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SEN. FEINSTEIN: The hearing will come to order.

Our hearing today is the Senate Select Committee on Intelligence's 15th Annual World-Wide Threat Hearing. Today, we're going to hear testimony from Director Dennis Blair, the director of the National Intelligence community. This will be his first testimony to us since assuming his new position, so congratulations, Director, and welcome.

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ADM. BLAIR: Thank you. The stakes in this are high. Mexico, with its close trade links to the United States, is vulnerable to a prolonged U.S. recession. Europe and the former Soviet Union have experienced anti-state demonstrations. Much of the former Soviet Union, Latin America, Sub-Saharan Africa lack sufficient cash reserves and access to international aid. Economic crises increase the risk of regime-threatening instability if they are prolonged for a one-to-two- year period, and instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.

There are some silver linings. With low oil prices, Venezuela will face financial constraints this year. Iran's president faces less-than-certain prospects for reelection in June. However, a serious energy supply crunch may happen in the longer-term future if sustained low prices lead to the deferral or the canceling of energy infrastructure projects in the near term. So it's a confluence of events there.

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ADM. BLAIR: There are many challenges in that region that stretches from the Middle East to South Asia, despite this progress against countering violent extremism that I recounted. The U.S. has strong tools, from military force to diplomacy. We have good relations with the vast majority of states in the region, and we will need all of these tools in order to help forge a durable structure of peace and renewed prosperity in the region. The revival of Iran as a regional power, the deepening of ethnic, sectarian and economic divisions across most of the region, the looming leadership succession among U.S. allies are all reshaping this landscape. Hezbollah and Hamas, with support from Persian Iran, have successfully seized the mantle of resistance to Israel from moderate secular Arab regimes. Battle lines are increasingly drawn, not between Israel and Arab countries, but also between secular Arab nationalists and ascendant Islamic nationalist movements inside the Arab states.

The Iranian regime views the United States as its principal enemy and also as a threat to them. A more assertive regional Iranian foreign policy, coupled with its dogged development of a deliverable nuclear weapon, alarms most of the governments from Riyadh to Tel Aviv. The Levant is the key focal area for these strategic shifts. Recent fighting between Israel and Hamas in the Gaza Strip has deepened Palestinian political divisions. It has also widened the rift between regional moderates -- led by Egypt, Saudi Arabia and Jordan -- and hardliners, including Iran, Hezbollah and Syria.

With Hamas controlling Gaza, Hezbollah growing stronger in Lebanon, progress on a Palestinian-Israeli accord is going to be more difficult. With Iran developing a nuclear weapon capability and with Israel determined not to allow it, there is potential for an Iran- Israeli confrontation or crisis. Moderate Arab states fear a nuclear- armed Iran, but without progress on the Palestine settlement, they're harder put to defend their ties to the United States.

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ADM. BLAIR: The time when only a few states had access to the most dangerous technologies is long over. Often dual use, they circulate easily in our globalized economy, as does the scientific expertise to put them together into weapons. It's difficult for the United States and its partners to track efforts to acquire components and production technologies. They're widely available. Traditional deterrence and diplomacy constraints may not prevent terrorist groups from using mass-effect weapons. So, one of the most important security challenges facing the United States is fashioning a more effective nonproliferation strategy with our partners in this effort.

The assessment that was in our 2007 National Intelligence Estimate about Iran's nuclear weapons programs are generally still valid today. Tehran, at a minimum, is keeping open the option to develop deliverable nuclear weapons. The halt in the recent past in some aspects of the program was primarily in response to increasing international scrutiny and pressure. Some combination of threats -- threats of intensified international scrutiny and pressures, along with opportunities for Iran to achieve its security goals -- might prompt Tehran to extend the halt to some nuclear weapons-related activities.

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SEN. CHRISTOPHER BOND (R-MO): Thank you, Madame Chair.

Mr. Director, many of us on this committee criticized the way the 2007 NIE on Iran was drafted, which in the key unclassified judgments left the impression in the public that intelligence community was not concerned about Iran's nuclear efforts.

Indeed, today's article in The Los Angeles Times notes statements by the president and Mr. Panetta, when he was before us for confirmation, about the intent of Iran to seek nuclear capability. And they go onto say, "This language reflects the extent to which senior U.S. officials now discount an NIE issues in November '07 that was instrumental in derailing U.S. and European efforts to pressure Iran to shutdown its nuclear program."

In light of that, do you believe that the release of intelligence community judgments, and NIEs themselves, can be damaging to our national security interests?

ADM. BLAIR: Mr. Vice Chairman, I agree that we can cause as much harm as good by releasing many of these NIEs on very difficult subjects in which a great deal of secret intelligence -- which the taxpayers have paid an awful lot of money for us to use to collect secrets -- are put forth in the wrong way. And I think it's something we have to think carefully about.

Frankly, when I was here for confirmation hearings, I was a little more -- I was little less aware of how difficult this question is than I am in the couple of weeks since I've been on the job. The preparing of these remarks was not easy -- (laughs) -- in trying to figure out what to say in unclassified settings and classified settings.

So it's something that I think can cause us problems if not handled very well.

SEN. BOND: Well, I would agree with you. I'm a great believer that experience is what you get when you expected to get something else. And I hope the intelligence community learned something from it. I would hope that you would be producing an update of the Iran nuclear NIE.

And do you have any -- for the record, at this point -- have any assessment of the likelihood that Iran would forgo the development of nuclear weapons? Is there anything that you could say publicly that would indicate they are looking at forgoing this capability that most of us think they are pursuing?

ADM. BLAIR: I can say in this forum that Iran is clearly developing all the components of a deliverable nuclear weapons program -- fissionable material, nuclear weaponizing capability and the means to deliver it. Whether they take it all the way to nuclear weapons and become a nuclear power I think will depend on -- it will depend a great deal on their own internal decisions.

But I do think that the international community -- no one in the international community wants a nuclear-armed Iran either. The question is, what are you going to do about it? And if the international community can put together the right package of sticks and potential reassurances that will meet some of these security concerns that Iran feels, then there's a chance. There's a chance that they will choose another course. Other nations have.

I don't think it's a done deal either way, but I think it's going to be a difficult task for the international community both because it's split, and because of the advantage that many Iranians clearly feel would be served by having nuclear weapons. So I would not rule it out, but it's not something that's going to fall off -- it's not like falling off a log.

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SEN. WYDEN: Let me ask you a question if I could now about Iran. Obviously members of this committee are following the Iranian presidential election, and it's certainly my hope, I'm sure shared, that President Ahmadinejad gets replaced by a more stable and more rational individual. But of course in Iran, the president is not the commander in chief, and his influence over foreign policy is more limited than perhaps in many political systems. Is it your view that a change in president would result in a significant shift in Iranian foreign policy? And let's start particularly with the prospect that a replacement of President Ahmadinejad would result in a shift in nuclear policy.

ADM BLAIR: Senator, I don't believe that a change of a single individual as president would change in and of itself the fundamental Iranian policy like development of nuclear weapons. I think that those decisions are taken by the groups around the supreme leader, which is more than one person. So I think that we can't put our hopes in Iran on great changes to their policy towards the United States based on the presidential election itself.

SEN. WYDEN: I think you've touched on this, but what can you say in a public setting with respect to Iran's current support for Hamas and Hezbollah? And what does Iran get out of providing this support, in your judgment?

ADM BLAIR: I would say there are at least two motivations for Iran's support of these groups. One of them is to seize control of the resistance narrative within the Middle East as opposed to the peace narrative, which is what we and many others favor. Iran seeks to associate itself, even though it's Persian, with the Arab cause against Israel. It feels that will benefit its power in the region. And the second one is, fundamentally I think they don't like Israel, and anything that they can do to help somebody that's going against Israel is sort of good in their mind. So I would say those two things motivate them.

SEN. WYDEN: I share your view.

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SEN. BAYH: My impression is a lot of this has to do with who the personalities are and how well they get along, as much as it does with the structure.

Well, thank you for your initial impressions. Just a couple more things. There are published reports from time to time about the timeline for when Iran would have a weapon capability. To the extent you're allowed to talk about such things -- and the Israelis seem to have a little more aggressive timeline than has been published with regard to us, can you give the American people any indication about what timeframe we're looking at here, with having to confront that event?

ADM. BLAIR: Yes, sir, I could say that if Iran pursued its centrifuge uranium technology, they could have a weapon as early as 2010, but it might take them until 2015.

SEN. BAYH: So that's next year -- possibly as soon as next year.

ADM. BLAIR: It's possibly as soon as next year.

SEN. BAYH: And they just launched a satellite, if I'm not incorrect, so they're clearly working on their missile capabilities.

ADM. BLAIR: There's a missile that will carry it, and you don't need a missile to carry it.

SEN. BAYH: So your opinion, Director, any combination of carrots and sticks we could use to dissuade them from seeking a military capability, or is that just a strategic decision they've made that they're going to pursue?

ADM. BLAIR: We have seen in the past that international scrutiny and sticks have made changes in their behavior, in pieces of it. They have not --

SEN. BAYH: Has the lower price of oil made them more vulnerable at this moment, so possibly sticks might be have a little bit more impact?

ADM. BLAIR: I think that the lower price of oil has an effect. I think it has to be more comprehensive, though. The economic penalty that they would pay would have to be more comprehensive in order to really be a stick that would have an effect.

SEN. BAYH: Well, they are somewhat vulnerable to imports energy.

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SEN. BARBARA MIKULSKI (D-MD): Director Blair, first of all, welcome. We're very pleased regarding your confirmation. I think we're very fortunate that you've chosen to come back to government service. And I think we share with you your compliments to the men and women who work in our intelligence services, both here -- abroad and also here within our own country. The fact that we haven't had an attack in seven-and-a-half years is a tribute to them.

Let me go right to my questions. One goes to Iran. Like Senator Bayh, I'll do some quick ones.

On February 3rd, Iran used its own rocket to launch a small communications satellite in orbit. They began this satellite some years ago, but they're only the ninth country in the world to have that ability, to put a rocket up -- a satellite into space. The State Department calls it worrisome. What is your assessment of what that means, and do you believe that we need to, in addition to their nuclear capability, be more worried about -- additionally be worried about their growing scientific and technical capability?

ADM. BLAIR: Senator Mikulski, I think Iran's space launch demonstrated that they are mastering multistage missile and rocket -- or missile technology, and that technology can be used for peaceful pursuits and it can be used for military pursuits. They have some smart scientists and good engineers. If they put resources on it they can make a serious missile force.

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