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.
Moving on to specifics, Mr. Chairman, I see five key challenges as I look at the world in 1998 and beyond:
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.
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 US policy and US intelligence, technologies related to this threat continue to be available, and potentially hostile states are still developing and deploying WMD-related systems. Efforts to halt proliferation continue to be complicated, moreover, by the fact that most WMD programs are based on technologies and materials that have civil as well as military applications. Finally, a growing trend toward indigenous production of WMD-related equipment has decreased the effectiveness of sanctions and other national and multinational tools designed to counter proliferation.
Chinese and Russian assistance to proliferant countries requires particular attention, despite signs of progress. My statement for the record provides the details but some 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 US 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, materials, and technology.
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.
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 Yosuf 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 Hizballah 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.
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.
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.
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.
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.
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 States--especially in the energy rich Caucasus and Central Asia.
Turning now 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 a 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 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 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 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.
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.
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.
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.
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 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 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.
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.
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.
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 prospects 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.
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.
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.
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.
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