos that they don't currently have, that the communist ideology doesn't provide them.

What is shocking to the government about the Falun Gong, or any other mass movement, is just the fact that it exists, the fact that they showed up and demonstrated and surprised them, the fact that they're organized, the fact that they communicate on the Internet.

So all of these things, in addition to whatever ethos Chinese people are searching for that's not being provided, portends an enormous organizational challenge to what the Communist Party believes its legitimacy is.

So all of these forces at work -- the changing Chinese economy, the disparity between rural and urban Chinese areas, the party corruption that is so rampant -- all of these things create a cauldron that we have to pay careful attention to.

And you can keep focused on all the other things, but the next five to 10 years, from my perspective, the interesting question is, tell me what the political framework in China is going to look like when all these forces get unleashed, tell me what the price is the regime will pay for WTO accession and how it manages all that and can you keep all that boxed up?

You know, it will be very interesting.

But I think, in addition to their military modernization and their outreach in Asia, the other things that we're concerned about, proliferation behavior, we need to pay careful attention to this internal target to understand what it's about.

ROCKEFELLER: Well, one reason I raise that -- and this all was in the newspapers -- was there was some suggestion that, for example, in the 1996 missile launches on Taiwan -- which, in fact, I guess, ended up being empty -- the missiles were empty, but nevertheless they took off and landed, went over, fell short -- but that there was some question as to whether those, in fact, were ordered by younger officers in the PLA as opposed to the more senior officers, and therefore does that portend something when you say we need to watch, over the next five or 10 years, about what leadership patterns emerge. That's, kind of, a symbolic way of asking that question.

Admiral?

WILSON: Senator, let me weave together an answer to that question and build on what the DCI said in commenting on the Falun Gong.

The Chinese leaders are riding a tiger.

WILSON: They recognize that, and they fear it. For all of the social, the economic, political problems that they have, the tensions that could arise and topple them at any time are very great.

Falun Gong attest to the absence of any kind of a spiritual identity. Marxism as the god that died, nothing has replaced it. Materialism, as Deng Xiaoping's goal, isn't filling a gap. Falun Gong, in its existence, its combination of philosophy and martial arts and its connectivity, using the Internet, that -- the DCI is absolutely right -- leaders were shocked that groups that were as large or as widespread across the country as the Falun Gong...

ROCKEFELLER: No, I understand your question. And that question was basically answered by the director. I've moved onto another question, and if you don't care to answer that in public, then tell me so.

And it was the interest or the difference between the younger PLA as opposed to the more experienced, older, senior military leaders, in terms of the 1996 attack and what that portends for, what the director indicates, the next 10 to 15 years that we have to watch very closely.

SINGER: A specific answer to what may have been the most important question you ask on the missile launches, I don't believe we have any evidence that they were not fully sanctioned by the chain of command. Whether or not they thought that through well, in terms of the consequences, of course, may have been a post-launch debate because of our reaction.

And I believe there is a lot of debate on the military side in China about what the right strategy to follow is. But on the missile launches, no evidence of rogue, for example, officers doing anything.

TENET: You've asked, Senator, if we can come back to you with it. You've asked a very important question about what the generational change looks like. The implication of your question is that the younger generation may be more vehement about maintaining regime control than we know or think. But that's something we should come back to you on. Let me get some people to work on that for you and tell you what our view is.

ROCKEFELLER: Thank you.

SHELBY: Senator Roberts?

ROBERTS: Yes, thank you, Mr. Chairman. We have the Bremmer commission, the Gilmore commission, the CSIS study, the Hart-Rudman commission and several others. The Hart-Rudman commission and General Boyd (ph) just released their findings about a week ago.

And they said that homeland defense, in regard to terrorism, is now our number one national priority in regard to American security. When we asked Secretary Rumsfeld some questions on the Armed Services Committee, "What keeps you up at night?" He talked about terrorism. He talked about access denial. He talked about homeland defense. And he talked about the need for an adequate and beefed up intelligence capability.

Would you agree that this is now our number one national security priority?

TENET: I agree with your statement, sir.

ROBERTS: We're going to have a hearing. I say we -- Senator Gregg, who is the chairman of the Justice Department Appropriations, where they are the lead agency in regards to terrorism, and Senator Shelby is going to be participating in that, the distinguished chairman. I'm going to, as the chairman of the Emerging Threats Subcommittee, and Senator Warner of the Armed Services Committee.

We have identified 46 federal agencies that have some degree of involvement and jurisdiction in regards to the homeland defense issue, the terrorism issue. And we talk about stovepipes, if we have 46 agencies, it seems to me that we better get at it and try to get our arms around it in better fashion.

We've made progress; don't misunderstand me. We're going to invite you or your designee to attend. We're going to ask: What's your mission? What do you do? And who do you report to?

I can tell you the chart, in regards to the 46 agencies, looks a lot like other charts that we -- well, that are very confusing, to say the least. So we'll welcome your participation in that hearing.

Submarines: Rear Admiral Fages testified before the Armed Services Committee last year and said the following: "Employing currently available on-board imagery, SIGINT equipment and unmanned remotely controlled air and undersea vehicles, in the future, the submarine can gather intelligence that no other national asset can duplicate."

Director Tenet, do you agree with the value of the submarine force in the critical intelligence collection efforts of the U.S.? You're answer is yes, right?

TENET: Yes, that's very important to us.

ROBERTS: Right, thank you.

Then, will you enthusiastically support the Navy in obtaining the number of submarines they need to meet your mission requirements? TENET: Maybe.

ROBERTS: Maybe? Will you enthusiastically maybe support that?

TENET: Sir, when we make all of these collection decisions, I look at a whole range of investment decisions and collection items. The submarine is an important component, as is my overhead satellite constellation, as is my human...

ROBERTS: I know, they're all important.

TENET: No, but the balance is right...

ROBERTS: I know the balance is right. Let me give you my little editorial.

You know, yourself, that when we invite you up to the Intelligence Committee, when the distinguished chairman, the ranking member have you come up, it's usually a gee-whiz deal.

ROBERTS: "Gee-whiz, why did that happen? Oh, my gosh." And then when we take a look at how we get the intelligence, how we assess it and so on and so forth, and it worries me that we're headed for some problems.

Now, I'm quoting from some testimony that's public, so I'm not going to get into the closed session hearing, but I think you can tell where I'm headed.

TENET: Yes, sir.

ROBERTS: Page four of your testimony: "Russian entities are a significant source of dual-use, biotechnology chemicals." Dr. Pak, P- A-K, who is the Russian munitions agency head, came to town just a couple of days ago and assured Chairman Warner that the Russians are no longer making any biological weaponry and chemical weaponry.

I am in charge of the program, the CTR program, the Cooperative Threat Reduction program and the money for that. I need to understand that the Russians are telling us the truth in regard to their efforts in regard to nuclear, chemical and biological weapons for programs. I need an assessment. You'll probably tell me that you're going to go to that a little bit more in closed session; is that correct?

TENET: Yes, sir.

ROBERTS: I want to send a little message to Dr. Pak that you're going to do that and that they have to be, not only transparent, but they have to assure us that that is taking place or the money will not be forthcoming.

Lieutenant Commander Michael Speicher, KIA in 1991, MIA in 2001. President Clinton said the following, as of last month, he indicated that the commander might still be alive. "We've already begun working to try to determine whether, in fact, he's alive; if he is, where he is and how we can get him out," the president said, "because since he was a uniformed service person he's clearly entitled to be released, and we're going to do everything we can to get him out."

Senator Shelby, Senator Smith more especially, who came on the issue in 1996, I came on it in 1998, feel we've lost one of our own and we've left him behind. We think the system failed, we're trying to fix it.

Written testimony, if you could respond to the following questions. Please describe in regard to our efforts to establish within the intelligence community, quote, "An analytic capability with responsibility for intelligence and the support of the activities of the U.S. relating to POW and missing persons." We passed that in the authorization bill. We hope that there's been a big change, and I need to know the progress you've made in establishing this capability in regard to status, budget and the breadth of its activities.

To what extent has the new capability drawn on the resources of the DIA? I want to thank Admiral Wilson for his excellent work in this respect. I want to make sure that Admiral Wilson's right arm knows what your left arm is doing or vice versa. What is the role of the DIA as an organization, the DIA personnel in establishing this capacity?

And lastly, has compliance with this legislative directive changed the organizational relationship of the previous existing office structures within the CIA and the DIA? And I hope that's the case, and I would request a written report.

Now, on the same subject, just a couple of months ago the IG of the CIA and DOD gave a "noteworthy" -- I'm quoting -- "noteworthy assessment of the intelligence community support of the Speicher case, and, in fact, for the general quality of intelligence support for the POW-MIA matters."

I don't agree. I think it's noteworthy all right, but it's not the same connotation that was in that report.

Were the factors that contributed to this allegedly high-level work in place in the early and mid-'90s, when must of the effort now regarded as incomplete -- and that's the nicest way I can put it -- in regard to the Speicher case, were they considered in that IG report?

TENET: I don't know, sir. I'll have to check for you. I don't know.

Do you know?

(CROSSTALK)

SINGER: Did the IG look back as far as we had records dealing with the issue, but it was an independent investigation...

ROBERTS: From '91 up to '96, were those factors considered, Tom?

SINGER: As far as I know they were, sir.

ROBERTS: How on Earth could anybody reach the conclusion that they were noteworthy and excellent? That's beyond me.

SINGER: The conclusions reached were the independent actions of the IG, DOD and CIA IG.

ROBERTS: We might want to have the IG up for a smaller hearing, Mr. Chairman.

Was the evaluation of the IGs based on process alone, or did it also evaluate the extent to which substantive information was developed and analyzed or the utility of intelligence for operational and policy purposes?

You mentioned before, getting this information is one thing, and assessing it is another thing, and then the trigger to get it out to the field is another thing. Now, this is not -- I guess, the USS Cole example is a better example of that, but that's where I'm headed.

You assessment of that, Admiral?

WILSON: I think they evaluated the intelligence work and not the policy bulk of it.

ROBERTS: Or the assessment?

WILSON: Right.

ROBERTS: Well, I have a lot of trouble with that and I think it's certainly worthy of expiration now, after those questions. Thank you for the job you do.

I note that you have a regional situation here.

I haven't gotten my note yet, Mr. Chairman, so I'm going to go ahead.

I think on your regional assessments, you talked about the drug issue in regard to all the countries in the Southern Command, in the Southern Hemisphere, Hugo Chavez and Venezuela and about 20 percent of our oil supply from Mexico and Venezuela, immigration -- not only drugs, but immigration. I'm trying to get people to understand that the Southern Hemisphere, Latin American, and more especially Mr. Chavez, is equally important in vital national security interests, as is the Balkans. Would you agree?

TENET: Well, it's important, sir, absolutely given the oil relationship. I didn't mention him in the testimony, but we're prepared to go over that road.

ROBERTS: OK. Thank you.

SHELBY: Senator Feinstein?

FEINSTEIN: Thanks very much, Mr. Chairman.

Mr. Tenet and gentlemen, I want to just associate myself with the remarks of Senator Rockefeller. I think your written testimony is excellent, but Mr. Tenet, let me particularly say that I think your, kind of, state-of-the-world from the intelligence perspective that you just presented to us was really top notch.

TENET: Thank you.

FEINSTEIN: I want to say thank you very much.

Let me ask you this question, and I have three questions. If you had to identify, from a United States national security interest perspective, recognizing that missiles can come in suitcases as well as be launched across the Pacific, what would be the three most dangerous proliferators of fissile and missile technology? Who would the three most dangerous countries be today?

TENET: The most important proliferators, as I indicated in my testimony: Russia, China, North Korea. And then the secondary suppliers and the beneficiaries of those proliferation activities, the Pakistanis, Iranians and others, create a second chain of activity. So you know, the kind of technology flows that we see from big states to smaller states and then the inclination of those people who do the secondary proliferation I think is what's most worrisome to me.

The motivation in behavior here is usually not just about money, it's about strategic interests, It's about leverage in parts of the world that people are interested in. It's about what's left in terms of my ability to influence getting you to do something.

And so, as I rate it, I think we have a keen sense of the first tier, and then what the second tier does subsequently. I think it will be next year I'll be talking to you about the implications of secondary proliferation. In other words, the Iranians acquire all this capability. The Russians are intimately involved in helping them develop a ballistic missile. There's nuclear assistance. Where do the Iranians go with that? What set of relationships are they trying to influence?

FEINSTEIN: Sir, where I'm going with this is, as we begin to debate national versus theater missile defense, it seems to me those secondary people become very important in terms of what kind of a missile shield one is going to develop that's really going to be effective against what the future potential threats are.

I mean I, for one, don't worry as much about a single North Korean missile coming across the Pacific as I do other things that could be delivered in a much easier way and would obviously not be impacted by a missile shield.

TENET: All I can say, Senator, is that without trying to get into the policy issue of the what kind of, and the technology, there is an integral relationship between a medium-range ballistic missile and the evolution to an ICBM or a space-launched vehicle. So while you can compartment it in one way, in another way, it's the direct point assistance that allows that MRBM the growing capability to a longer-range capability.

The question you have to ask yourself, what are those time lines, how fast do I have to be ready? Do I have the luxury of making the bifurcation between theater and national missile defense? And is there some causality between the two?

But I'm trying to give you a very synergistic set of relationships that require the policy-makers and you to make plans about, about which, as we know historically, there is the great possibility for surprise here, largely derived by how much foreign assistance is involved in developing these programs.

So the Shahab-3 of today, you know, we can put you on the time line of how fast do the Iranians get to an ICBM capability. And we'll move you out to the right a number of years. Tell me how much Russian and Chinese assistance is in that program. I'll tell you how fast they'll get there. You then have to make a decision about how you balance those things. It's difficult to be sure, very, very difficult.

FEINSTEIN: So, if I understand you, if you had to say the most dangerous -- I used the question proliferators, but let me change it -- recipients of proliferation materials in terms of impacting our national interests, who would the top secondary tier be?

TENET: Well, you have to worry about the Iranians. You have to worry about what the North Koreans are going to do and who they proliferate.

Look, the whole -- let's take the Middle East as a region right now. Everybody has a medium-range ballistic missile capability. Libyans have one, the Iranians have one -- everybody wants to acquire that capability. So in essence, I would say to you, U.S. forces in the region are already at risk.

TENET: Now the question is how far does it vibrate? Where do the Russian, Chinese, North Korean relationships take you over the course of time and how fast do they proliferate to technology? How much money do they want to make?

So it's a hard question, I'm not trying to be evasive, but there's no easy answer here. And this threat continues to migrate. You have a couple of choices: choose to do nothing about it or you can choose to figure out what the appropriate defensive posture should be in your own thinking about offense and defense...

FEINSTEIN: Now, in view of my first question -- I don't mean to cut you off...

TENET: No, I'm sorry.

FEINSTEIN: ... but I've got three questions I want to ask.

TENET: Apologize.

FEINSTEIN: The second question goes then to the election that took place in Israel last night, or yesterday...

TENET: Yes, ma'am?

FEINSTEIN: ... and the impact that you see for the intelligence community of that election, specifically as it might impact added violence.

TENET: I think at this point to speculate on that would be a big mistake. I think we ought to let this settle for a while and see what transpires, see what the dynamic is between the Sharon government and the Palestinians, but try not to make any conclusions about where this is going to go. I think that would be a big mistake on my part. And I could speculate, but I don't want to do that here.

FEINSTEIN: Do you believe that Asian and European countries, in terms of their opposition to missile defense programs, differentiate between theater and national missile defense?

TENET: I don't know the answer to the question. I need to get back to you about that.

But let me also say something else to you about foreign reactions to missile defense. It's interesting, it's, sort of, free at this moment. There is nothing to react to other than a concept at this moment, so it's free for everybody.

So people portray what they may or may not do, and indeed we can posit what reactions will be on the part of the Chinese and Russians and others, but the fact is there isn't a program to react to and the consultative process hasn't occurred yet, even though there may be some downstream reactions.

But I will come back to you on that question. I don't have a clear answer in my head.

FEINSTEIN: Thank you very much.

Thanks, Mr. Chairman.

SHELBY: Senator Thompson, we welcome you to the committee and we recognize you.

THOMPSON: Thank you very much, Mr. Chairman.

Gentlemen, I'd like to ask you your views as to how you perceive the attitude of the leadership of the Chinese government toward the U.S. today. And leading up to that, I might say, it seems to be one of the most difficult thing our country faces is how to deal with another great power that may turn out to be friendly, that we're trying to make friendly, that we're trying to engage, while realizing at the same time things may not work out the way we want.

We understand that economic reform is taking place in China, there are pressures there bringing that about -- economic pressures. We also understand from what you say in your statements here that they are in large part dependent upon Western markets and Western technology. We are opening trade with them, obviously. We are sending them some of our most sophisticated high-performance computers.

We, over the last several years, have overlooked much of their proliferation activities. We've caught them time and time again with regard to their activities in Pakistan, with regard to their activities with Iran and so forth.

It seems that, while obviously they're one of the countries that prefers that we not have a missile defense system, certainly along the lines of what we're discussing, that we have reached out in that direction.

But we also know that they are engaged in military modernization and buildup. That includes nuclear. That includes their ICBM forces, as well as their strategic missiles that could be used in the straits.

We know from what you tell us they intend to expand their area of influence. They certainly intend to be a major East Asia power.

THOMPSON: And they look upon us as being the prime threat to that. You've mentioned the possible pending treaty with Russia, which is, I think would be fair to say, in response to how they perceive the United States in many respects -- anti-U.S., I think it would be fair to say in many respects.

And we also know they continue their proliferation activities. What they're doing today we might debate on. But we know for the course of several years -- well, you still have them listed, along with Russia and North Korea, as leaders in weapons of mass destruction technology proliferation.

So that all being part of the background, we now see, recently, publications, such as the "China National Defense 2000" white paper that the PRC released in October of 2000. And it noted what they called "new negative developments in the security situation." And most of the negativity had to do with the United States of America, actions that the United States had taken.

This paper is the one that suggested that they might take all drastic measures possible, including the use of force, if Taiwan refused to negotiate on reunification.

And recently, Michael Pillsbury -- I guess not that recently -- came out with a compilation of "China Debates the Future Security Environment." I don't know if you're familiar with that work or not, but it's a collection of most of the prominent Chinese writers and their assessment of the situation. And I think it can be fairly characterized as concluding that -- for the most part, they're not in total agreement but pretty much so -- the United States is in decline, that conflict was pretty much -- conflicts of interest, anyway, were inevitable, and really very negative assessments as to what the future would hold.

And were you surprised at the relatively harsh tone of the 2000 white paper? And what do you make of these writings by their intellectuals and leaders, military experts, that seem to be -- while I think the American people and we, for the most part, think that we're making substantial progress in this outreach program that we have, that underlying all of this, we have a substantial buildup and some very increasing -- seemingly -- to me, anyway -- increasingly harsh rhetoric about what the future holds?

Would you just discuss that for a few minutes with us?

WILSON: Senator, you've identified a large number of very important and interrelated questions. I'm going to pick out a few of them.

The first was how we think Chinese leaders view the United States.

Ambivalent is my short answer. We are terribly important to them for development, for the peaceful international environment which has enabled them to make the tremendous progress that they have over the last two decades.

They aspire to be a major player. They think of themselves already as a major player.

We are the key -- it's not just the obstacle, but the key to their success. When they see manifestations of a unipolar world, it makes them very uncomfortable. We are it.

They need us for development. They worry about us on Taiwan. Taiwan is a neuralgic issue and their...

THOMPSON: Excuse me. When you say they need us, you're talking about markets, you're talking about goods, you're talking about our technology?

WILSON: And not having us as an enemy. Their ability to deal with their internal problems is dependent in no small measure on them not having to deal with us as an active adversary, or the unsettled condition in Northeast Asia where we have an adversarial relationship with them.

The other point I would like to pick out is in the way in which the Chinese talk about us, our military. In some respects, it's a mirror image of the testimony that all of us have prepared. We talk about Russia and China, not small and less significant countries.

As they think about challenges, as they think about what kind of military they aspire to, we're it. We're the yardstick.

And if you go to justified budgets in China, you need a formidable adversary.

WILSON: The white paper is more negative than the last one which they produced. I believe that reflects, in part, the political cycle in China and, in part, the perceptions of where U.S., China, Taiwan were -- you know, WTO, and so forth -- at the time it was being prepared.

THOMPSON: All right, let me -- well, my time is up, I see.

SHELBY: Senator Kyl?

KYL: Thank you, Mr. Chairman.

This last weekend in Munich, at an annual defense conference called Wehrkunde, a number of NATO ministers, including Secretary Rumsfeld and also State Security Secretary Igor Ivanov, of Russia, made presentations.

And Ivanov made the point that an alternative to ballistic missile defense, which, of course, he opposed the United States deploying, was export controls.

I had the same reaction that you just did, Mr. Tenet. And let me quote a couple of things you've said and ask for your reaction. Among the things you said in your testimony were that: "I cannot underestimate the catalytic role that foreign assistance has played in advancing these missile and WMD programs, shortening their development times and aiding production." You were referring to the lesser countries in development of their programs.

You began by discussion of the Russian program. Russian entities, last year, continued to supply a variety of ballistic missile-related goods and technical know-how to countries, such as Iran, India, China and Libya. Indeed, the transfer of ballistic missile technology from Russia to Iran was substantial last year and, in our judgment, will continue to accelerate Iranian efforts to develop new missiles and to become self-sufficient in production.

You went on to talk about the support for the Iranian nuclear program as well as some other dual-use transfer of technology for biological and chemical weaponry.

Would it be correct to conclude that export controls and arms control agreements and sanctions have failed to stem the acceleration of proliferation of missile and weapons of mass destruction technology to these kinds of countries? TENET: Senator, the fact is that the Russian export control system has almost been nonexistent. So, you know, I can't prove the negative. In other words, if you had an export control system that was enforceable, that when we went to the Russians with specific cases, action was taken against it, and you understood precisely the input and output, then we might be able to have a reasonable debate.

But in and of itself, in the current situation, Russia export controls, in the absence of real policy to shut a border down and take action, I'm afraid would be ineffective, in and of itself.

KYL: As a matter of fact, they've made numerous and repeated commitments to us, specifically with respect to Iran, that they would not transfer this kind of technology, have they not?

TENET: Yes, there have been -- and we can talk about it in closed session more fulsomely -- but there has been a great interaction on these things.

And we understand -- I understand the problems of, you know, many companies, many research institutes -- I understand all of those issues. But it's counter-intuitive that what was once the Soviet Union can't get on top of the situation as difficult as this one appears to be from our perspective. And it's also counter- intuitive as to why the Russians would like to see an Iranian ballistic missile capability develop that could also, you know, threaten them and their interests in some way, shape or form.

So, you know, in many ways, this Russian-Iranian relationship, from my point of view, has been the proximate cause of a great deal of worry about how we are going to be able to deal with these threats in the future.

KYL: And it's also true -- and you infer this or maybe even directly state it in your testimony -- that you might start with a country like Russia, which may assist a country like China, which may assist a country like North Korea, which then may sell to another country. So this becomes synergistic among the countries participating, as well.

TENET: Those are the kinds of relationships that are most difficult for us to understand. So while you're looking at the front door, it's the back door and the nexus of relationships that you and I would not normally believe would extent because of geo-political issues or traditional -- you know, we work very, very hard at understanding what these webs look like. And I think that's my greater -- the secondary proliferation issue is the one that I'm worried about the most.

KYL: Also, in response to Senator Feinstein, I think you made a point that really bears repeating here, because, as you point out, the biggest -- and incidentally, there was a recent report provided just last week to the committee, which talked, among other things, about the assistance by Russian entities helping Iran save years in the development of Shahab-3 program, playing a critical role in Iran's ability to develop more sophisticated and longer-range missiles. You made the point to Senator Feinstein, as I understand it, that surprise is a key problem here for us. We simply don't know. And that the biggest contributor to surprise is the assistance by countries like Russia or China, for example, because instead of having to rely upon an indigenously produced program, which we can monitor, you never know when that transfer of technology has aided a country like Iran.

TENET: And as these countries become more sophisticated indigenously, that assistance becomes a bigger driver in someone's ability to complete their work.

And the other thing is that people need the -- we are not talking about unsophisticated countries. When you talk about Iraq and Iran, people need to understand these are countries with sophisticated capabilities, sophisticated technology, digital communications.

TENET: So you're not aiding -- this is not some Third World relief effort that the Russians are engaging in. There's already extant a base that people can build from that is my greatest worry. It is that foreign assistance piece that you have to have that very precise intelligence to understand and sometimes you get it and sometimes you don't.

But these time lines all become illusory when we put time lines on graphs. They don't mean very much in that context.

SHELBY: Including engineering and scientific capability in that, right?

TENET: The human dimension of this is that it's most difficult to understand and track.

KYL: Thank you very much.

SHELBY: Senator Wyden, we welcome you to this committee.

WYDEN: Thank you, Mr. Chairman. I'm pleased to be able to serve.

And, Mr. Director, pleased to have this time with you.

My first question would be how would you assess the willingness and the ability of the Palestinian Authority today to control violence in Gaza in the areas of the West Bank under its control?

TENET: Senator, I'd love to talk about all this in closed session, but I think that having this kind of discussion, in light of this recent election, in the open is not going to help anybody.

WYDEN: I respect your desire, and know that the election changes it, but that's why I asked about the PLO and their current capability. And if you want to pursue it in closed session, we'll do that.

TENET: I'd be pleased to do that, sir.

WYDEN: With respect to terrorism, there is no question that modern terrorists today are not technological simpletons. These are very savvy, sophisticated people. And I've been particularly concerned about the published reports of late that terrorist groups are using free encryption Internet programs. And I would like you to tell us, and I would hope that we could discuss this a bit this morning, whether you see the use of such an approach increasing and what you attribute it to.

TENET: You attribute it to operational security, ease of use, access to large numbers of people for recruiting or financial gain. You attribute it to the same reasons that you or I would use the Internet or any company would use the Internet: either sell your product, recruit people to your company, get your products known to people and it's also, from a security perspective, much more difficult to track.

So, you know, you recruit people on Internet sites and you use encryption. You move your operational planning and judgments over Internet sites by use of encryption. You raise money -- non-profit organizations who have a direct relationship to terrorist organizations because the money is fungible, all of this -- we're in the modern world, they're in the modern world and it's not very, very difficult.

WYDEN: And you see increased use inevitable as a result of the fact that these products are...

TENET: Absolutely. Absolutely, and it raises -- I mean, if -- we should talk about more of this in closed session. But from an operational perspective, you know, particularly if you're based in the United States and you're an American, you have those rights. Well, you know, getting the predicate to have legal action to sort of do all the FISA kinds of things that matter is a difficult proposition to understand their operating environments as well and how laws protect your ability to operate.

WYDEN: And I do want to discuss this more with you in the closed session.

TENET: OK.

WYDEN: Admiral Wilson, a question for you about Cuba. Is Cuba, in your view, a military threat to the United States?

WILSON: Cuba is, Senator, not a strong conventional military threat, but their ability to deploy asymmetric tactics against our military superiority would be significant. They have strong intelligence apparatus, good security and the potential to disrupt our military through asymmetric tactics. And I think that is the biggest threat that they present to our military.

WYDEN: What would be an example of an asymmetric tactic that you're speaking of?

WILSON: Using information warfare or computer network attack, for example, to be able to disrupt our access or flow of forces to the region.

WYDEN: And you would say that there is a real threat that they might go that route.

WILSON: There is certainly the potential for them to employ those kind of tactics against our modern and superior military. WYDEN: What can you tell us, again in a public session, about the state of Mr. Castro's health, his most likely successor, the whole question of a transition to Cuba? And I've got a little bit of a bias: My dad was an author who died not long ago and he wrote a book about the Bay of Pigs called "The Untold Story," and the family is especially proud of it, so I have an interest in this area. And, again, this is a public session, but what could you comment on publicly in this regard?

WILSON: Well, I think the DCI probably has better information. I would say if you look at the track record of predicting the decline in his health for the last 30 years, it tells you you shouldn't go too much further in trying to predict it for the next few years. The DCI probably has...

SHELBY: He's got a great gene pool, that's all I can say. I think he's going to be around for a while.

WYDEN: Right. I want to talk about that some more in a closed session.

Mr. Chairman, I thank you and very pleased to be with you and Senator Graham, two colleagues I have especially enjoyed working with. And I thank you.

SHELBY: Senator Durbin, we also welcome you to the committee.

DURBIN: Thank you, Mr. Chairman, I have a lot to learn, and I confess that, and I hope my questions are reasonable, in light of my new arrival on this committee. I'm still struggling with robust, transparent and asymmetrical.

(LAUGHTER)

When I get those nailed down I'm going to be in much better shape here.

On the question of proliferation, we tend to focus on nuclear, biological and chemical weapons. But, Director Tenet, I'd like to ask you, do you feel that there is any danger that the United States' sale of what we term conventional weaponry around the world, creates destabilizing situations?

TENET: I never thought about it from that perspective, to be honest with you.

We pursue these relationships -- I mean, from the perspective of how other people perceive them, perhaps, but there's a difference between our pursuit of our legitimate needs to help allies and friends beef up capability. And, certainly, we take very rigorous steps to ensure that we don't put out technology that we don't want to maintain a unilateral advantage in for ourselves, versus a mentality on the part of some countries that everything's for sale; you can have anything you want in the inventory.

So I guess I don't, but I need to think about it a bit. I haven't thought about it from that perspective.

DURBIN: If you would reflect on it, you might look at this morning's paper, where Argentina has said that it's not interested in an arms race with Chile, despite our sales of F-16s from Lockheed Martin to Chile.

And it raised a question in my mind -- South America was the first time it came to my attention, where we were selling what appeared to be off-the-shelf, fairly conventional weaponry, but inviting rivalries and many arms races in parts of the world that, frankly, need to be investing in a lot of things, including their own security. And I'd like to pursue that with you at some other time, because as you've said, it is something we both should think about a little more. A year ago I went to Africa to take a look at food programs and microcredit, and I was overwhelmed by the AIDS epidemic. That's what I ended up focusing on, and I've been focusing on it ever since. And if the figures I remember are correct, 25 million infected people -- HIV-infected in Africa, 12 million orphans. And now I read last week that one out of every five South Africans is infected with HIV.

I've also read that, even though these staggering figures tend to point to that continent, but the fastest growth in the AIDS epidemic is in India.

Can you comment, and I know you already have in your opening statement here, what is the impact of this kind of epidemic at these levels on Third World countries, in terms of our future relationship with them and our responsibility?

TENET: Look, we've done a lot of work on this, and we'll catch up on it, in terms of infectious diseases, demographic changes, population shifts, all the things that -- but for a continent like Africa, the devastating quality of what it does to civil life: How it undermines leadership structures, how it just basically takes generations out of play, can't be undermined. You create even bigger disasters than already exist. And then you have refugee flows, and then you have economic disasters, and then you have civil wars that result that require exfiltration and some kind of involvement whether you choose to or not.

And while we all believe we're immune from all this, we're not immune from all this, because if you are our European friends and you look at the epidemic and you look at it migrating north to North Africa, then you composite a situation where refugee flows become the very serious issue for you.

So the human devastation here and its impact civil society, government, the ability to relate to people, all, I think, are traumatic, in terms of the impact.

Now, the question is: How do you influence all that? And what do you try to influence at the end of the day? And what tools do you have at your disposal?

So, you know, healthy populations are always going to be better than not, because you're just creating this enormous dislocation that at some point somebody has to be responsible for.

DURBIN: The reason I raise it, during the course of the last presidential campaign there was asked about what is our strategic and national security interest around the world. And some interesting lines were drawn by each of the candidates between peacekeeping and actual defense of Americans and our territory.

This strikes me as something that falls between. It is just as threatening and destabilizing over the short and long term. And, frankly, if we ignore it, it is at our peril, if I understand your answer. And I hope that, if that is our conclusion, that we will take it to heart when it comes to some of the things that we'll pursue here.

A few months ago, I joined Senator Jack Reed of Rhode Island and went to Colombia and met with President Pastrana. My first trip to South America. And I don't profess to be an expert, but I was overwhelmed by what I found there. And I think you've described it very well in your opening statement; basically eminent breakdown of control in the country. A country where a helicopter rides over coca production just -- you see endless acreage, ultimately destined for the United States primarily and partially for Europe.

Interesting to me, though, that when we started on Plan Colombia how lukewarm the rest of South America was about the idea. How do you explain that?

TENET: Part of it's use, part of it is our involvement, but the truth is they are going to pay a lot more attention, because of the spillover -- the potential spillover out of Colombia. As we make progress against the FARC and the drug trafficking organizations, which is our primary motivation, it's going to spill over into those countries.

So getting the regional partners to step up and understand that they have a vested interest in also paying attention to this, is going to be very important, because this ameba will just migrate -- migrate out as you do this.

And while production numbers of cocaine for Peru and Bolivia are down this year compared to Colombia -- Colombia is still rising -- those countries are not immune from a resuscitation of all that, notwithstanding the important work that they've done in trying to stop the drug flow. But these cartels and the money involved will simply move into these other places. So there's got to be regional support for Pastrana, because they're all going to face it.

DURBIN: I felt that one of the major issues is whether the Colombian army was professional enough to do the job. And the police force had a very good reputation, the army did, but its leader had just left. And I wondered, Admiral Wilson or Director, if you could comment on that?

WILSON: Senator, I think that the Colombian army is making improvements, but they do have severe weaknesses in mobility, in command and control, and intelligence against what we all know to be an extraordinarily difficult problem, which is an insurgency.

And so, while they're making progress and they can protect the cities, being able to control the countryside is very difficult.

DURBIN: Mr. Chairman, I can't see the lights from where I'm sitting; if my time's up, please let me know.

SHELBY: It's up.

DURBIN: Is it? Thank you very much.

SHELBY: Senator Levin? LEVIN: Thank you, Mr. Chairman.

Just on Colombia first. Do we believe that the army or elements of the army have, in effect, quietly, behind the scenes, allied themselves with the private forces of the cartels to combat the growing strength of that insurgency? Are they still doing it?

TENET: Well, we know historically there have been linkages between the army and the paramilitaries.

LEVIN: Do they exist now?

TENET: You know, I'll have to get you an answer. I mean, we still look at that very carefully, but I don't know off the top of my head. It is something that we are concerned about.

LEVIN: In answer to I think it was Senator Wyden's question about your assessment on the PLO's use of violence against Israeli citizens, you answered that you wanted to comment on that in private session.

TENET: Yes, sir.

LEVIN: My question is slightly different. Have you made an assessment, not what it is, but have you made an assessment as to whether the PLO has used or sanctioned the use of violence against Israeli citizens in an effort to affect Israeli policy?

TENET: I can give you my assessment in closed session.

LEVIN: So you have made an assessment.

TENET: Yes, I have.

LEVIN: Now, on national missile defense, last year, in July, you published a classified national intelligence estimate, an NIE, on foreign responses to the deployment of a U.S. national missile defense. And you projected potential Russian, European, Canadian, Chinese and other -- excuse me -- Asian and Middle Eastern responses, political and military, to a national missile defense deployment by us under two scenarios: first, envisions an agreement with Russia to modify the ABM Treaty; the second considers a U.S. unilateral withdrawal from the treaty. And you also addressed related reactions in responses to theater missile defenses.

First question: Are you going to -- do you plan to update that July 2000 NIE this year? And if so, when would that occur?

TENET: I don't have any plans to do it at this moment because I don't know what we're going to be responding to. So it's a steady- state judgment, without understanding what it is that we're going to try and understand, the people are going to respond to.

LEVIN: So you're not in the midst of an update. So we'll rely on that, then.

TENET: No. LEVIN: Secondly, most of the key judgments in that NIE are classified. But one of the unclassified of the NIE judgments is the following statement: "North Korea, Iran, Iraq" -- that's the heading. "The principal targets of U.S. national missile defense are unlikely to eliminate their long-range missile programs because of NMD, and are likely to develop countermeasures."

Now, I assume that continues to be your assessment; is that correct?

TENET: I assume that, yes.

LEVIN: Would you get us, either in a classified or unclassified form, the likelihood that those countermeasures will succeed, the sophistication of the countermeasures? Can you get us that for that record?

TENET: Sure, absolutely.

LEVIN: Either classified or unclassified.

And for the moment, I think it is significant that it is your assessment that they are likely to develop countermeasures.

Now the next question relates to another unclassified finding on the foreign responses to a national missile defense deployment by us. It's in an annex updating your assessment of the ballistic missile threat to the United States through the year 2015. So we're still on the same subject, but it's now in the annex of the threat assessment.

On the issue of non-missile weapons of mass destruction threat to the U.S., this is what the NIE contains, in an unclassified statement. And this addresses partly what Senator Feinstein has asked, and I think other colleagues have asked as well.

" We project that in the coming years, U.S. territory is probably more likely to be attacked with weapons of mass destruction from non- missile delivery means" -- parenthesis, "more likely from non-state entities," close parenthesis -- "than by missiles. Primarily because non-missile delivery means are less costly, easier to acquire and more reliable and accurate. They can also be used without attribution," close quote.

Now that is obviously a very significant finding for the purposes of the debate over national missile defense. And it would be helpful to us if, for the record, you would give us some more detail on the following questions.

One, how much more likely is it that if there were an attack on us it would come from a non-missile delivery means rather than by a missile?

Two, how much less costly is a non-missile delivery means -- or are "they," because there's more than one?

Three, how much easier to acquire are the non-missile mechanisms? Four, how much more reliable and accurate are those alternatives that are available to the terrorists or the non-state entities that would use terrorist activity?

Can you do that for the record for us?

TENET: Yes, sir.

LEVIN: Now you also said that they can be used without attribution. And I understand what that means, but would you -- that's the return address question, is that right? So that a missile, we basically know where it comes from. But if it's a truck bomb or other kind of non-missile delivery system, it's frequently a lot more difficult to know the source, is that correct?

TENET: In the immediate time frame.

LEVIN: In fact, long term we sometimes never know the source, isn't that correct sometimes?

TENET: Sometimes.

LEVIN: The light is on. Thank you.

SHELBY: Thank you, Senator Levin.

Director Tenet -- oh, excuse me, I've got to recognize Senator Graham, because he was gracious in yielding his time.

Senator Graham?

GRAHAM: Thank you, Mr. Chairman.

I'd like to, somewhat, follow up on the questions that Senator Levin just asked from a slightly different perspective, and that is, what is our confidence level in our ability to answer those questions? So my question would be, could you assess our intelligence capability in two areas of major threat, first, being the proliferation capacity and inclination to use weapons of mass destruction, whether they be delivered by missiles or other methodologies?

TENET: Do you want it for the record, sir?

GRAHAM: If you -- an answer to the question.

TENET: I'd prefer to give it to you for the record.

GRAHAM: What's that?

TENET: I'd prefer to do it for the record, for you.

GRAHAM: All right. Maybe we could discuss that further this afternoon.

And almost the same question, relative to anti-terrorism: What is our level of confidence in terms of our ability to know, analyze, be able to respond to potential terrorist threats, both to U.S. citizens and interests abroad as well as domestically?

And that will then lead to the next question, and that is, if there are gaps in our capacity to understand those two forms of threats, what would be your recommendation as to what would be required to fill those gaps?

A third related question is, there has been a proliferation of open-source information. And you alluded to that in some of your statements. How has that affected the quantity and quality of needed clandestine information?

There is some who would say that there has been a relative decline in our need to have clandestine information because of the increasing availability of open-source information. And therefore, rather than expanding our intelligence capabilities, we can look to an intelligence dividend derived from increased open-source information. I'd be interested in your assessment as to whether that dividend is reality.

TENET: Well, I'm not one of those people. I think someone is hallucinating if they think that's true.

But in any event, I think that there is a great importance to acquire open-source information, to sift through the data, primarily to give me an ability to focus clandestine resources more properly. But the truth is, your requirement for clandestine HUMINT capability in particular is rising, not diminishing. And the truth is that most of the answers that the president cares about every morning, with all due respect to all the people sitting on my right, are not going to be found in the newspapers unless somebody leaks it. And that's just the fact of our life.

So the hard targets that we operate against, who use extensive deception and denial, who protect the secrets and protect their intentions, will not be available on the Internet. Although, the open-source data is important to be able to focus my analysts on those truly tough questions and our collectors on those truly tough questions. And if we're exploiting the open-source data adequately, and then synergizing it with our all-source data, it's very, very helpful and important to us.

TENET: But it is not a substitute for the clandestine business of intelligence.

GRAHAM: I'd like to go into that issue further this afternoon.

TENET: OK.

GRAHAM: To stay with the national missile defense, Senator Roberts and I serve on a commission which has had the charge of trying to assess the security threats to the United States in the post-Cold War era. And consistently our commission has put at the top of that list the proliferation of nuclear and other weapons of mass destruction, and thus, I think is one of the motivations for a national missile defense to defend against one of the methods of delivering those weapons of mass destruction.

What do you think are the characteristics which will affect the response of foreign nations, both our allies, such as the Europeans, and our potential adversaries, such as the Russians and the Chinese, toward our development of a national missile defense? To be more specific, if we were to approach this through securing a revision of the ABM Treaty, how would that effect the response as opposed a unilateral revocation of the ABM Treaty?

TENET: Senator, all of these -- and there's a heavy policy component in all of this, but the consultation, the common view of the threat, the what the it is, the way you bring allies along, the relative economic pain that countries are experiencing at any moment and time, the competitive dilemmas they have to face, all of these are going to dictate what a country's response is going to be. So we're at the front end.

The administration has to make some policy decisions. I try to portray the threat. To the extent that people can be brought along and there's a common perception of the threat, the allies are consulted, they understand where you're going, everybody has transparency into the system, and people have some common view of what defense should be and what -- why the policy-maker thinks it's important a threat, then it's all going to make it easier.

Not absolutely a slam dunk by any -- because there'll be controversy associated with this. But at this moment, I think, until there is a program that people decide on and then a strategy to implement it, I think, you know, there are a thousand flowers blooming about all the things that may happen, and they may or may not happen once this put in a more holistic policy framework. So what we focus on is trying to give you a sense of what the threat is; policy response is not our job. And the testimony is explicit about very important medium-range ballistic missile threat today, and an evolving ballistic missile threat in the future, for which everyone has to make a decision about what you want to do about.

So at this moment, I mean, it's a long-winded answer. As I say, there are multiple factors that make it easier or harder, and you really need to talk to the secretary and the policy-makers to get them to tell you about how they think about these things.

GRAHAM: Excuse me, Mr. Chairman. Maybe I'll just ask a question we could discuss this afternoon. I don't think you mean to say that it's not a role of the intelligence community to be able to give decision-makers...

TENET: No.

GRAHAM: ... an assessment of, for instance, will the Chinese respond to a unilateral revocation by, you know, entering into a new nuclear buildup?

TENET: No, no, sir, I'm not intended to say that all, because we will be asked that question, and we need to think about all that. I don't have answers to all things off the top of my head.

GRAHAM: I thank you.

SHELBY: Director Tenet, were you, basically, reiterating again that the basic role that you and the intelligence agencies you work with and coordinate and oversee is a role to provide the intelligence to the policy-makers not to make policy?

TENET: That's exactly right, Senator.

SHELBY: OK.

I just want to quickly go into NSA and TPED problems. Director Tenet, as director of CIA, you know all too well that the National Security Agency is in danger of, as we say, of going deaf, due to aging infrastructure and revolutionary changes in a telecommunications environment. We work with you on this. We work with NSA and the committee and the Appropriations Committee. How are you, as director of CIA, addressing the serious challenges at NSA?

TENET: Well, first, we pick the right guy to go over and lead the organization.

SHELBY: Absolutely.

TENET: And I stay in intimate contact with General Hayden about progress he is making, his strategic plan, his resource needs, and try and portray all those issues.

TENET: And we're doing that now with the new secretary of defense, the president, the vice president. And doing all we can to educate them about...

SHELBY: How important is that task that you're undergoing?

TENET: It's very important, because people have a clear understanding of the importance of SIGINT to the country, and so this is, as you know, Senator, my highest priority and something I devote a lot of attention to.

SHELBY: What you're talking about is signals intelligence?

TENET: Yes, sir.

SHELBY: Thank you.

As a related matter, lack of funding or adequate funding of tasking, processing, exploitation and dissemination, what we call TPED, of intelligence from satellites and other collectors, also threatens to leaves us with mountains of imagery that cannot be disseminated in a timely or useful fashion to our policy-makers and military users. What steps are you doing there? I know we've had hearing on this.

TENET: All I can say at this point is, the president, vice president, secretary of defense care deeply about intelligence. We are explaining -- we are going through a process of explaining where we are on our major programs, including TPED on the inventory side. They are paying a great deal of attention to us and will.

Obviously, resource decisions will follow. But, you know, not for this session. You understand where we're migrating on the inventory side, and the processing and exploitation. And its architecture, acquisition skills that NEMA needs are all being put in place by General King. But this is a long pole in the tent that we have to pay a lot of attention to.

SHELBY: But very important isn't it?

TENET: Yes, sir.

SHELBY: Secretary Rumsfeld has indicated in his confirmation hearing, and also in a conversation that I had with him, before the Senate Armed Services Committee, that intelligence would be a very high priority for him. Senator Graham has talked about this morning how important it is.

Since NSA and NEMA are defense agencies, his cooperation, Director Tenet, it seems to me would be essential enough to build on and correct the problems for the future. Have you had a chance to discuss these matters and issues with him? And what's been his response?

TENET: We're meeting on a regular basis, Mr. Chairman. We have opened these discussions, and he has been very receptive and open to learning more and being helpful. So we have a terrific partnership with the secretary of defense.

SHELBY: Director Tenet, given the vast number of terrorist attacks in Greece, against U.S. persons and companies and those of other Western countries over the years, attacks that basically resulted in few, if any, arrests, if the Olympics were held today, could you assure the president that American athletes and tourists would be safe in Greece?

TENET: Let me answer the question this way in open session. I've been very explicit in discussions with the relevant Greek ministers about their need to take on this terrorist threat far more seriously than it has been taken on in the past; that the Olympics are a major vulnerability, and they need to be seen as not just cleaning up old cases, but creating the kind of capability that's needed to assure the protection of all Olympic athletes, including Americans when they get there.

There is a lot of work that needs to be done here, a lot of work.

SHELBY: In another area -- and this will be my last question for you, hopefully today, until we get to the closed session -- leaks legislation.

TENET: Yes, sir.

SHELBY: Last year, President Clinton vetoed the Intelligence Authorization Bill over a provision that would have criminalized leaks of classified information. The CIA, the Defense Department and the Department of Justice, including our attorney general, they each had supported this legislation. We had had hearings and worked on it.

What impact, Director Tenet, has leaks of classified information had on your operations and capabilities?

TENET: Senator, you know that leaking has been devastating to us in terms of protecting sources and methods.

SHELBY: What about our people?

TENET: And devastating to our people in terms of their work and what they try and protect and work so hard to deal with. Now, I think we need to return to consideration of this kind of legislation.

SHELBY: Will you work with us on trying to tailor some legislation with the Justice Department and Defense that would help solve this problem?

TENET: And I think there was never any intention on anybody's part -- I think, you would agree with this, Mr. Chairman -- the focus was on government or former government employees who knowingly violated their oath and the law.

There was never any intention to go after the press. There was never any intention to go after whistleblowers. There was never any intention to deny anybody constitutional rights. That was not the proximate cause of what we were trying to do. And if there are ways to make that clear in the legislation, we should work together to make it clearer so that we can...

SHELBY: You committed to that end, are you?

TENET: Yes, sir.

SHELBY: Thank you.

Senator Graham?

GRAHAM: No further questions. I look forward to this afternoon's session.

Senator Thompson?

THOMPSON: Director Tenet, you were asked earlier to provide some information with regard to the issue of whether a threat was more likely from a missile source or non-missile source. Would you also include in that whether or not there is consideration to be had, in terms of whether or not a country with a missile capability might try to use that capability to blackmail a country, whether or not there was a very high likelihood of that use?

TENET: Yes, sir.

THOMPSON: And would you also delineate the amount of money that we spend on terrorist activities, otherwise?

TENET: Yes, sir.

THOMPSON: I believe we'll find that, although, there may be an assessment that the non-missile threat is more likely, we're spending about five times as much on that non-missile threat now, as a country, to defend against that, as we are a missile defense system, certainly at current times. Missile defense system a little later on would be more, of course, but it seems to me that we are addressing the non- missile terrorism threat right now.

My second question has to do with the issue of proliferation, again. You mentioned, I think, Director Tenet it was in your statement, that one of the proliferation problems that make it more difficult to monitor and control activities now is the increased availability of dual-use technology.

You pointed out that countries, Russia, China, North Korea, have supplied other so-called rogue nations with lots of things over the years. At the same time, we know that we are engaged in pretty robust trade right now certainly with regard to China.

Can you give me your thoughts in terms of our export policies with regard to that, with regard to our export policies concerning dual-use items, specifically with regard to supercomputers? As you know, we've greatly liberalized the MTOP levels at the level to which we control supercomputers. I think we went from 6,500 to 85,000 within one year.

As an essential decontrol, which seems to me like, some people say, "The genie's out of the bottle, you can't control anything anymore." Other people say, you know, "We still need to try." I'm not trying to get you in the middle of that policy debate, but strictly from an intelligence standpoint, and you're doing your job, do you have concerns in that area? And do you have a feeling with regard to where we are on the spectrum, good, bad or indifferent, in terms of our export policies?

TENET: Yes, sir, I'll get back to you on that point. I'll answer that question.

THOMPSON: Beg your pardon?

TENET: I'll come back to you on that...

THOMPSON: In closed session?

TENET: Yes, sir. I need to think about that last one.

THOMPSON: Lastly, Colombia -- could you give just a little bit more of a statement to the uninitiated, like myself? I haven't been down there; I'm going. But it seems to me like it's hard to differentiate between a drug war and a political war.

Have we had long enough of an opportunity yet to assess the Plan Colombia, its chances of working, the FARC versus the ELN? It's a very confusing situation it looks to me like. What is our goal and how do we define victory down there?

TENET: Well, in a few groups -- and we'd be pleased to talk to you before you go, give you an extensive presentation.

TENET: There's no short-term fix to this problem. This is a long-term problem that we're dealing with.

It is complicated, as you know, by the FARC migrating from taking rake-offs from drugs to actually becoming a drug trafficker in and of itself. So you've identified a very difficult issue, the difference between a counternarcotics mission and a counterinsurgency mission. That is a difficult distinction that we have to consciously stay on the line of the counternarcotics piece.

Tom talked to you about some of the limitations that the Colombian military has. All I can say here is, is I think it's a little bit early to make judgments about where we're going to be a year or two from now. I think it's going to take a while to understand this.

It is true that the FARC and the ELN control vast amounts of territory that the Colombian government has never controlled, largely rural Colombia, and the population distinctions are obvious when we look on the map. This is going to be complicated and it's going to take some patience.

The other piece of this that we can't lose of the fact is is that Colombia, the processing of cocaine that's flowing into this country, is a direct result of our inability to stop that drug trade in Colombia, and it is a poison that continues to come at us. So you've got a chicken-and-egg question: You're going to watch this thing go down or you can engage and see.

Although there are difficult issues. I talked about the paramilitaries. I talked about there are human rights issues we have to keep our eyes on here. There are issues with regard to the Colombian military capabilities and there are issues with regard to our relentlessly focusing on the counternarcotics mission, that's our job, and the fungibility of those two things.

So this is a difficult and dynamic environment where Pastrana has decided, and he's got his whole peace process and a whole set of other issues we need to talk about. But there's nothing easy about this, nothing easy about this.

THOMPSON: Thank you, Mr. Chairman.

SHELBY: Director Tenet, you know that Senator Hollings and I were just in Colombia, Peru and Bolivia, and I can tell you going to Colombia was sobering, because we both, as members of the Appropriations Committee and the Senate, had supported the Colombia plan, the initiative there. But I've talked to Senator Graham and others on this committee about that.

It seems to me, just being there for a while, that perhaps they've lost their fight to control their own country. They have lost, as you well know and just described, much of their territory, and not just in the rural areas, but, you know, everywhere. People are scared, they're scared to speak out in a legislative body. You just about have anarchy there.

And it concerns me, and I've told the defense minister, I told the other people there, that, you know, they can't expect us to do their fighting for them. We can help them. But they first have got to have a purpose to control their own country. And I don't believe they have it today.

And on another question, President Clinton pardoned former Director of the CIA John Deutch while he was negotiating a plea with the Justice Department on the mishandling of classified information. Now that he's been pardoned, do you have any plans, Director Tenet, to reinstate his clearances?

TENET: No.

SHELBY: Thank you.

We'll see you at 2:30 this afternoon in closed.

TENET: Thank you, sir.

SHELBY: Thank you for coming.