[Senate Hearing 105-587]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-587


 
  CURRENT AND PROJECTED NATIONAL SECURITY THREATS TO THE UNITED STATES

=======================================================================

                                HEARING

                               before the

                    SELECT COMMITTEE ON INTELLIGENCE

                                 of the

                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                                   on

  CURRENT AND PROJECTED NATIONAL SECURITY THREATS TO THE UNITED STATES

                               __________

                      WEDNESDAY, JANUARY 28, 1998

                               __________

      Printed for the use of the Select Committee on Intelligence



                               


                      U.S. GOVERNMENT PRINTING OFFICE
 51-954 cc                   WASHINGTON : 1998



                    SELECT COMMITTEE ON INTELLIGENCE

                  RICHARD C. SHELBY, Alabama, Chairman
               J. ROBERT KERREY, Nebraska, Vice Chairman
JOHN H. CHAFEE, Rhode Island         JOHN GLENN, Ohio
RICHARD G. LUGAR, Indiana            RICHARD H. BRYAN, Nevada
MIKE DeWINE, Ohio                    BOB GRAHAM, Florida
JON KYL, Arizona                     JOHN F. KERRY, Massachusetts
JAMES M. INHOFE, Oklahoma            MAX BAUCUS, Montana
ORRIN G. HATCH, Utah                 CHARLES S. ROBB, Virginia
PAT ROBERTS, Kansas                  FRANK R. LAUTENBERG, New Jersey
WAYNE ALLARD, Colorado               CARL LEVIN, Michigan
DAN COATS, Indiana
                  TRENT LOTT, Mississippi, Ex Officio
              THOMAS A. DASCHLE, South Dakota, Ex Officio
                                 ------                                
                   Taylor W. Lawrence, Staff Director
             Christopher C. Straub, Minority Staff Director
                    Kathleen P. McGhee, Chief Clerk



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held in Washington DC:
    Wednesday, January 28, 1998..................................     1
Statement of:
    Allard, Hon. Wayne, a U.S. Senator from the State of Colorado    11
    Baucus, Hon. Max, a U.S. Senator from the State of Montana...    10
    Bryant, Robert, Deputy Director, Federal Bureau of 
      Investigation..............................................    26
    DeWine, Hon. Mike, a U.S. Senator from the State of Ohio.....    88
    Freeh, Hon. Louis J., Director, Federal Bureau of 
      Investigation..............................................    27
    Glenn, Hon. John, a U.S. Senator from the State of Ohio......    80
    Hughes, Patrick M., Lieutenant General, USA, Director, 
      Defense Intelligence Agency................................    70
    Inhofe, Hon. James M., a U.S. Senator from the State of 
      Oklahoma...................................................     8
    Kerrey, Hon. J. Robert, a U.S. Senator from the State of 
      Nebraska...................................................     5
    Lugar, Hon. Richard G., a U.S. Senator from the State of 
      Indiana....................................................     9
    Oakley, Hon. Phyllis E., Assistant Secretary of State for 
      Intelligence and Research, Department of State.............    45
    Robb, Hon. Charles S., a U.S. Senator from the Commonwealth 
      of Virginia................................................    96
    Roberts, Hon. Pat, a U.S. Senator from the State of Kansas...    91
    Shelby Hon. Richard C., a U.S. Senator from the State of 
      Alabama....................................................     1
    Tenet, Hon. George J., Director of Central Intelligence......    12
Testimony of:
    Bryant, Robert, Deputy Director, Federal Bureau of 
      Investigation..............................................    86
    Hughes, Patrick M., Lieutenant General, USA, Director, 
      Defense Intelligence Agency................................    70
    Oakley, Hon. Phyllis E., Assistant Secretary of State for 
      Intelligence and Research, Department of State.............    43
    Tenet, Hon. George J., Director of Central Intelligence......    19
Supplemental materials, letters, articles, etc.:
    Questions for the record, dated March 12, 1998, submitted to 
      the Hon. George J. Tenet, Director of Central Intelligence.   105
    Questions for the record, dated March 12, 1998, submitted to 
      the Hon. Louis J. Freeh, Director, Federal Bureau of 
      Investigation..............................................   111
    Questions for the record, dated March 12, 1998, submitted to 
      Lt. General Patrick M. Hughes, USA, Director, Defense 
      Intelligence Agency........................................   113
    Questions for the record, dated March 12, 1998, submitted to 
      the Hon. Phyllis E. Oakley, Assistant Secretary of State 
      for Intelligence and Research, Department of State.........   118
    Letter of transmittal, dated June 9, 1998, responses to 
      questions for the record from the U.S. Department of 
      Justice....................................................   154
    Letter of transmittal, dated June 12, 1998, responses to 
      questions for the record from Defense Intelligence Agency..   167
    Letter of transmittal, dated June 15, 1998, responses to 
      questions for the record from U.S. Department of State.....   122
    Letter of transmittal, dated July 24, 1998, responses to 
      questions for the record from Central Intelligence Agency..   133



  CURRENT AND PROJECTED NATIONAL SECURITY THREATS TO THE UNITED STATES

                              ----------                              


                      WEDNESDAY, JANUARY 28, 1998

                                       U.S. Senate,
                          Select Committee on Intelligence,
                                                    Washington, DC.
    The Select Committee met, pursuant to notice, at 9:37 
o'clock a.m., in Room SH-216, Hart Senate Office Building, the 
Honorable Richard Shelby Chairman of the Committee, presiding.
    Present: Senators Shelby, Lugar, DeWine, Inhofe, Roberts, 
Allard, Kerrey of Nebraska, Glenn, Baucus and Robb.
    Also Present: Taylor Lawrence, Staff Director; Chris 
Straub, Minority Staff Director; Dan Gallington, General 
Counsel; Don Mitchell, Professional Staff; and Kathleen McGhee, 
Chief Clerk.
    Chairman Shelby. The Committee will come to order.
    Last year marked the 50th anniversary of the enactment of 
the National Security Act, the legislation that created the 
Central Intelligence Agency and established the national 
defense and intelligence structure for the Cold War era.
    This year, we approach an equally significant anniversary--
November 1999 will mark the tenth anniversary of the fall of 
the Berlin Wall, the beginning of the end of the Cold War, and 
the beginning of the post-Cold War era.
    Today, it is fitting that the Committee meet publicly, at 
the beginning of a new session of Congress, to hear the 
Intelligence Community's views regarding the nature and extent 
of the changing national security threats to the U.S.
    The identification and analysis of these threats are 
crucial to defining and conducting our nation's foreign policy. 
Our intelligence on these threats provides the basis for our 
defense strategy and planning, informs our budget and 
procurement choices, and supports our military forces when they 
go into action.
    To be useful, intelligence must be timely and, of course, 
accurate.
    Equally important, the Intelligence Community must ``call 
it as it sees it''--reporting the facts to policymakers without 
bias, even if the intelligence findings do not support a 
particular policy or decision.
    Every day, U.S. policymakers and military forces rely on 
Intelligence Community reporting. By its very nature, most of 
this information must be classified to protect the sources and 
methods from which it is derived.
    Today we meet in open session so that, at a time of waning 
interest in international affairs, the American people may 
learn about the very real threats that we face in the post-Cold 
War era.
    We look forward to hearing from Director Tenet and other 
witnesses on the broad range of threats to U.S. national 
security.
    Many of the issues we will discuss bear directly on 
critical policy choices facing the administration and the 
Congress today and in the near future, and raise a number of 
complex questions. For example:
    Once again, Iraq is refusing to allow UN inspectors full 
access to its weapons programs.
    How strong is Saddam Hussein within his own country that he 
can defy the international community?
    Is he, in fact, better off than he was before he instigated 
the current crisis over weapons inspections? What is the status 
of the Iraqi weapons programs? How quickly could these programs 
be expanded or revived if sanctions were removed?
    Is it true, as has been suggested in the press, that Iraq 
tested biological and/or chemical weapons on human beings?
    Will Saddam Hussein ever comply with the UN resolutions?
    And on the other side of the Shatt al Arab, we have Iran. 
Many of us saw Iranian President Khatami's recent television 
interview. What do his remarks then and subsequently--and the 
response of his hardline opponents--mean for US-Iranian 
relations?
    Most critically, has the Intelligence Community seen any 
reduction in Iranian support for international terrorism, or 
slackening in Iran's pursuit of weapons of mass destruction, 
since the election?
    How soon will Iran deploy new ballistic missiles capable of 
threatening Israel and other U.S. allies?
    Iran of course is only one of more than a dozen or so 
countries which possess or are developing ballistic missile 
systems, and one of over two dozen nations that are developing 
weapons of mass destruction.
    I am extremely concerned of the potential that such weapons 
will be used, or that someone somewhere will plausibly threaten 
to use such weapons, against the United States, our troops, our 
allies or our interests in the not too distant future.
    After all, it has already happened--the single greatest 
loss of life by American forces in the Persian Gulf War came 
when an Iraqi SCUD crashed into a barracks in Saudi Arabia.
    How does the Intelligence Community assess the global 
ballistic missile threat to the United States--the greatest 
single threat to our national security?
    The Committee is looking forward to reviewing in the very 
near future the updated National Intelligence Estimate on this 
subject, but we hope the witnesses will provide us with a 
preview today.
    The 1995 National Intelligence Estimate of ballistic 
missile threats to North America was the subject of extensive, 
and in my view largely justified, criticism.
    What steps have been taken in the current intelligence 
estimative process to address those criticisms? In particular, 
I would be interested to hear how Iran's faster-than-expected 
progress in its missile program comports with the assumptions 
underlying both the 1995 National Intelligence Estimate and the 
planned update?
    And of particular concern to this Committee is the status 
of North Korea's missile and nuclear programs. How does the 
Community view the unfolding political, military and economic 
developments in North Korea?
    On another front, I would like to commend the Intelligence 
Community for its support for the arrest of suspected war 
criminal in Bosnia last week.
    Although that matter did not receive the attention that I 
believe its deserved, I know that your efforts were critical to 
the success of that operation.
    But tough questions remain: What are the prospects for a 
meaningful peace in Bosnia? When, if ever, will conditions 
there permit the withdrawal of US forces? What is the potential 
for a terrorist attack on US troops deployed in Bosnia and the 
region?
    On the terrorism front, I am pleased to note that the past 
year has yielded some significant successes, including the 
rendition and conviction of Mir Aimal Kasi, who killed two CIA 
employees outside CIA headquarters in 1993, and the recent 
sentencing of Ramzi Yousef for his role in the World Trade 
Center bombings and his plot to blow up U.S. airliners.
    However, numerous other terrorist threats remain--in 
Bosnia, in the Middle East, and around the world.
    These include both traditional state-sponsored terrorist 
groups, and other more independent actors such as Usama Bin-
Laden. Furthermore, the murderers of 19 U.S. servicemen in the 
Khobar Towers bombing have yet to be brought to justice. I hope 
Director Tenet and Deputy Director Bryant today will provide us 
a status report on that investigation, including the 
cooperation of the Saudi government, and any indications of 
whether the government of Iran should be held responsible.
    Turning now to one of our most significant foreign policy 
and intelligence challenges of the 21st century: that is, 
China.
    I look forward to hearing the Community's assessment of the 
status of China's proliferation of nuclear, missile, chemical, 
biological and advanced conventional weapons technologies to 
Iran, Pakistan, and other countries.
    But today, we will also want to hear how China's extensive 
military modernization is complicating our ability to carry out 
military missions in support of key US interest in the region, 
as well as the extent and purpose of China's nuclear force 
modernization.
    Nearly a decade after the end of the Cold War, the United 
States continues to face a serious counterintelligence threat. 
We look forward to hearing from Deputy Director Bryant on the 
extent and the sources of this threat.
    In particular, we hope the FBI will be able to share with 
the American public its findings to date with respect to 
allegations that the Chinese government has attempted to 
illegally influence the American political process.
    We are also interested in the recent revelation that a 
former US government physicist passed classified information to 
the Chinese government, and in other Chinese government 
intelligence activities aimed at the United States.
    While China poses new challenges for the U.S., Russia still 
remains the only nation with the power to destroy the United 
States with intercontinental ballistic missiles. The security 
of Russia'snuclear arsenal, and the integrity of Russia's 
nuclear command and control systems, are of vital importance.
    So too are Russian sales of missiles and other technologies 
of mass destruction to Iran and elsewhere. We look forward 
today to hearing your assessments of the nature and extent of 
these programs.
    In addition to the traditional threats of a massive nuclear 
attack, terrorism, espionage, and the proliferation of advanced 
weaponry, we face new threats to our critical information 
infrastructure from hostile states, terrorism groups, and 
organized crime.
    Recall the enormous disruption to the northeastern United 
States and Canada caused by recent power outages. These 
disruptions were caused by an ice storm.
    Imagine if a computer operator in Tehran or Pyongyang could 
create the same havoc and confusion--or worse--with a few 
keystrokes.
    We look forward to hearing the Intelligence Community's 
current assessment of these threats.
    US businesses today also face an unprecedented level of 
industrial and economic espionage.
    A recent report cited in the Los Angeles Times estimated 
that U.S. businesses lost $300 billion worth of information in 
1997 alone.
    We look forward to hearing from Deputy Director Bryant on 
the extent of this threat--the countries involved, their 
methods, and what US technologies are most at risk.
    I have spent enough time outlining my concerns and raising 
questions regarding threats to the United States--it is time to 
hear from the real experts--our witnesses.
    Without objection, our four witnesses will submit their 
written testimony for the record. Director Tenet will begin by 
giving his statement.
    After Director Tenet's opening statement, he will be 
joined, as I think he already is, at the witness table by: FBI 
Deputy Director Bob Bryant, Assistant Secretary of State for 
Intelligence and Research Phyllis Oakley, and Lt. General 
Patrick Hughes, Director of the Defense Intelligence Agency.
    These witnesses will provide their perspectives on the 
current and projected threats to US national security.
    They have all submitted written testimony to the Committee, 
although not necessarily in a timely fashion, and so they will 
be asked to give brief summaries of their written testimony.
    We will then open the session to 5 minutes of questions 
from each Member of the Committee, based on the order in which 
Members have entered the hearing room.
    At 2:30 p.m. this afternoon in the Committee's hearing 
room, SH-219, the Committee will meet in a closed session to 
discuss classified matters related to threats posed to the 
national security of the United States.
    Director Tenet, Deputy Director Bryant, Assistant Secretary 
Oakley, and General Hughes--I want to thank you all for 
appearing before us today.
    Today's hearings mark the frst time that the FBI has been 
asked to participate in our annual threat hearings, and 
representMrs. Oakley's first appearance before our Committee in 
her new capacity. We look forward to hearing your perspectives on these 
important issues.
    Senator Kerrey.
    Vice Chairman Kerrey. Thank you, Mr. Chairman.
    I would first just ask that my full statement be included 
in the record.
    Chairman Shelby. Without objection, it is so ordered.
    [The prepared statement of Senator Kerrey follows:]

  Senate Select Committee on Intelligence Open Hearing on World Wide 
                                Threats

    Thank you, Mister Chairman. The Committee is starting out on the 
right foot with this very important hearing. I join you in greeting our 
witnesses, and in giving a special welcome to Secretary Oakley in her 
first appearance before the Committee in her new position. Secretary 
Oakley was born in Omaha, Nebraska, so her success was a foregone 
conclusion. This is also the first appearance of the FBI at this annual 
hearing, and I welcome Deputy Director Bryant.
    In measuring threats, we must resist the politician's natural 
tendency to follow the CNN curve, the pull of the international crisis 
of a particular moment. We must take the long view and prioritize the 
threats in terms of the life of our nation, the lives of our citizens, 
and the livelihoods of our citizens. We should also make this 
assessment in full awareness that Americans don't feel very much 
threatened today, at least not from external sources. The threats are 
more subtle now but they must still be identified and watched and 
deterred. The cycles of history or our short-term preoccupation with 
other matters do not absolve us of this duty.
    If preserving our life as a nation is the first priority, then 
Russia's nuclear weapons are still the first threat. The U.S. Strategic 
Command continues to deter the use of those weapons and our 
intelligence could have no more important topic. Nine years after the 
fall of the Berlin Wall I am disappointed we have not done more to 
reduce this threat further. The Russians have not done enough, either. 
Action is overdue. The Russian Duma should ratify START 2 promptly, and 
then we should discuss de-alerting the weapons of both sides together. 
Beyond deterring the other side's nuclear forces, these weapons have no 
purpose. But as long as they exist, we'll need all the intelligence on 
them we can get.
    The proliferation of nuclear weapons--and also chemical and 
biological weapons--is a growing concern. When proliferation links up 
with terrorism, we could face a high-order threat. Regional conflicts 
such as the Yugoslav war of the early 90's or the chronic instability 
of the Persian Gulf represent threats in the sense that the U.S. 
military could be in combat there at any moment. The foreign threats 
affecting the greatest number of Americans are probably the illegal 
drugs and accompanying crime coming from south of the border. Our 
interest in the stability and prosperity of a democratic Mexico, a 
Mexico which can stop the drugs and crime before they get here, has 
never been greater. This is about keeping Americans safe.
    Two events of 1997, the Asian economic crisis and the Kyoto summit 
on global warming, represent trends which are not traditional threats 
but which can certainly affect the livelihoods of Americans. I look 
forward to our witnesses' views on how much effort the intelligence 
community should devote to these topics.
    I want to highlight some of my concerns about intelligence as we 
start this session of Congress. First, we must act this year to reverse 
a fifty year trend and reduce government secrecy, including 
intelligence secrecy. It is not only a question of saving the cost of 
creating and keeping these millions of secrets. My goal is for the 
American people to understand how necessary your work is and how well 
you and our intelligence professionals do it. I want to counter the 
presumption that everything you do is somehow sinister. It can't happen 
unless we tell the people more. Also, we can't keep the secrets we must 
keep unless we get the classification system under control and throw 
the excess, unnecessary secrets overboard. The Committee has scheduled 
a hearing on the Moynihan-Helms secrecy legislation, and I look forward 
to it.
    The opposite of secrecy is openness, and I want to see the 
government and the public benefit from greater openness. All Americans, 
not just policymakers and military commanders, need information about 
our world to make decisions. I would like to see much more declassified 
information, including images, available to the public.
    The Intelligence Community should also be getting more of its 
information from open, unclassified sources. In addition, a new set of 
sources, the American commercial imagery industry, will soon have 
products available to respond to many of the demands of intelligence 
customers. I hope you will make use of them.
    I also challenge you to find more intelligence technologies with 
applications to benefit citizens. NIMA made a great start with image 
interpretation technology which could also help doctors detect breast 
cancer. But there is much more to be done and I urge you to redouble 
your efforts.
    We have not forgotten the whistleblower legislation which was 
dropped in conference with the House last year. In fact, the Committee 
will have a hearing on it next week. This legislation is about the 
right of Congress to know, the right of government employees to come to 
Congress with evidence of wrongdoing, and ability of both branches of 
government to keep necessary secrets from leaking. We will pass it this 
year.
    After our questions about the threats have been asked and answered 
today, I ask each of you to carry back to your agencies our 
appreciation for what your people do. They are striving in anonymity to 
keep our country safe, to keep policymakers informed, to give our 
warfighters the edge, and some of your people take significant risks. 
The overwhelming majority of them do this work in full accordance with 
American law and American values. If there were less unnecessary 
secrecy, more Americans would know that. Thank you, Mister Chairman.

    Vice Chairman Kerry. Mr. Chairman, I would say this as well 
to the public, that one of the questions that very often is 
asked is why, and the Chairman alluded to it--why do we have an 
open hearing on threat assessment. And I believe it is 
important to do so in order to engage the American people in a 
discussion, in a debate about what the threats are to this 
country and to hear especially from the Executive branch 
policymakers, how they prioritize the threats to the people of 
the United States of America.
    America, as a consequence of our leadership position of the 
world, sometimes gets called upon to do things that we perhaps 
would prefer not to do. Leaders always do get called upon to do 
things that they perhaps would prefer to fall to somebody else.
    We're an open society. We take sides in international 
conflicts. We're involved extensively in trade. Nearly a third 
of all the new jobs created in America today are created as a 
consequence of sales abroad. So there are lots of reasons for 
the United States of America to be engaged with the world, and 
lots of reasons, as a consequence, for us to be at risk. We're 
a target for very many reasons.
    And as I see it, your work has two parts--one, and most 
importantly, to provide accurate intelligence to the 
policymakers, particularly to the Commander in Chief, so that 
their decisions are good and so that their decisions enable 
them to prevent a conflict. The best war we ever fight is the 
one we avoid as a consequence of getting there ahead of time 
and with diplomacy preventing it from happening; or to deter, 
as a consequence of believing that somebody is not going to be 
able to be persuaded; or to organize a military effort; or to 
increasingly get to the bottom of some situation such as Khobar 
Towers, where we have been under attack and we then have to 
find out who it was that has done something against the United 
States of America.
    So good intelligence can reduce cost and increase the 
likelihood of success.
    I had the pleasure of working with General Hughes prior to 
him taking over at DIA and the organization of the takeover 
authority of Bosnia. And unfortunately, all Americans didn't 
have an opportunity to see the value of intelligence in making 
that operation a success.
    Back in the Ice Age, when I was in the Vietnam War--and 
General Hughes probably has similar experiences--there were 
many things that we probably could have got done if we had 
similar kind of intelligence. Our war fighters are much better 
prepared, much more able to get the job done, much more likely 
to be successful.
    There are things that America can do today. I know, with 
pride, the President's been nominated for a Nobel Peace Prize. 
I suspect that he, like I, would say that an awful lot of the 
success of that operation was due to the fact that we were able 
to get our war fighters good intelligence, enabling us to say, 
here's what you have done, here's what you haven't done, and as 
a consequence, get the warring parties to abide by the Dayton 
Peace Agreement.
    The most difficult thing for us to do is to prioritize the 
threats, however. It's very easy to get sort of drug around in 
this town in the current following the latest story, the latest 
news event, especially in the last week. We've all been in this 
black hole of conspiracy theories.
    And it is very important for you to come to us and orient 
us to the most important threats. And as I see them, as the 
Chairman said, there's only one threat that can still take 
every single citizen of the United States of America to their 
grave, and that's a nuclear weapon.
    And, I, for one, would have preferred the President to have 
talked about that last night in the State of the Union. It's 
been eight years since the Soviet Union fell apart. It's been 
seven years since August of 1991, when the coup was 
unsuccessful inside of Russia.
    We still don't have the Duma ratifying START II. I don't 
hear a vision of where we're going to go with nuclear weapons. 
The proliferation of nuclear weapons are clearly a major 
problem for us. And retargeting would be very easy for the 
Russians to do. It seems to me that if you look at the threat 
that can still take every single American down and the cost of 
maintaining and the difficulty of maintaining with the nuclear 
test ban in place, it seems to me that that ought to be top of 
the list, and we ought to be trying to figure out what it is, 
what's our strategy, what's our plan of attack to reduce that 
threat to the people of America.
    As I said, proliferation of all things--all matters--I was 
pleased with the President's very strong statement last night 
about Iraq. He went right to camera, right to Saddam Hussein, 
right to the people of Iraq, saying that we're not going to 
give you the capacity to use weapons of mass destruction again. 
We're going to prevent that from happening. However, we all 
know that until this dictatorship is gone, it's not likely that 
we're going to feel safe and secure. It's likely you're going 
to see a repeat of this kind of behavior in the future.
    I'm pleased, Mr. Bryant, to have you here for the first 
time. As I look at the radar screen of threats to us, 
increasingly they're non-rational threats. You can't negotiate 
with terrorists that aren't sent out by their government.
    Certainly, we still have nations that are funding terrorism 
throughout the world. But increasingly, we find, whether it's 
the kind of thing that the chairman is alluding to with 
information warfare or other kinds of terrorist activity, 
especially those associated with the movement of drugs into the 
United States of America, these are not being run by 
governments. They make corrupt governments, and they make 
governments less stable, and they may create problems for us in 
lots of ways. But these are non-rational threats and much more 
difficult to deal with, as a consequence.
    And I hope as well in your testimony, Mr. Bryant, Mr. 
Tenet, that you'll talk to us a little bit about your plans to 
resolve the conflicts over this encryption legislation. It is 
tied up in Avogadro's number of committees up here that have 
some sort of jurisdiction. Everybody has got a point of view on 
it. Almost none of us understand the technology. It is a very 
important issue from the standpoint of the U.S. economy, from 
the standpoint of U.S. values, of openness and personal 
freedom.
    But I'm also very much aware that if we want to make the 
American people continue to feel safe, you and NSA and others 
that have the responsibility of accumulating intelligence have 
to be able to somehow deal not just with a complexity of 
signals, but increasingly encrypted signals that are impossible 
for us to break.
    Next, I would say this committee intends to hold a hearing 
on the legislation that has been introduced by Senator Helms 
and Senator Moynihan on secrecy. Not only are the American 
people our customers from the standpoint of making them safer; 
they're our customers from the standpoint of informing them. 
This is government of, by, for the people; if they suspect 
we're withholding information, as we did for a short time, with 
the National Reconnaissance Office building just to protect our 
own mistakes, it's likely that they will suspect us, and it's 
likely, as a consequence, they're not going to give us the 
support that we need to keep those secrets that are essential 
for the security of this country.
    So we've got to make certain that this classification 
system is done in a fashion that protects national security, in 
order to protect the safety and security of the American 
people, and not just there as a consequence of our desire to 
have the American people not see how occasionally we can make 
mistakes and be stupid and do things wrong.
    The American people cannot make good decisions unless they 
are informed. As I said at the beginning, if the United States 
of America is going to lead, our people have to make good 
decisions. And increasingly, they are having to make decisions 
with open-source information. And I believe that though it's 
very tricky ground, I think that the creation of NIMA gives us 
the opportunity to use images in an open fashion to help the 
American people make better decisions.
    And I hope, Mr. Tenet, that we're able to over the course 
of the next couple of years get the American people to 
understand that they are our customers--their safety, their 
security and their capacity to make good decisions.
    Mr. Chairman, I appreciate this open hearing, and I look 
forward to the testimony.
    Chairman Shelby. Senator Inhofe.
    Senator Inhofe. Thank you very much.
    I think I caught everything that Senator Kerrey said. And 
everything I can remember, I do agree with. This hearing is 
taking placeat the same time--at 10:00 o'clock we're having a 
Senate Armed Services Committee hearing on essentially the same thing. 
And I have no choice, I have to be there.
    But I was a little distressed last night in the hour and 20 
minutes, we never did hear anything about what's happened to 
our ability to defend ourselves, the nature of the threat 
that's out there. And I think that's far more critical than 
anything else that I heard last night.
    Mr. Chairman, when you talked about the problems in Iraq 
and when are we going to--are we going to see any cooperation 
from Saddam Hussein, or when are we going to, I don't think we 
are. I think our head is in the sand if we think that we're 
going to get cooperation that he's going to do anything that he 
doesn't have to do.
    And as far as Iran is concerned, we do know there is--that 
Iran does have weapons of mass destruction. There's a 
communication and a transfer in trading of technology and 
systems between both China and Iran and Russia and Iran. And I 
really want to pursue this.
    Senator Kerrey said, when he talked about the fact that we 
are a target--and I agree with that--but he also asked the 
question about having this as an open meeting. I think it's 
very, very important to have this out in the open so that the 
people of this country can get over this euphoric idea that the 
Cold War is over and there's not a threat out there. There's a 
huge threat out there and a threat that we're going to have to 
face.
    I see some good things happening. I was very pleased when 
Secretary Cohen came out and now is talking about over 25 
nations with weapons of mass destruction--biological, chemical 
and nuclear--and the fact that we don't have a nuclear--a 
defense system, a missile defense system. He also talked about 
VX gas, that Saddam Hussein has enough to kill every man, woman 
and child on the face of this earth in 60 minutes. That's huge. 
That's very significant.
    Unfortunately, I won't be able to stay for this meeting, 
but I will be there at 2:30 and want to pursue this. I have 
such a high degree of confidence in Director Tenet that I'm 
very glad that at this very treacherous moment in our history, 
that he is at the helm of our intelligence community.
    I would, finally, say that I think that having open 
meetings like this are helping a lot. Prior to the recent sex 
scandals, virtually every national weekly publication has come 
out with articles talking about the threat that we're facing 
and our inadequate defense system.
    So, I will be here at 2:30 and look forward to the closed 
session.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Lugar.
    Senator Lugar. Mr. Chairman, I thank you for calling the 
hearing in such a timely way, and I join you and Senator Kerry 
in welcoming the witnesses.
    I would just underline, again, a theme that was picked up 
by you and Senator Kerry and Senator Inhofe. You alluded, Mr. 
chairman, to the thought that there appears to be a waning 
interest in foreign and security affairs. That is clearly not 
true of this Committee or of the panel that we have before us 
or those who have joined us in this hearing in the audience.
    I would have appreciated, as all now have pointed out, if 
the President had outlined--at least as the most crucial set of 
facts facing our country--our security and our military 
position. I think that really is essential, and we are working 
with the cooperative threat reduction situation in Russia with 
the Nunn-Lugar-Domenici program in this country right now in a 
quiet way, city-by-city, to prepare our citizens for what might 
be a terrifying threat--biological or chemical weapons conveyed 
by means other than missiles, by human beings, to those 
communities.
    The most dire threats right now to Americans, they come in 
unconventional forms, and the Intelligence Community that is 
represented here today is our major bulwark, because 
information, uncovering, revelation of this, prompt activity, 
coordination with state and local authorities, may make a very 
large difference in the saving of American lives in a way that 
we do not often think about as we think about more dramatic 
foreign adventures.
    So we look forward to this as a very, very important step 
in commencing our Committee's work this year. And I thank you 
again, Mr. Chairman, for your diligence in making certain we 
are on the job--literally the morning after the State of the 
Union.
    Chairman Shelby. Senator Baucus.
    Senator Baucus. Thank you, Mr. Chairman.
    Mr. Chairman, I thank you and particularly our witnesses. 
It is important that we establish this precedent of having as 
our first hearing a threat assessment. I think it's a good way 
to start the year, and again I compliment you and the Vice 
Chairman for beginning the year this way.
    As we look at threats, though, I think it's important--as 
has been indicated by other Senators--that the definition of 
threat has various meanings. It's changed and evolved over the 
years. We no longer concern ourselves only with traditional 
military threats as we did, say, during the Cold War. Rather 
we're now concerned, in addition, with more subtle threats. 
They may not be as dangerous as that presented by the Soviet 
Union--certainly the threats during the Cold War--but we must 
deal with them very clearly.
    Let me give an example. Last month, I visited the 
Philippines, Brunei, Thailand and Indonesia to investigate the 
financial crisis that's affecting that region. Now this may 
seem remote to some people, but it's not. In the last 100 
years, we fought seven foreign wars, and five, in part or in 
whole, were in Asia. But due to the political stability created 
by growth and prosperity in Asia, along with our military 
presence in the region, none of them happened in the last 20 
years. But a prolonged period of high unemployment, high 
inflation and recession could turn the clock back with very 
serious implications for us.
    At present, we also see very different responses to the 
crisis in different Asian countries. One interesting point is 
that democracies seem to be proving more capable of addressing 
the crisis than authoritarian countries.
    A second point is our failure to predict that economic 
troubles in Thailand could, within days, cause an Asian-wide 
financial crisis that's also affecting not only America but the 
rest of the world.
    Now this is not a swipe at the Intelligence community, 
because neither the Congress, banks or Asian governments 
themselves did any better. They did not anticipate this or take 
measures to correct it. But I wonder what we can learn and how 
we can do better in the future?
    And I also hope to hear our witnesses' views on other 
questions. What is the outlook in Asia? What are the short and 
long-term implications of this crisis for the United States? 
And how well are the respective governments poised to respond 
to the challenges that they face?
    Finally, by focusing on the economic questions, I do not 
want to imply that the military threats have disappeared. They 
have not. As my colleagues have mentioned, the threat of 
nuclear weapons remains. We have American soldiers keeping the 
peace in many part of the world. Other American military units 
are watching the bad actors like Saddam Hussein.
    Intelligence plays a crucial role in protecting them from 
the unexpected and preparing them to act decisively when we 
must. I am sure our witnesses will cover these issues in 
detail, and I look forward to their testimony during this 
hearing.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    Like other Members of this Committee, I'd like to thank you 
for the hearing. I think it is appropriate that we do have 
public hearings from time to time to remind the American public 
that we still have some very dangerous spots in this world and 
by no means is it--could we consider it a safe world.
    Information plays a vital point in how we shape public 
policy and many of the decisions that we have made in this 
Committee as well as the Administration has to make.
    So I am looking forward to this hearing. I think the 
gathering of information certainly has to occur with the 
cooperation of both domestic as well as foreign agencies. So 
I'm glad to see you put together this panel for us this morning 
so we can hear their perspective.
    I think we also have to realize that what is happening in 
the world of intelligence is many--corresponds in many regards 
as what is happening in just the regular business world out 
there as far as high technology and as far as drugs are 
concerned. And I think the drugs in many cases become an 
international currency, and I think our keeping track of what 
happens with the--in the international markets, as far as 
illegal drugs are concerned, leads to many other discoveries. 
And so not only does it help from a domestic standpoint in 
trying to control the use of illegal drugs, but I think it 
gives us a better feel of what is happening in the 
international area.
    So I'm going to keep my remarks brief, Mr. Chairman. I'm 
looking forward--because I want to hear what the panel has to 
say. And I'd like to associate myself with your remarks and 
those of my colleague from Oklahoma. I do believe that we live 
in a dangerous world, and we need to work hard to stay on top 
of it, and we shouldn't take anything for granted, and just 
because we have no major powers out there other than ourselves, 
I think. But we do have a lot of hot spots, and they can create 
a lot of instability in the international environment.
    So thank you, Mr. Chairman, and we'll listen to the panel.
    Chairman Shelby. Senator DeWine.
    Senator DeWine. Mr. Chairman, thank you very much for 
holding these hearings, and I'll waive my opening statement.
    Chairman Shelby. Director Tenet, before your testimony 
begins, I have one brief administrative comment to make just 
for the record. During the first session of Congress, I was 
disappointed, and others on the Committee, in the performance 
of the Intelligence Community in the timeliness of their 
responses to questions for the record propounded by Members of 
the Senate Intelligence Committee.
    Of the 31 sets of questions submitted to you and others 
over at the CIA, our hearings last session, 74 percent of the 
responses were received late with an average tardiness of over 
24 days. And there are at least four sets of questions from 
hearings back in September and October that are still 
outstanding. That's a long time. In addition, the community 
does not seem--the Intelligence Community--to be respectful of 
rule 8.5 of the Committee that requires witnesses to submit a 
copy of their written testimony at least 72 hours in advance of 
their appearance before the Committee.
    For example, we received your testimony, Director Tenet, 
for today's hearing only 16 hours ago. And General Hughes' 
final testimony was not received until just a few moments ago. 
Director Tenet, as a former staff director for this Committee, 
I'm sure you may have even written the rule. I'm sure you're 
well aware of the need to provide this Committee with timely 
information so that the staff can adequately prepare the 
members for hearings such as this.
    I hope that you and the other leaders in the Intelligence 
Community will work with the Committee to improve this in the 
second session of Congress, and I believe you will.
    Director Tenet. Mr. Chairman, you're right. We'll do 
better.
    Chairman Shelby. Okay.
    Director Tenet, you may proceed, as you wish.
    [The prepared statement of Director Tenet follows:]

     Statement of Director of Central Intelligence George J. Tenet

    Mr. Chairman, thank you for the opportunity to address the 
Committee again this year on the worldwide threats to our national 
security. I have submitted a detailed Statement for the Record and 
would like to summarize its key points in my opening remarks.
    Before plunging into the details, Mr. Chairman, I'd like to step 
back for a moment and put the threats to our security into a broader 
strategic context. Scholars and pundits, as you know, are still 
struggling to capture the essence of this post-Cold War world we live 
in, but no one, in my view, has quite put their finger on the things 
that make it uniquely challenging for US interests. From the 
perspective of an intelligence officer, Mr. Chairman, I think it comes 
down to three words: complexity, scope, and speed.
    Let me explain what I mean.
    I say complexity because, as my testimony will make clear, the 
dangers facing the United States today--ranging from chemical warfare 
to terrorism, regional crises, and societal turmoil--are linked in 
unprecedented ways and frequently span multiple countries or 
continents. Dealing with them therefore requires multiple intelligence 
disciplines, along with the combined tools of diplomacy, law 
enforcement, and the proliferation of Weapons of Mass Destruction 
(WMD), internationalterrorism, drug trafficking, information warfare 
and, most recently, the fallout from the Asian financial crisis.
    Second, Mr. Chairman, the stakes remain high for the United States 
in countries like China and Russia as they struggle through 
unprecedented political and economic transformations.
    Third, are the challenges facing us from countries that continue in 
the post-Cold War era to view the United States with varying degrees of 
hostility or suspicion--Iraq, North Korea, Libya, Sudan, and in a more 
complicated way this year, Iran.
    Fourth, we are challenged still by regional trouble spots that 
could flare into conflict, whether in the Middle East, South Asia, the 
Aegean, or Bosnia.
    Fifth, we must continue to be alert to humanitarian emergencies--
caused by natural disasters, ethnic conflict, and foreign government 
mismanagement--that emerge rapidly and place heavy demands on U.S. 
military and financial resources.
                   challenge i: transnational issues
    Mr. Chairman, in today's world few events occur in isolation, and 
national boundaries are much less reliable shields against danger. 
Emblematic of this new era is an assortment of transnational issues 
that hold grave threats for the United States. That is where I would 
like to begin today.
    Proliferation.--I am most concerned, Mr. Chairman, about the 
proliferation of WMD because of the direct threat this poses to the 
lives of Americans. Despite some successes for U.S. policy and U.S. 
intelligence, technologies related to this threat continue to be 
available, and potentially hostile states are still developing and 
deploying WMD-related systems.
    Efforts to halt proliferation continue to be complicated, moreover, 
by the fact that most WMD programs are based on technologies and 
materials that have civil as well as military applications.
    Finally, a growing trend towards indigenous production of WMD-
related equipment has decreased the effectiveness of sanctions and 
other national and multinational tools designed to 
counterproliferation.
    Chinese and Russian assistance to proliferant countries requires 
particular attention, despite signs of progress.
    My statement for the record provides the details but some key 
points should be made here. With regard to China, its defense 
industries are under increasing pressure to become profit making 
organizations--an imperative that can put them at odds with U.S. 
interests. Conventional arm sales have lagged in recent years, 
encouraging Chinese defense industries to look to WMD technology-
related sales, primarily to Pakistan and Iran, in order to recoup. 
There is no question that China has contributed to WMD advances in 
these countries.
    On the positive side, there have recently been some signs of 
improvement in China's proliferation posture. China recently enacted 
its first comprehensive laws governing nuclear technology exports. It 
also appears to have tightened down on its most worrisome nuclear 
transfers, and it recently renewed its pledge to halt sales of anti-
ship cruise missiles to Iran.
    But China's relations with some proliferant countries are long-
standing and deep, Mr. Chairman. The jury is still out on whether the 
recent changes are broad enough in scope and whether they will hold 
over the longer term. As such, Chinese activities in this area will 
require continued close watching.
    The Russian proliferation story is similar. On paper, Russia's 
export controls specifically regulate the transfer of missile-related 
technologies as well as missile components. But the system has not 
worked well, and proliferant countries have taken advantage of its 
shortcomings. Iran is one of those countries. When I testified here a 
year ago, Mr. Chairman, I said that Iran, which had received extensive 
missile assistance from North Korea, would probably have medium-range 
missiles capable of hitting Saudi Arabia and Israel in less than ten 
years.
    Since I testified, Iran's success in gaining technology and 
materials from Russian companies, combined with recent indigenous 
Iranian advances, means that it could have a medium range missile much 
sooner than I assessed last year.
    Following intense engagement with the United States, Russian 
officials have taken some positive steps. Just last week Prime Minister 
Chernomyrdin issued a broad decree prohibiting Russian companies from 
exporting items that would be used for developing WMD or their delivery 
systems--whether or not these items are on Russia's export control 
list. If it is enforced, this could be an important step in keeping 
Iran from getting the technology it needs to build missiles with much 
longer ranges.
    Without minimizing the importance of Russia's response, Mr. 
Chairman, I must tell you that it is too soon to close the books on 
this matter. Russian action is what matters, and therefore monitoring 
Russian proliferation behavior will have to be a very high priority for 
some time to come.
    Mr. Chairman, in focusing on China and Russia, we should not lose 
sight of other proliferators. North Korea is the most notable here, as 
it continues to export missile components and materials to countries of 
proliferation concern. Likewise, Mr. Chairman, in focusing on Iran's 
acquisition of WMD technology--as we should since it is one of the most 
active countries seeking such materials--we cannot lose sight of other 
proliferants. Iraq retains the technological expertise to quickly 
resurrect its WMD program if UN inspections were ended. Syria continues 
to seek missile-related equipment and materials. Despite the UN 
embargo, Libya continues to aggressively seek ballistic missile-related 
equipment and materials. Despite the UN embargo, Libya continues to 
aggressively seek ballistic missile-related equipment, materials, and 
technology.
    Asian Economic Instability.--Moving on to a very different 
transnational challenge, Mr. Chairman, the recent financial troubles in 
Asia remind us that global markets are so interconnected--and that 
economics and politics are so intertwined--that economic problems in 
one country can have far reaching consequences for others.
    At the root of this crisis is a confluence of economic, social, and 
political factors.
    Soaring growth and financial systems that lacked adequate 
regulation led to a speculative boom.
    Lending decisions by banks and finance companies ignored 
fundamental economic risks and when export growth began to slow 
regionally in 1995, corporate borrowers had trouble repaying loans. 
Faced with high levels of short term debt and limited foreign exchange 
reserves, Thailand first and then Indonesia and South Korea were forced 
to devalue their currencies. Because of the high level of economic 
integration and reaction of investors, the currency crisis spread 
rapidly to other countries in the region.
    The crisis has been difficult to resolve, in part because 
governments must take some politically risky steps like closing weak 
banks and shelving projects that will add to unemployment
    The current troubles in Asia will, of course, have economic costs 
for the United States--most important, a reduction in US exports to the 
region. But the troubles also carry political risks. Social tensions 
which we already see in Indonesia and other states in the region, are 
likely to increase as prices go up for things like food and fuel, and 
as unemployment rises.
    International Terrorism.--Turning now to terrorism Mr. Chairman, I 
must stress that the threat to US interests and citizens worldwide 
remains high. Even though the number of international terrorist 
incidents in 1997 was about the same as 1996, US citizens and 
facilities suffered more than 30 percent of the total number of 
terrorist attacks--up from 25 percent last year.
    Moreover, there has been a trend toward increasing lethality of 
attacks, especially against civilian targets. The most recent examples, 
of course, are the suicide bombings in Israel in 1996 and 1997 and the 
attacks on tourists in Luxor, Egypt last November. Perhaps most 
worrisome, we have seen in the last year growing indications of 
terrorist interest in acquiring chemical, biological, and nuclear 
weapons.
    In addition, a confluence of recent developments increases the risk 
that individuals or groups will attack US interests. Terrorist passions 
have probably been inflamed by events ranging from the US Government's 
designation of 30 terrorist groups to the conviction and sentencing of 
Mir Aimal Kasi and Ramzi Ahmed Yousef as well as the ongoing US 
standoff with Iraq and frustration with the Middle East peace process.
    Among specific countries, Iran remains a major concern, despite the 
election of a more moderate president. Since President Khatami assumed 
office in August, Iran has continued to engage in activities, such as 
support for Hezballah and its Palestinian clients, that would not 
require his specific approval. Iraq, Sudan, and Libya also bear 
continued watching, both for their own activities and for their support 
of terrorist organizations.
    International Narcotics.--Turning to the international narcotics 
threat, I must tell you, Mr. Chairman, that the illicit drug industry 
is adapting to the counterdrug successes that we and other governments 
have had in recent years. Most worrisome, the narcotics underworld is 
becoming more diverse and fragmented. In addition, traffickers are 
infusing their business with new technologies to enhance their 
operations, hide their illicit earnings, and improve their security.
    Mr. Chairman, I do not mean to downplay the impressive progress 
that has been made against drug traffickers, especially those that deal 
in cocaine.
    You know of the arrest of the Cali kingpins in Colombia--which has 
disrupted long-held smuggling patterns there and forced traffickers 
still at large into hiding.
    Drug interdiction efforts in Peru, once the world's leading 
producer of the leaf used to make cocaine, have seriously damaged that 
country's drug economy and led to a 40-percent decline in cultivation 
over the last two years.
    The cocaine trade, however, is still a formidable challenge--thanks 
to the industry's ability to adapt.
    Our success against the Cali kingpins has nurtured smaller groups 
that now dominate trafficking through the Caribbean.
    Violent Mexican drug cartels are exploiting the Cali mafia's 
setbacks to wrestle away a greater share of the international drug 
business.
    Despite declines in Peru and Bolivia, coca production continues to 
expand in southern Colombia--where the new ingredient is the 
involvement of insurgents who tax drug profits to fund their war 
against the state.
    I'm also concerned, Mr. Chairman, about developments in 
international heroin trafficking.
    Worldwide production of opium--the source of all refined heroin--
continues at record levels.
    And heroin traffickers are exploiting weak enforcement institutions 
in the former Soviet Union and Eastern Europe to expand traditional 
heroin smuggling routes from the Golden Crescent and, to a lesser 
extent, the Golden Triangle regions.
    International Organized Crime.--As for international organized 
crime, the globalization of business and technology have given crime 
syndicates unprecedented opportunities for illicit activities. Yet law 
enforcement authorities often remain constrained by national 
sovereignty and jurisdictions. Trends that cause us the greatest 
concern are:
    An increasingly sophisticated financial system that includes 
emerging financial secrecy havens, stretching from islands in the 
Caribbean to the South Pacific.
    A broader array of seemingly legitimate businesses that serve as 
fronts for criminal enterprise.
    The increasing role of gray arms brokers in arming rogue states, 
terrorists, and criminal groups. The activities of arms brokers make it 
even more difficult to judge when such actions are supported by 
governments and when they are not.
    Information Warfare.--As you know, Mr. Chairman, all of this is 
occurring in what we all call the ``Information Age.'' With that in 
mind, it is clear that foreign entities are aware that an increasing 
proportion of our civil and military activity depends on the secure and 
uninterrupted flow of digital information.
    In fact, we have identified several countries that have government-
sponsored information warfare programs underway. It's clear that those 
developing these programs recognize the value of attacking a country's 
computer systems--both on the battlefield and in the civilian arena. In 
addition, I believe terrorist groups and other non-state actors will 
increasingly view information systems in the United States as a target.
    Mr. Chairman, let me assure you that we are increasing our efforts 
to uncover information warfare activities. We are also developing the 
tools needed to improve our ability to detect and counter information 
warfare attacks.
    This is an enormously complex, sensitive, and innovative endeavor, 
Mr. Chairman, that will require insights from law enforcement and the 
private sector in order to fully succeed.
              challenge ii: russia and china in transition
    Moving beyond these transnational issues, Mr. Chairman. I want to 
focus for a moment on a second major challenge: the still unsettled 
state of affairs in key countries like Russia and China--one time Cold 
War adversaries who now have the potential to be major partners.
Russia
    Today we see hopeful signs that the seeds of democracy and a free 
market economy sown in Russia just a few years ago have taken root. 
Moreover, Moscow cooperates with the United States and the West in ways 
that were unimaginable during Soviet times.
    But whether Russia succeeds as a stable democracy, reverts to the 
autocratic and expansionist impulses of its past, or degenerates into 
instability remains an open question. The answer will depend in large 
part on how Russia copes with several major challenges.
    Democratic political institutions while developing, are not yet 
deeply rooted. The executive branch and Communist-dominated Duma often 
deadlock, while crime and corruption threaten to undermine confidence 
in political and economic reform.
    Russia has implemented many economic reforms and achieved a measure 
of economic stability, but long-term steady growth is still dependent 
on other reforms--namely ensuring that economic activities are governed 
by the rule of law.
    The Russian military, meanwhile, continues to suffer from serious 
social and economic difficulties. Finding the wherewithal to pay the 
retirement costs of over 250,000 redundant military officers will be a 
particular challenge. Despite these difficult times for the military, 
Russia retains a major nuclear arsenal--some 6,000 deployed strategic 
warheads. As long as there is even the slightest doubt about future 
political stability in Russia, those weapons must be a major 
preoccupation for US intelligence.
    We must also remain mindful that Russia continues a wide-range of 
development programs for conventional and strategic forces.
    Finally, while Russia continues to seek close cooperation with the 
United States on matters of mutual concern, it is increasingly strident 
in opposing what it sees as US efforts to create a ``unipolar'' world. 
And Moscow continues to place a high priority on keeping others from 
gaining undue influence in the New Independent--especially in the 
energy rich Caucasus and Central Asia.
China
    Turning now to China, the leadership there was a clear goal: the 
transformation of their country into East Asia's major power and a 
leading world economy on a par with the United States by the middle of 
the 21st Century.
    It is too soon to say what this portends, Mr. Chairman--whether 
China in the future will be an aggressive or a benign power. What is 
clear, though, is that China will be an increasingly influential 
player--one what will have the capacity to, at a minimum, alter our 
security calculus in the Far East.
    Hong Kong's 1997 reversion to Chinese rule was peaceful but 
involved important changes to the political system. The Chinese 
Government disbanded the existing legislative council and installed a 
hand-picked provisional legislature. A key question now is whether new 
legislative elections scheduled for May will be free and fair.
    Cross-strait relations with Taiwan are still tense, China has not 
renounced the use of force and is placing its best new military 
equipment opposite Taiwan.
    Chinese military modernization remains a key leadership goal. China 
is increasing the size and survivability of its retaliatory nuclear 
missile force is taking important steps toward building a modern navy 
capable of fighting beyond China's coastal waters.
    Finally, Mr. Chairman, the post-Deng Xiaoping leadership shows no 
signs of abandoning Communist political ideology, although it has 
committed itself to market-oriented economic reforms. These are eroding 
State control over major sectors of the economy as well as over the 
daily life of many Chinese citizens.
                 challenge iii: regional troublemakers
    Mr. Chairman, I would like now to turn to states for whom the end 
of the Cold War did not mean an end to hostility to the United States.
Iran
    Among these countries, Iran in many respects represents the 
greatest challenge we will face over the next year. It appears to us 
that a genuine struggle is now underway between hardline conservatives 
and more moderate elements represented by Iran's new President Khatami. 
And so the challenge is how to cope with a still dangerous state in 
which some positive changes may be taking place--changes that could, 
and I stress could--lead to a less confrontational stance toward the 
United States.
    Khatami's strongest card is his electoral mandate--a 70 percent 
vote representing mostly youth and women, as well as ethnic and 
religious minorities in Iran. Since assuming office in August, he has 
made limited but real progress toward fulfilling his campaign pledges 
for political and social reforms.
    He gained approval for a new cabinet that puts his people in key 
posts such as the ministries of Foreign Affairs, Interior, and Islamic 
Culture.
    Censorship is now less oppressive, with previously banned 
periodicals reappearing and socially controversial films being shown.
    And against this backdrop, there is even renewed debate about a 
central tenet of the revolution--rule by a supreme religious leader.
    Progress is likely to be fitful, however, and hard-line elements 
remain formidable obstacles.
    They still control the country's defense and security 
organizations, for example, and therefore exert heavy influence on 
issues most vital to the United States.
    Statements by Khatami and his foreign ministry suggest he is trying 
to play a more constructive role in the international community. It is 
simply too early to tell, however, whether this will lead to 
demonstrable changes in Iranian policies that matter most to the United 
States. We have seen no reduction in Iran's efforts to support 
Hizballah, radical Palestinians, and militant Islamic groups that 
engage in terrorism.
    Moreover, even as it attempts to improve its international image, 
Tehran is continuing to bolster its military capabilities. Iran is 
improving its ability potentially to interdict the flow of oil through 
the Strait of Hormuz. It has acquired KILO-class submarines from Russia 
and is upgrading its antiship-missile capabilities.
    And, as I noted earlier, Iran continues its efforts to acquire the 
capability to produce and deliver weapons of mass destruction.
North Korea
    Turning to North Korea, we also face a more complex challenge than 
last year--some progress but in the face of a worsening economic and 
social situation and a continued real military threat.
    The North is still observing the terms of the Agreed Framework that 
directly relate to freezing its nuclear reactor program. The IAEA has 
maintained a continued presence at Yongbyon since the May 1994 
refueling of the reactor, and P'yongyang and the IAEA continue to 
discuss steps the North needs to take to come into full compliance with 
its safeguards commitments.
    Amidst these signs of progress, however, a combination of economic 
stagnation and social decay continues to raise doubts about North 
Korean stability.
    North Korea's spreading economic failure is eroding the stability 
of the regime of Kim Chong-il. Industrial and agricultural output 
continues to drop. The North's most recent fall grain harvest was far 
less than the 4.5 million tons the North needs to meet even minimal 
rations. Crime, corruption and indiscipline, including in the security 
services and military, are increasing, and people are more willing to 
blame Kim Chong-il for their plight.
    While Kim reportedly is aware of the economic problems and their 
impact on soldiers and civilians, his legitimacy remains closely tied 
to his father's legacy. As a result, P'yongyang likely will avoid an 
avowedly reformist agenda and will try to package any reform 
experiments in traditional ideological terms. As such, significant 
improvements in the economy do not seem to be in the cards.
    Its economic weaknesses notwithstanding, North Korea retains a 
military with the capability to inflict serious damage on South Korea 
and the 37,000 US troops deployed there.
    The North's offensive posture along the demilitarized zone (DMZ) 
means that it could go to war with little additional preparation.
    And North Korea's long-range artillery and surface-to-surface 
missiles near the DMZ, some of which could deliver chemical warfare 
agents, can hit forward defenses, US Military installations, airfields 
and seaports, and Seoul.
Iraq
    Mr. Chairman, Iraq, under Saddam, continues to present a serious 
threat to US forces, interests and allies. Our principal aim must be to 
ensure that Saddam does not have weapons of mass destruction or the 
capacity to regain any he has lost.
    As my statement for the record points out in greater detail, we 
assess that Iraq continues to hide critical WMD production equipment 
and material from UN inspectors.
    Continued UN sanctions can keep pressure on his regime and cast 
uncertainty over Saddam's hold on power.
    But, as you know Mr. Chairman, Saddam is pushing more aggressively 
than last year to erode the sanctions regime.
    More than seven years of sanctions have had a devastating effect on 
Iraq's economy. Inflation is soaring, the civilian infrastructure is 
deteriorating, and the Iraqi population continues to suffer from high 
rates of malnutrition and inadequate services--in part because of 
Saddam's manipulation of relief supplies. Key regime officials and 
support organizations remain largely immune to the harsh living 
conditions facing the general population and even live off revenues 
generated through illicit trade--a fact that engenders resentment and 
poses an underlying threat to Saddam and his family.
    While its military force continues to slowly deteriorate under UN 
sanctions and the arms embargo implemented after the Gulf War, Iraq 
remains an abiding threat to internal oppositionists and smaller 
regional neighbors.
                  challenge iv: regional trouble spots
    Mr. Chairman, I propose again this year to provide you a brief 
description of where we stand in several potential ``hot spots.'' As I 
did last year, I will focus on the situation in the Middle East, South 
Asia, and Bosnia.
Middle East
    With regard to the Middle East, Mr. Chairman, my bottom line 
message must be that the region is more volatile and more troubled than 
when I testified here last year. Many of the threats I have discussed 
today intersect in the Middle East, where the historic strife and 
distrust that mark the region are now aggravated by the spread of 
sophisticated weapons programs, an upsurge in terrorism, and 
demographic trends that point to heightened social tensions.
    Against this backdrop, the peace process has foundered, with 
dangerous implications for all of the parties.
    Iraq, as noted earlier, continues to defy the international 
community's effort to deny it the means to again commit aggression.
    And some of the fixed points have begun to change, Iran in 
particular, but not so conclusively as to permit a dropping of our 
guard.
    Meanwhile, world demand for imported energy will ensure the 
region's strategic importance, along with the active, and sometimes 
competitive, engagement of many nations.
    In short, Mr. Chairman, the period ahead is one of enormous 
challenge for the United States as it seeks to ensure stability, 
prosperity, and peace in this most critical of regions.
South Asia
    In South Asia, relations between India and Pakistan remain poor. 
The long-standing dispute over Kashmir remains a major sticking point. 
A modest India-Pakistan dialogue is underway, though progress is 
certain to be slow and subject to abrupt setbacks. We cannot be sure 
this tentative dialogue will continue when a new Indian government 
assumes office after national elections in March.
    The stakes of conflict are high, because both countries have 
nuclear capabilities and have or are developing ballistic missile 
delivery systems. Although Indian and Pakistani officials say 
deterrence has worked for years, it would be at risk in a crisis.
Bosnia and the Balkans
    Turning to Bosnia, Mr. Chairman, the story is progress but with 
significant remaining challenges. On the positive side, developments in 
recent months have somewhat improved the prospect for Dayton 
implementation.
    The emergence in the Republika Srpska of a government backed by 
Muslim and Croat deputies is a breakthrough that--if sustained--could 
accelerate the pace of Dayton implementation.
    At the same time, the High Representative is using his new 
authority to impose solutions on the parties to reinforce central 
institutions.
    Bosnia's military forces remain demobilized with their heavy 
weapons stored in sites that are regularly inspected by SFOR. 
Furthermore, each army has significantly reduced its heavy weapons 
under the Dayton-mandated arms control agreement.
    Iran has terminated its military aid and training in Bosnia and has 
focused its involvement on economic assistance.
    Although Bosnians are a long way from regaining their pre-war 
standard of living, significant economic growth has resumed and 
unemployment is starting to decline.
    Relatively little progress has been made, however, in implementing 
minority returns and other provisions of Dayton relating to freedom of 
movement and resettlement. The OSCE goal of 220,000 returns in 1997 was 
only about half met, and the bulk of those who did return went to 
majority areas.
    Looking to the future, most Bosnians recognize that continued 
international engagement is essential for keeping the peace. Such 
involvement is required to continue weakening the hardline nationalists 
who are obstructing Dayton, and national elections in 1998 might 
increase the political clout of opponents of the nationalists who 
currently dominate the three communities.
    In addition, a number of volatile issues could still disrupt the 
gradual process of reconciliation. These include the Brcko arbitration 
decision--postponed last year but expected in March and the UN's stated 
goal of returning 50,000 refugees to minority areas during the first 
six months of 1998. In addition, continuing mutual distrust between 
Muslims and Croats will hamper the effort to create a functioning 
Federation.
    I must also note the threat of instability in the southern Serbian 
province of Kosovo, where animosity remains high between the 90 percent 
Albanian majority and the local Serbian residents. There is increasing 
support for violence as a way to resolve the situation.
The Aegean
    Turning to the Aegean, there is reason for increased concern about 
tensions between Greece and Turkey, particularly in the wake of the EU 
summit decision to proceed with membership negotiations with Cyprus--
while rebuffing Turkey's application--and the expected arrival of SA-10 
air defense batteries from Russia this summer. Ongoing disputes over 
air and sea delineations in the Aegean have also heightened long-
standing Greek-Turkish animosity.
                  challenge v: humanitarian challenges
    Mr. Chairman, last year I concluded my briefing by discussing with 
you the challenge posed to US citizens and interests by humanitarian 
crises whose origins often go back many years but which can escalate 
with dramatic suddenness. I regret to say that the dimension of this 
challenge remains unchanged.
    The totality of the problem is similar to that I described last 
year 34 million people worldwide unable to return to their homes; more 
than 20 million internally displaced; 14.5 million refugees.
    As it was last year, Africa is the region most troubled by these 
crises--with attendant calls on US and UN resources to assist relief 
operations and attendant risks to US citizens caught up in violence.
    We have no reason to believe that 1998 in Africa will be any more 
stable than was 1997. The instability in central Africa that led to the 
overthrow of governments in Zaire and Congo (Brazzaville) last year 
lingers, and it is probably only a matter of time until serious 
problems erupt again in Burundi and Rwanda. Apart from ethnic and 
political conflict, for the coming months the impact of El Nino, 
particularly in southern and eastern Africa, will bear careful 
watching--especially water shortages and consequent food scarcity.
                          concluding comments
    I hope these and the other challenges I have discussed with you 
today illustrate why I opened these remarks by referring to complexity, 
broad scope, and speed as the touchstones of this new era. These 
challenges will require the most sophisticated intelligence collection 
and analysis that we can produce. Only by continuing to invest in this 
kind of effort can the Intelligence Community play the role it must in 
protecting American lives, guarding American interests, and sustaining 
American leadership.
    Thank you Mr. Chairman, I would welcome your questions at this 
time.

    Director Tenet. Mr. Chairman, thank you very much. I'm 
pleased to be joined today by my distinguished colleagues.
    The world we face today poses a complexity and scope of 
problems that I believe is unprecedented for the United States. 
The speed of technological change in the world magnifies these 
threats.
    I'm most concerned, Mr. Chairman, about the proliferation 
of weapons of mass destruction because of the direct threat 
this poses to the lives of Americans. Despite some successes 
for U.S. policy and U.S. intelligence, technologies related to 
this threat continue to be available and potentially hostile 
states are still developing and deploying WMD related systems. 
Efforts to halt proliferation continue to be complicated, 
moreover, by the fact that most WMD programs are based on 
technologies and materials that have civil as well as military 
applications.
    Finally, a growing trend towards indigenous production of 
WMD-related equipment has decreased the effectiveness of 
sanctions and other national and multinational tools designed 
to counter proliferation.
    Chinese and Russian assistance to proliferant countries 
requires particular attention despite signs of progress. My 
statement for the record provides the details, but some of the 
key points should be made here.
    With regards to China, its defense industries are under 
increasing pressure to become profit making organizations, an 
imperative that can put them at odds with U.S. interests. 
Conventional arms sales have lagged in recent years, 
encouraging Chinese defense industries to look to WMD 
technology-related sales, primarily to Pakistan and Iran, in 
order to recoup. There is no question that China has 
contributed to the WMD advances in these countries.
    On the positive side, there have recently been some signs 
of improvement in China's proliferation behavior. China has 
recently enacted its first comprehensive laws governing nuclear 
technology exports. It also appears to have tightened down on 
its most worrisome nuclear transfers. And it recently renewed 
its pledge to halt sales of anti-ship cruise missiles to Iran.
    But China's relations with some proliferant countries are 
longstanding and deep, Mr. Chairman. The jury is still out on 
whether the recent changes are broad enough in scope and 
whether they will hold over the longer term.
    As such, Chinese activities in this area will require 
continued close watching.
    The Russian proliferation story is similar. On paper, 
Russia's export controls specifically regulate the transfer of 
missile-related technologies as well as missile components. But 
the system has not worked well and proliferant countries have 
taken advantage of its shortcomings.
    Iran is one of those countries, Mr. Chairman. When I 
testified here a year ago, I said that Iran--which had received 
extensive missile assistance from North Korea--would probably 
have medium range missiles capable of hitting Saudi Arabia and 
Israel in less than 10 years. Since I testified, Iran's success 
in gaining technology and material from Russian companies, 
combined with recent indigenous Iranian advances, means that it 
could have a medium range missile much sooner than I assessed 
last year.
    Following intense engagement with the United States, 
Russian officials have just taken some positive steps. Just 
last week, Prime Minister Chernomyrdin issued a broad decree 
prohibiting Russian companies from exporting items that would 
be used for developing WMD or their delivery systems--whether 
or not these items are on Russia's export control list. If 
enforced, this could be an important step in keeping Iran from 
getting the technology it needs to build missiles with much 
longer ranges.
    Without minimizing the importance of Russia's response, Mr. 
Chairman, I must tell you that it is too soon to close the 
books on this matter. Russian action is what matters, and 
therefore monitoring Russian proliferation behavior will have 
to be a very high priority for some time to come.
    Likewise, Mr. Chairman, in focusing on Iran's acquisition 
of WMD technology, as we should, since it is one of the most 
active countries seeking such materials, we cannot lose sight 
of other proliferants. My statement talks about Iraq, Syria and 
Libya.
    Moving on to the very different transnational threat that 
Senator Baucus talked about, the recent financial troubles in 
Asia remind us that global markets are so interconnected and 
that economies and politics so intertwined that economic 
problems in one country can have far-reaching consequences for 
others. At the root of this crisis is a confluence of economic, 
social and political factors. Soaring growth and financial 
systems that lacked adequate regulation led to a speculative 
boom. Lending decisions by banks and finance companies ignored 
fundamental economic risks. And when export growth began to 
slow regionally in 1995, corporate borrowers had trouble 
repaying loans.
    Faced with high levels of short-term debt and limited 
foreign exchange reserves, Thailand first, and then Indonesia 
and South Korea, were forced to devalue their currencies. 
Because of the high level of economic integration and reaction 
of investors, the currency crisis spread rapidly to other 
countries in the region.
    The crisis has been difficult to resolve--in part because 
governments must take some politically risky steps like closing 
weak banks and shelving projects that will add to unemployment.
    The current troubles in Asia will, of course, have economic 
costs for the United States. But the troubles also carry 
political risks. Social tensions--which we already see in 
Indonesia and other states in the region--are likely to 
increase as the prices go up for things like food, fuel and as 
unemployment rises.
    Turning to terrorism, Mr. Chairman, I must stress that the 
threat to U.S. interests and citizens worldwide remains high. 
Even though the number of international terrorist incidents in 
1997 was about the same as 1996, U.S. citizens and facilities 
suffered more than 30 percent of the total number of terrorist 
attacks--up 25 percent from last year.
    Moreover, there has been a trend toward increasing the 
lethality of attacks, especially against civilian targets. The 
most recent examples, of course, are the suicide bombings in 
Israel in 1996 and 1997, and the attacks on tourists in Luxor, 
Egypt, last November. Perhaps most worrisome, Mr. Chairman, is 
the fact that we have seen in the last year growing indications 
of terrorist interest in acquiring chemical, biological and 
nuclear weapons.
    In addition, a confluence of recent developments increases 
the risk that US individuals or groups will attack US 
interests. Terrorists' passions have probably been inflamed by 
events ranging from the US government's designation of 30 
terrorist groups to the conviction and sentencing of Mir Aimal 
Kasi and Ramzi Ahmed Yousef, as well as the ongoing standoff 
with Iran and frustration with the Middle East peace process.
    Turning to international narcotics, I must tell you, Mr. 
Chairman, that the illicit drug industry is adapting to the 
counterdrug successes that we and other governments have had in 
recent years. Most worrisome, the narcotics underworld is 
becoming more diverse and fragmented. In addition, traffickers 
are infusing their business with new technologies to enhance 
their operations, hide their illicit earnings and improve their 
security.
    I do not mean to downplay the impressive progress that has 
been made against drug traffickers, especially those that deal 
in cocaine. You know that the arrests of the Cali kingpins in 
Colombia, whichhas disrupted long-held smuggling patterns there 
and forced traffickers still at large into hiding. Drug interdiction 
efforts in Peru--once the world's leading producer of the leaf used to 
make cocaine--have seriously damaged the country's drug economy and led 
to 40 percent decline in cultivation over the last two years.
    The cocaine trade, however, is still a formidable challenge 
thanks to the industry's ability to adapt. Our success against 
the Cali kingpins has nurtured smaller groups that now dominate 
trafficking through the Caribbean. The violent Mexican drug 
cartels are exploiting the Cali mafia's setbacks to wrestle 
away a greater share of the international drug business.
    Despite declines in Peru and Bolivia, coca production 
continues to expand in southern Colombia where the new 
ingredient is the involvement of insurgents who tax drug 
profits to fund their war against the government.
    I'm also concerned, Mr. Chairman, about developments in 
international heroin trafficking. Worldwide production of 
opium--the source of all refined heroin--continues at record 
levels. And heroin traffickers are exploiting weak enforcement 
institutions in the former Soviet Union and Eastern Europe to 
expand traditional heroin smuggling routes from the Golden 
Crescent and, to a lesser extent, the Golden Triangle regions.
    As for international organized crime, the globalization of 
business and technology have given crime syndicates 
unprecedented opportunities for illicit activities. Yet law 
enforcement authorities often remain constrained by national 
sovereignty and jurisdictions.
    Trends that cause us the greatest concern are an 
increasingly sophisticated financial system that includes 
emerging financial secrecy havens stretching from the islands 
in the Caribbean, to the South Pacific; a broader array of 
seemingly legitimate businesses that serve as fronts for 
criminal enterprises and the increasing role of gray arms 
brokers in arming rogue states, terrorists and criminal groups. 
The activities of arms brokers make it even more difficult to 
judge when such actions are supported by governments and when 
they are not.
    As you know, Mr. Chairman, all of this is occurring in what 
we call the information age. With that in mind, it is clear 
that foreign entities are aware that an increasing proportion 
of our civil and military activity depends on the secure and 
uninterrupted flow of digital information. In fact, we have 
identified several countries that have government sponsored 
information warfare programs well underway. It's clear that 
those developing these programs recognize the value of 
attacking a country's computer systems, both on the battlefield 
and in the civilian arena. In addition, I believe terrorists 
groups and other non-state actors will increasingly view 
information systems in the United States as a target.
    Mr. Chairman, I want to talk about Russia and China and the 
transition they find themselves in.
    With regard to Russia, today we see hopeful signs that the 
seeds of democracy and a free market economy sown in Russia 
just a few years ago have taken root. Moreover, Moscow 
cooperates with the United States and the West in ways that 
were unimaginable during Soviet times. But whether Russia 
succeeds as a stable democracy, reverts to the autocratic and 
expansionist impulses of its past or degenerates into 
instability remains an open question. The answer will depend in 
large part on how Russia copes with several major challenges. 
Democratic political institutions, while developing, are not 
yet deeply rooted. The executive branch and communist dominated 
Duma often deadlock while crime and corruption threaten to 
undermine confidence in political and economic reform.
    Russia has implemented many economic reforms and achieved a 
measure of economic stability. But long term steady growth, is 
still dependent on other reforms, namely ensuring that economic 
activities are governed by the rule of law. The Russian 
military, meanwhile, continues to suffer from serious social 
and economic difficulties. Find the wherewithal to pay the 
retirement costs of over 250,000 redundant military officers 
will be a particular challenge.
    Despite these difficult times for the Russian military, 
Russia retains a major nuclear arsenal--some 6,000 deployed 
strategic warheads. As long as there is even the slightest 
doubt about the future political stability in Russia, those 
weapons must be a major preoccupation of US intelligence. We 
must also remain mindful that Russia continues a wide range of 
development programs for conventional and strategic forces.
    Finally, while Russia continues to seek close cooperation 
with the United States on matters of mutual concern, it is 
increasingly strident in opposing as what it sees as US efforts 
to create a unipolar world. And Moscow continues to place a 
high priority on keeping others from gaining undue influence in 
the newly independent states, especially in the energy-rich 
Caucasus in Central Asia.
    Turning to China, the leadership there has a clear goal--
the transformation of their country into East Asia's major 
power and a leading world economy on a par with the United 
States by the middle of the 21st century. It is too soon to say 
what this portends, Mr. Chairman, whether China in the future 
will be an aggressive or benign power. What is clear, though, 
is that China will be an increasingly influential player, one 
that will have the capacity to, at a minimum, alter our 
security calculus in the Far East.
    Hong Kong's 1997 reversion to Chinese rule was peaceful, 
but involved important changes in the political system. The 
Chinese government disbanded the existing legislative council 
and installed a hand-picked provisional legislature. The key 
question now is whether new legislative elections scheduled in 
May will be free and fair.
    Cross-strait relations with Taiwan are still tense. China 
has not renounced the use of force and is placing its best new 
military equipment opposite Taiwan. Chinese military 
modernization remains a key leadership goal. China is 
increasing the size and survivability of its retaliatory 
nuclear missile force and is taking important steps toward 
building a modern navy capable of fighting beyond China's 
coastal waters.
    Finally, Mr. Chairman, the post-Deng Xiaoping leadership 
shows no sign of abandoning communist political ideology, 
although it has committed itself to market-oriented economic 
reform. These are eroding state control over major sectors of 
the economy as well as over the daily life of many Chinese 
citizens.
    Mr. Chairman, I want to talk about Iran, because you 
mentioned it in your opening statement. Among the countries, 
Iran in manyrespects represents the greatest challenge we will 
face over the next year. It appears to us that a genuine struggle is 
now under way between hard-line conservatives and more moderate 
elements represented by Iran's new President Khatami. And so the 
challenge is how to cope with a still dangerous state in which some 
positive changes may be taking place, changes that could--and I stress 
could--lead to a less confrontational stance toward the United States. 
Khatami's strongest card is the electoral mandate, a 70 percent vote 
representing mostly youth and women, as well as ethnic and religious 
minorities in Iran.
    Since assuming office in August, he has made limited but 
real progress toward fulfilling his campaign pledges for 
political and social reforms. He gained approval for a new 
cabinet that puts his people in key posts, such as the 
ministries of foreign affairs, interior and Islamic culture.
    Censorship is now less oppressive with previously banned 
periodical reappearing and socially controversial films being 
screened. And against this backdrop, there is even renewed 
debate about a central tenet of the revolution--rule by a 
supreme religious leader.
    Progress is likely to be fitful, however, and hard-line 
elements remain formidable obstacles. They still control the 
country's defense and security organizations, for example, and 
therefore exert heavy influence on issues most vital to the 
United States. Statements by Khatami and his foreign ministry 
suggest he is trying to play a more constructive role in the 
international community. It is simply too early to tell, 
however, whether this will lead to demonstrable changes in 
Iranian policies that matter most to the United States. We have 
seen no reduction in Iran's efforts to support Hizbollah, 
radical Palestinians and militant Islamic groups that engage in 
terrorism.
    Moreover, even as it attempts to improve its international 
image, Tehran is continuing to bolster its military 
capabilities. Iran is improving its ability potentially to 
interdict the flow of oil through the Strait of Hormuz. It has 
acquired KILO-class submarines from Russia, and it is upgrading 
its anti-ship cruise missiles.
    As I noted earlier, Iran continues its efforts to acquire 
the capability to produce and deliver weapons of mass 
destruction.
    Turning to North Korea, Mr. Chairman, we also face a far 
more complex challenge than last year. Some progress, but in 
the face of a worsening economic and social situation and a 
continued real military threat, the North is still observing 
the terms of the agreed framework that directly relate to 
freezing its nuclear reactor program. The IAEA has maintained a 
continued presence at Yongbyon since the May 1994 refueling of 
the reactors, and Pyongyang and the IAEA continue to discuss 
steps the North needs to take to come into full compliance with 
its safeguard commitments.
    Amidst these signs of progress, however, a combination of 
economic stagnation and social decay continue to raise doubts 
about North Korea stability. North Korea's spreading economic 
failure is eroding the stability of the regime of Kim Chong II. 
Industrial and agricultural output continue to drop. The 
North's most recent fall grain harvest was far less than the 
4.5 million tons the North needs to meet even minimal rations. 
Crime, corruption and undiscipline--including in the security 
services and military--are increasing, and people are more 
willing to blame Kim Chong II for their plight.
    While Kim reportedly is aware of the economic problems and 
their impact on soldiers and civilians, his legitimacy remains 
closely tied to his father's legacy. As a result, Pyongyang 
likely will avoid an avowed reformist agenda and will try to 
package any reform experiments in traditional ideological 
terms. As such, significant improvements in the economy do not 
seem to be in the cards.
    Its economic weaknesses notwithstanding, North Korea 
retains a military with a capability to inflict serious damage 
on South Korea and the 37,000 US troops deployed there. The 
North's offensive posture along the demilitarized zone means 
that it could go to war with little additional preparation. And 
North Korea's long-range artillery and surface-to-surface 
missiles near the DMZ, some of which could deliver chemical 
warfare agents, can hit forward defenses, US military 
installations, and airfields and seaports in Seoul.
    Finally, Mr. Chairman, I'll talk about Iraq. Iraq under 
Saddam continues to present a serious threat to US forces, 
interests and allies. As my statement for the record points out 
in great detail, we assess that Iraq continues to hide critical 
weapons of mass destruction equipment and material from UN 
inspectors.
    Continued UN sanctions can keep pressure on his regime and 
cast uncertainty over Saddam's hold on power. But as you know, 
Mr. Chairman, Saddam is pushing more aggressively than last 
year to erode the sanctions regime. More than seven years of 
sanctions have had a devastating effect on Iraq's economy. 
Inflation is soaring. The civilian infrastructure is 
deteriorating. And the Iraqi population continues to suffer 
from high rates of malnutrition and inadequate services--in 
part because of Saddam's manipulation of relief supplies. Key 
regime officials and support organizations remain largely 
immune to the harsh living conditions facing the general 
population and even live off revenues generated through illicit 
trade--a fact that engenders resentment and poses an underlying 
threat to Saddam and his family.
    While its military forces continue to slowly deteriorate 
under UN sanctions and the arms embargo implemented after the 
Gulf War, Iraq remains an abiding threat to internal 
oppositionists and smaller regional neighbors.
    Mr. Chairman, I'll stop there. I'll enter the rest of my 
statement into the record. There's much more ground to cover. 
Perhaps we would be best suited to do that in questions and 
answers.
    Chairman Shelby. Thank you, Director Tenet.
    I'll ask the other witnesses to briefly sum up their 
testimony--take five minutes or less. As I said earlier, your 
written testimony will be made part of the record in its 
entirety.
    Deputy Director Bryant of the FBI, we're glad to have you 
here. We understand that Judge Freeh, the director, is awaiting 
the imminent birth of his sixth son. Is that correct?
    Mr. Bryant. Yes, it is. He's at home with his family, and I 
think his sixth son is due at any moment now.
    Chairman Shelby. Well, we welcome you to the Committee.

  STATEMENT OF ROBERT BRYANT, DEPUTY DIRECTOR OF THE FEDERAL 
                    BUREAU OF INVESTIGATION

    Mr. Bryant. I'll just take a few moments to summarize my 
statement. But I want to hit a few key points.
    We've seen a lot of changes in the world in the last dozen 
years. Many of them have made a better world for us. But 
certainly we have great challenges ahead of us. And before I 
get into specific threats, I just want to hit one issue. I'm 
speaking of encryption.
    This is a critical problem. It is here right now and is 
only going to get worse. Encryption has implications for our 
ability to combat every threat to national security that we 
see. Federal, state and local law enforcement officials 
unanimously agree that the widespread use of robust non-key 
recovery encryption will ultimately devastate our ability to 
fight crime and prevent terrorism. There are all kinds of views 
about this issue, but we see that this issue needs to be 
addressed very quickly because it's going to harm all of our 
abilities to do what is legal, ethical and for the best 
interests of the American People.
    I guess I would just say on the summary of the national 
threats, from a law enforcement perspective--the drug issue 
that faces the United States is a significant issue. We see it 
in all the investigations that the FBI has; we see it in all 
corners of our investigations. And it's of grave concern. 
Whether it's methamphetamines, cocaine, heroin or whatever, 
there's just great concern for that issue and what we're going 
to do about it.
    I guess the next issue I see is international terrorism. We 
certainly have, from the DCI's statement, an agreement. We have 
concerns over weapons of mass destruction and what they can do. 
The FBI currently has investigations directed toward these 
activities. Certainly, we've had help with legislation from 
this body and that has been tremendously helpful. But I 
consider this a priority that could have devastating 
consequences for this great nation.
    The next issue that I would go to would be international 
terrorism organizations and terrorism generally. The FBI looks 
at domestic terrorism as groups of individuals that are 
American citizens using violence to commit * * *--to change--
for social or political change. The domestic side of it is an 
issue with us. Certainly, the international side, as Mr. Tenet 
said, the state sponsors, certainly the organized federations, 
such as Hizbollah, Gama'at al-Islamiyyah, Hamas are areas where 
we're very concerned.
    I guess another issue I want to hit a little bit is this 
critical infrastructure protection. We have a society that's 
terribly dependent upon computers, and the service they perform 
for this nation. It's helped our economy. We're probably world 
leaders in computer technology. But it's also a vulnerability, 
and it could be used and is being used by criminals, by 
terrorists, by intelligence services and certainly by military 
services. And we have to basically put in the infrastructure 
and vehicles to protect this great nation from this type of 
attack.
    I guess I would just close and just say that certainly the 
espionage issues. We've had--numerous cases have been 
prosecuted in the last year. This is ever a threat that's been 
here for--since the beginning of time. It's still here.
    Chairman Shelby. Not getting any better, though, is it?
    Mr. Bryant. It's probably as serious as ever.
    Chairman Shelby. Okay.
    Mr. Bryant. Just in passing, on economic espionage, the 
Congress passed the economic espionage statute last year. This 
statute has certainly brought about a change in the way 
business is done, because our technology--we now have a law to 
protect it. There are prosecutions going forward. And this has 
been a great benefit, and can discuss this more in the question 
and answer.
    The only thing I would add, on the drug trafficking 
situation--there are foreign-based groups that are bringing 
vast amounts of drugs into this country. And ourself, the 
Intelligence Community, with the DEA and Customs and the whole 
government is trying to develop strategies to basically control 
this issue.
    I guess I would just close and say, on July 26, 1998, the 
FBI will celebrate its 90th birthday. The FBI has been a 
remarkable institution for many reasons, but not the least of 
which its ability to change and evolve and face growing 
threats. And we serve--we serve you all, we serve the American 
people, but we see numerous threats that I've just enumerated 
and hope we're part of the solution.
    Thank you.
    [The prepared statement of Mr. Freeh follows:]
 Statement of Louis J. Freeh, Director, Federal Bureau of Investigation
    Good morning Mr. Chairman, Vice Chairman Kerrey and Members of the 
Committee. I welcome this opportunity to be part of this distinguished 
panel to discuss threats to U.S. National Security.
    The overriding concern now facing law enforcement is how rapidly 
the threats from terrorists and criminals are changing, particularly in 
terms of technology, and the resulting challenge to law enforcement's 
ability to keep pace with those who wish to do harm to our nation and 
our nation's citizens. This is why the encryption issue is one of the 
most important issues confronting law enforcement and potentially has 
catastrophic implications for our ability to combat every threat to 
national security that I am about to address in my statement here 
today. Law enforcement remains in unanimous agreement that the 
widespread use of robust nonrecovery encryption ultimately will 
devastate our ability to fight crime and terrorism. Uncrackable 
encryption is now and will continue, with ever increasing regularity, 
allow drug lords, terrorists and even violent gangs to communicate 
about their criminal intentions with impunity and to maintain 
electronically stored evidence of their crimes impervious to lawful 
search and seizure. Other than some type of key-recoverable system, 
there is currently no viable technical solution to this problem for law 
enforcement.
    This is not a problem that will begin sometime in the future with 
theoretical implications. In many important investigations effective 
law enforcement is being frustrated by criminals and terrorists using 
non-recoverable encryption. For example:
    Convicted spy Aldrich Ames was told by his Soviet handlers to 
encrypt computer file information that was to be passed to them.
    Ramzi Yousef and other international terrorists were plotting to 
blow up 11 U.S.-owned commercial airliners in the far east. Yousef's 
laptop computer, which was seized in Manila, contained encrypted files 
concerning this terrorist plot.
    A major international drug trafficking subject recently used a 
telephone encryption device to frustrate court-approved electronic 
surveillance.
    Requests for cryptographic support pertaining to electronic 
surveillance interceptions from FBI field offices and other law 
enforcement agencies have steadily risen over the past several years. 
From 1995 to 1996, there was a two-fold increase (from 5 to 12) in the 
number of instances where the FBI's court-authorized electronic efforts 
were frustrated by the criminal's use of encryption that did not allow 
for law enforcement access.
    Over the last two years, the FBI has also seen the number of 
computer related cases utilizing encryption and/or password protection 
increase from two (2) percent to seven (7) percent, to include the use 
of 56 bit Data Encryption Standard (DES) and 128 bit ``Pretty Good 
Privacy'' (PGP) encryption.
    It is for this reason that the law enforcement community is 
urgently calling for our Nation's policy makers to adopt a balanced 
public policy on encryption. In our view, any legislative approach to 
the encryption issue that does not achieve such a balanced approach 
seriously jeopardizes the utility of some of our most important and 
effective investigative techniques upon which law enforcement must 
depend to ensure public safety and to maintain national security.
    Several bills have been introduced in this Congress that address 
certain aspects of the encryption issue. Unfortunately, most of these 
legislative proposals would largely remove existing export controls on 
encryption products, and would promote the widespread availability and 
use of uncrackable encryption products regardless of the impact on 
public safety and national security.
    It is important to note that S. 909, the ``Secure Public Networks 
Act,'' introduced by Senators Kerrey, McCain, and Hollings, comes close 
to addressing law enforcement's public safety needs in the area of 
encryption. However, law enforcement believes that the bill does not 
contain sufficient legislative assurances to adequately address law 
enforcement's public safety needs regarding the use and availability of 
encryption products and service within the United States.
    Conversely, the substitute bill adopted by the House Permanent 
Select Committee on Intelligence (HPSCI) on September 11, 1997, during 
their mark-up of H.R. 695 does effectively address all of law 
enforcement's public safety and national security concerns regarding 
encryption products and services manufactured for use in the United 
States or imported into the United States. The HPSCI substitute bill 
would require all such encryption products and services to contain 
features that would allow for the immediate access by law enforcement 
to the ``plaintext'' of encrypted criminal-related communications or 
electronically stored data pursuant to a court order.
    We are now at an historic crossroad on this issue. If public policy 
makers act wisely, the safety of all Americans will be enhanced for 
decades to come. But if narrow interests prevail, law enforcement will 
be unable to provide the level of protection that people in a democracy 
properly expect and deserve. I do not believe it is too late to deal 
effectively with this issue and would encourage the Committee to look 
closely at the action taken by the HPSCI in their efforts to adopt a 
balanced encryption policy.
                          intelligence threat
    The counterintelligence mission of the FBI is to identify, 
penetrate and neutralize foreign intelligence and terrorist activities 
directed against the United States. This mission includes the 
investigation of espionage. At the outset, I want to emphasize that the 
``fall of communism'' has not reduced the level or amount of espionage 
and other serious intelligence activity conducted against the United 
States.
    In many cases, the targets have not changed at all: there is still 
a deadly serious foreign interest in ``traditional'' intelligence 
activities such as penetrating the U.S. intelligence community, 
collecting classified information on U.S. military defense systems, and 
purloining the latest advances in our country's science and technology 
sector.
    In addition to these traditional intelligence operations, there 
have been at least three changes in foreign intelligence activity that 
have required the FBI to modify its counterintelligence programs.
    The first change is intelligence activity by non-intelligence 
personnel. Today, national security issues go beyond the passage of 
classified military information. There have been many cases which show 
that individuals outside the intelligence service apparatus, but who 
are no less foreign sponsored, engage in clandestine activity that is 
inimical to the security and economic well-being of the United States.
    A second area of change has been the intelligence environment, 
which includes the growing importance of maintaining the integrity of 
our country's information infrastructure. Our growing dependence on 
computer networks and telecommunications has made the U.S. increasingly 
vulnerable to possible cyber attacks against such targets as military 
war rooms, power plants, telephone networks, air traffic control 
centers and banks.
    Third, many traditional and non-traditional adversaries today are 
technologically sophisticated and have modified their intelligence 
methodologies to use advanced technologies to commit espionage. In 
telecommunications, even some smaller intelligence adversaries now use 
equipment the FBI is unable to monitor.
    To address these changes in intelligence activity, intelligence 
environment, and intelligence methodology, the FBI uses general 
investigative strategy we refer to as the national security threat list 
or NSTL. It is a concept adopted in 1992 to prioritize issues and 
countries at which to direct our efforts. Our counterintelligence 
investigative techniques include the recruitment of human assets, 
double agents, undercover operations, various surveillance techniques, 
and analysis. NSTL has given the FBI additional flexibility to approach 
non-traditional intelligence problems from new perspectives.
    In addition, the FBI also has created the Computer Investigations 
and Infrastructure Threat Assessment Center (CITAC), which draws on the 
technical expertise of a number of other U.S. agencies in order to 
bring more analytical power to bear defending our ability to peacefully 
and securely enjoy important recent advances in our country's 
information technology sphere.
    Regarding the problem of monitoring advanced communications 
techniques used by some of our country's intelligence adversaries, I 
have already stressed that, the FBI supports pending legislative 
proposals to allow law-enforcement access to encryption-recovery 
information.
    Let me summarize this general overview by stating that the simple 
truth is that there has been no ``peace dividend'' in the form of a 
reduced need for FBI counterintelligence operations. On the contrary, 
foreign intelligence activities against the United States have grown in 
diversity and complexity in the past few years.
    Press reports of recent espionage cases involving Russia, South 
Korea, and China are just the tip of a large and dangerous intelligence 
iceberg. In addition to these and other covert intelligence operations 
run by intelligence officers using standard intelligence methodologies, 
however, the FBI these days is just as likely to encounter covert 
activity on the part of non-intelligence people such as visiting 
scientists or foreign businessmen.
    Although I believe the FBI is well positioned for the 
counterintelligence challenges before us, what some pundits have called 
the ``end of history'' is definitely not the end of dangerous 
intelligence attacks against the United States. Through our continuing 
efforts to develop effective intelligence and through dedicated, hard 
work, the FBI continues to strive to identify, penetrate and neutralize 
foreign intelligence and terrorist activity directed against the United 
States. We cannot accomplish this alone. Only with the continued 
cooperation of other U.S. government agencies, the Congress, state and 
local authorities, and the American public, can the FBI accomplish its 
mission.
                        international terrorism
    The threat of international terrorism directed at Americans and 
U.S. national interests is following the general pattern we have 
identified in terrorist activity worldwide. Although the number of 
attacks directed at American interests remains comparatively low, the 
trend toward more large-scale incidents designed for maximum 
destruction, terror, and media impact actually places more Americans at 
risk. As you are aware, and as recent tragedies demonstrate, this 
threat confronts Americans both at home and abroad. America's 
democratic tradition and global presence make Americans a fast, and 
often all-too-easy, target for opportunities who are willing to kill 
innocent victims to further their extremist causes.
    The international terrorist threat can be divided into three 
general categories. Each poses a serious and distinct threat, and each 
has a presence in the United States.
    The first category, state-sponsored terrorism, violates every 
convention of international law. State sponsors of terrorism include 
Iran, Iraq, Syria, Sudan, Libya, Cuba, and North Korea. Put simply, 
these nations view terrorism as a tool of foreign policy. In recent 
years, the terrorist activities of Cuba and North Korea have declined 
as their economies have deteriorated. However, the activities of the 
other states I mentioned continued and, in some cases, have intensified 
during the past several years
    The second category of international terrorist threat is made up 
for formalized terrorist organizations. These autonomous, generally 
transnational organizations have their own infrastructures, personnel, 
financial arrangements, and training facilities. They are able to plan 
and mount terrorist campaigns on an international basis, and actively 
support terrorist activities in the United States.
    Extremist groups such as Lebanese Hizballah, the Egyptian Al-Gamat 
Al-Islamiya, and the Palestinian Hamas have placed followers inside the 
United States who could be used to support an act of terrorism here.
    The third category of international terrorist threat stems from 
loosely affiliated extremists--characterized by the World Trade Center 
bombers and rogue terrorists such as Ramzi Ahmed Yousef. These loosely 
affiliated extremists may pose the most urgent threat to the United 
States at this time because their membership is relatively unknown to 
law enforcement, and because they can exploit the mobility that 
emerging technology and a loose organizational structure offer.
    The FBI believes that the threat posed by international terrorists 
in each of these three categories will continue for the foreseeable 
future.
    In response to these threats, the United States has developed a 
strong response to international terrorism. Legislation and executive 
orders enacted during the past 15 years to expand the FBI's role in 
investigating international terrorism directed at American interests 
has strengthened the ability of the U.S. Government to protect its 
citizens.
    As you are aware, recent Congressional appropriations have helped 
strengthen and expand the FBI's counterterrorism capabilities. To 
enhance its mission the FBI centralized many specialized operational 
and analytical functions in the Counterterrorism Center.
    Established in 1996, the Counterterrorism Center combats terrorism 
on three fronts: International terrorism operations both within the 
United States and in support of extraterritorial investigations, 
domestic terrorism operations, and counterterrorism relating to both 
international and domestic terrorism.
    Within the Center, the FBI has deployed over 50 new intelligence 
analysts since 1996. These highly skilled analysts work in every facet 
of the Bureau's National Security Program from counterterrorism to 
industrial security. This enhanced analytical ability helps to increase 
the efficiency of the Bureau's overall investigative efforts in these 
areas.
    The Domestic Counterterrorism Center also represents a new 
direction in the FBI's response to terrorism. Eighteen federal agencies 
maintain a regular presence in the Center and participate in its daily 
operations. These agencies include the CIA, the Defense Intelligence 
Agency, and the United States Secret Service, among others. This 
multiagency arrangement provides an unprecedented opportunity for 
information-sharing and real-time intelligence analysis among the 
various components of the American intelligence community.
    But the threat of international terrorism demands continued 
vigilance. Today's terrorists have learned from the successes and 
mistakes of terrorists who have gone before them. The terrorists of 
tomorrow will have an even more dangerous arsenal of weapons and 
technologies available to further their destructive ambitions. 
Compounding the enhanced capabilities of contemporary terrorists is 
another disturbing aspect of modern terrorism. As recent events have 
shown, this ``web of terrorism'' perpetuates violence upon violence and 
poses a particular challenge to nations that take a strong stand 
against terrorism.
    The November 1997 attack on foreign tourists in Luxor, Egypt, was 
apparently carried out in an attempt to pressure the United States into 
releasing Sheik Omar Abdel Rahman. Sheik Rahman is serving a life 
sentence in a federal prison for his part in the plot to assassinate 
the President of Egypt and bomb several sites in New York City in 1994.
    Since his imprisonment in 1995, followers of Sheik Rahman have 
issued several threats warning of violence in retaliation for his 
continued imprisonment.
    Likewise, a series of letter bombs addressed to the Washington, DC, 
and New York offices of the Al-Hayat newspaper and the parole officer 
at the federal penitentiary in Leavenworth, Kansas, in December 1996 
appear to be part of an effort to force the U.S. Government to release 
imprisoned fundamentalist terrorists. All of the bombs were rendered 
safe by law enforcement. Each of the 12 letter bombs bore an 
Alexandria, Egypt, postmark.
    Circumstances surrounding the November 12, 1997, ambush of four 
American businessmen in Karachi, Pakistan, suggest a link to the 
conviction of Mir Aimal Kasi in a Virginia court for his 1995 attack on 
CIA workers outside the agency's headquarters. Although no clear motive 
has been established for the killings in Karachi, the attackers tracked 
the activities of the victims for several days and launched the attack 
within 36 hours of the verdict. Earlier, Kasi had predicted that ``his 
people'' would retaliate for his prosecution.
    In the 15 years since President Reagan designated the FBI as the 
lead agency for countering terrorism in the United States, Congress and 
the executive branch have taken important steps to enhance the federal 
government's counterterrorism capabilities. The FBI's counterterrorism 
responsibilities were further expanded in 1984 and 1986, when Congress 
passed laws permitting the Bureau to exercise federal jurisdiction 
overseas when a U.S. national is murdered, assaulted, or taken hostage 
by terrorists, or when certain U.S. interests are attacked. Since the 
mid 1980's, the FBI has investigated more than 350 extraterritorial 
cases.
    More recently, the Antiterrorism and Intelligence Authorization 
Acts and the Antiterrorism and Effective Death Penalty Act of 1996 
(AEDPA) have broadened the FBI's ability to combat international 
terrorism. Enactment of the AEDPA will enhance the ability of the U.S. 
Government to respond to terrorist threats. Section 302 of the Act 
authorizes the Secretary of State, in conjunction with the Attorney 
General and Secretary of the Treasury, to designate as foreign 
terrorist organizations (FTOs) groups that meet certain specific 
criteria. This designation means that funds raised in the U.S. by an 
FTO can be confiscated by the federal government. In time, the Act 
could prove an invaluable tool to disrupt the fundraising capabilities 
of international terrorist organizations.
    During the past 3 years, the United States has sent a clear signal 
to terrorists and potential terrorists. We will not tolerate attacks 
against Americans and will make every effort to apprehend those who 
perpetrate such acts. Thanks in large part to the expanded resources 
Congress has committed to the fight against terrorism, we have been 
successful in bringing to justice some of the most egregious terrorists 
plotters of the recent past: Ramzi Ahmed Yousef, mastermind of the 1993 
World Trade Center bombing, was extradited by Pakistan and made to 
stand trial in the United States for his crime. In November 1997, he 
was found guilty of his crime and on January 8 of this year was 
sentenced to 240 years in federal prison.
    On November 10, 1997, Mir Aimal Kasi was found guilty of capital 
murder in a Fairfax, VA, courtroom. His conviction culminated an 
intense 5 year investigation that began the day in 1993 when he opened 
fire outside CIA headquarters in Langley, VA killing two CIA employees 
and wounding several others. In June 1997, FBI agents had located Kasi 
in Pakistan and ``rendered'' him to the United States to stand trial. 
Because he had previously been convicted in absentia in an American 
court for the attack, the FBI had the authority to apprehend Kasi in 
Pakistan and return him to the United States to stand trial in person.
    In 1995, Sheik Omar Rahman was sentenced to life in prison for his 
part in a conspiracy to bomb the Holland and Lincoln tunnels and 
several major landmarks throughout New York.
    As satisfying as these and other recent convictions are, the battle 
against international terrorism leaves little time to relish past 
successes. The FBI and Saudi Arabian investigators continue to 
investigate the attack on the Al-Khobar housing complex in Dhahran, 
which left 19 Americans dead and wounded 500. Within hours of the truck 
bombing on June 25, 1996, the FBI dedicated vast resources to the 
investigation. In the immediate aftermath of the explosion, we sent 125 
personnel to Dhahran, including a Special Agent in Charge, who directed 
the crisis response and investigative effort. During the first months 
of the investigation, personnel in Dhahran were supported by the FBI's 
Legal Attache office in Rome. However, in 1997, the FBI opened a Legal 
Attache office (or Legat) in Riyadh, Saudi Arabia, which now 
coordinates the joint investigation with Saudi investigators.
    Terrorism is perpetrated by individuals with a strong commitment to 
the causes in which they believe. An action in one location can bring 
about a reaction somewhere else. The web-like nature of terrorism 
underscores the need for vigilance in counteracting terrorist groups. 
Unfortunately, American successes can spur reprisals. As the United 
States develops a stronger investigative and prosecutorial response to 
international terrorism, we may witness more attempts at reprisal both 
at home and abroad.
    Also, reliance on computers and other amazing technologies has 
inadvertently created vulnerabilities that can be exploited from 
anywhere in the world. Modern transportation and modern technology give 
terrorists abilities unheard of only a few years ago.
                           domestic terrorism
    Domestic terrorism investigations are among the highest priorities 
of the FBI's National Security Division.
    Domestic terrorist groups are those which are based and which 
operate entirely within the United States, or its territories, and 
whose activities are directed at elements of the U.S. government or its 
civilian population. The threat posed by domestic terrorist groups has 
remained significant over the past several years. Domestic terrorist 
groups represent interests spanning the full political spectrum, as 
well as social issues and concerns. However, FBI investigations of 
domestic terrorist groups are not predicated upon social or political 
beliefs; rather, they are based upon planned or actual criminal 
activity.
    The current domestic terrorist threat primarily comes from right-
wing extremist groups, including radical paramilitary (militia) groups, 
Puerto Rican terrorist groups, and special interest groups.
Right-wing extremist groups
    A basic philosophical tenet of many right-wing extremist groups is 
a belief in the superiority of the white race and that blacks, Jews, 
and other ethnic minorities are inferior racially, mentally, 
physically, and spiritually. Much of their philosophy flows from 
racist, anti-Semitic religious beliefs such as ``Christian 
Identity.''Christian Identity teaches that white Aryans are God's 
chosen race and that Jews are the offspring of Satan. Aryans who 
cooperate with Jews and darker races are considered ``race-traitors.''
    Many right-wing extremist groups also espouse anti-government 
sentiments. In an attempt to live apart from ``inferior people,'' some 
right-wing groups advocate creating a separate nation from the five 
states comprising the northwest region of the United States--
Washington, Oregon, Idaho, Montana, and Wyoming.
    Examples of right-wing extremist groups operating in the United 
States are the Aryan Nations, True Knights of the Ku Klux Klan, and the 
Republic of Texas. You may recall that in April, 1997, three members of 
the True Knights of the Ku Klux Klan were arrested and have been found 
guilty in Texas for planning to blow up a natural gas storage facility 
as a diversionary tactic prior to robbing an armored carrier. This was 
the FBI's ``Sour Gas'' investigation.
    As another example, you may be familiar with the FBI's ``Rapid 
Lighting'' investigation. This investigation involved a series of 
criminal acts committed by individuals associated with a domestic 
terrorist organization known as the Phineas Priesthood. The subjects of 
the investigation were responsible for at least two bombing/ bank 
robbery incidents in Spokane, Washington, in April and July, 1996. 
Three subjects were arrested in October, 1996, and a fourth in 1997. 
Since then, all four have been convicted of all eight felony counts for 
which they were charged and have received lengthy jail sentences.
Militia groups
    Militia groups are often multi-racial, but they are predominately 
white. Their members often view themselves as ``sovereign citizens'' 
who are exempt from the laws and regulations of the U.S. government. 
Many militia members subscribe to the theory that the federal 
government is in a conspiracy with the United Nations that would result 
in the creation of a one-nation world government, or ``New World 
Order.'' This one-world government would use foreign troops in the 
United States to seize all privately owned weapons and imprison and 
execute patriotic militia members.
    Many militia groups advocate stockpiling weapons and explosives and 
conducting paramilitary training as part of their preparation for what 
they believe will be an inevitable armed conflict with the government 
and the impending U.N. invasion. Some militia groups openly advocate 
the overthrow of the federal government.
    Since 1992, the United States has seen a growth of militia groups. 
While the majority of militia members are law abiding citizens, there 
is a small percentage of members within militia groups who advocate and 
conspire to commit violent criminal acts. Of particular concern to the 
FBI is the potential for militias to be infiltrated by extremists who 
seek to exploit militias and their members in order to further their 
own violent terrorist agendas.
    Militia members who engage in criminal acts commit a wide variety 
of criminal activity, such as bombings, bank robberies, and destruction 
of government property. They also file spurious lawsuits and liens 
designed to harass law enforcement, elected officials, and others, as 
well as to disrupt the courts. Militia members have engaged in 
fraudulent financial schemes to raise funds.
    As an example, I'd like to mention the FBI's investigation of the 
Mountaineer Militia. This investigation was initiated in August, 1995. 
The group had obtained the plans to the FBI Criminal Justice 
Information Services facility in Clarksburg, West Virginia, and they 
intended to destroy the facility as part of their war on the U.S. 
government. The FBI began an undercover investigation and arrested 
seven key members of the group in October, 1996. All seven have since 
been convicted and sentenced to lengthy jail sentences.
Puerto Rican terrorist groups
    Although the last terrorist incident involving Puerto Rican 
terrorist groups was a bombing in Chicago in December, 1992, these 
groups continue to be of concern. Between 1982 and 1994, approximately 
44 percent of the terrorist incident committed in the United States and 
its territories are attributed to Puerto Rican terrorist groups. 
Efforts are continuing to locate fugitives still at large from these 
incidents.
    Puerto Rican terrorist groups believe the liberation of Puerto Rico 
from the United States justifies the use of violence to obtain that 
objective. These groups characterize their terrorism activities as 
``acts of war'' against invading forces and, when arrested, they 
consider themselves to be ``prisoners of war'' who must be treated as 
such according to the Geneva Convention. Clandestine behavior and 
security are of utmost importance in these group's activities.
    The EPB-Macheteros has been the most active and violent of the 
Puerto Rican-based terrorist groups it emerged in 1978. The FALN (Armed 
Forces for Puerto Rican National Liberation) is a clandestine terrorist 
group based in Chicago which emerged in the 1970s. The MLN (Movement of 
National Liberation) is the ``above ground'' support group and 
political arm of the FALN. The MLN is the major fundraiser for the 
FALN.
Special interest terrorist groups
    Special interest terrorist groups engage in criminal activity to 
bring about specific, narrowly-focused social or political changes. 
They differ from more traditional domestic terrorist groups which seek 
more wide-ranging political changes. It is their willingness to commit 
criminal acts that separate special interest terrorist groups from 
other law-abiding groups that often support the same popular issues. By 
committing criminal acts, these terrorists believe they can force 
various segments of society to change attitudes about issues considered 
important to them.
    The existence of these types of groups often does not come to law 
enforcement attention until after an act is committed and the 
individual or group leaves a claim of responsibility. Membership in a 
group may be limited to a very small number of co-conspirators of 
associates. Consequently, acts committed by special interest terrorists 
present unique challenges to the FBI and other law enforcement 
agencies.
    An example of special interest terrorist activity is the February 
2, 1992, arson of the mink research facility at Michigan State 
University. Rodney Coronado, an animal rights activist, pled guilty to 
arson charges on July 3, 1995. Other acts of violence against animal 
enterprise have occurred recently and are under investigation.
                      weapons of mass destruction
    The FBI views the proliferation of weapons of mass destruction 
(WMD) as a serious and growing threat to our national security. 
Pursuant to our terrorism mandate and statutory requirements, we are 
developing within the inter-agency setting broad-based, pro-active 
programs in support of our mission to detect, deter, or prevent the 
threat of nuclear, chemical and biological weapons, their delivery 
system, and WMD proliferation activities occurring in or directed at 
the United States.
    Our programs cover the broad spectrum of Foreign 
Counterintelligence (FCI), criminal and counterterrorism 
investigations, focusing on persons or organizations involved in WMD 
proliferation activities.
    During 1997, the FBI initiated over 100 criminal cases pertaining 
to nuclear, biological and chemical threats, incidents, or 
investigations (excluding Proliferation cases). Many of these threats 
were determined to be non-credible, however, this represents a three 
fold increase over 1996. Credible cases have resulted in arrests and 
prosecutions by the FBI, and state and local authorities. In support of 
this growing problem, legislative changes by Congress over the past 
three years have strengthened the FBI's powers to investigate and bring 
to prosecution those individuals involved in WMD proliferation.
    The FBI has also investigated and responded to a number of threats 
which involved biological agents and are attributed to various types of 
groups or individuals. For example, there have been apocalyptic-type 
threats which actually advocate destruction of the world through the 
use of WMD. We have also been made aware of interest in biological 
agents by individuals espousing white-supremacist beliefs to achieve 
social change; individuals engaging in criminal activity, frequently 
arising from jealousy or interpersonal conflict; individuals and small 
anti-tax groups, and some cult interest. In most cases, threats have 
been limited in scope and have targeted individuals rather than groups, 
facilities, or critical infrastructure. Threats have surfaced which 
advocate dissemination of a chemical agent through air ventilation 
systems. Most have made little mention of the type of device or 
delivery system to be employed, and for this reason have been deemed 
technical not feasible. Some threats have been validated. As an 
example, during 1997, a group with white supremacist views pled guilty 
to planning to explode tanks containing the deadly industrial chemical 
hydrogen sulfide as a diversionary act to their primary activity, an 
armored car robbery.
    The FBI has experienced an increase in the number of cases 
involving terrorist or criminal use of WMD. These cases frequently have 
been small in scale and committed primarily by individuals or smaller 
splinter/extremist elements of right wing groups which are unrelated to 
larger terrorist organizations.
    For example: As most of you will remember, on April 24, 1997, B'nai 
B'rith headquarters in Washington D.C. received a package containing a 
petri dish labeled ``Anthracis Yersinia,'' a non-existent substance and 
a threat letter. Although testing failed to substantiate the perceived 
threat, the significant response mobilized to mitigate the situation 
highlights the disruption, fears, and complexity associated with these 
types of cases.
    On September 17, 1997, an individual was indicted in violation of 
Title 18 U.S.C. Section 175(A)/Biological Weapons Anti-Terrorism Act 
for knowingly possessing a toxin (ricin and nicotin sulfate) for use as 
a weapon and knowingly possessing a delivery system designed to deliver 
or disseminate a toxin. On October 28, 1997, he pled guilty to 
manufacturing a toxin (ricin) for use as a weapon. On January 7 1998, 
he was sentenced to 12 years and 7 months in federal prison to be 
followed by 5 years of supervised release.
    In what the FBI considers a significant prevention, the FBI 
arrested four members of a white supremacist organization in Dallas, 
Texas, who planned to bomb a natural gas refinery, which could have 
caused a release of a deadly cloud of Hydrogen Sulfide. This act was 
planned to divert law enforcement attention from the group's original 
objective of committing an armored car robbery. On video, the subjects 
discussed their complete disregard for the devastating consequences of 
their intended actions. The four were indicated on several charges to 
include Use of Weapons of Mass Destruction. The group pled guilty to 
several criminal charges and are awaiting sentencing.
    The FBI's countermeasure initiatives, such as the Domestic 
Preparedness Program which is being worked jointly with the Department 
of Defense and other members of the federal interagency community to 
train local ``first responders'' and about which the FBI has previously 
provided testimony, is designed to address the potential widespread 
consequences associated with WMD.
    As a result of increased funding from the Antiterrorism and 
Effective Death Penalty Act of 1996, the Director supported and the 
Attorney General approved an enhancement of 175 Special Agents to the 
WMD program throughout our 56 field offices. Additionally, $21,200,000 
from the 1998 FBI's Counterterrorism budget has been allocated to 
ensure that state and local agencies have basic equipment and training 
for responding to chemical or biological incidents and incidents 
involving improvised explosive devices. The FBI's National Security 
Division, Laboratory Division, and the Critical Incident Response Group 
(CIRG) have received total funding in the amount of $8,000,000 from the 
'FY 97 budget for equipment, training, and assistance to be provided to 
the FBI field offices to address this growing problem.
    Notwithstanding that which we have already faced and continually 
plan for, the potential for WMD to damage our national security does 
exist and trends are troublesome. The ease of manufacturing or 
obtaining biological and chemical agents is disturbing. Available 
public source material makes our law enforcement mission a continuous 
challenge. Nevertheless, I can and will assure you that the FBI will 
remain vigilant to the threat and continue to strive to prevent and 
counter the use and proliferation of WMD.
                   critical infrastructure protection
    In a few short months, on July 26, 1998, the FBI will celebrate its 
90th birthday. The FBI has been a remarkable institution for many 
reasons, not the least of which has been its ability to remake itself 
to address new challenges to U.S. national security and criminal 
justice. In the beginning, FBI agents were not authorized to carry 
firearms. In response to the gang-era of the 1920s and 1930s, agents 
were first issued handguns, and then the storied Thompson submachine 
gun. In what is much more than a symbolic shift, today's agents are 
issued laptop computers. This important advancement is the direct 
result of an evolution in national security vulnerabilities.
    As one consequence of technological innovation, deregulation, and 
economic imperatives, critical infrastructure systems have become more 
complex and interdependent. Digital control systems based on commercial 
off-the-shelf hardware and software are being used to streamline 
network operations and reduce personnel requirements. These control 
networks frequently are connected by publicly-accessible 
telecommunications systems and commercially available information 
technologies--the National Information Infrastructure (NII)--a trend 
that will accelerate as utility, transportation, and government 
activities eliminate antiquated, expensive private telecommunications 
networks. The result is a revolutionary and systemic improvement in 
industrial and commercial processes that has been widely recognized and 
exploited by both public and private sectors.
    Public- and private-sector organizations that rely on information 
technologies are diverse. Within the government, information 
technologies provide leverage for performing traditional missions more 
efficiently, e.g., law enforcement, intelligence gathering and 
exploitation, and national defense. In the private sector information 
systems allow rapid, efficient transfers of information and capital, 
enable a new wave of electronic commerce, and enable far-flung, 
technically complex operations to exist over vast geographic distances.
    However, as commercial information technologies create advantages, 
their increasingly indispensable nature transforms them into high-value 
targets. Moreover, in practice these developments have resulted in 
diminished systems redundancy and the consolidation of core assets, 
heightening the risk of catastrophic single-point failures. These 
vulnerabilities are accompanied by a more variegated threat picture. 
The range of potential adversaries that may seek to attack U.S. 
infrastructure systems is broad and growing. Disgruntled employees, 
disaffected individuals or groups, organized crime, domestic and 
international terrorists, and adversary nations are all potential 
sources of attack.
Vulnerabilities
    Hundreds of information system vulnerabilities are discovered every 
day--many directly related to US national security. Dozens of 
previously unknown computer system vulnerabilities are uncovered every 
day by the vast yet interconnected community of technical experts. Most 
of these vulnerabilities are subsequently posted publicly, usually on 
the Internet first. For example, Internet mailing lists routinely 
distribute vulnerability information and software that can be used to 
exploit vulnerabilities.
    Vulnerability publicity usually follows through a succession of 
books, magazine and newspaper articles, electronic bulletin board 
messages, and a growing list of World Wide Web sites that are targeted 
at informing hackers, crackers, ``phreakers,'' and, potentially, 
members of terrorist organizations and foreign intelligence services, 
about the latest methodology for staging successful cyber attacks. List 
of Frequently Asked Questions (FAQs) outlining the specifics of system 
vulnerabilities are widespread. ``The Unofficial Web Hack FAQ,'' ``The 
Hacker FAQ,'' and ``How to Hack a Website'' are popular, accessible, 
and easily downloaded from the Web. These vulnerabilities are present 
in the same commercial, off-the-shelf computer hardware and software 
used by both private industry and government.
    These developing phenomena are associated with another, perhaps 
even more worrisome development. As information technologies and the 
physical infrastructure systems they control become increasingly 
complex, our ability to reliably anticipate system-wide behavior 
diminishes. This is because as systems increase in complexity, the 
effect of manipulating, degrading, or eliminating a single component is 
difficult to predict. Accidents, even seemingly minor ones, can have 
catastrophic effects. This creates a growing increase in the likelihood 
of catastrophic, single-point failures--accidental or induced.
    The details of the nation's infrastructure vulnerabilities are 
clearly illustrated in both classified and unclassified arenas. For 
instance, the myriad of government studies and reports on the matter 
include one recently published by the President's Commission on 
Critical Infrastructure Protection. The report was preceded by similar 
assessments by the Defense Science Board, the Office of Science and 
Technology Policy, and the Office of Management and Budget.
Threats
    With very few exceptions, attacks against the nation's cyber assets 
can be aggregated into one of four categories: crime, terrorism, 
foreign intelligence, or war. Regardless of the category, any country 
or group can acquire the capability to conduct limited attacks against 
information systems from friendly nations, commercial vendors, arms 
dealers, hacker conferences, the Internet, and computer bulletin 
boards.
    Software is one weapon of information-based attacks. Such software 
includes computer viruses, Trojan Horses, worms, logic bombs and 
eavesdropping sniffers. Advanced electronic hardware can also be useful 
in information attacks. Examples of such hardware are high-energy radio 
frequency (RF) weapons, electromagnetic pulse weapons, RF jamming 
equipment, or RF interception equipment. Such weapons can be used to 
destroy property and data; intercept communications or modify traffic; 
reduce productivity, degrade the integrity of data, communications, or 
navigation systems; and deny crucial services to users of information 
and telecommunications systems.
    Where hackers formerly may have been motivated by the technical 
challenge of breaking into a computer system, the motivation may be 
shifting more toward hacking for profit. As more and more money is 
transferred through computer systems, as more fee-based computer 
services are introduced, as more sensitive proprietary economic and 
commercial information is exchanged electronically, and as the nation's 
defense and intelligence communities increasingly rely on commercially-
available information technology, the tendency toward information 
threats emerging as national security threats will increase.
    Terrorists, transnational criminals, and intelligence services are 
quickly becoming aware of and exploiting the power of information tools 
and weapons. This has beentrue in the past as new means of 
communication, transportation, and secrecy have been introduced to the 
public. For example, narcotics traffickers began using communications 
advances such as pagers and cellular phones soon after their 
introduction to the public.
    Perhaps the most imminent threats today come from insiders. 
Insiders have the advantage of not needing to break into computer 
systems from the outside, but only to use, or abuse, their legitimate 
access. A large portion of the computer intrusion reports that the FBI 
and other law enforcement organizations receive have at their core an 
employee, or a former employee, who has exceeded his or her access, 
often in revenge for a perceived offense or wrong. These individuals 
have the knowledge of where the most sensitive information is stored, 
how to access the information, and, at times, how to steal or damage 
the data.
    One such example involves a U.S. defense contractor firm that 
subcontracted with a foreign firm. The U.S. firm employed foreign 
contractors onsite, and allowed these employees access to certain areas 
of the premises that were necessary to their duties. However, the 
foreign contractors used their knowledge of the company's computer 
system to access other areas of the company's computer network that 
were off limits to non-U.S. employees. The foreign contractors were 
able to access proprietary and potentially classified information 
regarding the U.S. company's government contracts. Their activities 
jeopardized the competitiveness of the company and posed a potential 
threat to U.S. national security.
    Another insider incident occurred in October 1997 when a former 
Pacific Gas & Electric Co. worker caused a widespread power outage in 
San Francisco. Moreover, security experts have repeatedly and publicly 
demonstrated the ease of compromising security at both private- and 
public-sector facilities through social engineering--posing as an 
insider to easily acquire information on internal security, passwords, 
and system configurations.
    In terms of the maturity of the threat, the numbers tell the story. 
So far, in the month of January 1998 alone, there have been over forty 
reported hacked web sites according to hacked.net, a website that 
tracks such statistics. The FBI's load of computer intrusion-related 
cases is more than doubling every year. Because of the uncertainties 
associated with the evolutionary path of information technologies, the 
threat picture fifteen years hence is difficult to predict. However, 
some certainties apply: information technology is sure to proliferate, 
and those who would exploit these technologies for nefarious purposes 
are sure to multiply.
The FBI response
    The FBI was among the first to recognize the importance of 
predicting information-based attacks on critical infrastructures, 
preventing their occurrence, and mitigating damage in the event such 
attacks did occur. Since the 1992 creation of the National Computer 
Crime Squad in the FBI's Washington Field Office, additional regional 
computer squads in New York, San Francisco, Boston, Atlanta, Dallas, 
and Los Angeles. In addition to regional squads, the FBI has created 
computer investigative teams in each of its 56 field offices that will 
respond to computer incidents within their geographical area of 
responsibility.
    The expansion of the National Computer Crime Squad was accompanied 
by the creation of a new National Security Threat List (NSTL) issue 
within the FBI's FCI program: Targeting the National Information 
Infrastructure, which the Attorney General approved in September 1995. 
The addition of this issue to the NSTL makes it possible for the FBI, 
working within its FCI authority, to investigate information 
infrastructure-related incidents perpetrated or coordinated by foreign 
intelligence services. These attacks might be directed against the U.S. 
Government or U.S. corporations, establishments, or persons and could 
target physical facilities, personnel, information, or computer, cable, 
satellite, or telecommunications systems. With the new NSTL issue, 
these teams have responsibilities over both the criminal investigative 
and the potential national security implications of computer 
intrusions.
    The FBI is responding to these novel threat and vulnerability 
combinations through a coordinated interagency effort that includes, 
among other important participants, the Department of Defense, the 
National Security Agency, the Central Intelligence Agency, and the 
President's Commission on Critical Infrastructure Protection.
                  the infrastructure protection center
    One important interagency attempt to meet the emerging threat to 
the nation's critical infrastructures is the Infrastructure Protection 
Center (IPC). The IPC, a government-industry partnership hosted by the 
FBI, will provide a mechanism for assessing, warning, investigating, 
and responding to attacks on interconnected interdependent 
infrastructures. The IPC units will be staffed with representatives 
from FBI and DOD, Intelligence Community, and agency detailees 
experienced in computer crimes and infrastructure protection. To build 
private confidence and information sharing, IPC will hire 
representatives of private industry or private sector computer 
emergency response teams (CERTs) making them an integral part of the 
center. Direct electronic connectivity is also being established with 
private industry and the CERTs.
    Twenty-four-hour watch presence and connectivity maintained between 
the FBI, the National Security Agency, the Defense Intelligence Agency, 
and the Defense Information Systems Agency reinforce the respective 
strengths these parties bring to the infrastructure assurance mission. 
Future connectivity will include other government participants.
    The IPC builds on and enhances close ties to the ``first 
responders'' to an attack on critical infrastructures--state and local 
law enforcement and government. Building on FBI's long standing 
relationships and state and local law enforcement (through mechanisms 
like the Joint Terrorism Task Forces), the IPC will conduct outreach, 
provide training, share information, and coordinate interagency efforts 
during an attack. The IPC would also establish direct electronic 
connectivity to state and local governments building on existing FBI 
programs such as the Law Enforcement On-line (LEO) and Awareness of 
National Security Issues and Response (ANSIR) systems.
    Though the national security threat from cyber-related issues is of 
concern, the FBI, with its private- and public-sector partners, is 
building a firewall of protection between malevolent actors and 
critical U.S. infrastructure systems. The threat is real and growing, 
but an effective response is underway. The IPC will embody the 
collected interagency expertise in the infrastructure protection 
mission, and exemplifies the depth of commitment the FBI has made to 
this important law enforcement and national security issue.
                           economic espionage
    Since I last appeared before this committee, the passage of the 
Economic Espionage Act of 1996 (EEA) has greatly assisted the FBI in 
its battle against Economic Espionage. Important partnerships have been 
formed with the Department of Defense and industry allowing for 
successful investigative efforts.
    Through the use of the EEA and other tools, the FBI has developed 
significant information on the foreign economic espionage threat, to 
include: (1) identification of the perpetrators of economic espionage, 
(2) the economic targets of their spying and criminal activities, and 
(3) the methods used to steal clandestinely and illicitly U.S. trade 
secrets and technology.
    The increasing value of trade secrets in the global and domestic 
marketplaces, and the corresponding spread of technology, have combined 
to significantly increase both the opportunities and methods for 
conducting economic espionage. The development and production of trade 
secret information is an integral part of virtually every aspect of US 
trade, commerce, and business. Consequently, the security of trade 
secrets is essential to maintaining the health and competitiveness of 
critical segments of the US economy.
    The Economic Espionage Act has helped to protect valuable US trade 
secrets. The statute was the result of a Congressional mandate, coupled 
with a joint effort on the part of the FBI and industry, to provide law 
enforcement with a tool to deal effectively with trade secret theft. 
The EEA resolved many gaps and inadequacies in existing federal laws by 
creating two new felonies outlawing acts of economic espionage (Title 
18, U.S.C. 1831) and commercial theft (Title 18, U.S.C. 1832), and by 
specifically addressing the national security aspect of these crimes.
    The FBI National Security Division sponsored a series of six 
regional Economic Espionage Conferences. These conferences brought 
together elements of industry and U.S. federal government criminal and 
intelligence sectors which play a role in economic espionage matters. 
Traditional threat countries and a number of non-traditional threat 
countries continue their collection of US trade secrets. The US 
counterintelligence community has specifically identified the 
suspicious collection and acquisition activities of foreign entities 
from at least 23 countries. Analysis of updated information indicates 
that of those identified countries, 12 are assessed to be most actively 
targeting US proprietary economic information and critical 
technologies. This list has not changed since the 1996 Annual Report on 
Foreign Economic Collection and Industrial Espionage.
    Foreign collection continues to focus on US trade secrets and S&T 
information products. Of particular interest to foreign collectors are 
dual-use technologies and technologies which provide high 
profitability.
    The FBI National Security Division's Awareness of National Security 
Issues and Response (ANSIR) Program brings to the attention of U.S. 
corporations their potential vulnerability to classic and economic 
espionage, as well as other national security concerns. In each of the 
FBI's 56 field offices, there is a Special Agent assigned as the ANSIR 
coordinator who deals directly with the corporate security directors in 
their region.
    Through ANSIR, the FBI has undertaken several initiatives. ANSIR-
FAX is a facsimile transmission system for the dissemination of 
unclassified counterintelligence and terrorism threat warning 
information to approximately 25,000 corporate directors. ANSIR-FAX is 
used to provide corporate America with updates on economic espionage. 
Briefings have been provided to American corporations overseas. 
Corporate security directors and other personnel in Australia, Ireland, 
New Zealand, Panama, South Korea, and the United Kingdom have received 
briefings on economic espionage. Local and national government 
officials in the Czech Republic, Austria, the Slovak Republic, and 
Hungry were also briefed.
    Examples of some recent Economic Espionage Cases are:
    Pittsburgh: On December 7, 1996, the first arrest under the new law 
occurred in Pittsburgh, Pennsylvania. Patrick Worthing and his brother, 
Daniel, were arrested by FBI agents after agreeing to sell Pittsburgh 
Plate Glass (PPG) information for $1,000 to a Pittsburgh agent posing 
as a representative of Owens-Corning, Toledo, Ohio. Both subjects were 
charged under Title 18 United States Code, Section 1832 (18 U.S.C. 
1832; Theft of Trade Secrets). On April 18, 1997, due to his minimal 
involvement, Daniel Worthing was sentenced to six months of home 
confinement, five years probation, and 100 hours community service. In 
June 1997, Patrick Worthing was sentenced to 15 months in jail and 
three years probation.
    Philadelphia: On June 14, 1997, Hsu Kai-lo and Chester H. Ho, 
naturalized U.S. citizens were arrested by the FBI and charged with 
attempting to steal the plant cell culture technology to Taxol, 
patented and licensed by the Bristol-Myers Squibb (BMS) Company. On 
July 10, 1997, a Federal Grand Jury for the Eastern District of 
Pennsylvania returned indictments, totaling eleven counts against Hsu, 
Ho, and Jessica Chou (a Taiwanese citizen who was actively involved 
with Hsu in attempting to obtain the Taxol formulas). Hsu and Chou are 
employed by the Yuen Foong Paper Manufacturing Company of Taiwan, a 
multinational conglomerate. Ho is a professor at the National Chaio 
Tung University and the Institute of Biological Science and Technology 
in Taiwan. Chou remains in Taiwan. Two of the eleven counts were 
violations of Title 18 U.S.C. 1832. Taxol is a billion dollar a year 
industry for BMS. The foreign market share is estimated to be $200,000. 
Potential losses could have been in the billions of dollars over the 
ten year period BMS holds the patent for the plant cell culture 
technology.
    Cleveland: On September 5, 1997, Pin Yen Yang, and his daughter 
Hwei Chen Yang (aka Sally Yang) were arrested on several charges, 
including Title 18 U.S.C. 1832. Also charged is the Four Pillars 
Company, which has offices in Taiwan, and a registered agent in El 
Campo, Texas. It is alleged that the Four Pillars Company, Pin Yen 
Yang, Sally Yang, and Dr. Ten Hong Lee were involved in a conspiracy to 
illegally transfer sensitive, valuable trade secrets and other 
proprietary information from the Avery Dennison Corporation, Pasadena, 
California, to Four Pillars in Taiwan. Dr. Lee, who is at present not 
charged and is cooperating with investigation, has been an Avery 
Dennison employee since 1986, at the company's Concord, Ohio facility. 
Dr. Lee allegedly received between $150,000 and $160,000 from Four 
Pillars/Pin Yen Yang for his involvement in the illegal transfer of 
Avery Dennison's proprietary manufacturing information and research 
data over a period of approximately eight years. Direct development 
costs of technology transferred during this time is estimated to be in 
the tens of millions of dollars.
    On October 1, 1997, a Federal Grand Jury returned a 21 count 
indictment, charging Four Pillars, Pin Yen, and Sally Yang with 
attempted theft of trade secrets, mail fraud, wire fraud, money 
laundering, and receipt of stolen property. On the same date, Dr. Ten 
Hong Lee plead guilty to one count of wire fraud and promised continued 
cooperation with the investigation.
    Memphis: On October 3, 1997, the Memphis Division arrested Steven 
Louis Davis, who was indicted in the Middle District of Tennessee on 
five counts of fraud by wire and theft of trade secrets. Wright 
Industries, the victim company and a sub-contractor of Gillette, had 
fully cooperated with the FBI's investigation. Although the FBI knows 
that Davis reached out to one foreign owned company (BIC), it is 
unclear if he was successful in disseminating trade secrets overseas. 
The FBI, however, has learned that a competitor in Sweden had seen the 
drawings of the new Gillette razor. The case is pending.
    Buffalo: Harold C. Worden was a 30-year employee of the Eastman 
Kodak Corporation who established his own consulting firm upon retiring 
from Kodak. Worden subsequently hired many former Kodak employees and 
stole a considerable amount of Kodak trade secret and proprietary 
information for use at his firm. The market share at risk could have 
been in the billions of dollars. As a result of investigation, Worden 
signed a plea agreement with the U.S. Attorney's Office for the Western 
District of New York in which he pled guilty to one felony count of 
violating Title 18, U.S.C., Section 2314 (the Interstate Transportation 
of Stolen Property). Worden was sentenced to one year imprisonment, 
three months of home confinement with monitoring bracelet, three years 
of supervised probation and a fine of $30,000. Investigation is 
continuing in this matter. For additional information concerning the 
Harold Worden case, see attached press release and judge's remarks at 
sentencing.
    Boston: This case involved unauthorized intrusion into a voice-mail 
system by a disgruntled former employee. The victim was Standard 
Duplicating Machines Corporation (Standard), whose main competitor was 
the U.S. affiliate, Duplo Manufacturing Corporation of Japan (Duplo). 
John Hebel was employed by Standard as a field sales manager from 1990 
to 1992, when he was terminated. Through an unsolicited phone call from 
a customer, Standard discovered Hebel had accessed Standard's phone 
mail system and had used the information to compete against Standard. 
Hebel was employed by Duplo at the time of the intrusions.
    A civil suit was brought against Duplo by Standard with a final 
settlement of close to one million dollars. On November 6, 1996, Hebel 
was charged with one count of violating Title 18, U.S.C., Section 1343 
(Wire Fraud). On March 14, 1997, Hebel was sentenced to two years 
probation.
    Recent press accounts have highlighted the high financial risk of 
economic espionage to American businesses, communities and jobs. The 
American Society of Industrial Security (ASIS) reported this month to 
the FBI that over $30 billion in American intellectual property were 
``placed at risk'' from attempted theft in 1996 alone. Over 270 
separate incidents were confirmed in the ASIS study. ASIS presently is 
finalizing its results for publication this year.
                     international drug trafficking
    The President has stated in PDD-42 that international organized 
come and drug trafficking are a threat to national security. A 
Presidential Directive, however, is not required to convince law 
enforcement and the citizens of the United States that the trafficking 
in illicit drugs is a serious threat to all aspects of our daily lives 
and consequently to our National Security.
    Unlike traditional threats to national security, the drug threat is 
not the result of the political agenda of a terrorist group or foreign 
government. Instead, it is perpetuated by criminal enterprises that 
conduct a myriad of egregious acts of violence, corruption, fraud, 
murder and extortion, all generated by personal greed and a quest for 
power. Extremist groups or foreign powers have yet to cause the level 
of devastation to our communities and affect the fabric of our society 
as that due to illicit drug trafficking.
    The rippling effects of the political and/or economic 
destabilization of other countries by drug trafficking organizations 
indirectly impacts on our nation's security. Drug trafficking and 
international organized crime groups often attempt to thwart 
enforcement action by bribing or threatening foreign government 
officials. In some instances, entire governments or sectors of 
governments operate as criminal enterprises, using the appurtenances of 
the state for illicit purposes. The United States is not immune to the 
political, moral and societal debilitation that has occurred in other 
countries due to the distribution of criminally obtained assets to buy 
assistance or ensure ignorance from corrupt government officials.
    The goal of the FBI's drug program is to identify, disrupt and 
dismantle core trafficking organizations by attacking their command and 
control structures. This is most effectively accomplished by using the 
Enterprise Theory of Investigation, wherein the FBI conducts long-term, 
sustained investigations targeting and exploiting all criminal 
activities being conducted by the organization in furtherance of their 
drug trafficking enterprise. Drug trafficking organizations do not 
limit their criminal activity to Title-21 violations. They also commit 
crimes of violence such as drive by shootings to eliminate rival 
traffickers and kidnapping for ransom to settle unpaid drug debts. They 
engage in concerted efforts to corrupt public officials and they commit 
financial crimes to launder the illegal gains of their criminal 
activity. The Enterprise Theory promotes a coordinated, multi agency 
environment which allows law enforcement to attack criminal 
organizations on multiple fronts, identifying and exploiting 
vulnerabilities throughout the command and control structures of the 
organization. The Enterprise approach also enables Federal Prosecutors 
to utilize the Federal Racketeering Influenced and Corrupt 
Organizations (RICO) Act and theContinuing Criminal Enterprise (CCE) 
statutes. These prosecutorial tools carry maximum sentences for the 
leaders of these enterprises.
    The FBI has demonstrated the effectiveness of this drug strategy 
through the dismantlement of the major drug trafficking Organization of 
Juan Garcia Abrego (JGAO) which is a drug trafficking group based in 
Matamoros, Mexico. The JGAO was headed by Juan Garcia Abrego, who is 
presently incarcerated serving eleven life sentences in the U.S. for 
drug trafficking, conspiracy, money laundering and operating a 
continuing criminal enterprise. Before his arrest Abrego had an 
estimated net worth of $300 to $400 million, and was described as ``the 
owner of Matamoros, Tamaulipas, Mexico.''
    The FBI's drug program is structured to investigate and prosecute 
illegal drug manufacturers and distributors, provide assistance to 
other law enforcement agencies and strengthen international 
cooperation. By concentrating resources on major areas of drug 
trafficking the FBI is also able to enhance its intelligence base and 
make informed projections of the future of the drug threat.
Southwest border
    The FBI is currently focusing on the Southwest Border, Caribbean 
Basin and emerging Asian, Russian and Nigerian Organized Crime groups 
which we believe present the most significant drug threats to our 
country. I will briefly summarize the situation in each area and 
describe the ongoing FBI initiatives in place to address each threat:
    Mexican Drug Trafficking Organizations are among the most numerous 
and pose the most significant crime threats facing the United States 
today, due to their domination of polydrug trafficking across our 
Southwest Border. The pervasive corruption of Mexican law enforcement 
institutions and the increased threat of corruption of U.S. law 
enforcement coupled with violent acts in furtherance of drugs and 
weapons trafficking drug related gang violence and the overall effect 
that drugs have on our economy and banking institutions effectively 
constitute a threat to our national security. The FBI has identified 
seven major Mexican drug trafficking organizations that pose the 
greatest threat to the Southwest Border of the United States. Needless 
to say there are numerous lesser known organizations which pose 
problems for law enforcement at all levels These Mexican drug/criminal 
enterprises import the majority of the cocaine, heroin, marijuana, and 
a growing portion of the methamphetamine entering the United States. 
The activities of Mexican Drug Trafficking Organizations present 
pervasive crime problems which impact upon virtually every region of 
the U.S.
    The FBI plays an, integral role in the Southwest Border Project, 
which is a comprehensive investigative and prosecutive strategy 
targeting the major Mexican drug trafficking organizations. It features 
the FBI, DEA, DOJ, USCS, and U.S. Attorney's Offices, as well as state 
and local law enforcement agencies working in concert to attack the 
complex organizations on a multi-disciplined level. This initiative 
continues to have significant successes in identifying and disrupting 
core organizations, as well as secondary organizations providing 
transportation, distribution, and money laundering services throughout 
the United States. As a part of this project, the FBI leads several 
Corruption and Violent Gang Task Forces along the Southwest Border. Our 
case successes are typified in the total dismantlement of the Surenos 
13 Street Gang in Albuquerque, NM and the Logan Street Gang in San 
Diego, CA, both of which feature youths capable of the most vicious 
murders and violence.
    Most recently, the FBI indicted Ramon Arellano Felix one of the 
leaders of a major Mexican drug organization known as the Arellano 
Felix Organization. The FBI Southwest Border Project, in coordination 
with the FBI's Safe Streets Initiative, conducted an investigation 
which spanned several years and resulted in an arrest warrant for Ramon 
Arellano Felix for conspiracy to import cocaine and marijuana. On 
September 11, 1997, Arellano Felix became the 451st person placed in 
the FBI's ``Top Ten Most Wanted'' fugitive list. Intelligence indicates 
that this action by the U.S. Government has adversely impacted Ramon 
Arellano Felix's ability to move freely in Mexico and other countries. 
It is a matter of time before he is brought to justice.
    Another success was ``Operation Reciprocity'', a multi-
jurisdictional, multi-agency drug investigation conducted by the FBI, 
DEA, and U.S. Customs Service which targeted various cells of the Amado 
Carrillo-Fuentes Organization (AFCO) in ten U.S. cities. The operation 
which was initiated in October, 1996, was based upon information 
received from an FBI source who identified a money laundering cell of 
the AFCO operating in New York. As a result of the evidence developed 
in this matter, 53 high-level operatives of the AFCO were arrested on 
various charges including conspiracy, distribution, money laundering 
and importation. During this case, 7.4 tons of cocaine was seized along 
with 2,794 pounds of marijuana and over $11 million in U.S. currency.
    The FBI is a major contributor to other international counter 
narcotics initiatives including the U.S. Mexico Bilateral Task Forces 
vetting and operations, High Level Contact Group on Mexico, Mexican 
Organized Crime Unit vetting and training Mexico's Sensitive 
Investigative Unit and Resolution Six which assigns FBI agents to DEA 
foreign offices.
The Caribbean
    U.S. law enforcement agencies estimate that up to one third of all 
U.S. bound cocaine is smuggled through the Caribbean basin. As many as 
nineteen Caribbean drug trafficking organizations have been identified 
by United States law enforcement as significant drug trafficking 
threats. Puerto Rico is the gateway to the mainland as a U.S. territory 
and is used as the major transshipment point for narcotics destined for 
New York City and other East Coast destinations. The significant drug 
trafficking organizations operating in the Caribbean are predominantly 
Dominican, Jamaican and Colombian groups. These groups maintain 
contacts with both the South American suppliers and the U.S. based 
distributors of the drugs. Caribbean Criminal Enterprises have emerged 
as a significant threat to the United States because of their ability 
to transport large quantities of cocaine and Colombian heroin; their 
emergence as both wholesale and retail drug distributors along the 
eastern seaboard; and their propensity to use violent criminal activity 
such as murder, extortion and kidnaping to further their criminal 
activity. They also move enormous sums of money through ``customer 
friendly'' Caribbean banks.
    The scope and magnitude of emerging Caribbean criminal activity was 
recognized by Attorney General Janet Reno two years ago when she 
ordered that a comprehensive crime survey be conducted and the 
implementation of a coordinated comprehensive inter-agency 
investigative strategy be constructed to addresses all aspects of 
Caribbean based criminal activity. A key feature of the Caribbean plan 
is the establishment of the FBI managed Information Coordination Center 
(ICC) under the HIDTA structure to fully exploit tactical and strategic 
criminal intelligence which is developed and shared on an inter-agency 
basis and intended to focus on major organizations operating in the 
region. The ICC also serves as a clearing house for tactical 
information which triggers deployment of enforcement assets. There have 
been several notable successes attributed to the ICC this year. On 2/
10/97, an ICC source provided information which led to the interdiction 
of 823 kilos of cocaine off the coast of Cabo Rojo, PR. On 11/10/97, a 
different ICC source furnished information which led to the 
interdiction of approximately 1,140 kilograms of cocaine. Several 
federal fugitives have been located and apprehended as a result of 
information disseminated by the ICC. An ICC source has contributed 
significantly to a major DEA drug trafficking investigation, which led 
to the seizure of property valued at over one million dollars and the 
arrests of 15 individuals.
    The FBI, the Drug Enforcement Administration, United States Customs 
Service and other U.S. and foreign law enforcement agencies are 
committed to a coordinated effort under HIDTA and have dedicated 
additional field office resources to Caribbean matters which have 
enormously improved investigative support in the Caribbean. For example 
in 1997 and 1998, the FBI has assigned forty-nine additional Special 
Agents and additional support personnel, formed three additional 
Resident Agencies on the island of Puerto Rico and dedicated 
significant additional resources to address the growing Caribbean crime 
problem. The new Resident Agencies are designed to be joint operations 
of the FBI, Police of Puerto Rico, DEA, Immigration and Naturalization 
Service, and Bureau of Alcohol, Tobacco and Firearms, which will 
address violent crime, gangs and drug traffickers. Joint drug squads 
between the DEA and the FBI have been created and already proven to be 
highly effective.
    Other FBI counter drug efforts have been focused in the area of 
emerging crime groups, such as Asian Criminal Enterprises, Nigerian 
Criminal Enterprises, and Russian/Eastern European Organized Crime, all 
of which pose an increased threat to the nation. These organized crime 
groups and other emerging criminal enterprises represent an increasing 
economic, criminal, and public safety threat. They are involved in a 
myriad of crimes including heroin smuggling, money laundering, loan 
sharking, murder and fraudulent financial schemes. As a result of these 
emerging crime groups, the FBI has established specific initiatives to 
address these new, yet significant, crime problems. To address the 
Nigerian Criminal Enterprises (NCE), efforts are underway to: establish 
task forces in U.S. cities which have been identified as having ongoing 
NCE crime problems, to establish a joint U.S./United Kingdom (U.K.) 
working group to exchange information regarding NCEs, and to coordinate 
FBI participation in the Combined Agency Border Intelligence Network. 
Wehave also adopted measures to acquire greater linguistic capability 
in the African dialects to support investigations of these groups.
    Although disrupting and dismantling major trafficking organizations 
continues to be among our top priorities, the increase in drug related 
violence and the emergence of violent, drug trafficking street gangs in 
the early 1990's led to the initiation of the FBI's Safe Streets 
Initiative in 1992. Under the Safe Streets Initiative, the FBI is 
successfully targeting violent, drug trafficking street gangs through 
the establishment of long-term, proactive task forces.
                     international organized crime
    I would like now to turn my attention to the area of International 
Organized Crime (IOC). The FBI defines an organized crime group or 
enterprise as a continuing, self-perpetuating criminal conspiracy, 
having an organized structure, fed by fear and corruption, and 
motivated by greed. These groups have established hierarchies, are 
criminally diverse, organizationally mature, and multi-jurisdictional 
in their operations and influence.
    IOC is an immediate and increasing concern not only for U.S. law 
enforcement, but also for the worldwide law enforcement community. IOC 
groups are engaged in a myriad of criminal activities that include: 
murder, extortion; corruption of public officials; bribery; drug 
trafficking; money laundering; financial fraud; kidnaping; 
prostitution; arms smuggling; and alien smuggling.
    The widespread political, economic, social and technological 
changes and advances occurring within the last two decades have allowed 
IOC groups to become increasingly active worldwide. These criminal 
organizations are exploiting the increased ease of international 
travel, liberalization of emigration policies, expansion of free trade, 
high technology communications and sophisticated money laundering 
techniques to further their criminal efforts. The ability of IOC groups 
to adapt to these changes has hindered law enforcement efforts against 
them.
    The FBI's approach to combating IOC includes: (1) aggressive 
investigations targeting IOC groups operating in the U.S.; (2) general 
and specialized law enforcement training for foreign law enforcement 
agencies; (3) the development of working group relationships with 
selected foreign police agencies in an effort to address the increasing 
threat of international organized crime; and (4) the operation of a 
sound Legal Attache Program.
    The FBI places IOC groups into three categories: (1) Russian/
Eastern European/ Eurasian (R/EE/E) Organized Crime Groups; (2) Italian 
Organized Crime Groups; and (3) Asian Criminal Enterprises.
    R/EE/E criminal groups will pose a significant domestic problem for 
the U.S. in the future if they are not checked by law enforcement 
efforts. Russian Federation Ministry of Interior (MVD), Organized Crime 
Control Department (OCCD) officials report the existence of over 8,000 
R/EE/E criminal groups. There are allegedly over 150 ethnic-oriented 
criminal groups, including the Chechens, Georgians, Armenians and 
Russian ethnic Koreans. Russian authorities also report the existence 
of some 750-800 Russian so-called ``Thieves-in-law'', the 
``Godfathers'' of the Russian Mafia.
    To date, R/EE/E criminal groups in the U.S. have shown an ability 
to work closely with established American criminal elements, including 
the American La Cosa Nostra, Italian OC groups, and drug trafficking 
organizations. In addition, as law enforcement efforts against 
established OC groups in the U.S. become increasingly successful, it is 
possible that the R/EE/E criminal elements will move to fill the voids 
left by the other criminal groups.
    Unlike some of the other ethnically-oriented OC groups that arrived 
in this country, the R/EE/E criminal groups appear to gravitate at an 
earlier stage toward complex criminal activities, such as gasoline tax 
frauds, cyber security, bankruptcy fraud, insurance frauds, and health 
care industry frauds. That level of sophistication, coupled with a 
documented tendency toward violence, indicates that the R/EE/ E 
criminal groups could be on the way to becoming significant criminal 
elements in the U.S.
    R/EE/E criminal groups in the United States are most visibly 
organized in the major metropolitan areas of Los Angeles, San 
Francisco, Philadelphia, New York, Newark, Boston and Miami. Factions 
of this criminal group have aligned themselves with the New York LCN 
families in certain criminal activities. While the so-called ``Russian 
Mafia'' appears to prefer economic crimes such as credit card, 
insurance and gas excise and other tax fraud for larger schemes, they 
also engage in extortion, robbery, theft, murder, and drug trafficking.
    Vyacheslav Kirillovich Ivankov is the only high level Russian 
organized crime leader known to have taken up residence in the U.S. 
Ivankov arrived in the U.S. in March 1992, reportedly to establish 
control of and direct Russian/Eurasian organized crime activities in 
the U.S. In 1995, Ivankov and five of his associates were arrested by 
the FBI in New York on federal charges of conspiracy to commit 
extortion. Much of the predication for this investigation was provided 
by the Russian MVD and the Canadian RCMP. In 1996, Ivankov was 
convicted and sentenced to a 9 year and 7 month term of incarceration. 
Ivankov was clearly one of the most notorious Russian organized crime 
figures operating at that time. Although he was based in New York, his 
criminal enterprise was truly global and posed serious threats to a 
number of countries.
    The threat to the U.S. posed by Italian OC groups centers around 
their drug trafficking and money laundering activities. The four 
Italian Organized Crime (OC) groups currently active in the United 
States are the Sicilian Mafia, Camorra, 'Ndrangheta and Sacra Corona 
Unita (United Sacred Crown). Italian OC groups regularly cooperate with 
other international organized crime groups in the trafficking of drugs 
and other criminal activities. Their influence extends to parts of 
Europe, Asia, North America, South America, the Caribbean and 
Australia.
    Italian OC members and associates in the United States are presumed 
to be involved in criminal activities, both on an independent basis and 
in conjunction with members of the American La Cosa Nostra (LCN). Most 
of the Italian OC affiliates in the United States are concentrated in 
the northeast; however, there is also significant Italian OC presence 
in Florida, Southern California, and selected areas of the Midwest and 
mid-Atlantic regions.
    Italian OC enterprises have been involved in heroin trafficking for 
decades and were the primary importers of heroin into the U.S. prior to 
the Pizza Connection case in the early 1980s. In addition, 
investigations have documented Italian OC involvement in cocaine 
trafficking, often in collaboration with Colombian drug cartels.
    The FBI works closely with international law enforcement agencies 
to address Italian OC. For example, in 1991 the FBI initiated a joint 
investigation with Italian police services, the Royal Canadian Mounted 
Police and Colombian judicial authorities. This investigation targeted 
members of the Sicilian Mafia, Camorra, and 'Ndrangheta who were 
collaborating with Colombian drug cartels in the shipment of cocaine to 
Italy and heroin to the U.S. This successful investigation resulted in 
the arrest of 89 people in the U.S., Italy, Canada and Colombia. Thirty 
people have been convicted in the U.S. alone and 50 individuals are 
currently on trial in Italy. As recently as November, 1997, several FBI 
agents traveled to Italy and testified at this trial.
    The term Asian Criminal Enterprises (ACE) incorporates the 
definitions used by the FBI to refer to Asian Organized Crime and Asian 
Drug Trafficking Organizations. ACEs include Chinese Triads, criminally 
influenced Tongs, the Japanese Boryokudan, Vietnamese criminal groups 
and Korean criminal groups.
    ACEs have emerged as a significant criminal force in the U.S. and 
have displayed a considerable degree of violence in perpetrating crimes 
such as murder, extortion, drug trafficking, kidnaping, gambling, 
prostitution, weapons smuggling, money laundering and armed home 
invasions.
    ACEs are involved in a wide range of criminal activities that 
transcend national and international boundaries. Many of these 
enterprises bear allegiance to parent organizations in Asian countries, 
necessitating a close working by the FBI relationship with foreign law 
enforcement agencies where these groups are based.
    The first priority of the law enforcement community pertaining to 
IOC operations is the dismantling of these groups through coordinated 
international and domestic investigations. With the growing 
international nature of organized crime, law enforcement agencies must 
continue to find innovative ways to develop a concerted, cooperative, 
and global attack on the spread of organized crime.
                               conclusion
    On July 26, 1998, the FBI will celebrate its 90th birthday. The FBI 
has been a remarkable institution for many reasons, not the least of 
which has been its ability to remake itself to address new challenges 
to U.S. national security and criminal justice. On behalf of the men 
and women of the FBI who work tirelessly toward protecting the American 
people against the threats we are discussing here today, I wish to 
thank this Committee for its support. I am certain that our efforts 
will justify your commitment and confidence in this important area of 
the FBI's responsibility.

    Chairman Shelby. Our next witness will be Assistant 
Secretary of State for Intelligence and Research, Phyllis 
Oakley.
    Secretary Oakley.
    Mrs. Oakley. Thank you, Chairman Shelby, Senator Kerrey, 
Members of the Committee. I appreciate this opportunity 
topresent the views of the State Department's Bureau of Intelligence 
and Research, I&R. And I will certain shorten my already short remarks.
    Let me just begin by saying that thanks to the 
effectiveness of American diplomacy, military readiness and 
intelligence capabilities, the dangers of nuclear attack, 
large-scale conventional military attack and other threats to 
our national existence are low. Most of our citizens are quite 
safe most of the time and in most places around the globe. Our 
world has become safer, but it certainly is not yet safe 
enough.
    We just ensure that we do our utmost to preserve that 
safety, and in the State Department, of course, our focus is 
providing information as quickly and as efficiently as we can 
to support all of our diplomatic operations overseas.
    The Committee's call for an annual review and ranking of 
threats to our national security serves, as I'm sure you 
intended, as a useful prod to reconsider how best to deploy our 
intelligence resources.
    This year's fresh look at the array of threats we face 
produced the following observations:
    First, although we could and did rank the threats and 
priority order, we continued to believe that all of the threats 
listed, from the proliferation of weapons of mass destruction 
to international terrorism, the behavior and intentions of 
specific countries, are sufficiently important to warrant 
attention from both the intelligence and policy communities.
    Second, we concluded that progress in certain areas made it 
appropriate to rank threats differently than we had in 1997. 
Accordingly, the danger of proliferation of weapons of mass 
destruction joins terrorism at the top of our list. Iraq has 
moved up in the ranking of problem states, and North Korea has 
been accorded a lower, but still dangerous, ranking.
    Let me just make a few brief comments. Certainly we believe 
the spread of weapons of mass destruction continues to pose a 
serious threat to US national interests at home and abroad. 
Iraq's obstruction of UN Special Commission inspectors 
underscores the need for continued vigilance. Political 
incentives and opportunities for WMD proliferation are greatest 
in the Persian Gulf and South Asia. North Korea, China and 
Russia are the principal targets of acquisition efforts by 
countries seeking WMD capabilities. The latter are also the 
most active purveyors of WMD-related equipment and technology.
    I think I don't need to dwell in Iraq, and I'll certainly 
be happy to answer any questions that you have about that 
later.
    We agree that Russia continues to pose special problems, 
and we cannot underestimate Russia's continuing capabilities. 
And I think for us the greatest concern is this porosity of 
Russia's military-industrial infrastructure and the prospect 
for unauthorized transfers of materiel, equipment, know-how and 
technologies.
    For China, we certainly viewed that there had been positive 
steps regarding China as a producer of nuclear, chemical and 
missile related equipment. However, we have--there has not been 
equivalent progress in other areas, particularly in the 
ballistic missile field.
    Terrorism, we remain deeply concerned about it. Terrorism 
originating in the Middle East continues to pose the greatest 
danger to US citizens and interests. The region remains home to 
four of the seven officially designated state sponsors of 
terrorism--Iran, Iraq, Syria and Libya. It's also the locus of 
violent opposition groups which regularly employ indiscriminate 
terrorism as part of their campaigns to overturn policies and 
regimes.
    I think the last point I want to make is about the Asian 
financial crisis. It has--I think we're all aware of the 
advantages to the United States of globalization. But the 
current financial crisis in Asia has highlighted a number of 
vulnerabilities that while not on a par with traditional 
threats to the security of our nation, have a direct or 
indirect impact on American interests, though I certainly would 
say that it's too soon to know exactly how various sectors will 
be affected.
    As I said at the outset, the world has become safer, but it 
is not yet safe enough. Potential threats to the security of 
our nation and to individual Americans remain unacceptably 
high, and require our continued vigilance, intellectual rigor 
and working together to reduce them.
    Thank you.
    [The prepared statements of Mrs. Oakley and General Hughes 
follow:]

Statement by Assistant Secretary of State for Intelligence and Research 
                           Phyllis E. Oakley

    Chairman Shelby, Senator Kerrey, Members of the Committee. I 
appreciate this opportunity to present the views of the State 
Department's Bureau of Intelligence and Research (INR) on current and 
projected threats to our national interests. Happily--and thanks to the 
effectiveness of American diplomacy, military readiness, and 
intelligence capabilities--the danger of nuclear attack, large-scale 
conventional military attack, and other threats to our national 
existence is low. Most of our citizens are quite safe, most of the 
time, and in most places around the globe. Compared with threats in our 
own recent past and with those currently facing many nations, the 
threats we face today are less direct and more diffuse.
    Our world has become safer, but it is not yet safe enough. 
Individual Americans are vulnerable to terrorism, international crime 
and criminal acts in other countries the perils associated with 
narcotics and other illicit drugs, and to diseases transmitted over 
long distances by tourists, migrants, and business travelers. On any 
given day, millions of our fellow citizens are living or traveling 
outside the United States many of them are in regions subject to ethnic 
or religious tensions, political instability, and environmental risk. 
We cannot protect all Americans from all dangers but we most remain 
vigilant and aggressive in our efforts to identify and eliminate 
threats to our safety as well as our security. This work involves more 
than just gathering intelligence on potential adversaries and 
buttressing our defensive and deterrent capabilities; it requires 
vigorous effort to anticipate and ameliorate threats to all of the 
national interests and goals articulated and in the administration's 
Strategic Plan for International Affairs.
    I recognize that the primary purpose of this hearing is to define 
and prioritize direct threats to the national security of our country, 
but before doing so I want to note the contribution that intelligence 
can and must make to the attainment of our national objectives. Failure 
to attain these objectives may be caused as much by what we do to 
ourselves--by failing to act or overlooking opportunities--as by 
foreign efforts to thwart or threaten us. History tells us that a 
vacuum of power invites aggression or mischief Intelligence must 
identify not just the threats we face, but the hidden opportunities, 
the weaknesses of allies, and the strengthening or crumbling of foreign 
powers. Thus, threats and opportunities, critically linked to each 
other, must be considered in the context of our international 
objectives.
    The International Affairs Strategic Plan published by the 
Department of State last September lists the following foreign policy 
goals:
     Secure peace, deter aggression, prevent, defuse, and 
manage crises; halt the proliferation of weapons of mass destruction; 
and advance arms control and disarmament;
     Expand exports, open markets, assist American business, 
foster economic growth, and promote sustainable development;
     Protect American citizens abroad and safeguard the borders 
of the United States;
     Combat international terrorism, crime, and narcotics 
trafficking;
     Support the establishment and consolidation of 
democracies, and uphold human rights;
     Provide humanitarian assistance to victims of crisis and 
disaster, and
     Improve the global environment, stabilize world population 
growth, and protect human health.
    The first, third, and fourth of these goals address traditional 
threats to the security of our country and our citizens and will be 
discussed further in the pages that follow, but there is an important 
sense in which failure to advance any and all of these objectives 
entails dangers for the United States. To achieve these goals, 
decisionmakers, diplomats, the military services, and the law 
enforcement community must have timely, accurate, and correctly 
interpreted intelligence. That is why the Department has made Support 
for Diplomatic Operations a priority.
    We must ensure that our diplomats have access to intelligence when 
they need it and where they need it. Diplomacy is moving increasingly 
fast and is increasingly mobile--intelligence must keep peace. The 
Department of State has been working with the Intelligence Community to 
identify innovative ways to harness technology to provide intelligence 
support to our Chiefs of Mission, diplomats, and negotiators, both on 
the road and at fixed locations. Intelligence is often called a ``force 
multiplier'' with respect to the military; the same is true for 
diplomats. Timely, tailored, all-source intelligence can increase our 
diplomatic readiness and allow our diplomats to face challenges, seize 
advantages, and identify opportunities in our complex global 
environment.
    The Committee's call for an annual review and ranking of the 
threats to our national security serves, as I'm sure you intend, as a 
useful prod to reconsider how best to deploy our intelligence 
resources. This year's fresh look at the array of threats, challenges, 
and opportunities we face produced the following observations. First, 
although we could and did rank the traditional (and some 
nontraditional) threats in priority order, we continue to believe that 
all those noted below--from the proliferation of Weapons of Mass 
Destruction to international terrorism, and from the behavior and 
intentions of specific countries to environmental degradation and eco-
migration--are sufficiently important to warrant attention from both 
the intelligence and the policy communities.
    Second, we concluded that progress in certain areas (e.g., the 
start of Four Party Talks on the Korean Peninsula and the decline in 
the number of terrorist incidents directed at Americans) made it 
appropriate to rank threats differently than we had in 1997. 
Accordingly, the danger of proliferation of weapons of mass destruction 
joins terrorism at the top of our test, Iraq has moved up in the 
ranking of problem states, and North Korea has been accorded a lower--
but still dangerous--ranking.
    Third, INR's position on the frontline of Support to Diplomatic 
Operations and the Secretary of State's mandate to deal simultaneously 
with challenges and opportunities in every corner of the globe continue 
to require that we deploy our resources to ensure both global coverage 
and attention to the entire array of international affairs strategic 
goals. The net result is that, although we have assigned relatively 
more people--albeit still very small numbers--to coverage of the 
highest priority threats, our small size--I have only 170 analysts to 
cover all countries and issues--means that in INR the difference 
between the number of people covering high- and low-priority topics is 
small.
    With that as prologue, I will now turn to the discussion of threats 
to US national security.
                         proliferation concerns
    The spread of weapons of mass destruction (WMD) continues to pose a 
serious threat to US national interests at home and abroad. We have 
seen some encouraging signs over the past year, but Iraq's obstruction 
of UN Special Commission (UNSCOM) inspectors underscores the need for 
continued vigilance. Effective diplomatic intervention, informed by 
targeted and timely intelligence, is the key to limiting the transfer 
of critical technologies and equipment.
    To halt the spread of WMD, the United States and its partners must 
both alleviate underlying regional tensions and instabilities and 
address the motives and mechanisms of potential suppliers. Political 
incentives and opportunities for WMD proliferation are greatest in the 
Persian Gulf and South Asia. Entities in North Korea, China, and Russia 
are the principal targets of acquisition efforts by countries seeking 
WMD capabilities. Entities in these three countries are also the most 
active purveyors of WMD-related equipment and technology.
Iraq
    Saddam Hussein continues to defy United Nations Security Council 
(UNSC) resolutions and to test the resolve of the international 
community in general and the United States in particular. As UNSCOM and 
the International Atomic Energy Agency (IAEA) indicated in their 
respective October 1997 reports, substantial gaps remain in Iraq's WMD 
declarations. We do not yet have a complete understanding of Iraq's 
past WMD programs and remaining capabilities.
    There should be no doubt that Saddam will try to rebuild his WMD 
programs at the earliest possible opportunity. There should also be no 
doubt that Saddam will attempt to capitalize on perceived differences 
of opinion among our allies on this issue. His recent efforts to 
exploit French and Russian diplomatic initiatives to loosen the 
sanctions regime are only the latest examples of such behavior.
Russia
    Half a decade into the post-Cold War era, Russia continues to pose 
special challenges to US national security interests. The good news is 
that the dramatic political transformation of the former Soviet Union 
and the development of a cooperative relationship between the US and 
Russia have made it extremely unlikely that the Russian government 
would attack the United States or our allies; detargeting has reduced 
the danger of accidental launch, and existing command and control 
safeguards make unauthorized launches both difficult and unlikely. 
Budgetary problems and the difficulties inherent in reforming the 
Russian military establishment also have reduced Russia's capability to 
endanger US interests. Bilateral strategic arms control agreements are 
gradually reducing the numbers of nuclear weapons in both our 
countries' arsenals.
    Nevertheless, we should not underestimate Russia's continuing 
capabilities. Russia maintains significant nuclear strike capability. 
Largely owing to the same budgetary problems that have reduced the 
overall Russian threat to US interests, Russia has abandoned its policy 
of ``no-first-use'' and is relying more than ever before on nuclear 
deterrence to compensate for its diminished conventional capabilities. 
START II remains unratified, and though Russia ratified the Chemical 
Weapons Convention (CWC) last year, its CW stockpiles are enormous and 
their destruction poses staggering ecological and economic challenges.
    Moreover, very real concerns persist about the porosity of Russia's 
military-industrial infrastructure and the prospect for unauthorized 
transfers of materials, equipment, know-how, and technologies. The 
leakage of missile technology and expertise from Russia's industries to 
Iran has underscored this serious proliferation concern. Events over 
the past year have demonstrated the ability of would-be proliferators, 
notably Iran, to exploit Russia's missile development infrastructure. 
If allowed to continue, access to Russian technology and expertise will 
enable the Iranians to develop and field intermediate range ballistic 
missiles faster than if they were left to their own devices.
    The President last summer appointed Ambassador Frank Wisner as his 
special envoy for this issue. Ambassador Wisner has met with Russian 
counterparts several times since then, most recently on January 12-13. 
The Russian government has taken initial steps--and made commitments to 
take substantial additional steps--to crack down on Russian entities 
supplying missile technology to Iran.
Fissile material in the former Soviet Union
    Although we are heartened by reports of enhanced security at 
several Russian nuclear installations, and by the decline since 1994 in 
known smuggling incidents, we are by no means at a point where we can 
speak of the inherent dangers in the past tense. We continue to regard 
the possible acquisition of fissile materials and technology by 
aspiring proliferators as a very real threat with potentially 
catastrophic consequences.
    Russia's nuclear weapons control system remains equal to the task. 
We have no evidence that any Russian nuclear weapon is unaccounted for. 
Russia's security system for fissile material suffers from a lack of 
funds, modern equipment, and trained personnel. Joint US/Russian 
efforts to strengthen Russia's nuclear material security and 
accountability system, such as those being pursued under DOE and DOD 
assistance programs, continue to play an important part in efforts to 
rectify the most serious shortcomings, and significant progress has 
been made. Initiative and persistencewill be essential to ensuring 
Russia and the other NIS live up to their commitments to illicit 
trafficking before it starts.
Chemical and biological weapons technology in the former Soviet Union
    Russia's remaining chemical and biological warfare capabilities 
pose an additional set of concerns. With losses in government funding 
on the civilian side of the programs, many of the institutes which 
developed and produced the Soviet Union's chemical and biological 
weapons have faced serious problems and shortages of paying contracts. 
As in the aerospace industry, some face temptations offered by would be 
proliferators. Even seemingly innocuous ties between Russian chemical 
and biological institutes and their counterparts in other countries 
could hold the potential for conveying expertise in weapons of mass 
destruction. This is particularly true in the biological sciences, 
where medical and other scientific research can easily--and without 
detection--veer off into research on biological warfare agents. The US 
has a number of programs designed to help these institutes and their 
employees convert these skills to production in civilian work. These 
programs have had a positive impact on the Russian scientific 
community.
China
    As a major producer of nuclear, chemical, and missile-related 
equipment and technology, China has a responsibility to subscribe to 
internationally accepted nonproliferation standards. Successive 
administrations have worked to bring China's behavior into line with 
international norms. We have made significant progress with China in 
the nuclear area over the past few years. China took steps in 1997 to 
develop more effective administrative oversight of its nuclear industry 
by promulgating nuclear export control legislation. China joined the 
Nuclear Non-Proliferation Treaty (NPT) exporter committee. China also 
started the process for adoption of comprehensive dual-use export 
controls.
    China appears to be living up to its commitment--publicly offered 
in May 1996--not to provide assistance to any unsafeguarded nuclear 
facilities. This commitment is especially important because of China's 
past assistance to Pakistan's nuclear weapons program. China also has 
significantly curtailed its nuclear cooperation with Iran. While this 
cooperation was fully consistent with China's Nuclear Non-Proliferation 
Treaty (NPT) undertakings and subject to international safeguards, we 
nevertheless have found the cooperation troubling because of its 
ability to support a nuclear infrastructure and contribute indirectly 
to Iran's effort to acquire nuclear weapons.
    Unfortunately, China has not made equivalent progress in other 
areas. At least until mid-1997 Chinese entities have been the main 
source of supply for Iran's CW program. In May 1997, the United States 
imposed trade sanctions on seven Chinese entities for knowingly and 
materially contributing to Iran's CW program. Over the past year, China 
has made some progress in addressing the gaps in its export-control 
policies, but some key loopholes remain. Specifically, we have urged 
China to control the 20 Australia Group (AG) precursors not on the CWC 
schedules, and AG-controlled chemical production equipment, regardless 
of its end-use, and to adopt catch-all controls.
    China has agreed to abide by the ``guidelines and parameters'' of 
the Missile Technology Control Regime (MTCR) and has committed not to 
transfer ground-to-ground MTCR-class missiles. But China does not 
appear to interpret its responsibilities under the MTCR guidelines as 
strictly as the US and other MTCR members. By all indications China has 
taken itself out of the business of exporting complete ballistic 
missiles. This is an important step--one that has slowed the process of 
military destabilization in South Asia and the Middle East. But it is 
not enough. We would like to see China upgrade its commitments to 
current MTCR levels and implement effective export controls.
    Last year, Beijing created within the Ministry of Foreign Affairs a 
separate division to address all arms control and proliferation issues. 
We hope this development marks a turning point by introducing an arms 
control and global security perspective into the export oversight 
process. The Chinese have agreed to conduct regular dialogues at the 
senior level on arms control, global security, and nonproliferation. 
This dialogue will provide continuing opportunities to press our case, 
to review Chinese commitments, and to address specific problems as they 
arise.
    Transfers of modern Chinese anti-ship missiles to Iran are 
particularly troubling. China last fall agreed to end sales of anti-
ship missiles to Iran and reiterated this commitment during Secretary 
Cohen's recent visit. The administration is reviewing, but has not yet 
decided, whether the number and type of transfers to date trigger 
sanctions under the Iran-Iraq Non-Proliferation Act.
North Korea
    The North Korean nuclear program remains frozen under continuous 
IAEA monitoring in accordance with the 1994 US-DPRK Agreed Framework. 
However, we continue to have concerns about the North's missile 
program. North Korea has been a leading supplier of missile technology 
since the mid-1980s and is developing longer-range missiles. Of 
greatest immediate concern is the North's 1,300-kilometer-range No Dong 
missile. Though not capable of reaching the US, this system permits the 
North to target Japan and the entire southern half of the Korean 
Peninsula from deep within North Korean territory. But we must not be 
complacent about the current low threat posed directly to the 
continental United States--North Korean engineers are developing other, 
more capable systems. The Intelligence Community will continue to 
monitor the potential North Korean ballistic missile threat to the US 
and report on any significant changes.
    Unlike Russia and China, both of which have agreed to abide by MTCR 
guidelines and parameters, North Korea has yet to accept any 
constraints on its willingness and proven ability to sell missiles and 
missile technology. US diplomats met with the North Koreans in 1996 and 
1997 to discuss our concerns about their missile program and exports, 
and we hope to meet with them again soon. Unless and until Pyongyang 
agrees to restrict sales, it must be regarded as a dangerous 
proliferator, not least because missile sales generate badly needed 
foreign exchange and constitute one of the few significant bargaining 
chips available to a regime determined to do whatever it takes to 
survive in a world it perceives as hostile.
Iran
    Iran's efforts to acquire weapons of mass destruction and their 
delivery systems have continued during the past year. Iran has made 
some progress in its missile and chemical weapons programs, but it 
apparently has yet to realize significant and tangible advances in its 
nuclear program.
    Iran's missile development work has captured global attention and 
raised significant international concerns. Tehran has had Scud-type, 
short-range missiles since the mid-1980s. Now there are clear 
indications that Iran is developing a medium-range missile that 
eventually will permit Tehran to project military power far beyond its 
borders and to hold targets--including US troops and allies--at risk 
throughout the Middle East. Iranian attainment of enhanced missile 
capabilities will introduce a new element of instability into an 
already troubled region. As noted above, Iran has received assistance 
from Russian aerospace firms and enterprises.
South Asia
    South Asia remains one of the few places in the world where 
potential adversaries have the capability of using nuclear weapons 
against each other, although the possibility of war currently is 
remote. Neither India nor Pakistan is prepared to subscribe to 
international regimes such as the NPT or the Comprehensive Test Ban 
Treaty (CTBT), preferring to maintain a deterrent by keeping open the 
``option'' of using nuclear weapons. Both countries have continued 
increasingly public efforts to develop ballistic missiles. India is 
producing the short-range Prithvi and continuing to develop the longer-
range Agni. Pakistani officials have vowed to have the capability to 
respond to such systems; the Pakistani press recently noted efforts to 
develop and deploy a 1,500-km missile to counter the Agni.
    The United States has made control and eventual resolution of the 
proliferation problem in South Asia one of its highest priorities for 
the region. Attaining our goals in this regard will not be easy--strong 
Support exists in both countries, and Indian and Pakistani governments 
historically have been reluctant to take steps necessary to address US 
concerns. India and Pakistan's intense rivalry, and Indian suspicions 
about China, cause both to pursue aggressive indigenous development and 
foreign acquisition programs.
Threat posed by proliferation of advanced conventional weapons
    We also are concerned about the spread of Advanced Conventional 
Weapons (ACW), particularly to the seven state sponsors of terrorism 
(Iran, Iraq, Syria, Libya, Sudan, North Korea, and Cuba). Although such 
weapons are unlikely to be used directly against the US, they have the 
potential to threaten US allies and US forces deployed abroad. For this 
reason, and because such transfers have the potential to destabilize 
regional balances, we monitor efforts to sell or acquire ACW, consult 
regularly with other governments and implement relevant sanctions laws 
as part of the effort to control exports of advanced weapons and 
technology.
                               terrorism
    We remain deeply concerned over the threat that international 
terrorism poses to US officials, citizens, and property, both abroad 
and at home. The most serious anti-US attack last year occurred in 
November when four US businessmen were gunned down in Karachi by 
unknown assailants shortly after the guilty verdict was handed down 
against Mir Kasi for his 1993 attack at CIA headquarters. Even when 
terrorism is not aimed directly at us, it can have a devastating impact 
on our broader political objectives, particularly efforts to resolve 
the Arab-Israeli conflict.
    Terrorism originating in the Middle East continues to pose the 
greatest danger to US citizens and interests. The region remains home 
to four of the seven officially-designated state sponsors of terrorism 
(Iran, Iraq, Syria, and Libya). It is also the locus of violent 
opposition groups which regularly employ indiscriminate terrorism as 
part of their campaigns to overturn policies or regimes. It was a 
matter of luck that no Americans were killed or injured in the November 
random massacre of more than 60 tourists at Luxor, Egypt. The 
apparently growing willingness of extremists to inflict large numbers 
of casualties reinforces fears that terrorists in the Middle East may 
be tempted to acquire and use weapons of mass destruction.
    Tensions that feed terrorism remain high in the region, especially 
in the Persian Gulf and over the stalled Middle East peace process. 
Hamas last year claimed responsibility for three suicide bombings in 
Jerusalem that killed 24--including two American citizen bystanders--
and wounded several hundred. Renegade Saudi terrorism financier Usama 
bin Ladin has issued more public threats against the United States. He 
remains in Afghanistan in areas controlled by the Taleban. Terrorism is 
rampant in Algeria's internal struggle.
    Iran remained the most active state sponsor of terrorism in 1997. 
In April, a German judge found an Iranian and three Lebanese guilty of 
the 1992 murders of Iranian Kurdish dissidents in Berlin's ``Mykonos'' 
restaurant, declaring that the killings had been approved at the most 
senior levels of the Iranian government. Last year Tehran assassinated 
at least 12 dissidents outside Iran, all in northern Iraq. Despite the 
recent conciliatory comments of new Iranian President Khatemi, Iran has 
continued to provide support--money, weapons, and training--for a 
variety of Middle East terrorist groups, including Lebanese Hizballah, 
Hamas, and Palestine Islamic Jidhad (PIJ). Tehran has encouraged 
violent rejection of the Middle East peace process. In September the 
new government reaffirmed the 1989 ``fatwa'' against author Salman 
Rushdie.
    American interests also are at risk in regions outside the Middle 
East. In Colombia leftist guerrillas are increasingly active, in 1997 
they conducted the most attacks ever against oil pipelines, partly 
owned by US corporations. The guerrillas also facilitate coca and opium 
cultivation and the production of cocaine and heroin much of which is 
subsequently smuggled to the US by traditional traffickers. The risk of 
terrorist attack remains a prime concern to SFOR elements securing the 
peace in Bosnia.
            the drug trade and international organized crime
    The illicit international drug trade and the powerful international 
crime syndicates that control it and myriad other illegal activities 
pose serious threats to US security. In addition to having many adverse 
effects on American society, the drug business corrupts foreign 
governments at the highest levels, undermines judicial systems, and 
distorts economies. Greater ease of travel and telecommunications makes 
it easier for international criminals to expand and conceal their 
empires.
    The key drug threat to the US remains the Latin American cocaine 
trade. Coca grown in Bolivia, Peru, and Colombia is processed into 
cocaine largely in Colombian laboratories and reaches the US market via 
a number of smuggling routes, still principally through Mexico. In 
addition to cocaine, heroin from Colombia and methamphetamines from 
Mexico are gaining prominence in the drug threat from Latin America. 
When traveling abroad, Americans are at risk from violence associated 
with narcotrafficking. For example, Colombia was plagued by increased 
violence from guerrilla and rightist paramilitary groups that exploit 
the drug trade for money, and Mexico has seen a surge of narcotics-
related violence by traffickers, particularly in northern states that 
serve as drug corridors to the United States.
    The other major locus of the drug threat is Asia. Opium and heroin 
production is concentrated in Burma and Afghanistan, where US influence 
is extremely limited. Regimes in both countries appear to be tolerating 
the drug business to shore up local political support and to prop up 
their economies.
    The expansion of international organized crime increases the threat 
of physical violence to US citizens and businesses both at home and 
abroad. American companies are disadvantaged when companies linked to 
international organized crime secure contracts, export licenses and 
customs exemptions, often through payoffs to corrupt officials. 
Additionally, international organized crime has a destabilizing 
influence on countries that are important to US national security. It 
robs emerging democracies of badly-needed revenues, taints their reform 
process, and undermines popular confidence in government at all levels.
    Organized crime is also heavily involved in financial fraud schemes 
and money laundering, as well as the international trafficking of 
narcotics, aliens, and weapons, including to the United States. The 
smuggling of weaponry to regional trouble spots further contributes to 
instability in these areas. Growing ties among foreign criminal groups 
further facilitates illegal activities. The underworld contacts, 
clandestine networks, and extensive finances of international organized 
crime organizations also raises the possibility that they could obtain 
and sell nuclear weapons or their components.
                 threats against our economic interests
Dangers inherent in the global economy
    The United States benefits greatly from participation in the global 
economy, but globalism entails risks as well as rewards. The current 
financial crisis in Asia has highlighted a number of vulnerabilities 
that, while not on a par with traditional threats to the security of 
our nation, have a direct or indirect impact on American interests. 
Increasing dependence on foreign markets makes American firms and 
workers vulnerable to economic difficulties far beyond our borders. It 
is too soon to know precisely which crops, products, firms, and regions 
of the United States will suffer most from greater budgetary discipline 
in Thailand, Indonesia, South Korea, and other affected economies, but 
that some will be seriously disadvantaged is certain. American mutual 
funds (many with a large component of pension funds) invested in Asian 
markets have already taken a big hit, as have American sales to 
companies no longer able to obtain the necessary financing. Likely 
consequences for the United States include slower growth, constraints 
on the creation of new jobs, and lower wages.
    Covertly-obtained intelligence is not a particularly helpful source 
of information for understanding the psychology of markets. The 
Intelligence Community has no role in providing assessments and 
insights to the private sector actors who make most of the key 
decisions shaping the course of events. Policymakers, like business 
leaders, want and need analytical judgments and informed predictions on 
such questions as whether the contagion has been contained, what impact 
economic difficulties will have on societies and political systems, who 
else might be vulnerable, and what impact cutbacks in military budgets 
will have on the military capabilities of allies and regional balances. 
It would be easy to extend the list of questions, but my point here is 
simply to note that economic--like environmental--vulnerabilities and 
threats are far more numerous, complex, and difficult to anticipate 
than are traditional threats to our national interests. The threats and 
their impact are real and obvious. Less apparent is what role, if any, 
the Intelligence Community should play in addressing such dangers.
Economic espionage
    The overseas operations of US corporations are increasingly vital 
to this country's prosperity. US proprietary secrets are vulnerable to 
targeting by domestic corporate spies and overseas intelligence agents, 
either performing classic private industrial espionage or linked to 
foreign government attempts to boost national technical knowledge. The 
increasing value of trade secret information and technology in the 
global marketplace has increased and motivated foreign firms and some 
governments to conduct economic espionage and information collection 
against the United States. During the past year, the US Intelligence 
Community has identified suspicious collection and acquisition 
activities of foreign entities associated with at least 23 countries.
Unfair foreign competition
    Unfair foreign competition is another threat to US interests. The 
profits involved in large infrastructure, military, and aircraft 
contracts lead to cut-throat and sometimes unfair competition. In 
December, the 29 members of the Organization for Economic Cooperation 
and Development (OECD) and five additional countries signed an anti-
bribery convention. If the convention is ratified and enforced, this 
now-recognized threat to American competitiveness will be alleviated, 
but we foresee a continuing role for the Intelligence community in 
monitoring compliance.
             countries with global impact: russia and china
    Russia and China are each undergoing dramatic social transitions 
that complicate our efforts to assess trends and anticipate their 
future roles. We have had successes in building constructive relations 
with both countries, but many actual and potential problems require 
continuing attention.
Russia
    Russia's evolution remains uncertain. New institutions, 
personalities, and habits of behavior continue to take hold, even as 
others looking more to the past remain strong in some areas, such as 
the Duma and the defense industrial establishment. Early in the year a 
revitalized Yeltsin brought new impetus to reform by the appointment of 
young reformers to positions of authority in the government. By the end 
of the year, however, the Russian political scene became increasingly 
dominated by infighting among factions and competition for access to 
privatized state property. Yeltsin's intermittent absences from the 
helm because of illness accentuated the sense of policy drift. The 
coalition of political and financial leaders that worked to bring about 
President Yeltsin's reelection in 1996 splintered. This falling out was 
accompanied by a slowing of progress toward social and economic reform.
    Among the reform programs identified by the new Russian team in 
spring 1997--land, tax, legal, and military reforms as well as 
repayment of back wages and pensions and adjustment of center-regional 
relations--military reform has progressed the most, with 
reorganizations of military commands already under way. But military 
reform continues to face bureaucratic resistance. The tax code, sent to 
the Duma in the spring of 1997, has been returned for further work; 
land reform was discussed at a high-level meeting in December but 
continues to be hobbled by Duma resistance; legal reform has made 
little progress; the government claims that it paid back wages and 
pensions in 1997, largely by forcing some big tax debtors to pay their 
arrears, but continued grumbling suggests that problems remain. Center-
regional relations continue to be marked by unilateral initiatives by a 
number of provincial governments. Although negotiation has replaced 
violence as the principal mechanism for resolving the differences 
between Moscow and Grozny, differences over Chechnya's status continue 
to divide the two parties. They have agreed to settle the question of 
Chechnya's status by 2001.
    Economic stabilization brought declining inflation, a stable ruble, 
and the end to a decade-long decline in economic output. For now, 
Russia appears to have weathered the potential crisis in confidence 
that accompanied Asian financial instability, but reserves have fallen 
and government predictions for 1998 indicate little or no growth. 
Inconsistent direction on government policy in 1997 meant that Russia 
spent another year in its slump. Only a revitalized, engaged president 
can make 1998 a better year than the past six.
    President Yeltsin's and Foreign Minister Primakov's year-end 
interviews indicated the Yeltsin government continues to see Russian 
interests better served by engagement and cooperation than by isolation 
or confrontation. The best example of this over the last year was 
Moscow's decision to sign the Founding Act with NATO. This fall the 
Russian parliament ratified the Chemical Weapons Convention, and Russia 
continues to adhere to START I and CFE. The Russians also continue to 
play an active role in SFOR in Bosnia.
    However Primakov has highlighted Russia's support for the notion of 
a multi-polar world, which is intended to counter what many Russians 
profess to see as US unilateralism. START II, CTBT, and Open Skies 
still await ratification by the Russian parliament. While the Yeltsin 
government continues to support the sanctions regime against Iraq and 
the need for UNSCOM inspections, it has argued the need to show Baghdad 
``a light at the end of the tunnel.'' On the nonproliferation front, we 
are actively engaged in discussions to prevent any export of materials 
or know-how associated with WMD and ballistic missiles. Though Russia 
is now far less able to project power beyond its borders and to 
challenge Western interests, economic realities are such that Russia 
perceives the need to export arms in order to maintain its arms 
industry, and Moscow continues to try to expand sales to old and new 
customers alike. If done indiscriminately, such sales have the 
potential of fueling regional tensions or exacerbating regional arms 
races.
    We remain both concerned and encouraged with the state of Russia's 
strategic nuclear forces. Moscow continues to maintain a significant 
strategic nuclear force. But it has become increasingly clear that the 
Russian strategic nuclear force will continue to shrink in size as 
Moscow finds it cannot afford to maintain the kind of ballistic missile 
force the Soviet Union once had, and other strategic modernization 
programs, such as the next-generation submarine-launched ballistic 
missile, continue to suffer delays owing to wage shortages and R&D test 
failures.
    Further, while the Russian strategic command and control and early 
warning system is functioning adequately, it is clearly showing its 
age. Equipment breakdowns in this system could force Moscow to rely on 
less reliable long-range strategic warning indicators that, without 
clear and transparent political-military signals from the US, would be 
likely to increase Moscow's uncertainties during an escalating crisis.
    Despite these problems, nuclear forces are playing a larger role in 
Russian security as military reform muddles along and defense budgets 
are cut. Statements by senior national security officials seem to 
confirm that Russia continues to look toward its nuclear weapons as a 
deterrent against a variety of conventional and nuclear military 
threats, including formally dropping the Soviet ``no first use'' 
declaration in 1993. This emphasized reliance on nuclear weapons to 
deter even conventional threats is a graphic symbol of the weakness in 
Russia's conventional military forces. Given the anticipated time 
required to complete its military reform plans, Moscow probably will 
continue to rely heavily on its nuclear forces for years to come.
China
    Constructive partnership between the US and China is central to the 
peace and prosperity of the Asia-Pacific region. Over the past year, we 
have revitalized our dialogue with high-level Chinese leaders, 
highlighted by the visit to the US in late October of President Jiang 
Zemin. We still have many unresolved issues and continue to hold 
sharply different views on important matters, including human rights, 
religious freedom, political expression, and freedom of association. We 
plan to expand cooperation where possible and to work seriously on 
areas where we have differences. Among the unresolved issues in our 
relationship is that of nonproliferation. Through intensive dialogue, 
we have reached a mutual understanding on a number of nonproliferation 
issues, but disagreements continue over Chinese sales and technological 
cooperation on potentially destabilizing weapons systems in sensitive 
regions.
    China continues to have the largest standing army in the world and 
is steadily modernizing its ground, air, and naval weapons and tactics. 
We must be attentive to China's growing military capabilities, as 
demonstrated in the 1996 combined-forces exercises in and around the 
Taiwan Strait.
    China's military modernization continues at a steady pace, and 
Beijing during the past year strengthened its arms-import relationship 
with Russia. China is replacing its aging naval fleet with new 
domestically-produced ships and submarines, and recently took delivery 
of a third Kilo-class submarine and finalized a deal to purchase two 
Russian naval destroyers that could be armed with modern SS-N-22 
SUNBURN anti-ship missiles. While this growth in naval capability bears 
watching, the gradual pace of Chinese modernization is having only a 
marginal impact on the current naval balance in the region.
    Though military and civilian leaders both agree that economic 
modernization has priority over military development, China is embarked 
on a ballistic missile modernization program. Although China's ICBM 
force will remain considerably smaller and less capable than those of 
Russia and the United States, Beijing views this modernization effort 
as essential to maintaining a credible deterrent force.
    China is expected to remain primarily a land-based ballistic 
missile power, but continues to look at sea-based platforms and land-
attack cruise missiles as additional means of delivery. In the next 20 
years, the number of Chinese ballistic missiles capable of reaching the 
continental United States will increase marginally. The greatest 
growth, both in numbers and capabilities, is expected to be in China's 
short-range SRBM force--the M-9 and M-11.
    We anticipate that the many transformations under way in China for 
the past two decades will continue into the next century. The 
cumulative effect of economic, political, societal, technological, and 
military change will produce a China that is more powerful and, if we 
are successful, more tightly integrated into global systems. We are 
likely to see positive results from the impact of participation in the 
global economy, exposure to information and ideas from around the 
world, and the proliferation of shared interests which is intrinsic to 
modernization everywhere.
              middle east states: iraq, iran, libya, syria
    Several Middle Eastern states threaten us by maintaining programs 
for weapons of mass destruction, sponsoring terrorism often targeted 
specifically at Americans, and by their hostility toward and active 
opposition to our political and social systems and those of our friends 
and allies. Assurance of energy security is critical to the political, 
economic, and strategic interests of the US and its allies.
Iraq
    As dramatically seen over the past several months, with Saddam 
Hussein in power, Iraq continues to threaten regional stability and 
pursue aims contrary to our national security interests. Iraq's refusal 
fully to disclose its WMD capabilities, retention of a potent 
conventional military, and support for terrorism against dissidents 
threaten countries and peoples in the region and jeopardize a wide 
array of US objectives. The 1994 movement of troops toward Kuwait and 
the 1996 offensive in Irbil, violations of no-fly zones in September-
November 1997, the ongoing confrontation with UNSCON, and blatant 
threats to the UNSCOM U-2 all attest to Saddam Hussein's continued 
disregard for the will of the international community.
    Baghdad threatens US interests not only with its military forces 
and blatant defiance of UN Security Council resolutions, but also 
through its attempts to manipulate broader Arab opinion against the US 
in a variety of ways. This could greatly complicate and jeopardize the 
attainment of US objectives in the region. It is no accident that much 
of his propaganda during his recent challenge against UNSCOM has been 
directed against the United States. In northern Iraq, Saddam wishes to 
exclude the international community's involvement, and at the UN he has 
sought to undermine every effort to ensure UN enforcement of, and Iraqi 
compliance with, various aspects of UNSCR 687.
Iran
    We are encouraged by the election of President Khatami, who 
promises a more relaxed atmosphere at home and espouses the 
implementation of international law and cooperation abroad, but we 
remain concerned about several aspects of Iran's behavior that pose 
threats to US interests. Moreover, we are not yet able to determine how 
much Khatami is able or willing to address priority US concerns, 
foremost of which is Iran's support for terrorist groups opposed to the 
Middle East peace process. These include Hizballah in southern Lebanon, 
and Hamas and the PIJ, whose terrorist attacks in Israel have taken 
many lives, including those of some Americans. We also are concerned 
about Iranian support for Islamic extremists in other parts of the 
Muslim world, and activities such as Iranian surveillance of US 
entities abroad. Finally, Iran has considerable WMD capabilities, 
particularly extended-range missiles and chemical weapons, and is 
continuing its efforts to enhance those capabilities, which already 
pose a substantial threat to neighboring states and to US installations 
in the region.
Libya
    Despite repeated disclaimers and deceptions, the Qadhafi regime 
continues to support terrorist groups--including support for the PIJ 
and the Abu Nidal Organization (ANO). It continues to develop WMD, 
particularly CW and missiles. Libya opposes the Middle East peace 
process. Libya also seeks to exploit differences between Washington and 
allied capitals on how to bring to trial those implicated in the 
destruction of Pan Am 103.
Syria
    Syria has been engaged in the Arab-Israeli peace process since the 
1991 Madrid conference and has not been directly involved in planning 
or executing international terrorist attacks since 1986. Nevertheless, 
Syria continues to support international terrorism by allowing 
terrorist groups to maintain a presence in Damascus and operate from 
Syria-controlled areas of Lebanon. Some of these groups include 
fundamentalist and secular Palestinian organizations, such as Hamas, 
the PIJ, and the Popular Front for the Liberation of Palestine-General 
Command (PFL-GC), as well as non-Palestinian groups, such as the 
Kurdistan Workers' Party (PKK). Syria acquired from the former Soviet 
Union standard SCUD-B missiles, with a range of 300 kilometers, and a 
smaller number of 500 kilometer SCUD-Cs from North Korea, it has had a 
CW program since the mid-1980s. While there is no indication Syria is 
planning to initiate a conflict with Israel, there is always a danger 
that Syrian-Israeli tensions could lead to hostilities through 
miscalculation by either side, particularly over the fighting in 
southern Lebanon.
hot spots and uncertainties: bosnia/balkans; africa; north korea; south 
                         asia; the aegean; cuba
Bosnia/Balkans
    NATO and SFOR have proven their value in carrying out the 
successful international military intervention ending the military 
conflict in Bosnia and enabling implementation of the Dayton Peace 
Agreement. The main threat to peace now stems not primarily from a 
resumption of conflict among the three formerly warring armies, but 
from the obstruction by Bosnia's leaders of certain aspects of civilian 
implementation of the peace agreement, especially the return of 
displaced persons and refugees to minority areas, apprehension of 
fugitive war criminal suspects, economic rehabilitation, and 
establishment of fully functional, truly democratic institutions. 
Bringing intelligence to bear on these issues has been difficult, but 
novel structures and processes to ensure its proper application have 
been devised, and the need for it remains critical if the US and its 
partners are to establish a stable, enduring peace in Bosnia.
    The situation in Serbia (especially in Kosovo and increasingly in 
Montenegro) remains volatile. The potential for conflict between ethnic 
Serbs and Albanians in Kosovo is considerable, oppressed Kosovars 
increasingly resort to violent resistance to Serbian abuses of human 
and civil rights. A Kosovo eruption could still ignite international 
conflict, spilling potential refugees into The F.Y.R.O.M. and/or 
Albania--which has pulled back only slightly from the edge of the 
precipice of economic and social disintegration. Democracy remains to 
be realized in Serbia, Croatia, and Bosnia, and is still in transition 
in Bulgaria and Romania. In the former three, political pluralism, 
peaceful and effective transfer of power, and more responsive political 
leaderships remain to be established.
Africa
    Patterns of behavior stemming from the regional and civil conflicts 
which dominated important parts of Africa in 1997 make the continent a 
dangerous and unpredictable arena in 1998. Cross-border interventions, 
touted by many Africans as legitimate defensive behavior, seemingly 
have superseded the OAU principle of nonintervention and increased the 
prospect of additional inter-state conflict.
    African leaders are now both more willing and more able to project 
force across national borders in pursuit of national interests. A 
coalition of African states supported Kabila's ouster of Mobutu. 
Kabila's government in Congo (Kinshasa) has not yet demonstrated that 
it can draw together the many disparate elements of the country which 
borders on none others, some of which are competing for dominant 
influence. The stability of Nigeria, Africa's most populous state, is 
increasingly shaky as its military leader maneuvers to transform 
himself into an elected civilian president by next October. In Liberia, 
the election last July of Charles Taylor as president has not stilled 
concerns about the former warlord's inclinations toward repression at 
home and adventurism in neighboring states.
    Tensions also are increasing in southern Africa, particularly 
Angola, which is finding it difficult to tie down the loose ends of a 
peace accord ending the long struggle with UNITA. To undercut regional 
support to UNITA, Luanda has intervened in Congo (Brazzaville) to 
return Sassou to power, and is pressing democratically elected 
officials in shaky Zambia to cut off aid to Savimbi.
    The civil war in Sudan is now in its 14th year, having taken the 
lives of 1.5 million people and forced 2 million more from their homes. 
The regime in Khartoum continues to provide haven and support to 
terrorists while sponsoring insurgent groups intent on destabilizing 
neighboring regimes.
    Ethnic and civil wars have caused millions of people to flee for 
refuge and helped to further erode the sanctity of national borders. 
Interconnected insurgencies in Rwanda and Burundi and related unrest in 
eastern Congo (Kinshasa) define a large area in the center of Africa 
where regimes seem powerless to stem the bloodshed or are inclined to 
engage in unacceptable behavior toward certain groups. As a 
consequence, there is a continuing likelihood of resurgent genocide.
North Korea
    North Korea's military continues to be a threat to US and South 
Korean forces, although the steady deterioration of the North Korean 
economy and crumbling infrastructure, as well as another year of 
critical food shortages, have further undercut Pyongyang's ability to 
wage a sustained conflict. Despite reports of executions of some 
ranking officials, the political situation appears stable, with Kim 
Jong II fully in charge. Late last year, Kim assumed the title of 
general secretary of the Korean Workers' Party. Diplomatically, the 
situation has improved marginally. The North Koreans have entered four-
party talks with South Korea, China, and the US; are moving to improve 
relations with Japan; and appear prepared to re-engage Seoul under the 
new administration of Kim Dae Jung.
South Asia
    South Asia is an area of multiple and growing US interests. Tension 
between India and Pakistan, centered on their dispute over Kashmir, 
contributes to concerns over regional instability. The proximity of two 
populous, mutually suspicious states, each seemingly convinced that 
nuclear weapons are an essential attribute of major power status, makes 
this one of the world's more troubling regions. The originalmotive for 
India's acquisition of a nuclear weapons capacity--a perceived threat 
from China--remains salient to Delhi. Pakistan continues its own 
nuclear program because of its security fears of a larger India.
    India continues to charge that Pakistan supports Kashmiri Muslim 
secessionists, while Islamabad contends it provides only moral support. 
Though the Kashmir dispute remains a possible flashpoint for regional 
war with the potential to escalate into a nuclear exchange, tensions in 
the region have eased somewhat in recent years.
    Fighting continues in Afghanistan, a country riven by ethnic, 
tribal, ideological, and regional differences. International mediation 
efforts have not yet resulted in a political settlement; the United 
States continues to support the ongoing UN-led effort to help the 
Afghans establish a broadly representative government. Afghanistan 
remains a focus for meddling by neighbor states, a narcotics 
trafficking center, a source for international terrorist training and 
equipment, and hence a major source of regional instability.
The Aegean
    Tensions between Greece and Turkey have almost led to open conflict 
in the recent past and could easily do so again, whether over the 
installation of air defense missiles on Cyprus by the Greek Cypriots, 
competing claims involving tiny islets, or accidental clashes and hair-
trigger military exercises. Failure to find a real, long-term solution 
on Cyprus and in the Aegean could raise tensions, undermine both NATO 
and EU expansion (because of Turkish and Greek vetoes), and cause 
serious problems in the Middle East peace process and in US relations 
with Russia, which is becoming a major arms supplier to Cyprus.
Cuba
    The threat that Cuba poses to US interests stems primarily from the 
potential consequences of its own political and economic rigidities 
rather than its past promotion of subversion or its faded attraction as 
a model for other states and movements. An aging--and possibly ailing--
Fidel Castro refuses to make any concessions toward a more open 
political system, and Cuba's overall human rights record remains the 
worst in the hemisphere. Cuba's economy continues to founder, with a 
dismal performance in the vital sugar sector largely nullifying gains 
in tourism and nickel exports, and there is no sign of significant 
reform in the domestic economic structure. With no real provision for 
succession (beyond much of the same, only with Raul Castro at the 
helm), the departure of Fidel could usher in a period of serious 
instability under an inevitably less charismatic leader, possibly 
leading to further mass migration and internal violence.
                 threats to democracy and human rights
    The United States seeks to increase governments' adherence to 
democratic practices and respect for human rights, not only because we 
seek to promote these values, but also because they contribute to 
regional stability. Bosnia is a current example of where democracy 
promotion, human rights protection, and prospects for regional 
stability are closely linked. While the Dayton Peace Agreement goals of 
a reintegrated and viable Bosnian state have yet to be realized, 1997 
did see a modest decline in short-term instability and the staging of 
peaceful elections. Although the main instigators of the Bosnian 
genocide remain at large and continue to pose a long-term stability 
concern, their political power base has been eroded. Moreover the War 
Crimes Tribunal has increased the number of Balkan war criminals it has 
under detention and has several trials under way--a clear sign of 
international interest in implementing justice against those 
responsible for mass killings and regional instability.
              humanitarian assistance and forced migration
    Ethnic tensions, social inequity, lack of access to farmland and 
water, poverty, and political disfranchisement often lead to violent 
civil unrest, if not warfare. As cities in poor countries increase in 
population and poverty, social instability could intensify. US efforts 
to promote sustainable development are based on recognition of the link 
between poverty and political instability, and the responsibility of 
international lending and development agencies to reduce this threat.
    Effective humanitarian assistance in response to complex 
emergencies may help to stem forced migrations within and across 
international boundaries--itself a destabilizing force as witnessed 
over the last several years in the border region of Rwanda and eastern 
Congo (Kinshasa). Early warning and preventive measures could minimize 
the deployment of peacekeeping troops, including US forces, to manage 
the consequences of a war-induced humanitarian crisis.
 threats to the environment, stabilized world population growth, human 
                                 health
Environment
    A key goal of US foreign policy is to protect the United States and 
its citizens from environmental degradation. Under the UN Framework 
Convention on Climate Change agreed to in December 1997 in Kyoto, 
Japan, developed countries committed themselves to legally binding 
action to lower the threat of global warming through proposed cuts in 
greenhouse gases, as measured against 1990 levels. In contrast, most 
developing countries did not commit to any targets. There is broad 
scientific agreement that, left unchecked, global warming over the next 
century would have such adverse impacts on the United States as coastal 
flooding from sea level rise, volatile weather fluctuations with both 
costly droughts and flash floods, and loss of sensitive habitats, 
particularly the Everglades.
World population growth
    From a mid-1997 population of about 5.8 billion, the world total is 
expected to rise to about 8 billion by 2002--an increase of over 2 
billion that takes into account already declining birth rates. Almost 
all of this increase will be found in developing countries, where about 
85% of the world's population will live. Many of these countries 
currently fail to meet even minimum needs of their populations, 
requiring annual food donations and other international assistance 
merely to subsist. In addition to producing the tragedy of growing 
numbers without adequate health care and education and with poor job 
prospects, rapid population growth is likely to lead to substantial 
increases in the number of frustrated young people able to move across 
boundaries. Many born in rural areas will move to cities; many living 
in poor countries will attempt to move to wealthier countries, 
including the United States. With few opportunities, many could well 
contribute to ethnic tensions, civil unrest, crime, and violence.
Reducing disease worldwide
    The plight of Hong Kongs chickens at the end of December provides a 
lesson in the problems of managing the ever-present threat of 
infectious diseases that can affect all parts of the globe. Hong Kong's 
``bird flu'' may have been imported along with poultry from China, just 
as the United States imports many of its foodstuffs from countries 
where food-borne disease monitoring is woefully inadequate. Hong Kong's 
dense population provides a congenial urban environment for disease 
transmission--as do most cities in the world. Finally, Hong Kong is a 
``global city'' with international transportation connection--including 
direct connections to many US cities--that ensure rapid worldwide 
diffusion of any disease. Bacterial and viral diseases are both durable 
and mutative ensuring they will never be completely eradicated. 
Improved monitoring and rapid response is essential to curb this threat 
to the health of Americans.
                                 ______
                                 

   Statement of Lieutenant General Patrick M. Hughes, USA, Director, 
Defense Intelligence Agency-Global Threats And Challenges: The Decades 
                                 Ahead

    Mr. Chairman, I am again pleased to have the opportunity to provide 
the Defense Intelligence Agency's perspective on the threats and 
challenges confronting the United States now and in the decades ahead.
    The testimony I provided before the Committee last February 
reflected the extensive analysis done by the Defense Intelligence 
Community in support of the Joint Strategy Review and the Quadrennial 
Defense Review. The conclusions drawn from that effort were based on 
our understanding of the most important trends and factors shaping the 
international security environment over the long term. Much of what I 
testified to last year remains valid. The ``headline'' events of the 
past year--confrontation with Uraq, developments in Bosnia, NATO 
expansion, unrest in Central Africa, the troubled Middle East peace 
process, rogue state efforts to acquire advanced weapons, and the 
economic crisis in Asia--reinforce the central themes from that 
testimony:
    The turmoil and uncertainty that have characterized international 
affairs since the end of the Cold War will last at least another 
decade. During this transition period, the United States will continue 
to face a dynamic, complex, and uncertain security environment.
    The ``bi-polar'' (Cold War) security framework has given way to a 
more generalized global set of partners, potential competitors, and 
adversaries, the troubling proliferation of ``negative'' technologies, 
and the advent of numerous persistent small-conflict circumstances. US 
security policy planners and operators must reexamine their viewpoints 
and re-think the circumstances in order to understand this new and 
evolving global paradigm.
    Despite our tremendous power and influence, threats and threatening 
conditions exist today. Others will emerge over time. The most 
important of these involve challenges posed by competing regional 
powers, including a host of very complex and demanding local, regional, 
and transnational circumstances and conditions.
    The combined impact of rapidly advancing technology and human 
ingenuity will continue to alter the nature of warfare and the 
characteristics and capabilities of future threats. This change could 
be very positive given the right circumstances, but the potential, 
indeed the trend, for continued proliferation of missile technology 
weapons of mass destruction, and related capabilities, is negative and 
of growing concern.
                          critical assumptions
    In attempting to analyze this uncertain environment, we make two 
basic assumptions:
    The United States will remain the dominant global power--
politically, economically, and militarily--and will continue its active 
engagement in world affairs. It either our power or our willingness to 
remain globally engaged diminish significantly, then the overview 
outlined here would change accordingly.
    The future unfolds along discernible (linear) lines, as reflected 
in current trends and conditions. History tell us that this will not 
occur--at least not in all of the dimensions addressed here. Thus, our 
``best estimate'' will no doubt prove partially wrong. In order to deal 
with this dynamic, we in Defense Intelligence will continue -to 
consider and analyze alternative (nonlinear) futures.
Prolonged turmoil and uncertainty
    The objective global conditions that have driven the turmoil and 
instability of the post-Cold War era remain largely in effect. The most 
important include:
    Uneven economic and demographic growth-population in the developed 
world remains relatively stable, but the number of people in the 
developing world will increase some 25% over the coming two decades. 
Rapid urbanization continues throughout Asia, Africa, and Latin 
America. Meanwhile, although we expect global economic growth to 
continue over the long term (despite recent events in Asia) progress 
will be sporadic particularly throughout the so called 3rd World. These 
conditions will strain the leadership, resources, and infrastructure of 
the developing states. Many will struggle to cope. Some will 
undoubtedly fail.
    Disparties in wealth and resource distribution--the developed 
(mostly northern) world accounts for some three-quarters of global 
wealth and consumes the lion's share of the world's resources, with 
less than a quarter of global population. Local or regional shortages 
of fresh water, arable land, food, fisheries, and energy are already 
causing tensions. Resource shortages will be a source of regional 
conflict and will retard environmental, health, and economic progress. 
These general conditions will not ``improve significantly over the next 
decade or so, exacerbating north-south and inter-regional tensions and 
contributing to regional instability.
    Ethnic, religious, cultural strife--political and cultural entities 
will continue to align along ethnocentric, theocratic, and linguistic 
lines. Tensions between and among various ethnic groups, and between 
them and established governments, will continue. As evidenced by the 
genocide in Bosnia, the Great Lakes region of Africa and the former 
Zaire, ethnic-based conflict is often brutal and intractable.
    Broad technology advances and proliferation--the rapid pace of 
technological change is straining the social order in both developed 
and developing nations. Technological competition is an increasingly 
important aspect of relations between advanced states. The gap between 
information and technology ``haves and have-nots'' will become a key 
issue for future international relations. Meanwhile, the proliferation 
of weapons and other military technologies will alter regional arms 
balances and, in may cases, undermine stability.
    Uncertain regional and global security structures-the dramatic and 
complex changes underway in many regions continue to tax ``Cold War'' 
security structures precepts, and organizations. Many of these are ill 
suited to the new era. As evidenced by the problems and tensions 
associated with NATO expansion, the process of adapting old and 
developing new structures is proving complex and sometimes 
confrontational
    International criminal activity--terrorism, drug trafficking, and 
other forms for transnational crime will continue as criminal groups 
and individuals take advantage of advances in global communications, 
transportation, finance, and other favorable circumstances. The 
potential for such groups to have access to and to use weaponsthat can 
cause large numbers of casualties will increase Countering 
international crime will become an increasingly important dimension of 
US security policy.
    Rogues, renegades, and outlaws--``isolated'' individuals, sub-
national groups, and states--for instance Iraq, Iran, and Libya--will 
continue to exist. These ``rogues'' will frequently engage in behavior 
outside commonly accepted international norms--violent extremism, 
terror, and unacceptable use of military force--as they struggle to 
improve their position while undermining the established order.
    Western cultural expansion--the global expansion and perceived 
dominance of ``western'' (and particularly American) values, ideals, 
culture, and institutions is very threatening to some individuals, 
groups, and states. Efforts to slow, halt, prevent, or undo this 
phenomenon, though generally futile, will give rise to ``anti-
American'' behavior of all kinds. While there is not at present an 
ideology that is both inimical to our interests and widely appealing, 
one could conceivably arise under the rhetoric of providing a 
counterpoint to western culture.
    Natural disasters and environmental issues--natural disasters of 
all types will continue to occur, often with little or no warning. 
Global awareness of the human consequences will keep pressure on 
governments and leaders to respond. Meanwhile, mankind's global 
activities particularly population growth, resource consumption 
pollution, urbanization, industrialization, ``desertification,'' and 
deforestation--will increasingly impact climate and weather patterns, 
strain fragile ecosystems, and put more pressure on health and social 
support systems. All of these issues will take on increased national 
security import.
    Other critical uncertainties--Russia and China in transition, 
Korea's evolution the viability of the nation-state, the outcome of the 
Middle East peace process, the future of Bosnia, internecine conflict 
in Africa, and an array of upcoming leadership changes, are but a few 
of the many key uncertainties which add to the general turmoil in the 
global condition.
    No condition, circumstance, or power is likely to emerge over the 
next decade or two, which is capable of transcending these sources of 
uncertainty and instability and establishing a more stable global 
order. The international security environment will remain dynamic, 
complex, and challenging for US security policy planners and operators.
The new global threat paradigm
    During the Cold War, the predominance of the Soviet threat, and the 
bi-polar nature of superpower competition, allowed for substantial 
continuity in US defense planning and force development. Defending the 
`western way of life' against Soviet expansion provided the basic 
context for US security policy decisionmaking. Meanwhile, Soviet 
doctrine, warfighting concepts, and equipment--combined with Warsaw 
Pact-NATO force ratios and mobilization potential, and the unique 
terrain and geographic features of Central Europe--provided the basis 
for our doctrine, strategy tactics and materiel development, our force 
sizing criteria, our equipment, operational, and organizational 
requirements, and our functional characteristics. Within this broad 
``Soviet threat'' paradigm, other force requirements were generally 
considered lesser-included cases, on the assumption that if the US 
could handle the Soviets in Central Europe, we could also handle 
everything else.
    One of the more intriguing aspects of the post Cold War era is that 
while the global strategic threat to US interests has diminished 
greatly in comparison to the Soviet era, the residual regional and 
transnational threats are much more complex and diverse and much harder 
to plan for. For instance, Iraq and North Korea, currently our most 
likely opponents in a major theater conflict, pose significantly 
different challenges in terms of their tactics, equipment, and 
capabilities, and the theater terrain and locale. Neither state 
presents a pacing technology threat, although it is likely that North 
Korea has a limited nuclear capability and the capability to engage in 
chemical warfare. Meanwhile, Russia and our European and Asian allies 
represent our most important military technological ``competitors,'' 
but we are not likely to face any of these states in a direct military 
conflict during the next ten-to-twenty years. Similarly, our most 
pressing current challenges terrorism, narcotics trafficking, and other 
criminal activity with national security implications--and the biggest 
emerging threats--weapons of mass destruction (WMD) and missile 
proliferation--have limited utility as the basis for sizing and 
defining future force requirements.
    This complexity and diversity presents a unique challenge for 
Defense Intelligence: to discern from the general mix of global 
political, economic, military, technological, and social conditions, a 
specific characterization of extant, emerging, and potential threats 
and circumstances. Our efforts to address this challenge and establish 
a new threat paradigm center on three general factors:
    A recognition of conditions that would threaten US interests--for 
instance, the rise of an ideology inimical to US ideals, concepts, and 
values, denial of access to key resources and markets; regional or 
local instability in areas of US vital interest; and the emergence of 
foreign economic, technological, or military capabilities that 
undermine our general economic position, or our deterrent and 
warfighting superiority.
    An understanding of the reasons why peoples, leaders, and states 
engage in warfare--to include competition grounded in antiquity, 
internal or external pressures on leaders, governments, and states; 
competition over access to or control of markets and resources; and 
dissatisfaction with present conditions or the perceived ``likely'' 
future.
    An understanding of the interaction between a potential enemy's 
capability which we are generally very good at determining; 
intentions--which are difficult to anticipate and understand without 
indwelling or invasive sources and will . . . which is a function of 
evolving conditions, as well as the emotions and perceptions of leaders 
and citizens. Will is transient, ephemeral, and nearly impossible to 
know with certainty.
    Using this general analytic framework, and our assessment of the 
key factors shaping the global security environment, we can outline the 
three central features of the new global paradigm.
    First, it is clear that the bipolar world has given way to a more 
generalized multipolar, global set of partners, competitors, 
adversaries, and conflict circumstances some of which do not conform to 
traditional nation-state or alliance definitions but rather transcend 
political boundaries and territorial limitations. We classify these 
entities as follows:
    Cooperative partners--who generally share US values and usually can 
be considered allies (particularly in the military field).
    Uncooperative partners--who generally share our values but may at 
times be inclined to frustrate our policies to further their own 
interests.
    Competitors--who are generally neutral regarding our values and 
interests, will compete with us in a variety of fora, but are not 
military adversaries.
    Benign adversaries--who generally conform to contrary values and 
interests, but lack the economic or military wherewithal to actively 
oppose us.
    Renegade adversaries--who engage in unacceptable behavior 
frequently involving military force and violence, are current or 
potential enemies of the US, and against whom we must consider the 
active use of military force.
    It is important to note that, circumstantially, a nation-state or 
non-state entity can be a cooperative partner, and uncooperative 
partner, and even a competitor, concurrently, depending on the issue 
and conditions extant.
    And finaly--Emergency conditions--usually involving humanitarian 
disasters, attempts at ``deconfliction'' of warning groups, and/or the 
restoration of civil control--which could require the commitment of our 
military forces, often in threatening and sometimes lethal conditions.
    Second, the ``traditional conflict spectrum''--ranging from 
conflict short of war at the low end, through conventional (both local 
and regional) war, to global nuclear war at the high end--remains valid 
in that the US military could conceivably engage in operations along 
the entire spectrum. However, within the broad spectrum, some 
conditions and circumstances are more likely than others:
    Operations at the lower end of the spectrum--military assistance 
various peacekeeping contingencies, operations other than war, etc.--
are most likely.
    Limited local or regional conflict is likely to occur.
    Large-scale regional war or global nuclear war is unlikely to 
occur.
    Chemical and biological warfare will probably occur, generally 
within the context of very limited use and very restricted kinds of 
conflict.
    Terrorism will remain a transnational problem but will mainly be a 
factor at the lower end of the conflict spectrum.
    New (or innovative modifications of old) forms of warfare, many of 
which transcend the entire conflict spectrum, are emerging and will 
likely be employed (these will be discussed in more detail in the 
Future Warfare Trends section).
    Informabon warfare--actions taken to degrade or manipulate an 
adversary's information systems while defending one's own.
    Cybernetic warfare--a form of information warfare involving 
operations to disrupt, deny, corrupt, or destroy information resident 
in computers and computer networks.
    Transnational Infrastructure warfar--attacking a nation's key 
industries and utilities--telecommunications, energy and power, 
transportation, governmental operations and services, emergency 
services, financial, manufacturing, etc.
    Asymmetric warfare--attacking an adversary's weaknesses, avoiding 
his strengths, while preventing him from doing the same to you, using 
asymmetric means such as terrorism.
    Asynchronous warfare--a pre-selected or delayed attack on an 
adversary taking advantage of the passage of time to develop a 
strategic opportunity or exploit a future vulnerability.
    Third, the likelihood that several separate events or conditions 
will occur simultaneously, or concurrently, over time, thereby 
amplifying and compounding their impact. One related aspect of this 
phenomenon is that the daily global engagement posture of the US 
military will limit the forces and resources available to respond 
immediately to multiple crises. Anticipating a threat environment in 
which more than one situation will require a direct military response 
at the same time is critical to contingency and operational planning.
    Beyond this general description of the new global threat paradigm, 
we are also able to identify a number of specific threats and 
potentially threatening conditions.
    The most important of these are outlined below.
Extant, emerging, and potential threats
    No state has the potential to match the worldwide strength and 
influence of the United States--in terms of combined political, 
economic, technological, military, and cultural power--over the next 
two decades. However, a select group of states--Russia, China, Japan, 
Europe (collectively or a coalition of key European nations), and 
India--will likely possess capabilities that are an echelon above other 
regional powers and nations. These major powers will routinely exert 
influence within their own regions, and in some cases or dimensions, 
will also exert influence on a global scale. They will retain unique 
capabilities to either assist or frustrate US interests and policies. 
Each nation will also continue to compete for regional and global 
influence and for access to or control of resources, markets, and 
technology. Relations between and among these major powers and the US--
particularly the nature and extent of their competition--will be a 
primary factor shaping the future global security environment. In this 
regard, there are two potential--though unlikely--developments that 
would be especially troubling for the US:
    The formation of an anti-US alliance involving two or more of the 
major powers or a similar regional alliance led by a single major 
power.
    An expansion of major power competition from the political-economic 
to the military sphere.
    Beyond this interaction between the major powers, there are a wide 
variety of conditions, circumstances, and individuals who either now 
do, or could in the future threaten the vital interests of the United 
States. We generally classify these current and potential threats as 
either transnational or regional.
                  key transnational threats and issues
Proliferation
    The proliferation of nuclear, chemical, and biological weapons, 
missiles, and other key technologies remains the greatest direct threat 
to US interests worldwide. More than 20 states are actively pursuing 
weapons of mass destruction (WMD), motivated either by regional 
competition or the desire to develop a deterrent or counter to the 
concomitant superiority of others, including the US.
    Nuclear proliferation--both weapons and technology--presents a 
continuing significant threat. While nuclear weapons are generally 
difficult and expensive to obtain, and counter-proliferation efforts 
have been successful to date, we expect the number of nuclear states to 
slowly increase into the next century. We are also concerned with the 
threat posed by ``peaceful nuclear technology''--due to unsafe or 
faulty technical designs, aging facilities, inadequate safeguards and 
security, improper handling, etc.--which will grow as more nuclear 
technology is used over the coming decades.
    Chemical and biological weapons--being generally easier to develop, 
hide and deploy than nuclear weapons--will be more widely proliferated 
and have a high probability of being used over the next two decades. 
The technology and materials to produce relatively sophisticated 
chemical weapons are readily available, often as dual-use commercial 
items. Many states see chemical weapons as a cost-effective alternative 
to developing large conventional capabilities. Biological agents are 
more difficult to weaponize, handle and store, but the information and 
technology to do so is available. We are particularly concerned about 
the increasing potential for chemical and biological weapons use by 
sub-national groups or individuals--that are very difficult to identify 
and to deter.
    Ballistic and cruise missile proliferation presents a growing 
challenge to deployed US forces worldwide. While the types of missiles 
most likely to be proliferated will be a generation or two behind the 
global state of the art, states that acquire them will have increased 
(and in some cases unprecedented) capabilities for delivering WMD or 
conventional payloads inter-regionally against fixed targets. We are 
particularly concerned about two trends:
    The significant increase we expect over the next two decades in the 
numbers of ballistic missiles with ranges between 300 and 1,500 
kilometers.
    The potential for land attack cruise missiles to be more widely 
proliferated.
    Certain key technologies, such as nanotechnology--which allows 
advanced functions to be achieved in very small and lightweight form--
are important to the development and effective delivery of WMD. 
Information-related technology including encryption, high volume data 
handling, complex computational capability and offensive and defensive 
information warfare capabilities, are also critical proliferation 
concerns.
Terrorism
    Terrorism will continue as a global challenge so long as groups and 
individuals oppose established political, economic, and social 
processes due to perceived ethnic, religious, nationalist, political, 
and other forms of discrimination. In some cases, the use of extreme 
violence for some identifiable goal will be more criminal and less 
political than in the past, blurring the line between terrorism and 
common crime. The characteristics of the most effective ``terrorists 
groups''--highly compartmented operations planning, good cover and 
security, extreme suspicion of outsiders, and ruthlessness--make them 
very challenging intelligence targets. The following emerging trends 
are particularly noteworthy:
    The terrorist threat to the US will increase--both abroad and here 
at home--as groups exploit technological advances in communications and 
transportation, counterfeiting/forgery, cover and concealment, weapons, 
and explosives.
    Middle East-based terrorism, which remains the primary politically-
motivated terrorist threat to US interests, will increase over the next 
two decades, in part because of growing demographic and resource 
tensions.
    Many state sponsors will be less active than in the past, but Iran 
and private entitles (such as Usama Bin Ladin) will continue to sponsor 
a wide range of terrorist activities.
    In some cases, such as in Algeria, internal terrorism will threaten 
the viability of the national government and will lead to spiraling 
violence.
    Terrorists groups are becoming increasingly multinational, more 
associated with criminal activity, and less responsive to external 
influences.
    Counterterrorism successes will lead to more ``unknown and new 
name'' groups that are less likely to claim responsibility for their 
actions.
    Advanced and exotic weapons (including WMD) will be increasingly 
available and will and intent of terrorists groups to use them will 
likely increase. But terrorist capabilities to use such weapons will 
remain limited for a number of technological, operational, and other 
reasons.
    Chemical or biological agents would likely be the choice if WMD 
were employed. The Aum Shin-Rykyo chemical attacks are harbingers of 
future possibilities.
Narcotics
    International drug cultivation, production transport, and use will 
remain a major source of instability, both within drug producing, 
transit, and target countries, and between trafficking and consumer 
nations. The connection between drug cartels, corruption, and 
antigovernment activities (terrorism and insurgency) will increase as 
the narcotics trade provides an important funding source for criminal 
and antigovernment groups. States with weak democratic traditions and 
poor economic performance and prospect will be particularly 
susceptible. Counternarcotic activities will become more complex and 
difficult to discern as new areas of cultivation and transit emerge and 
traffickers exploit advances in technology, communications, 
transportation and finance. Illicit synthetic drug production in urban 
areas is a significant and growing threat.
                       other international crime
    International organized crime will pose an increasing threat to US 
interests. Criminal cartels are becoming more sophisticated at 
exploiting technology, developing or taking control of ``legitimate'' 
commercial activities, and seeking to directly influence--through 
infiltration, manipulation, and bribery--local, state, and national 
governments, legitimate transnational organizations, and business. 
Increased cooperation between independent criminal groups, including 
terrorist organizations,is likely. We expect that greater interaction 
between the US military and federal agencies will be required to 
counter this growing threat.
                    key regional threats and issues
North Korea--a failing state
    North Korea remains in crisis. As the pressure builds on the 
economy, society, and military, the potential for internal collapse, 
instability, and leadership change is rising. Some form of 
significant--perhaps violent--change is likely in the next five years. 
There are four basic alternatives: leadership change, government 
collapse, negotiated accommodation with the South, or major economic 
reform. Any of these scenarios will have significant security 
challenges for the US.
    In the meantime, North Korea's overall military readiness continues 
to erode in line with its worsening economic situation. However, 
because the North retains significant, forward-deployed strike 
systems--artillery, missiles, rocket launchers, and aircraft--it will 
maintain its capability to inflict enormous damage on heavily populated 
northern areas of South Korea with little or no warning. In fact, over 
the next several years Pyongyang's WMlD, missile, artillery, and 
special operations force capabilities will likely improve, despite the 
dire economic situation. Continued vigilance and readiness, for both 
``implosion and explosion'' scenarios, is required.
China--another transition/transformation
    China's top priorities will continue to be economic development, 
modernization, and domestic political stability. The Chinese regime is 
likely to become more responsive to the desires and needs of its 
people, but not significantly more democratic or pro-Western. Beijing's 
foreign policy will seek to avoid conflict and sustain the trade, 
investment, and access to technology that are essential to economic 
development. Within this cooperative framework, however, several points 
of friction will persist:
    The Taiwan issues remains the major potential flashpoint. US policy 
supports peaceful evolution in cross-straits relations, but Beijing 
believes US policy encourages the independence movement of Taiwan, 
deliberately or inadvertently.
    Beijing believes the US is bent on containing, dividing, and 
westernizing China and will continue to pursue policies designed to 
counter perceived US efforts toward that end.
    China perceives Japan as its principal Asian regional rival, and 
views US-Japanese defense cooperation as helpful only if it limits the 
emergence of a long-term Japanese military threat.
    Other regional territorial disputes may flare into period crisis.
    China's ethnic separatist movements are another potential point of 
conflict, especially in Tibet and northwest China.
    China's military strategy will continue to emphasize the 
development of a survivable nuclear retaliatory capability as a 
deterrent against the use of nuclear weapons by the United States, 
Russia, or India. There is no indication that China will field the much 
larger number of missiles necessary to shift from a minimalist, 
retaliation strategy to a first-strike strategy.
    China's conventional force modernization will continue at a 
measured pace, with emphasis on developing a more credible military 
threat against Taiwan (though not the large amphibious capability 
necessary for invasion), and protecting claims in the South China Sea 
against Southeast Asia rivals. China is not likely to build the 
capability to project large conventional forces beyond its immediate 
borders or nearby seas.
    The Chinese military will decrease in size during the next two 
decades to conserve funds for military modernization. Absent a major 
resurgence of Russian military power, the air and naval threat from the 
east is seen as much greater than the ground threat from the north. 
China's top military priority will therefore remain modernizing its 
air, air defense, and naval forces. With the exception of several 
select units, the ground forces will continue to receive relatively low 
priority.
    Beijing emphasis on defense requires the PLA Navy in particular to 
expand its operating area further out from the mainland. The Navy's 
emphasis is on offensive strike capability against surface ships, 
including more modern fighters, aerial refueling, and anti-ship cruise 
missiles launched from surface, sub-surface, and aerial platforms.
    China will continue to actively seek advanced technology, including 
a much-improved knowledge base from ``overseas'' students, and from 
cooperative nations and commercial partners, and will proliferate some 
technical capabilities as it sells selected weapons systems to other 
countries.
Russia--perplexing evolution
    Russia will remain focused on internal political, economic, and 
social imperatives for at least the next decade. The periodic turmoil 
that has plagued Moscow since the late 1980s will continue. Immature 
political institutions, economic weakness, organized crime, and 
corruption will heighten the potential for political instability, 
particularly during periods of leadership transition.
    As with the other components of Russia's social order, economic 
progress is the key to the future of Russia's military. Over the next 
several years, Moscow will be hard pressed to maintain the modicum of 
conventional military capability it now has. Barring a significant 
increase in Russia's external threat perception, non-military issues 
will continue to receive priority in terms of national leadership 
attention, resources, and popular concern. Moreover, other para-
military and internal security forces will continue to compete with the 
Ministry of Defense for scarce security resources.
    There is little chance that Russia will reemerge as a global 
military peer competitor to the US over the next two decades. During 
this period, Russia's strategic nuclear forces will remain the backbone 
of Moscow's military might, preserving Russia's perception of great 
power status and protecting its vital security interests.
    The size, characteristics, and capabilities of Russia's 
conventional forces could vary widely over the next 20 years, depending 
on the outcome of numerous unsettled issues. Among the most important 
of these are: the timing, pace, and extent of Russia's economic 
recovery; the ``urgency'' embodied in Russian external threat 
perceptions; the ability to achieve political and cultural stability; 
the size of Russia's defense investments; whether or not the national 
leadership achieves consensus on a blueprint for Military Reform 
(including restructuring and ``recapitalizing'' the defense industry); 
and Moscow's success at restoring the ``intangible'' components of 
military operational effectiveness (effective leadership, readiness, 
morale, sustainment, etc.). There are two basic alternatives:
    Military reform fails--due to continued underfunding, indecision, 
and leadership indifference--and Russia's future conventional forces 
present about the same (or even a reduced) level of threat to US 
interests as does the Russian military today. This alternative becomes 
more likely the longer Russia's economic problems persist, defense 
budgets decline or remain relatively stagnant, there is no consensus on 
the direction for defense reform, and the national leadership continues 
to neglect the needs of the military.
    Military reform succeeds and the Russian armed forces emerge 
smaller, but more modern and capable. The keys to this future are that 
the Russian economy achieves sustained, steady growth, Russia's defense 
burden stabilizes, a national consensus on military reform emerges, and 
the General Staff is ``put back in charge'' of the reform process. 
These developments would allow the military to sustain adequate levels 
of research and development, improve training, and complete the 
restructuring of forces over the near term, to begin moderate rates of 
series production of a new generation of combat systems around 2005, 
and reemerge beyond then with greatly improved capabilities for 
regional military operations.
Bosnia--progress with permanance
    International Peacekeeping forces in Bosnia continue to operate in 
a complex inter-ethnic environment that poses significant challenges to 
the establishment of a stable and enduring peace. We believe the 
Bosnian factions will continue to generally comply with the military 
aspects of the Dayton Accords and Stabilization Force directives, and 
will not engage in widespread fighting between themselves, so long as 
Peacekeeping forces remain credible. However, if civil implementation 
of Dayton lags, the prospects for renewed fighting would increase 
significantly following the withdrawal of stabilizing forces, due to 
the unrealized aims of the Bosnian factions. The threat to US and 
allied forces from, organized indigenous military and police forces 
will remain low. Nonetheless, the Stabilization Force continues to face 
a threat from mines and various forms of low-level, sporadic and random 
violence, which could include high profile attacks by rogue elements or 
terrorists. Pervasive international engagement--both political and 
economic--will be necessary to prevent de facto or even permanent 
division of Bosnia along ethnic lines.
Iraq--continued belligerence
    Iraq will remain capable of limited incursions against its 
neighbors but incapable of holding against a determined ``western'' 
counterattack. Saddam retains the goal of dominating Kuwait, but his 
options to destabilize the Gulf region and the GCC will remain limited 
so long as UN sanctions are in place and effective.
    Iraq's military capability continues to erode. Saddam's forces have 
significant weaknesses--in leadership, morale, readiness, logistics, 
and training--that would limit their effectiveness in combat.
    Iraq continues limited efforts to preserve and expand its missile 
and WMD capabilities and to hide that activity from the international 
community. If sanctions are removed these efforts will receive 
increased emphasis, along with efforts to improve Baghdad's air defense 
and ground forces capabilities.
    Iraq will remain a threat to US regional policies and interests and 
to the safety and security of Iraqi opposition groups, so long as 
Saddam remains in power. His presence demands the continued enforcement 
of UN sanctions to limit Iraq's military expansion, and the continued 
commitment of US power to deter Iraqi aggression.
    While predicting the nature of a post-Saddam government is highly 
speculative, Iraq is likely to maintain its regional ambitions, and 
will continue to place a high premium on military power, well into the 
future. The perceived threat from neighboring nations will also 
motivate any future Iraqi government to sustain and enhance Baghdad's 
military capability.
Iran--a chance for change
    Iran is deliberately building up its military and developing new 
capabilities, motivated by its desire to provide a means to intimidate 
its Gulf Arab neighbors, to limit the regional influence of the west--
particularly the United States--and to deter a resurgent Iraq or any 
other potential aggressor. Tehran will gradually overcome its near term 
economic difficulties, although progress will be slowed by the dual 
challenges of a rapidly growing population and uncertainties over the 
pace and extent of internal reform. Over the longer term, Iran will 
probably eschew some of its more visible unacceptable practices abroad 
and seek better relations with the US--although its early moves in this 
direction are likely to be tactical expedients. However, Tehran will 
not abandon its drive for regional hegemony and circumstantial 
domination or for increased WMD capabilities.
    Iran recognizes that it cannot hope to match US military power 
directly and therefore seeks asymmetric and asynchronous means to 
challenge the US indirectly; through subversion and terrorism directed 
against US and western interests; the development of air, air defense, 
missile, mine warfare, and naval capabilities to interdict maritime 
access in the Gulf and through the Strait of Hormuz; and the pursuit of 
WMD designed to deter the US and intimidate Tehran's neighbors. These 
efforts reflect a clear intent to build an offensive capability well 
beyond Iran's defensive needs. Iran will continue to seek more 
effective ways to use its single best defense asset--the geography and 
terrain of the country.
    Given its internal difficulties, Iran's rearmament will proceed 
gradually. Over the next decade, Tehran will likely develop and deploy 
additional WMD and missile capabilities, make moderate progress in its 
ability to interdict shipping in and around the Strait of Hormuz and 
the Gulf, and limited progress in its air defense programs. Thereafter 
depending on the pace of Iraq's military modernization, Iran will 
likely devote ad1itional resources to develop its ground forces, which 
are its principal means of deterring and defending against Baghdad, as 
well as a significant internal and regional control mechanism for 
Tehran to use in its version of the future.
    Despite these gradual force improvements, the Iranian military will 
retain many of its current conventional force shortcomings-particularly 
command and control maintenance, training, and equipment-which will 
limit its effectiveness against Iraq and the west.
lndia--Pakistan--dangerous circumstances
    The tense rivalry between India and Pakistan remains an important 
security concern. India's economic growth is likely to continue at a 
brisk pace, while Pakistan's prolbems--including weak infrastructure, 
high illiteracy, weak political institutions, and the slow pace of 
reforem--will temper economic growth. As a result, India's considerable 
military advantage is likely to increase, leaving Pakistan felling more 
vulnerable, and more dependent on international moderating influences 
and its WMD, especially nuclear, deterrent. Both countries will remain 
beset by numerous internal challenges to national unity. While India 
will continue to pursue improved ties to other Asian states and the 
west, proliferation concerns will remain a source of friction.
    In the military sphere, India and Pakistan both continue to view 
their security relationship in zero-sum terms, possess sufficient 
material to assemble a limited number of nuclear weapons, have short 
range ballistic missiles, and maintain large standing forces in close 
proximity across a tense line of control. In short, although the 
prospect for major war between India and Pakistan is low at present, we 
remain concern about the potential, particularly over the near term, 
for one of their occasional military clashes to escalate into a wider 
conflict. Over the longer term, however, the threat of large-scale war 
should diminish.
Latin America--hopeful progress
    The outlook for democracy in Latin America is good. The acceptance 
of military subordination to civil control will expand and should be 
commonplace over the next two decades. Nevertheless, there will be a 
continuing susceptibility to setbacks and stresses rooted in the 
persistent political, social, and economic problems of many countries. 
The scourage of narco-trafficking, related money laundering, weapons 
and contraband smuggling, illegal migration, and insurgency will remain 
the principal obstacles to stability and democratic progress.
    The prospect for interstate warfare in Latin America will remain 
low. Historic, unresolved border issues--such as the dispute between 
Peru and Ecuador--have the potential to erupt abruptly into armed 
conflict, but these conflicts will generally be limited in scope and 
duration.
    With some notable exceptions, relations between Latin America 
states and the US will remain positive and friendly. There is virtually 
no threat of armed conflict with the US. However, the US military is 
likely to deploy to Latin America for operations at the lower end of 
conflict spectrum--natural disaster requiring humanitarian assistance, 
counterdrug operations, military assistance, etc. Evolving conditions 
in Cuba, Haiti, and several drug producing and transit countries may 
lead to some greater concern.
Greece-Turkey--flashpoint
    The situation in the Aegean will continue to be fragile. Though 
diplomacy has helped contain tensions, the potential for conflict 
remains. Ongoing disputes over territorial claims and Cyprus, advanced 
weapons proliferation into the region, and contentious economic issues 
have furthered tensions between the two NATO members.
    Ankara's failure to obtain European Union membership has raised the 
sense of isolation form Turks, while others have been ``vindicated'' in 
their anti-western rhetoric. Security assistance and economic 
cooperation with the US will help alleviate Turkish concerns, but any 
withdrawal of US interests in the next few years will exacerbate 
Turkish fears and frustration. These conditions could foster more 
extreme nationalism, and could undermine the government's efforts to 
sustain secular stability.
Sub-Saharan Africa--tribal and cultural confrontation
    Perhaps the greatest challenge for the future of Africa is the need 
for good governance, the rule of law, and respect for human rights. 
Protracted tribal competition and conflict will continue to destabilize 
the Sub-Saharan region, exacerbated by population growth, poverty, and 
poor humanitarian conditions.
    Despite these festering problems, there are productive efforts by 
many Sup-Saharan countries to more toward more representative 
government and the pursuit of political pluralism. Some are addressing 
security concerns through greater regional cooperation and collective 
participation. Other African states have pursued security arrangements 
through private firms in lieu of state-to-state assistance.
    Black and gray arms markets will continue to be the primary venue 
for military forces to acquire new equipment. Small arms and light 
weapons--which are cheaper, easier to transfer, and require minimal 
maintenance--will be emphasized.
    Relations between Sub-Saharan countries and the US will generally 
be friendly and positive as these nations seek increased US trade and 
economic investment.
Central Asia and the Caucasus--future challenge
    The Caspian Macro region will be attractive as a relatively new 
global market for energy resources and infrastructure projects. 
International interest and investment in the oil and gas fields of this 
region will continue to grow in concert with the global demand for 
energy. Russia will like]y acquiesce to both western and Asian 
investments as long as Russian entrepreneurs and included in the 
concessions. Turkey, Iran, and China will pursue greater economic and 
political involvement.
    The region will continue to experience ethnic, tribal, and other 
forms of internecine conflict and it is probable that Central Asian 
problems and Central Asian involvement in ethnic issues will 
``spillover'' into both China and Russia. Relations between the US and 
the various states of the region should remain ``fair-to-good'' as many 
explore economic ties to the west.
                  the impact of technology--technowar
    The rapid pace of military technology advancement-particularly in 
the areas of precision weapons, information and communications will 
continue. Major technological breakthroughs are likely in the next two 
decades. Some aspects of our technological dominance--especially those 
with commercial and industrial applications--will be difficult to 
maintain because the transfer of these capabilities will initially 
appear as purely civilian events. Perhaps our greatest challenge is 
that a rogue nation or sub-national group might acquire key 
technologies, which would lead to some form of strategic technical 
surprise.
    Overall, the impact of applied automation and computers, 
electromagnetic warfare, brilliant sensors, and the other technologies 
listed below will lead to the rise of a military-techno culture in 
which time, space, speed, and other fundamental conditions are 
radically changed. These developments have the potential to 
dramatically alter the nature of warfare and the characteristics of 
future threats.
    Nuclearization and the proliferation of WMD capabilities;
    precision munitions;
    electrodynamic weapons;
    ``conventional'' weapons of mass destruction;
    non-lethal weapons;
    information technology and cybernetic warfare;
    camouflage, cover, concealment, denial, and deception (C3D2);
    techno-terrorism;
    nanotechnology; and
    applied biotechnologies.
    To date the development and integrated application of the most 
important military technologies and concepts has been limited to the 
advanced western militaries--particularly the United States. One key 
reason is economic. In general, these technologies are very expensive 
to develop and maintain and most nations have emphasized other 
priorities since the end of the Cold War. In fact, non-US global 
defense spending has dropped some 40 percent since the late 1980s, and 
the ``military modernization accounts''--research and development, and 
procurement--have been hit even harder. Moreover, during the same 
period, the global arms market has decreased by more than 50 percent. 
With reduced domestic procurement, declining foreign consumption, and 
other spending imperatives, many nations have had neither the 
motivation, the resources, nor the capability to pursue high technology 
military endeavors. Over the next decade, however, as post Cold War 
defense reorganizations are completed, defense industries stabilize, 
and funding (potentially) increases, these areas could see additional, 
albeit still limited, emphasis.
                    new (modified) forms of warfare
    Technology, combined with the creative genius of military thinkers 
around the world, is leading to the development and application of new 
forms of warfare, and the innovative modification of traditional 
military practices. While the US and its allies are the source of much 
of this innovation, others are motivated by the dominant military 
position of the US, and our demonstrated commitment to maintaining our 
military lead. This basic reality is forcing many of our adversaries 
(current and potential) to seek other means to attack our interests. 
Some of the more important are listed below:
    Information Warfare (IW) involves actions taken to degrade or 
manipulate an adversary's information systems while actively defending 
one's own. Over the next two decades, the threat to US information 
systems will increase as a number of foreign states and sub-national 
entities emphasize offensive and defensive information warfare 
strategies, doctrine, and capabilities. Current information on our 
vulnerabilities, and foreign intelligence initiatives in general, point 
to the following threats:
    Trusted insiders who use their direct access to destroy or 
manipulate the information or communications system from within.
    Modification of equipment during transport or storage.
    Physical attack of key systems or nodes, including the insertion of 
modified or altered hardware.
    Network penetration to include hacking, exploitation, data 
manipulation, or the insertion of various forms of malicious code.
    Electronic attack of various interconnecting links, sensors that 
provide data to the system. or other system components.
    Empowered agents including ``sponsored'' or individual hackers, 
cyber-terrorists criminals, or other individuals who degrade, destroy, 
or otherwise corrupt the system. In the most advanced case, empowered 
robotic agents, embedded in the system,could be used to take autonomous 
(timed) actions against the host or remote systems or networks (cyber 
war).
    Cybernetic warfare (CYW) is a distinct form of information warfare 
involving operations to disrupt, deny, corrupt, or destroy information 
resident in computers and computer networks. One particularly troubling 
form of ``war in cyberspace'' is the covert modification of an 
adversary's data and information systems. This form of warfare will 
grow in importance as technology makes new methods of attack possible. 
Cybernetic warfare defies traditional rules of time and distance, speed 
and tempo, and the conventional or traditional military capabilities of 
the opposing elements.
    Transnational Infrastructure Warfare (TIW) involves attacking a 
nation's or subnational entity's key industries and utilities--to 
include telecommunications, banking and finance, transportation, water, 
government operations, emergency services, energy and power, and 
manufacturing. These industries normally have key linkages and 
interdependencies, which could significantly increase the impact of an 
attack on a single component. Threats to critical infrastructure 
include those from nation-states, state-sponsored sub-national groups, 
international and domestic terrorists, criminal elements, computer 
hackers, and insiders.
    Asymmetric warfare--attacking an adversary's weaknesses with 
unexpected or innovative means while avoiding his strengths--is as old 
as warfare itself. In the modern era, many forms of asymmetric attack 
are possible--to include the forms of warfare outlined above, 
terrorism, guerilla operations, and the use of WMD. Because of our 
dominant military position, we are very likely to be the focus of 
numerous asymmetric strategies as weaker adversaries attempt to advance 
their interests while avoiding a direct engagement with the US military 
on our terms. If forced into a direct conflict with the US, those same 
adversaries are likely to seek ways of ``leveling the playing field.''
    Asynchronous warfare involves a preselected, or delayed (timed) 
attack on an adversary, taking advantage of the passage of time to 
develop a strategic opportunity or to exploit a future vulnerability. 
In a preselected attack, the operation has a latent effect on the 
adversary. Human or technical assets are strategically placed well 
before--sometimes years before--the actual confrontation. In a delayed 
attack--often carried out as an act of reprisal months or even years 
later--the operation is conducted after an opponent has lowered his 
guard.
                          other warfare trends
Ground Forces
    Many ground forces throughout the world are being reduced due to 
diminished threat perceptions and other, mostly economic, imperatives. 
Many developing nations--who still see ground forces as the essential 
force component--are saddled with outdated equipment that is either 
non-operational or in serious disrepair. These states hope to 
``modernize''--within economic limits--with surplus Cold War stocks. 
For many, however, overall combat effectiveness will remain limited due 
to persistent shortfalls in training, maintenance, leadership, 
operational concepts, and morale.
    The developed states are in various stages of modernization, but 
ground forces are a low priority for many of these countries. In terms 
of doctrine, few states have either the inclination or the capability 
for anything other than old western or Sovietera equipment and 
practices. Training and logistics are generally in tandem with 
modernization and doctrinal advancement. Most nations do little beyond 
battalion level training and few have any proficiency at joint or 
combined arms operations.
    To balance the demands of responding rapidly to local or regional 
contingencies, while maintaining the capacity to mobilize for large 
scale war, many states are adopting a two-tiered readiness structure 
consisting of a few ``ready'' units (smaller, more mobile, better-
equipped, trained, and manned), and a larger component of ``not-ready'' 
units (usually large units, with older equipment, manned at pre-
mobilization or cadre status).
    Those nations with the motivation and resources to upgrade their 
armies will generally be able to acquire improved tanks and fighting 
vehicles (primarily with western fire controls, night-vision devices, 
add-on passive or reactive armor, threat warning and obscurant systems, 
and, in the more distant future, active protective systems).
Naval Forces
    The foreign naval threat in the next 20 years will consist of both 
larger numbers of older weapons systems and a smaller yet more diverse 
set of modern systems. Naval warfare will become more complex, with a 
wide variety of potential adversaries, situations, and forces capable 
of confronting the US during the execution of overseas presence and 
warfighting missions. This is especially true in littoral regions.
    The majority of the world's fleets will consist of ships not larger 
than destroyers and frigates, although a select few will retain or 
build aircraft carriers. New ship designs will emphasize improved 
multi-mission capability, endurance, reduced signatures, and increased 
system automation and firepower.
    The submarine threat will remain significant especially in coastal 
or contiguous waters where many smaller navies are confined in operate. 
Russian submarines, sensors, and weapons will continue to pose the 
pacing undersea technology challenge for the US.
    Mine warfare threats will increase as maritime nations continue to 
see mines as cheap and effective weapons against ships and submarines, 
and more sophisticated mine systems become widely available.
    Anti-ship cruise missiles will be more widely proliferated, posing 
an increasing threat to naval and civilian maritime traffic.
Air and Air Defense Forces
    Global combat aircraft inventories will decline over the next two 
decades, but residual aircraft will be more technologically capable and 
lethal (extended ranges, multirole mission capability and multiple 
engagement capability). The proliferation of advanced air-to-air 
missiles precision-guided munitions, land attack cruise missiles, and 
``smart weapons'' will increase the defensive and strike capabilities 
of air forces globally. Most countries will focus on modified and 
upgraded versions of proven airframes.
    Overall, however, resource shortfalls, qualitative training 
deficiencies, and limited C3I, electronic warfare, logistics, and 
maintenance capabilities will limit the combat effectiveness of most 
air forces.
    Cognizant of the advantages afforded those nations possessing 
superior air warfare capabilities, and unwilling or unable to bear the 
high cost of advanced air superiority aircraft, many nations will place 
a high premium on improving their groundbased air defenses. Across-the-
board upgrades in missiles and sensor capabilities--improved seekers, 
propulsion, guidance, and control--will occur. However, most states 
will lack the resources and technological sophistication necessary to 
acquire and field integrated air defense networks and systems. As a 
result, the operational effectiveness of these advanced weapons systems 
will remain limited, albeit challenging.
Space Warfare
    While the US will remain the world's dominant space power, over the 
next two decades, increased foreign military and civilian space 
capabilities will erode the relative US advantage in satellite 
reconnaissance, communications, mapping, and navigation. The space 
systems of 2018 will be much more capable and more widely used than 
those of today. By that time, nearly 40 countries will have their own 
satellites (compared with about two dozen today), and more than a dozen 
commercial consortia will provide satellite services (imagery, geo-
spatial data, communications) to the rest of the world. As part of this 
general commercialization of space, the number of countries capable of 
using space-based platforms or capabilities for military purposes will 
increase. We must also consider the increased potential for future 
adversaries to employ a wide variety of means to disrupt, degrade, or 
defeat portions of the US space support system.
                               conclusion
    As the protracted transition from the Cold War order to an 
uncertain future continues the United States will remain the world's 
dominant power. Beyond the enduring challenge posed by the strategic 
nuclear forces of Russia and China, the global threats facing the 
United States are diminished in magnitude when compared to the Cold War 
ear. This relative ``strategic hiatus provides the opportunity for a 
breathing space in which the US gains time at reduced risk.
    However, the world remains a very dangerous and complex place and 
there is no relief from the high tempo of operational activity short of 
war at US forces respond to a broad spectrum of challenges resulting 
from the general global turmoil. A wide variety of operations--
peacekeeping, peace enforcement, counternarcotics, humanitarian 
emergencies, non-combatant evacuations, military assistance, and 
limited conflict when necessary--will continue to place our military 
personnel at risk. Operational environments in these contingencies 
range from relatively benign, to nonpermissive, to hostile.
    A number of nations, especially rogue states like North Korea and 
Iraq, retain capabilities to directly threaten US interests. This 
condition demands constant US vigilance and the retention of 
demonstrable warfighting capabilities.
    Various transnational threats--weapons smuggling, terrorism, drug 
trafficking and other forms of criminal activity--continue to plague 
the international environment and pose the most direct daily threat to 
US citizens, forces, property, and interests. Some aspects of these 
threats have national security implications and will continue to 
involve US military forces and capabilities in the future.
    The changing nature of future warfare--including the application of 
new technologies and innovative doctrinal concepts, and the development 
of new forms of warfare--presents a constant challenge for US strategy, 
doctrine, force structure, and materiel development.
    The continuing proliferation of weapons of mass destruction, 
missiles, and related technologies, will result in a broadly increasing 
threat to stability and a specific direct threat to US military forces.
    The global presence of the United States--our tremendous power, 
influence, and willingness to remain engaged--is the key factor 
affecting the future shape of the international security environment. 
We in the Defense Intelligence Community re main committed to providing 
the best possible military intelligence support to US and allied 
leaders engaged in planning for and acting in any contingency or 
crisis.
    A final thought--we are trying to maintain military superiority and 
to use military capability in positive and constructive ways in an 
environment in which espionage and the selective public disclosure of 
US classified information is commonplace. Unless we make progress in 
preventing espionage and stopping the unauthorized public disclosure of 
classified information, we should anticipate a steady erosion of 
confidence in our abilities and the real loss of advantage to our 
adversaries.

    Chairman Shelby. Our next witness is Lieutenant General 
Patrick Hughes, Director of the Defense Intelligence Agency.
    General Hughes.

   STATEMENT OF LIEUTENANT GENERAL PATRICK HUGHES, DIRECTOR, 
                  DEFENSE INTELLIGENCE AGENCY

    General Hughes. Thank you very much for the opportunity to 
address you this morning, Mr. Chairman and Members of the 
Committee.
    I remain convinced that the turmoil and uncertainty that 
have characterized the post-Cold War world will last at least 
another decade. I say this because most of the underlying 
factors remain in place: uneven economic and demographic 
development; disparities in wealth and resource distribution; 
continued ethnic, religious and cultural strife; broad, rapid 
technology advances and attendant proliferation of advanced 
weapons; certain regional and global security structures, 
international criminal activity with national security 
overtones; the continued existence of rogue, renegade and 
outlaw states, resistance to the rapid expansion of Western 
ideas and culture; natural disasters and environmental issues; 
and numerous other critical uncertainties. These factors all 
bring great stress to the international order. No condition, 
circumstance or power is likely to emerge over the next 10 to 
20 years which will somehow transcend them and lead to a more 
stable global order.
    In fact, one of the more intriguing aspects of the post-
Cold War period is that while the global strategic threat to US 
interests has greatly diminished in comparison to the Soviet 
era, the residual transnational and the regional threats are in 
many ways more complex and diverse, and much more difficult to 
plan for.
    This brings me to my next theme--a new security paradigm is 
evolving, one in which the United States faces a generalized 
global set of competitors and potential adversaries, the 
troubling proliferation of negative technologies and the 
existence and emergence of numerous persistent small conflict 
situations and conditions.
    US security policy planners and operators must carefully 
study these emerging circumstances in order to understand this 
evolving paradigm. The new global condition affects every 
aspect of the US military, including the planning and execution 
of current operations, and the development of the strategy, 
organization and equipment that will shape and define our 
future forces.
    The most important challenge facing defense intelligence is 
to discern from the general mix of global conditions, more 
specific and useful characterizations of extant, emerging and 
potential threats and circumstances. We are doing this now.
    That sort of threat identification forms the basis for my 
next theme. The United States is likely to remain the world's 
only superpower in terms of combined political, economic, 
technological, military and cultural strength for the next two 
decades. Despite our tremendous power and influence, however, 
threats and threatening conditions exist today, and others will 
emerge over time.
    We generally group these extant potential and emerging 
threats into either trans-national or regional categories.
    Regarding trans-national threats, I am most concerned with 
the proliferation of nuclear, chemical and biological weapons, 
missiles and other key technologies which can be applied in 
decidedly negative ways. Two aspects of this trend are 
particularly troubling. Activities that would provide our 
adversaries with increased or enhanced capabilities for 
delivering weapons of mass destruction or conventional payloads 
interregionally. And those that will allow a rouge nation, or 
sub-national group to surprise us with a covertly acquired or 
innovatively applied new technology.
    Terrorism, narcotics traffcking, illicit weapons transfers 
and other international criminal activity, with national 
security overtones, pose direct daily threats to US citizens, 
property, resources and interests worldwide. The terrorist 
threat to the US will probably increase both abroad and here at 
home as various groups exploit technological advances in 
communications and transportation, forgery and counterfeiting, 
cover and concealment, and weapons and explosives.
    International drug cultivation, production, transport and 
use will remain a major source of instability and tension 
within producing, transit and target countries, and between 
traffcking and consumer nations. Of particular concern is the 
connection between drug trafficking and insurgency.
    Regarding the most pressing regional threats, North Korea, 
Iraq and Iran remain generally hostile. Each retains the 
capability to directly attack US and allied interests with 
relatively little advance warning. These conditions require 
continued vigilance and the retention of demonstrable 
warfighting and deterrent capabilities.
    Russia and China, two major powers undergoing lengthy and 
generally positive but challenging transitions, will continue 
to demand our attention. While neither state is likely to pose 
a dramatically increased military threat over the next decade, 
both have significant military capabilities and the potential 
to threaten our vital interests.
    Other regional issues and hot spots, to include the 
uncertain situation in Bosnia; tensions in the Aegean; ethnic, 
tribal and religious conflict throughout many parts of Africa; 
continued hostility between India and Pakistan; ongoing border 
disputes between several nations; and ethnic and political 
conflict in resource rich Central Asia, all have the potential 
to erupt abruptly into larger conflicts that could result in 
the requirements for US military involvement.
    Finally, it is important to note that the rapid pace of 
military technology advancement, particularly in the areas of 
information and communications, will continue. Major 
technological breakthroughs in military capability are likely 
in the next two decades. Some aspects of our technological 
dominance, especially those with commercial and industrial 
applications, will be difficult to maintain. We can expect our 
adversaries to develop and apply new or innovative forms of 
asymmetric and asynchronous warfare as they seek to advance 
their interests while avoiding direct military engagement with 
the United States on our terms.
    A final thought. We are trying to maintain military 
superiority and to use military capacity in positive and 
constructive ways in an environment in which espionage and the 
selective public disclosure of US classified information is 
commonplace. Unless we make progress in preventing espionage 
and stopping the unauthorized public disclosure of classified 
information, we should anticipate a steady erosion of 
confidence in our abilities and the real loss of advantage to 
our adversaries.
    Thank you very much, Mr. Chairman.
    Chairman Shelby. Thank you, General Hughes.
    Director Tenet, Saddam Hussein continues to defy the United 
Nations Security Council's resolutions requiring the 
dismantlement of his capability to produce weapons of mass 
destruction. Once again, we find ourselves in a confrontation 
with serious implications for the security and the stability of 
the vital Persian Gulf region.
    First, would you please describe for the Committee today 
the current status of Iraq's missile, chemical, biological and 
nuclear programs. And even if full inspections were resumed 
today, how confident could we be that we could find and we 
could eradicate all of Saddam Hussein's weapons programs, 
especially his chemical weapons and biological weapons 
programs?
    Director Tenet. Well, Mr. Chairman, I think it's fair to 
say that the UN inspection regime has been absolutely critical 
in keeping those programs in a box. We have destroyed a lot of 
his Scud capability. We have destroyed much of his chemical 
weapons capability. We are, quite frankly, still worried about 
his biological weapons capability, because as you know, much of 
that information came to us through the defection of his son-
in-law in 1995.
    Chairman Shelby. We're also getting very close to 
sensitive, probably critical areas, and hence the defiance, 
right?
    Director Tenet. Yes, sir. But the fact is--the fact is, is 
that he understands very well that unfettered access is what is 
required of hi;n. We understand that someone with his track 
record of aggression--he's used aggression against his Arab 
brothers, he's used aggression against his own people, he's 
launched Scuds against Israel, he's used chemical weapons 
against the Kurds: He has a track record.
    We understand what he's about and what he would do if he 
were unfettered from UN sanctions and relevant resolutions. He 
understands he has to comply.
    Now, we are at an enormously sensitive stage in thinking 
through all this. Diplomacy is being used. We've moved forces 
into the region. We are taking this very seriously. And at any 
moment in time--and I'm always interested in newspaper stories 
about whether he's better off or worse off--at any moment in 
time, it should come as no surprise to anybody, that he is 
trying to exploit the current diplomatic situation for his 
benefit.
    At the end of the day, he's a desperate man, in terrible 
shape. I wouldn't want to play his deck of cards in a card game 
when he's dealing with the international community that I 
believe the United States has kept united throughout this 
period.
    Chairman Shelby. Director Tenet, how quickly could these 
programs be expanded, the programs that he has--chemical 
weapons, biological weapons and so forth--or revived if 
sanctions were removed?
    Director Tenet. Well, I don't think sanctions are going be 
removed anytime soon, Mr. Chairman. But I will make the 
distinctions and ask my colleagues to comment on this as well.
    Look at this in a continuum. Biological weapons, biological 
capability I think could be reconstituted very, very quickly in 
a matter of weeks. Chemicals in the continuum take some time of 
a--some kind of a longer time period, but I believe six months 
is not unreasonable. Ballistic missile capability is something 
that takes much, much longer to reconstitute.
    Chairman Shelby. Director Tenet, in recent months, as we 
all know, Saddam Hussein has successfully, up to now, defied 
the United Nations, widened the split within the UN Security 
Council, and dealt his old benefactor, Russia, back into the 
Middle East as a major player. Seven years after the Gulf War, 
he retains significant portions of his weapons programs and a 
significant capability to threaten the Persian Gulf region, if 
not immediately, then on relatively short notice.
    Do you agree that Saddam Hussein is better off today than 
he was before the showdown began?
    Director Tenet. No I do not, Senator, I think he's got less 
options.
    Chairman Shelby. Do You think he's more desperate today?
    Director Tenet. Senator, there's substantial force in the 
region. Operation Northern Watch. Operation Southern Watch. No-
fly zones. No-drive zones. We have this man in a box. And he's 
going to stay in a box. And at this moment in time, that's 
exactly what we should be saying to him. No other statement 
would be fair to our men and women who may have to go do 
something about this guy.
    Chairman Shelby. What are the key factors, Director Tenet, 
that you believe have encouraged Saddam Hussein to pursue his 
path of confrontation and defiance? Is it desperation? Or is it 
a hopeful split of the UN Security Council?
    Director Tenet. Well, Senator, I don't know him, never met 
him, haven't talked to him, and don't know what's in his mind. 
But I think he's someone who's--people often say he makes 
mistakes. I think he's also very adroit and clever at seeking 
the split the international coalition, taking advantage of 
different partners at various points in time. And he will 
continue to do that.
    But the fact is that we have maintained the integrity of 
the Security Council and the UNSCOM process, and unfettered 
access remains the goal of the UN Security Council today. I 
think as long as that position is maintained and is firm, I 
don't think he'll be able to exploit our position.
    And I'd welcome Mrs. Oakley's and General Hughes' comments.
    Chairman Shelby. Secretary Oakley.
    Mrs. Oakley. Well, I would certainly agree with this. I 
think it's important to understand that in all the years of the 
UNSCOM inspections that have gone on, Iraq has never really 
come clean. And they have never really given us the complete 
information on the baseline for their activities on biological, 
chemical, nuclear and ballistic missiles.
    So that there are a lot of things we don't know. We had to 
surmise various things, and therefore it's very diffcult to say 
how long it would take to restart all these things. And it's 
not just that we want to prevent any future development, which 
we would agree he will try immediately if sanctions are lifted. 
But we need to really understand where he was starting from, 
how long it will take, what are the key factors in his 
projects.
    And I think that is very important to understand--that not 
only do we need to keep him from moving ahead, but we really do 
need to find out what he was doing.
    Chairman Shelby. What some people have talked about--a lot 
of the pundits, a lot of people that make policy in this 
country said, basically, this Administration has only a 
reactive policy to Saddam Hussein. Do you agree with that?
    Mrs. Oakley. No, I don't.
    Chairman Shelby. Well, tell me why you don't.
    Mrs. Oakley. Well, I don't agree with it because I think 
the thrust of everything that we have been doing is to keep the 
pressure on Saddam Hussein and to keep him in the box that 
George Tenet has talked about.
    It is Saddam Hussein who keeps pushing the envelope to see 
what he can get away with.
    Chairman Shelby. But then we react to that, do we not?
    Mrs. Oakley. Well, of course we do.
    Chairman Shelby. Isn t that a reactive policy?
    Mrs. Oakley. Well, it is reactive if you look at it one 
way. We can also say it is a warning to him not to go any 
further.
    Chairman Shelby. For how long can we continue to warn him 
if he continues to defy us? And we hear it over and over. 
Shouldn't we have a definite policy to decide where we're going 
to go at the end of the day? And I'm not sure we have that 
policy today--at least, it's certainly debatable.
    Mrs. Oakley. Well, let me just say we're getting into 
policy issues that certainly the Department of State's INR 
branch is very close to. But I think some of those policy 
questions are more properly directed at other places.
    What we have done is to present the facts. These are the 
gaps in our knowledge. This is what we think he's trying to do. 
And with the evaluation that we think he will--that there's no 
way to stop him without pressure on him to stop trying to push 
the envelope.
    Chairman Shelby. But when you're dealing with what a lot of 
people would term an international scoundrel--you know, someone 
you have no reason to really believe the integrity of his--his 
regime has not been known anywhere for truth and veracity. We 
have got to be very careful and very cynical in dealing with 
him, or we should say very realistic.
    Mrs. Oakley. I would say that we are very realistic in 
dealing with Saddam Hussein. I think that none of the people 
with whom I work have any illusions that he is going to have a 
conversion or will not pursue these issues.
    The question of what we do about it and how we approach is, 
I think, in the policy realm. But let me just reiterate that 
there are no differences in the Intelligence Community on the 
dangers from Saddam Hussein.
    Chairman Shelby. I know I'm running out of time, but I will 
be generous with anyone else's including your's, Senator 
Kerrey.
    But Director Tenet, is your current statement about Saddam 
Hussein's position consistent with current intelligence, or is 
it a policy wish? Is there new intelligence which is reflected 
in your statement that maybe perhaps I didn't pick up? And if 
yes, can we discuss it or should we discuss it in a closed 
session?
    Director Tenet. Well, I think a more fulsome discussion can 
occur this afternoon. But I'm not expressing any policy wishes. 
You know, at any moment in time, anybody can make a judgment 
about whether somebody is better off or worse off if you--on 
the left hand side of the column, if you rack it all up--look 
at his military, look at his economy, look at his people, look 
at how he terrorizes them--these are not the actions of a man 
who is in control of his own destiny in the way that I 
understand it, in any event. And while at any moment in time 
the diplomacy gets rough and your partners may move in 
different directions, that has nothing to do with his strength 
or weakness. That has everything to do about how we lead this 
coalition and bring them to the right conclusion.
    And there are sensitive deliberations going on, and I think 
the Congress and your leadership at some point will bring into 
everything that's being thought about. But the fact is, I think 
there is a course, and the course is to use diplomacy and to 
use force and to bring the carrot and stick together to try and 
resolve this outcome in a way that satisfies US national 
interests.
    Chairman Shelby. Do you believe that he has, in fact, made 
certain accommodations with his neighbors? I wouldn't say 
friends, but neighbors. And a lot of neighbors believe that he 
is going to be there perhaps after we're gone and are 
evaluating it from a long-term perspective.
    Director Tenet. I've seen no evidence that the's made any 
accommodation with any of his neighbors, Senator.
    Chairman Shelby. Well, have they made some with him out of 
fear----
    Director Tenet. I've seen none, I see no----
    Chairman Shelby [continuing]. Not respect?
    Director Tenet. I see no evidence of that.
    Chairman Shelby. Secretary Oakley, you want to comment?
    Mrs. Oakley. I would like to comment on that, because I 
think that there has been a certain amount of attention to that 
in the press. Back to the comments that you made earlier that 
certain people have said that he has scored successes and that 
he has done various things.
    I think that in regard to Iran, we can say that his 
relationship there is marginally better, that certain 
arrangements have been made----
    Chairman Shelby. Define marginally.
    Mrs. Oakley. Well, there have been a visit during the OIC 
conference. They have been able to work out some arrangements 
for pilgrims coming to shrines and things like that. But I 
don't think our analysis would lead us to think in any way that 
that's a great improvement in relations. As I say, I think 
those issues are on the margins. They've eased it.
    There's no doubt that Saddam Hussein has made a great play 
for better relations in the area. And I would agree that he is 
very skillful and he does this. He has certainly played on the 
issue of the suffering of the Iraqi people, and there is no 
doubt that the neighborhood is tense. It is tense over what he 
is trying to do from the instability that his continuing 
defiance of the United Nations Security Council resolutions has 
produced.
    But I would agree that when you look at the hard facts, 
away from what people say, that he is not better off, and if 
you will, is in a desperate situation where he has faced strong 
US resolve. That doesn't make him less dangerous, because I 
think we all know, as has been said, that he's capable of 
making mistakes. But I think you really have to look at that 
almost country-by-country and issue-by-issue.
    Chairman Shelby. But we have to agree, and assuming that 
he's still there--I think he is; I hadn't heard anything--so 
that's a problem.
    Is it, Director Tenet, the Intelligence Community's view 
that the only way Iraq will destroy its weapons of mass 
destruction and rejoin the world community is under a leader 
other than Saddam Hussein? And what would an Iraqi leader other 
than Saddam Hussein look like in your opinion, not that we 
think it's imminent, but is it always a possibility?
    Director Tenet. Let's talk about that in closed session.
    Chairman Shelby. Closed session.
    Senator Kerrey, you've been very patient.
    Vice Chairman Kerrey. Thank you, Mr. Chairman. I just look 
like I've been patient.
    Chairman Shelby. Well, I was charitable, you know. [General 
laughter.]
    Vice Chairman Kerrey. I appreciate that, too.
    Well, Mr. Tenet, your answer qualifies you to be Secretary 
of Defense.
    Director Tenet. I don't want to be Secretary of Defense.
    Vice Chairman Kerrey. I want to ask you about the secrecy 
legislation, but I would feel compelled to comment on Iraq. I 
do think that the--it must be said that our current policy is a 
dual-containment policy. Contain Iraq, contain Iran. Prior to 
that, our policy was to support Iraq. And one of the problems 
we have got with Iraq right now is we didn't voice much 
opposition to their use of chemical weapons when they were 
using it against the Iranians. And so our previous policy was 
not containment. Our previous policy was support.
    And I think one of the difficulties that we are having is I 
think as long as we have a policy of containment of a 
dictatorship in Iraq we're going to struggle. And I hope at 
some point, we can begin to discuss a change of that policy to 
replace the dictatorship with democracy, because I think it's 
possible and clearly desirable.
    I said earlier that the best war we fight is the one we 
avoid, and the ones that we have avoided are the ones where 
there has been a transition from dictatorship to democracy. 
That's why the trend lines are good in Russia today. I mean, 
that's why I am encouraged even in the face of doom and gloom 
coming out of Asia, we have a liberal constitution now in 
Thailand. There was a military coup in the early 1990s. I mean 
this--democracy brings stability. Democracy decreases the 
threat.
    And I know that we have fear, well, it can't be done; the 
risk is high and so forth. But remember all the fears that we 
had going into Bosnia or the fears that a lot of us had going 
into Desert Storm. I mean, we typically underestimate our 
ability to do good and wonderful things. We have great power. 
We have diplomatic skills. We have, I think, the intelligence 
and the force to accomplish this miracle. And we ought to put 
that as the goal, not containment. I say it with great respect. 
I know it's difficult. I know it's not an easy change to make. 
I have great respect for you and your answers that you have 
given. But I do see the opening of the border with Syria, the 
problems that Jordan is having. I mean there's been some--the 
Pope has made a statement during the recess in opposition to 
the impact of the sanctions, that we can see in the Security 
Council the deterioration of support of a policy of 
containment.
    And it seems to me that we need to change direction. We are 
not the Foreign Relations Committee. We are not the Armed 
Services Committee. We're the Intelligence Committee. But I 
felt compelled to make once again a comment on that particular 
situation.
    Could you comment, Mr. Tenet, on S. 712? We have had some 
discussion about that. I know you're concerned about the--this 
is the bill that Senator Helms and Senator Moynihan have 
introduced. And I would appreciate very much if you would 
include in your answer, if you could, some of the concerns very 
eloquently raised by General Hughes at the end of his testimony 
having to do with the giving up of secrets that put us at risk. 
Could you talk a little bit about this secrecy legislation?
    Director Tenet. Senator, you know that--you and I've talked 
about this, and we're trying to work our way through. I want to 
sit down with Senator Moynihan. We're working through the 
Administration in terms of a final position.
    What matters to me the most is that we are more open, we do 
more on the openness front, but I have the ability to control 
and protect sources and methods.
    Vice Chairman Kerrey. Can you talk--Mr. Tenet, one of the 
values of an open session, it gives us a chance to have a 
conversation with the American people about this. Can you--and 
General Hughes at the end expressed with great passion the 
concern that he's got with the deterioration of our ability to 
acquire things that enable us to keep our soldiers, sailors, 
airmen and Marines, as well as the people that are doing 
operations that are out there trying to keep the American 
people safe.
    Director Tenet. Yes, sir.
    Vice Chairman Kerrey. The giving up of a secret is a crime, 
and it's a crime because it puts our people at risk, it risks 
lives. You know, the loose lips sinks ships line has real 
practical application even today.
    And I just want you to talk a little it about the 
importance of secrecy, why do we have it, what's the purpose, 
what do we accomplish as a consequence, and why do you think 
it's important for you to retain primacy of classification.
    Director Tenet. Well, Senator, the fact is, is that if you 
look at the leaking that's gone on in the last couple of years, 
it is unprecedented in our history, from my perspective. And it 
may make interesting reading for people, and there are people 
in this government who think it's in their interest to provide 
secrets that compromise sources and methods. We know what we 
know about what goes on in the world because of our ability to 
collect information. And embedded----
    Vice Chairman Kerrey. Mr. Tenet, can I just get you to--
with great respect, and I apologize for interrupting; I know 
It's not polite to do so--but when you use the phrase, sources 
and methods, I mean, in closed session we all understand that. 
But in an open session, put it in human terms. I mean, when you 
say source and method, aren't we talking about men and women 
who are out there doing things to help us keep this country 
safe? And aren't you talking about the possibility that they 
could die as a consequence of being compromised as well as not 
being willing to cooperate with us and provide the intelligence 
necessary to keep America safe?
    Director Tenet. I think we should switch places. You're 
doing a better job of this than I am.
    Chairman Shelby. Senator Kerrey is right, Director Tenet, 
on this. When we talk about sources and methods, we know what 
we're talking about basically. But do the American people 
understand? And I think it's very important that they 
understand where we're going.
    Director Tenet. Well, they need to understand that when I 
talk about terrorism, and weapons of mass destruction, and 
Iranians and Iraqis, that we have men and women all over the 
world who are putting their lives at risk every night to try 
and collect information to provide to the President that makes 
a difference to our security. They need to understand that 
technologically we have the means to collect intelligence that 
make a difference as to whether the men and women in uniform 
prevail when they go into conflict. All of those capabilities 
are put at risk when people freely and without regards for the 
consequences throw real secrets out into the public domain and 
jeopardize our nation's interests. They shut down our ability 
to do our job. They make it impossible for us to protect 
Americans. And I think they undermine the national security of 
the United States. And it's become a free good in this country. 
Everybody believes they have a right to a secret, and it's got 
to stop. And we're doing the best we can with the FBI to find 
people who are doing this. And when we do, we will fire them. I 
don't necessarily have to prosecute them. But firing them and 
making a public example----
    Chairman Shelby. Why not fire them?
    Director Tenet. Well, I'll settle for firing them, Senator, 
and humiliating them for what they've done to the country. 
Prosecution at times is a diffcult standard.
    Chairman Shelby. But is that enough, though?
    Director Tenet. No, it's not enough, It's not enough.
    Chairman Shelby. That's not enough. So why give them a tap 
on the wrist when they put people in harm's way, and perhaps 
cause people to lose their lives?
    Director Tenet. Senator, we're not going to tap anybody on 
the wrist.
    Chairman Shelby. Okay.
    Vice Chairman Kerrey. Will you give--just in a minute 
response, and I'll let the other Members ask questions.
    Director Tenet. Yes, sir.
    Vice Chairman Kerrey. In the legislation there is a 
national declassification center. And you've at least privately 
expressed some concerns about that. And again, I don't think 
you're going to be undercutting your authority or your capacity 
to work with either Senator Helms or Moynihan to talk openly 
about this. But you have some concern about what the center 
would cost and the way that it could undercut your capacity to 
do your job, do you not?
    Director Tenet. I have the ability to ultimately--since I 
originate--we originate, under my authority, so much classified 
information, I have to have the ability to be in the debate 
about something that is or isn't classified, and meets the 
public interest tests or doesn't meet the public interest test. 
We need more checks and balances into this system to ensure 
that I can have the confidence that I need to protect sources 
and methods.
    Now, I have a whole declassification factor that we've 
built out at CIA to start churning more and more material out 
about our historical record. We have a commitment to do that. 
But we need to do it with the proper checks and balances. We 
have an obligation to the America people to talk to them about 
our history and things that have gone in our history that where 
intelligence has played a vital role. But at the same time, we 
have a responsibility to protect real secrets. And I think 
Senator Moynihan's heart's in this place. He wants to protect 
real secrets. He wants----
    Vice Chairman Kerrey. And Senator Helms.
    Director Tenet. And Senator Helms.
    He wants to remove impediments that lumps everything into 
that real secret category, and I want to sit down with him and 
look at the cost, because it costs a lot of money, it's labor-
intensive. A lot of people are involved. We have 25 percent 
fewer people thanwe've had. We're being asked to do many, many 
difficult things that requires the time and energy of people. 
Technology may or may not help. But I think there's a balance that we 
can meet here with Senator Moynihan and with Senator Helms and with 
this Committee in moving a piece of legislation that satisfies what I 
believe are competing and legitimate requirements. And I've heard 
nothing from the Secrecy Commission or Senator Moynihan that would 
indicate he's opposed to any of that. And I want to sit down and work 
with him.
    Vice Chairman Kerrey. Well, they are competing and they are 
legitimate in both cases. And I think it's terribly important, 
both from the standpoint of being able to maintain our ability 
to keep secrets, to keep the American people safe, and also 
from a standpoint of keeping their confidence that we aren't 
unnecessarily classifying just to protect ourselves.
    So I appreciate not only your testimony but General Hughes' 
comments earlier, because I think they're very constructive and 
it will make it more likely that we'll change the law and be 
able to resolve those two conflicts.
    Thank you, Mr. Chairman.
    Chairman Shelby. Secretary Oakley, did you have a comment?
    Mrs. Oakley. Let me just add a footnote on that. I cannot 
underline enough the importance of confidentiality in 
diplomatic exchanges. It's not quite the same thing as 
information to DIA or CIA. But without that, diplomats cannot 
do their job. And I would simply say that you've got to 
remember that. And if we do think of diplomacy as our first 
line of defense, not secrecy, but confidentiality has to be 
kept in mind.
    Chairman Shelby. Senator Glenn.
    Director Tenet. Senator----
    Senator Glenn. Thank you, Mr. Chairman.
    Director Tenet. Senator Glenn. Mr. Bryant's getting lonely 
here. He'd like some questions.
    Senator Glenn. I'll do my best.
    Chairman Shelby. He's going to get some.
    Senator Glenn. I'll do my best. Let me just comment on 
about the security breaches here. You know, we crawl all over 
you, George, out there at CIA every time there's a problem that 
comes up and somebody leaks something or purportedly has leaked 
something. But I think one of the biggest problems is right 
here on the Hill. More leaks come out of here for political 
reasons and I know you--I'm not asking you to comment on this, 
but you were up here long enough to know that we need action 
right here, too, and we ought to tighten up our own operation 
here on the Hill. That's just a comment.
    Director Tenet. Senator, can I comment on that for a 
minute?
    Senator Glenn. At your own peril, yes. Go ahead.
    Director Tenet. I must tell you that this is--I'm not 
trying to ingratiate myself to you, but the Executive branch 
leaks like a sieve. I'm here to tell you that right now. And 
there's no doubt about that. And you look at it carefully, and 
there's guilt everywhere here. But the Executive branch and 
everybody sitting behind me knows it all too well, and it's a 
major frustration. And there are people all over this Executive 
branch who are violating a trust. So it's not one side or the 
other. There's plenty of blame to go on our side.
    Senator Glenn. I just didn't want anybody to think that all 
the leaks were in the Executive branch, at CIA, that's all.
    Chairman Shelby. Senator Glenn, if you would just yield for 
10 seconds.
    Senator Kerrey, the Vice Chairman, and I, as you know, 
Director Tenet, Mr. Bryant knows, Judge Freeh knows, we have 
asked the FBI on several occasions to do an extensive 
investigation regarding leaks. Everywhere, everybody, every 
source, because we want them to stop. I share Senator Glenn's 
concerns. I think it's widespread. I appreciate your 
acknowledgement because I know it to be true.
    Thank you. Sorry, Senator.
    Senator Glenn. No, thank you. That's all right. I probably 
should have used my opening--when everybody was making opening 
statements, I should have availed myself of that five minutes.
    But I want to make sort of a general statement here and 
then get your response to it. We may be able to go into it in 
more detail this afternoon when we are in classified session.
    I think we have new dimensions to our intelligence 
gathering and new dimensions to our security problem. These 
hearings are always titled National Security Threat, and I 
think that threat is changing, and changing rather 
dramatically. And I'm not at all sure that we're keeping up 
with it.
    We're accustomed to going through these things nation by 
nation--who's developing weapons, who's doing what. And we go 
nation by nation--China and all the rest of them. And in the 
past that's okay, but I think what's happening is over the past 
few years we've seen the availability of technology go to 
nations that are tiny little nations in the big scheme of 
things, or to terrorist groups or small groups, where these 
groups can have a firepower available to them or a mass 
destruction capability available to them that was only 
available to major nations in times past, 15 or 20 years ago, 
just that recently. In other words, they carry a big stick now. 
And this is tough to keep up with.
    Now, it's in two areas. In the WMD area. I--this sounds a 
little crazy maybe, but I'm not that much concerned about the 
nuclear matter now as much as I am about the BW and CW, but BW 
in particular, because we can keep up with satellites and 
everything else, we keep up with what's going on with regards 
to the huge industrial complex necessary for nuclear weapons. 
We can't keep up with stuff like--I asked Judge Webster once 
when he was here, when he was out at the CIA, I asked him in 
another hearing over in Governmental Affairs one day, what size 
room would be necessary for a valid chemical or biological 
weapons plant? He turned around and consulted one of the people 
on the first row and said, an area about the size of this 
hearing room.
    Now you folks can't--that's difficult to keep up with all 
over the world on every group that might have a BW plant that 
any graduate chemist can set up. And that's the tough part. And 
so this is now spreading to where it's--you know, we can--we 
say, well, but they can bring in nuclear weapons in suitcase 
size. But it still takes a very, very high degree of 
sophistication of nuclear knowledge and development capability 
to make the smaller weapons.
    And we have these 70- to 80-pound chest pack-types that are 
available in the military, and we're aware of those. But it 
still takes a very high degree of sophistication to make these 
things. So--but the BW, you think a BW brought in a suitcase, 
not monitorable, going through airports, things like that, 
brought in and then sprayed out of the back of a cab driving 
around Wall Street in New York and people start dropping dead, 
and you've done the same damage as far as casualties go over a 
period of five days or six days. You probably have the same 
number of people die as if you'd nuked the place. And that's 
not an exaggeration. It's true. That's the kind of threat that 
I think we have to think a lot more about.
    And we still tend to think of the--you know, we tend to 
think in terms of big nuclear weapons and all this, and I'm 
concerned about those. But I think we have a new dimension to 
the threat that we really haven't dealt with yet.
    Now, that's one area. The second area--and you've alluded 
to this several times through this morning already--we have an 
international, a worldwide dependence on computers now that is 
unbelievable. The President mentioned last night in his speech 
the cyberspace thing that we're into here, that just in a few 
years things that used to be available only to the most skilled 
scientists in the computer area are now available to everybody.
    And what does this mean? Well, it means, for instance, a 
hearing I conducted over there also some years ago was on the 
six electrical nodes, control centers, that we have in the 
Northeast United States, controls the whole electrical grid for 
that area. And they're computer-controlled now. And you have 
hackers getting into that thing. You just dump the whole 
electrical grid for the Northeast if somebody wants to get in 
there and do it. And you have Defense hackers trying to get in 
the Pentagon. We've had hearings on that. We have economic 
hackers. We had one Russian a couple of years ago that we're 
all aware of that dumped some of the accounts out of New York 
into his accounts in LA and another account in Zurich. And this 
is what's going on right now with the--we are becoming more 
computer-dependent around the world and yet more computer-
vulnerable than I think most of us realize.
    The purpose of war is to bring the enemy to its economic 
knees. We've usually done that by bombing and knocking the 
devil out them until we could march in and take over. We can 
bring a nation to its economic knees right now if you had the 
right trained computer hackers to get into the Defense 
Department. But not only that, but you get into Wall Street. 
You transfer some funds out of the Fed to George Tenet, George 
Tenet to me, and I get rich. And it's all over the place. 
You've got things all criss-crossed. And a few hundred hackers 
trained to do this could just wreak havoc. It could be--the 
results could be like war without the bombs. And I think it's 
that serious that we have to plan for.
    Now I don't know how we keep up with all this. It's the 
international flow of money. It's the transfer of accounts. 
It's economic hackers. It's--I've gone out to NSA and been 
briefed several times on this. They're very concerned about all 
this, as we--all you are very much aware also.
    So my question or comment that maybe we'll get into more 
this afternoon--but how do we keep up with this thing? Do we 
needdouble our HUMINT people that are out dealing with these 
things? Do we need a whole new emphasis on HUMINT or SIGINT or a 
combination thereof? What resources do you need? How do we keep up with 
what these threats are? Are we cooperating with other nation's 
intelligence, because other nations are concerned about this, too? It 
can hit them as hard as it hits us.
    You can imagine in this recent economic crisis in the Far 
East if we had suddenly dumped some computer hacker problems 
into Hong Kong and screwed things up there royally, that would 
have reverberated around the world immediately. So it's not a 
small item.
    What I'd ask you all is, what's our status now? What do you 
see? What--where--are we able to keep up with what the secret 
groups are or what nations might be developing this kind of a 
capability? You folks have a very tough job. It's--intelligence 
is always vital, first as a warning, and second as a force 
multiplier. But now we have all these new problems, and it's a 
very tough one. And we expect you to be clairvoyant and all-
knowing when you're not in areas like this. But how are we set 
up to handle these things of technology advances that give WMD 
capability to almost anybody that really wants it and gives 
it--and computer vulnerability that I don't think we're even 
beginning to learn how to deal with yet?
    That's a very long question, but if you could comment 
briefly on that, and maybe we can get into more of it this 
afternoon.
    Mr. Bryant, I will call on you.
    Thank you.
    Mr. Bryant. Thank you.
    I just want to comment first on the key to the best defense 
to these two issues--WMD and the computer intrusions issues--is 
number one, cooperation. The people that are sitting at this 
table in the law enforcement community have to have a strong 
partnership of exchange of candid information about what's 
going on, not only information from the international scene, 
from the Agency and DIA and other sources of information, but 
that information has to come in and we have to deal with it.
    From a law enforcement and a counterintelligence and 
terrorism perspective, the FBI set up in 1992 a computer 
intrusion squad in the Washington field office. Currently, we 
have a group of individuals where we're proposing basically to 
have a partnership with the Intelligence Community--DOD, the 
Agency, et al., and state and local law enforcement where this 
information would come in. And one, there would be an 
analytical look at what the issue is, what's coming in, what 
the threat is. And two, there would be an investigations 
branch, where we're running right now about 500 computer 
intrusion cases in the FBI. Those are coordinated with various 
entities in the Intelligence Community or working with state 
and local law enforcement.
    This is a start. But this issue is going to do nothing but 
get much bigger, and it's got to be a partnership. There's just 
responsibilities in a lot of different places. But we're trying 
to put together an Infrastructure Protection Center that would 
basically would answer some of your questions.
    As I said, the current state of the threat is increasing 
daily. And as far as the Weapons of Mass Destruction, with help 
of the Nunn-Lugar money for Defense and FEMA and the FBI and a 
lot of agencies, there's a lot of training going on, first-
responder training. But once again, it comes back to 
prevention, which is our core issue here. It goes to your 
Intelligence Community, our ability to stop these issues before 
they occur.
    Senator Glenn. Do you need more resources? The FBI?
    Mr. Bryant. Oh, I think yes.
    Senator Glenn. Okay. Good answer. [General laughter.]
    Who else wants to address this?
    General Hughes. Well, from a defense standpoint, sir, I'll 
mention that I think we understand these new threat conditions 
that you outlined quite will. We have been working on them for 
some time. We do know with regard to intelligence gathering 
that they pose new challenges in collection of information. And 
it's technical as well as human.
    I think you hit on the issues of human intelligence being a 
critical factor here, but the technical intelligence gathering 
to give us information about these new circumstances is very 
important.
    Senator Glenn. Let me ask, is HUMINT, is that the most 
important factor, or is HUMINT minimal compared to SIGINT, or 
do these groups all have contact with each other so you can 
intercept what they're doing or both?
    General Hughes. I'd prefer to address the details of that 
in closed session, sir.
    Senator Glenn. Okay.
    General Hughes. I should also mention that new defensive 
mechanism are called for. The protection of our civil 
infrastructure and our attendant military infrastructure 
against the kind of threats that you mentioned, such as 
organized or nation-state or subgroup-sponsored intrusion is 
very important. We have to work on that in the future.
    I'd also like to say with regard to weapons of mass 
destruction that new sensor technology is vital. We have to be 
able to sense the presence of these kind of weapons in 
proximity to not only our military forces, but our civilian 
infrastructure--ports, airfields, and cities. And that kind of 
sensor technology is being developed, but there are some 
technical hurdles to it right now, and we need to proceed with 
that on--in my view, on a national basis.
    Senator Glenn. Who else? Mrs. Oakley, do you have any 
comment?
    Mrs. Oakley. I think the State Department is also very 
concerned about this issue, particularly as it affects our 
relations with other countries. And I think that we have begun 
to focus on certain countries who may be developing an 
information warfare capability. I'd be glad to discuss this 
with you this afternoon in closed session. It's how you put 
that developing capability in the context of other concerns 
about terrorism, weapons of mass destruction, how we mount an 
effective diplomatic and law enforcement campaign to deal with 
that.
    I would say that I think it's something that we're going to 
have to give a great deal more attention to, and I would 
certainly agree that we've got to work together with all these 
agencies if we're going to get our hands around the problem.
    Senator Glenn. Mr. Tenet, do you have adequate resources? 
Do you think it's HUMINT, SIGINT? Do you need to double the 
size of any of those or what do you need to really keep up in 
this area?
    Director Tenet. I don't have an answer on the resource 
front for you. My intuitive answer is it is probably yes, given 
all the other things we're trying to manage in the technology 
arena. But this is something we should work through together in 
our budget cycle, because there's a lot of room here for 
growth, but we need a strategy that's sound first before we 
start asking for money and people.
    Senator Glenn. Yes. Well, my time is up, Mr. Chairman. But 
I think we need to spend a lot of time on this, because I think 
it's a real danger and a real hazard, and I want to set up to 
manage this as best we can. This is a very tough one. And when 
everybody has this kind of information available to them, some 
people are going to misuse it. And people that are willing to 
sacrifice their lives for whatever their misguided purpose may 
be, with this kind of technology are a real danger to us. It's 
a new way of making warfare.
    Thank you.
    Chairman Shelby. Thank you, Senator Glenn.
    Senator Allard.
    Senator Allard. Thank you Mr. Chairman.
    I want to bring up an area that I don't think anybody has 
talked too much about, but it's been in the news lately, and 
that's Cuba, with the Pope's visit down to Cuba. I'm curious to 
know just your interpretation of the current status as far as 
Cuba is concerned.
    Do you think that there is some possibility that we can get 
a transition to democracy if--maybe the change of philosophy 
within the current administration there or perhaps maybe a 
successor that may follow up from behind Fidel Castro?
    Director Tenet. I don't have any raw facts to throw at you, 
Senator, that informs my judgment in that regard. I mean, we 
all hope that there is a transition. Certainly, the Pope's 
visit we would hope ends up strengthening the institution of 
the church and that that institution becomes more vibrant in 
the pursuing of themes that really lead to a transition on the 
island. But I have nothing that I could say that says I've got 
an estimate in place that say, he will be gone, or there will 
be an automatic transition there. We would all be hopeful of 
that fact, certainly.
    But I don't--you know, there is--this is a place that's 
economically hasn't, you know, is not doing very, very well, 
and there are a lot of problems, But I have no--there is no 
opposition that I can point to. There is no ferment that I can 
point to at this point that leads me to tell you that--
everything in my gut tells me that there will be a transition 
at some point. All the factors are in place. How, when, the 
pace, who is involved--I don't have answers.
    Senator Allard. Now, strategically, they're certainly--
would you agree that they're not as big a threat as they were a 
decade ago?
    Director Tenet. Yes, sir, I would agree with that.
    Senator Allard. What is happening as far as drugs, you 
know. As I mentioned in my comments, I have a real interest in 
drugs and how they are coming into this country. And I know 
that there has been a shift in some of the way that they have 
been coming back. And certainly, the Caribbean countries are 
part of that and sitting right in among those islands is Cuba. 
And do we have some overflight issues with Cuba in some of 
these ways that might be coming into Florida?
    Director Tenet. Senator, I have to----
    Senator Allard. Or any other part of the continental United 
States?
    Director Tenet [continuing]. Take that one for the record. 
I'm not certain that I can take you and a drug connection to 
the Cuban mainland at this point. The transition to the 
Caribbean has been quite palpable. But I'd have to go get you a 
solid answer on that question.
    Mrs. Oakley. I----
    Senator Allard. Go ahead.
    Mrs. Oakley. May I just put in something about that? I 
think that ail through the Caribbean, in the State Department 
we view that all airspace at some time or another has been used 
by drug traffickers and has evaded law enforcement activity. 
But in our view, the available information does not suggest 
that Cuba has been a major route for drugs en route to the 
United States. I think that their military capabilities have 
kept that to a minor degree. It is, or course, always a 
concern, and there are always possibilities for corruption of 
officials, particularly in a weakening economy.
    Senator Allard. Let me ask the question just more directly. 
Are there narcotraffickers overflying Cuban airspace to bring 
drugs into the United States? And if they are, to what extent?
    Mrs. Oakley. I think--I would agree that we'd have to take 
that question. I think my general statement that I can give you 
here in the unclassified session stands. But I would have to 
get back to you in a classified manner on specific instances.
    Senator Allard. I would respect that.
    General Hughes. I'll just give you a short answer here, 
sir.
    The monitoring of airspace over Cuba and in the surrounding 
area is a military issue. And it is inappropriate for us to 
discuss that in this setting. We can give you an answer later 
today.
    Senator Allard. Okay, very good. I appreciate that.
    Thank you.
    Again, I'd like to follow up a little bit on what Senator 
Glenn was talking about in regards to the infrastructure. Are 
we prepared to deal with a sort of a major disinformation 
effort by some adversary as far as our computer systems in this 
country are concerned. I mean, there is that possibility with 
all the development on the Internet and what not. And there is 
a lot of information that comes out on the Internet. Some of it 
is bad and some of it is not so good. And obviously, there are 
enough people that are beginning to tune in and be conscious of 
what's happening on the Internet, including the media, is there 
a plan in action to deal with any kind of disinformation effort 
over the Internet?
    Mr. Bryant. Any type of disinformation campaign, wherever 
it is, once we know about it--and there's a lot of issues there 
as far as guidelines and what we can do and look at under our 
legal authorities--but if we're aware of a disinformation 
campaign from a counterintelligence view, or a criminal view, 
we're going to respond to it with whatever resources in the 
government are necessary to prevent it from becoming a major 
damage to our national security.
    And we do see--we have seen disinformation campaigns and we 
have frankly, stopped their effectiveness by basically 
notification and curtailing the damage.
    Senator Allard. Is there an attempt to monitor what's 
coming on the--I don't understand why there would be legal 
restrictions on----
    Mr. Bryant. According to the Attorney General----
    Senator Allard [continuing]. Just checking into the 
Internet and following it?
    Mr. Bryant. No. We cannot, as an investigative law 
enforcement agency, or counterintelligence, counterterrorism 
agency, under our guidelines, monitor the Internet. If we have 
a specific reason, certainly, we go look at it.
    Senator Allard. Even though--this is a mixed audience. I 
mean, it's an international audience. It's not only Americans, 
but it's people in Europe, South America----
    Mr. Bryant. Right.
    Senator Allard [continuing]. Africa, all the continents.
    Mr. Bryant. Right. But we have to have some specific cause 
or reason under an investigative authority to look at it. I 
mean, we just can't sit there and wholesalely, wholesale 
monitor that medium.
    Senator Allard. Is that true with all the enforcement 
agencies?
    Mr. Bryant. Well, it's true of the law enforcement agencies 
affected by the Attorney General guidelines----
    Senator Allard. I see.
    Mr. Bryant [continuing]. Which is what we operate under.
    Senator Allard. So this basically is a policy that was set 
up by the Attorney General?
    Mr. Bryant. Right. It's a guideline.
    Senator Allard. And there wasn't any legislation that put 
that policy in place? She did that by herself?
    Mr. Bryant. Well, it's been in effect for many years.
    Senator Allard. I see.
    Mr. Bryant. And it's come out of other issues where they 
thought that the FBI in particular was using techniques that 
were possibly intrusive. And so, as a matter of policy, we 
don't.
    Senator Allard. But it's--I'm having a hard time 
understanding this concept because to sit down and read a paper 
is not intrusive. You can print off a paper on the Internet. 
What is the difference?
    Mr. Bryant. I, as an individual private citizen, can go to 
my home computer and do whatever I want to, but as an 
investigative agency, I cannot direct investigative resources 
to wholesalely go on a public medium and monitor it for 
criminal or counterintelligence or counterterrorism.
    Senator Allard. So you can't even assign anybody according 
to the Attorney General's guidelines to read a paper on a 
regular basis, searching for some clue that might indicate that 
there's drugs being distributed in this country, for example?
    Mr. Bryant. I think if we have an indication of criminality 
or some area where we have jurisdiction, certainly we can 
monitor it. But as far as a wholesale review of the Internet, 
we don't do it.
    Senator Allard. That's kind of an interesting area. Maybe 
we ought to check into that a little bit. I didn't realize we 
had that kind of constraints on something as public as the 
Internet.
    Chairman Shelby. Senator Allard, if you'd yield just for an 
observation. Mr. Bryant, you're not saying, are you, as I 
understand it, that the FBI, if they had reason to believe that 
the Internet was used directly and indirectly for heavy drug 
trafficking you wouldn't investigate that?
    Mr. Bryant. No, that's not what I'm saying.
    Chairman Shelby. What----
    Mr. Bryant. What I'm trying to make clear here----
    Chairman Shelby [continuing]. Are you saying?
    Mr. Bryant [continuing]. We as a practice do not have 
analysts sitting down in front of the Internet reviewing all 
material. If we have reasonable belief----
    Chairman Shelby. OK.
    Mr. Bryant [continuing]. That there's some criminal or 
counterintelligence or counterterrorism activity that we can go 
to that medium and certainly use it. But we have to have 
basically an investigative interest to go to this medium.
    As I said, I as a private citizen can do whatever I want to 
do. But we have to have an investigative interest, namely a 
case.
    Senator Allard. Well, have you ever considered the 
possibility of maybe checking out the Internet from time to 
time for clues as to whether you have a problem or not?
    Mr. Bryant. Certainly, if we have an investigation. We do 
it.
    Senator Allard. OK.
    Mr. Bryant. But we have to have the investigation.
    Senator Allard. Thank you.
    Chairman Shelby. Mr. Bryant, are the guidelines required by 
the Executive Order, a certain Executive Order, is that 
correct?
    Mr. Bryant. Yes.
    Chairman Shelby. OK. Do you know who first brought out that 
Executive Order? Was this this Administration or was it a prior 
Administration?
    Mr. Bryant. No, I think it was a prior--Senator, I think it 
came out of some issues regarding issues many years ago 
regarding, I think, the CISPES investigation.
    Chairman Shelby. OK.
    Senator DeWine.
    Senator DeWine. Thank you, Mr. Chairman.
    George, let me turn, again, to Iraq. And I'm sure we'll get 
into this in more detail in the closed hearing this afternoon. 
But it's been pointed out these open public hearings do have a 
real purpose. And I think that is to help not only educate us 
but to educate the American people. But you talked about and 
some of the other members of the panel talked about the 
sanctions and what that has been able to do and what would 
happen if the sanctions were removed, and how quickly they 
would be able to get some of these production capabilities up.
    The other variable, though, is inspection. And that's what 
the American people keep reading about in the paper is the 
inspection problem. Describe for us what the problem is. 
Describe for us what the UN should be able to do. And compare 
where we are today versus where we were a year ago or two years 
ago. I mean, Saddam has not exactly been cooperative during the 
entire post-Gulf War era. He's never been, you know, totally 
cooperative. So what's the difference today? What's going on 
today that was--anybody? Ms. Oakley?
    Mrs. Oakley. Let me just say that----
    Senator DeWine. Let me just say, just, you know, put this 
into terms that the average American can understand. What's the 
problem? What's different today?
    Mrs. Oakley. I think what we're seeing--and again, I go 
back to what I said earlier--there are two basic problems in 
Iraq that we don't know what they were doing before, and we're 
not confident that we know where they are--what has been 
destroyed, what it would take to get back to their production 
and development of all of these weapons of mass destruction.
    What the inspections have enabled people to do is to find 
out a lot of information, but we also know that that 
information is incomplete, and so the inspections that continue 
help us fill in those gaps of our knowledge. The inspections 
also prevent further development from going forward. People in 
the inspections have gone in and they put seals and tapes on 
various machines and various facilities. And so they know when 
they go back to inspect that people have not been in those 
places because the seals have not been broken. And I'll be able 
to get into more detail about what we do know.
    What has happened now is that Saddam Hussein has said, all 
right, some of these sites that you've been visiting, you can 
no longer see. So we don't know what they've moved in those 
sites of their past activity, and we don't know what they're 
doing now for the future in those sites.
    Senator DeWine. So, excuse me.
    Some sites that we did have access--the UN did have access 
to, now no longer have access. That's one change.
    Mrs. Oakley. Well, that is one change. And there has been 
some discussion about the number of sites that would now be 
off-limits to UNSCOM inspectors. That number has been whittled 
down. But the physical dimensions of those sites are large 
enough that we don't know what they've moved into those sites 
and, if we can't get at them, we won't know what they're doing 
with them now. That's the major problem.
    Senator DeWine. And how do you know--speaking to the whole 
universe, how do you know what the universe is? I mean, how do 
you know that you've already in previous times identified all 
the sites?
    Mrs. Oakley. Well, you're----
    Senator DeWine. How do you know you know the universe to 
begin with, let alone----
    Mrs. Oakley. That's what we know we don't know. We don't 
know what the universe was. Saddam Hussein's government and 
officials and technicians, in our view, have never come clean 
on the extent of what they were doing before. It would 
certainly make it easier for future inspections if we knew what 
they had had before.
    But when we talk about information that you can put it on a 
disk, you put formulas, you can put production techniques, 
things like that, it makes it very difficult. The people who've 
gone in--andI would like to reiterate, what we have learned 
from the UNSCOM inspections is an incredible amount. But there are 
enormous gaps in what we know about where they were on the development 
of these weapons of mass destruction.
    Senator DeWine. Anybody else?
    General?
    General Hughes. If I could just make a comment to try to 
put this into the context that you asked for. Much of what 
Saddam Hussein has done in the past and perhaps in part what 
he's doing now is done to create perceptions that will be 
favorable to his goals. And as you know, he's brought us to the 
brink on two or three occasions in the past since the Gulf War, 
probably to generate some support inside his own country and to 
create a favorable climate in the surrounding nations and in 
the Arab world.
    This time, it's a little different because the adversarial 
nature of his belligerence is so difficult for us to accept and 
understand. We do have essential control of Iraq's external 
capabilities. They are not able to attack anyone or to project 
a military force or to undertake aggressive conflict against a 
neighboring nation. Even a small event would be met with 
immediate retaliation and resistance by not only us, but our 
allies.
    What we lack is the control of the internal circumstances 
inside Iraq so that we can prevent this kind of generation of 
crisis and this belligerent attitude that is resistant to the 
inspection regime and the sanctions regime.
    My personal view--and I hope it's somewhat reflected in 
intelligence--is that we probably are faced with some kind of a 
decision point here in the next few weeks and months, where we 
have to decide what it is we want to do with Iraq in the 
future. I agree that the circumstances that have developed over 
time have got us to a point where continuing everything that's 
happened in the past is very difficult. This is once again a 
policy issue that someone else will have to decide.
    From a military and from a intelligence standpoint, this is 
the context we're now in. Saddam Hussein has the capability to 
generate a crisis, and there's not much we can do about that 
right now except respond to the crisis.
    Senator DeWine. With the chair's indulgence, I just want to 
make sure again, in very simplistic terms, making it clear what 
you're saying, or I understand what you're saying. We have the 
ability to stop them from projecting, is what you said, 
external.
    General Hughes. That is correct.
    Senator DeWine. We do not have the ability to stop them 
doing this internally?
    General Hughes. Essentially, that is correct.
    Senator DeWine. A simplistic question would be then, what 
is--define then the danger to the neighboring countries and the 
danger to the United States.
    General Hughes. Well, in----
    Senator DeWine. What's the danger?
    General Hughes [continuing]. A narrow band of danger--there 
may be other dangerous conditions that could result--but the 
unfettered or continued development of weapons of mass 
destruction is a critical issue for all of us, and certainly 
for the surrounding nations.
    Now we--my personal belief is that he has somehow protected 
the essential knowledge and some few capabilities that he still 
has at his command to continue with weapons of mass destruction 
capabilities at some later time. And that's why he's being so 
difficult with us now--to protect that core capability he's 
managed to conceal from us.
    But much of what he had has been taken or destroyed by us, 
and that's very appropriate. And the countries that surround 
Iraq know that, and I believe appreciate it, on a national 
level.
    Senator DeWine. Thank you.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Roberts.
    Senator Roberts. Thank you, Mr. Chairman. And I thank the 
panel for your patience. I note with interest that our five-
minute question and answer timeframe is very comparable to the 
President's 20 minute State of the Union speech last night.
    I have several observations, and then a question. Senator 
DeWine and myself, along with the majority leader, Senator 
Lott, went to five countries in six days in Central America. 
And then later on I went with CODEL Stevens to Australia and 
New Zealand. And I want to acknowledge the comments by Director 
Tenet and General Hughes and others in relation to the drug 
interdiction programs. The briefings we received in the field 
are certainly commensurate with your observations. The same is 
true in regards to the briefing we received from Admiral 
Prueher in regards to the Asian flu, what the temperature is, 
what we can do as an antidote, more especially with Indonesia.
    And I would feel remiss if I did not make a personal 
comment, being a former Marine and always interested in the 
esprit de corps business, I think without question our 
intelligence agencies, more particularly the CIA, have been on 
a moral roller coaster for the past several years. It was my 
experience, I think Senator DeWine would back me up, I know the 
Chairman would, that in terms of renewed commitment and purpose 
and morale, thank you George for the job you're doing. We can, 
in the Committee, feel very strongly--I know the Chairman does, 
I know the Vice Chairman does--that we want to be of all 
possible help in regards to the regular work that has to be 
done. They're doing it and I certainly applaud your efforts
    I have a little bit different view in regards to the 
situation in Iraq. I wonder who has whom in the box? The 
Chairman asked whether or not we were proactive or reactionary. 
I was in Paris as part of the Trans-Atlantic partnership 
meeting and had to give a response to M. Hubert Vedrine who is 
the Paris, pardon me, the French Foreign Minister, who had more 
sharp elbows to say about the United States than an NBA 
forward.
    It seems to me that obviously Russia wants their Iraq 
arrearages paid, China wants the oil and certainly, France 
wants to sell it. And so, we have a--just a remarkable change, 
a significant change in the Security Council in that part of 
the world. All three countries are saying no to economic 
sanctions. All three countries are saying not to any kind of 
military contingencies although we areworking on that. The 
Arab-Israeli situation is changed vastly because of the leadership 
changes since Desert Storm. The Arab states are sort of like, you know, 
asking them in fact to say, will you give testimony against the Mafia 
without a witness protection program, and they're not going to do that.
    So, I think it is markedly different. And I think Senator 
DeWine's questions are right on the money. And in terms of 
practical effect, it affects our Security Council, it affects 
the whole balance of power in the Mideast. I don't know who has 
who in the box in this regards, and I'm not going to go into 
it. But I think the Chairman was right on the money in his 
remarks.
    NATO expansion. Do we have--I'm going to quote General 
Hughes. ``During this period, Russia's strategic nuclear forces 
will remain the backbone of Moscow's military might, preserving 
Russia's perception of great power status and protecting its 
vital national security interests.''
    And George, you've indicated, ``Finally, while Russia 
continues to seek close cooperation with the United States on 
matters of mutual concern, it is increasingly strident in 
opposing what it seems as US efforts to create an unipolar 
world.''
    I understand in regards to NATO expansion that we planted 
the flag. I understand it's probably going to happen. I 
understand we want the historical rewrite of Europe. I 
understand in terms of Hungary and Poland and the Czech 
Republic, that they want their self determination and they want 
entree to the European Common Market. I understand the 
President wants to make a speech on the 50 year anniversary of 
NATO. And I understand that we want to cage and tame the 
Russian bear. But the Russians don't see it that way.
    And in all of my discussions with the members of the 
Russian Duma, staff members, others, Mr. Primakov is off the 
reservation they're going to play the nuclear card to keep on 
the world stage. I don't think we have any chance for START II. 
I think it is fodder for the hard liners. And I think it's in 
our vital national security interests to take a hard look at 
this. What's the trade off?
    I notice that we had some paragraphs or some short 
sentences in regards to that. Could you respond, from an 
intelligence standpoint, about the trade off on what I consider 
to be vital national interests, START II and control of the 
nuclear capability of Russia vis-a-vis in regards to NATO 
expansion.
    Director Tenet. Well, Senator, you've asked a lot of 
questions. The point I was making in the testimony is that it's 
clear to me that the Russians have a sense of their own 
national interest and they're going to pursue it. And it's 
going to conflict with our's in some way, shape or form, and we 
have to be enormously mindful of it.
    This whole crisis in the Middle East is illustrative of it. 
They have economic interests. They have regional interests. 
They have an ability to maintain their own sense of who they 
are as a great power and they're about doing that. My only 
suggestion is, is we have to open our eyes and understand that 
that's what they're about.
    We went through a number of different periods in our 
relations with the Russians immediately after the Wall fell. I 
think they were falling all over themselves to do whatever we 
asked them to do. We're now at a period where this pragmatic 
nationalism has set in. They have national interests that they 
are going to pursue because they think they still remain a 
great power, and they're going to do things that benefit their 
own national interests and we have to just have our eyes wide 
open and understand what that's all about. Because, it will be 
a relationship that's both collaborative and competitive, and 
they will do things that we don't like and we're going to do 
things that they don't like, and we just have to accept that 
fact. And that's simply where we are with the Russians at this 
point in time.
    But we are--we have our interests and we are pursuing them 
and I don't think anybody is backing down from doing that. But 
we have a Russian entity that is evolving, that is working 
itself through who they think they are and what their interests 
are, and what they stand for. And managing that relationship 
will become more difficult than it has been in the past.
    Senator Roberts. And in terms of the contingency 
involvements that may take place, you are advising the 
President and others in regards to NATO expansion in regards to 
some of these hurdles and the law of unintended effects?
    Director Tenet. Yes, sir.
    Senator Roberts. Anybody else have any comment?
    One final question. If we lifted the economic sanctions is 
that going to hasten the transition in Cuba in regards to Fidel 
Castro? From an intelligence standpoint?
    Director Tenet. I don't know the answer to that question, 
Senator. I'll take that for the record. I don't know the answer 
to that.
    Senator Roberts. Now the Library of Congress can show you 
in terms of economic sanctions, they're very usually counter-
productive unless it's in our national security interests. When 
Senator DeWine and I were in Central America, the Southern 
Command indicated 31 out of 32 countries now, they are 
experiencing some form of democracy except one, and that's 
Cuba. And they are not exporting revolution now.
    It seems to me we would put Mr. Castro in a real pickle if 
we simply lifted the economic sanctions. I say that obviously 
without Senator Helms being here.
    Director Tenet. Well, we may, Senator. That may also be 
true. I'm no great lover of Fidel Castro and I would never want 
to do anything that he could take advantage of to extend his 
power as well. So, I understand all the academic discussions 
here, and maybe someone should look at this. But we'll get you 
a thoughtful answer from our community.
    Senator Roberts. Thank you.
    Chairman Shelby. Senator Robb, Senator Kerrey is going to 
have to leave to go to a luncheon. He's got one quick question, 
I believe. Is that correct, Senator?
    Vice Chairman Kerrey. Mr. Bryant was starting to yawn and 
nod off there, so I want to bring him back into this 
conversation.
    Chairman Shelby. Oh, the FBI never nods off. [General 
laughter.]
    Mr. Bryant. We're always alert.
    Vice Chairman Kerrey. Mr. Bryant, how do Director Freeh and 
you and Mr. Tenet--I mean, how do you plan to break this logjam 
that we've got right now on encryption legislation? We know--I 
mean, industry and you believe the status quo is unacceptable. 
The current law doesn't work. How do we bridge the differences? 
I mean that's what we have to do. We have to bridge the 
differences between where you are and where industry is and 
where privacy people are. I mean, we're not going to get--we're 
never going to get extremes on all sides.
    But this legislation--this law needs to be changed, both 
for the development of the market and for the development of 
our capacity to keep the American people safe and secure. If 
you could tell me what you think--what is the intent of the 
Administration to organize this effort in 1998?
    Mr. Bryant. Just a couple of statements. Just----
    Vice Chairman Kerrey. You have to answer, don't you, Bob?
    Mr. Bryant. Just to restate a couple of issues here.
    The law enforcement community, in particular, believes that 
the market-based solutions probably won't work, and we are 
pretty concerned that we have to have--I don't want to tell 
some--some father that we've lost a child because we couldn't 
break the telephone conversation or we couldn't get to a 
storage on a disk or something like that. And that's all we're 
saying. We have to have--all we want are the authorities that 
we have now. In other words, we want to be able to get a court 
order to do electronic surveillance or to do a search and be 
able to get into encrypted areas such as telephone 
conversations or computers and do what we do now.
    To break this deadline, we see the national--we're 
concerned about it because the way this is going is we're all 
aware that there's going to be a time and period that we're 
basically not going to be able to use investigative tools that 
are critical to national security and to law enforcement. And--
--
    Vice Chairman Kerrey. But you also know that--I mean, I can 
write out a code on a piece of paper and haul it out of the 
country. This is not a difficult thing to prevent me from 
exporting, and we know this thing is slipping away from us. So, 
from your standpoint, the current law is not acceptable. From a 
market standpoint, it's not acceptable. So what are we going to 
do to break--what does the administration intend to do to break 
this?
    Mr. Bryant. Well, I will speak for the FBI.
    Vice Chairman Kerrey. Okay, good.
    Mr. Bryant. The thing I see is that we have to have some 
ability to have--to have a key recovery so that we can have 
access to plain text information so we can use it for law 
enforcement purposes and national security purposes. And I 
think there are several bills floating around. I think you--I 
think you sponsored one, and I think there's one that's come 
out of HPSCI, and I think some of those bills that we're just 
going to have to look at very carefully because I think it's a 
critical national interest. And I think it's a very thoughtful 
discussion because there's a lot of market forces here. But we 
would like to see on U.S. manufactured devices and encryption, 
that there be some kind of key recovery system or anything 
exported in.
    Vice Chairman Kerrey. Yes, and let me just say to suggest 
some language changes and ways to bridge the gap. I mean, I 
think we can use the market to solve this problem. I don't 
think the market all by itself is going to. We're going to have 
to have law to intervene in the market in order to be able to 
keep people safe. But I think we can use market solutions. I 
mean, that's basically what we're doing. We're trying to set up 
a mechanism where a market can develop for key recovery. I 
mean, that's because key recovery is only being used by the 
marketplace. If it wasn't being used by the marketplace, it 
would be a much more difficult transaction to accomplish. I 
mean, the language on both sides of this argument is so 
provocative, it seems to me that what we need to do is get a 
list of differences and try to resolve the ones we can.
    Chairman Shelby. Senator Kerrey, can I----
    Vice Chairman Kerrey. Just go down the list. I mean, I've 
met with industry. I've met with the privacy groups. I've met 
with you and NSA on a number of occasions. And it seems to me 
that the differences are nowhere near as great as the rhetoric 
would lead one to believe.
    Chairman Shelby. Are you saying, Senator Kerrey, or are you 
not saying that the marketplace will do it all? I doubt very 
seriously that the marketplace will do it all. I have some of 
the concerns that the FBI has.
    Vice Chairman Kerrey. No, I am not saying that at all. I'm 
not saying that at all. What we're trying to do is write 
legislation that would enable the market to develop the 
solution. We're going to use the power of market-based 
solutions. I mean, you've basically got private sector people 
out there, whether it's a banking institution or a power 
company or a small business of any kind, saying I'm 
communicating. I'm going to talk. You give me an individual.
    I mean the goal of the McCain legislation is to develop a 
secure public network for the purpose of developing commerce, 
and for the purpose of enabling us to continue in national 
security and law enforcement to do the business the American 
people want us to do. So what I'm saying is that I think we can 
bridge the rhetorical gap. What's needed is to make a list of 
where there's differences and try, where possible, to bridge 
them. But the current status quo leads me to have a very low 
level of confidence that the current law's going to be changed. 
That's bad for the American people from the standpoint of 
domestic and international security. It's also bad from the 
marketplace. Everybody loses if the current law's not changed.
    Chairman Shelby. Senator Kerrey, I have one quick 
observation just for the record here.
    As part of the marketplace, as I understand it and have 
witnessed it all my life, you're going to have a lot of illegal 
activity in any marketplace that I believe that the law 
enforcement people should have an opportunity to put a handle 
on in some way.
    Vice Chairman Kerrey. Well, in fact, one of the things that 
very often is not discussed--I mean, there's an article on the 
12th of January 1998 and Jack Nelson from the Los Angeles Times 
talking about U.S. firms estimating $300 billion of losses in 
1997 coming as a consequence of espionage against them. So I 
mean, there's an interest in the marketplace to develop 
security that I think is consistent with your own goals and 
objectives. I mean, what you're trying to do is help them 
accomplish this job. You want to help them become more secure. 
I think there are parallel interests here that don't seem 
obvious because the rhetoric sounds so different. You listen to 
one side describe it and you would think it was completely 
different and there's no possibility of compromise because 
they're very often presuming. I mean, the bill that came out of 
Senator McCain's Committee contains some concessions in there 
to the business community that I've talked to people on the 
business side, they're completely unaware of it. They're 
unaware of some of the things that were done, and I just--I'm 
very fearful, sitting here in the early part of the session, 
that we're going to end up in the last part of the session 
having done nothing because we're presuming the differences are 
enormous. And I think we need a process. And personally, I 
think it's going to have to be led by the President in some 
fashion, saying, okay, it's time to resolve the conflicts. It's 
time to make a list of the differences and resolve as many as 
we can, and if you can't resolve them, get it to the Floor and 
get the law changed.
    You know, we never get 100 percent of what we want. But we 
know that the current law is not acceptable. We're experiencing 
losses on the commercial side. We're experiencing loss of our 
ability to be able to protect the American people. I mean, if 
we drift on this one, I think that we're going to have very, 
very unhappy outcomes.
    Chairman Shelby. Senator Robb.
    Thanks for your patience.
    Senator Robb. Thank you, Mr. Chairman.
    I apologize that I could not be here for the earlier part 
of the hearing. We're having a full Armed Services Committee 
hearing at this time, and several Members serve on both 
Committees, so we're moving between them. And so as not to 
repeat any of the areas that have already been covered with 
this panel, I asked Mr. Grant, a member of the professional 
staff, ``What hasn't been covered so far?'' He said, ``Well, 
encryption hasn't been covered.'' I said, ``Well, I'll just, 
I'll take that one up very quickly.'' It's one that I have an 
interest in, and my views are not necessarily entirely in sync 
with the Vice Chairman's. And when he asked his question, I 
thought, well, what else hasn't been covered? And Mr. Grant 
said, ``Well, economic issues haven't been covered in any 
detail.'' So let me take a quick shot at those. If they have 
been covered, somebody was out of the room when they did. I'm 
sure they have at least been alluded to.
    And I might say, first of all, I was walking here with the 
Chairman of the Australian Foreign Relations Committee and 
visiting with him. He was observing some parallels between some 
of the things they do and the way we do business here.
    I might add--not for the benefit of any of the Committee 
Members who are, at the moment, not here--that I hope that the 
number of open hearings this Committee holds is very limited. I 
think this threat assessment hearing and the confirmation of 
DCIs are about the limit of what we ought to discuss in an open 
hearing. There are other Committees for policy questions, and 
both the Armed Services Committee and the Foreign Relations 
Committeethe appropriate venue for many of the matters to be 
discussed. We've been having some internal discussions here on that 
particular point.
    But I think this hearing is important, and I only raise the 
subject because when talking about key recovery in the 
encryption area, we quickly get into areas that we would not be 
able to discuss in public. I think economic analysis, however, 
is one of the few subjects that lends itself relatively easily 
and appropriately to public discussion.
    There have been very severe problems recently in East Asia, 
affecting most of the financial markets in Asia, around the 
world, and in this country, many of the real experts are very 
much concerned about what is happening. I had occasion to have 
dinner with Hank Greenberg of AIG a few nights ago. It was an 
off-the-record dinner, so I won't quote anything he said. He 
gave a very succinct and important insight as a major financial 
player in that area of discussion.
    But I wonder what Mr. Tenet and others could tell us at 
this point about your view of where things stand and what 
actions--well, I won't get into the issue of our policy 
response. Provide us an analysis of where things stand at this 
point with respect to Indonesia and Korea and the possible 
impact on Japan and China regarding the whole question of 
economic security and financial markets.
    Director Tenet. Well, Senator, in my opening statement, I 
went through some of the factors that affect this crisis. I'm 
going to say just a very few things, because I want to be 
careful about what we say about this financial crisis. And the 
less we say as an Intelligence Community, I think the better in 
some respects in open session. I think one of the things that 
we worry about
    Senator Robb. I was searching for something that I could in 
good conscience discuss in open session, and I thought this was 
appropriate for open discussion. And I will accept your 
admonition that----
    Director Tenet. No. The concern I have----
    Senator Robb [continuing]. Comments on this area
    Director Tenet. The concern I have is people speak about 
these crises, and then 20 minutes later the stock market 
plunges by 50 points, and we're not economists, and I'm 
certainly not an economist. But from the political stability--
--
    Senator Robb. Don't clear your throat, whatever you do.
    Director Tenet [continuing]. Perspective, these countries 
are now being asked to do rather dramatic things internally 
that will have political consequences and consequences for 
their stability.
    All of that matters a great deal to us. We have been deeply 
engaged here. We see them as strategic partners. They have been 
part of an emerging market boom. They believe that they've been 
playing by the rules, and all of this capital has been infused 
into their countries and they've been great consumers. And now 
they see a way of life start to erode on them. And the 
political turbulence it creates as they implement austerity 
measures, as they're asked to clamp down, have consequences for 
how they view us, what the long-term engagement of the United 
States is in the region, and quite candidly, what the long-term 
influence of the Chinese may be in taking advantage of this 
crisis. Big, stable power with lots of hard currency reserves.
    So those are the things we have to watch. I don't want to 
opine on how it all turns out. But I think engagement on the 
part of the United States in this region is absolutely critical 
for our long-term security interests. So while people are 
focusing on Wall Street's reactions and interest rates and bond 
trading, we have, from a geopolitical perspective, invested a 
lot here, and we have to help these countries work through 
this. Because it has serious consequences for us.
    I don't know if General Hughes wants to say anything or 
not.
    General Hughes. No. I don't wish to make any comment on 
this topic in open session, sir.
    Senator Robb. All right. Let me just ask one other question 
that may be answerable in open session. I'll begin with an 
observation that last night the President, in his State of the 
Union message, covered a number of topics. One of the few that 
seemed to have a relatively clear-cut delineation in terms of 
response from the two sides of the aisle had to do with a 
potential IMF bail-out.
    Again, I won't ask you to go into the specific implications 
there. But I would like you to discuss the relationship among 
economic security and related conditions, political security 
and related conditions, and military security and related 
conditions as you see them, to the extent you think you can do 
so in open session.
    General Hughes. Well, I think it's very clear that there 
are connections between the societal conditions brought about 
by economic change and the security conditions attendant to the 
society. That's probably obvious to everyone.
    The nature of those conditions and how they evolve over 
time is something that we need to keep our eye on and clearly 
understand. Our involvement in those conditions is an entire 
another matter. It requires very careful policy decisionmaking 
and very careful activity.
    What we can or cannot do in the military sphere to help 
stabilize conditions or to help control circumstances is a 
topic for discussion at another time.
    But there are issues that we should examine from the 
standpoint of our assistance to other nations, our work with 
allies, and our approach to understanding their internal 
security requirements and assisting them where we can. And the 
U.S. military is well aware of that.
    Senator Robb. All right, this one last question, Mr. 
Chairman, if I may, to just follow up in this area.
    Is it your sense at this point that our intelligence 
institutions are capable of gathering most, if not all, of the 
relevant information for economic analysis from open sources--
economic only.
    Director Tenet. Well, let me turn the question around a 
little bit. I mean, certainly from open sources, we can collect 
everything that's out there. There's a more fundamental 
question about whether we're positioned over the long haul to 
do this kind of work in terms of people, capability and 
collection profile. And I would--I would say to you that I 
think the record is mixed in that regard, and this is something 
that I'm paying a lot of attention to right now.
    Senator Robb. Senator Moynihan had some pretty specific 
views at one point in terms of past efforts in that area. But--
--
    Director Tenet. Well, the question, Senator--this is an 
important question. We don't want to do economic espionage. We 
have no interest in any of that. The question is where----
    Senator Robb. Well, let me just interrupt then. What if 
we've been targeted for economic espionage, do you feel that we 
have adequate resources in place to effectively counter 
targeting our efforts?
    Director Tenet. Let me--I'll turn that over to Mr. Bryant, 
who can talk about how we counter those efforts. The point I 
was making is how our community covers economic issues has to 
be thought through more carefully than we have. We have to 
identify the areas where we could really add value. There's 
very little I can tell Secretary Rubin about what the markets 
are doing today. I shouldn't try and recreate that capability. 
But there are discrete issues where we may, on a macroeconomic 
basis and a warning function, provide real insights to our 
policymakers. And we need to carve that turf up and build it 
over the course of the next 20 or 30 years, and be very, very 
attentive to this area. That's what I would say.
    Now on the economic espionage side, I'd ask Mr. Bryant in 
terms of how you counter it. But on--in terms I'll 
categorically state, we don't do it offensively, we won't do 
it. It's not in our interest to do so. It makes no sense.
    It's been one of the red herrings hanging around our neck 
for years. It's not the kind of thing an Intelligence Community 
should do for our private sector.
    Senator Robb. Thank you.
    Would you like to comment just briefly on our capability of 
countering anything that might be targeted against us? Without 
going into----
    Mr. Bryant. Yes, just very briefly.
    The passage of the economic espionage statute in 1996 was a 
major step forward. And basically what that does is says--it 
tells the world that we're going to protect our economic and 
technological research and development. That's been a major 
step forward.
    There's a lot of other issues which I'll go into this 
afternoon that I can talk then.
    Senator Robb. Thank you.
    Please.
    Mrs. Oakley. Let me just make one comment on this. I think 
that your remarks and what we've heard from my other colleagues 
underlines one of the basic facts of the modern world--that so 
much information is out there through open sources on markets, 
the psychology of the market. What we really haven't talked 
about is the handmaiden of intelligence, which is analysis. And 
I think what all this has brought forward is the need to make 
sense of all this information and to understand it and to 
provide just not the raw data, but the analysis of what is 
happening, why it happened, and what's going to happen in the 
future. And this is an area where I think the Intelligence 
Community, perhaps, needs to sharpen its tools to look to this 
other side of analysis.
    Senator Robb. Amen.
    With that, I think that's a good place to leave it.
    Thank you, Mr. Chairman. I appreciate your patience.
    Chairman Shelby. I know it's lunch time for a lot of 
people. But I've got a couple of more areas I'd like to get 
into and I'll try to be brief.
    Director Bryant, for some time now, the FBI has been 
investigating reports that the Chinese government attempted to 
influence the American political process by illegally funneling 
campaign contributions into our electoral process. If these 
reports are true, they go to the very heart of our system of 
government. So far, the American people have had to read about 
this investigation through leaks in the newspapers, television, 
and so forth. I'm well aware of the sensitivity of the 
intelligence in question and the fact that a number of counter-
intelligence and criminal investigations are ongoing.
    But is there anything this afternoon that you can share 
with the American people at this time? If not, when do you 
expect to announce the results of these investigations?
    Mr. Bryant. On that question, I do not feel free to comment 
in this forum at this time. All I can----
    Chairman Shelby. But you do acknowledge there is an ongoing 
investigation that we all know.
    Mr. Bryant. There is an ongoing criminal investigation.
    Chairman Shelby. And there will be closure on that, 
hopefully.
    Mr. Bryant. There is an ongoing criminal investigation, 
which I'm not free to comment on.
    Chairman Shelby. We understand that.
    Mr. Bryant. And the counterintelligence aspects, there's 
been briefings made periodically to the Oversight Committees as 
to the progress and what's going on as far as the 
counterintelligence side.
    Chairman Shelby. But there's nothing you can add to tell 
the American people today at this point in time?
    Mr. Bryant. No, there's not. There's nothing I can add at 
this time.
    Chairman Shelby. Director Tenet, I know that as head of the 
CIA you're not charged with conducting a criminal 
investigation. Is there anything that you could add today, from 
a purely intelligence or counterintelligence view point to the 
American people or will you await the outcome of the complete 
investigation?
    Director Tenet. Yes, sir, there is not anything I can add.
    Chairman Shelby. Members of this Committee are very aware 
of China's record of reckless proliferation of the most 
dangerous and threatening weapons and technologies, which 
reportedly includes helping Pakistan develop a nuclear weapons 
capability, providing Pakistan with M-11 missiles and a factory 
to build more such missiles. Selling Iran anti-ship cruise 
missiles that threaten US naval ships and personnel in the 
Persian Gulf, as well as the flow of oil from the region. 
Selling Iran chemical and biological weapon related and missile 
related materials and equipment. Assisting Iran's nuclear 
program and other destabilizing actions.
    In your discussion of China, I'm surprised that you do not 
mention any of these matters, which are hard facts, things that 
have happened and that have damaged and continue to damage US 
interests in your testimony. Instead, you go into considerable 
depthon all of the things that the Chinese are reportedly ready 
to do or about to do to respond to our concerns about past behavior.
    I'd like to turn to the issue of China's proliferation 
activities. Both Secretary Oakley and General Hughes identify 
the weapons of mass destruction as most critical threats to US 
national security.
    Secretary Oakley, I won't summarize all the points that's 
been here. But I think it's fair to say that this litany 
consists primarily of things that have not happened yet. And is 
generally phrased in terms of what China has, as I have 
alluded, agreed to do, or committed to do. Of course, China has 
committed to do, or not to do a lot of things in the past with 
respect to the proliferation of weapons. And our experience 
with these commitments has not been a positive one yet.
    Many of the transfers that I have described have violated 
international treaties and agreements. Many of these actions 
appear to have triggered the requirements for sanctions under 
US law.
    Secretary Oakley, you concede that even though China 
appears to be--that's your phrase--living up to it's May, 1996 
pledge not to provide assistance to unsafeguarded nuclear 
facilities, it, quote, ``has not made equivalent progress in 
other areas.'' While in another area, your words, ``key 
loopholes remain.''
    You also note correctly that while China has apparently 
taken itself out of the business of exporting ballistic 
missiles, that this is not enough. The reason, I understand, 
that it's not enough is that China has reportedly sold an 
entire missile plant to Pakistan and so forth.
    In short, I believe that your statement is long on hope, 
with all due respect, but ignores a bitter experience, a long 
experience. This seems to be, to me and other Members of the 
Intelligence Committee, the Administration's position with most 
of the issues relating to China.
    It's especially problematic today when the Congress has 
been asked to assent to the implementation of the 1985 US-China 
Nuclear Cooperation Agreement, which is based on the 
Administration's conclusion that China has now--has now, 
Secretary Oakley--decided to be a responsible world power and 
cease nuclear weapons-related assistance to any state other 
than the five declared nuclear states. This conclusion is in 
turn based largely on the Chinese commitments made at the 
recent summit and its record of apparent but not unambiguous 
compliance with the May '96 pledge.
    I hope, I certainly hope, that China has changed its views 
on the desirability of proliferation of weapons of mass 
destruction. And I know you do. I have not yet had the 
opportunity to read all of the agreements and the materials in 
support of the Administrations decision that I understand have 
been submitted to Congress for its review.
    But I do know myself that the record to date, and therefore 
I tend to agree with Director Tenet's statement, quote, ``that 
the jury is still out on whether the changes in Chinese 
proliferation behavior are broad enough in scope and whether 
they will hold over the long term.''
    Secretary Oakley, you're a very important member of that 
jury, so I'd like to ask you this. Given the long history that 
you're familiar with of Chinese proliferation activity, China's 
poor record inkeeping previous commitments, the grudging, last-
minute nature of China's most recent promises, and a lack of a 
meaningful track record on most of these recent pledges, do you feel 
that the record supports a finding that China has changed its policies 
sufficiently to support implementation of the '85 agreement? And if so, 
why?
    Mrs. Oakley. I think you've raised----
    Chairman Shelby. I know that's a long----
    Mrs. Oakley. Yes, it is. And it's a very important 
question. We have submitted various views in my written 
statement. I think that one has to understand the role of INR 
in a question like this. We worked very closely with the rest 
of the Intelligence Community to prepare what we call a 
statement of facts or to present the facts on a situation.
    I think you've put your finger on it, that often these are 
not as clear-cut as we would like, that there is ambiguity. 
Certainly the direction that China has taken----
    Chairman Shelby. Ambiguity plus a history, has it not?
    Mrs. Oakley. Ambiguity and a history and what they've said 
and various things like that. All those factors, in the end, 
have to be weighed by the people who make the decisions on 
whether they have abided by these agreements.
    If I may, I would like to discuss some of this very----
    Chairman Shelby. In closed session?
    Mrs. Oakley [continuing]. Very important question in closed 
session this afternoon.
    Chairman Shelby. That would be fine.
    Director Tenet, when you say in your words, quote, ``the 
jury is still out,'' what do you mean? What specific Chinese 
activities do you have in mind? What would you like to see 
before the jury? Would you like to discuss that later?
    Director Tenet. Yes, well, Senator, I've submitted the 
classified testimony which I think goes through all of the 
facts in greater detail.
    But I think the point I make--the lead sentence is the 
Chinese have enjoyed very deep relations with proliferant 
countries for a long time.
    Chairman Shelby. Like Pakistan.
    Director Tenet. And that's something you have to weigh. So 
these relationships have to be watched very, very carefully. 
And as you'll see from the classified statement of facts, there 
is a mixed record. There are some positive things and there are 
some negative things. And we can go through that this 
afternoon, and I think----
    Chairman Shelby. But when any nation signs an agreement, 
agrees to something----
    Director Tenet. It doesn't mean anything until they act, 
Senator.
    Chairman Shelby. Absolutely. But it should mean something, 
shouldn't it?
    Director Tenet.When you sign an agreement, you must abide 
by the agreement. And our job is then to prove to you that 
either one or the other is happening.
    Chairman Shelby. Absolutely.
    Getting into my last area of inquiry here and concern, 
ballistic missile threat, the most critical threat that I 
understand faces the US today is the threat of attack by 
ballistic missiles bearing nuclear, biological or chemical 
weapons. The Intelligence Community has no more serious 
responsibility than to monitor this threat. Today, with more 
and more nations--many hostile to the US that are seeking to 
develop ballistic missiles to deliver weapons of mass 
destruction, I believe it's very important that the community 
faces this to identify and to monitor these new threats and to 
alert and support policymakers in their efforts to eliminate or 
counter those threats.
    The Intelligence Community is in the process of completing 
an update to the '95 National Intelligence Estimate of Emergine 
Missile Threats to North America during the next 15 years. As 
we all know, the previous National Intelligence Estimate was 
the subject of a number of criticisms, many of which were, in 
my view, justified.
    Some of the most important deficiencies of that--especially 
critical when the consequences of mistaken analysis are 
potentially so enormous--were a failure to explore possible 
alternative futures, a failure to identify key assumptions, and 
a failure to quantify the level of certainty of the judgments 
reached, and a failure to fully address all of the strategic, 
political and psychological aspects of this complicated 
problem--for example, by excluding Alaska and Hawaii from 
certain key judgments or by simplistic assumption as to the 
motives and likely courses of actions of hostile actors.
    We have talked about this in open session before, and 
closed. We've talked about it in the Appropriations Committee, 
Subcommittee on Defense, on which I serve, which Senator 
Stevens chairs and which Senator Inouye--formerly the 
Chairman--is the ranking Democrat. They voiced their concerns 
before.
    Director Tenet, would you describe for the Committee today 
how the Intelligence Community has addressed these and other 
deficiencies in preparing the current National Intelligence 
Estimate?
    Director Tenet. What I'd like to say to you, Senator, is--
one, I've seen a draft. It has incorporated many of the 
challenges that you and Bob Gates laid down to us in reviewing 
our last draft. I believe it meets all those challenges. We're 
still working on it. We'll be here early with it. It won't take 
until March to finish it and I think you will see a document 
that reflects all of the concerns that were raised with it, and 
it's very, very thorough, and very, very deep in terms of this 
subject.
    I think the thing that will jump out at you is, if there's 
a headline out of it for me was the growing concern about the 
introduction and proliferation of medium-range ballistic 
missiles. Everybody focuses on longer-range missiles, but the 
proliferation of medium-range ballistic missiles and their 
impact on US security, I think, is something that is heightened 
and you will get a keen sense of that in this estimate. And I 
think it's something that you--when you see the product, I 
think you will agree that it's been very well done.
    Chairman Shelby. The history of ballistic missiles is 
largely, as everybody on this panel knows, is a history of 
unpleasant surprises. For example, Soviet missiles in Cuba, the 
Soviet ICBM buildup; Iraq's use of extended-range SCUDs during 
the Iran-Iraq war; and the acceleration of Iran's missile 
program with extensive, obvious Russian assistance.
    Have your analysts addressed the uncertainties and 
potential alternative futures inherent in analyzing this 
difficult intelligence target?
    For example, by the use of red teams, how have they 
addressed potential variations, such as the transfer of missile 
know-how and equipment from third countries? The substitution 
of lighter biological warheads for heavy first-generation 
nuclear devices? The effects of improvisation, corner cutting 
and alternate technical paths? And the willingness of some 
leaders to do what we call the unexpected, including things 
that analysts with an American cultural background may find 
very illogical or even crazy? Or to marshal a nation's 
resources for high priority military goals?
    General Hughes, I first want you to comment on that, if you 
would.
    General Hughes. Well, I can look you in the eye and tell 
you that we have taken virtually all of the issues that you've 
mentioned into account. I do think that----
    Chairman Shelby. And these are issues that should be taken 
into account.
    General Hughes. They should be taken into account.
    However, there are gaps in our knowledge base that we have 
to continue to work on. That is particularly true in what I 
would call the key technology referred to generally as 
nanotechnology the ability to put very complex objects in very 
small form and very reduced weight in operational capabilities 
like missiles. And that challenge that technical challenge, 
that is coming to us is something we don't fully understand or 
have control over right now. We have a lot of work to do in the 
future and we need to maintain constant vigilance.
    The last issue is I'd like to characterize the three 
components of threat that we work with--capability, intent and 
will. I think we have a good understanding of the capability 
now and in the future that most countries who seek medium and 
long-range ballistic missiles have. What we do need a better 
understanding of is their intent to use them and their will to 
use them in a given context.
    That's where most of the surprise actually has come from. 
We were not technically surprised about the capability in the 
past. We were surprised about the way in which or the 
circumstances in which this capability was put to use. We need 
to focus on that.
    And speaking for the military side of the Intelligence 
Community--and if Director Tenet will allow me, because I know 
my colleagues in the CIA on this issue very well; we work 
closely together--we are well aware of the need to understand 
intent and will.
    Chairman Shelby. Secretary Oakley, do you have any 
comments?
    Mrs. Oakley. I don't have any further comments. We, of 
course, will be cooperating with this estimate as we do with 
others. We are not equipped to really assess the capability. We 
feel that our contribution is much stronger on the intent and 
will chapters and we'll be working with them.
    Chairman Shelby. Director Tenet, how--how important is it 
that this estimate be well done? In other words be as 
comprehensive as analysts can make it?
    Director Tenet. It's extremely important to me, sir, as it 
is to you.
    Chairman Shelby. We thank the panel for being here. We look 
forward to the closed hearing this afternoon.
    The Committee is adjourned.
    [Thereupon, at 12:35 o'clock p.m., the Committee was 
adjourned.]

                                       U.S. Senate,
                          Select Committee on Intelligence,
                                    Washington, DC, March 12, 1998.
Hon. George J. Tenet,
Director of Central Intelligence,
Central Intelligence Agency, Washington, DC.
    Dear Director Tenet: We appreciate your participation in our 
January 28 hearing on the current and projected national security 
threats to the United States. Your willingness to address this 
important issue in open session was appreciated and made an important 
contribution, not only to the work of our Committee, but to the 
American public's awareness of U.S. national security interests.
    We are submitting the attached questions for the record to you. The 
unclassified responses to these questions will be an important part of 
our hearing transcript which we hope to release as expeditiously as 
possible. Accordingly, we would appreciate it if you would respond in 
writing to these questions no later than June 1, 1998.
    If there are any questions, please have your staff contact Don 
Mitchell of our Committee. We appreciate your cooperation in this 
matter.
            Sincerely,
                                         Richard C. Shelby,
                                                          Chairman.
                                          J. Robert Kerrey,
                                                     Vice Chairman.
    Enclosure.

                        Questions for the Record

               russia's ballistic missile defense program
    (1) Please describe the nature and extent of Russia's ballistic 
missile defense effort. Where do you see Russia's ballistic missile 
defense program heading over the course of the next 15 years?
               russia's safeguarding of nuclear materials
    (2) What is the Intelligence Community's assessment of the adequacy 
of Russia's safeguard of nuclear weapons and missile material?
    (a) What about missile systems, components and technology? What is 
the status of Russian nuclear command and control systems?
    (b) Has there been any change in the last year regarding Russian 
capabilities and programs in chemical or biological weapons? Does 
Russia persist in unacknowledged CW programs and illegal BW programs?
          transfer of technology from the former soviet union
    (3) What general trends has the Intelligence Community detected in 
the flow of scientists, technology, and conventional and unconventional 
military equipment to other nations? What evidence have you detected 
that Soviet nuclear materials, BW, CW, or ballistic missile-related 
materials or technology, have found their way to the international 
black market?
                         chinese proliferation
    (4) Please describe all significant transfers over the past 5 years 
of WMD-related technology or information from China to Iran, Pakistan 
or other countries, to include advanced conventional weapons and 
technology. Do you believe that this assistance could raise compliance 
concerns with China's commitments to the Nonproliferation Treaty (NPT) 
and the Missile Technology Control Regime (MTCR)? How likely is it that 
China will comply with the Chemical Weapons Convention (CWC)?
                   north korea as a continuing threat
    (5)(a) In this prepared testimony, General Hughes stated that 
``[s]ome significant--perhaps violent--change is likely in the next 
five years. There are four basic alternatives: leadership change, 
government collapse, negotiated accommodation with the South, or major 
economic reform.'' In your opinion, what is the likeliest scenario? 
Why?
    (b) How widely is this view shared in the Intelligence Community? 
What do you view as the most likely scenario?
                         changes in south korea
    (6) Talks on peace on the Korean peninsula involving North and 
South Korea, China and the U.S., began in Geneva last December. Long-
time opposition leader Kim Dae Jung won last December's presidential 
election in South Korea. What do these developments bode for change in 
South Korea as well as prospects for normalized relations between or 
reunification of North and South Korea?
                         saddam's hold on power
    (7)(a) Do you believe that Saddam's hold on power is stronger today 
than it was one year ago? What is the likelihood that Saddam will be in 
power one year from now? What would be the characteristics and policies 
of likely successors to Saddam? What are the chances that a successor 
regime to Saddam will be worse?
    (b) Will Saddam's fall lead necessarily to Iraq's disintegration? 
If not, why?
    (c) Has Saddam effectively regained control of northern Iraq?
                  support for iraq in the middle east
    (8) Currently, how much support exists for Saddam in the region? If 
military action were taken against Iraq, what would be the likely 
reaction of other nations in the region? What, if any, governments in 
the Middle East would be publicly supportive of military action against 
Iraq?
                    the impact of sanctions on iraq
    (9) Iraq has argued that the continued ban on oil exports are 
causing mass suffering in Iraq, including unaffordable prices for food 
and unavailability of medicine. What is your assessment of the nature 
and extent of the suffering to the Iraqi people as a result of economic 
sanctions?
                   iraq's weapons of mass destruction
    (10) What is the current status of Iraq's BW, CW, nuclear weapon 
and missile programs? How much activity has there been in each of these 
areas since the conclusion of the Persian Gulf War? Do we have any 
evidence that the Iraqi regime has tested CW or BW agents on humans 
since the Persian Gulf War?
                         the new regime in iran
    (11) Do you see President Khatami's election and reform agenda as a 
watershed that could change the nature of the Iranian regime? What is 
the possibility that Khatami's conservative critics will sidetrack him? 
What is the likelihood that the Khatami government will still be in 
power 3 years from now? Does his election signify a change in Iran's 
support for terrorism and its acquisition of weapons of mass 
destruction? Is there any evidence of such a change?
                    the impact of sanctions on iran
    (12) Are sanctions likely to influence Iran's behavior over the 
next 3 years? Why or why not? Late last September, Iran and France 
confirmed the award of a $2 billion deal to develop Iran's South Pars 
gas field to Total SA, and its minority partners Gazprom (Russia) and 
Petronas (Malaysia). What does this deal say about the effectiveness of 
the U.S. economic sanctions against Iran?
                        iranian forces in bosnia
    (13) How large an Iranian presence currently exists in Bosnia? Is 
this presence growing or diminishing? What is the extent of Iranian 
influence on or penetration of the Bosnian government?
                       the palestinian authority
    (14)(a) Please assess both the willingness and the ability of the 
Palestinian Authority to control terrorist violence in Gaza and the 
areas of the West Bank under its control.
    (b) To what extent is Hamas receiving outside support, and from 
whom is that support coming
    (c) Please assess Chairman Arafat's health, comment on his likely 
successor and describe the impact his departure would have on the peace 
process.
                the stability of the israeli government
    (15)(a) Please give us your assessment of Prime Minister 
Netanyahu's commitment to abiding by the Oslo Accords. Is he committed 
to a land-for-peace formula, or does he want to kill the peace process 
as currently formulated?
    (b) How do you assess the longevity of the current Likud 
government? How do you assess Labor's ability to win an election at 
this point?
    (c) Please assess Israeli Defense Minister Mordechai's recent 
statements in support of United Nation's Resolution 425, which calls 
for Israel's unilateral withdrawal from southern Lebanon. Does this 
represent a significant change in Israeli policy? What has been the 
response of the Lebanese and Syrians to Mordechai's statement?
                    the israeli presence in lebanon
    (16) Please comment on the losses the Israelis have suffered in 
Lebanon in the past year and the impact of those losses on Israeli 
public opinion and the likelihood that Israel will initiate a 
unilateral withdrawal from the Southern Lebanon. Do those losses 
indicate that the Hizballah is becoming a more effective force? Please 
comment on the military effectiveness of Israel's allies, the Southern 
Lebanese Army (SLA) and describe the current military cooperation 
between the Israeli Defense Force and the SLA.
                                 egypt
    (17)(a) What impact would a reduction in U.S. military aid to Egypt 
have on U.S. Egypt relations, particularly if such a reduction is not 
matched by a comparable reduction of U.S. military aid to Israel?
    (b) Please assess the current strength of the Mubarak government 
and its ability to prevail over terrorist internal opposition. To what 
degree is that internal opposition receiving outside support, and from 
whom?
                      political killings in haiti
    (18) What is the status of investigations into the various high 
profile political murder cases that have occurred in Haiti during the 
last several years? Has any evidence of government complicity in those 
murders been uncovered? In this regard, please provide an assessment of 
the performance of the Haitian National Police's Investigative Unit and 
Haitian Judiciary in solving these crimes.
                                 mexico
    (19) President Clinton's February 1997 certification of Mexico as 
fully cooperative in drug control efforts prompted considerable 
criticism in Congress. What is your current assessment of the nature 
and extent of Mexico's drug control efforts? To what extent does 
Mexican government corruption hamper these efforts?
      monitoring compliance with a comprehensive nuclear test ban
    (20) How high is the Intelligence Community's confidence that it 
can effectively monitor the Comprehensive Test Bank Treaty? What are 
the notable shortcomings? Is U.S. intelligence doing everything 
possible to improve U.S. monitoring capabilities in this area? If not, 
why not?
                     nuclear test at novaya zemlya?
    (21) There was concern that Russia may have conducted a low-yield 
nuclear test on August 16, 1997 at Novaya Zemlya. Is there any reason 
to believe that the August 16 event was a nuclear explosion? Is this a 
view that is commonly held through the Intelligence Community?
                    the chemical weapons convention
    (22)(a) Over one hundred of the 168 signatories have ratified the 
Chemical Weapons Convention (CWC). (Last November, both Iran and Russia 
completed their CWC ratification.) Do you have any intelligence that 
any of the signatories of the CWC have engaged in activities that raise 
compliance concerns?
    (b) The Intelligence Community has conceded that its ability to 
monitor compliance with the CWC is limited. Has that capability 
improved since U.S. ratification of the CWC?
                   north korea's taepo dong missiles
    (23) North Korean Taepo Dong II missile (which is under 
development) will have an estimated range of 4,000 to 6,000 kilometers, 
and therefore qualifies as an intercontinental ballistic missile 
(ICBM). How confident are you in these range estimates? What U.S. 
states or territories could the Taepo Dong hit? How soon could the 
Taepo Dong I and Taepo Dong II become operational, and how firm is that 
estimate? How has this assessment changed in the last year?
                      missile threats to the u.s.
    (24) The proliferation of missile-delivered weapons is an issue 
directly confronting the strategic interest of the United States and 
its traditional allies. When will the updated National Intelligence 
Estimate (NIE) on this subject be completed? What are the current 
strategic missile threats to the United States and theater missile 
threats to deployed U.S. forces? How have these threats changed in the 
last year? What are the projected threats for the next decade? Is this 
assessment shared by all components of the Intelligence Community? In 
the wake of the criticism of the previous NIE on this subject, what 
improvements have been made in the NIE process?
                      trends in economic espionage
    (25) A recent survey by the American Society for Industrial 
Security estimates that intellectual property losses from foreign and 
domestic espionage may have reached $300 billion in 1997 alone. Does 
this estimate seem plausible to you? A January 12 Los Angeles Times 
article dealing with this issue states that currently pending before 
the FBI ``are more than 700 foreign counterintelligence investigations 
involving economic espionage.'' Is that an accurate number? Please 
comment on trends in economic espionage directed against the U.S. How 
effectively are you able to measure the level of economic espionage 
against the U.S.? Has U.S. business reporting of economic espionage 
improved over the last year? What other measures would help to stop 
industrial espionage?
                         economic espionage law
    (26) In last year's response to this Committee's question regarding 
the effectiveness of the Economic Espionage Act of 1996, the CIA stated 
that the law clearly has attracted the attention of many of our key 
economic competitors, but that it is ``perhaps too early to assess 
whether the law has had an appreciable effect on the level of economic 
espionage directed against the United States.'' Over the past year, 
have you seen any results from the Economic Espionage Act? Do you have 
information that the law has deterred economic espionage activity by 
foreign governments of foreign corporations?
                   espionage by foreign corporations
    (27) Last year, in response to a question by this Committee, the 
definition of economic espionage was given as ``government-directed or 
orchestrated clandestine effort to collect U.S. economic secrets or 
proprietary information.'' To what extent are U.S. corporations 
threatened by the theft of trade secrets by foreign entities that are 
not ``government directed or orchestrated''? How do you distinguish 
whether espionage government directed or not, especially if the foreign 
corporation involved receives extensive government subsidies?
                           economic analysis
    (28) Over the past several years, the CIA has emphasized an 
increasing interaction with academic experts and an increasing use of 
open source information in its economic analysis products. As the CIA 
increasingly reports information based on open and public sources, does 
this lessen the significance of the classified information in CIA 
economic reporting? Does the CIA create analysis products that are 
based entirely on open source or public information?
                      south korea economic crisis
    (29) How well can the political institutions in South Korea manage 
the socioeconomic repercussions of the economic crisis? What is the 
likelihood of civil disorder--in South Korea as a result of layoffs, 
high inflation, and other consequences of the economy's downturn? How 
will the economic turmoil in South Korea affect their relationship with 
North Korea? Do you believe that South Korean's economic problems make 
conflict with North Korea more or less likely?
           potential impact of asian economic crisis on china
    (30) How will China react to the growing economic instability in 
the region. Will the Chinese leadership view the crisis as an 
opportunity to gain influence with other Asian nations? How do you 
judge the likelihood that China will ``competitively devalue'' its 
currency, the yuan, in order to ensure that its companies maintain 
export market share? Will the ``Asian contagion'' spread to mainland 
China? If so, how will economic problems affect the policies of China's 
President Jiang Zhemin and his government? With unemployment already 
rising in China's state-owned industrial sectors, will slower or 
negative economic growth lead to civil strife in China?
                  the philippines' economic situation
    (31) How will the economic crisis affect the upcoming Philippine 
elections? Are that nation's democratic institutions strong enough to 
withstand economic and financial turmoil? How likely is a return to 
martial law in the Philippines?
                  potential bw/cw attacks on the u.s.
    (32) What is the likelihood that the U.S. will be subjected to a 
biological or chemical attack within the next 2-5 years? 5-10 years? 
How is this attack likely to be carried out? Do you consider a BW/CW 
attack against the U.S. as more likely than a ballistic missile attack 
against the U.S.? How difficult is it for a group to construct and 
deliver an effective chemical weapon? A biological or radiological 
weapon? A nuclear device? What existing groups now have or are seeking 
such a capability?
              threat of information warfare by terrorists
    (33) Our traditional definition of terrorism does not include such 
things as computer attack intended to damage our telecommunications or 
transportation infrastructure. Are we prepared to deal with ``virtual 
terrorism?'' What steps do we need to take to focus Intelligence 
Community counterterrorism efforts on this new threat?
                threat to u.s. deployed forces in bosnia
    (34)(a) What are the shortfalls in Intelligence Community support 
to the Bosnia operation and what is being done to rectify these problem 
areas?
    (b) In recent months, SFOR troops (including U.S. soldiers) have 
acted in support of Republika Srpska President Biljana Plavsic by 
seizing radio and television transmitters, police stations and other 
government installations controlled by her hardline opponents. Does the 
participation of U.S. troops in such operations expose them to increase 
risk of attach from hard-line supporters? Would hard-line response be 
limited to stone-throwing civilian mobs, or could it escalate into 
sniper attacks and other forms of armed conflict?
    (c) What is the prospect and key action required for establishing 
long-term stability in Bosnia?
    (d) How many foreign Islamic fundamentalist fights still reside in 
Bosnia? What countries do they come from? Who supports them? Do they 
pose a threat to U.S. troops?
    (e) Would more active participation by SFOR in civil implementation 
tasks such as refugee resettlement increase the risk to U.S. Forces?
    (f) What is the possibility that current low-level violence in 
Kosovo in Serbia could escalate into major conflict, spreading into 
Macedonia and endangering the security of U.S. troops there?
    (g) Are you satisfied that the U.S. has sufficient HUMINT assets in 
Bosnia to provide early warning of possible threat to U.S. forces?
    (h) How do you deconflict your HUMINT collection assets for force 
protection with those already deployed by DOD to prevent duplication?
          counterintelligence threat to national laboratories
    (35) A September 1997 GAO report regarding DOE's security controls 
over foreign visitors to the National Laboratories noted that ``DOE's 
procedures for obtaining background checks and controlling the 
dissemination of sensitive information are not fully effective'' and 
that as a result, ``sensitive subjects may have been discussed with 
foreign nationals without DOE's knowledge and approval.'' In your 
opinion, how significant is the counterintelligence threat to DOE in 
general and the National Laboratories in particular? What is being done 
to rectify this problem?
                          international crime
    (36) How critical do you assess the current and future threat to 
U.S. interests from international crime activities and networks? Is 
there room for improvement in the FBI-CIA relationship in dealing with 
international crime?
                             nato expansion
    (37) What are the risks, if any, to U.S. intelligence personnel and 
the Intelligence Community in general, in allowing Poland, the Czech 
Republic and Hungary to join NATO?
                         information operations
    (38) The Defense Science Board and the President's Commission on 
Critical Infrastructure Protection both issued reports during 1997 
which identified our nation's vulnerability to both physical and 
computer attacks on our nation's information infrastructure. These 
reports noted that such an attack could come from a foreign government, 
a non-state actor, a criminal organization, or an individual hacker. 
How significant is the threat to our critical information 
infrastructure in the short-run? In the long-run? How do you judge the 
Intelligence Community's ability to collect intelligence on this 
threat?
                        the threat posed by hiv
    (39) To what extent has HIV had an impact on the health and 
economies of foreign countries? How has HIV impacted foreign 
militaries?
                        actionable intelligence
    (40) Some analysts say that the increased emphasis on action-
oriented intelligence has come at the expense of other important--but 
more mundane--work, like maintaining data bases and conducting in-depth 
analyses on foreign militaries and political groups. Do you share this 
concern? If so, how do you intend to deal with these competing needs?
           intelligence community's role in the pow/mia issue
    (41)(a) National Security Advisor Sandy Berger wrote to the Senate 
Majority Leader last year and indicated that he had directed the 
Intelligence Community to produce a Special National Intelligence 
Estimate (SNIE) regarding POW/MIA issues with Vietnam. After consulting 
with this Committee, the terms of reference were settled. When do you 
expect to have this Estimate completed? Mr. Berger also indicated that 
he would ask for an updated Intelligence Community assessment on the 
so-call ``735'' and ``1205'' documents found in the Russian archives. 
What efforts has the Intelligence Community made to acquire additional 
information about these documents either in Russia or in Vietnam? As 
per the Committee's request, have the 574 classified CIA documents on 
the POW/MIA subject matter been reviewed and summarized? Do they shed 
any light on the SNIE?
    (b) In his letter, Mr. Berger offers assurances that ``collection 
requirements pertaining to the POW/MIA issue [will] remain as a high 
priority'' after administrative officials conceded that it had 
mistakenly left off the POW/MIA issues from PDD-35--the document that 
sets our intelligence collection priorities. Has this oversight been 
corrected?
    (c) In July 1993, the Secretary of Defense consolidated four DoD 
offices charged with different functions of the POW/MIA issue. The 
Intelligence Community's only POW/MIA analytical element, the Defense 
Intelligence Agency's Office of POW/MIAs Affairs, was then transferred 
out from the oversight of both the DCI and the responsible 
Congressional committees. Do you now have oversight of the Defense 
Prisoner of War/Missing persons Office (DPMO) analytical section? If 
not, who is responsible for oversight of this capability? Why is this 
intelligence capability not reflected in the Congressional 
Justification Books (National Foreign, Joint Military and Tactical 
intelligence accounts) provided to the congressional oversight 
committees?
                      a declining military threat
    (42) In your testimony before the committee, you indicated that the 
military threat to the U.S. was declining, and General Hughes concurred 
with this assessment. Please elaborate on this critical issue and 
discuss the impact it will have on the Intelligence Community.
                                 ______
                                 
                                       U.S. Senate,
                          Select Committee on Intelligence,
                                    Washington, DC, March 12, 1998.
Hon. Louis J. Freeh,
Director, Federal Bureau of Investigation,
J. Edgar Hoover Building, Washington, DC.
    Dear Director Freeh: We appreciate the participation of Deputy 
Director Robert Bryant in our January 28 hearing on the current and 
projected national security threats to the United States. His 
willingness to address this important issue in open session was 
appreciated and made an important contribution, not only to the work of 
our Committee, but to the American public's awareness of U.S. national 
security interests.
    We are submitting the attached questions for the record to you. The 
unclassified responses to these questions will be an important part of 
our hearing transcript which we hope to release as expeditiously as 
possible. Accordingly, we would appreciate it if you would respond in 
writing to these questions no later than June 1, 1998.
    If there are any questions, please have your staff contact Don 
Mitchell of our Committee. We appreciate your cooperation in this 
matter.
            Sincerely,
                                         Richard C. Shelby,
                                                          Chairman.
                                          J. Robert Kerrey,
                                                     Vice Chairman.
    Enclosure.

                        Questions for the Record

                        russian organized crime
    (1) What general trends do we see in Russian organized crime? How 
is organized crime impacting the Russian economy and the Russian 
political system? To what extent is Russian organized crime involved in 
the trafficking of weapons of mass destruction? What is your prognosis 
for Russian efforts to combat this problem? How active is Russian 
organized crime in the U.S.?
                      trends in economic espionage
    (2) A recent survey of the American Society for Industrial Security 
estimates that intellectual property losses from foreign and domestic 
espionage may have exceeded $30 billion in 1997 alone. Does this 
estimate seem plausible to you? A January 12 Los Angeles Times article 
dealing with this issue states that currently pending before the FBI 
``are more than 700 foreign counterintelligence investigations 
involving economic espionage.'' Is that an accurate number? Please 
comment on trends in economic espionage directed against the U.S. How 
effectively are you able to measure the level of economic espionage 
against the U.S.? Has U.S. business reporting of economic espionage 
improved over the last year? What other measures would help to stop 
industrial espionage?
                         economic espionage law
    (3) In last year's response to this Committee's question regarding 
the effectiveness of the Economic Espionage Act of 1996, the CIA stated 
that the law clearly has attracted the attention of many of our key 
economic competitors, but that it is ``perhaps too early to assess 
whether the law has had an appreciable effect on the level of economic 
espionage directed against the United States.''
    (a) Over the past year, have you seen any results from the Economic 
Espionage Act? Do you have information that the law has deterred 
economic espionage activity by foreign governments or foreign 
corporations?
    (b) To what extent have you been able to use the Economic Espionage 
Act of 1996 as a tool against foreign economic spying?
                    espionage by foreign corporation
    (4) Last year, in response to a question by this Committee, the 
definition of economic espionage was given as ``government-directed or 
orchestrated clandestine effort to collect U.S. economic secrets or 
proprietary information.''
    (a) To what extent are U.S. corporations threatened by the theft of 
trade secrets by foreign entities that are not ``government directed or 
orchestrated''? How do you distinguish whether espionage is government 
directed or not, especially if the foreign corporation involved 
receives extensive government subsidies?
    (b) What steps are you taking to prevent corporate espionage that 
is not directed by a foreign government?
                     working with u.s. corporations
    (5) If you find evidence that a U.S. company is being targeted for 
economic espionage or is the subject of unfair competition with a 
foreign firm, what mechanisms are in place to remedy the situation? How 
often does this situation occur?
                  economic espionage against the u.s.
    (6) How do you distinguish between economic espionage and 
aggressive but legitimate information gathering by a foreign government 
or foreign corporation? Please describe the type of economic espionage 
you see as the greatest threat to U.S. economic competitiveness. To 
what extent is economic espionage against the U.S. supported and 
coordinated by foreign governments?
                  potential bw/cw attacks on the u.s.
    (7) What is the likelihood that the U.S. will be subjected to 
biological or chemical attack within the next 2-7 years? 5-10 years? 
How is this attack likely to be carried out? Do you consider BW/CW 
attack against the U.S. as more likely than a ballistic missile attack 
against the U.S.? How difficult is it for a group to construct and 
deliver an effective chemical weapon? A biological or radiological 
weapon? A nuclear device? What existing groups now have or are seeking 
such capability?
               possible retaliation for kasi sentencing?
    (8) Mir Aimal Kasi has recently has been sentenced to death for the 
killing of CIA employees outside CIA Headquarters. What is the 
likelihood that there will be acts of terrorism against the U.S. as a 
result of this?
                           economic terrorism
    (9) Do you have any evidence that foreign governments, corporations 
or individuals are targeting U.S. economic interests using technology 
(such as a virus, computer hacking, etc.)? Do you see this as a near-
term threat, or more long-term?
               terrorists' use of advanced infrastructure
    (10) Terrorists are making more use of advanced computing and 
telecommunications technology, their own communications and 
intelligence gathering, and establishing a worldwide network of 
contacts and support. Does this easy access to information, 
communication and transportation make the job of intelligence gathering 
more difficult or does it provide opportunities which you can exploit? 
Are there steps that we can take to deny terrorists the ease of 
movement and communication they now enjoy?
              threat of information warfare by terrorists
    (11) Our traditional definition of terrorism does not include such 
things as computer attack intended to damage our telecommunications or 
transportation infrastructure. Are we prepared to deal with ``virtual 
terrorism?'' What steps do we need to take to focus Intelligence 
Community counterterrorism efforts on this new threat?
      executive branch organization on the counterterrorism issue
    (12) How well is the Executive Branch organized to deal with 
counterterrorism? Is there room for improvement in the CIA-FBI 
relationship on counterterrorism matters? Should the FBI be given 
primacy over both domestic and foreign counterterrorism intelligence 
gathering?
          counterintelligence threat to national laboratories
    (13) A September 1997 GAO report regarding DOE's security controls 
over foreign visitors to the National Laboratories noted that ``DOE's 
procedures for obtaining background checks and controlling the 
dissemination of sensitive information are not fully effective'' and 
that as a result, ``sensitive subject may have been discussed with 
foreign nationals without DOE's knowledge and approval.'' In your 
opinion, how significant is the counterintelligence threat to DOE in 
general and the National Laboratories in particular? What is being done 
to rectify this problem?
                          international crime
    (14) How critical do you assess the current and future threat to 
U.S. interests from international crime activities and networks? Is 
there room for improvement in the FBI-CIA relationship in dealing with 
international crime?
                           encryption issues
    (15) For a number of year, the United States Government and the 
computer industry have wrestled over our nation's policy towards 
encryption technology. While domestically there are no restrictions on 
the use, sale or importation of encryption products, the U.S. still 
maintains export restrictions on the sale of stronger encryption 
products overseas. The computer industry argues that export 
restrictions unnecessarily hinder the sale of American encryption 
products abroad, which in turn adversely affects the global 
competitiveness of the U.S. computer industry. However, the 
Administration has argued that export restrictions are necessary to 
protect law enforcement and intelligence equities. Otherwise, the 
widespread use of unbreakable encryption products would enhance the 
ability of narcotics traffickers, terrorists, international criminals, 
and purveyors of child pornography to escape detection by the agencies 
to which we entrust our national and domestic security. How has the 
commercial availability of strong encryption products here and abroad 
hindered the FBI's ability to perform its counterintelligence and 
counterterrorist duties? What changes would you like to see in the 
United States government's policy on encryption? Why do you believe 
these changes are necessary?
                         information operations
    (16) The Defense Science Board and the President's Commission on 
Critical Infrastructure Protection both issued reports during 1997 
which identified our nation's vulnerability to both physical and 
computer attacks on our nation's information infrastructure. These 
reports noted that such an attack could come from a foreign government, 
a non-state actor, a criminal organization, or an individual hacker. 
How significant is the threat to our critical information 
infrastructure in the short-run? In the long-run? How do you judge the 
Intelligence Community's ability to collect intelligence on this 
threat?
                                 ______
                                 
                                       U.S. Senate,
                          Select Committee on Intelligence,
                                    Washington, DC, March 12, 1998.
Lt. Gen. Patrick M. Hughes,
Director, Defense Intelligence Agency,
The Pentagon, Washington, DC.
    Dear General Hughes: We appreciate your participation in our 
January 28 hearing on the current and projected national security 
threats to the United States. Your willingness to address this 
important issue in open session was appreciated and made an important 
contribution, not only to the work of our Committee, but to the 
American public's awareness of U.S. national security interests.
    We are submitting the attached questions for the record to you. The 
unclassified responses to these questions will be an important part of 
our hearing transcript which we hope to release as expeditiously as 
possible. Accordingly, we would appreciate it if you would respond in 
writing to these questions no later than June 1, 1998.
    If there are any questions, please have your staff contact Don 
Mitchell of our Committee. We appreciate your cooperation in this 
matter.
            Sincerely,
                                         Richard C. Shelby,
                                                          Chairman.
                                          J. Robert Kerrey,
                                                     Vice Chairman.
    Enclosure.

                        Questions for the Record

                     russian military capabilities
    (1) In your prepared testimony, you state that ``[t]here is little 
chance that Russia will reemerge as a global military peer competitor 
to the U.S. over the next two decades. During this period, Russia's 
strategic nuclear forces will remain the backbone of Moscow's military 
might, preserving Russia's perception of great power status and 
protecting its vital security interests.''
    (a) Does the fact that Russia's strategic nuclear forces ``will 
remain the backbone of Moscow's military might'' for the next 20 years 
raises the likelihood that Russia might be more inclined to use nuclear 
weapons if it feels that its interests are being threatened?
    (b) What vital interests would Moscow perceive beyond its periphery 
that would warrant its commitment of military force, including the 
threat or use of nuclear weapons?
    (c) If present trends continue, what will be the Russian military's 
capability to conduct operations 5 years from now? Do these trends 
indicate the possibility that Russia may soon have insufficient 
military force to retain order within Russia?
    (d) What is your assessment of the likelihood that military reform 
will succeed in Russia?
               russia's ballistic missile defense program
    (2) Please describe the nature and extent of Russia's ballistic 
missile defense effort. Where do you see Russia's ballistic missile 
defense program heading over the course of the next 15 years?
               russia's safeguarding of nuclear materials
    (3) What is the Intelligence Community's assessment of the adequacy 
of Russia's safeguard of nuclear weapons and fissile material?
    (a) What about missile systems, components and technology? What is 
the status of nuclear weapons and fissile material?
    (b) Has there been any age in the last year regarding Russian 
capabilities and programs in chemical or biological weapons? Does 
Russia persist in unacknowledged CW programs and illegal BW programs?
          transfer of technology from the former soviet union
    (4) What general trends has the Intelligence Community detected in 
the flow of scientists, technology, and conventional and unconventional 
military equipment to other nations? What evidence have you detected 
that Soviet nuclear materials, BW, CW, or ballistic missile-related 
materials or technology, have found their way to the international 
black market?
                       china's military strategy
    (5)(a) In your prepared testimony, you state that ``China's 
military strategy will continue to emphasize the development of a 
survivable nuclear retaliatory capability as a deterrent against the 
use of nuclear weapons by the United States, Russia or India. There is 
no indication that China will field the much larger number of missiles 
necessary to shift from a minimalist, retaliation strategy to a first-
strike strategy.'' How confident are you of this assessment? What 
trends do you perceive in the quantity and quality of Chinese ballistic 
missiles capable of reaching the U.S.? Are these views shared by the 
remainder of the Intelligence Community?
    (b) Do you believe that China views its nuclear forces as a 
deterrent to other non-nuclear, military or political actions by the 
U.S. or other countries?
                            china and taiwan
    (6) In your prepared testimony, you state that ``[t]he Taiwan issue 
remains the major potential flashpoint. Beijing believes U.S. policy 
encourages the independence movement of Taiwan, deliberately or 
inadvertently.'' Please elaborate. What is the potential for armed 
conflict between China and Taiwan? What would be the likely outcome of 
such a conflict? Has the threat of a confrontation between the PRC and 
Taiwan replaced North Korea as the number one security issue in Asia?
                           india and pakistan
    (7) In your prepared testimony, you state that ``India and Pakistan 
both continue to view their security relationship in zero-sum terms, 
possess sufficient material to assemble a limited number of nuclear 
weapons, have short range ballistic missiles, and maintain large 
standing forces in close proximity across a tense line of control. In 
short, although the prospect for major war between India and Pakistan 
is low at present, we remain concerned about the potential, 
particularly over the near term, for one of their occasional military 
clashes to escalate into a wider conflict. Over the longer term, 
however, the threat of large-scale war should diminish.'' Why do you 
consider a large scale conflict between India and Pakistan likelier in 
the short term than in the long term? Is this assessment shared by 
other components of the Intelligence Community?
                   north korea as a continuing threat
    (8)(a) In your prepared testimony, you state that ``[s]ome 
significant--perhaps violent--change is likely in the next five years. 
There are four basic alternatives; leadership change, government 
collapse, negotiated accommodation with the South, or major economic 
reform.'' In your opinion, what is the likeliest scenario? Why?
    (b) You also stated in your testimony that ``[o]ver the next 
several years Pyongyang's WMD, missile, artillery, and special 
operations force capabilities will likely improve, despite the dire 
economic situation.'' How do you account for this?
                         changes in south korea
    (9) Talks on peace on the Korean peninsula involving North and 
South Korea, China and the U.S., began in Geneva last December. Long 
time opposition leader Kin Dae Jung won last December's presidential 
election in South Korea. What do these developments bode for change in 
South Korea as well as prospects for normalized relations between or 
reunification of North and South Korea?
                  support for iraq in the middle east
    (10) Currently, how much support exists for Saddam in the region? 
If military action were taken against Iraq, what would be the likely 
reaction of other nations in the region? What, if any, governments in 
the Middle East would be publicly supportive of military action against 
Iraq?
                   iraq's weapons of mass destruction
    (11) What is the current status of Iraq's BW, CW, nuclear weapon 
and missile programs? How much activity has there been in each of these 
areas since the conclusion of the Persian Gulf War? Do we have any 
evidence that the Iraqi regime has tested CW and BW agents on humans 
since the Persian Gulf War?
                        iranian forces in bosnia
    (12) How large an Iranian presence currently exists in Bosnia? Is 
this presence growing or diminishing? What is the extent of Iranian 
influence on or penetration of the Bosnian government?
                    the israeli presence in lebanon
    (13) Please comment on the losses the Israelis have suffered in 
Lebanon in the past year and the impact of those losses on Israeli 
public opinion and the likelihood that Israel will initiate a 
unilateral withdrawal from the Southern Lebanon. Do those losses 
indicate that the Hizballah is becoming a more effective force? Please 
comment on the military effectiveness of Israel's allies, the Southern 
Lebanese Army (SLA) and describe the current military cooperation 
between the Israeli Defense Force and the SLA.
                                 syria
    (14) Please assess the current military strategic threat Syria 
poses for Israel and Syrian military capabilities in general. What is 
the possibility Syria will exercise the military option to regain the 
Golan? How do you interpret the Syrian military movement toward the 
Golan within the last year?
                    libya's chemical weapons program
    (15) What is the status of Libya's CW activities? What is the 
status of their overall CW program? Is Libya making progress toward 
obtaining any other weapons of mass destruction for their delivery 
systems?
                      cuban military capabilities
    (16)(a) Does Cuba, in any way, pose a strategic threat to the 
United States at this time? Will Cuba pose a strategic threat to the 
U.S. at any time in the next two to five years? What, if anything, 
might change that assessment?
    (b) Is Cuba currently attempting to undermine democratically-
elected governments in the Western Hemisphere? What support, if any, is 
it providing opposition movements in Colombia and Peru?
                     cuba and narcotics trafficking
    (17) Are Cuban government officials implicated in narcotics 
trafficking? To what extent are narcotraffickers overflying Cuban 
airspace to bring drugs into the U.S.? Do these overflights require 
Cuban government complicity of any kind?
                      trends in illegal narcotics
    (18) In your prepared testimony, you state that ``[i]llicit 
synthetic drug production in urban areas is a significant and growing 
threat.'' Please elaborate. Have we detected any change in the world-
wide supply or demand for illegal drugs? Are our efforts having any 
effect on the drug trafficking organizations?
      monitoring compliance with a comprehensive nuclear test ban
    (19) How high is the Intelligence Community's confidence that it 
can effectively monitor the Comprehensive Test Ban Treaty? What are the 
notable shortcomings? Is U.S. intelligence doing everything possible to 
improve U.S. monitoring capabilities in this area? If not, why not?
                     nuclear test at novaya zemlya?
    (20) There was concern that Russia may have conducted a low-yield 
nuclear test on August 16, 1997 at Novaya Zemlya. Is there any reason 
to believe that the August 16 event was nuclear explosion? Is this a 
view that is commonly held throughout the Intelligence Community?
                    the chemical weapons convention
    (21)(a) Over one hundred of the 168 signatories have ratified the 
Chemical Weapons Convention (CWC). (Last November, both Iran and Russia 
completed their CWC ratification.) Do you have any intelligence that 
any of the signatories of the CWC have engaged in activities that raise 
compliance concerns?
    (b) The Intelligence Community has conceded that its ability to 
monitor compliance with the CWC is limited. Has that capability 
improved since U.S. ratification of the CWC?
                   north korea's taepo dong missiles
    (22) North Korean Taepo Dong II missile (which is under 
development) will have an estimated range of 4,000 to 6,000 kilometers, 
and therefore qualifies as an intercontinental ballistic missile 
(ICBM). How confident are you in these range estimates? What U.S. 
states or territories could the Taepo Dong hit? How soon could the 
Taepo Dong I and Taepo Dong II become operational, and how firm is that 
estimate? How has this assessment changed in the last year?
                the proliferation of ballistic missiles
    (23) In your prepared testimony, you state that ``[w]e are 
particularly concerned about two trends: the significant increase we 
expect over the next two decades in the numbers of ballistic missiles 
with ranges between 300 and 1,500 kilometers; the potential for land 
attack cruise missiles to be more widely proliferated.'' 
Pleaseelaborate. What countries' ballistic missile and cruise missile 
programs are you most concerned about?
                threat to u.s. deployed forces in bosnia
    (24(a) What are the prospects and key actions required for 
establishing long-term stability in Bosnia? While the goal of the 
international military presence is to make it possible for the three 
factions is to coexist peacefully, a threat against foreign forces 
remains. What is the threat facing U.S. forces deployed in Bosnia?
    (b) What are the shortfalls in Intelligence Community support to 
the Bosnia operation and what is being done to rectify these problem 
areas?
    (c) In recent months, SFOR troops (including U.S. soldiers) have 
acted in support of Republika Srpska President Biljana Plavsic by 
seizing radio and television transmitters, police stations and other 
government installations controlled by her hardline opponents. Does the 
participation of U.S. troops in such operations expose them to increase 
risk of attack from hard-line supporters? Would hard-line response be 
limited to stone-throwing civilian mobs, or could it escalate into 
sniper attacks and other forms of armed conflict?
    (f) Would more active participation by SFOR in civil implementation 
tasks such as refugee resettlement increase the risk to U.S. forces?
    (g) What is the current status of efforts to remove land mines in 
Bosnia? Do land mines still pose a significant threat to U.S. troops in 
Bosnia?
    (i) Are you satisfied that the U.S. has sufficient HUMINT assets in 
Bosnia to provide early warning of possible threats to U.S. forces?
    (j) How do you determine the extent of personnel required for 
HUMINT collection operations for force protection?
                             nato expansion
    (25) What are the risks, if any, to U.S. intelligence personnel and 
the Intelligence Community in general, in allowing Poland, the Czech 
Republic and Hungary to join NATO?
                      the threat posed by disease
    (26) To what extent has HIV had an impact on the health and 
economies of foreign countries? How has HIV impacted foreign 
militaries?
                 the role of dod intelligence analysis
    (27) As senior military intelligence advisor to the Secretary of 
Defense and the Chairman of the Joint Chiefs of Staff, your production 
units and activities around the world have been the producer of action-
oriented intelligence--the moment-to-moment reporting that enables 
policy makers and military commanders to make tactical decisions with 
timely information. How do you evaluate the Defense Intelligence 
Community's performance in the production of threat assessments. What 
contributions have been provided by the Reserve component?
                        actionable intelligence
    (28) Some analysts say that the increased emphasis on action-
oriented intelligence has come at the expense of other important--but 
more mundane--work, like maintaining data bases and conducting in-depth 
analyses on foreign militaries and political groups. Do you share this 
concern? If so, how do you intend to deal with these competing needs?
           intelligence community's role in the pow/mia issue
    (29)(a) In July 1993, the Secretary of Defense consolidated four 
DOD offices charged with different functions of the POW/MIA issue. The 
Intelligence Community's only POW/MIA analytical element, the Defense 
Intelligence Agency's Office of POW/MIAs Affairs, was then transferred 
out from the oversight of both the DCI and the responsible 
Congressional committees. Do you now have oversight of the Defense 
Prisoner of War/Missing Persons Office (DPMO) analytical section? If 
not, who is responsible for oversight of this capability? Why is this 
intelligence capability not reflected in the Congressional 
Justification Books (National Foreign, Joint Military and Tactical 
intelligence accounts) provided to the congressional oversight 
committees?
    (b) This Committee is looking into intelligence information on the 
January 1991 loss of a Persian Gulf F-18 aircraft and its pilot, 
Lieutenant Commander Michael Scott Speicher. It has requested a report 
that documents the chronology of the intelligence community's 
activities. Will you share with us, what evidence exists that Speicher 
was killed in action? What evidence exists to support the 
classification ``missing in action?'' What specific collection actions, 
by discipline, are underway by the Intelligence Community and by whom? 
If not, why not? What office has the responsibility to keep 
intelligence collection requirements on the books? At what point did 
the Intelligence Community reduce its collection effort? Why? Who is 
responsible for dedicated all-source analysis on the MIA topic in the 
Intelligence Community? How is the current structure working?
                                 ______
                                 
                                       U.S. Senate,
                          Select Committee on Intelligence,
                                    Washington, DC, March 12, 1998.
Hon. Phyllis E. Oakley,
Assistant Secretary of State for Intelligence and Research,
Department of State, Washington, DC.
    Dear Ms. Oakley: We appreciate your participation in our January 28 
hearing on the current and projected national security threats to the 
United States. Your willingness to address this important issue in open 
session was appreciated and made an important contribution, not only to 
the work of our Committee, but to the American public's awareness of 
U.S. national security interests.
    We are submitting the attached questions for the record to you. The 
unclassified responses to these questions will be an important part of 
our hearing transcript which we hope to release as expeditiously as 
possible. Accordingly, we would appreciate it if you would respond in 
writing to these questions no later than June 1, 1998.
    If there are questions, please have your staff contact Don Mitchell 
of our Committee. We appreciate your cooperation in this matter.
            Sincerely,
                                         Richard C. Shelby,
                                                          Chairman.
                                          J. Robert Kerrey,
                                                     Vice Chairman.
    Enclosure.

                        Questions for the Record

                     russian military capabilities
    (1) What is your assessment of the likelihood that military reform 
will succeed in Russia?
                    russia-iran missile relationship
    (2) In your prepared testimony, you state that ``[e]vents over the 
past year have demonstrated the ability of world-be proliferators, 
notably Iran, to exploit Russia's missile development infrastructure. 
If allowed to continue, access to Russian technology and expertise will 
enable the Iranians to develop and field intermediate range ballistic 
missiles faster than if they were left to their own devices?'' How has 
Russian assistance enhanced the capabilities of Iranian ballistic 
missiles? What are current projections about the range capabilities of 
Iranian missiles over the next 15 years? What are the implications for 
U.S. national security?
                         chinese proliferation
    (3) Please describe all significant transfers over the past 5 years 
of WMD-related technology or information from China to Iran, Pakistan 
or other countries, to include advanced conventional weapons and 
technology. Do you believe that this assistance could raise compliance 
concerns with China's commitments to the Nonproliferation Treaty (NPT) 
and the Missile Technology Control Regime (MTCR)? How likely is it that 
China will comply with the Chemical Weapons Convention (CWC)?
                        the future of hong kong
    (4) On July 1 of last year, Hong Kong reverted from British to 
Chinese sovereignty. What is your long-term assessment of the 
likelihood that Hong Kong will continue to have strong economic growth, 
foster a friendly and supportive businessenvironment and provide an 
atmosphere allowing significant scope for individual freedom? What are 
the economic implications of this for the U.S.?
                   north korea as a continuing threat
    (5) In his prepared testimony, General Hughes stated that ``[s]ome 
significant--perhaps violent--change is likely in the next five years. 
There are four basic alternatives: leadership change, government 
collapse, negotiated accommodation with the South, or major economic 
reform.'' In your opinion, what is the likeliest scenario? Why? How 
widely is this view shared in the Intelligence Community? What do you 
view as the most likely scenario?
            monitoring the north korean framework agreement
    (6) In 1994, North Korea signed the nuclear framework agreement and 
promised to forgo further development of nuclear weapons in return for 
assistance from the U.S. and others. Has North Korea been living up to 
its commitments under the framework agreement? Do we expect continued 
compliance? Does the economic situation in North Korea make compliance 
more or less likely? How high is your confidence that the U.S. 
Intelligence Community can adequately monitor North Korea's compliance 
with the U.S.-North Korean Framework Agreement?
                         changes in south korea
    (7) Talks on peace on the Korean peninsula involving North and 
South Korea, China and the U.S., began in Geneva last December. Long 
time opposition leader Kim Dae Jung won last December's presidential 
election in South Korea. What do these developments bode for change in 
South Korea as well as prospects for normalized relations between or 
reunification of North and South Korea?
                       iraq and u.n. inspections
    (8) Iraq has recently barred a U.S.-led team from conducting 
inspections in Iraq, claiming that the team composition was 
``unbalanced'' and the U.S. team chief was a spy. Saddam Hussein has 
vowed to suspend cooperation with U.N. weapons inspectors if they do 
not finish their work by May 20. What is your assessment of the 
likelihood that Saddam is serious about his threat to suspend 
cooperation with the inspectors? What is the likelihood that military 
action against Iraq will alter Saddam's behavior?
                    the impact of sanctions on iraq
    (9) Iraq has argued that the continued ban on oil exports are 
causing mass suffering in Iraq, including unaffordable prices for food 
and unavailability of medicine. What is your assessment of the nature 
and extent of the suffering to the Iraqi people as a result of economic 
sanctions?
                         the new regime in iran
    (10) Do you see President Khatami's election and reform agenda as a 
watershed that could change the nature of the Iranian regime? What is 
the possibility that Khatami's conservative critics will sidetrack him? 
What is the likelihood that the Khatami government will still be in 
power 3 years from now? Does his election signify a change in Iran's 
support for terrorism and its acquisition of weapons of mass 
destruction? Is there any evidence of such a change?
                    the impact of sanctions on iran
    (11) Are sanctions likely to influence Iran's behavior over the 
next 3 years? Why or why not? Late last September, Iran and France 
confirmed the award of a $2 billion deal to develop Iran's South Pars 
gas field to Total SA, and its minority partners Gazprom (Russia) and 
Petronas (Malaysia). Will the U.S. impose sanctions on these countries? 
What does this deal say about the effectiveness of the U.S. economic 
sanctions against Iran?
                       the palestinian authority
    (12)(a) Please assess both the willingness and the ability of the 
Palestinian Authority to control terrorist violence in Gaza and the 
areas of the West Bank under its control.
    (b) To what extent is Hamas receiving outside support, and from 
whom is that support coming?
    (c) Please assess Chairman Arafat's health, comment on his likely 
successor and describe the impact his departure would have on the peace 
process.
                the stability of the israeli government
    (13)(a) Please give us your assessment of Prime Minister 
Netanyahu's commitment to abiding by the Oslo Accords. Is he committed 
to a land-for-peace formula, or does he want to kill the peace process 
as currently formulated?
    (b) How do you assess the longevity of the current Likud 
government? How do you assess Labor's ability to win an election at 
this point?
    (c) Please assess Israeli Defense Minister Mordechai's recent 
statements in support of United Nation's Resolution 425, which calls 
for Israel's unilateral withdrawal from southern Lebanon. Does this 
represent a significant change in Israeli policy? What has been the 
response of the Lebanese and Syrians to Mordechai's statement?
                    the israeli presence in lebanon
    (14) Please comment on the losses the Israelis have suffered in 
Lebanon in the past year and the impact of those losses on Israeli 
public opinion and the likelihood that Israel will initiate a 
unilateral withdrawal from the Southern Lebanon. Do those losses 
indicate that the Hizballah is becoming a more effective force? Please 
comment on the military effectiveness of Israel's allies, the Southern 
Lebanese Army (SLA) and describe the current military cooperation 
between the Israeli Defense Force and the SLA.
                                 syria
    (15) Under what conditions will Syria withdraw from Lebanon? Do you 
see those conditions being met in the near future?
                  the security environment in lebanon
    (16) Please comment on the general security environment in Lebanon 
and the safety of Americans who travel there, now that the U.S. travel 
ban has been partially lifted. If the Israelis should withdraw their 
forces from southern Lebanon, are the Lebanese Armed Forces capable of 
controlling southern Lebanon and preventing Hizballah attacks against 
Israel?
                                 egypt
    (17)(a) What impact would a reduction in U.S. military aid to Egypt 
have on U.S.-Egypt relations, particularly if such a reduction is not 
matched by a comparable reduction of U.S. military aid to Israel?
    (b) Please assess the current strength of the Mubarak government 
and its ability to prevail over terrorist internal opposition. To what 
degree is that internal opposition receiving outside support, and from 
whom?
                   the taliban militia in afghanistan
    (18) The Taliban militia has overtaken significant portions of 
Afghanistan. What is the likelihood that the Taliban will come to 
dominate Afghanistan over the long-term? If the Taliban sustain their 
dominance over Afghanistan, what are the likely implications for Iran-
Afghanistan relations?
                 castro's hold on power and succession
    (19)(a) What is the state of Fidel Castro's health and the 
prospects for a peaceful transition of democracy in Cuba within the 
next two to five years? Who is a likely successor?
    (b) Please comment on the short, medium and long-term impact of 
Pope John Paul's recent visit to Cuba. Will the Catholic Church in Cuba 
begin to play a more aggressive oppositionist role in Cuba as a result 
of the visit?
    (c) Please characterize the strength of the current opposition to 
the Castro government. Does the opposition pose a serious challenge to 
the regime? If not, do you anticipate that it will within the next 2-5 
years?
                             cuba's economy
    (20) How would you characterize Cuba's current economic health? 
What impact has the Helms Burton legislation had on foreign investment 
in Cuba?
                      political killings in haiti
    (21) What is the status of investigations into the various high 
profile political murder cases that have occurred in Haiti during the 
last several years? Has any evidence of government complicity in those 
murders been uncovered? In this regard, please provide an assessment of 
the performance of the Haitian National Police's Investigative Unit and 
Haitian Judiciary in solving these crimes.
                                colombia
    (22) Please assess the strength of the Colombian guerrilla movement 
and its chances for military success against the government of 
Colombia. To what extent have the various guerrilla movements in 
Colombia become involved in narcotrafficking? What role do they play in 
drug trafficking and have they in effect become one with the country's 
narcotraffickers? Please assess the current human rights situation and 
the relative involvement of both government and guerrilla forces in 
committing such abuses.
                                 mexico
    (23) President Clinton's February 1997 certification of Mexico as 
fully cooperative in drug control efforts prompted considerable 
criticism in Congress. What is your current assessment of the nature 
and extent of Mexico's drug control efforts? To what extent does 
Mexican government corruption hamper these efforts?
      monitoring compliance with a comprehensive nuclear test ban
    (24) How high is the Intelligence Community's confidence that it 
can effectively monitor the Comprehensive Test Ban Treaty? What are the 
notable shortcomings? Is U.S. intelligence doing everything possible to 
improve U.S. monitoring capabilities in this area? If not, why not?
                    the chemical weapons convention
    (25)(a) Over one hundred of the 168 signatories have ratified the 
Chemical Weapons Convention (CWC). (Last November, both Iran and Russia 
completed their CWC ratification.) Do you have any intelligence that 
any of the signatories of the CWC have engaged in activities that raise 
compliance concerns?
    (b) The Intelligence Community has conceded that its ability to 
monitor compliance with the CWC is limited. Has that capability 
improved since U.S. ratification of the CWC?
                       the situation in indonesia
    (26) How will Indonesia's economic problems affect the security 
situation in that nation? How do you assess President Suharto's ability 
to prevent civil strife that may arise as a result of slower if not 
negative economic growth, and likely higher unemployment and inflation? 
If Suharto is not re-elected or not able to fulfill his seventh term as 
president, is there a credible successor available that could lead 
Indonesia through this economic downturn in the coming years? How 
likely is the Indonesian military to intercede in the political 
process?
                threat to u.s. deployed forces in bosnia
    (27) What are the shortfalls in Intelligence Community support to 
the Bosnia operation and what is being done to rectify these problem 
areas?
            intelligence support to the war crimes tribunal
    (28) How is the U.S. Intelligence Community supporting the War 
Crimes Tribunal?
                             nato expansion
    (29) What are the risks, if any, to U.S. intelligence personnel and 
the Intelligence Community in general, in allowing Poland, the Czech 
Republic and Hungary to join NATO?
                      the threat posed by disease
    (30) In your prepared testimony in which you discuss the 
implications of Hong Kong's ``bird flu,'' you note that ``[b]acterial 
and viral diseases are both durable and mutative, ensuring they will 
never be completely eradicated. Improved monitoring and rapid response 
is essential to curb this threat to the health of Americans.'' What 
diseases pose the greatest threat to the U.S.?
                                 ______
                                 
                                  U.S. Department of State,
                                     Washington, DC, June 15, 1998.
Hon. Richard C. Shelby,
Chairman, Select Committee on Intelligence, U.S. Senate.
    Dear Mr. Chairman: Enclosed are responses to the questions posed in 
your March 12, 1998 letter to Assistant Secretary Oakley. Please let us 
know if we can be of further assistance.
            Sincerely,
                                            Barbara Larkin,
                          Assistant Secretary, Legislative Affairs.
    Enclosures: As stated.
                    1. russian military capabilities
    Question 1. What is your assessment of the likelihood that military 
reform will succeed in Russia?
    Answer: The Russian military continues to be short of funds and 
afflicted with a series of problems that have sharply lowered morale. 
Efforts at reform, begun in earnest last year by the new minister of 
defense, have led to the consolidation of some commands and now await 
approval of a comprehensive program to revamp the services. Yeltsin has 
stated that he wants to reduce the military to no more than 1.2 million 
men by the end of the decade. The main problems of money and will-power 
remain, however, and, as in the case of the economy, entrenched 
interests are proving difficult to dislodge.
                2. the russia-iran missile relationship
    Question 2. In your prepared testimony, you state that ``[e]vents 
over the past year have demonstrated the ability of would-be 
proliferators, notably Iran, to exploit Russia's missile development 
infrastructure. If allowed to continue, access to Russian technology 
and expertise will enable the Iranians to develop and field 
intermediate range ballistic missiles faster than if they were left to 
their own devices.'' How has Russian assistance enhanced the 
capabilities of Iranian ballistic missiles? What are current 
projections about the range capabilities of Iranian missiles over the 
next 15 years? What are the implications for U.S. National security?
    Answer. The Administration wants to prevent Russian assistance to 
Iran's long-range missile program. This is why the President appointed 
a special envoy for the issue in 1997 and why the U.S. continues to 
urge Russia to take steps to ensure that Iran does not obtain 
equipment, technology, training, or materials from the Russian 
aerospace industry.
    Assistance from Russian experts has saved Iran time and improved 
the quality of the missile program, but we do not know exactly how much 
time Russian assistance has saved Iran.
    Iran's missile program was not starting from scratch when it began 
recruiting Russian experts. Iran has an active Scud program and has 
been looking at developing medium-range missiles for some time, at 
least since the early 1990s when it negotiated to purchase North 
Korea's No Dong system.
                        3. chinese proliferation
    Question 3. Please describe all significant transfers over the past 
5 years of WMD-related technology or information from China to Iran, 
Pakistan or other countries, to include advanced conventional weapons 
and technology. Do you believe that this assistance could raise 
compliance concerns with China's commitments to the Nonproliferation 
Treaty (NPT) and the Missile Technology Control Regime (MTCR)? How 
likely is it that China will comply with the Chemical Weapons 
Convention (CWC)?
    Answer. (NPT/Iran) In late 1997 China announced it would phase out 
existing, and not engage in any new, nuclear cooperation with Iran. In 
the past, Chinese sales of nuclear facilities to Iran have been made 
pursuant to IAEA safeguards. We do not believe China would knowingly 
assist Iran to acquire nuclear weapons.
    (NPT/Pakistan) China is providing assistance to Pakistan's civilian 
nuclear program through construction of a nuclear power reactor that 
will be subject to IAEA safeguards. But China also has cooperated with 
Pakistan's unsafeguarded nuclear program in areas that raise concerns. 
Prior to China's NPT accession in March1992, the U.S. had concluded 
that China had assisted Pakistan in developing nuclear explosives. In 
May 1996, China stated publicly that it will not provide assistance to 
unsafeguarded nuclear facilities. Our current information does not 
provide a basis for concluding that China has acted inconsistently with 
that statement.
    (Missiles) The Department continues to be concerned about reports 
of Chinese-supplied M-11's in Pakistan, and about reports of missile-
related assistance to countries such as Iran and Pakistan. In October 
1994, China reaffirmed its 1992 commitment to abide by the original 
guidelines and parameters of the MTCR. Beijing also committed to ban 
all exports of MTCR-class ground-to-ground missiles. We have no reason 
to believe China has done anything inconsistent with that commitment.
    (Chemical Weapons Convention) The U.S. for some time has been 
concerned that various Chinese companies have been transferring 
chemical weapon-related dual-use chemicals, production equipment, and 
technology to Iran, which we believe Iran is using in its chemical 
weapons program. In May 1997, the U.S. government imposed trade 
sanctions on five Chinese individuals, two Chinese companies, and one 
Hong Kong company for knowingly and materially contributing to Iran's 
CW program. We have no evidence that the Chinese or Hong Kong 
governments were involved in the specific transfers that provoked these 
sanctions. Beijing has said on many occasions that it is committed to 
and is abiding by the CWC, and that it is opposed to the development of 
chemical weapons by any nation.
                       4. the future of hong kong
    Question 4. On July 1 of last year, Hong Kong reverted from British 
to Chinese sovereignty. What is your long-term assessment of the 
likelihood that Hong Kong will continue to have strong economic growth, 
foster a friendly and supportive business environment and provide an 
atmosphere allowing significant scope for individual freedom? What are 
the economic implications of this for the U.S.?
    Answer. Less than a year after reversion, Hong Kong continues to 
play an important role as a regional finance center, actively 
participating in efforts to address the Asian financial crisis. As a 
member of the World Trade Organization and the Asia Pacific Economic 
Cooperation Forum, Hong Kong has pressed for further trade and 
investment liberalization.
    Beijing continues to take pains not to be seen as interfering in 
Hong Kong's affairs. Mainland Chinese companies in Hong Kong are 
subject to Hong Kong laws and supervision. The rule of law and the 
independent judiciary remain in place.
    China also has shown restraint and offered support in dealing with 
Hong Kong during the Asian financial crisis. Last fall, while the Hong 
Kong dollar was under enormous pressure, Beijing did not second guess 
the SAR's decision to hold fast to the peg--and it noted that it too 
had considerable reserves that could be made available for the defense 
of the exchange rate.
    The defense of the peg has required Hong Kong to deflate its 
economy. As a speculative pressure on the exchange rate has diminished, 
interest rates have retreated to close to where they were before the 
crisis began. The banks appear to have withstood well the fall off in 
property prices and other assets. Growth forecasts for this year range 
from about 2 percent to 3.5 percent, significantly lower than in recent 
years, and unemployment likely will rise slightly as demand for 
services eases. The export services sector remains more buoyant than 
anticipated because China's trade has not yet encountered sharply 
increased competition from southeast Asian countries where exchange 
rates tumbled.
    The Hong Kong press remains free and continues to comment 
critically on the PRC and its leaders, though some self-censorship has 
been reported. Demonstrations--often critical of the PRC--continue to 
be held. Western journalists and media focus on legislative elections 
scheduled for May and adoption of laws on sedition, subversion, and 
secession that might undermine fundamental human rights.
    Reversion has not dimmed Hong Kong's attractions as an operational 
base for U.S. companies because of its unduplicated regional strengths 
in finance, shipping services, and communications. Hong Kong's longer-
term economic prospects are too bound up with China's to separate, but 
as long as China's economy can sustain robust growth, Hong Kong's 
economy will remain vibrant.
                 5. north korea as a continuing threat
    Question 5. In his prepared testimony, General Hughes stated that 
``[s]ome significant--perhaps violent--change is likely in the next 
five years. There are four basic alternatives: leadership change, 
government collapse, negotiated accommodation with the South, or major 
economic reform.'' In your opinion, what is the likeliest scenario? 
Why? How widely is this view shared in the intelligence community? What 
do you view as the most likely scenario?
    Answer. INR believes that there is a good chance that the North 
will make enough economic adjustments and receive sufficient external 
assistance to sustain a strategy of engagement and economic 
regeneration over the next five years. We think the DPRK is most likely 
to continue on its present path of:
    Implementing the agreed framework and seeking broader engagement 
with the United States.
    Seeking foreign aid, trade, and investment to foster economic 
growth without undermining political control.
    Relying on and rewarding the military to ensure Kim Jong II's 
position.
    Reinforcing internal control and deterring challenges to the 
regime.
    As long as the DPRK stays on this course, the probability of war or 
military conflict short of war on the peninsula should remain 
relatively low.
           6. monitoring the north korean framework agreement
    Question 6. In 1994, North Korea signed the Nuclear Framework 
Agreement and promised to forgo further development of nuclear weapons 
in return for assistance from the U.S. and others. Has North Korea been 
living up to its commitments under the Framework Agreement? Do we 
expect continued compliance? Does the economic situation in North Korea 
make compliance more or less likely? How high is your confidence that 
the U.S. intelligence community can adequately monitor North Korea's 
compliance with the U.S.-North Korean Framework Agreement?
    Answer. At this stage of the Agreed Framework's implementation, the 
specific nuclear-related commitments which the North has undertaken are 
the freezing of the nuclear production facilities at Yongbyon, a halt 
to construction on two uncompleted graphite-moderated nuclear reactors, 
and the canning of the approximately 8,000 spent fuel rods that were 
unloaded in 1994. We are satisfied that the North is living up to each 
of these commitments. The facilities are frozen, construction has 
stopped, and canning has been completed.
    In another area we are not yet so satisfied. Although the North is 
not obligated to come into full compliance with its safeguards 
agreement with the IAEA until a ``significant portion'' of the LWR 
project is completed, the IAEA feels it needs to take preliminary steps 
to be able to deal with the question of verifying the accuracy and 
completeness of the DPRK's initial inventory expeditiously when the 
time comes. At the moment, there are differences between the North and 
the IAEA on how to proceed on this question. We believe that, in the 
spirit of the Agreed Framework, the North Koreans can and should be 
more cooperative with IAEA requests.
    We expect continued compliance from the North in areas where they 
have already fulfilled their commitments, and we are constantly 
focusing their attention on the need to be as cooperative as possible 
with the IAEA, now and in the future. The Agreed Framework is 
constructed to let us take one step at a time, and that is how we will 
deal with future North Korean obligations.
    One could image scenarios under which the North's desperate 
economic situation might lead to circumstances where it would decide to 
break the Agreed Framework. However, our view is that it is much more 
likely that the North's economic situation will keep it focused on 
efforts to improve relations with the United States, and that it fully 
realizes that this goal would be unattainable if it were to stop 
complying with its Agreed Framework obligations.
    We have high confidence that the U.S. intelligence community can 
adequately monitor the North's compliance with its specific commitments 
under the Agreed Framework, freezing production of nuclear materials 
at--as well as halting construction and eventually dismantling--the 
designated facilities.
                       7. changes in south korea
    Question 7. Talks on peace on the Korean peninsula involving North 
and South Korea, China and the U.S., began in Geneva last December. 
Long time opposition leader Kim Dae Jung won last December's 
presidential election in South Korea. What do these developments bode 
for change in South Korea as well as prospects for normalized relations 
between or reunification of North and South Korea?
    Answer. President Kim Dae Jung has said that he wants to make a 
number of reforms. He aims to make the current financial situation and 
IMF program an opportunity for Korea to achieve a more balanced 
economic development.
    He also has said that he is open to a North-South Korean summit, 
and he believes in increased economic intercourse between the North and 
South. The North Koreans have recently proposed resumption of 
government-to-government talks at the vice-ministerial level, possibly 
a first step in a broader reengagement with the south. Public North 
Korean comment on the new South Korean administration has avoidedharsh 
criticism, leaving the door open to exploring progress in inter-Korean 
relations.
                      8. iraq and u.n. inspections
    Question 8. Iraq has meetly barred a U.S.-led team from conducting 
inspections in Iraq, claiming that the team composition was 
``unbalanced'' and the U.S. team chief was a spy. Saddam Hussein has 
vowed to suspend cooperation with U.N. weapons inspectors if they do 
not finish their work by May 20. What is your assessment of the 
likelihood that Saddam is serious about his threat to suspend 
cooperation with the inspectors? What is the likelihood that military 
action against Iraq will alter Saddam's behavior?
    Answer. The crisis has been resolved for now and UNSCOM inspectors, 
including Americans, have inspected facilities previously off limits. 
Nevertheless, significant gaps remain regarding Iraq's WMD programs, 
especially in the biological weapons area. Additionally, Saddam's track 
record suggests strongly that we need to remain vigilant and prepare 
for additional challenges from his regime. This latest crisis was 
resolved peacefully in large part because Saddam faced a credible 
military threat.
                   9. the impact of sanctions on iraq
    Question 9. Iraq has argued that the continued ban on oil exports 
is causing mass suffering in Iraq, including unaffordable prices for 
food and unavailability of medicine. What is your assessment of the 
nature and extent of the suffering to the Iraqi people as a result of 
economic sanctions?
    Answer. The U.N. oil-for-food program initiated in 1996 has done 
much to alleviate the suffering of the Iraqi people, and we are 
prepared to look favorably on expanding the program. The Baghdad regime 
finally accepted terms of the oil-for-food arrangement, which had been 
available to Baghdad in one form or another since 1991. The arrangement 
has noticeably improved Iraqi nutrition and medical care though the 
overall economy remains hamstrung by shortages of imported raw 
materials and spare parts, by inferior public services, and by a 
dilapidated infrastructure. The Baghdad regime bears the onus for the 
humanitarian costs of economic sanctions. The Iraqi government's 
repeated flouting of U.N. Security Council resolutions precludes easing 
of the sanctions regime. Moreover, the U.N. oil-for-food arrangement, 
which was developed specifically to address the humanitarian issue, lay 
dormant for six years because of Baghdad's unwillingness to allow the 
U.N. to ensure equitable distribution of food and medicine.
                       10. the new regime in iran
    Question 10. Do you see President Khatami's election and reform 
agenda as a watershed that could change the nature of the Iranian 
regime? What is the possibility that Khatami's conservative critics 
will sidetrack him? What is the likelihood that the Khatami government 
will still be in power 3 years from now? Does his election signify a 
change in Iran's support for terrorism and its acquisition of weapons 
of mass destruction? Is there any evidence of such a change?
    Answer. Under Khatami, a number of changes are increasing prospects 
for a more democratic and less ideological Iran. For example, many 
press restrictions have been lifted and numerous new publications have 
been started. Some fundamental ideological taboos have been broken, 
most notably when Khatami praised American civilization and culture.
    Khatami's conservative opponents have been able to slow the pace of 
some of his reforms, but so far they have not stopped him. In April, 
for example, he overcame an indirect conservative attack on him when he 
won the release from prison of his ally, the mayor of Tehran, whose 
arrest was ordered by the conservative-dominated judiciary.
    Khatami appears to have worked out a modus vivendi with other key 
leaders we expect him to complete his four-year term.
    We do not know what Khatami's policies on terrorism and WMD are. He 
has brought in a new intelligence minister, but so far we lack 
sufficient evidence that would demonstrate reforms on terrorism.
                  11. the impact of sanctions on iran
    Question 11. Are sanctions likely to influence Iran's behavior over 
the next 3 years? Why or why not? Late last September, Iran and France 
confirmed the award of a $2 billion deal to develop Iran's South Pars 
gas field to Total SA, and its minority partners Gazprom (Russia) and 
Petronas (Malaysia). will the U.S. impose sanctions on these countries? 
What does this deal say about the effectiveness of the U.S. economic 
sanctions against Iran?
    Answer. We lack hard evidence that unilateral US sanctions have had 
significant positive effects in changing objectionable Iranian 
behavior. Tehran says the sanctions policy proves Washington's 
hostility and its insincerity in calling for a reduction in tensions 
with Iran. Even where the sanctions have had some effect, as in 
increasing Tehran's costs in securing international financing, we lack 
evidence that such costs affect Iranian policy on terrorism and weapons 
of mass destruction. Multilateral controls to deny Iran sensitive 
military and dual-use technology, however, have hampered Tehran's 
efforts to develop its WMD program.
    After extensive review, the Secretary on May 18 determined that the 
Total-Gazprom-Petronas investment in the South Pars gas field was 
sanctionable activity under the Iran and Libya Sanctions Act (the Act). 
At the same time, the Secretary under authority of Section 9(c) of the 
Act, determined it is important to the national interest to waive 
sanctions against Total, Gazprom, and Petronas. The Administration does 
not support the Total-Gazprom-Petronas investment and undertook 
vigorous efforts to stop it, including representations to the highest 
levels of the governments involved. All three companies, for varying 
reasons, are insulated from any practical negative impact of the 
imposition of sanctions, and were prepared to proceed with their 
investment projects in Iran even in the wave of U.S. sanctions. The 
administration concluded the Act's sanctions would not stop the South 
Pars deal.
    In reaching a decision, the Secretary took into account the Act's 
objective of building an effective multilateral regime to deny Iran the 
ability to acquire weapons of mass destruction (WMD) and their delivery 
systems and to support acts of international terrorism. In the areas of 
WMD and terrorism, the Administration has achieved significant enhanced 
cooperation with the European Union, with whom cooperation was already 
at a high level, and with Russia, which has undertaken some important 
commitments and initiatives on non-proliferation, whose implementation 
we will monitor for effectiveness. Malaysia has not been actively 
engaged with us on nonproliferation issues, nor has it been a source of 
proliferation concern, and it has acted as a force of moderation in 
Islamic circles. The Administration fully recognizes the dangers to 
Israel posed by the potential threat of development of WMD by its 
adversaries in the region and we will continue to engage with Israel to 
assure our cooperation supports Israel's ability to resist such 
threats.
    In reaching a decision, the Secretary also took into consideration 
additional factors relating to our national interest. The waivers will 
enhance our ability to work with the European Union, Russia, and 
Malaysia on a host of bilateral and multilateral issues. Inter alia, 
these include:
    Russia's ratification of START II, further cooperation on 
nonproliferation, and progress on internal economic reform;
    Resolution of differences over Helms-Burton, including a new 
discipline to deter investment in illegally expropriated property 
worldwide, including in Cuba, and further EU support for democratic 
change and human rights in Cuba, and creation of a new US-EU initiative 
to further liberalize world trade;
    Multilateral cooperation on Iraq to maintain the isolation of 
Saddam Hussein and to bring about Iraqi compliance with UN Security 
Council resolution, including cooperation with the UNSCOM/IAEA 
inspections;
    Progress on peaceful solutions to the issues of Kosovo and Bosnia 
where the cooperation of our NATO allies is essential, and on other 
European security issues;
    Cooperation with European and Asian governments, including 
Malaysia, in addressing the Asian financial crisis and the rapidly 
unfolding events in Indonesia.
                     12. the palestinian authority
    Question 12. (A) Please assess both the willingness and the ability 
of the Palestinian Authority to control terrorist violence in Gaza and 
the areas of the West Bank under its control.
    (B) To what extent is Hamas receiving outside support, and from 
whom is that support coming.
    (C) Please assess Chairman Arafat's health, comment on his likely 
successor and describe the impact his departure would have on the peace 
process.
    Answer. (A) (Control Over Terrorism) The Palestinian Authority (PA) 
recognizes that it must fight terrorism and has taken steps to prevent 
terrorist attacks. We believe that the PA must make a total effort to 
fight terrorist groups. The President the Secretary, and other USG 
officials have publicly and privately made this point to the PA. We 
will continue to monitor the PA's efforts in this regard.
    (B) (Outside Support of Hamas) Hamas receives a substantial portion 
of its financing from private Palestinian and Islamist supporters 
around the globe,especially in the Gulf states but also in the U.S. and 
Europe. Most of this money is intended and used for Hamas charitable 
activities, though some is siphoned off to Hamas' military wing. The 
group also receives financial and training assistance from Iran and at 
least some terrorist training from other terrorist groups in the 
region, especially in Lebanon.
    (C) (Arafat's Health and Successor) We have heard reports that 
Chairman Arafat's health is deteriorating, however, U.S. officials who 
meet with him often report that he seems vigorous and fully engaged.
    Yasser Arafat holds two positions: ``ra'es'' (chairman or 
president) of the Palestinian Executive Authority (elected in 1996), 
and Chairman of the Palestinian Liberation Organization (PLO). Arafat 
is also head of Fatah, the dominant faction in the PLO. In the event he 
vacates his posts due to death, resignation, or loss of legal capacity, 
the Speaker of the Palestinian Legislative Council, currently Ahmed 
Quray (Abu Alaa), takes over as head of the Palestinian Authority for 
no more than 60 days, within which time elections must be held to elect 
a new ``ra'es.''
    There is no clear line of succession for Arafat in his capacity as 
Chairman of the PLO Executive Committee, although its Secretary General 
Mahmoud Abbas (Abu Mazen) is considered a likely candidate to assume 
this position. A successor would likely be from Fatah, the PLO's 
dominant faction, a meeting of the Palestine National Committee (PNC) 
might be called to confirm the new Chairman. Arafat himself remains, 
for most Palestinians, the symbol of their cause. It is likely that 
after a period of consolidation, Arafat's successor would continue to 
negotiate the outstanding issues on the Palestinian-Israeli peace 
track.
              13. the stability of the israeli government
    Question 13. (A) Please give us your assessment of Prime Minister 
Netanyahu's commitment to abiding by the Oslo accords. Is he committed 
to a land-for-peace formula, or does he want to kill the peace process 
as currently formulated?
    (B) How do you assess the longevity of the current Likud 
government? How do you assess labor's ability to win an election at 
this point?
    (C) Please assess Israeli Defense Minister Mordechai's recent 
statements in support of United Nation's Resolution 425, which calls 
for Israel's unilateral withdrawal from southern Lebanon. Does this 
represent a significant change in Israeli policy? What has been the 
response of the Lebanese and Syrians to Mordechai's statement?
    Answer. (A) (Netanyahu and the Oslo Accords) Prime Minister 
Netanyahu has stated publicly he is committed to the Oslo accords, and 
concluded an agreement with PA chairman Arafat in January 1997, which 
led to the Israeli army's redeployment from Hebron.
    (B) (Longevity of Likud Government) The government was elected to 
serve a four-year term in accordance with Israel's electoral law.
    (C) (Mordechai's Statement on Lebanon Withdrawal) Mordechai's 
statement earlier this year led the Israeli cabinet, in a major policy 
shift, on April 2 to endorse UNSC Resolution 425. Syrian and Lebanese 
leaders have reacted negatively in public, calling the statement a 
maneuver designed to reach a separate peace with Lebanon and an Israeli 
tactic aimed at avoiding giving back the Golan Heights as part of a 
peace settlement with Syria.
                  14. the israeli presence in lebanon
    Question 14. Please comment on the losses the Israelis have 
suffered in Lebanon in the past year and the impact of those losses on 
Israeli public opinion and the likelihood that Israel will initiate a 
unilateral withdrawal from southern Lebanon. Do those losses indicate 
that the Hizballah is becoming a more effective force? Please comment 
on the military effectiveness of Israel's allies, the Southern Lebanese 
Army (SLA) and describe the current military cooperation between the 
Israeli Defense Force and the SLA.
    Answer. Israel's losses in south Lebanon have generated increasing 
public calls for a troop withdrawal. Some Israelis support a unilateral 
pullout; others, a pullout conditioned on security arrangements worked 
out with Lebanon and Syria prior to Israeli withdrawal.
    The government has stated that UNSC Resolution 425 provides for 
negotiating security arrangements prior to an Israeli pullout.
    Though most of the Israeli casualties last year were due to 
accidents, Hizballah's military tactics have grown steadily more 
sophisticated. Hizballah now regularly mounts coordinated operations 
involving multiple units.
    Israeli troops fight alongside the SLA, and Israel trains, equips, 
and pays the SLA. There are indications of poor morale within the SLA 
due to repeated Hizballah attacks and uncertainty about the militia's 
future. The Lebanese government has indicted several SLA commanders on 
charges of treason. The prospect of an Israeli withdrawal from Lebanon 
could only have a negative effect on SLA morale.
                               15. syria
    Question 15. Under what conditions will Syria withdraw from 
Lebanon? Do you see those conditions being met in the near future?
    Answer. Syria relies on its forces in Lebanon to prevent inter-
factional strife and to ensure that the Lebanese government does not 
act contrary to Syrian security and foreign policy interests. The 
Syrian troop presence also provides a first line of defense against an 
Israeli military move toward Damascus via the Bekaa valley. Lastly, it 
facilitates Syrian support for Hizballah's guerrilla resistance 
activities against the Israeli military presence in Lebanon.
    The Taif Accord, which ended the Lebanese civil war, calls on Syria 
to redeploy its troops to the Bekaa valley, but it does not call for a 
Syrian withdrawal from Lebanon. Syria has refused to redeploy, claiming 
provisions of the Accord calling for curbing sectarianism and Israeli 
withdrawal from southern Lebanon have not been implemented.
    A comprehensive Arab-Israeli peace settlement could result in 
conditions more conducive to a Syrian withdrawal.
                16. the security environment in lebanon
    Question 16. Please comment on the general security environment in 
Lebanon and the safety of Americans who travel there, now that the U.S. 
travel ban has been partially lifted. If the Israelis should withdraw 
their forces from southern Lebanon, are the Lebanese armed forces 
capable of controlling southern Lebanon and preventing Hizballah 
attacks against Israel?
    Answer. Though the security situation in Lebanon has improved in 
recent years the intelligence community continues to rate the terrorist 
threat to U.S. interests--especially the official U.S. presence--in 
Lebanon as high. The State Department strongly advises U.S. citizens 
not to travel to Lebanon, but recognizes that some Americans may have 
compelling reasons to accept the risks.
    We believe the LAF has the potential to maintain security in all 
parts of Lebanon, though it is not clear that it would be able to 
prevent Hizballah or other groups from attacking Israel.
                               17. egypt
    Question 17. (A) What impact would a reduction in U.S. military aid 
to Egypt have on U.S.-Egypt relations, particularly if such a reduction 
is not matched by a comparable reduction of U.S. military aid to 
Israel?
    (B) Please assess the current strength of the Mubarak government 
and its ability to prevail over terrorist internal opposition. To what 
degree is that internal opposition receiving outside support, and from 
whom?
    Answer. (A) (Reduction of Military Aid) Reducing U.S. military aid 
to Egypt without a concomitant reduction of U.S. military aid to Israel 
would be badly received in Egypt and could make the Egyptians less 
cooperative on a host of strategic issues, including the Gulf, Africa, 
peace-keeping activities and the Middle East peace process. Egypt has 
long bristled at the fact that the U.S. has worked to ensure that 
Israel maintains a qualitative military edge over all its neighbors. A 
unilateral cut in U.S. military aid would make the Egyptians feel even 
less secure about their regional military standing (despite their many 
years of peace with Israel) and apprehensive that they were losing U.S. 
political support.
    (B) (Strength of Mubarak Government) Though Egyptian Islamist 
extremists, including the Egyptian al-Gama'at al-Islamiyya and the 
Egyptian al-Jihad, pose no immediate threat to the stability of the 
Egyptian government, both groups have a proven ability to attack 
government and civilian targets in Egypt. Following the November 17, 
1997 Luxor massacre, which killed 58 foreign tourists, Egyptian 
officials charged Iran and terrorist financier Usama bin Ladin with 
supporting Egyptian Islamist extremists. Egypt also accused a number of 
western governments, including the UK, the Netherlands and Switzerland. 
with providing haven to Egyptian terrorists.
                 18. the taliban militia in afghanistan
    Question 18. The Taliban militia has overtaken significant portions 
of Afghanistan. What is the likelihood that the Taliban will come to 
dominate Afghanistan over the long-term? If the Taliban sustain their 
dominance over Afghanistan, what are the likely implications for Iran-
Afghanistan relations?
    Answer. The Taliban are unlikely to dominate Afghanistan 
permanently by military means. The two sides have reached approximate 
parity in military strength, neither capable of making major permanent 
gains against or defeating the other. Both seem to be growing weary of 
the fight. While the northern opposition has always been fractious, the 
Taliban has also experienced rising internal dissension. The southern 
populace is increasingly concerned about Taliban failure to govern 
fairly or effectively.
    If the Taliban does succeed in dominating the country, relations 
between Afghanistan and Iran would be tense. The Taliban have accused 
Iran of being the chief supplier of war material to anti-Taliban 
opposition forces and have threatened to reciprocate by supporting 
Iranian opposition groups.
               19. castro's hold on power and succession
    Question 19. (A) What is the state of Fidel Castro's health and the 
prospects for a peaceful transition to democracy in Cuba within the 
next two to five years? Who is a likely successor?
    (B) Please comment on the short, medium and long-term impact of 
Pope John Paul's recent visit to Cuba. Will the catholic church in Cuba 
begin to play a more aggressive oppositionist role in Cuba as a result 
of the visit?
    (C) Please characterize the strength of the current opposition to 
the Castro government. Does the opposition pose a serious challenge to 
the regime? If not, do you anticipate that it will within the next 2-5 
years?
    Answer. (A) (Health and Succession) A number of foreign observers 
over the last few months have reported that Castro has lost 
considerable weight and appears to be in very poor health. Other 
observers, his recent delivery of a seven-hour speech, and his 
appearance during the just concluded papal visit do not support the 
conclusion that he is in failing health.
    Should Castro die or become disabled due to natural causes--the 
most likely scenario for his departure from power--the Communist Party, 
bureaucracy and military would likely continue running the country in 
the short run, probably with Castro's brother and armed forces chief 
Raul at least nominally at the helm. Over time Fidel Castro's departure 
would open the door for reform, but instability and a migration crisis 
could occur.
    (B) (Papal Visit) The Cuban government, in preparation for the 
papal visit, gave the church more space, but may withdraw some of it--
such as permission for outdoor religious events--and has shown no 
inclination to undertake systemic change. The Pope's challenge to the 
Cuban government to allow freedom of religion and to respect 
fundamental freedoms and human rights will be difficult for Castro to 
ignore. Castro's response--so far limited to small concessions to the 
Church and the release of some prisoners--is likely to fall short of 
the expectations raised by the Pope's visit. Whether the people of 
Cuba, long accustomed to bending to the government's will and fearful 
of its repressive security apparatus, will press for change is more 
difficult to judge. The Cuban Catholic Church will likely continue to 
focus its efforts in increasing space for its evangelical activities. 
It now has the Pope's very public endorsement, making renewed 
obstructionism by the Cuban government more difficult.
    (C) (Opposition) The internal opposition remains small in number, 
factionalized, isolated, and infiltrated by government security 
operatives. Dissidents are subject to harassment and arbitrary arrest 
on a variety of pretexts at virtually any time, and regime tactics have 
prevented the formation of an effective opposition organization. At 
present, the opposition does not pose a serious challenge to the 
regime, and there is little indication that it is growing in strength. 
Barring unforeseeable events that would change the basic political 
environment in Cuba, it is difficult to envision the internal 
opposition emerging into a force capable of mounting a serious 
challenge to the regime within the next few years.
                           20. cuba's economy
    Question 20. How would you characterize Cuba's current economic 
health? What impact has the Helms-Burton legislation had on foreign 
investment in Cuba?
    Answer. After rising 7.8 percent in 1996, Cuba's economic growth 
has slowed considerably, though the likelihood for economic collapse 
such as occurred after the end of Soviet aid remains low. The Cuban 
government reports GDP grew 2.5 percent in 1997 and predicts 1998 GDP 
growth of between 2.5 and 3.0 percent. We have found Cuban economic 
statistics unreliable and there is the possibility that real economic 
growth will be lower
    Cuba's current prospects have been hindered by a sharp drop in 
nickel prices linked to the Asia crisis and the slowdown in the world 
economic growth. At the same time, the crisis has cut Cuba's import 
bill by lowering oil prices. Sugar prices have also dropped recently, 
compounding Havana's continued problems in falling sugar harvests.
    Helms-Burton has deterred some potential investment and has caused 
the withdrawal of limited amounts of existing investment. The 
legislation has also sharpened Cuba's financing difficulties, delaying 
purchases of inputs to the crucial sugar sector and raising already 
high lending rates to around 20 percent.
                    21. political killings in haiti
    Question 21. What is the status of investigations into the various 
high profile political murder cases that have occurred in Haiti during 
the last several years? Has any evidence of government complicity in 
those murders been uncovered? In this regard, please provide an 
assessment of the performance of the Haitian national police's 
investigative unit and Haitian judiciary in solving these crimes.
    Answer. The special investigative unit (SIU) continues to actively 
pursue investigations, but has not resolved any of the 80-plus cases 
assigned to it. Major obstructions to resolution include insufficient 
expertise of members of the SIU, reluctance of potential witnesses to 
talk to the police, organizational rivalries between the SIU and other 
security elements, and the ineffectiveness of the Haitian judiciary.
    The SIU has not yet sought indictments in any of the cases it is 
investigating. We do not know whether it has uncovered evidence that is 
credible to support a charge of complicity against any past or present 
government official.
                              22. colombia
    Question 22. Please assess the strength of the Colombian guerrilla 
movement and its chances for military success against the government of 
Colombia. To what extent have the various guerrilla movements in 
Colombia become involved in narcotrafficking? What role do they play in 
drug trafficking and have they in effect become one with the country's 
narcotraffickers? Please assess the current human rights situation and 
the relative involvement of both government and guerrilla forces in 
committing such abuses.
    Answer (A) (Strength of Guerrilla Movement) Both the Colombian 
Armed Revolutionary Force (FARC) and the National Liberation Army (ELN) 
are robust guerrilla movements having grown in strength since 1990, and 
presently numbering approximately 10-15,000 combatants. Both groups 
also have expanded their areas of operation. Guerrillas are estimated 
to control some 13 percent of Colombian territory, and have a presence 
in about 67 percent of the country. FARC operates primarily in southern 
and eastern Colombia though its presence extends beyond these areas. 
The FARC is capable of denying the government a civil or military 
presence in large areas of the countryside. The ELN, which operates 
throughout the northern half of the country, is able to attack the 
canolimon oil pipeline (owned by a consortium of U.S. firms and the 
Colombian government) with relative impunity.
    The guerrillas are not likely to overthrow the Colombian government 
in the near future. Neither the FARC nor the ELN has made significant 
operational inroads into Colombia's major cities, although increased 
guerrilla attacks in urban areas remain a possibility. The guerrillas 
can, however, deny government presence in large areas of the 
countryside and carry out various attacks with relative impunity.
    The government has been able to protect the cities--where 75 
percent of the population lives--and vital economic areas like oil and 
coal fields. While security forces will likely retain the overall 
advantage in urban areas, their commitment there could result in 
additional ground lost to the guerrillas in rural areas. The oil 
pipeline bombings, while costly and annoying, are impossible to 
completely prevent, and have not generally stopped production. The 
pipeline attacks last summer, however, were exceptional because they 
did, for the first time, successfully halt production.
    The guerrillas have increased the boldness and sophistication of 
their attacks and can coordinate successful operations involving 
hundreds of widely scattered fighters. Moreover, the army lacks the 
necessary training, resources and strategy to effectively combat the 
guerrillas in the countryside.
    (B) (Narcotrafficking) Over the past several years, the FARC, ELN, 
and EPL guerrillas appear to have become increasingly involved in coca 
cultivation, performing a security role for coca growers. In addition 
to providing physical protection to coca crops, the guerrillas also 
``tax'' coca growers, requiring a percentage of the revenue from 
narcotics produced in a given area in exchange for permitting the 
activity to occur. Guerrillas also require pay-offs for some narcotics 
logistics operations, including the use of airstrips and the movement 
of precursor chemicals. In some cases, the guerrillas have operated 
their own cocaine production laboratories. The guerrillas, however, do 
not constitute a new cartel, and we have not picked up anysigns of 
significant guerrillas trafficking, export or distribution of cocaine. 
Still, the narcotics industry--along with kidnapping and extortion--is 
a major source of guerrilla financing.
    We believe guerrilla involvement in the narcotics industry has 
increased because coca cultivation itself has increased in areas 
traditionally under guerrilla influence.
    (C) (Human Rights) Colombia's human rights situation continues to 
deteriorate due to the long-simmering guerrilla war, uncontrolled 
actions by numerous paramilitary groups, and an inefficient and easily 
corrupted judiciary.
    While the number of politically motivated extra judicial killings 
went up in 1997, the percentage attributed to government security 
forces continued to decline, from 54 percent in 1993 to 7.5 percent in 
1997. Paramilitary groups committed 69 percent of 1997 killings, 
continuing an upward trend, while guerrillas committed 23.5 percent.
    Although the government and the military officially treat 
paramilitaries as criminals, they have done little to disband them and 
prosecute human rights violators. Some military officers turn a blind 
eye to paramilitary actions or even actively collaborate with them.
    Colombia has the world's highest kidnapping rate, over 50 percent 
committed by the guerrillas. Other problems include disappearances, 
torture, arbitrary arrest, prolonged Pretrial detention, and internal 
displacement.
                               23. mexico
    Question 23. President Clinton's February 1997 certification of 
Mexico as fully cooperative in drug control efforts prompted considered 
criticism in Congress. What is your current assessment of the nature 
and extent of Mexico's drug control efforts? To what extend does 
Mexican government corruption hamper these efforts?
    Answer: In general Mexico has stepped up its counternarcotics 
performance. Cocaine seizures are at the highest level since 1993. 
President Zedillo appears committed to forging a closer drug control 
relationship with the United States.
    President Zedillo has achieved mixed results in his ongoing 
campaign to root out officials engaged in graft or drug-related 
corruption. The arrest of former drug czar General Gutierrez and the 
establishment of a new counternarcotics unit with personnel who are 
more carefully selected are positive steps.
    However, traffickers continue to suborn security officials to 
facilitate the movement of large cocaine loads to the United States. 
More disturbing, press reports of traffickers' in-roads to the military 
hierarchy suggest corruption is probably more extensive than President 
Zedillo initially believed.
    24. monitoring compliance with a comprehensive nuclear test ban
    Question 24. How high is the intelligence community's confidence 
that it can effectively monitor the Comprehensive Test Ban Treaty? What 
are the notable shortcomings? Is U.S. intelligence doing everything 
possible to improve U.S. monitoring capabilities in this area? If not, 
why not?
    Answer. The intelligence community will use a combination of 
dedicated technical systems and national intelligence means to monitor 
the treaty.
    The U.S. intelligence community established specific yield 
thresholds in various testing environments (underground, underwater, 
atmosphere and space). Last year's national intelligence estimate 
reviewed our technical monitoring capabilities and concluded that our 
technical systems will generally monitor evasively tested explosions 
down to required levels in areas of high interest with high confidence. 
With lesser but still significant confidence, we can detect and 
identify explosions at even lower levels.
    The CTBT enhancement program, to be in place by 2005, is aimed at 
improving our monitoring capabilities. Elements of this program 
include: additional or upgraded seismic, hydro-acoustic, radionuclide, 
and infrasound monitoring stations; establishment of a national data 
center, replacement of existing satellite sensors; research into a 
replacement airborne sampler; and research to optimize the use of 
monitoring data from the above U.S. monitoring enhancements.
    Enhancements to the U.S. Atomic Energy Detection System (USAEDS) 
and contributions from the CTBT's International Monitoring System (IMS) 
will increase the amount of data, thus improving the U.S. monitoring 
capability ten-fold.
    The CTBT provides the U.S. with access to additional monitoring 
stations that it would not otherwise have. With the planned 
improvements in U.S. national technical capabilities and the addition 
of the international sensors mandated by the treaty, the U.S. will have 
more resources with which to monitor nuclear testing.
                  25. the chemical weapons convention
    Question 25. (A) Over one hundred of the 168 signatories have 
ratified the Chemical Weapons Convention (CWC). (Last November, both 
Iran and Russia completed their CWC ratification.) Do you have any 
intelligence that any of the signatories of the CWC have engaged in 
activities that raise compliance concerns?
    (B) The intelligence community has conceded that its ability to 
monitor compliance with the CWC is limited. Has that capability 
improved since U.S. ratification of the CWC?
    Answer. (A) (Concerns) In many cases, we are still in the process 
of analyzing declarations, so any compliance judgment would be 
premature. In some cases, members' failure to provide the necessary 
declaration information has complicated analysis of treaty compliance.
    (B) (Monitoring Capability) CW production capabilities are 
inherently dual-use, which further complicates the process of assessing 
whether a country is in compliance with the convention.
    We expect to gain additional insights into global CW programs as 
implementation of the CWC matures, although some countries of concern 
are not party to the treaty. The implementation of the CWC has already 
revealed some new information on CW programs. We continue to monitor 
activities of potential concern
                     26. the situation in indonesia
    Question 26. How will Indonesia's economic problems affect the 
security situation in that nation? How do you assess President 
Suharto's ability to prevent civil strife that may arise as a result of 
slower if not negative economic growth, and the likely higher 
unemployment and inflation? If Suharto is not re-elected or not able to 
fulfill his seventh term as President, is there a credible successor 
available that could lead Indonesia through this economic downturn in 
the coming years? How likely is the Indonesian military to intercede in 
the political process?
    Answer. As you are aware, Suharto resigned as President on May 21 
and immediately had Vice President Habibie installed as his successor. 
Habibie, who initially believed he would serve out a term that lasted 
until 2003, quickly became aware that political and economic reform 
would have to be at the top of his agenda if he is to survive in office 
even as a transitional figure. Some formula for change must be found to 
satisfy the demands of the students, who are now protesting Habibie's 
presidency, for example through the calling of new elections or a 
special session of the People's Consultative Assembly to change 
election and party laws.
    The military plays a major role in Indonesia and has a strong 
commitment to and tradition of providing stability and security. There 
is no history of military coupe, but the military is fully understood 
to be a key political player, and will continue to play a significant 
background role as the situation develops.
              27. threat to u.s. deployed forces in bosnia
    Question 27. What are the shortfalls in intelligence community 
support to the Bosnia operation and what is being done to rectify these 
problem areas?
    Answer. The intelligence community has done a very good job in both 
force protection and Dayton implementation coverage. Intelligence on 
military developments and strengths among the former warring parties 
remains excellent, as does coverage of internal political developments 
in Bosnia and the Republika Srpska.
          28. intelligence support to the war crimes tribunal
    Question 28. How is the U.S. Intelligence community supporting the 
war crimes tribunal?
    Answer. The U.S. Government provides information support to the 
International Criminal Tribunal for the Former Yugoslavia (ICTY) Office 
of the Prosecutor (OTP), primarily for lead purposes in war crimes 
investigations.
    Thousands of USG documents have been made available to the ICTY 
prosecutor, including graphics, imagery and mapping materials, pursuant 
to an arrangement with the OTP which protects confidential information. 
Sensitive documents are stored in a secure area at the American Embassy 
in the Hague
    The war crimes unit, located within the Department of State's 
Bureau of Intelligence and Research, serves as the interagency 
executive agent for the provision of USG-supplied information to the 
OTP.
                           29. nato expansion
    Question 29. What are the risks if any, to U.S. intelligence 
personnel and the intelligence community in general, in allowing 
Poland, the Czech Republic and Hungary to join NATO?
    Answer. This subject is discussed in the intelligence community 
assessment produced in March 1998 and referred to in the March 9, 1998 
letter of Assistant Secretary of State for Legislative Affairs Larkin 
to the Chairman and Vice-Chairman. INR and the State Department hold no 
views at variance with the community judgments rendered in the report.
                    30. the threat posed by disease
    Question 30. In your prepared testimony in which you discuss the 
implications of Hong Kong's ``bird flu,'' you note that ``[b]acterial 
and viral diseases are both durable and mutative, ensuring they will 
never be completely eradicated. Improved monitoring and rapid response 
is essential to curb this threat to the health of Americans.'' What 
diseases pose the greatest threat to the U.S.?
    Answer. While this is a question more appropriately directed to the 
Centers for Disease Control and Prevention than to the Bureau of 
Intelligence and Research recent international public health research 
indicate a general resurgence of infectious diseases any one of which 
could adversely affect the health of Americans, either living overseas 
or in the United States. A recent report by the National Science and 
Technology Council's Committee on International Science, Engineering, 
and Technology Working Group on Emerging and Re-emerging Infectious 
Diseases, entitled Global Microbial Threats in the l990s, lists a 
number of disease threats from well known ones like AIDS and TB to 
those that were once thought to be on the decline such as cholera, 
malaria, and yellow fever. The study also notes the widespread problem 
of stubborn bacterial resistance to antibiotics and the persistent 
global threats from mutating strains of influenza.
    While we cannot confidently predict when or even where the next 
infectious disease outbreak will occur that will most affect Americans, 
we now understand better the factors behind resurgence, which include: 
population growth, particularly in already congested urban areas, 
worldwide transportation linkages that facilitate increases in food 
trade and international migration, inadequate public health programs in 
poor countries; and misuse of antibiotics. Our realization of how 
difficult it is to eliminate infectious diseases and our appreciation 
for how fast these diseases can now spread across international borders 
are behind our strong recommendation that we work with other 
governments and international health agencies to establish a much more 
vigorous and comprehensive monitoring and response network focused on 
infectious disease vectors.
                                 ______
                                 
                               Central Intelligence Agency,
                                     Washington, DC, July 24. 1998.
Hon. Richard C. Shelby,
Chairman, Select Committee on Intelligence,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: Per your 12 March 1998 request, enclosed is our 
set of unclassified answers to the Committee's questions arising out of 
your 28 January 1998 hearing. Note that these answers are current and 
complete as of 15 June 1998.
    An original of this letter is also being provided to Vice Chairman 
Kerrey.
            Sincerely,
                                           John H. Moseman,
                                 Director of Congressional Affairs.
    Enclosure.
               russia's ballistic missile defense program
    (1) Please describe the nature and extent of Russia's ballistic 
missile defense effort. Where do you see Russia's ballistic missile 
defense program heading over the course of the next 15 years?
    Russia's ballistic missile defense (BMD) effort consists of both 
strategic and tactical (theater) systems. Its strategic anti-ballistic 
missile (ABM) complexes are located around Moscow and consist of both 
endo- and exoatmospheric interceptors as well as a large multifunction 
radar collocated at the ABM complex near Pushkino. These sites are 
fully operational and are in compliance with the 1972 ABM Treaty, which 
permits one ABM deployment location and a maximum of 100 total 
interceptors.
    Russia's strategic ABM system is provided early warning data by a 
network of radars located along the periphery of the Former Soviet 
Union. As conceived, the network would have provided highly redundant 
coverage of the main US ICBM attack corridors. The break-up of the 
Soviet Union, however, has left this network incomplete and reliant on 
older-technology radars, while work on the newer radars--most located 
in non-Russian states--has slowed or halted altogether.
    Russia's theater missile defense (TMD) consists of two surface-to-
air missile systems, the SA-12 and SA-10, both of which are being 
heavily marketed in direct competition with the US Patriot system. The 
SA-12 (Russian designator S-300V) Russia's foremost anti-tactical 
ballistic missile (ATBM) system, was deployed in the mid-80's to 
counter US Pershing deployments in Europe. The SA-12 is a highly mobile 
tactical system--deployed with the Russian ground forces--and consists 
of several surveillance and long-range acquisition radars in addition 
to the battery level engagement radar and suite of six launchers. The 
SA-12 system employs two missile types, one for more traditional air 
defense targets, the other reserved for tactical ballistic missile 
targets having speeds up to 3000 meters per second. In early 1997 
Russia debuted a new version of the SA-12, called Antey-2500. The 
system reportedly offers improved capabilities in both conventional air 
defense as well as tactical ballistic missile defense. It is not clear, 
however, if Moscow intends to upgrade domestic SA-12 deployment with 
the new version.
    The SA-10 system is Russia's premier air defense system that boasts 
some inherent ATBM capability. The system consists of a long-range 
surveillance radar, and a dedicated low-altitude surveillance radar 
(primarily to look for low-altitude aircraft and cruise missile 
targets). At the fire unit level is a phased-array fire-control radar 
and as many as 12 launchers (8 is typical--each containing four 
missiles. Following Desert Storm the SA-10 was marketed as having 
``capabilities equal to the US Patriot'' including the ability to 
engage Scud-class tactical ballistic missiles. A newer version of this 
system was debuted at the Moscow Airshow in 1997. Called S-300PMU2 or 
`FAVORIT', the improvements to this SA-10 variant were described by 
Russian designers as intended to improve its ATBM role.
    Restrictions in Russia's military R&D, including a marked slowdown 
of system testing programs, have resulted from severe funding problems 
across all forces. Russian planners appear to be prioritizing weapon 
development programs and keeping key developments alive with low-levels 
of funding at the sacrifice of procurement of many lower-priority 
systems that may be further along. Despite these efforts, however, the 
net result almost certainly will be significantly slower pace of 
improving existing systems and introducing new systems than was noted 
during the Soviet era, requiring concerted Russian efforts to extend 
the operational lifetime of existing hardware well beyond the 
originally planned period of use.
               russia's safeguarding of nuclear material
    (2) What is the intelligence Community's assessment of the adequacy 
of Russia's safeguard of nuclear weapons and fissile material?
    Russian nuclear weapons-usable fissile material--plutonium and 
highly enriched uranium (HEU)--stocks are more vulnerable to theft than 
nuclear weapons or warheads. Since the breakup of the Soviet Union, we 
assess that all of the seizures in Russia and Europe of stolen nuclear 
weapons-usable fissile materials were from research and fuel 
fabrication facilities rather than from nuclear weapons manufacture or 
disassembly facilities. For several years the US Department of Energy 
has been carrying out cooperative programs at 39 sites in Russia and 10 
sites in the Newly Independent States and the Baltics that are known to 
have nuclear weapons-usable fissile materials. The programs include 
assessing and improving nuclear material protection, control, and 
accounting (MPC&A), installing equipment and training operators, and 
providing instruction in safeguards and security. This effort has 
improved security and accountability by preventing misuses or 
diversions of materials at these sites. Nonetheless, these programs 
still have at least several years to go and DOE has not yet been given 
access to all of the facilities with nuclear weapons-usable fissile 
material to fully assess the need for--and to develop plans for--MPC&A 
upgrades.
    Nuclear warheads in storage are relatively secure, but declining 
morale and discipline in the military, as well as economic conditions, 
raise our concerns about the potential for warhead theft:
    Igor Valynkin, Chief, of the Defense Ministry's 12th Military 
Directorate responsible for nuclear security, stated last year that 
there have been no incidents of attempted theft, seizure. or 
unauthorized actions involving nuclear weapons.
    (a) What about missile systems, components, and technology? What is 
the status of Russian nuclear command and control systems?
    We regard the possibility of an unauthorized launch of strategic 
nuclear weapons as very low due to the many safeguards built into the 
system. An extreme political crisis, however, would raise our concerns 
about the possible circumvention of the system.
    (b) Has there been any change in the last year regarding Russian 
capabilities and programs in chemical or biological weapons? Does 
Russia persist in unacknowledged CW programs and illegal BW programs?
    The US continues to have questions on certain aspects of the 
Russian CW program. Russian scientists formerly involved in the 
research and development of CW have alleged that Moscow is hiding a 
program designed to ensure a continuing offensive CW capability despite 
arms control commitments. The "Whistleblowers" have also described an 
offensive program that is much more extensive than that describe in 
official declarations. These allegations when combined with other 
information give rise to concerns that at least some factions within 
the Russian government desire to circumvent the CWC.
    In September and October 1992, Russian chemical weapons scientist 
Vil Mirzayanov stated in the Moscow press that the Russians were 
developing a new generation of binary chemical agents. This new 
chemical agent is reportedly 5-10 times more effective than VX, the 
most lethal agent in the US CW inventory. The managers of the 
development program, including retired General Anatoly Kuntsevich, were 
awarded the Lenin Prize in the spring of 1991 for their efforts by 
then-President Gorbachev.
    Development of the new class of agents, known as Novichok--or 
Newcomer--continued into early 1992 at a test site known as Nukus in 
Uzbekistan--a site since closed down. Dr. Mirzayanov was employed at 
the State Scientific Research Institute for Organic Chemistry and 
Technology, the Moscow institute which pioneered the research on binary 
chemical agents in the 1970s.
    With regard to the former Soviet offensive BW program, since 1992, 
there have been several decrees and pronouncements by President Yeltsin 
declaring offensive BW-related activities illegal.
    In recent years, some research and development facilities have been 
deactivated and many have taken personnel and funding cuts.
    Other facilities, however, may retain the ability to produce BW 
agents.
    We cannot establish that Russia has given up this capability and 
remain concerned that some of the individuals involved in the old 
Soviet program may be trying to protect elements of it.
          transfer of technology from the former soviet union
    (3) What general trends has the Intelligence Community detected in 
the flow of scientists, technology, and conventional and unconventional 
military equipment to other nations? What evidence have you detected 
that Soviet nuclear materials, BW, CW, or ballistic missile-related 
materials or technology, have found their way to the international 
black market?
    The financial position of defense industries in the countries of 
the former Soviet Union continues to be shaky, prompting many entities 
to seek foreign contracts to keep operating. Government oversight of 
the activity of these firms appears to be spotty, allowing them 
considerable opportunities to transfer proscribed technology and 
equipment. The financial condition of defense-related firms in these 
countries is likely to remain difficult for several years, and many 
firms are likely to continue to look abroad for business opportunities.
    Increasingly scientists from the former Soviet Union appear to be 
providing their expertise and know-how to solving weapons development 
problems for foreign countries. Almost all of these scientists are 
working in the countries of the former Soviet Union and are not 
emigrating.
    Companies in the former Soviet Union have remained a major source 
of assistance for foreign military and WMD-related programs.
    Export laws exist and, on paper, appear to provide an adequate 
basis to stop most proliferation-related transfers, but enforcement 
remains a major problem, given high levels of corruption, limited 
expertise, and resource shortages.
    Economic conditions at laboratories, institutes, and factories are 
contributing to an increase of such sales. From 1992 through 1995, 
there were several seizures of stolen nuclear weapons-usable fissile 
material in Russia and Europe. The most notable seizure was 3 kilograms 
of weapons-grade highly enriched uranium (HEU) in St. Petersburg in 
June 1994. And, 2.7 kilograms of HEU were seized in Prague in December 
1994. There have been no seizures of nuclear weapons-usable fissile 
material since 1995. Contrary to numerous press reports, we have no 
credible evidence that large organized crime groups are involved in the 
proliferation of nuclear materials, although this remains a matter of 
concern.
    We are concerned also about the efforts of other countries to 
acquire BW capabilities. Iran, for example, has been attempting to 
develop a biotechnical trade relationship with Russia in recent years, 
and we are concerned that some of the dual-use technology which the 
Iranians are seeking may be used to support their BW efforts.
                         chinese proliferation
    (4) Please describe all significant transfers over the past 5 years 
of WMD-related technology or information from China to Iran, Pakistan, 
or other countries. Do you believe that this assistance could raise 
compliance concerns with China's commitments to the Nonproliferation 
Treaty (NPT), and the Missile Technology Control Regime (MTCR)? How 
likely is it that China will comply with the Chemical Weapons 
Convention?
    China's defense industries are under increasing pressure to become 
profit-making organizations--an imperative that can put them at odds 
with US interests. Over the past five years, Chinese defense industries 
have looked to missile-, nuclear-, and chemical-related technology 
sales, primarily to Pakistan and Iran, and conventional weapons 
transfers in order to remain profitable. There is no question that 
Chinese firms have contributed to WMD advances in these countries.
    On the positive side, there have recently been some signs of 
improvement in China's proliferation posture. China ratified the 
Chemical Weapons Convention (CWC) on April 25, 1997 and submitted its 
initial declaration on May 29, 1997 within the treaty mandated time 
requirement. The US is currently evaluating the Chinese CWC declaration 
to determine if China is in compliance with the treaty. China also has 
enacted its first comprehensive laws governing nuclear technology 
exports, and at the beginning of this year renewed its pledge to halt 
sales of C-801/C-802 anti-ship cruise missiles to Iran. China has also 
created a new arms control department in the Foreign Ministry to build 
a cadre of officials knowledgeable about international treaty and 
nonproliferation matters.
    China's relations with some proliferating countries, however, are 
long-standing and deep. Moreover, in many cases, Chinese firms are 
selling dual-use technology, hardware, and expertise, which are not 
always explicitly controlled under the various multilateral control 
regimes. It remains to be seen whether recent positive developments are 
broad enough in scope and whether they will hold over the longer term.
                   north korea as a continuing threat
    (5) Is significant--possibly violent--change likely during the next 
five years?
    No one can predict how or when the current North Korean regime will 
end or transform, but several factors suggest that fundamental change 
is inevitable:
    The tide of history--symbolized by the failure of communism to 
serve as a viable alternative to capitalism in Russia, Eastern Europe, 
China, and Vietnam--is against P'yongyang.
    Most of North Korea's economic problems are systemic. Foreign aid 
or tinkering with existing policies will not produce sustainable 
increases in agricultural or industrial output.
    North Korean leaders are rigid policymakers who rely on strategies 
adopted in the 1950s--internal coercion and propaganda along with 
external threats and aid--to survive.
                         changes in south korea
    (6) South Korea. What impact will the election of Kim Tae-chung 
have on South Korea and on prospects for normalized relations between 
the Koreas?
    The election of Kim Tae-chung was an important test of democracy's 
strength in South Korea. He is the first opposition party candidate to 
win the presidency and U.S. diplomats say the election last December 
was the fairest in the country's history
    Kim is capitalizing on the financial crisis to end government-
corporate collusion and reform economic policies based on strong 
government guidance, protectionism, and debt financing. Even before his 
inauguration in February, Kim was leading a reform charge that resulted 
in the creation of an independent bank supervisory agency, the opening 
of domestic financial markets to foreigners, and rules requiring 
transparent bookkeeping and limiting conglomerates' ability to 
subsidize unprofitable businesses.
    Nevertheless, reform in the near term is contributing to 
bankruptcies, layoffs, and inflation, which in turn could sap public 
support for change and hamstring Kim's ability to govern effectively.
    Kim is diverging from his predecessor's North Korea policy by 
pledging to separate politics from economics. Accordingly, the 
administration is raising the ceiling on private investment in the 
North and easing restrictions on business, humanitarian, and tourist 
travel, according to press. Kim also says he will disseminate North 
Korean propaganda in the South and be patient in seeking improved 
inter-Korean ties.
                         saddam's hold on power
    (7)(a) Do you believe that Saddam's hold on power is stronger today 
than it was one year ago? What is the likelihood that Saddam will be in 
power one year from now? What would be the characteristics and policies 
of likely successors to Saddam? What are the chances that a successor 
regime to Saddam will be worse?
    Saddam's control over Iraq is comparable to what it was one year 
ago.
    Saddam's hold on power is based almost exclusively on the strength 
of his security services, whose status appears unchanged.
    The two major Kurdish parties remain independent of Baghdad and 
continue to reject Saddam's overtures.
    Despite the regime's brutal efforts to suppress the southern 
insurgency--including the draining of marshes and burning of villages--
Shia groups continue to stage hit-and-run attacks against regime forces 
and installations.
    Saddam is likely to remain in power during the next year. His 
security services have been very successful in suppressing the 
development of any organized political opposition groups and in 
crushing internal dissent and plotting within the regime.
    We continue to assess that if Saddam were to be overthrown, the 
most likely successors would be Arab Sunni military leaders who 
probably would share some of Saddam's policies and outlook, such as a 
militarily strong Iraq and distrust of Kuwait. However, we believe 
there are strong incentives for a successor regime to ``clean the 
slate'' and moderate Iraq's behavior so that it can rejoin the 
international community in good standing.
    (7)(b) Will Saddam's fall lead necessarily to Iraq's 
disintegration? If not, why?
    A possibility clearly exists that the collapse of Saddam's regime 
could lead to a period of anarchy in Iraq. We do not assess, however, 
that Saddam's fall would necessarily lead to Iraq's disintegration. 
Despite their long-standing opposition to Saddam's regime, the leading 
Kurdish and Shia opposition groups have affirmed their support for a 
united Iraq.
    The specific outcome would largely depend on the nature of the 
person or group that comes to power in Baghdad.
    (7)(c) Has Saddam effectively regained control of northern Iraq?
    No. Two major Kurdish parties--the Kurdistan Democratic Party and 
the Patriotic Union of Kurdistan--still control the region through 
their independent militias. Iraqi media recently has issued calls for 
the Kurds to enter into a dialog with Baghdad on allowing the regime to 
reassert its control over northern Iraq, but the KDP and PUK continue 
to keep Saddam at arm's length.
                  support for iraq in the middle east
    (8) Currently, how much support exists for Saddam in the region? If 
military action were taken against Iraq, what would be the likely 
reaction of other nations in the region? What, if any, governments in 
the Middle East would be publicly supportive of military action against 
Iraq?
    We assess that there is a great depth of regional support and 
concern for the Iraqi people, rather than for Saddam or his regime. 
Naturally, any military strike against Iraq would cause anxiety 
throughout the region for its potential impact on the Iraqi people, but 
the record shows that reactions vary widely according to the nature of 
the event that precipitates a strike.
    For example, another Iraqi threat to a neighboring state--such as 
Baghdad's movement of forces toward the Kuwaiti border in October 
1994--would probably generate widespread public support by regional 
governments for military action.
                    the impact of sanctions on iraq
    (9) Iraq has argued that the continued ban on oil exports is 
causing mass suffering in Iraq, including unaffordable prices for food 
and unavailability of medicine. What is your assessment of the nature 
and extent of the suffering to the Iraqi people as a result of economic 
sanctions?
    General living conditions for most Iraqi citizens remain difficult, 
despite the infusion of humanitarian supplies under the UN's oil-for-
food program. Indeed, inflation is running in triple digits, wages 
remain stagnant, unemployment and underemployment are widespread, and 
basic services have deteriorated. Many Iraqis are copying with poor 
conditions by working multiple jobs, selling personal possessions, 
moving in with relatives, and relying on remittances from relatives 
abroad. The Iraqi middle class have effectively disappeared.
    Segments of the Iraqi population have not yet felt the full 
benefits of the UN's oil-for-food program and continue to face 
nutritional and health problems.
    UN studies confirm high rates of malnutrition among children and 
young adults. Two primary reasons are the deficiency of nutrient-rich 
food in the oil-for-food ration basket and the inability of average 
Iraqis to supplement their diets with costly foodstuffs sold on the 
open market.
    The most serious problems facing Iraqi's health care system include 
shortages of medicines, inadequate storage facilities, unreliable power 
supplies, interrupted water supplies, and poor waste disposal systems.
    Despite the deterioration, Iraq's economy is functioning 
significantly above subsistence level. Economic growth, after having 
fallen by two-thirds in the early years of the sanctions regime and 
experiencing no growth more recently, may have risen last year by as 
much as 25 percent with the implementation of the oil-for-food program. 
Although growth was concentrated in the oil sector, the construction 
sector also has been buoyed by public sector works programs, and the 
building of presidential palaces. Agriculture has improved because the 
regime is paying higher prices to farmers for their produce, and the 
oil-for-food program is allowing farmers to market their crops more 
freely.
    Baghdad's claims about mass suffering and death are exaggerated. 
Iraqi medical statistics are often contradictory and incomplete, and 
their reliability is highly questionable as the regime often inflates 
numbers to generate international support for ending sanctions. 
Baghdad's claim that 1.5 million children have died since sanctions 
were imposed, for example, implies an infant mortality rate close to 
three times the US Census Bureau's recent estimate for Iraq. Child 
mortality as high as this is suffered by only a few countries 
undergoing extreme duress--Afghanistan, Rwanda, Mali, and Niger.
    The oil-for-food program is slowly improving humanitarian 
conditions in Iraq. Food supplies are relatively stable in northern 
Iraq, and health care there has tangibly improved, as seen by the 
increased number of outpatients, surgical procedures, and laboratory 
investigations. Humanitarian conditions in central and southern Iraq 
are improving more slowly because of the inefficiency of the Iraqi 
bureaucracy and the lack of relief assistance from nongovernmental 
organizations--most of which withdrew from the area in 1993 after 
Saddam effectively prevented them from operating there.
                   iraq's weapons of mass destruction
    (10) What is the current status of Iraq's BW, CW, nuclear weapon, 
and missile programs? How much activity has there been in each of these 
areas since the conclusion of the Persian Gulf War? Do we have any 
evidence that the Iraqi regime has tested CW and BW agents on humans 
since the Persian Gulf War?
    Iraq currently is developing two ballistic missiles that fall 
within the UN-allowed 150-km range restriction. The Al Samoud liquid 
propellant missile, described as a scaled-down Scud has been flight-
tested. Iraq's pre-war Scud missile technicians are working on the Al 
Samoud program and, while under UNSCOM monitoring, are developing 
technology base improvements that could be applied to future longer-
range missile programs. The Ababil-100 solid propellant missile also is 
under development, although progress on this system lags behind the Al 
Samoud. Iraq could convert these programs into longer-range systems for 
production after sanctions are lifted and inspections cease.
    Iraq has an active missile force before the Gulf war that included 
819 operational Scud B missiles (300-km range) purchased from the 
Soviet Union, and advanced programs to extend the range of the Scuds 
and to reverse-engineer the Scud for indigenous production. UNSCOM 
believes it has accounted for all but two of the original 819 Scuds. 
Discrepancies in Iraqi accounting for the original 819 Scuds in 
addition to incomplete explanations for indigenous Scud production 
efforts, however, suggest that Iraq retains a small covert force of 
Scud-type missiles.
    Despite UNSCR-87, which limits Iraq to having or developing 
ballistic missiles with ranges less than 150-km, Baghdad has not given 
up its desire to build larger, longer-range missiles. UNSCOM inspectors 
have uncovered numerous pre-war Iraqi design drawings, including multi-
stage systems and clustered engine designs, thatcould theoretically 
reach Western Europe. In addition, computer simulations and drawings of 
missile and space-launch-vehicle concepts that post-date the war have 
been discovered in Iraq. If sanctions were lifted and inspections 
ceased. Iraq could resume production of Scud-type missiles, perhaps 
within one year.
    On the basis of remaining gaps and inconsistencies in Iraqi 
declarations to the UN, we assess Iraq could retain a small force of 
Scud-type missiles, a small stockpile of chemical and biological 
munitions, and the capability to quickly resurrect WMD production 
absent UN sanctions and UNSCOM and IAEA monitoring.
    UNSCOM and IAEA routinely monitor all known Iraqi facilities 
capable of producing WMD, reducing Baghdad's ability to produce 
prohibited weapons at these sites.
    Iraq may have hidden WMD production components which would allow it 
to continue small scale covert WMD efforts at locations unknown to 
UNSCOM or the IAEA.
    CW, BW and Nuclear activity since the war: After the Gulf war, 
Baghdad rebuilt for civilian purposes many of the industrial facilities 
involved in prewar WMD production, which are now under UNSCOM and IAEA 
monitoring. In addition, Iraq retains sufficient technical expertise in 
all WMD program areas to have continued covert WMD research and 
development.
    Nuclear: UNSCOM and IAEA inspections have hindered Iraq's nuclear 
program but Baghdad continues to withhold information about enrichment 
techniques, testing data, foreign procurement, and weapons design 
needed to fully clarify its nuclear weapons capability. Iraq could be 
conducting covert nuclear research and development that would be 
difficult to detect.
    Chemical: UNSCOM supervised the destruction of more than 40,000 CW 
munitions and hundreds of thousands of liters of agents and precursors. 
Absent inspections, however, Baghdad could restart limited production 
of the blister agent mustard within a few weeks, full scale production 
of sarin within a few months, and pre-Gulf war production levels--
including VX--within two to three years.
    Biological: UNSCOM supervised the destruction of Iraq's largest 
known BW production facility at Al Hakm, but Baghdad has failed to 
provide the UN an even remotely credible picture of its prewar program. 
Iraq is capable of restarting BW agent production virtually overnight 
at facilities that currently produce legitimate items, such as 
vaccines.
                         the new regime in iran
    (11) Do you see President Khatami's election and reform agenda as a 
watershed that could change the nature of the Iranian regime? What is 
the possibility that Khatami's conservative critics will sidetrack him? 
What is the likelihood that the Khatami government will still be in 
power three years from now? Does his election signify a change in 
Iran's support for terrorism and its acquisition of weapons of mass 
destruction? Is there any evidence of such a change?
    President Khatami's election is an important step in the political 
development of post-revolutionary Iran. Khatami's agenda of social and 
cultural liberalization, coupled with his apparent desire to reduce 
Iran's international isolation, could lead to real changes in the 
Iranian regime.
    Conservatives are attempting to slow the pace of liberalization, 
but Khatami's popularity is allowing him to make slow but steady 
progress on his agenda.
    Khatami has sought to improve Iran's international image, and some 
of his public statements suggest that he may seek to reform the 
Ministry of Intelligence and Security--an organization that has 
supported terrorist groups.
    Khatami, however, does not have control over the Islamic 
Revolutionary Guard Corps. The Revolutionary Guard--which plays an 
integral role in Iran's sponsorship of terrorism--reports directly to 
Supreme Leader Khamenei.
    There is no evidence that Khatami has the inclination or ability to 
reduce Iran's attempts to acquire weapons of mass destruction--which he 
probably views as legitimate means to ensure Iran's security.
                    the impact of sanctions of iran
    (12) Are sanctions likely to influence Iran's behavior over the 
next 3 years? Why or why not. Late last September, Iran and France 
confirmed the award of a $2 billion deal to develop Iran's South Pars 
gas field to Total SA, and its minority partners Gazprom (Russia) and 
Petronas (Malaysia). What does this deal say about the effectiveness of 
US economic sanctions against Iran? (U)
    Tehran is offering more attractive projects for tender, a trend 
that makes it harder to maintain a sanctions regime.
    A large number of foreign firms have already expressed interest in 
an upcoming round of oil and gas projects that Iran will tender in 
early July.
    Nonetheless, companies with significant assets in the United 
States, such as Royal Dutch Shell and British Petroleum, will remain 
sensitive to US concerns about foreign investment in Iran.
    Companies from outside the EU, especially Japanese firms, may 
remain reluctant to aggressively pursue Iranian projects until 
sanctions are lifted or additional waivers are granted.
                        iranian forces in bosnia
    (13) How large an Iranian presence currently exists in Bosnia? Is 
this presence growing or diminishing? What is the extent of Iranian 
influence or penetration of the Bosnian government?
    Tehran operates an embassy in Sarajevo and a consulate in Mostar 
which are staffed by personnel from the Iranian Foreign Ministry, as 
well as a cultural center in Sarajevo. Iran probably also has 
intelligence personnel operating in Bosnia. A number of organizations 
affiliated with the Iranian Government--many of which are involved in 
humanitarian efforts--are active in Bosnia, including the Iranian Red 
Crescent Society and Iran's Ministry of the construction Jihad.
                       the palestinian authority
    (14)(a) Please assess both the willingness and the ability of the 
Palestinian Authority to control terrorist violence in Gaza and areas 
of the West Bank under its control.
    The Palestinian Authority's efforts against the two most active 
terrorist groups--the Islamic Resistance Movement (HAMAS) and the 
Palestine Islamic Jihad (PIJ) in Palestinian-controlled areas have 
enjoyed some notable successes apprehending terrorists, capturing 
materiel, and disrupting support networks. While investigating the 
death of prominent HAMAS bombmaker Muhi al-Din al-Sharif, the 
Palestinian General Intelligence Organization arrested Imad Awadallah--
a leading HAMAS militant in the West Bank and one of Israel's most 
wanted fugitives. Both Israeli and Palestinian press reports have 
highlighted Palestinian security services' successes in uncovering 
terrorist bombmaking facilities and weapons caches in recent months.
    The Authority's antiterrorism campaign over the past year has 
largely avoided targeting HAMAS political leaders--Arafat's main 
competition--and legitimate HAMAS social service and charitable 
institutions that provide relief to poor Palestinians. Although 
Palestinian security services have occasionally detained HAMAS members 
for incitement, Arafat's preferred approach is to attempt a ``unity 
dialogue'' with political leaders and have the Authority fund rival 
social and charitable organizations. This approach has left the 
political, social, and financial structure of HAMAS largely intact and 
left Arafat open to Israeli charges of not doing enough to dismantle 
the terrorist infrastructure.
    The Authority could order a broad crackdown on all aspects of 
HAMAS's infrastructure as they did after the February and March 1996 
bombings in Israel. Palestinian security services have shown the 
capability to undertake severe and sustained measures, such as 
arresting militant HAMAS members, closing HAMAS-affiliated charities, 
and halting incitement by opposition press offices. Such actions 
undermine the armed wing of HAMAS's ability to conduct terrorist 
attacks, but also damage essential social service like education and 
health care, and leave the Authority vulnerable to charges of human 
rights abuse. Arafat's counterterrorism efforts are hampered by a 
Palestinian public that is increasingly sympathetic to suicide attacks 
according to polls, is upset over poor economic conditions, and angry 
over Israeli unwillingness to be implement key peace accord 
commitments.
    (14)(b) To what extent is HAMAS receiving outside support, and from 
whom is that support coming
    HAMAS receives the majority of its annual budget--estimated to be 
25-50 million dollars per year--from private donors and charitable 
institutions worldwide. Wealthy individuals in the Persian Gulf region 
are the primary source of these funds, but donors in Europe and the 
United States also provide substantial amounts, usually through Islamic 
charitable organizations.
    Prominent HAMAS-affiliated charities include Interpol in the United 
Kingdom and the Al Aqsa foundation in Germany. The Islamic Relief 
Agency, Muslim Aid, and other Islamic charities not necessarily 
affiliated with HAMAS also are key sources of support. Iran gives HAMAS 
several million dollars per year.
    (14)(c) Please assess Chairman Arafat's health, comment on his 
likely successor and describe the impact his departure would have on 
the peace process.
    Palestinian Authority Chairman Arafat has largely recovered from 
the head trauma he suffered in a plane crash in 1992 and from 
subsequent surgery to remove blood clots from his brain.
    According to the 1995 Palestinian election law and draft basic law, 
if a vacancy occurs in the position of president, the speaker of the 
legislative council will take over for no more than 60 days, during 
which time a new election for the head of the Palestinian Authority 
will take place. The current speaker of the legislative council is 
Ahmad Qurei (Abu Ala), the primary negotiator of the 1993 Declaration 
of Principles. The strongest party at present is Fatah, Arafat's 
support base and the preeminent political movement in the West Bank and 
Gaza Strip. Arafat has not publicly favored any candidate. The most 
widely touted successor to Arafat, according to many middle East 
commentators, is his deputy Mahmud Abbas (Abu Mazin) Arafat's chief 
peace negotiator and an architect of the breakthrough 1993 PLO-Israel 
peace deal.
    Arafat's departure could slow efforts at progress on the peace 
process. Palestinian commentators have assessed that no other leader 
could command the loyalty of disparate Palestinian groups and unite 
them around such controversial goals.
                the stability of the israeli government
    (15)(a) Please give us your assessment of Prime Minister 
Netanyahu's commitment to abiding by the Oslo Accords. Is he committed 
to a land-for-peace formula or does he want to kill the peace process 
as currently formulated?
    Refer to the classified appendix for the response.
    (15)(b) How do you assess the longevity of the current Likud 
government? How do you assess Labor's ability to win an election at 
this point?
    Refer to the classified appendix for the response.
    (15)(c) Please assess Israeli Defense Minister Mordechai's recent 
statements in support of United Nations Resolution 425, which calls for 
Israel's unilateral withdrawal from southern Lebanon. Does this 
represent a significant change in Israeli policy? What has been the 
response of the Lebanese and Syrians to Mordechai's statement?
    Refer to the classified appendix for the response.
                    the israeli presence in lebanon
    (16) Please comment on the losses the Israelis have suffered in 
Lebanon in the past year and the impact of those losses on Israeli 
public opinion and the likelihood that Israel will initiate a 
unilateral withdrawal from southern Lebanon. Do those losses indicate 
that Hizballah is becoming a more effective force? Please comment on 
the military effectiveness of Israel's allies, the South Lebanese Army 
(SLA) and describe the current military cooperation between the Israel 
Defense Forces and the SLA.
    Refer to the classified appendix for the response.
                                 egypt
    (17)(a) What impact would a reduction in US military aid to Egypt 
have on US-Egyptian relations, particularly if such a reduction is not 
matched by a comparable reduction in US military aid to Israel?
    President Mubarak has reacted to reports of likely reductions in US 
assistance by publicly saying that Cairo did not expect US aid to 
continue forever and that its elimination will not mean an end to good 
relations with the United States. Egyptian press commentary indicates 
that the key elements to contain a potential Egyptian backlash to aid 
reductions are to engage Cairo in discussions aimed at managing the 
pace and targets of cuts, implement cuts gradually, and roughly retain 
the post-Camp David ratio in allocating US assistance between Egypt and 
Israel.
    Significant changes to the Egypt-Israel funding ratio at Egypt's 
expense are likely to be viewed with disfavor by Cairo rather than a 
rational reallocation of US assistance. Egyptian progovernment 
newspapers reacted angrily last year to reports that Israel was 
pressing Washington to use Egypt's aid package to press Cairo to soften 
its policy toward Israel.
    (17)(b) Assess the current strength of the Mubarak government and 
its ability to prevail over terrorist internal opposition. To what 
degree is that internal opposition receiving outside support, and from 
whom?
    There is no indication that Egyptian mainstream Islamic opposition 
or Islamic extremist groups pose a significant challenge to the 
Mubarak's leadership. Nonetheless, the extremists' attack last November 
at Luxor that killed 58 foreign tourists dramatically demonstrated 
their continued ability to conduct acts of terrorism in Egypt. Despite 
improved Egyptian security efforts following Luxor, the extremists 
retain the capability to strike soft targets.
    The Egyptian Government has accused Iran, Sudan, Usama Bin Ladin, 
and Afghan militant Islamic groups of supporting Egyptian Islamic 
extremist groups in Egypt and members abroad. Such support undoubtedly 
plays a significant role in motivating these groups and sustaining 
targets overseas.
                      political killings in haiti
    (18) What is the status of investigations into the various high 
profile political murder cases that have occurred in Haiti during the 
last several years?
    The Special Investigative Unit (SIU), which is mandated to 
investigate a number of politically-motivated murders, is pursuing 
several investigations but has not yet brought a case to trial.
    The SIU has made limited progress in the last year on active cases 
such as the 1995 murders of General Max Mayard and Air Haiti Director 
Michael Gonzales.
    In February, the SIU assigned a new team of investigators to the 
case of Jean Hubert Feuille's 1995 murder in an attempt to jump start 
the stalled investigation.
    The SIU actively investigated the 1996 murders of opposition 
politicians Antoine Leroy and Jacques Fleurival until the death of one 
of the suspected triggermen, Eddy Arbrouet, during a SWAT raid last 
December.
    Seven of the 12 cases listed in the DeWine Amendment, however, 
including the 1995 murder of rightwing lawyer Mireille Bertin, are not 
under active investigation.
    Has any evidence of government complicity in those murders been 
uncovered?
    There is no definitive evidence of high-level government complicity 
in any of the political murders under investigation. Ten members of the 
Presidential Security Unit--including its former chief and deputy 
chief--were dismissed in July 1997 for their involvement in the Leroy-
Fleurival case.
    In this regard, please provide an assessment of the performance of 
the Haitian National Police's Investigative Unit and Haitian Judiciary 
in solving the crimes.
    The investigations into the political murders have been hampered by 
a plethora of problems associated with the SIU and Haitian Judiciary 
judiciary.
    The SIU's progress has been plagued by its members' lack of 
training, absenteeism, lack of initiative, and resource shortfalls. The 
two US advisers have spearheaded almost all of the investigative work.
    The judicial system remains in an embryonic stage and is ill-
equipped to prosecute any case that may be eventually brought to trial.
                                 mexico
    (19) President Clinton's February 1997 certification of Mexico as 
full cooperative in drug control efforts prompted considerable 
criticism in Congress. What is your assessment of the nature and extent 
of Mexico's drug control efforts?
    President Zedillo has made a strong effort to show he is committed 
to counter-narcotics. He publicly has underscored the threat drug 
trafficking poses to Mexican society, directed the military to continue 
playing a significantly enhanced antidrug role, and engaged in 
extensive contacts with US officials on antidrug matters. The Mexican 
government also has had success at keeping drug crop production in 
check and made some improvements in its narcotics seizures. 
Nonetheless, Mexico's law enforcement efforts against the country's 
powerful trafficking groups have not substantially undercut their 
ability to ship illicit drugs into the United States.
    To what extent does Mexican government corruption hamper these 
efforts?
    As with any country where trafficking is a major problem, 
corruption is one of our top concerns and is an impediment to effective 
antidrug operations. The arrest of former lead antidrug police director 
Gen. Gutierrez Rebollo in 1997 points to the ability of Mexico's major 
traffickers to corrupt officials even at senior levels of Mexico's law 
enforcement and security forces to help insulate their massive drug 
shipment and money laundering operations. At the same time, it 
underlines Mexico's ability and willingness to search out and punish 
high level corruption. In early June, a Mexican court increased 
Gutierrez's prison sentence to 32 years after determining the original 
14-year judgment for arms trafficking and official corruption was 
insufficient. He still faces drug-related charges.
      monitoring compliance with a comprehensive nuclear test ban
    (20) How high is the Intelligence Community's confidence that it 
can effectively monitor the CTBT? Where are the notable shortcomings? 
Is US Intelligence doing everything possible to improve US monitoring 
capabilities in this area? Why or why not?
    The IC has drafted a national intelligence estimate on CTBT 
monitoring in which our monitoring conclusions are presented in terms 
of confidence levels. These conclusions can only be discussed in 
classified channels.
    The Treaty provides for the use of National Technical Means (NTM), 
which will be supplemented by an international system of technical 
sensors, a challenge on-site inspection (OSI) regime and voluntary 
confidence-building measures (CBMs).
    The President identified a set of desired capabilities to monitor 
nuclear tests underground, underwater, in the atmosphere and in space, 
roughly equal to a few kilotons of TNT-equivalent evasively tested, and 
the IC currently is implementing an NTM enhancement program intended to 
meet that goal.
    The US is currently implementing an NTM enhancement program aimed 
at meeting the monitoring requirements for clandestine explosions 
underground, underwater, or in the atmosphere. However, these 
enhancements plus the resources necessary for sustaining our monitoring 
base do not come cheaply. As the CTBT ratification debate approaches, 
we will be consulting closely with this committee on our capabilities, 
their cost, and the tradeoffs involved.
    Our confidence in monitoring the CTBT will also depend on the 
verification tools provided by the Treaty, including international 
technical sensors with a capability to detect and identify non-
evasively conducted nuclear tests down to a level of about one kiloton. 
Recognizing the inherent limitations of OSI and CBM regimes, the 
technical monitoring capabilities of our NTM and the International 
Monitoring System take on every greater importance.
                     nuclear test at novaya zemlya?
    (21) There was concern that Russia may have conducted a low-yield 
nuclear test on August 16, 1997 at Novaya Zemlya. Is there any reason 
to believe that the August 16 event was a nuclear explosion? Is this a 
view that is commonly held throughout the Intelligence Community?
    Refer to the classified appendix for the response.
                    the chemical weapons convention
    (22)(a) Over one hundred of the 168 signatories have ratified the 
Chemical Weapons Convention (CWC). (Last November, both Iran and Russia 
completed their CWC ratification.) Do you have any intelligence that 
any of the signatories of the CWC have engaged in activities that raise 
compliance concerns?
    The Intelligence Community assesses that around 30 countries 
possess, once possessed but no longer maintain, or are possibly 
pursuing CW capabilities. Of these `countries of concern,' 
approximately half are States Party to the CWC. Most of these countries 
may not have fully met their obligations under the CWC. In many cases 
countries have not declared all of the facilities and/or past 
activities required by the Convention. Reasons for incomplete 
declarations may include bureaucratic difficulties in gathering the 
required information, varying interpretations of the declaration 
requirements, or political sensitivities in acknowledging past or 
present offensive activities. Several States Party may be retaining or 
continuing to pursue offensive CW capabilities.
    (22)(b) The Intelligence Community has conceded that its ability to 
monitor compliance with the CWC is limited. Has that capability 
improved since U.S. ratification of the CWC?
    The Intelligence Community's ability to monitor the CWC remains 
limited due largely to the inherent difficulty of monitoring CW 
programs, which are based on dual-use material and technology. 
Nonetheless, steps are being taken that should--over time--improve that 
capability. Additional resources are being directed against both 
collection and analysis of information on CW programs and proliferation 
worldwide. Likewise, the implementation process have revealed some new 
information on CW programs and chemical capabilities in several 
countries of concern and we expect more information will become 
available in time.
                   north korea's taepo dong missiles
    (23) The North Korean Taepo Dong II missile (which is under 
development) will have an estimated range of 4,000 to 6,000 kilometers, 
and therefore qualifies as an intercontinental ballistic missile. 
(ICBM). How confident are you in these range estimates? What U.S. 
states or territories could the Taepo Dong hit? How soon could the 
Taepo Dong I and Taepo Dong II become operational, and how firm is that 
estimate? How has this assessment changed in the last year?
    No unclassified response.
                       missile threats to the us
    (24) The proliferation of missile-delivered weapons is an issue 
directly confronting the strategic interest of the United States and 
its traditional allies. When will the updated National Intelligence 
Estimate (NIE) on this subject be complete? What are the current 
strategic missile threats to the United States and theater missile 
threats to deployed US forces? How have these threats changed in the 
last year? What are the projected threats for the next decade? Is the 
assessment shared by all components of the Intelligence Community? In 
the wake of the criticism of the previous NIE on this subject what 
improvements have been made in the NIE process? '
    The Annual Report to Congress on Foreign Missile Developments was 
published and passed to the Congress on 3 March 1998. The report 
updates judgments reached in NIE 95-19 Emerging Missile Threats to 
North America During the Next 15 Years. The Annual Report also provides 
the Intelligence Community's assessment of theater missile threats to 
US interests worldwide. All components of the Intelligence Community 
concur with the Report's conclusions, except as noted by either 
alternate text or footnotes. The report remains classified.
    In preparing the Annual Report the National Intelligence Council 
(NIC) tried to respond to the criticisms leveled at NIE 95-19 by both 
the Review Panel chaired by former-DCI Robert Gates and other critics. 
Compared to the 1995 NIE, the Annual Report:
    Has a more thorough presentation of the intelligence information 
and analysis backing the IC's judgments on future missile threats to 
the United States and its interests worldwide. It also has a more 
thorough discussion of:
    The likelihood that the IC will detect indicators of a long-range 
ICBM development program.
    Theater-missile developments that could threaten US forces and 
interests overseas. The inclusion of theater missile developments 
provides a more complete picture of foreign missile developments and 
the impact of proliferation activities.
    Russian and Chinese missile forces and the risk of an unauthorized 
launch of a strategic missile.
    The possibility of a country developing the capability to threaten 
the United States with short- or medium-range cruise or ballistic 
missiles deployed on forward based platforms, such as a surface ship.
    More clearly lists its assumption and includes a discussion of 
events that could alter the IC's assessment of future missile threats.
    Was reviewed by outside experts, including some who were critical 
of the 1995 NTE.
                      trends in economic espionage
    (25) A recent survey by the American Society for Industrial 
Security estimates that intellectual property losses from foreign and 
domestic espionage may have exceeded $300 billion in 1997 alone. Does 
this estimate seem plausible to you? A January 12 Los Angeles Times 
article dealing with this issue states that currently pending before 
the FBI "are more than 700 foreign counterintelligence investigations 
involving economic espionage". Is that an accurate number? Please 
comment on trends in economic espionage directed against the US. How 
effectively are you able to measure the level of economic espionage 
against the US? Has US business reporting of economic espionage 
improved over the last year? What other measures would help to stop 
industrial espionage?
    Although the ASIS study is the best available estimate of the 
economic costs of economic espionage, it is difficult to assess if the 
study understates or overstates the cost.
    The ASIS uses blind surveys of several thousand US businesses so 
that US firms can report that they were victimized without suffering 
embarrassment or damage to their stock price--a common reason for 
underreporting.
    Since corporate security officers often answer the survey, this 
method could encourage overstating of numbers and costs of the events 
to justify security programs.
    The ASIS survey asks about copyright violations and trademark 
infringements which, although illegal and damaging, are not typically 
considered economic espionage.
    Only known or suspected incidents are reported--successful 
espionage goes undetected--which results in underestimating impact.
    The response rate to the ASIS study is low--eight percent in the 
1995 survey, a further indication that some economic espionage is 
missed.
    Estimating the economic impact of a single act of economic 
espionage is itself quite difficult. For example, two companies--or 
countries--could steal the sameproprietary information but use it in 
different ways, resulting in widely different economic impacts. In 
addition, a company's reaction to the loss of a trade secret, as well 
as the general development of the market, also can affect the ultimate 
economic impact of the theft. As a result, a company's knowledge that 
it has been victimized and its efforts to mitigate the damage may 
lessen the act's cost.
    We defer to the FBI on the question of the number of ongoing 
investigations as well as on what new measures would help stop 
industrial espionage.
                         economic espionage law
    (26) In last year's response to this Committee's question regarding 
the effectiveness of the Economic Espionage Act of 1996, the CIA stated 
that the law clearly has attracted the attention of many of our key 
economic competitors, but that it is ``perhaps too early to assess 
whether the law has had an appreciable effect on the level of economic 
espionage directed against the US.'' Over the past year, have you seen 
any results from the Economic Espionage Act? Do you have information 
that the law has deterred economic espionage activity by foreign 
governments or foreign corporations?
    We believe it is still too soon to gauge adequately the impact of 
the US Economic Espionage Act. There have only been a handful of cases 
since it was enacted, and only two that involved foreign individuals. 
To foreign intelligence services, how the US Deploys resources to 
uncover economic espionage and how aggressively the US prosecutes 
economic espionage cases will be as important as the Act itself.
                   espionage by foreign corporations
    (27) Last year, in response to a question by this Committee, the 
definition of economic espionage was given as ``government-directed or 
orchestrated clandestine effort to collect US economic secrets or 
proprietary information''. To what extent are US corporations 
threatened by the theft of trade secrets by foreign entities that are 
not ``government-directed or orchestrated''? How do you distinguish 
whether espionage is government-directed or not, especially if the 
foreign corporation involved receives extensive government subsidies?
    The EEA has separate provisions to prosecute economic espionage 
conducted to benefit a foreign government, instrumentality, or agent. 
We defer to the FBI and the Justice Department as to how this legal 
standard is applied. From an intelligence standpoint, however, we would 
look at connections between the foreign firm and foreign intelligence 
and security services to decide whether they are government-directed or 
orchestrated. Any communication or connection between these entities 
regarding tasking, targeting, or execution of economic espionage 
activity would, to the CIA, suggest government direction or 
involvement.
                           economic analysis
    (28) Over the past several years, the CIA has emphasized an 
increasing interaction with academic experts and an increasing use of 
open source information in its economic analysis products. As the CIA 
increasingly reports information based on open and public sources, does 
this lessen the significance of the classified information in CIA 
reporting? Does the CIA create analysis products that are based 
entirely on open source or public information?
    Classified information continues to make a significant value-added 
contribution to our economic analysis. The contribution in any given 
assessment, however, ranges broadly from a small slice of the all-
source information used to a much larger input in the case of analysis 
on closed societies and illicit economic activities, such as sanctions 
busting and money laundering. Clandestine collection is targeted 
against information that policymakers tell us they need but which 
cannot be obtained in the public domain; it is especially critical to 
helping us warn of economic trends and policy choices that could affect 
US interests. We do not duplicate solid work done outside the 
Intelligence Community. In the cases where the bulk of the raw 
information to answer the policymaker need comes from open sources, the 
value-added of our product is the range of information we can tap, 
including foreign media, the timeliness of the product in meeting the 
request, and the expertise we bring to bear in putting the information 
in context, including how the current situation could change or affect 
foreign policy and political decisions.
                      south korea economic crisis
    (29)(a) How well can the political institutions in the South manage 
the socio- economic repercussions of the economic crisis--is there a 
likelihood of civil disorder?
    Political institutions in South Korea are stable and there are no 
signs of serious civil disorder. The election last December of long-
time dissident leader Kim Tae-chung as president is one indication that 
democratic institutions are taking root.
    The election was the cleanest on record, according to local 
political observers, and the public was not swayed by the alleged 
efforts of South's primary intelligence service to fan longstanding 
suspicions about Kim's ``communist leanings.''
    Kim has worked to minimize possible social unrest stemming from the 
recession by co-opting the most likely source of disturbances--labor 
unions.
    Even before his inauguration in February, Kim sought to create an 
atmosphere of shared sacrifice. He brought together union, government, 
and business leaders to expand the social safety net, increase labor 
flexibility, and encourage corporate restructuring.
    Media opinion is running against union officials whose actions 
appear to discourage foreign investment or delay economic recovery, 
suggesting that South Koreans have little stomach for domestic 
political turmoil.
    Leaders of the Korean Confederation of Trade Unions (KCTU)--the 
more militant of the two major labor umbrella groups--have called-off 
or shortened several job actions in the face of public opposition, low 
participation rates, and threats of legal action from President Kim.
    Strikes and demonstrations--even sporadic violence--are inevitable, 
however. The unemployment rate in April topped 6.7 percent--1.5 million 
workers--up from 2.5 percent last December, according to official 
figures.
    The huge conglomerates, or chaebol, are just beginning to 
restructure and some private forecasters project unemployment will 
exceed 10 percent by year's end.
    (29)(b) How will the economic turmoil in the South affect its 
relations with the North? Does it make conflict with the North more or 
less likely?
    South Korean President Kim Tae-chung takes the traditional view 
that economic aid is Seoul's trump card in negotiating with P'yongyang. 
His ability to extend largess to the North is constrained by Seoul's 
financial crisis, however.
    Despite Kim's pledge to separate politics from economics, South 
Korean officials say North Korean concessions are necessary to generate 
public support for aid.
    Seoul during bilateral talks in April conditioned the provision of 
fertilizer on progress toward reuniting families separated since the 
war.
           potential impact of asian economic crisis on china
    (30) How will China react to the growing economic instability in 
the region?
    One way China will react to the Asian crisis is by stimulating 
domestic demand to compensate for the anticipated drop in export 
growth. Chinese government agencies predict exports--which grew 21 
percent and accounted for about one-third of GDP growth in 1997--will 
grow between three and ten percent this year. As a result, government 
economists estimate investment growth must rise to between 15 and 18 
percent from about 10 percent last year to achieve Beijing's 8-percent 
official target for GDP growth. Premier Zhu Rongji in a nationally 
televised press conference in March stated that the main method of 
ensuring 8-percent growth this year would be by raising domestic 
demand.
    In particular, Chinese authorities will take some steps to develop 
new sources of growth by raising investment in infrastructure, high-
technology industry, and residential housing. Increasing investment in 
traditional labor-intensive export industries would merely add to 
excess capacity--already below 60 percent in many industries--and 
ultimately worsen the financial health of state enterprises and state 
banks. Chinese leaders, therefore, are stressing the development of new 
``growth points.'' For example, Vice Premier Li Lanqing told foreign 
reporters earlier this year that China would spend $750 billion on 
infrastructure investment during the next three years. Beijing by June 
will issue a new housing reform plan--aimed at stimulating demand for 
new construction--under which state enterprises will stop providing 
workers with subsidized housing, according to Chinese press reports.
    Beijing has also reacted to the crisis by accelerating structural 
reforms, particularly in the financial sector. China's leaders last 
November convened an extraordinary national financial conference--
attended by top central and provincial officials--to respond to the 
crisis, and in January the central bank unveiled an ambitious program 
of bank reforms to be completed by 2001. The package includes 
restructuring the central bank by eliminating many provincial branches, 
a similar reorganization of the four largest state banks, and 
establishing over 200 new local banks. Other reforms to be completed 
this year include scrapping mandatory credit quotas, installing a new 
risk-based loan classification system, and the special bond issue of 
270 billion yuan to recapitalize the four largest state banks. The 
acceleration in financial reforms does not extend to liberalization of 
capital account transactions; Chinese senior officials have repeatedly 
stated that they have no timetable for achieving capital account 
convertibility.
    Will the Chinese leadership view the crisis as an opportunity to 
gain influence with other nations?
    Chinese officials have repeatedly touted Beijing's commitment not 
to devalue the yuan as China's contribution to regional stability. 
Premier Zhu Rongji in his March press conference, for example, stated 
that the government must ensure China achieves 8-percent growth and 
that the exchange rate is not devalued this year because this would 
affect the ``prosperity and stability'' of Asia as a whole.
    How do you judge the likelihood that China will ``competitively 
devalue'' its currency, the yuan, in order to ensure that its companies 
maintain export market share?
    China's leaders since last November have repeatedly denied they 
will devalue. They generally have not explicitly mentioned a timeframe 
for this commitment, but statements by Premier Zhu suggest Beijing 
intends to maintain this commitment at least through 1998. Financial 
market speculation that China would devalue this year appears to have 
somewhat subsided in the face of Beijing's repeated assurances. China's 
lack of capital account convertibility and relatively strong balance of 
payments make it unlikely that it will face external payments problems 
during the next year that would force it to devalue; thus, Beijing is 
in a position to maintain its commitment.
    China has several political reasons to avoid a devaluation this 
year. Devaluing after repeated assurances that this was not under 
consideration would be a political embarrassment and would undermine 
Beijing's goal of expanding China's influence in East Asia. A 
devaluation also poses several significant economic risks. It would 
raise pressures on the Hong Kong dollar and financial markets, risk a 
further round of devaluations in the region, raise tensions with major 
trading partners, and increase the costs of debt servicing and imports.
    A devaluation cannot be entirely ruled out, however. Despite senior 
leaders' repeated statements that a devaluation is not being 
considered, a PRC-owned Hong Kong newspaper has published two articles 
this year quoting Chinese government economists and mid-level Chinese 
officials as recommending a moderate devaluation. If exports fall and 
economic growth falls short of 8 percent in 1998, Beijing next year may 
consider its commitment not to devalue.
    Will the ``Asian Contagion'' spread to mainland China?
    China's lack of capital account convertibility and relatively 
strong balance of payments make it unlikely that it will face external 
payments problems such as those that precipitated the crises in other 
East Asian economies. Foreign debt levels are relatively manageable at 
15 percent of GDP, and only a small fraction of foreign investment is 
portfolio investment. China recorded a $40 billion trade surplus last 
year, and--even with a sharp drop in export growth--will probably 
record a substantial trade surplus in 1998.
    China, however, shares some systemic economic problems with its 
East Asian neighbors that could ultimately lead to a domestic economic 
crisis if Beijing does not implement structural reforms. Many 
industries are now operating at less than 60 percent capacity, 
according to Chinese surveys, in part because of poor investments made 
during the sharp credit expansion earlier in the decade. Commercial 
real estate markets have slumped, occupancy rates in Shanghai, for 
example, are less than 60 percent. Slower growth probably has also 
compounded problems with nonperforming loans, which Chinese officials 
acknowledge are 20 to 25 percent of total bank lending.
    If so, how will economic problems affect the policies of Jiang 
Zemin and his government.
    Slower growth could lead Beijing to slow down enterprise reforms 
that generate large layoffs. Unemployment in urban areas probably is 
already eight to ten percent, based on unofficial estimates cited in 
Chinese press, and considerably higher in some sections of the country 
such as the industrial Northeast. Slower growth may also lead to 
increased capital flight, which could cause Beijing to be even more 
cautious about removing controls on capital account transactions and 
opening financial markets to foreign participation. It may also lead 
Beijing to adopt export subsidies and other measures that would 
complicate its WTO accession negotiations.
    With unemployment already rising in China's state-owned industrial 
sectors, will slower or negative economic growth lead to civil strife 
in China?
    The chances of negative economic growth in China are extremely slim 
and probably would only occur as a result of widespread civil strife or 
political instability. Nevertheless, increased unemployment and labor 
demonstrations during the next few years probably will lead Beijing to 
further strengthen internal security forces to curb social unrest. 
Although internal security forces appear to have been fairlysuccessful 
so far in avoiding large-scale violent confrontations with workers 
protesting layoffs and unpaid wages, the lack of training with non-
lethal methods of riot control could potentially lead to increased 
numbers of violent incidents.
                  the philippines' economic situation
    (31) How will the economic crisis affect the upcoming elections? 
Are democratic institutions strong enough to withstand economic and 
financial turmoil? How likely is a return to martial law?
    The slowdown of the Philippines' economy due to the regional 
financial crisis has helped the candidacy of recently inaugurated Vice 
President Estrada, who ran on the slogan ``Estrada for the poor.'' He 
won the election with an unprecedented 40 percent plurality in a field 
of 11 candidates.
    The business community--which once formed the core of his 
detractors--is now cautiously optimistic of an Estrada presidency; 
since the election, Estrada has toned down his populist rhetoric, 
appointed mainstream technocrats to his cabinet, and focused on 
promises to continue former President Ramos's reform policies.
    Manila remains vulnerable to exogenous forces--in particular, 
weakness in Japan's economy and continued turmoil in Indonesia--but its 
openness to economic reform has placed it in a strong position to 
weather the regional crisis. Democratic institutions, in particular, 
have been strengthened during the Aquino and Ramos administrations.
    Unlike many of its neighbors, the Philippines has strong civilian 
institutions--including the Catholic church, non-government 
organizations, and a vigorous free press--that are committed to the 
preservation of constitutional democracy.
    A return to martial law is extremely unlikely. The military appears 
more professional and unified than at any time in the last 30 years and 
has shown no inclination to intervene in civilian politics; many of its 
highest level officers were promoted to their current posts in the 
post-Marcos era.
                   potential bw/cw attacks on the us
    (32) What is the likelihood that the US will be subjected to a 
biological or chemical attack within the next 2-5 years? 5-10 years? 
How is this attack likely to be carried out? Do you consider a BW/CW 
attack against the US as more likely than a ballistic missile attack 
against the US? How difficult is it for a group to construct and 
deliver an effective chemical weapon? A biological or radiological 
weapon? A nuclear device? What existing groups now have or are seeking 
such a capability?
    Nonstate actors appear to be increasingly interested in, and 
developing capabilities for, employing chemical and biological 
materials. International terrorism remains a significant threat, 
whether conventional or unconventional, despite improved 
counterterrorist efforts worldwide. The United States, as the only 
superpower, is widely resented by radical groups worldwide and is a 
major target of international terrorism. Terrorists probably will 
continue to favor conventional tactics like bombings and shootings 
because these means are more familiar and have proven successful, but 
we judge that the potential for terrorist to use or attempt to use WMD 
or chemical, biological, radiological, and nuclear (CBRN) materials is 
increasing.
    The relative ease with which some chemical and biological agents 
can be acquired or produced in simple laboratories makes them 
potentially attractive to terrorists, making it difficult to 
anticipate, warn against, or disrupt such a terrorist threat. 
Particularly appealing to some groups is the potential to produce large 
numbers of casualties, cause residual disruption, and generate 
significant psychological impact on a population and its 
infrastructure. Delivery and dispersal techniques are also manageable 
and can be made effective relatively easily.
    Some groups, including the Aum Shinrikyo and the Chechen rebels, 
have employed, threatened, or are interested in chemical, biological, 
and radiological materials and the IC is monitoring this issue closely.
              threat of information warfare by terrorists
    (33) Our traditional definition of terrorism does not include such 
things as computer attack intended to damage our telecommunications or 
transportation infrastructure. Are we prepared to deal with ``virtual 
terrorism?'' What steps do we need to take to focus Intelligence 
Community counterterrorism efforts on this new threat?
    Being prepared to protect against and take active measures to fight 
this form of terrorism requires understanding it. Efforts to understand 
terrorists who would attack or threaten to attack information systems 
is the first step, one of many that has been taken within the 
Intelligence Community (IC). The CIA has a variety of technical experts 
dedicated to understanding this threat and defending against it through 
a variety of means.
    The CIA has recognized the importance of this threat and has hired 
additional experts to address this issue. A new branch within the DCI's 
Counterterrorist Center, which has Information Systems Terrorism (IST) 
as a major focus, has taken steps to understand the nature of this 
threat and its multiple facets by coordinating with the IC, academia, 
and the private sector.
    In October of 1997 the CIA convened a roundtable on Information 
Systems Terrorism. Since October, the results of this roundtable have 
spurred additional, on-going efforts to coordinate understanding on IST 
within the IC. New collection requirements have been levied to focus on 
IST. The results of this roundtable have been briefed and published in 
classified IC Counterterrorism community publications to spur 
understanding, coordination, and collection on this threat.
                 threat to us deployed forces in bosnia
    (34)(a) What are the shortfalls in Intelligence Community support 
to the Bosnian operation and what is being done to rectify these 
problem areas?
    No unclassified response.
    (34)(b) In recent months, SFOR troops (including US soldiers) have 
acted in support of President Biljana Plavsic by seizing radio and 
television transmitters, police stations, and other government 
installations controlled by her hard-line opponents. Does the 
participation of US troops in such operations expose them to increased 
risk of attack from hard-line supporters? Would a hard-line response be 
limited to stone-throwing civilian mobs, or could it escalate to 
attacks and other forms of arms conflict?
    While the inclusion of US troops in the aforementioned activities 
exposes them to greater risk and in theory increases the chances that 
these operations will result in attacks by Serb hardliners, in practice 
this has not been the case. US SFOR troops have not been attacked by 
Bosnian parties after these actions. Moreover, the improved political 
and security atmosphere in Bosnia has greatly reduced tensions over the 
last six months, and has reduced the chances that Bosnian parties will 
use violence against US personnel. We remain alert to the possibility 
of attacks on US forces, however, and continue to dedicate significant 
resources to force protection.
    (34)(c) What is the prospect and key action required for 
establishing long-term stability in Bosnia?
    Refer to the classified appendix for the response.
    (34)(d) How many foreign Islamic fundamentalist fighters still 
reside in Bosnia? What countries do they come from? Who supports them? 
Do they pose a threat to US troops?
    The Intelligence Community estimate of the number of former Islamic 
fundamentalist fighters remaining in Bosnia remains classified. The 
former mujahedin who have remained in Bosnia have married Bosnian women 
and obtained citizenship or are legally documented workers with 
humanitarian organizations. The Intelligence Community and SFOR 
continue to monitor the former mujahedin in Bosnia to safeguard the 
troops against potential threats these individuals might pose.
    (34)(e) Would more active participation by SFOR in civilian 
implementation tasks such as refugee resettlement increase the risk to 
US forces?
    The improved security situation in Bosnia has reduced the chances 
that resettlement efforts would result in significant violence. Refugee 
resettlement, however continues to be resisted by all sides, especially 
the Bosnian Serbs and Bosnian Croats, and tensions could flare in some 
local situations to the point that US SFOR troops find themselves in 
the middle of ethnic violence.
    (34)(f) What is the possibility that current low-level violence in 
Kosovo in Serbia could escalate into a major conflict, spreading into 
Macedonia and endangering the security of US troops there?
    Increasing Yugoslav army and security forces in Kosovo and a 
growing number of clashes between Serbian forces and Kosovar Albanians 
along the Kosovo-Albanian border increase the chances that this dispute 
could develop into a major conflict. It is too early to determine the 
full consequences of such a conflict on neighboring states.
    (34)(g) Are you satisfied that the US has sufficient HUMINT assets 
in Bosnia to provide early warning of possible threats to US forces?
    No unclassified response.
    (34)(h) How do you deconflict your HUMINT collection assets for 
force protection with those already deployed by DOD to prevent 
duplication?
    No unclassified response.
          counterintelligence threat to national laboratories
    (35) A September 1997 GAO report regarding DOE's security controls 
over foreign visitors to the National Laboratories noted that ``DOE's 
procedures for obtaining background checks and controlling the 
dissemination of sensitive information are not fully effective'' and 
that as a result ``sensitive subjects may have been discussed with 
foreign nationals without DOE's knowledge and approval.'' In your (the 
DCI's) opinion, how significant is the counterintelligence threat to 
DOE in general and the National Laboratories in particular? What is 
being done to rectify this problem?
    (Note: The following response was provided by the Dept. of Energy's 
Office of Counterintelligence.)
    The Counterintelligence threat facing the Department of Energy and 
the national laboratories is serious. In February 1998 the President 
signed PDD/NSC-61, ``The Department of Energy Counterintelligence 
program,'' to enhance DOE's CI effort. The PDD charges the Director, 
Office of Counterintelligence (OCI) to conduct a 90-Day Study as a 
basis for determining near-term and strategic actions for revitalizing 
the department's CI program.
    The Director, OCI shared preliminary findings and recommendations 
of the 90-Day Study with SSCI staff on 11 June, and he intends to 
formally brief the Committee and staff when the Secretary of Energy has 
approved the report.
                          international crime
    (36) How critical do you assess the current and future threat to US 
interests from international crime activities and networks?
    Several factors are in play that clearly indicate international 
crime will be a growing threat to US interests, and so this issue is of 
very high priority in US intelligence collection and analytical 
efforts. The threats to US national interests from international 
criminal activities and organizations are twofold:
    International criminal activities directly affect the lives, 
property, and livelihood of US citizens living or working at home and 
abroad. Inside the United States, they have a corrosive effect on the 
safety and integrity of communities across the country. These effects 
include drug addiction, violence undermining of societal values and job 
performance, and defrauding of individual citizens businesses, and 
local state, and federal governments of hundreds of millions of 
dollars. Overseas, international criminal activities can undermine US 
business interests and competitiveness in global markets, as well as 
threaten US citizens working and living in foreign countries.
    Also important from a national security perspective, international 
crime undermines political and economic stability in countries 
important to US interests. Corruption of government, politics, and 
business by criminal entities is antithetical to democracy wherever it 
occurs. Nowhere is this problem more serious than in Russia and other 
countries making the difficult transition to democratic and free market 
systems.
    The problem takes on an added dimension of urgency because the 
globalization of international commerce, finance, transportation, and 
telecommunications greatly facilitates the spread and scope of criminal 
activities:
    The breaking down of political barriers around the world since the 
end of the Cold War has allowed international criminals unprecedented 
freedom to operate and to move virtually without constraint across 
national frontiers.
    The globalization of international business--including multilateral 
agreements reducing trade barriers in North America, Europe, and 
elsewhere--has made it easier for criminals to smuggle contraband and 
illicit financial proceeds.
    The advanced telecommunications and information systems that 
underpin legitimate international commercial and financial activity are 
as easily used by international criminals.
    As a result of these developments, international criminals have 
been able to expand their networks and increase cooperation in illicit 
activities and financial transactions.
    The ease with which globalization allows international criminals to 
conduct their activities across national borders makes the challenge 
more difficult for both intelligence and law enforcement. Unlike 
international criminals, who are not constrained by national 
boundaries, governments and law enforcement agencies must respect other 
countries' sovereignty and legal statutes in law enforcement 
operations.
    Is there room for improvement in the FBI-CIA relationship in 
dealing with international crime?
    Because of differences in mission and approaches--most 
fundamentally, the CIA's focus on foreign intelligence to support 
policy and the FBI focus on investigative intelligence to support 
prosecutions--we have worked hard to establish an effective 
collaborative relationship on the international crime problem. There is 
now a mutual recognition that foreign intelligence can provide 
significant benefits to law enforcement efforts against criminal 
organizations and activities with international connections, and there 
is an unprecedented level of commitment by the senior-most officials in 
both agencies to work cooperatively together.
    Programs are in place to join forces and capabilities against 
common international criminal targets, and exchanges of personnel at 
both working and senior levels have done much to enhance collaboration 
and ensure that intelligence collection and analysis meets the highest 
priority needs of law enforcement. Senior officials from both agencies 
meet regularly to address important aspects of interaction and the 
overall relationship between the intelligence and law enforcement 
communities. The rules of the road for cooperation are consistent with 
the National Security Act and are designed both to protect foreign 
intelligence sources and methods, and to support law enforcement 
investigations and prosecutions.
                             nato expansion
    (37) What are the risks, if any, to US intelligence personnel and 
the Intelligence Community in general, in allowing Poland, the Czech 
Republic, and Hungary to join NATO?
    No unclassified response.
                         information operations
    (38) The Defense Science Board and the President's Commission on 
Critical Infrastructure Protection both issued reports during 1997 
which identified our nation's vulnerability to both physical and 
computer attacks on our nation's information infrastructure. These 
reports noted that such an attack could come from a foreign government, 
a non-state actor, a criminal organization, or an individual hacker. 
How significant is the threat to our critical information 
infrastructure in the short-run? In the long-run? How do you judge the 
Intelligence Community's ability to collect intelligence on this 
threat?
Short-run threat
    The information warfare (IW) threat is real and growing. The number 
of known potential adversaries conducting research on information 
attacks is increasing rapidly and it is clear that these foreign 
entities are aware that an increasing proportion of our civil and 
military activity depends on the secure and uninterrupted flow of 
digital information. All are competent to conduct cyber attacks, but 
the intelligence and military IW programs and state-sponsored 
terrorists pose the greatest short-run risk to our critical 
infrastructure because they have the greatest knowledge and resources.
    Several countries have government sponsored information warfare 
efforts underway (many countries also have excellent electronic 
warfare, jamming, and command and control attack capabilities). 
Equipment and systems necessary to conduct information warfare attacks 
are increasingly available on the open market.
    Trans-national and sub-national groups like terrorists and 
organized crime have some capability to attack US information systems, 
and the ability to conduct such attacks is growing as technologies and 
tools spread around the world. We have noted increased interest in IW 
techniques among terrorists, hackers narcotraffickers, and organized 
criminals. We believe these non-state actors will increasingly view 
information systems in the United States as a target.
    Information systems attacks by terrorists are likely to be 
undertaken for psychological or terror effects rather than for 
strategic, or battlefield application. We estimate that computer-
literate terrorists could carry out damaging attacks against US 
information systems with little risk or cost to themselves.
Long-run threat
    More and more foreign governments and their military services are 
paying increasing attention to the concept of information warfare. 
Foreign military writings discuss the importance of disrupting the flow 
of information in combat. The battlespace of the future will also 
extend to our domestic information infrastructure, such as our electric 
power grids and our telecommunications networks. We know that a number 
of countries around the world are developing the doctrine, strategies, 
and tools to conduct information attacks. At present, most of these 
efforts are limited to information dominance on the battlefield; that 
is, crippling an enemy's military command and control centers, or 
disabling an air defense network prior to launching an air attack.
    Many countries are observing US actions and public debates with 
respect to information warfare and using them as a guideline or a 
jumping off point for their own programs. They may not follow the US 
lead, but rather select areas to concentrate on where they feel 
information warfare will have an impact for them.
Intelligence community collection
    We have taken steps to focus our collection and analytic resources 
on this threat and have taken steps to increase the level of 
cooperation between intelligence analysts and their counterparts in the 
law enforcement community. Unfortunately cyber threats are a difficult 
intelligence target. They are cheap, they require little 
infrastructure, and the technology required is dual use. In short, they 
are exceptionally easy to conceal.
    Unlike traditional military preparations, where our technical 
systems can reliably detect the movement and coordination of large 
forces, preparation for an information warfare attack presents no such 
opportunities.
    The subtle and diverse nature of IW operations makes it difficult 
to detect an attack even when it is actually underway, and the 
cumbersome process of investigation these events inhibits effective 
real-time tracing of the actual source of an attack.
    In order to address this relatively new threat area, we are 
pursuing a number of initiatives inside the Intelligence Community and 
in cooperation with the law enforcement community, other government 
agencies, and the private sector.
                        the threat posed by hiv
    (39) To what extent has HIV had an impact on the health and 
economies of foreign countries? How has HIV impacted foreign 
militaries?
    UNAIDS and the World Health Organization (WHO) recently released a 
joint report that revises upward--to roughly 30 million--the total 
number of people estimated to be infected worldwide through the end of 
1997. This new estimate left unchanged the regional distribution of 
HIV/AIDS cases, Sub-Saharan Africa still accounts for over two-thirds 
of the world's HIV-positive population.
    The social implications of the HIV infection will be felt between 
2005 and 2010 with the deaths of a large number of those already 
infected. Because the disease got an earlier start in Africa, gains in 
Africa. Life expectancies achieved over the past few decades are being 
canceled out by HIV.
    The health systems in less developed countries are unable to cope 
with the HIV epidemic, governments with limited resources are likely to 
categorize HIV/AIDS patients as low priority in funding decisions, and 
medical triage will result in AIDS patients receiving little or no 
treatment for their illness.
    World Bank and UNDP studies have found, however, that the disease 
has had relatively little impact on economic development. For example, 
in Africa, a recent World Bank model estimates HIV/AIDS lowers annual 
per capita income by just half a percent in developing countries, 
although the epidemic has driven the poorest families deeper in 
poverty.
    Many African countries are already accepting and retaining HIV 
positive military personnel who pose some readiness problems for 
national and joint--including peacekeeping--forces. Outside of Africa, 
Thailand's military has the worst reported infection rates with some 
military units having up to 60 percent HIV positive, according to a 
recent journal article.
                        actionable intelligence
    (40) Some analysts say that the increased emphasis on action-
oriented intelligence has come at the expense of other important--but 
more mundane--work, like maintaining data bases and conducting in-depth 
analyses on foreign militaries and political groups. Do you share this 
concern? If so, how do you intend to deal with these competing needs?
    The Directorate of Intelligence is working to strike an appropriate 
balance between the production of current intelligence and in-depth 
analysis. The DI's senior management has commissioned a series of in-
depth studies on fundamentally important issues. In addition, analytic 
tool and production integration projects currently under way will bring 
increased efficiencies to those ``mundane'' processes, thereby 
providing analysts increased time to focus on longer term analytic 
work.
           intelligence community's role in the pow/mia issue
    (41)(a) National Security Advisor Sandy Berger wrote to the Senate 
Majority Leader last year and indicated that he had directed the 
Intelligence Community to produce a Special National Intelligence 
Estimate (SNIE) regarding POW/MIA issues with Vietnam. After consulting 
with this Committee, the terms of reference were settled. When do you 
expect to have this Estimate completed? Mr. Berger also indicated that 
he would ask for an updated Intelligence Community assessment on the 
so-called ``735'' and ``1205'' documents found in the Russian archives. 
What efforts has the Intelligence Community made to acquire additional 
information about these documents either in Russia or in Vietnam? As 
per the Committee's request, have the 574 classified CIA documents on 
the POW/MIA subject matter been reviewed and summarized? Do they shed 
any light on the SNIE?
    The National Intelligence Estimate on ``Vietnamese Intentions, 
Capabilities, and Performance Concerning POW/MIA Issues'' recently was 
published.
    The Estimate was drafted by one of our most senior East Asia 
specialists, and was actively supported by all elements of the 
Intelligence Community. The drafter consulted closely with analysts at 
DOD/DPMO and traveled to Thailand, Vietnam, and Honolulu to consult 
with US officials involved in POW/MIA issues. Besides examining 
material available in intelligence archives, relevant CIA documents, 
and transcripts of interviews of Russian officials conducted by the 
Joint Commission Support Directorate/DPMO, he also reviewed material in 
SSCI files. (An Annex to the Estimate spells out in detail the nature 
of the sources examined and the scope of the research.)
    The completed draft was read by four distinguished outside experts 
thoroughly familiar with the issue and representing a variety of 
professional experience. All four praised its balance and thoroughness.
    (41)(b) In his letter, Mr. Berger offers assurances that 
``collection requirements pertaining to the POW/MIA issue [will] remain 
as a high priority'' after administration officials conceded that it 
had mistakenly left off the POW/MIA issues from PDD-35--the document 
that sets out intelligence collection priorities. Has this oversight 
been corrected?
    POW/MIA issues on SE Asian countries such as Vietnam, Laos, and 
Cambodia, have always remained priority collection requirements.
    (41)(c) In July 1993, the Secretary of Defense consolidated four 
DoD offices charged with different functions of the POW/MIA issue. The 
Intelligence Community's only POW/MIA analytical element, the Defense 
Intelligence Agency's Office of POW/MIA Affairs, was then transferred 
out from the oversight of both the DCI and the responsible 
Congressional committees. Do you now have oversight of the Defense 
Prisoners of War/Missing persons Office (DPMO) analytical section? If 
not, who is responsible for oversight of this capability? Why is this 
intelligence capability not reflected in the Congressional 
Justification Books (National Foreign, Joint Military and Tactical 
intelligence accounts) provided to the congressional oversight 
committees?
    The analytical component of DPMO is not a component of the 
Intelligence Community, and the Director of Central Intelligence has no 
oversight responsibilities for it. That responsibility belongs to the 
office of the Secretary of Defense.
                      a declining military threat
    (42) In your testimony before the Committee, you indicated that the 
military threat to the United States was declining, and General Hughes 
concurred with this assessment. Please elaborate on this critical issue 
and discuss the impact it will have on the Intelligence Community.
    It would be incorrect to characterize the military threat to the 
United States as declining and conclusions drawn from general testimony 
to that effect would be erroneous. While the threat of massive conflict 
may have diminished, new or intensified challenges have emerged with 
profound implications for the Intelligence Community.
    Tracking WMD Development and Proliferation. A number of 
dissatisfied states seek to alter regional balances through force of 
arms. Unable to compete with US conventional arms, they seek to deter a 
US response by threatening WMD use. Tracking the development and 
proliferation of WMD programs, including delivery systems, is an 
extraordinarily difficult mission. The number of states involved is 
substantial, their programs lack signatures, and their use of denial 
and deception is rapidly improving.
    Force Protection Intelligence Support. The US military has always 
concerned itself with force protection and the Intelligence Community 
has assisted in that effort. Today, however, as regional rogues turn 
more to asymmetric challenges to US presence abroad--including 
terrorism, sabotage, and subversion--intelligence support for the force 
protection mission has become more demanding and complex.
    Global Coverage Support. During the Cold War, any adversary likely 
to attack US interests was likely to have been equipped and trained by 
the Soviets. In short, bycovering the Soviet target, US intelligence 
was able to address a substantial range of issues of concern. Today by 
contrast, potential adversaries may have received weapons, doctrine, 
and training from any of a number of states. Tracking tomorrow's 
threats requires a much broader coverage of an increasing set of 
targets.
    Forecasting Future Threats. Although the US may not be confronted 
by conventional military peers today, over the longer term such 
challenges may emerge. Forecasting the emergence of future challenges 
is a daunting challenge, requiring an understanding of economic, 
social, political, military, and technological trends in many regions 
and for many states.
    In addition to these challenges, the Intelligence Community is 
called on to support the US military as it takes on new missions to 
protect our global interests. US military operations have changed since 
the end of the Cold War, to include increasing involvement in 
operations other than war and lower-tier conflicts. In response, the 
intelligence needed to support US military operations is changing, with 
growing emphasis on the need to:
    Monitor S&T/weapons developments that could lead to an introduction 
of a technology surprise against US forces or interests. Aside from the 
terrorist threats or acts of sabotage, the changing nature of our 
military operations may encourage adversaries to pursue limited gains 
in encounters with US forces--seeking to inflict damage against US 
interests as opposed to pursuing a more traditional military victory. 
This will require additional emphasis on ``tactical'' support to US 
policymakers as well as the continued emphasis on strategic context.
    Track foreign transfers of weapons systems or expertise to pariah 
states or regions of potential conflict. The rising cost of some 
advanced weapon systems is driving foreign suppliers to increasingly 
pursue export opportunities during the research and development stage. 
This could increase the rate at which new technologies become a threat 
to US interests and result in a more diverse range of systems as 
recipients pursue individual applications.
                                 ______
                                 
                        U.S. Department of Justice,
                           Federal Bureau of Investigation,
                                      Washington, DC, June 9, 1998.
Hon. Richard C. Shelby,
Chairman, Select Committee on Intelligence,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: Attached are the unclassified responses to 
questions for the record resulting from the January 28, 1998, hearing 
of the Senate Select Committee on Intelligence on security threats to 
the United States.
    Please contact me if I can be of any further assistance.
            Sincerely yours,
                                       John E. Collingwood,
    Assistant Director, Office of Public and Congressional Affairs.

                        Russian Organized Crime

    (1) What general trends do we see in Russian organized crime? How 
is organized crime impacting the Russian economy and the Russian 
political system? To what extent is Russian organized crime involved in 
the trafficking of weapons of mass destruction? What is your prognosis 
for Russian efforts to combat this problem? How active is Russian 
organized crime in the U.S.?
               general trends in russian organized crime
    The FBI has noted several emerging trends with respect to Russian 
organized crime activity. First and foremost is the fact that this 
activity is increasing not only in Russia but worldwide. Recent 
statistics published by the Russian Ministry of Internal Affairs (MVD) 
indicate that the share of crimes committed by ``mafia'' groups as a 
percentage of total crimes committed in 1997 has risen throughout the 
Russian Federation. This trend is magnified in the larger cities such 
as St. Petersburg, Russia where regional law enforcement authorities 
are reporting a 100 percent increase in the crime rate over the 
previous year. Although this statistic includes all types of crime in 
addition to those related to organized crime groups, it is nevertheless 
indicative of the overall rise in violent crime which local officials 
attribute to the criminal influence of organized crime groups.
    Moscow law enforcement authorities have also reported a higher 
incidence of contract murders of the type normally associated with 
``turf'' battles between organized crime groups and mob style 
retribution. Foreigners doing business in Moscow, including US 
citizens, have not been immune to this trend. In November of 1996 US 
businessman Paul Tatum was murdered in a mob-style execution in a 
Moscow Metro station which was likely the result of his disagreements 
with the local Chechen crime boss. This upsurge in violence involving 
Russian organized crime continues to impact the international scene. In 
February of this year three Russian nationals were killed during a gun 
battle in Ostrava, Czech Republic which, police believe, resulted from 
disagreements between rival organized groups. In this same month a 
suspected Russian organized crime ``boss,'' believed to be involved in 
prostitution and money laundering, was gunned down in Marbella, Spain. 
Thus far Spanish law enforcement authorities have not ruled out a 
``settling of scores'' as the motive for this killing.
    The sheer number of Russian organized crime groups is also 
increasing. In December, 1992 the Russian Ministry of Internal Affairs 
(MVD) reported the existence of 4,352 organized crime groups in Russia, 
with widely varying size, criminal activities and organizational 
structure. In 1994, the MVD reported the existence of 5,691 organized 
crime groups. In October 1997, Interior Minister Kulikov estimated that 
the number of identifiable and operational organized crime groups in 
Russia is more likely closer to 12,000.
    There appears to be an emerging trend which suggests a growing 
level of sophistication in the area of large scale financial 
institution fraud and transnational money laundering involving Russian 
organized crime groups. These groups are continuing to solidify their 
control of a major portion of the banking industry within the Russian 
Federation and Russian law enforcement sources estimate that as much as 
one half of the country's financial sector may be affected. Russian 
Ministry of Interior sources have reported that 550 banks, or nearly 
half of Russia's credit and financial organizations, are controlled by 
organized crime interests. This capability allows these groups to more 
easily launder and to ultimately move large amounts of cash around the 
world and to evade efforts by the government to collect taxes. This has 
become an operational necessity due the large amounts of cash being 
generated by their criminal enterprises. Russian organized crime 
figures are also known to have purchased controlling interests in 
banking institutions located in Cyprus and other ``offshore'' locations 
such as Antigua and Aruba in the Caribbean. During the past years five 
Russian owned banks have opened for business on the island of Aruba. 
From these locations they electronically launder large amounts of cash 
around the world. Due to strict bank secrecy laws it is extremely 
difficult for law enforcement agencies to trace the origin of these 
funds. This transnational banking activity has been accompanied by a 
high level of violence directed against senior banking officials in 
Russia and dozens of them have been the victim of contract murders. 
Last year one prominent Moscow journalist compared the life expectancy 
of a Russian banker in recent years to that of a bomb-disposal officer.
    Russian organized crime groups are becoming increasingly more 
diversified and professionalized. Former, and sometimes active, 
soldiers of Russian Special Forces units have been recruited by 
organized crime groups to perform as private bodyguards, hit-men, debt 
collectors and security guards for smuggling operations. As increasing 
numbers of these individuals are demobilized into an economy where 
meaningful employment is scarce, the prospect of steady employment with 
established organized crime groups is an attractive prospect. In 
addition to active duty soldiers and military veterans, police officers 
from a variety of Russian law enforcement agencies have become involved 
in organized racketeering activity. Recently, a group of 12 Moscow 
police officers were arrested and charged with murder, extortion and 
robbery. Reports indicate that this group was led by a long serving 
officer from the Interior Ministry's detective branch and included an 
instructor from a Moscow police academy. In addition to attracting 
these types of professionals into their ranks, Russian organized crime 
groups are also utilizing the services of professionals from other 
fields in the operation of their various criminal enterprises. These 
include specialists in computer software applications, international 
law and finance, intelligence gathering and corporate security (some of 
whom include former KGB officers), international banking, casino gaming 
operations and hotel and restaurant management. In many cases these 
individuals are employed in seemingly legitimate ``front'' companies 
which are proliferating around the world and which are used to 
represent the interests of Russian organized crime groups in various 
locales.
    Russian organized crime activity is increasing in the area of 
narcotics trafficking and human smuggling. In the last five years the 
amount of drugs smuggled into Russia has grown by a factor of fifteen. 
Former Interior Minister Anatoly Kulikov recently announced that within 
the Russian Federation drug related offenses have nearly doubled in 
1997. Use of narcotic substances and drug addiction has increased 
substantially throughout Russia and the resulting increase in consumer 
demand has fueled an expansion of the drug trade. This has provided 
Russian organized crimegroups with additional profit making 
opportunities in this area and they are capitalizing on this problem by 
expanding their drug smuggling and marketing operations. Russian 
organized crime figures are known to have allied themselves with 
members of the Cali Colombian drug cartel for this purpose and Russian 
law enforcement authorities have stated that heroin and cocaine 
originating from Colombia is being sold on the streets of Moscow. 
Russian organized crime groups have furnished the Cartel with weapons 
and combat helicopters in exchange for drug shipments. At one point 
Cartel members were considering the purchase of a surplus diesel-
powered patrol submarine from Russian organized crime sources for drug 
smuggling purposes but canceled the deal at the last minute. In 
addition to establishing links to the Columbian cartels, Russian 
organized crime groups are also believed to have developed ties with 
Italian mafia groups for the purpose of coordinating narcotic 
trafficking efforts.
    As Russian organized crime groups become more firmly established in 
the international vice trade, their involvement in the trafficking of 
young women has increased dramatically. They are operating hundreds of 
brothels and striptease bars throughout Europe and Asia and are 
expanding their role in the worldwide prostitution industry. In many 
cases young women from Russia and Eastern Europe are lured into a life 
of sexual bondage with promises of lucrative legitimate employment made 
by bar and casino operators associated with Russian organized crime.
    Russian organized crime groups continue to generate a high level of 
corruption among politicians, police officers, businessmen and other 
officials within the Russian Federation and elsewhere. Not only has 
this trend gained momentum in the Russian Federation but has surfaced 
in other countries where Russian organized crime groups have 
established a foothold. Israel's National Unit for Serious Crimes has 
been redesignated as the National Anti-Mafia and Serious Crimes Unit 
after it became obvious that Russian organized crime was seeking to 
bolster its efforts to take over state assets and infiltrate the 
government. Reports have surfaced which suggest that Russian organized 
crime figures played a prominent role in selecting and supporting 
certain candidates during Israel's recent national election. In 
Colombo, Sri Lanka Russian organized crime figures are believed to have 
coopted the majority of the local police force into providing security 
for their vice and gambling operations.
    impact of russian organized crime upon the russian economy and 
                            political system
    Russian organized crime groups have accumulated great wealth and 
extensive social and political influence within the Russian Federation 
and other republics of the former Soviet Union. They have successfully 
exploited the period of political chaos which followed the collapse of 
the Soviet regime. Previously, they had been silent partners of the 
regime in the black market economy. Today, Russian organized crime 
groups dominate the economic life of Russia by exerting control over 
key economic sectors such as: petroleum distribution, pharmaceuticals, 
and consumer products distribution. This control has allowed them to 
dominate certain markets associate with a wide variety of consumer 
goods and this has the undermined open market competition necessary for 
normal economic development. Along with corrupt public officials and 
unscrupulous businessmen they have perverted the all-important 
privatization process by acquiring ownership of previously owned state 
assets and then selling them off at tremendous profits which should 
have accrued to the Russian government. Many of the most powerful 
groups have close working relationships with senior public officials 
and high-level politicians. Through bribery and coercion Russian 
organized crime figures have obtained favorable consideration in 
obtaining government contracts, various commercial licenses and tax 
exemptions. Known organized crime figures have been elected to the 
Russian Duma where they champion legislation favorable to their 
business interests. However, the most destructive impact of Russian 
organized criminal activity upon the Russian economy is in the area of 
small business development, the backbone of any successful capitalist 
economy. Most emerging private businesses are forced to pay protection 
money to the local organized crime bosses in order to remain in 
business. By some estimates, such protection payments, which are called 
``krishas'' (roofs), amount to 20 percent of a private business's 
turnover. The amount of money funneled to Russian organized crime 
figures puts them in a position to corrupt widely the police, judiciary 
and other government agencies, especially when measured against 
abysmally low government and police salaries. In an environment where 
journeyman level police officers earn an average salary of 200 dollars 
a month and where they are frequently paid on an irregular basis, 
organized crime groups are amassing tremendous influence. This was 
highlighted in a recent newspaper poll in Russia in which the majority 
of respondents believed that the ``Russian Mafia'' was more powerful 
than the Duma.
    To what extent is Russian organized crime involved in the 
trafficking of weapons of mass destruction? What is the prognosis for 
Russian efforts to combat this problem?
    While purported nuclear weapons and weapons-grade nuclear material 
have been offered for sale, at the present time, there are no known 
instances in which law enforcement authorities have confirmed that such 
materials were actually available for sale. There have been confirmed 
illicit transactions in Europe which involve uranium and plutonium, 
however, these nuclear materials have been well below the enrichment 
and/or quantity levels required for weapons production. It is the 
illicit trafficking in the relatively more common, commercially 
available nuclear or radioactive materials that pose the most 
significant potential for serious damage. Most of these incidents have 
been determined to be frauds involving industrial or relatively 
lowgrade nuclear materials perpetrated by petty criminals who believe 
that a market exists for such items. These items have included 
discarded nuclear reactor residue or radioactive substances associated 
with various manufacturing processes or military applications. 
Nevertheless such materials do pose a threat to public health and 
environmental safety and are taken very seriously by law enforcement 
agencies worldwide.
    The FBI is not aware of any involvement by established Russian 
organized crime groups at this time in nuclear weapons trafficking, 
however, the potential for such involvement cannot be discounted. The 
large potential profit associated with such trafficking may attract 
rogue or otherwise undisciplined organized crime factions into this 
arena. The more established organized crime groups would probably 
discourage such activity since it would tend to adversely impact the 
international status-quo and thereby interrupt currency markets, 
investment climates, real estate valuations and international mobility.
    Russian law enforcement authorities are very sensitive about the 
issue of nuclear materials trafficking in light of Alexander Lebed's 
recent statements concerning unaccounted for ``suit-cased'' sized 
tactical nuclear weapons. Representatives of various Russian law 
enforcement agencies have stated repeatedly that there is no higher 
priority than to safeguard the disposition of nuclear weapons and 
related material. In the event that such materiel is trafficked within 
or through the Russian Federation it is likely that Russian law 
enforcement authorities would respond with a massive effort directed at 
recovery and prosecution.
    How active is Russian organized crime in the US?
    There are two basic types of Russian organized crime groups 
presently operating in the US. These include the larger, traditionally 
structured organizations which originate from Moscow, St. Petersburg 
and other locales within the former Soviet Union and which are 
attempting to maintain a foothold in the US, and the smaller fewer 
structured groups of career criminals who have come to be known as 
``fraudsters.'' The fraudsters share a common ethnic heritage and 
usually engage in a variety of financial fraud schemes which employ 
recently arrived Russian emigres. They have been primarily involved in 
white collar crimes including various types of entitlement fraud such 
as health care fraud (Medicare and Medicaid fraud), credit card fraud, 
computer fraud, financial institution fraud, check kiting, visa and 
immigration fraud, forgery of financial instruments, securities fraud 
and contract fraud. While lacking in size when compared to the larger, 
more structured groups, these groups are capable of causing losses in 
the millions of dollars. They often operate in particular geographic 
areas, primarily large urban areas, and are self-contained through an 
informal networking system comprised of criminally oriented Russian 
emigres. Although originally focused upon their own emigres' 
communities with respect to their criminal activity, these groups are 
continually expanding the range of their operations and are victimizing 
others as well. It is also increasingly more common for larger Russian 
emigre criminal organizations to ``muscle in'' on these groups and 
extract a share of the profits in the form of ``protection payments.''
    The larger, hierarchically structured groups have been found to 
exist in cities such as Miami and New York. These groups typically 
contain at least 100 members and have clearly defined leadership 
hierarchies and some semblance of an organizational structure. The 
members of these groups include veteran criminals who have served 
sentences in Soviet prisons and who are highly skilled in the fine arts 
of extortion, racketeering, smuggling, prostitution and large scale 
fraud. Individuals associated with these groups are very mobile and 
highly interconnected with confederates in the Russian federation. 
These groups are also involved in the establishment of front companies 
for the purpose of lending an air of business legitimacy to their 
various criminal enterprises. They have laundered billions of dollars 
of illicitproceeds and played the dominant role in channeling much of 
the $200 billion in capital flight from the Russian Federation in the 
last decade.
    The FBI has approximately 250 pending investigations targeting 
Russian organized crime groups in 35 field divisions in 27 states. 
These cases encompass all major investigative programs including 
Organized Crime/Drugs, White Collar Crime, Violent Crime/Major 
Offenders and Racketeering Enterprise Investigations. These groups have 
been found to be involved in a wide range of criminal activity 
primarily in the areas of fraud, money laundering, murder, 
prostitution, extortion and drug trafficking. As a result of these 
investigations the FBI has identified elements of 25 distinct Russian 
organized crime groups operating in the United States.
                          international crime
    How critical do you assess the current and future threat to US 
interests from international crime activities and networks? Is their 
room for improvement in the FBI-CIA relationship in dealing with 
international crime?
    Current and future threat to US interests from international crime 
activities and networks?
    International organized crime is an immediate and increasing 
concern of the worldwide law enforcement community. It is global in 
nature and respects no political boundaries. The widespread political, 
social, economic and technological changes which have occurred within 
the last two decades have enabled these groups to become more firmly 
entrenched on the international scene. The criminal activities of these 
groups are likely to increase in scope, magnitude and diversity as 
their operations expand worldwide. They are currently taking advantage 
of more open immigration policies along with the increased ease of 
international travel and international commerce to infiltrate existing 
governments and legitimate businesses. These groups are becoming more 
corporate in their outlook and more long-term in their planning. They 
are utilizing high-tech communications and information technology to 
increase the profitability of their criminal enterprises and to 
transfer these funds around the world. Some of these groups have 
demonstrated the capability to subvert or co-opt the governments and 
law enforcement agencies in the countries in which they operate as they 
have in Latin America. In short, international organized crime 
represents a growing and serious threat to US interests both 
domestically and worldwide.
    FBI-CIA relationship dealing with international crime?
    The FBI and CIA are working closely on a daily basis concerning 
international organized crime. Both agencies are regularly exchanging 
criminal intelligence information for the purpose of countering 
worldwide organized crime activity, especially that which threatens US 
interests directly. The FBI and CIA also routinely exchange personnel 
who are specialists in a variety of areas which contribute toward these 
complex transnational investigations. This relationship is now regarded 
by both agencies as being mutually beneficial and reinforcing and is 
continually evolving in proportion to the growing threat and 
sophistication of these groups. As personnel from the FBI and CIA 
become more familiar with each other's procedures, techniques and 
systems, it is expected that the relationship between the two agencies 
will improve even further.
                      trends in economic espionage
    (2) A recent survey by the American Society of Industrial Security 
estimates that intellectual property losses from foreign and domestic 
espionage may have exceeded $300 billion in 1997 alone. Does this 
estimate seem plausible to you? A January 12 Los Angeles Times article 
dealing with this issue states that currently pending before the FBI 
``are more than 700 foreign counterintelligence investigations 
involving economic espionage.'' Is that an accurate number? Please 
comment on trends in economic espionage directed against the U.S. How 
effectively are you able to measure the level of economic espionage 
against the U.S.? Has U.S. business reporting of economic espionage 
improved over the last year? What other measures would help to stop 
industrial espionage?
    Because trade secrets are an integral part of virtually every 
aspect of U.S. trade, commerce, and business, the security of trade 
secrets is essential to maintaining the health and competitiveness of 
critical segments of the U.S. economy.
    Prior to the passage of the Economic Espionage Act, the FBI was 
already addressing hundreds of foreign counterintelligence 
investigative matters concerning hostile economic intelligence 
activities. That pace continues.
    The FBI initiated its Economic Counterintelligence Program in late 
1994, with a mission to detect and neutralize threats against U.S. 
economic interests sponsored or coordinated by foreign powers. This 
focused effort resulted in a dramatic increasein FBI investigations and 
a realization that existing legal remedies at the federal level were 
insufficient to address the scope and nature of the economic espionage 
activities.
    Directly after the Economic Espionage Act of 1996 was signed into 
law, the FBI National Security Division sponsored a series of six 
regional Economic Espionage Conferences. These conferences brought 
together elements of industry and U.S. federal government criminal and 
intelligence sectors which play a role in economic espionage matters.
    The American Society of Industrial Security (ASIS) recently 
completed a study on economic espionage against U.S. corporations. 
Richard J. Heffernan, a consultant to ASIS for the study, stated 
``while the number of incidents appears to have leveled off at a high 
plateau, the damage caused by these incidents has drastically increased 
since the last survey. The amount of intellectual property at risk, 
through actual theft and targeting, is $44 billion for the survey 
period, this is an annualized amount of $31 billion.''
    Under FBI contract, the Pacific Northwest National Laboratory has 
developed a methodology to objectively assess and determine the scope 
of economic loss resulting from the theft and intellectual property. 
This Economic Loss Model was first applied to the facts of a case 
involving the theft of Intellectual Property from a U.S. corporation by 
a foreign competitor resulting in the foreign competitor capturing the 
market. The American firm was involved in a joint venture activity to 
produce a major product for foreign markets.
    Using the tool the misappropriation of Intellectual Property in 
this case resulted in over $600 million in lost sales alone, the direct 
loss of 2,600 full time jobs, and a resulting loss of 9,542 jobs for 
the economy as a whole over a 14-year time frame. The analysis also 
determined that the U.S. trade balance was negatively impacted by $714 
million, and lost tax revenues totaled $129 million.
    An actual increase or decrease in economic espionage is difficult 
to assess, although the reporting has shown a distinctive increase in 
the past year. It appears that as the FBI and large U.S. corporations 
succeed and the press follows high visibility cases, the reporting will 
continue to improve.
    Additionally, the FBI has forged crucial partnerships with the 
Department of Defense, Department of Energy, the private industry to 
allow for prompt detection and successful investigative efforts in this 
area.
    A number of countries continue to pursue economic collection 
programs. Foreign economic collection focuses on science and 
technology, as well as research and development. Of particular interest 
to foreign collectors are dual-use technologies and proprietary 
economic information which provide high profitability. Proprietary 
business information, e.g., bid, contract, customer and strategy 
information, is aggressively targeted. Foreign collectors have also 
shown interest in government and corporate financial and trade data.
                         economic espionage law
    (3) In last year's response to this Committee's question regarding 
the effectiveness of the Economic Espionage Act of 1996, the CIA stated 
that the law clearly has attracted the attention of many of our key 
economic competitors, but that it is ``perhaps too early to assess 
whether the law has had an appreciable effect on the level of economic 
espionage directed against the United States.''
    (a) Over the past year, have you seen any results from the Economic 
Espionage Act? Do you have information that the law has deterred 
economic espionage activity by foreign governments or foreign 
corporations?
    (b) To what extent have you been able to use the Economic Espionage 
Act of 1996 as a tool against foreign economic spying?
    Five case examples are offered to demonstrate the FBI's efforts to 
combat foreign economic spying. To date four indictments have been 
brought under the Economic Espionage Act of 1996 (EEA 96). Two of the 
four involve foreign nationals. One foreign corporation has been 
indicted. Guilty pleas have been entered in four of the five cases. In 
each instance, a significant economic loss was prevented. The estimated 
aggregate loss prevented is estimated to be several hundred million 
dollars. Prosecutions are still pending in two of the five cases. An 
outstanding warrant presently exists for a Taiwan national
    Each prosecution is a strong example of close cooperation between 
the FBI and the targeted major American company. In two cases, 
investigation continues to fully determine the extent of foreign 
government involvement.
Recent cases
    Pittsburgh: (U.S. v. Worthing, 2 guilty pleas, no foreign 
involvement) On December 7 1996. the first arrest under the new law 
occurred in Pittsburgh, Pennsylvania. Patrick Worthing and his brother 
Daniel were arrested by FBI agents after agreeing to sell Pittsburgh 
Plate Glass (P.P.G.) information to a Pittsburgh agent posing as a 
representative of Owens-Corning, Toledo, Ohio. Both subjects were 
charged under Title 18 United States Code, Section 1832 (18 USC 1832, 
Theft of Trade Secrets). On April 18, 1997, due to his minimal 
involvement, Daniel Worthing was sentenced to six months of home 
confinement, five years probation, and 100 hours community service. In 
June 1997, Patrick Worthing was sentenced to 15 months in jail and 
three years probation. Potential loss prevented was $20-$40 million.
    Philadelphia: (U.S. v. Hsu, et al., awaiting trial, involves Taiwan 
nationals) On June 14, 1997, Hsu Kai-lo and Chester H. Ho, naturalized 
U.S. citizens, were arrested by the Philadelphia Division for 
attempting to steal the plant cell culture technology of Taxol, 
patented and licensed by the Bristol-Myers Squibb Company. On July 10, 
1997, a federal grand jury for the Eastern District of Pennsylvania 
returned indictments, totaling eleven counts against Hsu, Ho, and 
Jessica Chou (a Taiwanese citizen who was actively involved with Hsu in 
attempting to obtain the Taxol formulas). Hsu and Chou are employed by 
the Yuen Foong Paper Manufacturing Company of Taiwan, a multinational 
conglomerate. Ho is a professor at the National Chaio Tung University 
and the Institute of Biological Science and Technology in Taiwan. Chou 
remains in Taiwan. Two of the eleven counts were violations of Title 18 
USC 1832. Potential loss prevented is estimated in the hundreds of 
millions of dollars.
    Cleveland: (U.S. v. Yang, et al., 1 guilty plea, two awaiting 
trial, Taiwan company indicated) On September 5, 1997, Pin Yen Yang and 
his daughter Hwei Chen Yang (aka Sally Yang) were arrested on several 
charges, including Title 18 USC 1832. Also charged is the Four Pillars 
Company, which has offices in Taiwan, and a registered agent in El 
Campo, Texas. It is alleged that the Four Pillars Company, Pin Yen 
Yang, Sally Yang, and Dr. Ten Hong Lee were involved in a conspiracy to 
illegally transfer sensitive, valuable trade secrets and other 
proprietary information from the Avery Dennison Corporation, Pasadena, 
California, to Four Pillars in Taiwan. Dr. Lee, who is cooperating with 
the investigation, has been an Avery Dennison employee, at the 
company's Concord, Ohio, facility since 1986. Dr. Lee received between 
$150,000 and $160,000 from Four Pillars/Pin Yen Yang for his 
involvement in the illegal transfer of Avery Dennison's proprietary 
manufacturing information and research data over an approximate ten 
year period. On October 1, 1997, a federal grand jury returned a 21-
count indictment, charging Four Pillars, Pin Yen, and Sally Yang with 
attempted theft of trade secrets, mail fraud, wire fraud, money 
laundering, and receipt of stolen property. On the same date, Dr. Ten 
Hong Lee plead guilty to one count of wire fraud and promised continued 
cooperation with the investigation. Economic loss estimated at $50-$60 
million.
    Memphis: (U.S. v. Davis, 1 guilty plea, 27-33 months) On October 3, 
1997, the Memphis Division arrested Steven Louis David, who was 
indicted in the Middle District of Tennessee on five counts of fraud by 
wire and theft of trade secrets. Wright Industries, the victim company 
and a sub-contractor of Gillette, had fully cooperated with the FBI's 
investigation. Although the FBI knows that Davis reached out to one 
foreign owned company (BIC), it is unclear if he was successful in 
disseminating trade secrets overseas. The FBI, however, has learned 
that a competitor in Sweden had seen the drawings of the new Gillette 
razor. Davis plead guilty on January 23, 1998, to a ten-count 
indictment pertaining to theft of trade secrets and wire fraud. 
Potential loss prevented was in the hundreds of millions of dollars.
    Buffalo: (Pre-EEA 96, 1 guilty plea, PRC-related) Harold C. Worden 
was a 30-year employee of the Eastman Kodak Corporation who established 
his own consulting firm upon retiring from Kodak. Worden subsequently 
hired many former Kodak employees and stole a considerable amount of 
Kodak trade secret and proprietary information for use at his firm. As 
a result of investigation, Worden signed a plea agreement with the U.S. 
Attorney's Office for the Western District of New York in which he pled 
guilty to one felony count of violating Title 18, USC, Section 2314 
(the Interstate Transportation of Stolen Property). Worden was 
sentenced to one year imprisonment, three months of home confinement 
with monitoring bracelet, three years of supervised probation. and a 
fine of $30,000. Investigation is continuing in the case. Potential 
loss prevented was in the hundreds of millions of dollars.
                   espionage by foreign corporations
    (4) Last year, in response to a question by this Committee, the 
definition of economic espionage was given as ``government-directed or 
orchestrated clandestine effort to collect U.S. economic secrets or 
proprietary information.''
    (a) To what extent are U.S. corporations threatened by the theft of 
trade secrets by foreign entities that are not ``government directed or 
orchestrated?'' How do you distinguish whether espionage is government 
directed or not, especially if the foreign corporation involved 
receives extensive government subsidies?
    (b) What steps are you taking to prevent corporate espionage that 
is not directed by a foreign government?
    The determination of economic espionage committed to the benefit of 
a foreign government, foreign instrumentality, or foreign agent, is 
made through logical FBI investigative steps. The FBI works with a 
number of different entities to determine foreign involvement in 
potential cases of economic espionage.
    Many of the steps taken to prevent corporate espionage that is not 
directed by a foreign government are essentially the same as those with 
possible foreign involvement.
    The FBI National Security Division's Awareness of National Security 
Issues and Responses (ANSIR) Program brings to the attention of U.S. 
corporations their potential vulnerability to economic espionage. ANSIR 
communicates via INTERNET ([email protected]) with thousands of American 
firms in high technology and other industry. ANSIR representatives are 
located at each FBI office nationwide. To date, the FBI has presented 
its economic espionage program at lectures in ten countries and has 
reached an audience of over 80,000.
    Industry is obviously one of the front lines in the battle to 
protect trade secrets. The FBI is currently working with industry to 
develop an on-line system to facilitate the timely sharing of 
information concerning incident reports, threat profiles, and referrals 
between industry and the FBI.
    The FBI has developed significant information on the foreign 
economic threat, to include: (1) identification of the foreign 
government sponsors of economic espionage; (2) the economic targets of 
their intelligence and criminal activities; and (3) the methods used to 
clandestinely and illicitly steal U.S. Government information, trade 
secrets and technology.
    Also, the FBI helped establish in 1998 the Department of Defense 
Counterintelligence Science and Technology Protection Working Group. 
This group was formed through the joint efforts of the Office of the 
Secretary of Defense and the FBI to develop a forum to identify and 
address defense-related technology protection issues. The group has 
attendees from all DOD elements, OSD, NSA, NRO, and other U.S. 
Government agencies such as DOE and CIA. The FBI participates both at 
the executive committee and working group levels.
    The FBI has initiated efforts to include operative language of the 
EEA 96 in the Federal Acquisition Regulation (FAR). The FAR provides 
uniform policies and procedures for acquisitions by executive agencies 
of the federal government. Current plans include placing a definition 
of the law and how to handle a violation (to include reporting 
requirements) in the Improper Business Practices section of the manual. 
Also, the instances where the U.S. Government retains the intellectual 
property rights to a particular unclassified technology, clauses will 
be included in the actual contract defining the technology as a trade 
secret belonging to the U.S. Government.
    These efforts are helping to forge a closer working relationship 
between the FBI and the various governmental and U.S. industry 
organizations that can assist and benefit from FBI counterintelligence 
programs.
                     working with u.s. corporations
    (5) If you find evidence that a U.S. company is being targeted for 
economic espionage or is the subject of unfair competition with a 
foreign firm, what mechanisms are in place to remedy the situation? How 
often does this occur?
    Practitioners of economic espionage seldom use one method of 
collection rather they have concerted collection programs that combine 
both legal and illegal, traditional and more innovative methods. 
Investigations have and continue to identify the various methods 
utilized by those engaged in economic espionage and to assess the scope 
of coordinated intelligence efforts against the United States.
    An intelligence collector's best source continues to be a mole, or 
``trusted person,'' inside a company or organization, whom the 
collector can task to provide proprietary or classified information. 
Recently, we have seen the international use of the Internet to contact 
and task insiders with access to corporate proprietary information. 
Other methodologies include the recruitment of foreign students, joint 
ventures, and the use of well-connected consultants to operate on 
behalf of a foreign government.
    A number of remedies are available to levy against entities that 
commit economic espionage. The FBI has used various statutes in 
addition to the EEA 96 to combat the theft of U.S. trade secrets. These 
remedies include, but are not limited to, Wire Fraud, Mail Fraud, 
Interstate Transportation of Stolen Property, Conspiracy, and Money 
Laundering.
                  economic espionage against the u.s.
    (6) How do you distinguish between economic espionage and 
aggressive but legitimate information gathering by a foreign government 
or a foreign corporation? Please describe the type of economic 
espionage you see as the greatest threat to U.S. economic 
competitiveness. To what extent is economic espionage against the U.S. 
supported and coordinated by foreign governments?
    Logical FBI investigation is used to determine foreign involvement 
in specific cases.
    The United States' proprietary economic information, research and 
development into cutting-edge technologies, and its overall science and 
technology bases are the envy of most nations in the world. The open 
nature of the United States is conducive to foreign targeting of 
sensitive economic and technological information. For these two 
reasons, U.S. science and technology research and development, and 
proprietary economic information are all susceptible to intense 
collection efforts.
    The increasing value of trade secrets in the global and domestic 
marketplaces, and the corresponding spread of technology, have combined 
to significantly increase both the opportunities and motives for 
conducting economic espionage. Traditionally hostile countries and a 
number of allies continue their collection of U.S. trade secrets. The 
U.S. counterintelligence community has specifically identified the 
suspicious collection and acquisition activities of foreign entities 
from at least 23 countries. Analysis of updated information indicates 
that of those identified countries, 12 are assessed to be most actively 
targeting U.S. proprietary economic information and critical 
technologies. This list has been revalidated since the 1996 Annual 
Report on Foreign Economic Collection and Industrial Espionage.
    All economic espionage is a threat to U.S. economic 
competitiveness. Foreign collection continues to focus on U.S. trade 
secrets and S&T information products. Of particular interest to foreign 
collectors are dual-use technologies and technologies which provide 
high profitability.
    Specifically, throughout the past year, foreign collectors had 
particular interest in targeting U.S. industry in areas such as 
biotechnology, communications equipment, aerospace technology, 
computer-related software/hardware, nuclear-related technology, 
electronics, pharmaceuticals, missile systems, lasers, night-vision 
equipment, encryption technology, stealth technology, and aircraft 
systems.
              potential bw/cw attacks on the united states
    (7) What is the likelihood that the U.S. will be subjected to a 
biological or chemical attack within the next 2-5 years? 5-10 years? 
How is this attack likely to be carried out? Do you consider C/B weapon 
attack against the U.S. as more likely than a ballistic missile attack 
against the U.S.? How difficult is it for a group to construct and 
deliver an effective chemical weapon? A biological or radiological 
weapon? A nuclear device? What existing groups now have or are seeking 
such a capability?
    It is very likely that there will be continued instances of WMD use 
in the United States in the next 2-5 years, since the U.S. has 
experienced increases in the number of individuals producing, 
possessing, planning and/or using chemical and biological materials. In 
1997 there were in excess of 100 investigations ongoing by the FBI in 
the WMD arena. While many of the threats were considered non-credible, 
more arrests and preventions have taken place by local, state and 
federal authorities. Although cases over the last two years did not 
involve large groups with significant resources, they did affect U.S. 
citizens where treatment and/or hospitalization was required in 
selected cases. The FBI has observed a trend of increased interest in 
WMD materials, especially biological agents. As the result of recent 
events, significant threats over the past few years, and the increased 
availability and proliferation of nuclear, biological and chemical 
materials, there is a growing concern for the potential of terrorist 
incidents occurring in the U.S. involving WMD, specifically chemical 
biological, and to a lesser degree, radiological, and nuclear. 
Therefore, the need to increase awareness and vigilance in the WMD 
prevention, mitigation, and response arenas is critical.
    The probability of a major WMD incident in the next 2-10 years is 
extremely difficult to quantify. Based on a number of factors, to 
include an arrest in April, 1997 of extremist elements of a right wing 
group who planned to blow up a natural gas refinery as a diversion to 
an armored car robbery, the prospect of such an incidentoccurring in 
the U.S. as we reach the millennium in the United States is increasing. 
Some of these factors include the following:
    (a) Certain WMD agents are relatively inexpensive to produce, 
commercially available, and easy to acquire, especially biological 
purposes.
    (b) Basic knowledge required to manufacture C/B substances is 
readily available, difficult to detect, and increased public awareness 
through the movies, T.V. and the Internet.
    (c) Certain state sponsors of terrorism have active WMD programs. 
Additionally, non-aligned terrorists and certain cult type groups are 
still a growing concern. Such efforts could result in a major WMD 
incident, however, we hold no credible intelligence presently that any 
such action is being contemplated.
    (d) The majority of both credible and non-credible threats in the 
U.S. has come from ``lone offenders.'' Motivation ranges from anti-
government sentiment, extortion, end of the world type logic to those 
who are mentally unstable. Nonetheless, while many did not possess the 
technical know-how, several individuals have had the intelligence and 
ability to create such devices.
    Based on case studies of threats/incidents and investigations, the 
FBI believes that two likely scenarios of a postulated attack in the 
U.S. would consist of a lone individual or small group of individuals 
either (1) deploying a small amount of a crude biological agent, 
probably a toxin, in an unsophisticated delivery system, resulting in a 
relatively small amount of casualties, but with some deaths possible or 
(2) theft and/or sabotage of a site storing industrial chemicals, 
associated with conventional explosives, with the likelihood of causing 
more significant widespread damage.
    Less likely, but equally difficult to quantify, is the use of an 
effective radiological weapon. Although technically feasible, 
difficulty in dispersal associated with a relatively small casualty 
rate makes this option less appealing to a would-be terrorist. Recent 
cases do not demonstrate a significant increase in interest in 
radiological devices. However, as with all WMD scenarios, the mere 
threat of any of these options can cause concern and disruption. The 
FBI does share concerns with the Department of Energy (DOE) on the ever 
present threat of the use of an improvised nuclear or radiological 
device and has embarked on a long term initiative involving Nuclear 
Site Security with both the DOE and the Nuclear Regulatory Commission 
(NRC) which cannot be further discussed in an unclassified setting.
    Internationally, as alluded to previously, the threat from state 
sponsored and nonaligned terrorists exists, however, the FBI has no 
intelligence professing imminent attack against the U.S. from these 
elements. We do consider the use of C/B weapon in a smaller 
quantitative attack, as noted above, a much more likely alternative 
than a ballistic missile attack.
    How difficult is it for a group to construct and deliver an 
effective chemical, biological, radiological weapon or nuclear device?
    Currently, no groups other than certain nations have the capability 
to build a nuclear device. Technical expertise in designing a weapon, 
and in obtaining the plutonium, or Highly Enriched Uranium (HEW) are 
required. Obtaining this critical material is what slowed down one 
known terrorist sponsored state's nuclear weapon developed program and 
will be the main difficulty faced by any terrorist group.
    Radiological devices in comparison are easier to build, but have 
extremely limited effectiveness other than the terror they would induce 
in people who fell threatened by the possibility of irradiation. There 
are thousands of radioactive sources used in medical and industrial 
applications. They could be stolen rather easily and dispersed by a 
terrorist or individual with an explosive charge. The results of such 
an explosion would be fairly limited and would depend upon the type and 
form of radioactive material stolen.
    The creation of a C/B weapon is within the ability of an individual 
or group, although effective dissemination is a more complicated task. 
A stressed in this testimony, we believe that C/B weapons would be the 
weapons of choice in the WMD environment, noting that we still believe 
that conventional terrorist weapons and methods, i.e., bombings, use of 
firearms and kidnappings are still the primary methods of operation by 
terrorists.
    The most difficult question from a law enforcement perspective is 
determining motivation, so that prevention can mitigate damage. As 
recent cases have shown, the reasons for using WMD can be as simple as 
creating a diversion for an armored car robbery or to take revenge on 
the Government, an institution or an employer. These factors make the 
task of accurate and timely prediction very difficult. While many in 
law enforcement and the intelligence community believe that a WMD event 
is in our future, there exists the proverbial argument of ``how small 
or large will it be?''
             possible retaliation for the kansi sentencing?
    (8) Mir Aimal Kansi has recently been sentenced to death for the 
killing of CIA employees outside CIA Headquarters. What is the 
likelihood that there will be acts of terrorism against the U.S. as a 
result of this?
    On November 10, 1997, a jury in Fairfax, Virginia, convicted Mir 
Aimal Kansi of capital murder. In January 1998 the court sentenced 
Kansi to death.
    The potential threat of retaliation against U.S. targets for 
Kansi's sentencing takes two distinct forms. The threat of some type of 
retaliatory attack on U.S. soil is low but not outside the realm of 
possibility. The threat of retaliation against U.S. targets outside the 
United States should be viewed as a somewhat more likely scenario, 
although the FBI has no credible information indicating that such an 
attack should be expected.
    Kansi's January 25, 1993, attack on CIA employees appears to be 
more a product of his own dementia than an organized conspiracy. 
Although Kansi warned during his subsequent trial that ``his people'' 
would retaliate for his sentencing, this warning may again represent 
more his delusional thought processes than a serious threat referring 
to a concerted effort to average his sentence. The FBI has not detected 
a support network within the United States that appears prepared or 
willing to retaliate for Kansi's sentencing. Kansi's own family has 
publicly distanced itself from his actions. The possibility of 
retaliation within the United States would most likely stem from the 
same type of rogue, lone attacker represented by Kansi himself. An 
attack by such an individual would be difficult to detect beforehand, 
or to prevent.
    The killing of four American businessmen in Karachi, Pakistan, 36 
hours after Kansi's conviction raised speculation that the killings 
were carried out in response to Kansi's conviction. However, there has 
been no indication that the killings in Karachi are related to Kansi in 
any way. To date, there have been no confirmed attacks against U.S. 
targets stemming from Kansi's conviction or sentencing. However, attack 
on ``soft'' U.S. targets abroad (business persons, tourists, 
nongovernmental facilities) could prove attractive to any individual or 
group seeking to avenge Kansi's sentence.
                           economic terrorism
    (9) Do you have any evidence that foreign governments, 
corporations, or individuals are targeting U.S. economic interests 
using technology (such as a virus, computer hacking, etc.)? Do you see 
this as a near-term threat, or more long-term?
    The FBI has, in numerous investigations, encountered evidence that 
foreign governments, corporations, and individuals have targeted U.S. 
economic interests using computer technology. Many of these 
investigations are still pending and some are classified, thus, 
detailed discussion is not possible in this format.
    A well-known example of this targeting is the Citibank 
investigation which revealed that individual Russian hackers had 
intruded into Citibank computers and attempt to divert over $10 million 
worth of electronic transactions. The FBI has pending investigations in 
which foreign corporations have, or have attempted to, obtain 
proprietary information from U.S. corporations using computer 
technology (either to access the information without authorization or 
to exceed an authorized level of access to the information).
    The FBI has an extensive economic counterintelligence program which 
has identified attempts by foreign governments and foreign government-
controlled entities to target U.S. economic interests. Many of these 
attempts now involve the use of computer technology either to obtain 
information from or about the U.S. targets, or as a means to facilitate 
more traditional espionage (e.g., to transmit large amounts of data 
abroad, to provide a secure means of communication).
    The threat, then, is present now, and is likely to increase in the 
long-term along with reliance on networked information systems. The 
FBI's outreach efforts for both economic counterintelligence and 
critical infrastructure protection purposes tend to suggest that there 
is significant amount of activity that is not reported by the victims 
or intended targets.
               terrorist's use of advanced infrastructure
    (10) Terrorists are making more use of advanced computer and 
telecommunications technology, their own communications and 
intelligence gathering, and establishing a worldwide network of 
contacts and support. Does this easy access to information, 
communication, and transportation make the job of intelligence 
gathering more difficult or does not provide opportunities which you 
can exploit? Are theresteps that we can take to deny terrorists the 
ease of movement and communication they now enjoy?
    Without question, the acquisition and use by terrorists of advanced 
technologies make the work of intelligence collection and operational 
countermeasures much more difficult. While a terrorist's uncritical 
reliance on new technologies may occasionally offer a spectacular 
opportunity for intelligence collection, such is the exception rather 
than the rule. The availability of strong encryption further 
complicates collection in these circumstances.
    From the FBI's perspective, the most effective steps to take here 
are those that enhance the FBI's ability to exploit collection 
opportunities and to monitor terrorist communications. An important 
initial step is to reinforce the FBI's technical resources, in terms of 
equipment, expert personnel, and trained agents. Given the rapid pace 
of technology development, it is essential that the FBI be able to stay 
abreast of the latest commercially available technologies. The Computer 
Investigations and Operations Section (CIOS) of the National 
Infrastructure Protection Center (NIPC) serves as the FBI's focal point 
for computer intrusion investigations. CIOS investigators and technical 
personnel currently support operations in other National Security 
Division components when computer technology issues arise. The 
technical expertise encompassed by the CIOS and other FBI components is 
subject to ever-increasing demands for criminal, counterterrorism, and 
counterintelligence assistance. Maintaining the appropriate level of 
expertise, retaining experienced personnel, and extending training to 
more counterterrorism agents are important steps in countering the 
broad spectrum of challenges posed by emerging technologies.
    It will also be important to ensure that the current legal 
authorities for FBI counterintelligence operations adequately 
correspond to the current technological environment. While Foreign 
intelligence Surveillance Act (FISA) authority applies to electronic 
communications, surveillance of the content of computer communications 
alone is not always sufficient to determine the path or true origin of 
the communication. ``Transactional'' or computer log data is often of 
critical significance. Unlike the legal authorities for criminal 
investigations, the counterintelligence authorities do not yet include 
mechanisms (short of full FISA authority) for obtaining this data. The 
Justice Department has proposed the creation of a counterintelligence 
``pen register'' mechanism to address this situation, and this proposal 
represents an important enhancement of our ability to deny terrorists 
the opportunities offered by new technology.
              threat of information warfare by terrorists
    (11) Our traditional definition of terrorism does not include such 
things as computer attacks intended to damage our telecommunications or 
transportation infrastructure. Are we prepared to deal with ``virtual 
terrorism?'' What steps do we need to take to focus Intelligence 
Community counterterrorism efforts on this new threat?
    The FBI's counterterrorism and infrastructure protection programs, 
computer attacks on critical infrastructures, such as 
telecommunications or transportation, are already considered weapons 
available to terrorists. In fact, terrorist groups have, in at least 
one incident recently made public, used a computer-based ``denial of 
service'' attack targeting the facilities of a foreign government. An 
effective response to this emerging threat depends on the rapid 
analysis and sharing of infrastructure information so that seemingly 
isolated computer intrusions can be recognized as coordinated attacks. 
The FBI's goal is to consolidate in the NIPC all relevant computer 
intrusion information, as well as all of the FBI's background 
information about the architecture and vulnerabilities of our nation's 
key infrastructures. The NIPC can then analyze information, determine 
the nature and scope of an attack, rapidly disseminate that information 
to FBI counterterrorism components (as well as the U.S. Intelligence 
Community [I.C.] and the Department of Defense) and if appropriate, 
issue public warnings to those at risk. Using NIPC analytical product, 
FBI counterterrorism components can craft an investigative response 
with the appropreations.''
    The Defense Department recently has sponsored information warfare 
exercises that featured computer attacks on critical infrastructures. 
The NIPC participated in these exercises, which incorporated 
representatives from the I.C., other government agencies, and the 
private sector. These exercises, as well as other discussions in the 
I.C., all identify rapid and effective information sharing as the key 
component of a successful defensive strategy. The NIPC is intended to 
serve as the focal point for this information sharing, which will be 
accomplished in a variety of ways. First, the NIPC will incorporate 
direct technical connectivity with relevant military and intelligence 
community components. Second, the NIPC staff will include a significant 
number of DOD and I.C. representatives who will be fully integrated 
into the NIPC and will facilitate rapid dissemination of information to 
their home agencies in accordance with legal requirements.
    Our defensive strategy against computer attacks also must 
incorporate the private sector owners and operators of the 
infrastructures. The FBI, through the NIPC's outreach programs and 
other initiatives, is seeking to open channels of communication with 
the private sector. The NIPC will ultimately incorporate private sector 
representatives on its staff and will generate analytical products 
tailored to the private sector's need for threat information and 
warnings.
      executive branch organization on the counterterrorism issue
    (12) How well is the Executive Branch organized to deal with 
counterterrorism? Is there room for improvement in the CIA-FBI 
relationship on counterterrorism matters? Should the FBI be given 
primacy over both domestic and foreign counterterrorism intelligence 
gathering?
    During the past three years, the U.S. Intelligence Community (I.C.) 
has significantly improved its information sharing capabilities. Much 
of this improvement stems from a profound shift in the organizational 
structure of the I.C. Two specific examples of this new approach--the 
DCI Counterterrorist Center (Central Intelligence Agency) and the FBI 
Counterterrorism Center--reflect this shift. Both centers integrate 
personnel from a variety of federal agencies into their daily 
operations. Currently, 18 federal agencies--including the CIA, the 
Department of Defense, and the U.S. Secret Service--maintain a regular 
presence in the FBI Counterterrorism Center. Likewise, the FBI has 
assigned senior-level officials to the DCI Counterterrorist Center. 
These exchanges--and the operational enhancements they have brought to 
the cooperative relationship of the two agencies--have helped the FBI 
and CIA move beyond the mutual distrust that sometimes marked their 
relationship in the past.
    This sense of cooperation extends to training as well. Since 1995, 
the FBI and CIA have participated in several joint training conferences 
around the country. In addition, the CIA now participates in 4 of the 
16 joint terrorism task forces operating in communities around the 
country. CIA representation to these task forces improves their ability 
to prevent acts of international terrorism from occurring in the United 
States.
    The FBI has been designated as the lead federal agency in the U.S. 
Government's response to terrorism, both within and outside U.S. 
borders. However, the FBI lacks the statutory mandate or the overseas 
presence to assume ``primacy'' in foreign intelligence gathering. Given 
the information sharing and integrated intelligence analysis that marks 
the U.S.I.C.'s response to terrorism, little would be gained from 
designating one agency as the primary foreign counterterrorism 
intelligence gathering arm of the U.S. Government. Agencies such as the 
CIA and the Defense Intelligence Agency (DIA) have developed effective 
means to monitor international terrorist threats. The coordinated 
effort now in place benefits from the individual expertise each agency 
brings to the government's intelligence gathering effort.
          counterintelligence threat to national laboratories
    (13) A September 1997 GAO report regarding DOE's security controls 
over foreign visitors to the National Laboratories noted that ``DOE's 
procedures for obtaining background checks and controlling the 
dissemination of sensitive information are not fully effective'' and 
that as a result, ``sensitive subjects may have been discussed with 
foreign nationals without DOE's knowledge and approval.'' In your 
opinion, how significant is the counterintelligence threat to DOE in 
general and the National Laboratories in particular? What is being done 
to rectify this problem?
    For reasons previously outlined to the Senate Select Committee on 
Intelligence (SSCI), and due to the sensitive nature of the material 
involved, the Commonwealth of Independent States (CIS) and Domestic 
Espionage Unit, Eurasian Section, National Security Division, is unable 
to respond to this question in the unclassified manner requested. The 
CIS and Domestic Espionage Unit can provide a classified statement to 
the SSCI if so requested.
                         information operations
    (16) The Defense Science Board and the President's Commission on 
Critical Infrastructure Protection both issued reports during 1997 
which identified our nation's vulnerability to both physical and 
computer attacks on our nation's information infrastructure. These 
reports noted that such an attack could come from a foreign government, 
a non-state actor, a criminal organization, or an individual hacker. 
Howsignificant is the threat to our critical information infrastructure 
in the short-run? In the long-run? How do you judge the Intelligence 
Community's ability to collect intelligence on this threat?
    As discussed in the responses to questions 9 and 11, the FBI 
regards the threat to the critical infrastructures as real and already 
present. The significance of the threat in the long-run depends, to a 
great degree, on the extent to which the private sector owners and 
operators of critical infrastructures recognize and respond to the 
threat. In many actual intrusions investigated by the FBI, as well as 
in certain exercise scenarios, intruders were able to compromise 
critical systems by exploiting widely known (and easily removable) 
vulnerabilities. As awareness of the threat increases, and relevant 
technical information about the nature of specific threats is 
disseminated, the owners of critical systems should be able to reduce 
the number of real vulnerabilities. Likewise, the deterrent effect of 
successful investigations or other responses to infrastructure attacks 
should begin to be evident.
    However, even if these trends develop successfully, the size and 
complexity of the critical infrastructures alone suggest that the 
threat will persist. Gathering intelligence about threats posed by 
foreign governments and terrorist groups operating abroad is the 
responsibility of the foreign intelligence community and will depend on 
both traditional intelligence gathering capabilities and technical 
capabilities designed to address the use of newer technologies. 
Gathering intelligence on individual actors or criminal organizations 
is often more complex, and depends on the integration of law 
enforcement and infrastructure protection efforts within U.S. 
territory. The FBI envisions the NIPC as the focal point for the 
interaction of law enforcement and infrastructure protection efforts in 
relation to this threat. Through the NIPC, and in compliance with 
applicable legal restrictions, analytical product derived from this 
information can be generated and disseminated through the I.C. to 
provide a current and full-spectrum portrayal of the threat to our 
infrastructures.
    All of these efforts assume a great deal: the creation of an 
effective information sharing protocol for the NIPC, the cooperation of 
the private sector and other government entities, and a successful 
campaign of outreach and education to infrastructure owners. However, 
this is the FBI's strategy for addressing the threat, and important 
steps have already been taken to implement these plans.
                                 ______
                                 
                               Defense Intelligence Agency,
                                     Washington, DC, June 12, 1998.
To: Don Mitchell,
Professional Staff Member,
Senate Select Committee on Intelligence,
Washington, DC.

Subject: Transmittal of the Defense Intelligence Agency's (DIA's) 
        Response to Questions For The Record January 1998 Threat 
        Hearing.

    1. This is in response to your 12 March letter to LTG Patrick 
Hughes, USA, Director of the Defense Intelligence Agency in which you 
provided 29 Questions For the Record (QFRs) which resulted from the 28 
January Select Committee on Intelligence Hearing on the Worldwide 
Threat.
    2. The enclosures provide DIA's response to the questions posed. 
The unclassified response to topics 12, 19, 20 and 29 could not be 
provided due to the sensitivity and nature of the subject matter. We 
have provided classified submissions for these four QFRs.
    3. If we can be of any further assistance in this or any related 
matter, please feel free to call the Congressional Liaison staff.
            Sincerely,
                                           E. John Hutzell,
                                 Acting Chief, Legislative Liaison.
    Enclosures.
                topic (1): russian military capabilities
    Question a. In your prepared testimony, you state that ``[t]here is 
little chance that Russia will reemerge as a global military peer 
competitor to the U.S. over the next two decades. During this period, 
Russia's strategic nuclear forces will remain the backbone of Moscow's 
military might, preserving Russia's perception of great power status 
and protecting its vital security interests.'' Does the fact that 
Russia's strategic nuclear forces ``will remain the backbone of 
Moscow's military might'' for the next 20 years raise the likelihood 
that Russia might be more inclined to use nuclear weapons if it feels 
that its interests are being threatened?
    Answer. While Russian strategic nuclear forces ``will remain the 
backbone of Moscow's military might'' for the next 20 years, their 
views on national security indicate that they perceive no major 
external threat for the foreseeable future.
    Question b. What vital interests would Moscow perceive beyond its 
periphery that would warrant its commitment of military force, 
including the treat or use of nuclear weapons?
    Answer. Beyond a direct threat to the Russian homeland, some 
writings have indicated that Russia would consider a threat to ethnic 
Russians residing in other states of the former Soviet Union as 
warranting commitment of military force. Large numbers of ethnic 
Russians remain, for example, in the Baltics states and in Kazakstan. 
However, Russia's ability to project sustained, effective conventional 
power remains limited. Moreover, it is highly unlikely that Russia 
would use or even threaten to use nuclear weapons as a means to protect 
ethnic Russians in other countries.
    Question c. If present trends continue, what will be the Russian 
military's capability to conduct operations 5 years from now? Do these 
trends indicate the possibility that Russia may soon have insufficient 
military force to retain order within Russia?
    Answer. The Russian military's fate hinges on the policy priorities 
and leadership capabilities of the man who replaces Yeltsin as well as 
on the condition of the economy. The responsibility for the maintenance 
of internal order, however, rests principally with the Ministry of 
Internal Affairs and other security organizations, although ultimately 
backed up by the Armed Forces. The forces of the other power ministries 
have enjoyed general priority over the MOD for funding, conscript, and 
military equipment.
    Question d. What is your assessment of the likelihood that military 
reform will succeed in Russia?
    Answer. The military reform process--intended to transform Russia's 
top-heavy military into an affordable force capable of meeting the 
threats facing Russia--remains stalled. A pattern of neglect and poor 
management of hard decisions on fundamental issues concerning the 
financing and implementation of reform have been the greatest stumbling 
blocks. Due to this inadequate leadership, the Armed Forces have been 
left on their own to struggle with ad hoc survival mechanisms. Only 
systematic control of budgetary resources and clear efforts at 
reduction and reorganization will improve the success of reform. This 
will depend largely on who succeeds Yelstin.
         topic (2): russia's ballistic missile defense program
    Question. Please describe the nature and extent of Russia's 
ballistic missile defense effort. Where do you see Russia's ballistic 
missile defense program heading over the course of the next 15 years?
    Answer. It is expected that only a few significant developments 
will be made in Russia's ballistic missile defense effort over this 
time period. They are developing both a new ICBM and SLBM within the 
limitations of extant arms control treaties. Revenue from the export of 
arms has helped Russia's defense programs to some extent. The latter 
includes R&B and modernization efforts for strategic weapons programs. 
As previously indicated, this is also consistent with the reliance on 
strategic systems for Russian security interests.
         topic (3): russia's safeguarding of nuclear materials
    Question. What is the Intelligence Community's assessment of the 
adequacy of Russia's safeguard of nuclear weapons and fissile material?
    Answer. The Russians have been consolidating some nuclear weapons 
reducing the threat somewhat, however, the deplorable financial 
situation has proven stressful for the Ministry of Defense and equally 
so for the nuclear security system. Undoubtedly, risks will endure.
    Question a. What about missile systems, components, and technology? 
What is the status of Russian nuclear command and control systems?
    Answer. Russia became a member of the Missile Technology Control 
Regime in 1995. However, activities of Russian defense firms remain 
problematic. The central government has also shown indications that it 
lacks total control of some of its personnel and resources.
    Russia currently has a safe and reliable system for controlling its 
strategic nuclear forces. However, many of the components that make up 
the infrastructure of Russia's strategic command and control system are 
aging.
    Question b. Has there been any change in the last year regarding 
Russian capabilities and programs in chemical or biological weapons? 
Does Russia persist in unacknowledged CW programs and illegal BW 
programs?
    Answer. Key components of the former Soviet biological warfare (BW) 
program remain largely intact and may support a possible future 
mobilization capability for the production of biological agents and 
delivery systems. Moreover, work outside the scope of legitimate 
biological defense activity may be occurring now at selected facilities 
within Russia. Such activity, if offensive in nature, would contravene 
the Biological and Toxin Weapons Convention of 1972, to which the 
former Soviet government is a signatory. It would also contradict 
statements by top Russian political leaders that offensive activity has 
ceased.
     topic (4): transfer of technology from the former soviet union
    Question. What general trends has the Intelligence Community 
detected in the flow of scientists, technology, and unconventional 
military equipment to other nations? What evidence have you detected 
that Soviet nuclear materials, BW, CW or ballistic missile-related 
materials or technology have found their way to the international black 
market?
    Answer. Russia continues to conduct some foreign sales related to 
NBC programs as well as missile technologies. It is unclear whether all 
or any of these marketing efforts are conducted officially or on the 
black market. It is likely that related training and technology support 
are inclusive to these same efforts. Russia does continue cooperation 
with China in the field of nuclear related technologies. This is 
worrisome since China also has similar market ties to Iran and 
Pakistan. Russian defense firms reportedly have assisted missile 
programs in South Asia, Middle East, and China. The ongoing poor 
economic conditions in Russia will continue to provide an environment 
for both sanctioned and illicit arms sales.
                  topic (5): china's military strategy
    Question a. In your prepared testimony, you state that ``China 
military strategy will continue to emphasize the development of a 
survivable nuclear retaliatory capability as a deterrent against the 
use of nuclear weapons by the United States, Russia or India. There is 
no indication that China will field the much larger number of missiles 
necessary to shift from a minimalist, retaliation strategy to a first-
strike strategy.'' How confident are you of this assessment? What 
trends do you perceive in the quantity and quality of Chinese ballistic 
missiles capable of reaching the U.S.? Are these views shared by the 
remainder of the Intelligence Community?
    Answer. There is a high confidence the Chinese will not produce 
more than the required ICBMs and the additional nuclear warheads for 
them over the ten years that would be needed for retaliatory strikes. 
China's limited nuclear deterrent has been, and will remain, a crucial 
component of its military strength and international prestige and is 
seen as contributing to Beijing's ability to maintain an independent 
foreign policy. China's defense expenditures are not expected to 
increase significantly for nuclear defense modernization. The 
Intelligence Community is in general agreement on these views.
    Question b. Do you believe that China views its nuclear forces as a 
deterrent to other non-nuclear, military or political actions by the 
U.S. or other countries?
    Answer. China considers the United States its principal military 
competitor in Asia. China has put increased emphasis on procuring 
nuclear forces designed to deter U.S. and the military involvement of 
other nations in Asian affairs.
                      topic (6): china and taiwan
    Question. In your prepared testimony, you state that ``(t)he Taiwan 
issue remains the major potential flashpoint. Beijing believes U.S. 
policy encourages the independence movement of Taiwan, deliberately or 
inadvertently.'' Please elaborate. What is the potential for armed 
conflict between China and Taiwan? What would be the likely outcome of 
such a conflict? Has the threat of confrontation between the PRC and 
Taiwan replaced North Korea as the number one security issue in Asia?
    Answer. From China's perspective, Taiwan is the single most 
important issue affecting Sino-American relations. Miscalculations or 
provocations generally run at a higher risk when two perspectives 
diverge as in the case of China and the U.S. on the issue of Taiwan. 
Both Taiwan and China see advantages in avoiding confrontation in 
achieving their long-term goals. Though China continues to modernize 
its forces in part to present a credible threat against Taiwan, it has 
not developed a significant amphibious capability that would be 
required for an invasion of ``Formosa''. North Korea remains the number 
one security issue in Asia.
                     topic (7): india and pakistan
    Question a. In your prepared testimony, you state that ``India and 
Pakistan both continue to view their security relationship in zero-sum 
terms, possess sufficient material to assemble a limited number of 
nuclear weapons, have short range ballistic missiles, and maintain 
large standing forces in close proximity across a tense line of 
control. In short, although the prospect for a major war between India 
and Pakistan is low at present, we remain concerned about the 
potential, particularly over the near term for one of their occasional 
military clashes to escalate into a wider conflict. Over the long term, 
however, the threat of large scale war should diminish.'' Why do you 
consider a large-scale conflict between India and Pakistan likelier in 
the short term than in the long term? Is this assessment shared by 
other components of the Intelligence Community?
    Answer. The risk of a major war between India and Pakistan, while 
still low, has increased recently as a result of several factors: the 
March election of the Hindu nationalist government in India; Pakistan's 
provocative Ghauri missile launch in early 1998; and both the Indian 
and Pakistani nuclear tests. Additional nuclear tests and missile tests 
by one or both countries is likely, which would further inflame 
tensions. Moreover, tensions over the disputed Kashmir region will 
continue to add friction to the contentious relationship. Despite the 
level of tensions, neither country wants war. Consequently, any 
conflict is likely to be the result of escalation or miscalculation and 
that is where our concern rests.
    Major acts of terrorism occur in both countries, escalate 
periodically and both sides are prone to holding the other responsible. 
Although such acts will continue to contribute toward tension between 
the two states, it is unlikely that individual acts of terrorism will 
lead to war between Pakistan and India. However, a dramatic terrorist 
incident, which one side ascribes to the other could cause an 
escalation in tension and subsequent exchanges along the border, in 
turn inadvertently leading to war.
             topic (8): north korea as a continuing threat
    Question a. In your prepared testimony, you state that ``some 
significant--perhaps violent--change is likely in the next five years. 
There are four basic alternatives: leadership change, government 
collapse, negotiated accommodation with the South, or major economic 
reform.'' In your opinion, what is the likeliest scenario? Why?
    Answer. Of the four alternatives, we believe the most likely 
scenario is leadership change and continue to assess that Pyongyang is 
least likely to attempt major economic reform or a negotiated 
accommodation with the South. Pyongyang's response to economic crisis 
has been one of retrenchment and ideological exhortation, coupled with 
rejection of economic reform which it fears would undermine both regime 
legitimacy and control and hasten the demise of the current government.
    Question b. You also stated in your testimony that ``over the next 
several years Pyongyang's WMD, missile, artillery, and special 
operations force capabilities will likely improve, despite the dire 
economic situation.'' How do you account for this?
    Answer. There is no doubt that North Korea continues to emphasize 
these capabilities. WMD, missile, and artillery systems serve not only 
as a deterrent. North Korea is always concerned with its geo-strategic 
position particularly as a small country surrounded by powerful 
neighbors. It likely sees these systems as a cost effective means to 
maintain a credible military threat to control or destroy allied 
defenses before full U.S. force engagement.
                   topic (9): changes in south korea
    Question. Talks on peace on the Korean peninsula involving North 
and South Korea, China and the U.S., began in Geneva last December. 
Long time opposition leader Kim Dae Jung won last December's 
presidential election in South Korea. What do these developments bode 
for change in South Korea as well as prospects for normalized relations 
between or reunification of North and South Korea?
    Answer. This is basically a political question on which State has 
the lead and is best qualified to comment. That said, we believe 
prospects for normalized relations between North and South Korea depend 
on North Korea seeking compromise and reconciliation rather than 
confrontation. There is some ground to speculate that North Korea may 
move gradually in that direction over the next few years--the Four-
Party Talks being one example suggesting that change may be possible--
but no solid evidence yet of any change in Pyongyang's intentions.
            topic (10): support for iraq in the middle east
    Question. Currently, how much support exists for Saddam in the 
region? If military action were taken against Iraq, what would be the 
likely reaction of other nations in the region? What, if any, 
governments in the Middle East would be publicly supportive of military 
action against Iraq?
    Answer. There is very little support for Saddam Hussein or the 
Iraqi regime in Middle Eastern ruling circles. Any reaction to military 
action against Iraq would be greatly dependent upon the conditions that 
could precipitate such action. Arab leaders remain concerned about the 
possible domestic and regional repercussions of such an attack. A few 
states could be expected to publicly support military action given that 
such actions followed full UNSC support.
             topic (11): iraq's weapons of mass destruction
    Question. What is the current status of Iraq's BW, CW, nuclear 
weapon, and missile programs? How much activity has there been in each 
of these areas since the conclusion of the Persian Gulf War? Do we have 
any evidence that the Iraqi regime has tested CW or BW agents on humans 
since the Persian Gulf War?
    Answer. Based on efforts conducted over the past few years in this 
venue, Iraq has demonstrated a commitment to rebuilding and expanding 
their WMD programs. The Iraqi nuclear program sustained considerable 
damage during the Gulf War and lost most of its infrastructure. 
However, they do retain critical knowledge gleaned by Iraqi scientists 
and technicians. Iraq maintains a limited ability to revitalize its 
chemical weapons program which also suffered during the Gulf War as 
well as through the subsequent UNSC inspections. Though it is unclear, 
the Iraqis may also retain a limited biological capability. The 
difficulty with this field of weaponry is that much of it is dual-use 
and can be found in Universities and similar commercial research labs. 
Iraq continues to devote limited resources and funding to overall 
development of these deadly programs. It is certain that if sanctions 
are lifted, Iraq will proceed expeditiously with its NBC programs as 
well as the corresponding delivery systems.
              topic (13): the israeli presence in lebanon
    Question a. Comment on the losses the Israelis have suffered in 
Lebanon in the past year, the impact of those losses on Israeli public 
opinion.
    Answer. Israeli public opinion polls consistently highlight a 
majority of support for occupying the security zone in southern Lebanon 
until security requirements for northern Israel are met despite losses.
    Question b. What is the likelihood that Israel will initiate a 
unilateral withdrawal from southern Lebanon?
    Answer. It is reasonable to assume that as long as the Hizballah 
continue to operate in southern Lebanon, Israel will more than likely 
seek to maintain some sort of presence.
    Question c. Do the recent losses indicate that the Hizballah is 
becoming a more effective force?
    Answer. IDF losses in 1997 more than likely resulted from a variety 
of factors.
    Question d. Comment on the military effectiveness of Israel's 
allies, the Southern Lebanon Army (SLA).
    Answer. The SLA is of limited strength and consists of 
approximately 2 to 3 thousand personnel. They operate primarily with 
small arms, however, they do possess 20 to 40 pieces of armored 
equipment.
    Question e. Describe the current military cooperation between the 
Israeli Defense Force and the SLA.
    Answer. The IDF continues to train, equip, and support the SLA.
                           topic (14): syria
    Question a. Assess the current military strategic threat Syria 
poses for Israel and Syrian military capabilities in general.
    Answer. Syrian military capabilities are severely limited and pale 
in comparison to Israeli capabilities. Severe deficiencies in 
maintenance skills, spare parts reserves, and transportation resources 
limit Syrian sustainment capabilities. Syria recognizes its 
deficiencies and has stressed the development of ballistic missiles and 
chemical programs as a deterrent to Israeli superiority.
    Question b. What is the possibility Syria will exercise the 
military option to regain the Golan?
    Answer. Syria is well aware of Israel's military superiority and 
the high military and political risks associated with an attempted 
land-grab on the Golan. As always, the chance of miscalculation remains 
a factor in such contentious zones.
    Question c. How do you interpret the Syrian military movement 
toward the Golan within the last two years?
    Answer. Syria retains the objective of regaining the Golan Heights 
but as previously mentioned it recognizes its military shortfalls.
              topic (15): libya's chemical weapons program
    Question. What is the status of Libya's CW activities? What is the 
status of their overall CW program? Is Libya making progress toward 
obtaining any other weapons of mass destruction or their systems?
    Answer. Libya maintains a heavy reliance on external assistance for 
its chemical weapons program given that it is deficient with its 
indigenous capabilities. Still, Libya has one of the most prominent 
programs in North Africa and the Middle East. Libya lacks adequate 
delivery systems for its chemical weapons. Nevertheless, the threat 
must be considered. Both the Libyan nuclear and biological programs are 
limited by a small technical base as well as very little outside 
assistance. As an added shortfall, Libya has not proceeded very far in 
regards to its ballistic missile program.
                topic (16): cuban military capabilities
    Question a. Does Cuba in any way pose a strategic threat to the 
United States at this time? Will Cuba pose a strategic threat to the 
U.S. at any time in the next two to five years? What, if anything, 
might change that assessment?
    Answer. Cuba poses a negligible threat to the U.S. and other 
surrounding countries. Cuba's weak economy and lack of foreign military 
benefactors will probably continue for the foreseeable future and 
subsequently prevent the country from significantly improving its 
fighting forces.
    Question b. (U) Is Cuba currently attempting to undermine 
democratically-elected governments in the Western Hemisphere? What 
support, if any, is it providing opposition movements in Colombia and 
Peru?
    Answer. Throughout the 1990s, Cuba has focused on improving 
relations with Latin American governments.
               topic (17): cuba and narcotics trafficking
    Question a. Are Cuban Government officials implicated in narcotics 
trafficking?
    Answer. There is no significant information to suggest the Cuban 
government is involved in narcotics trafficking. Allegations that Fidel 
Castro and his brother Raul are involved in narcotics trafficking have 
been repeatedly denied by the Government of Cuba (GOC). Since the 
celebrated trial and execution of top military and Interior Ministry 
officials on drug smuggling charges in 1989, the GOC has refuted any 
existence of narcotics-related corruption by government officials. The 
US Attorney's Office in Miami drafted a proposed indictment in 1993 
implicating Raul Castro, Manuel Pinerio and 13 other Cuban officials 
for trafficking narcotics through Cuba. The case failed to proceed to 
the indictment stage because US officials determined that there was not 
enough evidence to warrant prosecution.
    In July 1996, a press report identified Cuban Dictator Castro as 
being personally involved in cocaine trafficking into the United 
States. The newspaper also alleged that drug dealers busted with 
thousands of pounds of cocaine from Cuba not only say that the cocaine 
was brought into the United States with Castro's coordination, but also 
that there are photos of Castro with the traffickers and video of 
Castro assisted drug operations. Another report from the same press 
source claimed that United States drug enforcement agencies suspected 
the drugs were offloaded inside Cuban territory from a Colombian 
freighter and the agency is investigating a photo which documents a 
meeting between Castro and one of the drug smugglers arrested. The 
veracity of this report has not been confirmed and a DEA analyst 
indicated that the agency has no reporting to support these 
allegations.
    Question b. To what extent are narcotraffickers overflying Cuban 
airspace to bring drugs into the U.S.?
    Answer. Drug traffickers originating from Colombia and Jamaica 
routinely exploit Cuba's airspace for transit of narcotics to the 
United States.
    Question c. Do these overflights require Cuban government 
complicity of any kind?
    Answer. Currently, there is no evidence supporting Cuban complicity 
in drug trafficking overflights.
                topic (18): trends in illegal narcotics
    Question. In your prepared testimony, you state that ``illicit 
synthetic drug production in urban areas is a significant threat.'' 
Please elaborate. Have we detected any change in the worldwide supply 
or demand for illegal drugs? Are our efforts having any effect on the 
drug trafficking organizations?
    Answer. The Foreign Intelligence Community defers to the U.S. 
domestic Law Enforcement Agencies to address the threat posed by 
illicit synthetic drug production in domestic urban areas.
    The Foreign Intelligence Community does not address the question of 
the demand for illicit drugs in the United States. That information is 
maintained by U.S. domestic Law Enforcement Agencies, as are the 
available details on demand elsewhere in the world. In terms of any 
changes in the supply of drugs, there are periodic shifts/ fluctuations 
in the availability of both heroin and cocaine, based on such elements 
as counterdrug operational successes, adverse weather in cultivation 
areas, blight or other crop diseases, etc. However, none of these 
elements has had a crippling impact on the availability of those drugs 
in the United States. The supply continues to be more than adequate to 
meet the demand.
    As previously noted, counterdrug efforts have had some impact on 
the regional availability of drugs in the United States. Such successes 
primarily have been those making it more costly or inconvenient for 
drug traffickers to conduct business.
    Various key cocaine and heroin traffickers have been arrested or 
imprisoned in recent years, disrupting operations and spawning 
infighting among those seeking to assume power.
    Operational successes have disrupted some traditional routes used 
by traffickers to move drugs in and from South America, causing them to 
increase use of alternative means of moving their products.
    Some successes against the traffickers' financial assets (cash 
flow, properties, etc.) have raised the cost of doing business both in 
the United States and elsewhere.
    Operational successes disrupting the supply of essential chemicals 
have adversely affected the traffickers' production efforts.
    Seizures of drug shipments (especially cocaine) have increased 
traffickers' costs, possibly necessitating increased production to meet 
demand.
    These operations have not yet significantly reduced the supply of 
heroin and cocaine throughout the United States. However, if they can 
be sustained in the source and transit zones, it is much more likely 
that counterdrug operations ultimately will reduce the supply of drugs 
in the United States.
              topic (21): the chemical weapons convention
    Question a. Over one hundred of the 168 signatories have ratified 
the Chemical Weapons Convention (CWC). (Last November, both Iran and 
Russia completed their CWC ratification.) Do you have any intelligence 
that any of the signatories of the CWC have engaged in activities that 
raise compliance concerns?
    Answer. Due to ongoing concern about worldwide chemical warfare 
(CW)-related activities, the Intelligence Community (IC) monitors the 
spectrum of activities related to the CW issue.
    Question b. The Intelligence Community has conceded that its 
ability to monitor compliance with the CWC is limited. Has the U.S. 
monitoring capability improved since U.S. ratification of the CWC?
    Answer. The U.S. continues to seek ways to enhance its ability to 
monitor CW programs and related proliferation activities through 
enhancements in technology and personnel resources.
             topic (22): north korea's taepo dong missiles
    Question. The North Korea Taepo Dong II missile (which is under 
development) will have an estimated range of 4,000 to 6,000 kilometers, 
and therefore qualifies as an intercontinental ballistic missile 
(ICBM). How confident are you in these range estimates? What U.S. 
states or territories could the Taepo Dong hit? How soon could the 
Taepo Dong I and Taepo Dong II become operational, and how firm is that 
estimate? How has this assessment changed in the last year?
    Answer. North Korea lacks test experience on the Taepo Dong II and 
the potential range remains as the theoretical projection. Potentially, 
the Taepo Dong II system could conceivably provide Pyongyang with the 
ability to reach Guam and parts of Alaska, but not Hawaii. Both the 
Taepo Dong I and II are still in the early stages of development and it 
could be sometime before actual flight testing begins and much depends 
on the availability of resources.
          topic (23): the proliferation of ballistic missiles
    Question. In your prepared testimony, you state that ``we are 
particularly concerned about two trends: the significant increase we 
expect over the next two decades in the numbers of ballistic missiles 
with ranges between 300 and 1500 kilometers; the potential for land 
attack cruise missiles to be more widely proliferated.'' Please 
elaborate. What countries' ballistic missile and cruise missile 
programs are you most concerned about?
    Answer. With regard to ballistic missiles, the developing programs 
in the Middle East and East Asia are the most challenging to the 
strategic and national security interests of the United States. Of 
particular concern are the rogue states of Iran, Iraq, and Libya. In 
South Asia, developments in missile capabilities have taken on greater 
significance with both the Indian and Pakistani nuclear tests. The 
success of the North Korean missile programs and any subsequent 
proliferation as well as the status of Russian programs are and will 
remain chief concerns.
    With regard to the land attack cruise missile threat, proliferation 
will proceed via direct foreign military sales of complete systems, as 
well as through indigenous developments. Both Russia and China have 
been prime developers as well as exporters of land attack cruises.
          topic (24): threat to u.s. deployed forces in bosnia
    Question a. What are the prospects and key actions required for 
establishing long-term stability in Bosnia? While the goal of the 
international military presence is to make it possible for the three 
factions to coexist peacefully, a threat against foreign forces 
remains. What is the threat facing US Forces deployed in Bosnia?
    Answer. To establish long-term stability in Bosnia, the economy 
must be reconstructed, a legitimate, representative, political 
leadership must be established; rule of law must be established and 
enforced, free and open media must exist; and finally, the armed forces 
must be integrated or kept in military balance. All of the above will 
aid in reducing the mistrust and ethnic animosities all sides harbor. 
Nonetheless, it is possible that it will be at least a generation 
before Bosniacs, Bosnian Croats, and Bosnian Serbs can peacefully 
coexist.
    Creating a functional society will require a long-term commitment 
by a united international community. As long as key western nations 
pursue a focused and coordinated approach in implementing the civilian 
aspects of Dayton supported by a credible military force, the prospects 
for success are greatly improved. Anything short of such an effort will 
likely result in failure.
    All three of the entity armed factions have resisted full 
implementation of the Dayton Accords at one time or another. Each 
ethnic group will only cooperate as long as its perceived, long-term 
interests are not forfeited or marginalized. Although the civilian 
aspects of Dayton are lagging in their implementation, progress has 
been made. Such progress has been achieved by holding all parties' 
political leaders accountable for their actions.
    The threat facing the forces in Bosnia remains low to medium. When 
SFOR simply conducts its daily mission, the threats facing SFOR are 
low. However, when SFOR engages in other actions such as seizing 
communications towers or arresting war criminals, then the threat 
increases temporarily, albeit not significantly. Recent events have 
shown that low level violence initiated primarily by civilians, has 
followed such SFOR actions. The threat could possibly increase and 
elicit a stronger response if SFOR were to arrest more high-profile war 
criminals. However, the longer Bosnia remains under international 
supervision, the less it appears that such a move as the arrest of war 
criminals will elicit a violent response.
    The threat from the entity armed forces remains low. SFOR has taken 
several steps such as monitoring all armies, permitting the entities to 
train only with SFOR approval, and keeping all equipment in cantonment 
sites, which has significantly reduced this threat. None of the 
factions will risk taking any kind of overt military action against 
SFOR. The Federation Army is receiving training and equipment from the 
Train and Equip program which significantly modifies its attitudes and 
behavior towards SFOR. The Bosnian Serb Army, which no longer enjoys an 
overwhelming superiority in heavy weapons, poses very little threat to 
SFOR as it is hampered by its own internal problems such as 
insufficient funds for training, equipment modernization, maintenance, 
and even pay and salaries.
    Question b. What are the shortfalls in Intelligence Community 
support to Bosnia operations and what is being done to rectify these 
problem areas?
    Answer. The Intelligence Community conducts a constant effort to 
explore new or modified ways to best support operational forces in 
Bosnia all in an equal attempt to avoid shortfalls.
    Question c. In recent months, SFOR troops (including U.S. soldiers) 
have acted in support of Republika Srpska President Biljana Plavsic by 
seizing radio and television transmitters, police stations and other 
government installations controlled by her hard-line opponents. Does 
the participation of U.S. troops in such operations expose them to 
increase risk of attack from hard-line supporters? Would hard-line 
response be limited to stone-throwing civilian mobs, or could it 
escalate into sniper attacks and other forms of armed conflict?
    Answer. US forces are always at some level of risk and this can 
recede or escalate dependent on misperceptions or miscalculations of 
the indigenous factions.
    (Note: Original request from SSCI did not contain Question d, 
Question e, or Question h)
    Question f. Would more active participation by SFOR in civil 
implementation tasks such as refugee resettlement increase the risk to 
U.S. forces?
    Participating in refugee resettlement, freedom of movement, and 
other civilian programs may expose U.S. forces to increased risk. The 
international Community has proclaimed 1998 as the year of refugee 
returns and it has begun to focus on moving people back to areas where 
they are ethnically in the minority. Although the factions seem to have 
accepted the increased role of the international community in advancing 
the Dayton process return of refugees and displaced persons to minority 
areas is likely to spawn incidents of local resistance. This resistance 
has in the past and will likely continue to turn violent and draw SFOR 
in to keep order. Refugees could also become again the pawns of 
political disputes, as factions use them to pursue their political and 
territorial agendas. The threat to SFOR could further grow should it 
become involved in dealing with organized crime and corruption. The 
criminal elements in Bosnian society are prone to violence and possess 
the capability and determination to use it if they feel threatened.
    Question g. What is the current status of efforts to remove land 
mines in Bosnia? Do land mines still pose a significant threat to U.S. 
troops in Bosnia?
    Answer. This threat in the region of the former Republic of 
Yugoslavia (FRY) is pervasive and the international community continues 
efforts to locate and destroy these landmines. For the 4.5 years 
between mid-1991 and the end of 1995, minelaying has been ongoing, 
encompassing every imaginable method ranging from well planned and 
emplaced, marked and recorded minefields to simple hand scattering of 
antipersonnel (AP) mines. Additionally, sophisticated minelaying 
techniques have evolved that enhance the obstacle while protecting the 
mines themselves. The prevalence of low-metallic-content, difficult-to-
detect landmines requires heightened individual soldier skills, 
particularly in the area of mine detection.
    A serious threat from booby traps also exists. From the onset, the 
former Yugoslav Army was extremely well equipped with mines, fuzes, 
special booby trap devices, and explosives. The breakdown of natural 
authority, open displays of ethnic hatred, time, and availability of 
these devices has fostered a willingness to booby trap mines, 
equipment, facilities, and buildings. Any heightened danger from booby 
trapped mines is fully addressed by the combat engineer doctrine of 
blowing mines in place.
    The landmine situation faced by Bosnia is among the worst in the 
world; only Afghanistan, Cambodia, and Angola have a clearly more 
daunting problem. The mined area of Bosnia and Herzegovina is 
approximately, 8,400 square kilometers. There are 18,086 known mine 
fields, containing an estimated total of 246,262 anti-personnel and 
49,507 anti-tank mines. While our information is not complete, it is 
estimated that there may be between 600,000 and 1,000,000 landmines in 
country (a lower figure than the 1.7 million previously estimated).
    A few germane points to consider about the landmine problem in 
Bosnia include the following:
    The FRY was a major producer of landmines.
    The vast majority of mines found in Bosnia were manufactured by the 
FRY.
    Many of the AP and AT mines are within the category of low-
metallic-content, difficult-to-detect mines.
    All factions conducted mine-laying (including some of the UNPROFOR 
peacekeeping forces).
    More than 17,000 minefields have been identified with the FRY.
    Most minefields are small, point minefields located at once 
important checkpoints strategic locations, etc.
    Multiple belt, extensive mine obstacles have been encountered.
    Most main routes are safe.
    Shoulders, bypass routes, and unapproved roads remain suspect.
    UNPROFOR and IFOR/SFOR have operated successfully in the region 
despite the prevasiveness of the mine threat. Random and poorly marked 
often describe the minefields.
    Question i. Are you satisfied that the U.S. has sufficient HUMINT 
assets in Bosnia to provide early warning of possible threats to U.S. 
Force?
    Answer. The continued U.S. commitment to Bosnia forces us to 
constantly evaluate the intelligence assets in country.
    Question j. How do you determine the extent of personnel required 
for HUMINT collection operations for force protection.
    Answer. DIA provides resources but how other units are sized is 
beyond our ken.
                       topic (25): nato expansion
    Question. What are the risks, if any, to US intelligence personnel 
and the intelligence community in general, in allowing Poland, the 
Czech Republic, and Hungary to join NATO?
    Answer. As with any new military venture, there is a certain amount 
of risk involved. Poland, the Czech Republic, and Hungary are working 
hard to ensure compliance with NATO standards across the spectrum of 
military cooperation and operations.
                topic (26): the threat posed by disease
    Question. To what extent has HIV had an impact on the health and 
economies of foreign countries? How has HIV impacted foreign 
militaries?
    Answer. The HIV pandemic is worse than previously estimated by 
World Health Organization and the United Nations. This fact was 
verified last November when the UN Program on HIV/AIDS revised their 
estimate of worldwide HIV infections upward to 30 million at the end of 
1997; a 20 percent increase over their previous assessments.
    As HIV infections develop in to AIDS cases, health systems will be 
challenged to accommodate the cost of treating AIDS patients or to 
develop alternative care schemes. In many underdeveloped countries, 
AIDS treatment is likely to be reserved for leaders and those who can 
afford costly pharmaceutical regimens. Developed countries will be 
equipped to handle the cost of medications for a large infected 
population, and have the health care structure to support and monitor 
patients for compliance with treatments regimens. The problem will be 
most acute in countries that are on the cusp of developed status, or 
where the expectation of high-quality health care does not easily 
permit diverting patients from traditional inpatient care, such as in 
South Africa.
    HIV infections, like other medical problems, have the ability of 
significantly taxing health infrastructures depending on their 
severity. This can be problematic in developing regions such as Sub 
Saharan Africa where limited resources and facilities tend to further 
exacerbate the difficulties.
    HIV infection rates remain highest in Africa's militaries and to a 
lesser extend those of Southeast Asia. Because of the deplorable state 
of the economy in Russia and the Ukraine, necessary funds to properly 
maintain medical facilities and resources has dropped placing the armed 
forces of these countries at a greater health risk.
    By itself, being infected by HIV does not affect the performance of 
soldiers or their units. Only when HIV-infected soldiers become sick 
does their performance become impaired and their unit's capabilities 
degrade. The impact on the unit's overall capabilities depends on what 
duties were performed by the sick soldiers and how easily those 
soldiers can be spared or replaced. However, the impact of losing key 
personnel, such as pilots, and technicians, or effective leaders, could 
be severe and contribute to degraded readiness.
           topic (27): the role of dod intelligence analysis
    Question. As senior military intelligence advisor to the Secretary 
of Defense and the Chairman of the Joint Chiefs of Staff, your 
production units and activities around the world have been the 
producers of action-oriented intelligence--the moment-to-moment 
reporting that enables policy makers and military commanders to make 
tactical decisions with timely information. How do you evaluate the 
Defense Intelligence Community's performance in the production of 
threat assessments? What contributions have been provided by the 
reserve component?
    Answer. The demands for threat assessment production underscore the 
need to strike the right balance between current and term intelligence 
requirements. The Defense Intelligence Community is actively seeking 
means and ways to strengthening its capabilities to support the 
warfigher, decisionmaker, and planner with their demands. The turmoil 
and uncertainly of the current and future security environment that was 
highlighted in the testimony will continue to give credence to managing 
our support most expeditiously and prudently. The Defense Intelligence 
Community has and will continue to respond to customer requirements for 
production for threat assessments.
    Reserve component contributions are driven by active force tasking. 
The theater/ service intelligence production centers and DIA may use 
the already provided, Service Reserve-funded mandatory participation 
time (drill and annual tour) of their wartraced reservists to fulfill 
intelligence requirements. This concept, having the reservist ``do in 
peacetime what would be done in wartime,'' is a basic tenet of the 
January 1995 Deputy Secretary of Defense-approved implementation plan 
to leverage reserve intelligence assets in peacetime against Defense 
intelligence requirements. In essence, reservist mobilization readiness 
is enhanced by having the reservist perform real missions in peacetime. 
In addition to their mandatory participation time, reservists may 
augment active organizations, proving intelligence support via special 
man-day tours. There are several funding sources for those man-day 
tours. Specific to the GDIP, DIA managed a reimbursable GDIP man-day 
program, in FY 97 totaling $3 million, to meet its requirements, also, 
the Services program for manage and execute GDIP monies for reserve 
augmentation (in FY 97 over $3 million). Intelligence production 
requirements are also supported by the JMIP. In FY 97, almost 35,000 
JMIP-funded man-days were performed in support of CINC/CSA and Service 
intelligence requirements, with approximately 46% directly supporting 
intelligence production. To date for FY 98, reservists have performed 
in excess of 22,000 JMIP-funded man-days with 49% directly in support 
of intelligence production. The Joint Reserve Intelligence Connectivity 
Program (JRICP) connects the Reserves with the rest of the Intelligence 
Community, and allows the dynamic tasking of Reserve Intelligence 
assets by the nine Unified Command Joint Intelligence Centers, the 
Combat Support Agencies, and the Service Intelligence Organizations to 
meet peacetime, contingency crisis, and wartime requirements in support 
of military commanders. To carry out this mission, the JRICP is 
integrating and deploying a fully capable and seamless production 
environment consisting of workstations, software applications, secure 
connectivity, technical support, and training to 28 Service-owned 
Reserve production sites across the country. As an example, JAC 
Molesworth has leveraged this infrastructure capability and its 
reservists at three CONUS locations to levy over half of :its scheduled 
production requirements for reservist accomplishment. Due to the heavy 
tasking in EUCOM to support ongoing operations in theater, the JAC had 
been primarily engaged in current intelligence and indications and 
warning activities. As its scheduled production began to fall behind, 
the JAC turned to the reserves to fill the shortfalls in its 
intelligence production. In sum, the reserve component is a valuable 
resource that can be used to provided additional capability, based on 
active duty tasking, funding and reservist availability.
                  topic (28): actionable intelligence
    Question. Some analysts say that the increased emphasis on action-
oriented intelligence has come at the expense of other important--but 
more mundane--work, like maintaining data bases and conducting in-depth 
analyses on foreign militaries and political groups. Do you share this 
concern? If so, how do you intend to deal with these competing needs?
    Answer. I do share the concern and know that we must ensure the 
existence of a solid foundation for a long-term, basis intelligence 
knowledge base over the next several years. This knowledge base that 
has suffered from the many demands for analytic surge in support of the 
large number of crises over the past decade. In order to posture the 
Defense Intelligence Community to support the entire range of potential 
missions, strengthening our capability of provide strategic warning is 
one of the top priorities for all-sources analysis.