1997 Congressional Hearings
Intelligence and Security

HEARING OF THE SENATE SELECT INTELLIGENCE COMMITTEE

SUBJECT: NATIONAL SECURITY THREATS

CHAIRED BY: SENATOR RICHARD SHELBY (R-ALA)

WITNESSES:

ACTING CIA DIRECTOR GEORGE TENET;

DIRECTOR OF THE DEFENSE INTELLIGENCE AGENCY LT. GEN. PATRICK HUGHES;

ASSISTANT SECRETARY OF STATE FOR INTELLIGENCE AND RESEARCH TOBY GATI

216 HART OFFICE BUILDING

WASHINGTON, DC

10:06 A.M. EST

WEDNESDAY, FEBRUARY 5, 1997

SHELBY: The committee will come to order.

This year marks the 50th anniversary of the enactment of the National Security Act of 1947, which established the post-World War II era structure of our national defense and intelligence organizations, including the creation of the Central Intelligence Agency. With this legislation, the CIA's director was given the role of consolidating intelligence obtained by elements of other departments and agencies, usually referred to as the intelligence community, to support the vital national interests of this country.

Half a century later, the intelligence community's mission is more important in some ways than it was in 1947. While the Cold War is over, the U.S. confronts a host of threats, including terrorism, the proliferation of weapons of mass destruction, their delivery systems, and the spread of illegal narcotics.

In recent years, the intelligence community is increasingly being asked to justify its budget and therefore its role to the American public. The pressure for greater openness will persist for a long time to come, and this is as it should be. To the fullest extent possible consistent with the protection of sensitive sources and methods, Americans should be made aware of what the intelligence community is capable of accomplishing. This public hearing on the intelligence community's assessment of the national security threat to the United States is conducted in this spirit, to inform the American public about the threat to their country and their country's interests.

We have here with us today Mr. George Tenet, acting director of the Central Intelligence Agency; Lieutenant General Patrick Hughes, director of the Defense Intelligence Agency; and Assistant Secretary of State for Intelligence and Research, I&R, Ms. Toby Gati. We welcome you all to the committee.

And I would like to take just a moment to note that Ms. Gati has recently been the subject of a State Department inspector-general investigation regarding allegations about improper disclosure of classified information. This investigation concluded that the allegations were without merit. This committee has enjoyed a close and productive working relationship with Assistant Secretary Gati, who we believe is a capable and respected public servant with demonstrated integrity. And we look forward to continuing that close relationship with Ms. Gati in the 105th Congress.

Acting Director Tenet will give his statement, and then we will open the session to five minutes of questions from each member of the committee. General Hughes and Ms. Gati -- Secretary Gati will submit their written testimony for the record and are available to answer questions. At the conclusion of this session, we will recess and reconvene in SH-219 for a closed session to address members' questions regarding classified details supporting the witnesses' opening statements and testimony.

Senator Kerrey?

SEN. ROBERT KERREY (D-NE): Thank you very much, Mr. Chairman. I join you first of all in welcoming Acting Director Tenet, General Hughes and Assistant Secretary Gati to this very important hearing. And I realize that much of the supporting data for the testimony that we're going to hear today must be examined in closed session to protect intelligence sources and methods.

But I am pleased we're having at least part of this hearing in the open because it's important for the American public to hear about the threats which cause the greatest concern to the intelligence community. This annual public review of the threats is probably our most important hearing, and it sets the context for the resource decisions we will make in the intelligence budget. But even more important, it informs the public that there are still threats to the nation, and the people who work for our witnesses are sizing the threats and helping us to counter them.

We have a special obligation to size the threats, to prioritize them in terms of the pain they could inflict and the likelihood of their occurring.

One of the frustrations I have felt as a senator and as a member of this committee, Mr. Chairman, is the tendency in our post-cold war world to slip from threat to threat following the curve of journalistic interests. I can no longer include the administration in that criticism because by presidential directive the administration has laid out a classified set of threat priorities which guides the intelligence community. And I'd like to see the same kind of prioritization guide the public debate based on what a particular threat could do to our country and when it could do it.

Before the testimony begins, I, like you, Mr. Chairman, would like to -- second your recognition of the fact that the State Department's IG has found no basis for the irresponsible charges maliciously leaked to the press that Assistant Secretary Gati had improperly disclosed classified information. This kind of baseless character assault has unfortunately become part of the price many officials pay to perform public service. But that doesn't make it any easier to bear. I and the committee continue to benefit from Secretary Gati's counsel, and the country continues to benefit from the impact of her strong leadership at I&R.

Thank you, Mr. Chairman.

SEN. SHELBY: Senator Kyl?

SEN. JON KYL (R-AZ): Mr. Chairman, I don't have a statement. I appreciate the witnesses' being here. I am sure I share their desire to get on with providing the information that we're seeking today. I just want to make one preannouncement, and that is that as chairman of the Judiciary Committee's subcommittee on Terrorism and Technology one of the things that we're going to be doing is holding some hearings on terrorism, some of which will be overlapping jurisdiction, and we'll certainly appreciate the cooperation of the agencies represented here in that regard.

Thank you.

SEN. SHELBY: Thank you, senator.

Senator Glenn?

SEN. JOHN GLENN (D-OH): Mr. Chairman, I -- this is the one hearing every year that by tradition, I guess, more than anything else -- not by committee rules -- is open, in which we sort of lay out the general parameters of things. And I think it's good that we do this every year and want to congratulate you on having this hearing here. And we flesh this out, then, with our other more classified hearings and may have a closed session on the end of this one, I guess, if we feel --

SEN. SHELBY: That's fine.

SEN. GLENN: -- that's the direction we go. So I just want to make that statement here this morning. We don't have most of our hearings open, and I don't think they should be open. But this is the one where the posture statement really is open for everybody and should be open, and I just want to make that statement.

Thank you.

SEN. SHELBY: Senator Robb?

SEN. CHARLES S. ROBB (D-VA): Thank you, Mr. Chairman. I join particularly Senator Glenn's sentiments. I understand the need to have this particular hearing open, but I hope that most of our hearings will be closed so that we can go into details that would not be appropriately discussed in this forum.

I thank you.

SEN. SHELBY: Senator Roberts?

SEN. PAT ROBERTS (R-KS): After last night, Mr. Chairman, I think probably brevity is in order. (Subdued laughter.)

SEN. SHELBY: Senator DeWine?

SEN. MIKE DEWINE (R-OH): (I have no ?) -- (off mike).

SEN. SHELBY: Senator Coats?

Mr. Tenet?

MR. TENET: Thank you, Mr. Chairman.

Senator Roberts, I might be in a little trouble, but I'll trim back. (Subdued laughter.)

Mr. Chairman, there are many challenges we face, but I want to focus on five critical challenges, as we see them, to U.S. national security interests. First is the continuing transformation of Russia and the evolution of China. Second are those states -- North Korea, Iran, Iraq -- whose hostile policies can undermine regional stability. Third are the very important transnational issues -- terrorism, proliferation, international drug trafficking, and international organized crime. Fourth are those regional hot spots -- such as the Middle East, the South Asian subcontinent, Bosnia, and the Aegean -- which carry a high potential for conflict. Fifth are states and regions buffeted by human misery and large-scale suffering, states involved in or unable to cope with ethnic and civil conflict, forced migration, refugees, and the potential for large-scale deaths from disease and starvation.

Let's start with Russia, Mr. Chairman.

With little preparation and no historical experience and a tradition of central control dating back hundreds of years, Moscow has made some remarkable progress in building entirely new political and economic institutions. Politically, for the first time in Russian history, national and local elections have become a regular part of the political landscape. Equally important, Russia has made significant progress in building a genuine market-driven economy. It has freed prices, achieved some measure of financial stability, privatized most small and medium-sized industry, and ended the dominant role of the country's defense industries. These are major gains.

Let me point out some things that concern us. Renewed concern about President Yeltsin's health and Duma calls for limiting presidential powers highlight the fact that Russia's political institutions are young, fragile, and untested. Some have prospered, but others look for a new strong hand that would provide them with the predictability and social net of the Soviet system. Similarly, there are calls for law and order to combat organized crime and government corruption. These problems stem in large part from the absence of legislation that sets down clear rules and guidelines for economic behavior in Russia. New laws in areas such as private property and taxation would reduce the size of the burgeoning unreported economy, generate much-needed revenue, and diminish the opportunity for organized crime.

The Russian military, Mr. Chairman, is suffering from economic hardship and flagging morale. The process of downsizing, reorganizing, and adjusting to new missions will be long and hard, given reduced defense resources.

Despite these difficult times for the military, Russia retains, however, a major nuclear arsenal, nearly 6,000 deployed strategic warheads, and a range of development programs for conventional and strategic forces. In terms of military planning, the Russian government is emphasizing research and development over production at this time and parceling out a tight defense budget.

Russian military planners are also examining very closely the various ongoing arms-control regimes and treaties, particularly CFE, START II, CWC, and ABM, to assure that they adequately protect what they perceive to be key Russian security needs during this period of change.

In the international arena, Mr. Chairman, Moscow has sought to ensure its great power status by bolstering its ties to Germany, France, China, and Japan, and demanding an equal voice in the resolution of international issues, particularly with regard to the shape of future European security architecture and NATO's role in it.

Closer to home, Moscow has placed a high priority on retaining its influence in the newly independent states and minimizing the influence of outside powers. President Yeltsin and other leaders have pursued integration with some of these states through multilateral mechanisms, the Commonwealth of Independent States, and bilaterally. For example, Russia and Belarus have both talked about reuniting, although many practical obstacles remain. Moscow also seeks to play an influential role in the Caucasus in Central Asia, where rich energy resources have drawn considerable attention.

Let me turn to China, Mr. Chairman.

Led by President and party chief Jiang Zemin, the senior leadership in Beijing supports China's emergence on the world stage as a major economic, political, and military power. Over the past 10 years, China has become one of the world's fastest-growing markets, currently second only to the United States in annual direct foreign investment into its economy. By early in the next century, China will have a much-improved force projection capability. China's military modernization efforts, however, will be hampered by the military's need to compete for limited resources against other national priorities. China has tapped into its vast foreign reserves to purchase weapons and weapons technology from Russia, including modern fighter aircraft, air-defense systems, and submarines. In fact, China('s) once hostile relationship with Russia is now touted by both sides as a new type of, quote, "strategic partnership" for the next century, with a strong emphasis on cooperation and a high level of contacts, but not a strategic alliance.

Beijing's leaders view the 1 July 1997 reversion of Hong Kong to Chinese rule as an important symbol of China's reemergence as a world player. What remains unclear is the degree to which they will tolerate political activism and dissent in Hong Kong after the reversion, given their intolerance of political dissent within China. China's new assertiveness has led at times to frictions with Washington. Among these are troubling proliferation activities by China, particularly with Pakistan and Iran, and continuing concerns about human rights.

Mr. Chairman, let me now turn to North Korea. The continued deterioration of the North Korean economy is weakening the stability of the regime. North Korea's grain harvest last fall was less than half of its projected need for this year, and industrial operations in December fell to less than half the pace of 1992. Shortages of food and fuel in the military are becoming common and causing morale and discipline problems.

Potential dangers to the regime could include widespread food shortages among front line military units, the security service's becoming reluctant to crack down on dissent, or elites concluding that their fortunes were no longer linked with Kim Jong Il. We have no evidence, Mr. Chairman -- let me repeat, we have no evidence -- that any of these conditions are present at this time. But we remain concerned over how these uncertainties may play out over the course of time.

The north's economic difficulties make it even more dependent on external assistance. Without additional imports or aid of at least one million tons, the north will probably face worse food shortfalls by the spring.

Despite these difficulties, Mr. Chairman, the north's 1.1 million-strong military retains the ability to inflict enormous destruction on allied forces in South Korea. Its long range artillery and surface to surface missiles near the DMZ can hit forward defenses and U.S. military installations and Seoul.

On a more positive note regarding the October 1994 agreed framework, Mr. Chairman, the IAEA has maintained a continual presence at Yongbyon since of May of 1994, the fueling of the reactor. North Korea has not refueled its reactor or operated its reprocessing plant at Yongbyon, and it's halted construction of additional larger reactors.

Mr. Chairman, let me turn to Iran. Iran today is beset by economic stagnation, rising numbers of disaffected youth, and questions about the clerics' day to day role in governance. Despite growing discontent among many Iranians, however, the clerics have proven adept at burying their differences in the interest of retaining power. They stand poised to capture the presidency in June.

Iran's leaders are seeking ways to undermine our interests without challenging our conventional strength directly by improving their military capabilities relative to their neighbors, using terrorism, and developing weapons of mass destruction. Moreover, the Iranians are attempting to improve their foreign ties by reaching out to the Turks and Kazaks and by solidifying their oil supply relationship with Germany and Japan.

Iran is improving its ability to potentially threaten its neighbors and interdict the flow of oil through the Strait of Hormuz. Iran has acquired Kilo class submarines from Russia and is upgrading its antiship missile capabilities. It's building capabilities to produce and deliver weapons of mass destruction and in less than 10 years probably, Mr. Chairman, will have longer range missiles that will enable it to target most of Saudi Arabia and Israel.

Iran also sees terrorism as a useful tool. It continues to carry out its own terrorist acts, sponsors training in the region, and provides millions of dollars to a variety of militant Islamic groups such as Hezbollah and Palestinian groups opposed to the peace process.

Let me turn to Iraq, Mr. Chairman. Iraq under Saddam Hussein continues to present a serious threat to U.S. forces, interests, and allies. In 1996 Iraqi forces again fired at coalition forces as Saddam tested his limits as he has every year since Desert Storm. His military remains the largest in the gulf region, an abiding threat to Iraq's southern neighbors and to the Kurdish and Shi'a Iraqis.

Given Baghdad's continued evasive stance toward U.N. inspection, sanctions are unlikely in our judgment to be lifted anytime soon. Saddam has managed to survive the pressures and sanctions that have created mostly due to the strength of his security services, which have been effective in penetrating and destroying organized political opposition inside Iraq. Nevertheless, Iraq's economy is in shambles, and intense resentment that the regime has engendered in Iraq still poses a constant threat to Saddam and his family, as suggested by the assassination attempt against his son Uday in December.

Saddam's propaganda machine has touted U.N. Resolution 986 as the beginning of the end of sanctions. If properly enforced, however, 986 will not improve significantly the regime's crumbling infrastructure. Pessimism even within Saddam's establishment is likely to resurface as the Iraqis realize the sanctions remain intact, the economy remains crippled, and institutions like the Iraqi military continue to decline. We cannot rule out, however, Mr. Chairman, that Saddam's frustrations will prompt him to threaten another military confrontation with the West.

Let me talk a bit about the transnational issues I mentioned, Mr. Chairman. I'll get through these quickly.

We all know about the problems of terrorism. International groups are expanding their terrorist networks, in some cases literally encircling the globe. They use these networks to recruit, ship arms and material, and move operatives. We have also seen increasingly complicated channels for soliciting and moving funds, including the use of seemingly legitimate charitable or other nongovernmental organizations as conduits.

With regard to weapons of mass destruction, Mr. Chairman; not too many years ago, the primary threat facing the United States was from a single country with its thousands of nuclear weapons on alert. Today, more than two dozen countries are developing or acquiring weapons of mass destruction. Our concern is increasing as the ability of those countries to develop indigenous capabilities, including production technologies, continues to grow. Several U.S. programs, such as the Nunn-Lugar Program on cooperative threat reduction, are designed to improve the security of nuclear weapons and materials in the countries of the former Soviet Union. Nonetheless, the risk of diversion of weapons and material remains one of serious concern to us.

Nuclear weapons are not our only worry, Mr. Chairman. About 20 countries -- among them Libya, Iran and Syria -- have or are actively developing biological and chemical weapons. We are also concerned about the possible terrorist interest in such weapons, especially given the relative ease with which some of these weapons can be produced in simple laboratories. As the Aum Shinrikyo incident in Tokyo proved, no country is invulnerable to the possibility of civilian casualties from terrorist groups.

Mr. Chairman, we all know how dangerous drug trafficking has become. Counter-narcotics operations have dealt significant blows to some of the world's most notorious drug-trafficking organizations, such as the Cali cartel. Yet other Colombian traffickers, as well as traffickers in Peru, Bolivia and Mexico, seek to increase their role. Money laundering and financial crime, alien smuggling and criminal involvement in the gray arms trade, are also expanding. This is a problem, I think, we can talk about a little bit more, Mr. Chairman.

Mr. Chairman, there's a new threat I've put in this transnational threat area, and that is security to information systems in the United States. The tremendous growth in communications technology is shrinking distances and weakening the barriers to the flow of information. This technology also presents us with an important transnational challenge -- protecting our information systems. Recognizing this problem, we are assessing countries that have such potential, including which appear to have instituted formal information warfare programs.

To regional hotspots, Mr. Chairman. I'll touch at greater length on Bosnia, and we'll get through this.

There have been a number of positive developments since the Dayton Accords, and I think we have to talk about positive and negative in the Bosnian context. The exchanges of territory envisioned under Dayton occurred without bloodshed. The former warring parties have significantly demobilized their forces and put their weapons in containment sites, making it more difficult for them to resume fighting. The Iranian-Bosnian military relationship has been terminated, and we judge that Bosnia is in compliance with the foreign forces provision of Dayton.

Central institutions, although still in an early stage of development, were established following national elections. Economic reconstruction assistance has begun to flow in, although not at a level to make the peace process self-sustaining.

Looking out over the next 18 months, opportunities have improved for creating the conditions that would permit the withdrawal of SFOR without a resumption of conflict. In particular, the split between Milosevic and the Bosnian Serb leadership, at least for the time being, has removed the option of the Republic of Srpska's unification with Serbia. As a result, Bosnian Serb leaders will have an incentive to cooperate to a limited extent with Bosnian central authorities. If this cooperation can be sustained, the next 18 months provides an opportunity to build momentum on economic reconstruction and economic ties between Srpska, Croatia and the Federation.

But there are challenges here, Mr. Chairman, serious challenges. Relatively little progress has been made in implementing provisions of Dayton relating to the freedom of movement and resettlement of about 2.5 million refugees and displaced persons. More challenges loom ahead, including the reaction to the Brcko arbitration decision expected later this month. At the same time, we must be concerned about Kosovo, where the situation remains tense. Some fear that Milosevic might even provoke a crisis in Kosovo to distract attention from domestic problems.

Mr. Chairman, there are four regional crises in my testimony. The one I will highlight is the one in South Asia. In South Asia, relations between India and Pakistan remain poor. Although neither side wants war, the two rivals could stumble into it, mostly as a result of misperceptions of each other's intentions and military posture. Deterrence, which has worked for years, could break down in a crisis, and the time available for national leaders and external powers to defuse tensions will be limited. Leaders in both India and Pakistan face daunting domestic and political challenges at the same time that they have to contend with critical national security issues from nuclear testing to Kashmir that require real political strength.

Finally, Mr. Chairman, I talked a bit in my testimony about humanitarian crises, places where we -- these are non-traditional challenges, but places where we're called upon to intervene because of our military capability to avoid real suffering on the parts of human beings. This is an area where there will be more business for the intelligence community, not less business. And I highlight it for you in my testimony.

Finally, Mr. Chairman, I'll close with three points about our future work. We're trying to array our resources against this expanding list of challenges. We will be working to close critical gaps on the highest priority intelligence problems. Success will mean greater security for U.S. forces and better tools for U.S. efforts to head off regional instability and manage relations with major powers.

Second, because there will be no relief from the sort of crises that appear suddenly and do not fit the traditional mold, we will also be providing global coverage, including a capacity to surge during crises.

Third, we will be working closely with you, Mr. Chairman, and the vice chairman in planning investments to ensure a sound intelligence capability well into the 21st century.

Thank you, Mr. Chairman.

SEN. SHELBY: Thank you, George.

The Senate is being asked to advise and consent to ratification of the chemical weapons convention, the CWC. Is that treaty verifiable, or would you rather get into this in a closed hearing?

MR. TENET: Well, Mr. Chairman, there are a few things I can say in open session.

SEN. SHELBY: Okay.

MR. TENET: I'll say this: the verification judgment is a larger political judgment that you will make, Mr. Chairman. We tell you how well we monitor these events, and then you'll make some other judgments for yourself. Here are the facts. This is not a treaty that will be perfectly verifiable. But here are the facts.

There are tools in this treaty that as intelligence professionals we believe we need to monitor the proliferation of chemical weapons around the world.

SEN. SHELBY: And what are those?

MR. TENET: There are data exchanges, there are on site inspections. Those provide us with a critical ability to make judgments about places that we're going to cover anyway, Mr. Chairman, but which pose daunting challenges to us.

Now over the course of time, as confidence in this regime increases, we think our monitoring judgments may well improve. But the fact is, from the perspective of intelligence professionals, having the tools at our disposal is better than not having them at our disposal. We can never guarantee that a power that signs up to this agreement won't cheat. These are -- chemical and biological developments are small. They're easily hidden. They're not like big nuclear developments that have big signatures, that that everybody understands --

SEN. SHELBY: In other words, it will be fairly easy to cheat (someone ?) -- easier.

MR. TENET: It will be easy to cheat, Mr. Chairman. But in the absence of the tools that the convention gives to us, it would be much harder for us to apprise you, apprise the military and policy makers, of where we think we are in the world with regard to these developments.

SEN. SHELBY: Does the president's budget, if you've considered it, contain adequate funding to maintain and improve the intelligence community's abilities to adequately verify this?

MR. TENET: I think our budget --

SEN. SHELBY: Because you're going to need a lot of help.

MR. TENET: Yeah. I think our budget, Mr. Chairman, has us on the road to get healthier and better. We have ourselves recognized that historically we, the intelligence community, may have devoted more time and attention to nuclear issues than chemical and biological issues. And I believe we are now in the process of reevaluating very carefully what that budget should look like over the next four or five years.

Mr. Chairman, General Hughes (may have to deal with this ?) --

SEN. SHELBY: General Hughes, you want to comment?

GEN. HUGHES: I completely agree with the acting director's comments about verification. I can add to his comments, perhaps in closed session.

With regard to the intelligence community, my view is that we do need to reprioritize ourselves to some degree toward more esoteric forms of weapons of mass destruction, like chemical and biological weapons.

However, this is a long-term proposition, and I don't want to leave you with the impression that we're going to be able to fix all of our problems rapidly. It's going to take some time to gain the capabilities we need. This is a very difficult and somewhat technically challenging area.

SEN. SHELBY: Secretary Gati?

MS. GATI: We will be looking, in the State Department, to the intelligence community, to I&R, DIA, CIA, to gain information on the verification provisions. And they will tell it like it is, as they always have. And that will guide us in dealing with countries, demarche-ing them, finding out what they have, and, I think, provide a basis for a more effective monitoring than we would have without the treaty.

SEN. SHELBY: I want to shift into Khobar Towers. Have there been any developments that you can share in this open hearing ascertaining who was responsible for the Khobar Towers bombing, and do you agree, Mr. Tenet, with FBI Director Freeh and Attorney General Reno that the Saudis have not cooperated fully in this investigation? Have they changed?

MR. TENET: Mr. Chairman, I would defer any discussion of Khobar Towers to a closed session. I would respectfully decline to have anything to say about it.

SEN. SHELBY: Okay. We'll get into it then.

Senator Kerrey?

SEN. BOB KERREY (D-NE): Thank you very much, Mr. Chairman.

First of all, I appreciate very much both, Mr. Tenet, your delivered testimony as well as the other written testimony. Let me make a couple points.

First is I think it's terribly important both in open and closed session -- and I suspect we're going to get into it during the confirmation process of Mr. Lake -- that we increasingly call upon you to be independent -- in other words, to come to us both in the open and in the closed session with an understanding up the food chain to the political crew at the White House that you have the not only ability, but you have the requirement to come before the people's Congress and say "This is what we think the threats are. You may -- it may make you uncomfortable. You may wish it was something else. You may wish I didn't say this to you, but this is how I size the threats, particularly these are the things that can do bad things to us."

And General Hughes, I appreciate your having von Moltke the elder's quote in there, which I think is worth reading. It said, "Gentlemen, I notice that there are always three courses of action open to the enemy and that he usually takes the fourth." I mean, that does summarize the dilemma that you face in trying to protect the interests and the people of the United States.

Secondly I'd say that I think that we've got to come up with a strategy -- and we've talked about it privately -- of dealing with this encryption issue. And my personal recommendation is flipping to the other side of the coin and instead of worrying about -- focusing only on our need to break codes in order to keep the nation secure, but also our need to make codes. I mean, I think if we focused on the second area, our need to build that secure global communication network and get a global agreement, then I think it's more likely that the encryption issues will be settled in a satisfactory fashion: that is, a fashion that's both satisfactory to our law enforcement and security interests and to the interests of promoting our economy.

Next, I think it's very important to be very aggressive in saying who is in charge of some of these operations. I continue to be not critical of the FBI being in charge of the Khobar Towers investigation, but I certainly raise the question that if I've got a military operation, does it make sense to put a law enforcement agency in charge of investigation? We've talked about it again both privately and publicly. But if I've got a military operation in place, it seems to me that it's at least appropriate for me to ask the question, should I have military intelligence agencies in charge of the investigation itself?

A fourth thing I'd say is that I do believe -- and General Hughes, your testimony, which I find to be, again, characteristically good -- it is increasingly apparent to me that our response to threats is going to have a significant civilian component, a la Bosnia. I mean, our military are doing a superb job in theater. Indeed, you were -- we had visitations as you prepared to develop the intelligence capability, which in and of itself is a force in the region. I see right now still kind of a withered civilian side. We don't have a strong individual in charge of that civilian side with the power to execute and the ability to coordinate with the military officer on the ground. And I believe, particularly as you go through your assessment of the threats, I mean, you're identifying, first of all, a very important, I think, prerequisite. And I noticed last night in the State of the Union Address there was a big round of applause for almost everything relating to domestic, and when he got into foreign policy areas, far less enthusiasm.

You say -- you assume in your testimony that the United States remains a global power politically, economically, military, and that our country continues its active engagement in world affairs. I think it's very important for us to make the case as to why that's necessary. In and of itself, I think that's a very important presumption for us to continue to make to citizens who we're asking to give of their tax dollars in order to pay for all this stuff.

Once that's done, however, as you go through the threats as you're sizing them, in the new paradigm of threat assessment, not only do we get into asymmetrical threats, that is to say threats that some government doesn't control, but increasingly those threats are coming as a result of demographic changes, humanitarian trends, resource scarcity, the WMD and missile proliferation very often has a civilian undertow to it as well. So I think it's important for us to ask ourselves the question, if that's the case, then how do we change our own delivery of intelligence and our own assessment of these threats? And how do we change on our side, how do we change the way that we order the organization so that when you've got an operation out there, somebody's in charge and is able to direct resources so as to be able to get the job done. None of this that I've said has, at the end of it, a question of any kind. I've taken my first five minutes here merely to make a statement that I think you need to be independent. I think this encryption issue needs to be dealt with differently. I think you need to force a discussion about -- "Oh, if you don't mind, we'll do it," of who's in charge. And I think we've got to increasingly deal with the implications of operations that will have significant civilian components.

SEN. SHELBY: Senator Kyl?

SEN. JOHN KYL (R-AZ): Mr. Chairman, first of all, let me thank Mr. Tenet for a good brief but thorough survey of the situation, and it was very helpful. Since the chairman opened with a question on the Chemical Weapon (sic) Convention and the president talked about that last night, let me ask you a couple of questions.

Last fall, the administration declassified a portion of the National Intelligence Estimate, which had been published in August of 1993, which stated, and I am quoting: "The capability of the intelligence community to monitor plans for the Chemical Weapons Convention is severely limited and likely to remain so for the rest of the decade. The key provision of the monitoring regime, challenge inspections at undeclared sites, can be thwarted by a nation determined to preserve a small secret program, using the delays and managed-access rules allowed by the convention."

Is this still the judgment of the intelligence community?

MR. TENET: Well, Mr. Chairman, I think the 19 -- we haven't updated 1993 estimate, but we will for when we have hearings. I'll say that our ability to monitor probably still is not very good.

But let me come back to the point I made at the beginning. If you're asking me as an intelligence professional what my judgment is with regard to whether I want these tools in place as they evolve and as we get better, I would say to you I want these tools in place. Why?

I know that countries sign up to treaties and cheat on treaties. The fact is is that an intelligence professional, bringing everything that we can to bear on subjects, information and access lead us to places we never thought we would get and give you, the policy-makers, some precision with regard to the threats we face. We will have to cover the most objectionable countries anyway. Having the tools to get information and access, I think, is a great benefit to us, as it has been in the case of Iraq and UNSCOM inspections.

SEN. KYL: Okay. The two tools that you mentioned were the on- site inspections and data exchanges. Regarding on-site inspections, of course, the treaty specifically prohibits the exchange of that information, that is to say, from the on-site inspectors to the intelligence agencies, or any other agency, of the country of the on- site inspector. So if an American inspector, for example, were on a three-member team going to Iraq, it would be illegal under the treaty for that American inspector to pass on the information to the United States that that inspector gains. So how could the on-site inspection tool be of use if we comply with the treaty?

MR. TENET: Senator, I'd like to talk about inspection regimes and the issues raised in closed session and thoroughly go after this point.

SEN. KYL: All right. The other item you mentioned, the other tool, is the data exchange. Now, this is the voluntary information that people fill out on the form. Clearly, that -- I gather you're not relying on Iraq or Iran or Libya to provide us useful information in that regard?

MR. TENET: You can never rely on them, but you need a starting point. You need a base line that you judge -- you make judgments against the base line you already have. And the fact is, is over the course of time you'll refine your judgments. We never rely on what people provide us, but you need another tool, and data always leads us places that we never thought we would get to. And as a tool to an intelligence professional, it's an important piece to build upon. It is not a panacea, Senator Kyl.

SEN. KYL: Data -- yes, data generally. I'm talking about the voluntary information provided by a country, let's say like Iran.

MR. TENET: Well, you can never rely on it.

SEN. KYL: Okay.

MR. TENET: But it is a starting point that then allows you to focus your collection and analysis, and then may allow you to focus where inspections go or don't go.

SEN. KYL: Sure. But if you rely upon inaccurate data, then you may be led to the wrong conclusion.

MR. TENET: I would never assume that what some countries who may sign up provide me is going to be absolutely accurate. I mean, there's gambling in this casino. (Laughter.)

SEN. KYL: On May 25th, 1994, the Wall Street Journal published an article which carried several quotes from a veteran Soviet chemicalweapons scientist who was jailed in 1992 for revealing Moscow's continuation of covert chemical weapon production. He revealed that Russia had developed binary chemical weapons made from ingredients not listed on the CWC schedules of controlled chemicals. In discussing this, he said the treaty, as it stands, will help not hinder Russia's production of deadly chemical weapons. And he said that Russian generals see the treaty as a way to dispose of their obsolete and hazardous stockpiles with American taxpayers' help while preserving their new classes of toxins.

A declassified portion of a May 1995 National Intelligence Estimate states that production of new binary agents would be difficult to detect and confirm as a CWC-prohibited activity. Is this still the judgment of the intelligence community?

MR. TENET: Can you repeat that again, Senator Kyl, that last piece?

SEN. KYL: Is it still the judgment of the intelligence community --

MR. TENET: I'm sorry, read the quote again for me. I'm sorry.

SEN. KYL: The declassified NIE, quote, "Production of new bionary agents would be difficult to detect and confirm as a CWC- prohibited activity."

MR. TENET: I'm sure that that is the case.

SEN. KYL: Thank you.

Thanks, Mr. Chairman.

SEN. SHELBY: Thank you.

Senator Robb?

SEN. ROBB: Thank you, Mr. Chairman.

All of us are interested in CWC. We have different perspectives on this committee in the Congress. But it's certainly an important matter. Mr. Tenet, can you give us any specific advantages that might accrue to the United States by our declining to ratify the CWC by April 29th?

MR. TENET: Well, senator, as I said to you, we believe that the tools that it would provide us as intelligence analysts are important to have.

SEN. ROBB: I'm not challenging that. I'm on your side on this. But what I'm asking at this point is are there advantages -- putting aside the fact that some of the advantages to ratification may not be as great as some might assume based on some of the questions that have been raised, but are there any countervailing advantages that would accrue to the United States by not ratifying, notwithstanding the fact that the convention will go into force and we will be left out?

MR. TENET: I don't believe so, senator, unless you had bilateral agreements with every one of these countries where you had the kinds of regimes in place that the CWC would provide. I don't believe so.

SEN. ROBB: So it's fair to say that you don't believe we'd give away anything by ratification.

MR. TENET: I think as intelligence professionals we can only gain.

SEN. ROBB: Okay. Let me ask you one other question that relates to the gathering of information, and that's specifically with respect to diplomacy. There is always debate over how much support to provide for our diplomatic efforts in this particular area. Sometimes those traditional sources can provide information that your intelligence sources might otherwise have to gain. Would you like to comment at all on the degree of funding for our diplomatic efforts as they relate to your intelligence collection efforts?

MR. TENET: Well, I think that -- and Ms. Gati may want to answer, but I think one of the things that have to trouble everybody is the decimation and the degradation of the State Department's infrastructure around the world has a profound effect on us as a country to deliver a sound national security policy.

Now if you're going to ask General Hughes or George Tenet or Louis Freeh or the director of DEA what the implications are, they're quite severe, because our embassies are the homes we live and work in overseas. So the continued vibrancy of the State Department as an institution, a platform -- we call it a platform in our business -- to allow us to do our work is absolutely important. We can't do this business without a vibrant State Department. We have all kinds of fancy ways we can think about getting around it, all of which cost a lot of money and have some implications that we can talk about in closed session. But the fact is that as platform, as a base for American national security interests to be pursued, it is a very, very important piece of the intelligence business.

SEN. ROBB: I'm attempting to groove a pitch. I (would let ?) Secretary Gati have an opportunity to swing at it.

MS. GATI: Thank you very much.

Let me first of all say that there is a synergism between the diplomatic efforts, the military efforts we make, and the intelligence efforts. And all of us who have worked together know the contribution that diplomacy, first of all, makes to our foreign policy, but also diplomats -- their knowledge of countries and their assessment.

You will look at General Hughes's testimony and note that the first three threats that he talks about are humanitarian needs, resource scarcity, demographic trends -- in other words, the kinds of things that the military has to be concerned about because it is called upon to respond, but are really the concerns of diplomacy as the first line of defense.

In my own testimony, we discovered when we were writing that the startling figure that there are 8 million American non-U.S.-government personnel residing outside of the United States, residing and living outside of the United States. These --

SEN. SHELBY: What's that figure again?

MS. GATI: Eight million. There are 5 million traveling and 3 million residing. These people look to the State Department as their first line of defense, whether it's a lost passport, whether it's information about the country they're in. And so this is a crucial role for the American public and also for the intelligence community.

Mr. Chairman, can I take one moment, if I could?

SEN. SHELBY: You go ahead.

MS. GATI: I would be remiss if I didn't go back to your kind words at the beginning of this session, and also those of the vice chairman. I want to thank you very much for what you said about me personally. What I experienced was an ordeal and what was written about me was malicious. And I do note with sadness that it could happen to anyone, but note with great pleasure that thanks to the inspector and general and to your bipartisan agreement, that the conclusions were valid. My case is closed.

Those who made those false charges against me and my husband should certainly have the decency to retract their story and apologize. Some of you know my husband, Charles, who is in this room, and he was subjected to false accusations, also. So speaking for him, too, let me thank all of you for restoring our good name.

SEN. SHELBY: Senator Robb, do you -- that was done on some of your time.

SEN. ROBB: I would just say I lost a little of my time at the end, but most of the questions I had I think are more -- no -- and I think that's entirely appropriate -- and would more appropriately be pursued in close session in any event, so I will withhold until that time.

SEN. SHELBY: Secretary Gati, I just wanted to respond to your comments.

Senator Kerrey and I said what we did because we have total confidence in you as an individual, as a professional. And we felt and know those charges were totally unfounded and were uncalled for. (Confers with Senator Kerrey off mike.)

Senator Roberts?

SEN. ROBERTS: Yes, Mr. Chairman. I have an observation. I am probably jumping the gun in making an observation on all the witnesses' testimony, and I want to thank them. I would agree with Senator Kerrey in his most pertinent reference to "von Moltke, the elder." Was there a von Moltke the -- what -- the junior?

SEN. KERREY (?): Yeah. (Laughter.)

SEN. ROBERTS: Yeah.

SEN. SHELBY: Junior in a lot of ways.

SEN. ROBERTS: He was probably a lieutenant.

In General Hughes's statement, he is, I think, also quoted, in regards to Machiavelli, who is my administrative assistant -- (laughter) -- "There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things." And I think you have all tried very hard and successfully to address the new order of things. And I think that's a good quote, along with Senator Kerrey's reference.

I had the privilege of serving on a commission on America's national interests in the last session of Congress, along with my colleagues Senator Graham (sp), Senator Nunn and Senator McCain. I was only a House member in my previous life. And this is a report put together by the co-chairs Rita Hauser (sp), General Goodpaster and our former NATO ambassador Bob Ellsworth.

And they were concerned that after four decades -- and I am quoting here: "After four decades of extraordinary exertion, the fatigue of many and distraction of some with special interests leave American foreign policy passive and without direction in a fast- changing and uncertain world."

Pretty tough comments, but I would agree with that. And they have a statement here: "But today Americans have no vivid shared sense of this nation's interests in the world, no clear ranking of those interests." And you have listed those interests that it's our job and the administration's job to do the priority listing. "Many find it difficult to distinguish between America's national interests and whatever interests simply interest themselves personally. Our commission found chastening the experience on the Council on Foreign Relations nationwide year-long study -- one principal conclusion, and that was not consensus but dis-sensus. Even among the foreign policy elites there is widespread confusion and little agreement about the U.S. interest today."

Now, this commission, with the assistance of the Harvard University Center for Science and International Affairs, the Nixon Center for Peace and Freedom, and the Rand Corporation, did list the concerns that you have listed and then ranked them in their priority.

And I would say, Mr. Chairman, that I am in complete agreement with your statement that this public hearing is extremely valuable to alert the American public that we need a strong intelligence capability and investment so that we can in fact, in the new order of things, make some priority judgments. I don't think that's being done.

Do you think -- and I'll ask all three very quickly -- that this is a correct summary? And I'm -- when I say "this" I'm referring to that paragraph I read: that Americans have no vivid shared sense of this nation's interests in the world, no clear ranking of those interests.

I am very concerned about this. And without the intelligence capability that you are providing and will provide, we will not be able to do that.

Mr. Tenet, would you respond please, sir?

MR. TENET: Senator, I think that we have an advantage in that we do have a set of priorities that have been established by presidential decision directive that basically looks at the world and says that there are 10 or 15 things that matter the most to American security, and challenges us to focus our attention on them. It is a very powerful document for us, and it does say everything is not as important as everything else. In a time of diminishing resources and less people, we have to relentlessly focus on vital challenges. I think we are slowly but successfully getting down that road. So it's -- we're down that road.

I can't speak to the specifics of what we say about the American people there. But I just want to assure you that we do have a clear sense of what we have to do.

SEN. ROBERTS: I just don't think that it's a very high blip on people's radar screens post the cold war. And I think it should be, because it is an unsafe world.

General, do you have any comments in this regard?

GEN. HUGHES: I also believe that we have a good context in which to prioritize our intelligence gathering and our interests around the world from an information standpoint. I also am concerned about whether or not our focus is understood or shared by the broad population of the United States. I think we all need to work together to make sure that the real interests and concerns that we do have get -- the proper publicity and proper information gets out to the public. And as you said in your opening statement, sir, that's a good reason to hold open sessions of this type.

SEN. ROBERTS: Well, you say that we have to be actively engaged in your summary. I guess that's what we're summarizing here.

GEN. HUGHES: That's right.

SEN. ROBERTS: And Secretary Gati, if you can find the answer to having those who shine the light of truth in the selected darkness with selected flashlights to turn it in another way or to turn the flashlight off, why, let us know, too. There are many instances where unfortunately we have had similar instances. I suppose that's the value of the fourth estate, but sometimes it gets completely out of hand. And I associate myself with the remarks of the chairman and the distinguished ranking member.

I have nothing further, Mr. Chairman.

SEN. SHELBY: I'll ask all of you this basic question: missile threats to the U.S. Some of it you might want to get into in the other hearing, but just generally, what are the current strategic missile threats to the U.S. and theater threats to be deployed by U.S. forces? What are the projected threats, Mr. Tenet, for the next decade? Does the CIA and the rest of the intelligence community share the same view regarding this?

MR. TENET: Well, this is -- I have a long answer, so I'm going to give it.

SEN. SHELBY: Go ahead.

MR. TENET: And we should talk about this more in closed session. But let's talk about the strategic threat first.

Both Russia and China, of course, possess sizable ICBM forces that are the objects of our concern. We think that -- let me walk you through some of this, Mr. Chairman. We think the chances of an accidental or unauthorized launch are remote, but we would become more concerned about that situation if political turmoil increased.

Turning to the other countries and focusing on those that are potentially hostile, we believe that North Korea is the only one that could develop an ICBM capability over the next 10 to 15 years. North Korea, as you know, has in development the Taepo Dong II, a missile whose projected range of 4(,000) to 6,000 kilometers could bring it within striking distance of the far western Hawaiian Islands and part of Alaska.

Other countries, Mr. Chairman, such as Iran and Iraq, do not at this time appear capable of overcoming obstacles to ICBM development without extensive foreign assistance, which at this time we doubt will be forthcoming, but something we look at very, very carefully.

We've also looked carefully at the development of cruise missiles on the part of many countries and how these might be used and threaten the United States.

So I think we look at all of these things, and those are the kinds of threats in the strategic realm that concern us.

I'd ask General Hughes whether he has --

SEN. SHELBY: General Hughes?

GEN. HUGHES: Well, I like to divide this category of issue into two areas. One is the threats to the United States, particularly direct threats to the continental United States, but we must also include all the territories and outlying areas that we're concerned with. And then --

SEN. SHELBY: You're going include Hawaii and Alaska --

GEN. HUGHES: Of course I do. And in the continental United States -- I conclude that both of those are states and indeed part of that. Some people, when they use that term, refer only to the 48 contiguous states --

SEN. SHELBY: Sure.

GEN. HUGHES: -- but I do not.

Beyond that, sir, I'd say that the second category of threat is from missiles interacting in regional or theater circumstances, as we discuss them. We face threats in both areas, and both are important to vital national interests. And I'd use as a good example the Persian Gulf or the Arabian Gulf, where missile exchanges on either side of that body of water could have a great strategic impact on stability of the region and on our vital interests. So it's a tremendous problem for us. It is probably, in my view, the greatest threat extant to our interests around the world.

And I'd like to say one last thing: I'm concerned that we carefully monitor this, because it is in this area, I think, we can be confronted by technical surprise. We might not be able --

SEN. SHELBY: But also, it could be a growing threat, could it not?

GEN. HUGHES: Could be. It is a growing threat.

SEN. SHELBY: Growing threat. Make no mistake on that.

GEN. HUGHES: In the case of theater ballistic missiles, we are experiencing proliferation. The number of nations that currently have missile capabilities is indeed growing and will grow over the foreseeable future. In the case of intercontinental strategic ballistic missiles, long-range ballistic missiles, the growth is minimal. As Mr. Tenet pointed out, we're concerned about one country, primarily, North Korea. If our consideration of North Korea's evolution over the next few years is correct, it's unlikely that North Korea will reach that missile capability that we project they could reach technically.

SEN. SHELBY: Secretary Gati?

MS. GATI: Yes. You have asked the intelligence community for hard decisions and real judgment, and in some of the reports we have written, we have done that. And our overall assessment on this issue has been that we did not expect any third world country to have the capability to be able to strike the U.S. with ballistic missiles in the time frame of our reports. I agree with George Tenet that the possibility of accidental or unauthorized launch by China or Russia is quite remote. North Korea is developing a system which at its upward range would be capable of striking Alaska and Hawaii, but it is not clear if this system would ever be developed and successful deployed. We are monitoring this. We have made a judgment; we have not made an absolute truth. And I think the important point here is there's nothing absolute about it, but we did give you our best considered judgment and some of the concerns that we had in the documents that we give to you on a classified basis.

SEN. SHELBY: Senator Dewine. I overlooked him a minute ago. He can have whatever time he needs.

SEN. MIKE DEWINE (R-OH): Thank you, Mr. Chairman. You don't want to give me that big --

SEN. SHELBY: That's a big opening, isn't it.

SEN. DEWINE: Yeah, a big opening.

I'd like to take my time to ask about Mexico. And five minutes is not very long to talk about Mexico, but do the best you can. What's your assessment of Mexico's economy at this point, political situation, and the use of Mexico as a source of drugs, transshipment point for drugs, and the cooperation between the United States and Mexico? You can tell that's about a two-hour question, George, but -- a two-hour answer, anyway, but do the best you can.

MR. TENET: Let me start with the back-end piece, on drugs. I talked to you about some successes in my longer testimony. I talked about the fact that the destruction of the Cali cartel and some other successes we've had -- those are good things. But what you've seen is the -- these drug-trafficking organizations are very agile -- and the migration of distribution networks, leaving South America and moving into Mexico, is something that's of great concern to us, as is the methamphetamine problem from Mexico into California. So this is something that worries us; and the prospect of corruption tied into how drug organizations move into a country worries us.

The good news here, Senator, is that the Zedillo administration has made a firm commitment to fight drugs. It has invested its drug effort, in its military, and we are working -- our DEA, our State Department and other people are working very closely with the Mexicans. So I think that there is good prospects for long-term success, but it's something that we must watch very, very carefully. And we can talk a little bit more about that behind closed doors.

But the message there is that, yes, you have to be concerned about how they operate. You must be concerned that they've picked up on the fact that this long contiguous border provides us with a great possibility to enter this country, but you must be heartened by the fact that the Mexican government is doing the right thing in assisting us.

As to the larger economic questions, maybe we can talk about that; I mean, the fact that they've paid their debt back on time and ahead of time is a good thing. And let me stop there.

SEN. SHELBY (?): Senator --

SEN. DEWINE: Mr. Chairman?

SEN. SHELBY: Senator (DeWine ?)? Any other witnesses want to comment?

MS. GATI: I could comment.

I think Mexico has made great strides. Its economic recovery of 4-percent growth stands in stark contrast to the problems it had, and there's been an increase in capital flows. And I do believe that the Zedillo administration understands the underlying causes of the crisis that happened a few years ago and is determined to avoid them by an honest look at its own economy.

We are making some progress in dealing with them on the drug problems. President Zedillo said that is his major security concern. And the important thing is that both of our countries recognize the problems we face, the weaknesses, and are making a determined effort to deal with them.

SEN. DEWINE: I'd like to move, if I could, to Guatemala.

Peace accords have been signed. Any estimate about the prospects of success there and stability and lack of fighting?

MR. TENET: Well, I think it's -- I'll let Ms. Gati be the expert here -- but I think it's absolutely remarkable that we do have peace. It's a tremendous achievement. The healing process has just started. And like other examples in Central America, they're now about the business of reconciling and healing their past, and we're quite hopeful that this will all work very well.

MS. GATI: We have a situation where we are involved in a phased- in disarmament, demobilization and reintegration of a population that has been at war for a long time. It is a major task for a country to downsize its military and turn its structures upside down. The law on national reconciliation is a good start. We have to monitor it to make sure that it is used appropriately. And I think our assessment would be that the prospects that Guatemala will remain peaceful are quite good. The head of the new U.N. operation says that he expects it to be up and running this month as scheduled. The price tag for this operation will be high and there will be costs to be borne. But the cost of war was also enormously high.

SEN. DEWINE: Thank you.

Thank you, Mr. Chairman.

SEN. SHELBY: Senator Hatch?

SEN. ORRIN HATCH (R-UT): If I could just ask a couple of questions. Let me just ask this to Mr. Tenet and Ms. Gati. Why has the cocaine flow into the United States not decreased because -- considering or despite our multi-faceted efforts and our resource expenditures, and the arrests of at least a half dozen Colombian kingpins?

MR. TENET: Senator, obviously, cocaine continues to be an extremely profitable endeavor for these drug organizations. The focus of our government-wide effort -- and we can talk behind closed doors a little bit more clearly -- is to break the backs of these organizations, with the help and support of host countries. So the American effort has been not only interdiction, but breaking the infrastructure of these organizations and denying them the ability to show up in this country with something that kills our kids and creates a huge domestic problem.

We also have a domestic problem we have to worry about. I can't speak about that.

Our efforts are relentless, and we still see, as I note in my full testimony, increases in the number of tonnage of cocaine that's shipped around the world, and it's a very, very difficult problem. It's not -- I don't have a clinical answer for you to say why have you not done better in getting these numbers down? All I can say is you have to look at what we do, we have to look at the will of host governments in this regard. Sometimes that will is uneven. They have to take responsibility for this as much as we do. And then we have a whole demand side of this that is quite worrisome as well. So --

MS. GATI: The incentive -- monetary and otherwise -- to sell drugs are enormous. The alternate routes are infinite. But we have cracked down on many paths of drug smuggling. But there are always new ones.

The political and economic problems I think that are involved with drug smuggling, something that we have to also consider what it does to a country internally in terms of its democratic structure and its political process. And the tools we need are very diverse. The intelligence input is only one of them. And I think we have used the intelligence community very effectively to deal with the problem of drugs. But the incentives and the number of alternatives are so great that we have just made a dent in it.

SEN. HATCH: How many and which nations in particular can we identify as being threatened or undermined by criminal activity in the drug area? Maybe you can expand it to all organized crime activities. And do we have sufficient understanding of the threat the advent of criminal societies and so-called gangster states pose to this country?

MR. TENET: Well, senator, in my statement I tried to walk through a little bit of this. I mean, we have organized --

SEN. HATCH: Sorry, I missed it.

MR. TENET: We have -- in terms of organized crime -- and, of course, what you have to worry about is the nexus between crime, drugs, proliferation, and terrorism. Don't look at these things individually. Look at them as a continuum, because there's money being made and infrastructures being created. But we have Russian, Nigerian, Italian, ethnic Chinese networks.

If you go to central -- the newly independent states of Eastern Europe and you talk to them about what their number one problem is, it is how organized crime families from Russia and other parts of the world are undermining their ability to govern themselves. This is a burgeoning problem that law enforcement and intelligence are working on hand in glove. And until many of these countries develop the law enforcement infrastructure and the statutory framework to attack this problem, they remain very, very vulnerable, particularly newly independent states and new countries in what we used to call Eastern Europe. But this is a world-wide problem, senator, and they're lashing up together and making it very, very difficult for our law enforcement community.

MS. GATI: I think if we get it right economically, politically, legally, some of the opportunities for these organized criminal activities will decrease. And that is a task for diplomacy.

SEN. HATCH: If we -- I think my time's just about one. Do I have one -- time for one more?

SEN. SHELBY: Go ahead, sir.

SEN. HATCH: The nations under threat from criminal activity -- or from criminal organizations: have any of them reversed or had a downward trend in criminal activity during the last 12 months?

MR. TENET: Senator, I'd like to take that for the record and get back to you with a thoughtful answer.

MORE

SEN. HATCH: Okay.

MR. TENET: I just don't know that answer.

SEN. HATCH: Well, I'd appreciate that.

SEN. SHELBY: Senator Kerrey?

SEN. KERREY: General Hughes, I have just one more question on North Korea. We talked about the potential for them to develop a ballistic capability that could threaten Hawaii or Alaska or the lower 48. What's your assessment of the likelihood that North Korea survives 10 years from now?

GEN. HUGHES: Our assessment right now is not necessarily time dependent. We believe that there are serious problems within North Korea that are continuing to deteriorate. And there's at least some chance that North Korea today will be much different in the relatively near future because of the pressures that are forcing them to change. We have seen a trend in North Korea of accommodation, grudging and circumstantial accommodation, but nevertheless, some agreement by the North Koreans to open their social order a bit more to the West. The monitoring of their nuclear facilities is one example of that; it's not the only one. Their acceptance of outside aid, and other indicators of a more open social order there are hopeful. On the other hand, they continue to maintain a very strong military capability, despite the deprivation their people are suffering.

With particular focus on their missiles and long-range attack capability, they are capable of prioritizing their scarce resources away from other parts of their society into that key area. So we have to watch it very carefully. We could be threatened -- we are threatened right now by a North Korea which is fragile and, I think, volatile, trying to determine what direction it will go in and whether or not it will be a violent evolution.

So I can't say that North Korea will completely disappear and a unified Korean peninsula will appear in a given period of time. But I can say, sir, that change is on the horizon and it's likely to be a difficult change.

SEN. KERREY: Let me ask you in addition to that, I mean, do you feel -- Mr. Tenet, General Hughes, Ms. Gati -- do you feel as if you could come to this committee and say in the open, for example, that here's a trade policy that the European Union has or that we have that could actually indirectly increase the threat to this nation? Do you feel liberated to come -- do you feel sufficiently independent that you could come to us and identify something like that that might be a problem, that might actually increase the threat that we need to be addressing?

MR. TENET: I've been liberated for a while, Senator, so the answer is yes, and I think the three of us feel that way.

SEN. KERREY: Well, I hope say because I think it -- I pick it as an example, do you feel liberated, for example -- I mean, it seems to me, as I listen and read both of your testimonies, that the 6,000 ballistic missiles that Russia has, though they're not targeting us any longer, still pose -- you know, looking at sort of the uncertainty scenario, it is the threat that could eliminate the United States of America. I mean, if you're looking for the one answer to the question, "Is there any threat out there that could obliterate all life in the United States of America," that's the one that's still there. I mean, though they're not targeting us and their current policy is not threatening to us and their democracy is surviving, you know, it begs the question, "Why don't we then come up with a changed policy that aggressively tries to reduce that threat," and provide the resources to do it and try to develop, as well, an anti-missile capability so that we can respond to whatever residual is still there in place. I mean, are we --

You say, General Hughes, in your testimony that "DIA analysts continue to examine and study alternatives and excursions to each specific condition, event and circumstance." Are those the kinds of things that you're examining? And if so, how do we get so that we're in the room and (examine you ?)?

GEN. HUGHES: Well, they are indeed. And we will answer questions or provide you information right along with our work.

The reference made in my testimony was directly connected to the Quadrennial Defense Review and the excursions and branches and sequels of thought are an attempt to try to examine almost all possible conditions so that we can properly size and focus our military force in the future.

SEN. KERREY: I mean, what -- all right -- what sort of thinking do you have, though, on the notion that I just proposed, which is a changed policy to simultaneously reduce, more significantly than START II does, as well as to prepare ourselves for the possibility of some kind of inadvertent missile attack or unexpected missile attack on us?

GEN. HUGHES: Well, as you know, Senator Kerrey, I am not a policy person, and I would hesitate to make a comment about the policy. I'll just merely say that my goal is to try to deliver as much of the factual information and perceived truth as I can to you, the policy maker, so that we can form the right policies for the future. That's my role.

And I do, by the way, not feel constrained in the least by anyone to say what I want to say. However, as you know, not everyone has agreed with what I have said in the past. But that's my job, and I'm very happy to accept it.

SEN. KERREY: Mr. Chairman, I'd just say that it's --

SEN. SHELBY: (Yes, go ahead ?).

SEN. KERREY: -- to the committee it's one of the reasons I'm sort of increasingly leaning in the direction of making the DCI even more independent than it currently is under law, because it may be that our policy needs to be changed as a result of a radical change in circumstance. And it seems to me that the Congress needs to be apprised of perhaps some alternatives that may not be under consideration because of budgetary reasons or political reasons or any other thing.

I'm not taking a shot at the current administration at all. I just think if we're dealing with a radically changed circumstance as we are -- and I've heard Senator Roberts earlier pose the question -- I would have answered it emphatically yes. I think the American people do not today have a clear sense of the threats. It just seems to me that this need for independence is increasingly an important issue.

SEN. SHELBY: Senator Kerrey, I totally agree with you. And I'd like to work with you on some legislation that both of us have talked about in that regard.

I believe, Senator Kyl -- (Ms. Gati ?) -- Secretary Gati?

MS. GATI: If I could respond, I see our job as monitoring changes and providing early warning. And there are two issues you just raised, Senator Kerrey, where I think this is very important -- for example, nuclear weapons in Russia. Our job is not just to monitor forces and numbers, but also to look at planning, look at exercises, look at declaratory policy and how that's changing, because we know that the way you view your nuclear weapons is just as important as the numbers you have -- and also the discussions going on in society, which might lead to a change in policy.

Second issue: North Korea. The intelligence community several years ago started to look at economic indicators in North Korea and not just the number of troops on the DMZ, because of our firm belief that the economic factors would influence the way the North looked at its interaction with us and the international community.

So I think we have tried to respond to those new challenges.

SEN. SHELBY: Senator Kyl, I believe you had another comment or question.

SEN. KYL: Yes, thank you, Mr. Chairman. Let me ask George Tenet a question first and then a general question I'd like to ask for any of you to respond to.

This is the last question regarding terrorism and chemical weapons, if I could.

In May of last year the DCI's interagency committee on terrorism published a report titled "Aum Shinrikyo: Insights to the Chemical and Biological Terrorist Threat". A declassified portion of the report concluded, and I quote, "In the case of Aum Shinrikyo the CWC" -- the Chemical Weapons Convention -- "would not have hindered the cult from procuring the needed chemical compounds used in its production of sarin." And that's the end of the quotation. But the report also stated that CWS's provisions probably would make it more difficult and costly for terrorists to acquire CW by increasing the risks of detection, but a determined group could circumvent the provisions.

In addition, in February of last year the DIA report states, and again quoting, "Irrespective of whether the CWC enters into force, terrorists will likely look upon CW" -- chemical weapons -- "as a means to gain greater publicity and instill widespread fear." Does the intelligence community still believe these statements are accurate?

MR. TENET: Well, senator, let's parse them out a little bit now. We talk about the fact that terrorist groups look at the potential for chemicals, but the use of chemicals is a non-trivial event for a terrorist group and a state sponsor. So we can theorize about that, and it's easy to get, but there are consequences from the use of chemicals that people have to think about.

Now, with regard to what you said about the Japanese incident, I think both those judgments remain valid. Again, I wouldn't be -- I couldn't sit here and tell you that passage of the CWC is going to prevent chemical terrorism in the future, but I can sit here and tell you that if you increase the cost and the risk and the burden that someone has to bear to go get it, we're minimizing risks to an extent that either is or isn't acceptable. And I'd say minimizing risks with the regard to the use of chemicals is something we should try to do. That's never going to stop a dedicated group just because of the nature of what these developments look like.

SEN. KYL: In the case of Aum Shinrikyo, in fact, those chemicals were acquired within the country of Japan. There was no attempt to obtain them from elsewhere. Isn't that correct?

MR. TENET: I believe that's true. Yes, sir.

SEN. KYL: Okay. One of the things that you mentioned in your opening statement was information warfare.

MR. TENET: Yes.

SEN. KYL: And I wondered if either you or General Hughes would like to expand on that a little bit with respect to the potential threat that that provides, not necessarily -- well, in -- both with respect to our private and commercial information infrastructure, our communications and energy grids and so on, but in addition to our defense and intelligence areas, specifically.

MR. TENET: My preference would be we do it behind closed doors, senator.

GEN. HUGHES: Mine also.

SEN. KYL: All right. Both of you prefer to do that. Okay.

Just one final question, then. We haven't talked at all about the spy cases. And I don't mean to do that in a negative way, so I'll give you an opportunity to do it in a very positive way. It is my impression -- and I'd like to have you confirm this, if it is correct -- that the degree of cooperation between the CIA and the FBI, a subject of some concern in the past, has improved dramatically, and perhaps as a result of some of these incidences, but in any event, that there is a much greater degree of cooperation. And I wondered if you could comment on that and identify any other specific areas in which you think improvement needs to be made or where the committee might be of assistance.

MR. TENET: I think in the counterintelligence arena, senator, the improvements have been quite dramatic since the Ames case. And they are the result of the attention that this committee paid to the case, the legislation that you enacted, actions the president took. But the bottom line is is that Louis Freeh and John Deutch have worked systematically over the last 22 months to establish a relationship of trust and jointness that simply didn't exist before.

This also extends to other areas. Counterterrorism is one where there is a very important hand-over between the foreign and the domestic that I think is working quite well. But this relationship is extremely good, and we are now focusing on our roles with respect to each other overseas where there is a growing FBI legate presence of necessity. So the relationship is quite good and healthy, and I think --

Now, we are, ourselves, senator -- and we'll come to you -- going back and reevaluating the most recent cases to think whether the cooperation can even be made better. Are there things that could have been done better? On the face of it, it doesn't appear so. But we owe it to you and to ourselves to evaluate that very carefully.

SEN. KYL: Thank you very much.

SEN. SHELBY: If there are no further questions here, we will recess --

SEN. HATCH: Could I -- could I ask just one or two?

SEN. SHELBY: Okay. Senator Hatch. Go ahead.

SEN. HATCH: Mr. Tenet, do we have any information that the Iranians may have been involved in the El Khobar bombing?

MR. TENET: Senator, I indicated before that we would talk about Khobar behind closed doors.

SEN. HATCH: Okay. Now, let me just -- I'm going to ask you a couple more questions on that. Is the role of the Islamic change movement -- do you have any information that they may have been involved in the bombing?

MR. TENET: Sir, I will talk about this behind closed doors.

SEN. HATCH: You'll do that in the -- and how about Osama bin Laden?

MR. TENET: I'll talk about him behind closed doors.

SEN. HATCH: Okay. That'll be good enough.

SEN. SHELBY: Senator Hatch, what our intention is in just a few minutes to recess this hearing and go immediately to 219 for a closed session.

SEN. HATCH: That's fine. That'll be fine.

SEN. SHELBY: Senator DeWine.

SEN. DEWINE: I'd like to turn to the issue of trade with Central America and Latin America. And, you know, as we look at the extension of NAFTA and other trade issues, do you any of you have any comments on what inroads the European Community or Japan might be making in that region of the world as far as trade is concerned?

MR. TENET: Senator, I don't know. I'll take that for the record for you unless Ms. Gati has an answer.

MS. GATI: Our trade with Latin America increased dramatically in the last couple of years. Last year we do not notice as great an increase, and we attribute part of it to a concern, perhaps, that we're not as vigorously pursuing free trade zones, and therefore particularly the countries of MERCOSUR are looking to other parts of the world -- the EU, Japan, other places -- to increase their trade with those areas. So the perception of movement on free trade zones does have a very large impact on our own trade situation.

SEN. DEWINE: See more activity from our competitors? From Japan, from the European Community?

MS. GATI: We see more activity. Yes, we do.

SEN. DEWINE: Thank you.

Thank you, Mr. Chairman.

SEN. SHELBY: Any other questions? If not, we will recess and we will immediately reconvene in SH-219 for a closed session. (Sounds gavel.)

(end transcript)