Statement by Director of Central Intelligence
George J. Tenet
before the
Senate Select Committee on Intelligence
on the
Worldwide Threat 2001: National Security in a Changing World
(as prepared for delivery)
7 February 2001
 
As I reflect this year, Mr. Chairman, on the threats to American
security, what strikes me most forcefully is the accelerating pace of change
in so many arenas that affect our nation's interests. Numerous examples
come to mind: new communications technology that enables the efforts of
terrorists and narcotraffickers as surely as it aids law enforcement and
intelligence, rapid global population growth that will create new strains in
parts of the world least able to cope, the weakening internal bonds in a
number of states whose cohesion can no longer be taken for granted, the
breaking down of old barriers to change in places like the Koreas and Iran,
the accelerating growth in missile capabilities in so many parts of the
world-to name just a few.
Never in my experience, Mr. Chairman, has American intelligence had
to deal with such a dynamic set of concerns affecting such a broad range of
US interests. Never have we had to deal with such a high quotient of
uncertainty. With so many things on our plate, it is important always to
establish priorities. For me, the highest priority must invariably be on
those things that threaten the lives of Americans or the physical security
of the United States. With that in mind, let me turn first to the
challenges posed by international terrorism.
 
TRANSNATIONAL ISSUES
 
We have made considerable progress on terrorism against US interests and
facilities, Mr. Chairman, but it persists. The most dramatic and recent
evidence, of course, is the loss of 17 of our men and women on the USS Cole
at the hands of terrorists.
The threat from terrorism is real, it is immediate, and it is evolving.
State sponsored terrorism appears to have declined over the past five years,
but transnational groups-with decentralized leadership that makes them
harder to identify and disrupt-are emerging. We are seeing fewer centrally
controlled operations, and more acts initiated and executed at lower levels.
 
Terrorists are also becoming more operationally adept and more technically
sophisticated in order to defeat counterterrorism measures. For example, as
we have increased security around government and military facilities,
terrorists are seeking out "softer" targets that provide opportunities for
mass casualties. Employing increasingly advanced devices and using
strategies such as simultaneous attacks, the number of people killed or
injured in international terrorist attacks rose dramatically in the 1990s,
despite a general decline in the number of incidents. Approximately
one-third of these incidents involved US interests.
Usama bin Ladin and his global network of lieutenants and associates remain
the most immediate and serious threat. Since 1998, Bin Ladin has declared
all US citizens legitimate targets of attack. As shown by the bombing of
our Embassies in Africa in 1998 and his Millennium plots last year, he is
capable of planning multiple attacks with little or no warning.
His organization is continuing to place emphasis on developing surrogates to
carry out attacks in an effort to avoid detection, blame, and retaliation.
As a result it is often difficult to attribute terrorist incidents to his
group, Al Qa'ida.
Beyond Bin Ladin, the terrorist threat to Israel and to participants in the
Middle East peace negotiations has increased in the midst of continuing
Palestinian-Israeli violence. Palestinian rejectionists-including HAMAS and
the Palestine Islamic Jihad (PIJ)-have stepped up violent attacks against
Israeli interests since October. The terrorist threat to US interests,
because of our friendship with Israel has also increased.
At the same time, Islamic militancy is expanding, and the worldwide pool of
potential recruits for terrorist networks is growing. In central Asia, the
Middle East, and South Asia, Islamic terrorist organizations are trying to
attract new recruits, including under the banner of anti-Americanism.
International terrorist networks have used the explosion in information
technology to advance their capabilities. The same technologies that allow
individual consumers in the United States to search out and buy books in
Australia or India also enable terrorists to raise money, spread their
dogma, find recruits, and plan operations far afield. Some groups are
acquiring rudimentary cyberattack tools. Terrorist groups are actively
searching the internet to acquire information and capabilities for chemical,
biological, radiological, and even nuclear attacks. Many of the 29
officially designated terrorist organizations have an interest in
unconventional weapons, and Usama bin Ladin in 1998 even declared their
acquisition a "religious duty."
Nevertheless, we and our Allies have scored some important successes against
terrorist groups and their plans, which I would like to discuss with you in
closed session later today. Here, in an open session, let me assure you
that the Intelligence Community has designed a robust counterterrorism
program that has preempted, disrupted, and defeated international terrorists
and their activities. In most instances, we have kept terrorists
off-balance, forcing them to worry about their own security and degrading
their ability to plan and conduct operations.
 
PROLIFERATION
I would like to turn now to proliferation. A variety of states and groups
continue to seek to acquire weapons of mass destruction and the means to
deliver them.
First, let me discuss the continuing and growing threat posed to us by
ICBMs.
We continue to face ballistic missile threats from a variety of actors
beyond Russia and China--specifically, North Korea, probably Iran, and
possibly Iraq. In some cases, their programs are the result of indigenous
technological development, and in other cases, they are the beneficiaries of
direct foreign assistance. And while these emerging programs involve far
fewer missiles with less accuracy, yield, survivability, and reliability
than those we faced during the Cold War, they still pose a threat to US
interests.
For example, more than two years ago North Korea tested a space launch
vehicle, the Taepo Dong-1, which it could theoretically convert into an
ICBM. This missile would be capable of delivering a small biological or
chemical weapon to the United States, although with significant targeting
inaccuracies. Moreover, North Korea has retained the ability to test its
follow-on Taepo Dong-2 missile, which could deliver a nuclear-sized payload
to the United States.
Iran has one of the largest and most capable ballistic missile
programs in the Middle East. Its public statements suggest that it plans to
develop longer-range rockets for use in a space-launch program, but Tehran
could follow the North Korean pattern and test an ICBM capable of delivering
a light payload to the United States in the next few years.
And given the likelihood that Iraq continues its missile development
work, we think that it too could develop an ICBM capability sometime in the
next decade assuming it received foreign assistance.
As worrying as the ICBM threat will be, Mr. Chairman, the threat to US
interests and forces from short- and medium-range ballistic missiles is here
and now. The proliferation of MRBMs-driven largely though not exclusively
by North Korean No Dong sales-is altering strategic balances in the Middle
East and Asia. These missiles include Iran's Shahab-3, Pakistan's Ghauri
and the Indian Agni II.
Mr. Chairman, I cannot underestimate the catalytic role that foreign
assistance has played in advancing these missile and WMD programs,
shortening their development times and aiding production. The three major
suppliers of missile or WMD-related technologies continue to be Russia,
China, and North Korea. Again, many details of their activities need to
remain classified, but let me quickly summarize the areas of our greatest
concern.
Russian state-run defense and nuclear industries are still strapped for
funds, and Moscow looks to them to acquire badly needed foreign exchange
through exports. We remain concerned about the proliferation implications
of such sales in several areas.
Russian entities last year continued to supply a variety of
ballistic missile-related goods and technical know-how to countries such as
Iran, India, China, and Libya. Indeed, the transfer of ballistic missile
technology from Russia to Iran was substantial last year, and in our
judgment will continue to accelerate Iranian efforts to develop new missiles
and to become self-sufficient in production.
Russia also remained a key supplier for a variety of civilian
Iranian nuclear programs, which could be used to advance its weapons
programs as well.
Russian entities are a significant source of dual-use biotechnology,
chemicals, production technology, and equipment for Iran. Russian
biological and chemical expertise is sought by Iranians and others seeking
information and training on BW and CW-agent production processes.
Chinese missile-related technical assistance to foreign countries
also has been significant over the years. Chinese help has enabled Pakistan
to move rapidly toward serial production of solid-propellant missiles. In
addition to Pakistan, firms in China provided missile-related items, raw
materials, or other help to several countries of proliferation concern,
including Iran, North Korea, and Libya.
Last November, the Chinese Foreign Ministry issued a statement that
committed China not to assist other countries in the development of
ballistic missiles that can be used to deliver nuclear weapons. Based on
what we know about China's past proliferation behavior, Mr. Chairman, we are
watching and analyzing carefully for any sign that Chinese entities may be
acting against that commitment. We are worried, for example, that
Pakistan's continued development of the two-stage Shaheen-II MRBM will
require additional Chinese assistance.
On the nuclear front, Chinese entities have provided extensive
support in the past to Pakistan's safeguarded and unsafeguarded nuclear
programs. In May 1996, Beijing pledged that it would not provide assistance
to unsafeguarded nuclear facilities in Pakistan; we cannot yet be certain,
however, that contacts have ended. With regard to Iran, China confirmed
that work associated with two nuclear projects would continue until the
projects were completed. Again, as with Russian help, our concern is that
Iran could use the expertise and technology it gets-even if the cooperation
appears civilian-for its weapons program.
With regard to North Korea, our main concern is P'yongyang's
continued exports of ballistic missile-related equipment and missile
components, materials, and technical expertise. North Korean customers are
countries in the Middle East, South Asia, and North Africa. P'yongyang
attaches a high priority to the development and sale of ballistic missiles,
equipment, and related technology because these sales are a major source of
hard currency.
Mr. Chairman, the missile and WMD proliferation problem continues to
change in ways that make it harder to monitor and control, increasing the
risk of substantial surprise. Among these developments are greater
proficiency in the use of denial and deception and the growing availability
of dual-use technologies-not just for missiles, but for chemical and
biological agents as well. There is also great potential of "secondary
proliferation" from maturing state-sponsored programs such as those in
Pakistan, Iran, and India. Add to this group the private companies,
scientists, and engineers in Russia, China, and India who may be increasing
their involvement in these activities, taking advantage of weak or
unenforceable national export controls and the growing availability of
technologies. These trends have continued and, in some cases, have
accelerated over the past year.
 
INFORMATION OPERATIONS AND SPACE
 
Mr. Chairman, I want to reemphasize the concerns I raised last year
about our nation's vulnerability to attacks on our critical information
infrastructure. No country in the world rivals the US in its reliance,
dependence, and dominance of information systems. The great advantage we
derive from this also presents us with unique vulnerabilities.
Indeed, computer-based information operations could provide our
adversaries with an asymmetric response to US military superiority by giving
them the potential to degrade or circumvent our advantage in conventional
military power.
Attacks on our military, economic, or telecommunications
infrastructure can be launched from anywhere in the world, and they can be
used to transport the problems of a distant conflict directly to America's
heartland.
Likewise, our adversaries well understand US strategic dependence on
access to space. Operations to disrupt, degrade, or defeat US space assets
will be attractive options for those seeking to counter US strategic
military superiority. Moreover, we know that foreign countries are
interested in or experimenting with a variety of technologies that could be
used to develop counterspace capabilities.
Mr. Chairman, we are in a race with technology itself. We are
creating relations with the private sector and academia to help us keep pace
with ever-changing technology. Last year I established the Information
Operations Center within CIA to bring together our best and brightest to
ensure that we had a strategy for dealing with the cyber threat.
Along with partners in the Departments of Justice, Energy, and
Defense we will work diligently to protect critical US information assets.
Let me also say that we must view our space systems and capabilities as part
of the same critical infrastructure that needs protection.
 
NARCOTICS
 
Mr. Chairman, drug traffickers are also making themselves more
capable and efficient. The growing diversification of trafficking
organizations-with smaller groups interacting with one another to transfer
cocaine from source to market-and the diversification of routes and methods
pose major challenges for our counterdrug programs. Changing production
patterns and the development of new markets will make further headway
against the drug trade difficult.
Colombia, Bolivia, and Peru continue to supply all of the cocaine
consumed worldwide including in the United States. Colombia is the linchpin
of the global cocaine industry as it is home to the largest coca-growing,
coca-processing, and trafficking operations in the world. With regard to
heroin, nearly all of the world's opium production is concentrated in
Afghanistan and Burma. Production in Afghanistan has been exploding,
accounting for 72 percent of illicit global opium production in 2000.
The drug threat is increasingly intertwined with other threats. For
example, the Taliban regime in Afghanistan, which allows Bin Ladin and other
terrorists to operate on its territory, encourages and profits from the drug
trade. Some Islamic extremists view drug trafficking as a weapon against
the West and a source of revenue to fund their operations.
No country has been more vulnerable to the ramifications of the drug
trade than Colombia. President Pastrana is using the additional resources
available to him under Plan Colombia to launch a major antidrug effort that
features measures to curb expanding coca cultivation. He is also
cooperating with the US on other important bilateral counternarcotics
initiatives, such as extradition.
A key impediment to President Pastrana's progress on drugs is the
challenge from Colombia's largest insurgent group-the Revolutionary Armed
Forces of Colombia or FARC-which earns millions of dollars from taxation and
other involvement in the drug trade. Founded more than 35 years ago as a
ragtag movement committed to land reform, the FARC has developed into a
well-funded, capable fighting force known more for its brutal tactics than
its Marxist-Leninist-influenced political program.
The FARC vehemently opposes Plan Colombia for obvious reasons. It
has gone so far as to threaten to walk away from the peace process with
Bogota to protest the Plan. It appears prepared to oppose Plan activities
with force. The FARC could, for example, push back on Pastrana by stepping
up attacks against spray and interdiction operations. US involvement is
also a key FARC worry. Indeed, in early October FARC leaders declared that
US soldiers located in combat areas are legitimate "military targets."
The country's other major insurgent group, the National Liberation
Army or ELN, is also contributing to mounting instability. Together with
the FARC, the ELN has stepped up its attacks on Colombia's economic
infrastructure. This has soured the country's investment climate and
complicated government efforts to promote economic recovery, following a
major recession in 1999. Moreover, the insurgent violence has fueled the
rapid growth of illegal paramilitary groups, which are increasingly vying
with the FARC and ELN for control over drug-growing zones and other
strategic areas of rural Colombia. Like the FARC, the paramilitaries rely
heavily on narcotics revenue and have intensified their attacks against
noncombatants in recent months. Paramilitary massacres and insurgent
kidnappings are likely to increase this year, as both groups move to
strengthen their financial positions and expand their areas of influence.
As for Mexico, Mr. Chairman, President Fox is also trying to attack
the power of Mexican drug traffickers, whose activities had made Mexico a
transit point for cocaine shipments into the US and a source of heroin and
methamphetamine for the US drug market. He faces great challenges in doing
so and has simultaneously launched high-profile initiatives to strengthen
rule of law and reduce government corruption, including among Mexican law
enforcement officials.
 
REGIONAL ISSUES
 
THE MIDDLE EAST
 
Mr. Chairman, I would like to turn now to the Middle East. We are
all aware of the violence between the Israelis and the Palestinians, and the
uncertainty it has cast on the prospects for a near-term peace agreement.
So let me take this time to look at the less obvious trends in the
region-such as population pressures, growing public access to information,
and the limited prospects for economic development-that will have a profound
effect on the future of the Middle East.
The recent popular demonstrations in several Arab
countries-including Egypt, Saudi Arabia, Oman, and Jordan-in support of the
Palestinian intifada demonstrate the changing nature of activism of the Arab
street. In many places in the Arab world, Mr. Chairman, average citizens
are becoming increasingly restive and getting louder. Recent events show
that the right catalyst-such as the outbreak of Israeli-Palestinian
violence-can move people to act. Through access to the Internet and other
means of communication, a restive public is increasingly capable of taking
action without any identifiable leadership or organizational structure.
Mr. Chairman, balanced against an energized street is a new
generation of leaders, such as Bashar al Asad in Syria. These new leaders
will have their mettle tested both by populations demanding change and by
entrenched bureaucracies willing to fight hard to maintain the status quo.
Compounding the challenge for these leaders are the persistent
economic problems throughout the region that prevent them from providing
adequately for the economic welfare of many of their citizens. The region's
legacy of statist economic policies and an inadequate investment climate in
most countries present big obstacles. Over the past 25 years, Middle
Eastern economies have averaged only 2.8 percent GDP growth-far less than
Asia and only slightly more than sub-Saharan Africa. The region has
accounted for a steadily shrinking share of world GDP, trade, and foreign
direct investment since the mid-1970s, and real wages and labor productivity
today are about the same as 30 years ago. As the region falls behind in
competitive terms, governments will find it hard over the next 5 to 10 years
to maintain levels of state sector employment and government services that
have been key elements of their strategy for domestic stability.
Adding to this is the challenge of demographics. Many of the
countries of the Middle East still have population growth rates among the
highest in the world, significantly exceeding 3 percent-compare that with
0.85 percent in the United States and 0.2 percent in Japan. Job markets
will be severely challenged to create openings for the large mass of young
people entering the labor force each year.
One-fourth of Jordanians, for example, are unemployed, and annual
economic growth is well below the level needed to absorb some 60,000 new
labor market entrants each year.
In Egypt the disproportionately young population adds 600,000 new
job applicants a year in a country where unemployment is already near 20
percent.
Mr. Chairman, the inability of traditional sources of income such as oil,
foreign aid, and worker remittances to fund an increasingly costly system of
subsidies, education, health care, and housing for rapidly growing
populations has motivated governments to implement economic reforms. The
question is whether these reforms will go far enough for the long term.
Reform thus far has been deliberately gradual and slow, to avoid making
harsh economic choices that could lead to short term spikes in high
unemployment.
Arab governments will soon face the dilemma of choosing between a path of
gradual reform that is unlikely to close the region's widening gap with the
rest of the world, and the path of comprehensive change that risks fueling
independent political activity. Choosing the former risks building tension
among a younger, poorer, and more politically assertive population.
IRAQ
 
Mr. Chairman, in Iraq Saddam Hussein has grown more confident in his ability
to hold on to his power. He maintains a tight handle on internal unrest,
despite the erosion of his overall military capabilities. Saddam's
confidence has been buoyed by his success in quieting the Shia insurgency in
the south, which last year had reached a level unprecedented since the
domestic uprising in 1991. Through brutal suppression, Saddam's
multilayered security apparatus has continued to enforce his authority and
cultivate a domestic image of invincibility.
High oil prices and Saddam's use of the oil-for-food program have helped him
manage domestic pressure. The program has helped meet the basic food and
medicine needs of the population. High oil prices buttressed by substantial
illicit oil revenues have helped Saddam ensure the loyalty of the regime's
security apparatus operating and the few thousand politically important
tribal and family groups loyal.
There are still constraints on Saddam's power. His economic infrastructure
is in long-term decline, and his ability to project power outside Iraq's
borders is severely limited, largely because of the effectiveness and
enforcement of the No-Fly Zones. His military is roughly half the size it
was during the Gulf War and remains under a tight arms embargo. He has
trouble efficiently moving forces and supplies-a direct result of sanctions.
These difficulties were demonstrated most recently by his deployment of
troops to western Iraq last fall, which were hindered by a shortage of spare
parts and transport capability.
Despite these problems, we are likely to see greater assertiveness-largely
on the diplomatic front-over the next year. Saddam already senses improved
prospects for better relations with other Arab states. One of his key goals
is to sidestep the 10-year-old economic sanctions regime by making
violations a routine occurrence for which he pays no penalty.
Saddam has had some success in ending Iraq's international isolation. Since
August, nearly 40 aircraft have flown to Baghdad without obtaining UN
approval, further widening fissures in the UN air embargo. Moreover,
several countries have begun to upgrade their diplomatic relations with
Iraq. The number of Iraqi diplomatic missions abroad are approaching
pre-Gulf War levels, and among the states of the Gulf Cooperation Council,
only Kuwait and Saudi Arabia have not reestablished ties.
Our most serious concern with Saddam Hussein must be the likelihood that he
will seek a renewed WMD capability both for credibility and because every
other strong regime in the region either has it or is pursuing it. For
example, the Iraqis have rebuilt key portions of their chemical production
infrastructure for industrial and commercial use. The plants he is
rebuilding were used to make chemical weapons precursors before the Gulf War
and their capacity exceeds Iraq's needs to satisfy its civilian
requirements.
We have similar concerns about other dual-use research, development,
and production in the biological weapons and ballistic missile fields;
indeed, Saddam has rebuilt several critical missile production complexes.
 
IRAN
Turning now to Iraq's neighbor: events of the past year have been
discouraging for positive change in Iran. Several years of reformist gains
in national elections and a strong populist current for political change all
threaten the political and economic privileges that authoritarian interests
have enjoyed for years under the Islamic Republic-and they have begun to
push back hard against the reformers.
Prospects for near-term political reform are now fading. Opponents
of reform have not only muzzled the open press, they have also arrested
prominent activists and blunted the legislature's powers. Over the Summer,
Supreme Leader Khamenei ordered the new legislature not to ease press
restrictions, a key reformist pursuit. This signaled the narrow borders
within which he would allow the legislature to operate.
The reformist movement is still young, however, and it reflects on
the deep sentiments of the Iranian people. Although frustrated and in part
muzzled, the reformers have persisted in their demands for change. And the
Iranian people will have another opportunity to demonstrate their support
for reform in the presidential election scheduled for June. Although
Khatami has not announced his candidacy, and has voiced frustration with the
limitations placed on his office, opinion polls published in Iran show him
to remain by far the most popular potential candidate for president.
The short -term gains made by shutting down the proreform press and
prosecuting some of its most outspoken members is not a formula for
long-term success. A strategy of suppressing the demands of the new
generation coming of age risks a political explosion down the road. Some
advocates of the status quo are beginning to recognize this danger as more
conservatives-to include Khamenei-have endorsed the principle, if not the
substance, of reform.
Despite Iran's uncertain domestic prospects, Mr. Chairman, it is
clear that Khatami's appeal and promise of reform thus far, as well as the
changing world economy, have contributed to a run of successes for Iran in
the foreign arena over the past year. Some Western ambassadors have
returned to Tehran, and Iranian relations with EU countries and Saudi Arabia
are at their highest point since the revolution in 1979. Higher oil prices,
meanwhile, have temporarily eased the government's need to address difficult
and politically controversial economic problems. They have also taken more
of the sting out of US sanctions. Iran's desire to end its isolation has
not resulted in a decline in its willingness to use terrorism to pursue
strategic foreign policy agendas-Tehran, in fact, has increased its support
to terrorist groups opposed to the peace process over the past two years.
 
NORTH KOREA
 
I would like to shift gears to North Korea. P'yongyang's bold
diplomatic outreach to the international community and engagement with South
Korea reflect a significant change in strategy. This strategy is designed
to assure the continued survival of Kim Chong-il's regime by ending
P'yongyang's political isolation and fixing the North's failing economy by
attracting more aid. We do not know how far Kim will go in opening the
North, but I can report to you that we have not yet seen a significant
diminution of the threat from the North to American and South Korean
interests.
P'yongyang still believes that a strong military, capable of
projecting power in the region, is an essential element of national power.
P'yongyang's declared "military first" policy requires massive investment in
the armed forces, even at the expense of other national objectives. North
Korea maintains the world's fifth largest armed forces consisting of over
one million active-duty personnel, with another five million reserves.
While Allied forces still have the qualitative edge, the North Korean
military appears for now to have halted its near-decade-long slide in
military capabilities. In addition to the North's longer-range missile
threat to us, P'yongyang is also expanding its short and medium range
missile inventory, putting our Allies at greater risk.
On the economic front, there are few signs of real systemic domestic
reform. Kim has recently shown interest in practical measures to redress
economic problems, most notably with his trip to Shanghai. To date,
however, Kim has only tinkered with the economic system.
External assistance is essential to the recovery of North Korea's
domestic economy. Only massive food aid deliveries since 1997 have enabled
the country to escape a recurrence of the famine from the middle of the last
decade. Industrial operations remain low. The economy is hampered by an
industrial base that is falling to pieces, as well as shortages of materials
and a lack of new investment. Chronic energy shortages pose the most
significant challenge.
Aid and investment from the South bring with them increased foreign
influences and outside information that will contradict propaganda from the
regime. Economic engagement also can spawn expectations for improvement
that will outrace the rebuilding process. The risk for Kim is that if he
overestimates his control of the security services and loses elite support,
or if societal stresses reach a critical point, his regime and personal grip
on power could be weakened. As with other authoritarian regimes, sudden,
radical change remains a real possibility in North Korea.
 
CHINA
Mr. Chairman, let me now turn to China, whose drive for recognition
as a Great Power is one of the toughest challenges we face. Beijing's goal
of becoming a key world player and especially more powerful in East Asia has
come sharply into focus. It is pursuing these goals through an ambitious
economic reform agenda, military modernization, and a complex web of
initiatives aimed at expanding China's international influence-especially
relative to the United States.
Chinese leaders view solid relations with Washington as vital to
achieving their ambitions. It is a two-edged sword for them, Mr. Chairman.
China's development remains heavily reliant on access to Western markets and
technology. But they also view Washington as their primary obstacle because
they perceive the US as bent on keeping China from becoming a great power.
Perhaps the toughest issue between Beijing and Washington remains
Taiwan. While Beijing has stopped its saber rattling-reducing the immediate
tensions-the unprecedented developments on Taiwan have complicated
cross-strait relations. The election last March of President Chen ushered
in a divided government with highly polarized views on relations with
Beijing. Profound mutual distrust makes it difficult to restart the
on-again off-again bilateral political dialogue. In the longer term, Mr.
Chairman, cross-strait relations can be even more volatile because of
Beijing's military modernization program. China's military buildup is also
aimed at deterring US intervention in support of Taiwan.
Russian arms are a key component of this buildup. Arms sales are
only one element of a burgeoning Sino-Russian relationship. Moscow and
Beijing plan to sign a "friendship treaty" later this year, highlighting
common interests and willingness to cooperate diplomatically against US
policies that they see as unfriendly to their interests-especially NMD.
On China's domestic scene, the Chinese Communist leadership wants to
protect its legitimacy and authority against any and all domestic
challenges. Over the next few years, however, Chinese leaders will have to
manage a difficult balancing act between the requirements of reform and the
requirements of staying in power.
China's leaders regard their ability to sustain economic prosperity
as the key to remaining in power; for that reason, they are eager to join
the WTO. Beijing views WTO accession as a lever to accelerate domestic
economic reform, a catalyst for greater foreign investment, and a way to
force Chinese state-owned enterprises to compete more effectively with
foreign companies.
But Beijing may slow the pace of WTO-related reforms if the
leadership perceives a rise in social unrest that could threaten regime
stability. Chinese leaders already see disturbing trends in this regard.
Their crackdown on Falungong, underground Christians, and other spiritual
and religious groups reflects growing alarm about challenges to the Party's
legitimacy.
All of these challenges will test the unity of the leadership in
Beijing during a critical period in the succession process. The 16th
Communist Party Congress next year will be an extremely important event, as
it will portend a large-scale transfer of authority to the next generation
of Communist Chinese leaders. The political jockeying has already begun,
and Chinese leaders will view every domestic and foreign policy decision
they face through the prism of the succession contest.
 
RUSSIA
Mr. Chairman, yet another state driving for recognition as a Great
Power is Russia. Let me be perfectly candid. There can be little doubt
that President Putin wants to restore some aspects of the Soviet past-status
as a great power, strong central authority, and a stable and predictable
society-sometimes at the expense of neighboring states or the civil rights
of individual Russians. For example,
Putin has begun to reconstitute the upper house of the parliament,
with an eye to depriving regional governors of their ex officio membership
by 2002. He also created a system of seven "super districts" where
Presidential "plenipotentiaries" now oversee the governors within their
districts.
He has moved forcefully against Russian independent media including
one of Russia's most prominent oligarchs, Vladimir Gusinskiy, pressing him
to give up his independent television station and thereby minimize critical
media.
Moscow also may be resurrecting the Soviet-era zero-sum approach to foreign
policy. As I noted earlier, Moscow continues to value arms and technology
sales as a major source of funds. It increasingly is using them as a tool
to improve ties to its regional partners China, India, and Iran. Moscow
also sees these relationships as a way to limit US influence globally. At
the same time Putin is making efforts to check US influence in the other
former Soviet states and reestablish Russia as the premier power in the
region. He has increased pressure on his neighbors to pay their energy
debts, is dragging his feet on treaty-mandated withdrawals of forces from
Moldova, and is using a range of pressure tactics against Georgia.
Putin has also increased funding for the military, although years of
increases would be needed to deal with the backlog of problems that built up
in the armed forces under Yeltsin. The war in Chechnya is eroding morale
and thus the effectiveness of the military. Despite its overwhelming force,
Moscow is in a military stalemate with the rebels, facing constant guerrilla
attacks. An end does not appear close. There are thousands of Russian
casualties in Chechnya, and Russian forces have been cited for their
brutality to the civilian population. Increasingly, the Russian public
disapproves of the war. Because Putin rode into office on a wave of popular
support, resolution of the conflict is an issue of personal prestige for
him. Recently, Putin transferred command in Chechnya to the Federal
Security Service, demonstrating his affinity for the intelligence services
from which he came.
Despite Putin's Soviet nostalgia, he knows Russia must embrace markets and
integrate into the global economy and that he needs foreigners to invest.
Plus, public expectations are rising. Putin is avoiding hard policy
decisions because Russia enjoyed an economic upturn last year, buoyed by
high oil prices and a cheap ruble. But Putin cannot count on these trends
to last permanently. He must take on several key challenges if Russia is to
sustain economic growth and political stability over the longer term.
Without debt restructuring, for example, he will face harsh choices
through 2003. Russia will owe nearly $48 billion spread over the next three
years.
Domestic and foreign investment is crucial to sustained growth.
Moscow recently announced that capital flight last year increased to $25
billion. Putin will need to demonstrate his seriousness about reducing
corruption and pushing ahead with corporate tax reform and measures to
protect investor's rights.
 
CENTRAL ASIA
 
Mr. Chairman, the Caucasus and Central Asia are parts of the world that have
the potential to become more volatile as they become more important to the
United States. The strategic location of the Caucasus and Central
Asia-squeezed between Russia, Turkey, Iran, Afghanistan, and China-make the
stability of these countries critical to the future of Eurasia. Here
corruption, poverty, and other social ills are providing fertile ground for
Islamic extremism, terrorist networking, and drug and weapons trafficking
that will have impact in Russia, Europe, and beyond. Central Asian leaders,
seeking to fend off threats to their security from terrorists and drug
traffickers, are looking increasingly to the West for support.
We are becoming increasingly concerned about the activities of the
Islamic Movement of Uzbekistan, an extremist insurgent and terrorist group
whose annual incursions into Uzbekistan have become bloodier and more
significant every year.
In addition, US companies have a significant stake in Caspian energy
development. As you know, the United States supports the construction of
pipelines that will bring the Caspian's energy resources to Western markets.
One oil pipeline is expected to pass through both Georgia and Azerbaijan.
Western companies are pursuing the construction of a gas pipeline under the
Caspian Sea from Turkmenistan through Azerbaijan and Georgia en route to
Turkey. Although many of the leaders in the region through which the
pipelines will flow view the United States as a friend, regime stability
there remains fragile.
 
The Balkans
 
Mr. Chairman, let me now turn to another important region: the
Balkans. It is an open question when Balkan states will be able to stand on
their own. The Balkans continue to be fraught with turmoil, and the coming
year promises more challenges.
Milosevic's departure was a victory for the Serbian people and the
United States. America was a strong force in helping to depose this
indicted war criminal who was a major obstacle to progress. Milosevic's
fall through election and popular rebellion gives Serbia and what is left of
Yugoslavia a chance to remake its politics and to begin to recover. It also
means that Serbia can be reintegrated into Europe.
Milosevic's successors will have a hard time cleaning up the mess he
left. Milosevic, his family, and cronies stole much of what had value, ran
down industries, and wasted whatever resources were left. From the ashes,
newly elected President Vojislav Kostunica is trying to create a legal,
transparent, and effective government. Meanwhile, the Serbian economy has
contracted 50 percent since 1990.
Mr. Chairman, Kostunica will also face problems holding his country
together. Montenegro's drive for independence presents a simmering crisis.
Montenegrin President Djukanovic remains committed to negotiating a new,
decentralized relationship with Belgrade. Events in the rest of Yugoslavia
will have impact on Kosovo as well. Ethnic Albanians from across the
political spectrum in Kosovo still insist on independence.
There are signs that Kosovo's troubles are spilling over into
southern Serbia where both ethnic Albanians and Serbs live in close
proximity. Most ethnic Albanians in this region seek only greater civil
rights within Serbia, but militants are fighting to join the region to an
independent Kosovo. This is a dangerous flashpoint, Mr. Chairman, with the
potential for escalation. In short, Mr. Chairman, we are still not at the
point where we look confidently ahead to a Balkans without violence.
With regard to Bosnia, none of the three formerly warring
factions-Muslims, Serbs, or Croats-wants to begin fighting again. Refugee
returns continued at a brisk pace last year as in 1999, the most encouraging
development since the end of the war. Disarmament of the warring factions
has been generally successful, and positive developments in Croatia and
Serbia have removed some sources of earlier nationalist sentiment. But
there has been little progress in achieving a common vision of a unified,
multiethnic Bosnia capable of standing on its own.
 
SOUTH ASIA
 
At this point, Mr. Chairman, let me draw your attention to the
potentially destabilizing competition in South Asia. I must report that
relations between India and Pakistan remain volatile, making the risk of war
between the two nuclear-armed adversaries unacceptably high. The military
balance in which India enjoys advantages over Pakistan in most areas of
conventional defense preparedness remains the same. This includes a
decisive advantage in fighter aircraft, almost twice as many men under arms,
and a much larger economy to support defense expenditures. As a result,
Pakistan relies heavily on its nuclear weapons for deterrence. Their
deep-seated rivalry, frequent artillery exchanges in Kashmir, and short
flight times for nuclear-capable ballistic missiles and aircraft all
contribute to an unstable nuclear deterrence.
If any issue has the potential to bring both sides to full-scale
war, it is Kashmir. Kashmir is at the center of the dispute between the two
countries. Nuclear deterrence and the likelihood that a conventional war
would bog down both sides argue against a decision to go to war. But both
sides seem quite willing to take risks over Kashmir in particular, and
this-along with their deep animosity and distrust-could lead to decisions
that escalate tensions.
The two states narrowly averted a full-scale war in Kashmir in 1999.
The conflict that did occur undermined a fledgling peace process begun by
the two prime ministers. Now, for the first time since then, the two sides
are finally taking tentative steps to reduce tension. Recent statements by
Indian and Pakistani leaders have left the door open for high-level talks.
And just last week [2 Feb 2001], Vajpayee and Musharraf conversed by phone
perhaps for the first time ever, to discuss the earthquake disaster.
The process is fragile, however. Neither side has yet agreed to
direct, unconditional talks. Tension can easily flare once winter ends or
by New Delhi or Islamabad maneuvering for an edge in the negotiations.
Leadership changes in either country also could add to tensions.
Kashmiri separatist groups opposed to peace could also stoke
problems. India has been trying to engage selected militants and
separatists, but militant groups have kept up their attacks through India's
most recent cease-fire. In addition, the Kashmir state government's
decision to conduct local elections-the first in more than 20 years-will
provoke violence from militants who see the move as designed to cement the
status quo.
Pakistan's internal problems-especially the economy-complicate the
situation and further threaten what maneuvering room Musharraf may have.
Musharraf's domestic popularity has been threatened by a series of unpopular
policies that he promulgated last year. At the same time, he is being
forced to contend with increasingly active Islamic extremists.
Mr. Chairman, a word on proliferation. Last year I told you I
worried about the proliferation and development of missiles and weapons of
mass destruction in South Asia. The competition, predictably, extends here
as well and there is no sign that the situation has improved. We still
believe there is a good prospect of another round of nuclear tests. On the
missile front, India decided to test another Agni MRBM last month,
reflecting its determination to improve its nuclear weapons delivery
capability. Pakistan may respond in kind.
 
FRAGMENTATION AND FAILURE
 
The final point that I would like to discuss today is the growing in
potential for state fragmentation and failure that we have observed this
past year.
Mr. Chairman, Afghanistan obviously falls into this category. The
Afghan civil war will continue into the foreseeable future, leaving the
country fragmented and unstable. The Taliban remains determined to impose
its radical form of Islam on all of Afghanistan, even in the face of
resistance from other ethnic groups and the Shia minority.
Mr. Chairman, what we have in Afghanistan is a stark example of the
potential dangers of allowing states-even those far from the US-to fail. The
chaos here is providing an incubator for narcotics traffickers and militant
Islamic groups operating in such places as Kashmir, Chechnya, and Central
Asia. Meanwhile the Taliban shows no sign of relinquishing terrorist Usama
Bin Ladin, despite strengthened UN sanctions and prospects that Bin Ladin's
terrorist operations could lead to retaliatory strikes against Afghanistan.
The Taliban and Bin Ladin have a symbiotic relationship-Bin Ladin gets safe
haven and in return, he gives the Taliban help in fighting its civil war.
Mr. Chairman, events of the last few years in Indonesia paint a
vivid picture of a state struggling to regain stability. Last year I
described the difficult political transition that Indonesian President Wahid
was trying to manage. He has managed to stay one step ahead of his
opponents, mostly because they are unable to work together. He has survived
several confrontations with the legislature, but efforts to impeach him on
corruption charges will continue.
Separatist violence is rampant in Aceh and rising in two other key
provinces. Muslim-Christian violence continues, and resulted in several
thousand deaths last year. The country's security forces are poorly
equipped, and either back away from challenges or respond too forcefully.
Mr. Chairman, Indonesia's problems are worrying neighboring
countries that have long considered it as the pillar of regional stability.
Some Southeast Asian leaders fear a power vacuum in Indonesia would create
fertile ground for international terrorist groups and Islamic activists,
drug trafficking, and organized crime.
My final case study, Mr. Chairman, is Africa, a land of chronic
turbulence and crises that are among the most brutal and intractable in the
world. Left behind by globalization and plagued by ethnic conflicts,
several African states appear to be the first of the wave of failed nations
predicted by the Global Trends 2015 Report.
We are especially concerned because hotspots often set off chain
reactions across the region. The brutal civil war in Sierra Leone, for
example, started as an offshoot of fighting in Liberia and has now spread
into Guinea. These waves of violent instability bring even worse woes in
their wake, including the ethnically-based killings that are now routine in
the wars in Sudan, Congo (Kinshasa), and Burundi. Coping with this unrest
depletes the scant resources available to the region's governments for
fighting HIV/AIDS and other epidemics.
One immediate challenge in Africa, Mr. Chairman, is the protection
of US diplomats, military personnel, citizens, and other interests in the
region. Violent unrest has necessitated a half-dozen evacuations of Embassy
employees, other citizens, and Allied nationals in recent years.
 
CONCLUSION
 
Mr. Chairman, I have spoken at some length about the threats
we face to our national security. It is inevitable given our position as
the world's sole superpower that we would attract the opposition of those
who do not share our vision or our goals, and those who feel intimidated by
our strength. Many of the threats I've outlined are familiar to you. Many
of the trends I've described are not new. The complexity, intricacy, and
confluence of these threats, however, is necessitating a fundamental change
in the way we, in the Intelligence Community, do our business. To keep pace
with these challenges:
We must aggressively challenge our analytic assumptions, avoid
old-think, and embrace alternate analysis and viewpoints.
We must constantly push the envelope on collection beyond the
traditional to exploit new systems and operational opportunities to gain the
intelligence needed by our senior policymakers.
And we must continue to stay ahead on the technology and information
fronts by seeking new partnerships with private industry as demonstrated by
our IN-Q-TEL initiative.
Our goal is simple. It is to ensure that our nation has the intelligence it
needs to anticipate and counter threats I have discussed here today.
Thank you Mr. Chairman, I would welcome any questions you and your fellow
Senators may have for me.