DDI Speech 07/10/96

Speech to the Boston Committee on Foreign Relations by John C. Gannon, Deputy Directory for Intelligence.

Challenges of Intelligence Reform: The Case of Russia


Thank you. Always a real kick for me to be back in Boston. I grew up forty miles away in Worcester. Several generations of my family have taken summer refuge in Fenway Park. My father was for five years early in his career a Boston police officer. I have many relatives and friends living here. Boston is one of those justifiably self-centered communities, the "hub" of Massachusetts on the map but the hub of the universe to its proud residents. I remember reading once that when the Titanic sank, the headline of the Boston Globe was "Boston Woman Lost at Sea."

My job at CIA is to make sure that intelligence analysis is both relevant and accurate. Today, Id like to address how we see trends in Russia, including the impact of the recent presidential election. These remarks may serve to amplify the remarks of Professor Marshall Goldman; I understand he spoke to you in May. Next, I'd like to turn briefly to the broader challenges the Intelligence Community faces around the world and how we are addressing them. President Dwight Eisenhower once said, and I'm not kidding, "Things are more like they are today than they have ever been before." I hope the CIA has a clearer view of today and tomorrow. I'll be happy to take any questions you have at the end of my remarks.

The Significance of the Presidential Election

Let me start with a few words about Yeltsin's recent electoral victory and what it means for the democratic transition in Russia.

It was five years ago today that Yeltsin took the oath of office as the first popularly elected President of Russia in its 1,000-year history. The election held one week ago was the first time that citizens of the independent country of Russia elected their president.

Western democracies can take considerable satisfaction in the electoral outcome. Over the last two years, most analysts had warned that Russian voters longed for either the Communist past or an imperialist future. When given the choice between these options and reform, Russians overwhelmingly opted to continue reform. Their support for reform, of course, cannot always be interpreted as support for Yeltsin. In fact, polls show that half of Yeltsin's supporters in this last round would have preferred to vote for someone else.

This election gave Russian citizens a clear choice between two different political and economic models. The public took its civic responsibility seriously. In fact, the turnout rate for this and other recent Russian elections--between 65 and 70 percent--far surpassed the rates of our own presidential elections. And the vote occurred on schedule despite pressure for postponement or cancellation from hard-liners in Yeltsin's administration.

During both rounds of the presidential election, the vote was held peacefully and, overall, freely and fairly. Just as important, the losing side seems willing to abide by the result. Zyuganov made heated claims about Yeltsin's unfair advantages, but the Communist candidate accepted the runoff results immediately and did not call for demonstrations.

Nevertheless, the Communists are undoubtedly planning for future electoral battles. By the end of this year, gubernatorial elections are scheduled in as many as 52 of Russias 89 provinces. The Communist faction in the State Duma will also concentrate on resisting many of Yeltsin's legislative initiatives.

Why Did Yeltsin Win--And What Did We Learn From the Election?

The Russians have come a long way, but the election campaign showed that Russian democracy still has a ways to go. Some of Zyuganov's protests were quite valid. Yeltsin, for example, did dominate the mass media. He also mobilized government personnel and funds to stage a meteoric rise in his popularity ratings from single digits in early 1996. And there are credible charges that he exceeded the legal limits for campaign financing.

Another factor behind Yeltsin's victory was his campaign's use of sophisticated campaign tactics such as polling and his heavy reliance on TV advertising. And as Time Magazine reported--or perhaps sensationalized--this week, he also had the benefit of some experienced US campaign consultants.

Yeltsin's summer resurrection from a particularly gloomy political winter also results, I think, from three other factors: Communist blunders, Yeltsin's fear tactics, and the Lebed factor. The Communist campaign concentrated solely on door-to-door campaigning rather than sophisticated media placements--they lost the old-fashioned way. Zyuganov also failed to extend his political base beyond the elderly, poor, and rural voters. Rather than try to sway voters in the middle of the spectrum, Zyuganov insisted on preaching to the choir and did not soften his hard-edged message. Neither did he separate himself from some of his Stalinists allies in the Communist camp. This, in turn, made it all the easier for Yeltsin to employ his main tactic--scaring Russian voters with his charge that Zyuganov would bring back the totalitarian past. Last but not least, Yeltsins alliance with retired General Aleksandr Lebed, his newly named security adviser, played a critical role in altering the electoral math.

What Are the Implications of Yeltsins Victory for Russian Policy?

We don't follow Russia because its intrinsically interesting--though, frankly, it is. CIA exists to provide intelligence on issues affecting US interests. The fact remains that Russia is still a major nuclear power, and that anti-US and anti-Western groups and states are seeking Soviet-era systems and fissile material. Of course, Russia's domestic economic and political policies directly affect US interests as well. Events in Russia, moreover, will continue to have broader implications for security in Europe--a region of vital interest to the United States.

One way to look at how a Yeltsin second term will shape up is to contrast it to what Zyuganov would have offered Russia had he been elected. Even before his most recent illness, Yeltsin clearly lacked the stamina and political incentive to be the kind of zealous reformer he used to be. No longer is Yeltsin the towering symbol of reform he was when he mounted a tank in 1991 to push back the coup plotters.

Nonetheless, a second Yeltsin term is certain to be much more open to the West than a Zyuganov presidency would have been. Yeltsin will probably do more to protect civil and political liberties than Zyuganov would have. Knowing that he has, at most, only four years left in power, Yeltsin may try to press hard for such measures as the privatization of land or other reforms.

Chances are much better, however, that Yeltsin's second-term record will be less coherent. Yeltsin will face tremendous pressure to moderate some of the reform measures already in place. Some advisers, for example, will argue that privatization and freedom of movement within Russia fuel crime and corruption. Yeltsin himself has said he wants to emphasize law and order, the social safety net, and a more forceful foreign policy.

What policies do we expect?

What do we now expect of Yeltsin in terms of his new government and his domestic policies? The President's decision to retain Chernomyrdin as Prime Minister suggests he will lean toward reform, but more cautiously. Yeltsin will probably retain his core goals--marketizing and stabilizing Russias economy and establishing a pluralist state with relatively protected civil liberties. He will probably try to fulfill the conditions of the IMF's three-year credit, negotiating any deviations made necessary by election campaign spending. He is also likely to continue land reform and privatization--though he will curtail the tainted loans-for-shares privatization scheme.

At the same time, we would not be surprised to see some protectionist trade policies and the continuation of state subsidies to select domestic industries and agriculture. We also expect the influence and activity of Russia's security services to remain significant.

On foreign policy, Yeltsin is likely to give occasional voice to nationalist themes, which have broad appeal across the Russian political spectrum. Some advisers will argue for more forceful opposition to NATO enlargement, a tougher sell on arms control, and revival of Russian relations with Third World states that were closely allied with the former Soviet Union.

On the issue of Chechnya, Russias hesitancy in fulfilling the terms of the peace accord signed shortly before the election suggests that Yeltsin is sanctioning or initiating a harder line. Overall, the prospects for reestablishing peace in Chechnya seem increasingly remote. We worry that this could make the rebel forces more inclined to resort to terrorism again--either inside Russia, or possibly, outside.

Russia's Economic and Political Strides

Let me try to pull all this in perspective.

Ten years ago--just a few weeks short of the Reykjavik summit between Gorbachev and Reagan--few, if any, of us could have imagined what Russia would look like today. In 1986, the Soviet Union was ailing but very much alive.

Let me illustrate some of the changes of the past ten years. Take a walk along the main street of downtown Moscow--Tverskaya Street. In the old days, the street was called Gorkiy Street, after the Communist writer. Long lines of shoppers clogged the sidewalks in front of empty state-run stores. Shoppers carried netted bags that they nicknamed "Just-in-Cases"--"just in case" they found a store with a product worth buying.

On the Tverskaya Street of 1996, shoppers can choose from a wide range of colorful stores bursting with food and consumer products from all over the world. New construction is transforming the cityscape. The old Manezh Square just outside the Kremlin is today hardly recognizable as the place where Lenin once rallied crowds. Now, a very capitalist shopping mall is going up, with a business center complete with parking garage.

There have also been substantial structural changes in Russia's economy. The defense budget has been slashed by roughly 50 percent in real terms since 1992. Entrepreneurs have started hundreds of thousands of new businesses, which employ almost a third of Russian workers. More than 20,000 large enterprises and 100,000 small ones have been transferred from state ownership under Russia's ambitious privatization program. As a result, the private sector now accounts for more than 60 percent of Russia's gross domestic product.

Nearly all prices, once set by the state, have been freed. Russia now has a functioning civil code to govern market transactions and protect private property. The state monopoly on foreign trade has been dismantled, and market forces determine exchange rates. Inflation--which swelled to two-hundred fifty percent per month shortly after the collapse of the Soviet Union--has averaged about 3 to 4 percent per month over the past 6 months. That's still high by our standards, but its a significant achievement nonetheless.

Russia's political progress has been nearly as dramatic as in the economic sphere. In a country where religious activity was once all but banned, and churches were dynamited by government authorities, there is now a religious renaissance among both young and old. Even government officials show up at services, hoping to tap into the powerful symbolism of the church.

The print media are diverse and free-wheeling, despite their struggles to stay afloat financially without state subsidies. You heard that national television bent over backwards to portray Yeltsin in a positive light before the election. It's true. But it's also true that the Communists and nationalist print media were left unfettered. Independent television stations are springing up throughout the country.

Russians can now listen to the outside world. Millions of Russians tap into CNN. And every day thousands of Russians dial a modem to link up with the Internet and chat with computer users across the globe. Such contact with the outside world is the best guarantee against a return to totalitarianism.

I do not want to exaggerate the extent of change in Russia nor underestimate the obstacles that remain in its path. Much remains unchanged, particularly in regions far from Moscow and St. Petersburg. The institutions of civil society remain weak, and the rule of law often gives way to Presidential edict. The transformation to the market has wiped out the life savings of millions of Russians, crippled the state-run social welfare system, and fostered high rates of crime and corruption.

The growing disparity of income that has resulted from the reforms has spawned resentment of the so-called New Russians--the new class of entrepreneurs known for their vulgarity and arrogance. For example, they tell the story in Moscow about a New Russian who turns up at a Mercedes dealership, where he proceeds to buy a top-of-the-line silver Mercedes. As he is paying in cash, the salesperson suddenly stops counting the money. The salesperson says: Wait a minute, Sir. Didn't I see you just last week here, paying cash for the same make of car, and silver too? The New Russian answers: Of course, my good man. But in a week, my ashtray has filled up.

Resentment of change and nostalgia for the Soviet past partly explain the 40 percent of the vote that went to Zyuganov. We should also keep in mind that democracy and the market took centuries to develop in the West.

No Going Back to the Old System

The Russian system is by no means a model of Jeffersonian democracy, but the country is not likely to return to Soviet-style centralism. In the event a Communist or hard-line government were to come to power, at least three structural changes in the Russian system would hinder a return to the bad old days.

First, Russia is now a state in which powerful and diverse business interests have emerged. Among these groups are new entrepreneurs, industrial leaders, bankers, corrupt government officials, organized crime groups--and members of the old Soviet elite. Not all of these people, obviously, are disciples of Adam Smith. But they all share a common desire to hold on to their new wealth and property, and they have the clout to resist government efforts to take them away.

Second, over the past several years, a great deal of power has devolved from the central government in Moscow to regional governments in Russia's 89 territorial units. Not all of the governments in these regions are reform-minded, but most share one common interest: protecting their ability to call the shots in their territory by resisting central control from Moscow.

Finally, in addition to the emergence of business interests and the growth of regional autonomy, I would note that the telecommunications revolution will provide Russians with greater and greater access to the outside world in the coming years. This will continue to diminish the prospects for a future authoritarian regime relying on the levers of propaganda to sustain its rule.

So, What Will Russia Look Like In Ten Years?

Let me now venture some personal views on how I see Russia evolving over the next decade. Obviously, these are not intelligence-based judgments. Although we cannot know who will be Russia's next President, we can make some general predictions based on the known trends now molding Russia's landscape.

First of all, Russia's industrial decline is likely to bottom out--although progress could slow down if a future Moscow government props up large money-losing enterprises with massive subsidies. Whatever mistakes are made, it would be extremely hard for the government to recreate Soviet-style central planning. The private sector has already taken off with the transfer of hundreds of thousands of enterprises to private hands.

Nonetheless, Russia may well become much more of a corporatist system, with Financial-Industrial Groups holding increasing sway over resource allocations and political decisions. With the growing influence of groups connected with extractive resources, banking, and other key sectors, high-level corruption will almost certainly be a major force.

Over the next decade, central authorities probably will lose more influence over the regions. With the devolution of power to the 89 provinces, regional disparities are likely to grow. We do not foresee much chance that the integrity of the Federation will be threatened, as many feared was happening in 1992-1993--with one important exception. The Federation could splinter if Moscow insists on reinstating strict central control and takes away the powers that provincial authorities have come to take for granted.

Russian citizens also have come to take for granted the political freedoms that have flourished under Yeltsin, and a civic society has begun to sink roots. The public would react with great anger if Moscow tried to reinstate a political dictatorship and take away free elections, a free press, and freedom of religion and association. Support for democracy will gain force as the generation that grew up under Communism begins to die out. However, authorities may not face as much opposition if they continue to impose more restrictions on travel and residency--enacted in the name of fighting crime--or against religions not indigenous to Russia.

Moscow will probably have some limited success in reestablishing its sphere of influence in the Near Abroad and among Third World countries that were allied with the USSR. Nonetheless, Russia's sway in the international arena will also be limited by its military and economic weakness. Russia will probably also want to retain fairly good ties to the West to secure financial aid and a voice in resolving regional conflicts.

Let me make three points as we look ahead. First, Russia's transformation will continue for decades. It is not a short-term phenomena. One of the most extreme dangers, amidst much good news, in Russia is that political polarization could result in violence and instability. The center of the political spectrum is very weak, and wide ideological and political gaps exist between old-line Communists, the nationalists, and Russia's democrats. Few people appreciate how close the putchists in the Russian parliament came to seizing power in October 1993, when President Yeltsin had to rely on military force to retain control. There are still signs that the military is disgruntled and suffers from internal divisions. Although the Presidency remains in Yeltsin's hands, the Communists remain the strongest political force in the State Duma.

Second, although the nuclear threat from Russia is far reduced, Russia retains tens of thousands of nuclear weapons. The intelligence community will continue to carefully monitor these weapons and will remain alert to the possibility that they could fall into irresponsible hands.

Third, the rapid growth of criminal activity in Russia presents the Intelligence Community with a formidable challenge. Russian security officials say there are now over 8,000 organized crime groups in the country. About 200 are large, sophisticated criminal organizations with operations throughout the former Soviet Union and abroad. If Russian authorities are unable to check the growth of organized crime, the impact on reform and on Western interests could be profound.

Other Challenges to the Intelligence Community

Russia, then, will continue to be a high priority for the United States and for my analysts.

Let me turn now to a quick survey of other challenges around the globe:

--Several nations threaten regional stability with their formidable conventional military capabilities and their attempts to acquire weapons of mass destruction. Iran and Iraq are of particular concern. Iran continues to divert scarce economic resources to its military buildup. Tehran also supports terrorism and political violence, opposes the Middle East peace process, and abuses human rights at home.

Even as we concentrate on military and other threats from specific countries, nontraditional and transnational problems are becoming ever more prominent and important to American policy-makers.

Information Revolution

Making all these problems even harder to handle is the speed with which they can unfold. The communications revolution has vastly increased access to information from around the world. That tidal wave of information must be digested and carefully analyzed to inform the policymakers whose world is often moving in "fast-forward." Boston Globe columnist Ellen Goodman has rightly remarked, Information races ahead, but understanding creeps at its own pace.

There is another dimension of the information revolution that we are increasingly concerned about--the threat of attack against our information systems and information-based infrastructures. Hackers, criminal groups, and foreign intelligence services consider these systems lucrative targets. These threats will likely grow in the coming years.

Directorate of Intelligence Strategy

Now, let me turn, in conclusion, to the organization I manage, the Directorate of Intelligence, and the view I have of its future. For the Directorate of Intelligence, (or the DI, as we call it) change is an imperative, not an option. In the past decade we have witnessed a historic reordering of international relationships and an explosion of new technologies that are having a major impact on our information-based business. Change in the next decade likely will be equally dramatic.

First, as my global surf just indicated, the priority issues are becoming more numerous and more complicated: Ten years ago, our primary analytic effort was against the Soviet Union--its strategic forces, its politics and economy, and its activities around the world--subjects on which CIA was widely acknowledged to have special expertise. Over the next ten years, the DI will be expected to provide faster, focused, and sophisticated analysis on a much broader range of global, regional, and transnational issues--all of high priority to the President and other key intelligence consumers. On many of these issues, CIA will no longer be seen to have a unique comparative advantage over other government agencies and the private sector. We will need to concentrate our resources on what intelligence does best, collaborate more aggressively with outside experts, and invest early in the skills we will need to meet these priorities.

Customers will be more diverse and demanding: In 1986, most DI customers--the US government agencies and military leaders we serve--could still be serviced from Langley with written analysis in standardized formats delivered by courier. In 2006, all of our key customers will get personalized service and will be served electronically in a host of tailored formats by a workforce that will be increasingly deployed to Intelligence Community (IC) centers of excellence or with consumers to meet their specific needs.

The Information Revolution will either propel us toward new heights of advancement or swallow us up: In the mid-1980s, the DI analyst communicated within CIA by pneumatic tube; thousands of separate, unrelated files were maintained at Headquarters; the mainframe and "dumb" terminals were the "latest" in DI technology; a megabyte (1,000,000) was a lot of information; and most analysts saw computer expertise as a specialty in others' hands. Do you know, by the way, that in 1977 the president of a major computer firm addressed a meeting of the World Future Society here in Boston and said: "In the future there will be no reason for any individual to have a computer in his home." In 2006, every DI analyst will be adept in the use of his/her own interactive terminal combining telephone, computer, and television; worldnet will provide instant communications throughout the IC and consumer world, and across the globe; encryption will be unbreakable and fast; all information--for management as well as analysis--will be digitized or digitizable; and a terabyte (1,000,000,000,000) will be the norm for storage and retrieval of information. All this in a single generation! I must ensure that my analysts have the most advanced information systems and state-of-the-art analytic tools.

Workforce will be more flexible: Ten years ago, the typical DI officer expected to spend most of his/her career based at Headquarters in Langley--whether or not he/she switched jobs or areas of expertise--tied to the career service of a regional or functional office. Interdirectorate and cross-IC contacts existed, but stovepipes were the order of the day. Ten years from now, the workforce will be far more dispersed in various units and centers at Headquarters, across the Intelligence Community and overseas, and "forward deployed" with the intelligence consumer wherever he/she may be. A vigorous IC interaction will be enhanced by full electronic connectivity and a management stress on team building across the Community.

The DI will have greater outreach: In 1986, the interaction of DI analysts with academic and business experts was largely confined to the few who attended our seminars or provided contractual services. Our analysts often encountered suspicion or hostility among the broader communities. In 2006, the outside appearance of a DI expert will draw no more public attention than the presence of an officer from any other government agency, and analytic exchanges with outside academics and business experts across the Internet will be common. The expertise we need is out there. We need to be out there to get it! This is one reason, by the way, that I am delighted to be here today.

....I'll stop here. Thank you for your attention and for your hospitality. I'm sure that you have thoughts of your own on the subject of Russia's future and the challenges and role of the Intelligence Community. I'd be happy to respond to questions and comments.