Remarks by John C. Gannon

Intelligence Challenges for the New Millennium:

A Special Look At Russia and China
Remarks by John C. Gannon
Chairman, National Intelligence Council
to the
Mershon Center
Ohio State University
26 April 2000

Thank you for the kind introduction. It’s a pleasure to be here in Ohio—frankly, it’s always nice to get out of Washington for a couple of days. It’s important for folks like me to exchange views with scholars, business leaders, and others throughout the country who have an interest – and often unique experience, expertise, and insight -- in national security issues. I look forward after my remarks, to your comments and questions – no holds barred!

I am honored to be at the Mershon Center. The Center is making a significant contribution in research and public education not only to this University and to the Columbus community but also to our country. This world-renowned center holds conferences on high priority issues, sponsors stimulating guest speakers, and sponsors cutting-edge research, often in collaboration with international partners, on topics of high interests to US national security policymakers. The work that you do—and the tough issues you take on––is truly impressive: from the Middle East Peace Process, to examining how social science research methods can be applied to national security issues, to exploring why the Cold War ended.

The Mershon Center’s work reflects a sophisticated understanding of the complexity of national security issues facing our country and its Intelligence Community today. I am pleased to contribute to your important program.

I will lay out a broad conceptual framework of the world as the Intelligence Community – in collaboration with a lot of outside experts -- sees it evolving over the next 15 years which we’ll publish later this year under the title of Global Trends 2015. Then, I will focus on two countries of special interest: Russia and China, concluding with an assessment of the impact of global trends on the intelligence business. Finally, I will do what I like best: take your comments and questions.

For the next few minutes, I’d like to share with you some of the preliminary results of research we are conducting in the National Intelligence Council, or NIC, which I am proud to chair. The NIC is leading the DCI’s Strategic Estimates Program––a systematic effort to examine broad, cross-cutting issues for the new millennium. Looking out into the future, doing serious strategic analysis, is now more important, and more challenging than it has ever been. I can tell you that, during the Cold War, the Soviet Union made both the present and the future fairly clear to the intelligence analyst!

The study attempts to identify the drivers that will influence the world of 2015.

The first driver we have identified is global population trends. Despite substantial drops in fertility in some countries, the momentum of the existing population translates into an increase in the world’s population from 6 billion to around 7.5 billion by 2015. Population patterns will vary markedly in different regions of the world.

Most population growth will occur in relatively low income, developing countries in Sub-Saharan Africa and parts of South Asia, as well as in much of the Middle East. Much of this growth will occur in crowded and volatile cities.

But not all developing countries will experience population growth. Despite fairly high birth rates, some countries in Africa, which are heavily affected by HIV/AIDS, will have stable or even declining populations.

Russia’s population also will decrease—perhaps substantially–– as a result of declining birth rates and declining life expectancy.

Some countries—particularly in Sub-Saharan Africa and the Middle East––will experience a “youth bulge” while other populations, especially in the industrialized world, will have a disproportionately large older population.

Moving on to a second global trend, the demand for food, water, and energy will increase over the next 15 years. Scarcities resulting from the uneven distribution of natural resources—especially fresh water–– will increase by 2015 in many developing countries.

The good news is that world food stocks are projected to be sufficient to meet overall global needs by 2015.

But bottlenecks remain in the distribution of food. Thus, the problems of feeding the world’s poorest populations, as well as those affected by internal conflicts, will persist.

Water is a big issue! Fresh water––while globally abundant–– is scarce in much of South Asia, northern China, the Middle East, and parts of Africa, and will become scarcer in the years ahead.

Growing populations and increases in per capita income will drive the demand for more energy. Fortunately, this demand will not be difficult to meet.

The oil deposits most economically exploited remain in the Persian Gulf region and Venezuela, with new areas coming online in the West African Basin and the Caspian Sea.

The third global trend is that international affairs, in all its dimensions, will increasingly involve competing uses of information networks. US national interests will increasingly be tied to our dependence on global networks that ensure the unrestricted flow of economic, political, and technical information, as well as goods and capital.

But information and technology will not be “owned” by a single country, nor can they be easily contained.

Information and communications technologies will continue to advance and diffuse rapidly, empowering individuals and groups of all kinds, with widespread but uneven economic, political, and social consequences.

Communications technology will become so inexpensive that most countries will be able to connect to the global information infrastructure, accelerating their entry into the global economy.

But rigid and authoritarian governments that resist the flow of information associated with communications advances will fall further behind technologically, economically, and politically.

The fourth major driver is economic growth. Frankly, the global financial crisis of 1997-1998 surprised us all. But perhaps more surprising has been the speed of the recovery from the crisis.

The globalization of financial transactions and the rapid increase in the volume of money in global financial markets leads us to expect that the next 15 years will be punctuated by more global financial crises.

Notwithstanding these crises, we anticipate that accelerating global trade, the continued integration of capital markets, and efficiencies gained from the increasing use of information technology will lead to real growth in world GDP and in per capita income. We expect world per capita income to increase at an average annual rate of at least 2 percent between now and 2015.

But the rising tide will not lift all boats, and not every state will benefit equally.

To cite a fifth trend, the relative control and influence of many nation-states over developments within their borders is likely to continue to decline over the next 15 years. Globalization and the permeability of borders to the flow of people, goods, and information are all combining to reduce state sovereignty.

The state’s power appears to be shifting in many directions: to international businesses, nongovernmental organizations, ethnic groups, terrorists, criminal groups and narcotraffickers and to regional and international organizations and legal regimes.

Let me say that, although the relative power of nation-states will decline, countries will continue to be key actors on the world stage.

The sixth trend points to a shift in power relationships and international alignments. The world currently has only one superpower, but the United States will not be a hegemon. Other states – principally the collective European Union, Japan, Russia, and China – will actively try to shape the world of the future:

The most dangerous consequence of a return to multipolarity will be the reemergence of national rivalries within East Asia, and even within Europe, if American internationalism declines.

The seventh and final trend is the changing nature of warfare. The widespread consensus is that the United States will have no peer military competitor by 2015. But our military and technological prowess will not be enough to guarantee that our interests are secure.

Many countries and groups will try to blunt US military superiority in other ways — for example:

by using asymmetric means, such as terrorism and weapons of mass destruction, instead of large conventional forces.

Terrorist incidents are likely to continue, at least at current levels, and may increase by 2015. Terrorists will be better armed with more sophisticated weaponry…and they will pose a much greater threat to the US homeland than ever before.

Viewing the world of 2015 as a whole, no country, no ideology, and no movement will emerge to threaten US interests on a global scale. The days of superpower rivalry are gone.

Now, let me turn to a brief discussion of Russia and China, two Communist countries that face distinct problems, and are taking different approaches to the challenges of globalization.

Although Russia is no longer a superpower, I would emphasize that Russia’s future is characterized more by uncertainty than pessimism. Much is for the Russians to decide.

First, it is in the midst of a major political transformation—that is, moving from a communist dictatorship to an as yet uncertain new system, which could be a renewed authoritarianism or something more closely resembling democracy.

· Russia has elements of a market system, particularly in the consumer goods sphere, but Russia’s economy is neither a command economy nor a market economy.

Third, Russia is still searching for a post-Soviet identity. This is hard to quantify or even describe, but suffice it to say that many Russians today wonder exactly what it means to be a Russian as the new millennium dawns.

These challenges will face Russian leaders for the foreseeable future, and it will be an uphill struggle to achieve consensus on fundamental policies.

Putin’s election shows the Russian people’s desire for a strong hand at the top who will give the state a prominent role in running the economy and be more assertive in foreign and security policy. The Russian people embraced Putin for his youth, vigor, and tough-mindedness, seeing him as potentially capable of putting Russia back on track. What track that will be, however, remains as yet uncertain: as a candidate, Putin chose not to take firm positions on many issues, largely voicing the messages that the audience he was addressing at the time wanted to hear.

Putin’s public statements suggest he is a pragmatic man with little use for ideology, and that he is likely to stress stability, order, and restoring Russia's greatness, while at the same time recognizing the value of constructive relations with the West. Putin's limited experience in high office, unwavering prosecution of the war in Chechnya, and KGB past leave many questions, however--both about the direction in which he might lead Russia, and about the means he will use to lead it.

¨ First, will he keep Russia moving toward further consolidation of its new democracy or will growing public sentiment in favor of a strong hand and a yearning for order tempt him to slow down or even reverse course?

¨ Second, will he try to build a consensus on quickening the pace of economic reform and expanding efforts to integrate into global markets—some Russian officials favor this—or will he rely on heavy state intervention to advance economic goals?

¨ Finally, will Moscow give priority to a cooperative relationship with the West or will anti-US sentiments take root, leading to a Russia that is isolated, frustrated, and hostile? This would increase the risk of an unintended confrontation, which would be particularly dangerous as Russia increasingly relies on nuclear weapons for its defense—an emphasis reflected most recently in its new national security concept.

¨ As these questions indicate, Putin inherits a country in which much has been accomplished—but in which much still needs to be done to fully transform its economy, ensure that democracy is deeply rooted, and establish a clear future direction for it in the world outside Russia.

All this means that, for now, at least, the development of civil society in Russia remains problematic. Nevertheless, there are some signs that positive change could be forthcoming.

Russia does now have a youthful, vigorous president who promises action and sees the need for corrections in Russia's course.

There are new forces in today’s Russia, such as small businessmen; increasing numbers of people who travel outside Russia; people who connect through the Internet; and people who have founded journals and newspapers where independent views are expressed.

As long as elections are held and remain relatively free, and as long as Putin emphasizes the rule of law, there is the hope that Russia will change its current trajectory toward authoritarianism....but Russia’s domestic picture remains a big question mark.

The second Russian-Chechen war in this decade has drained resources and attention from urgent social and economic problems. The war has been a disaster – for Chechnya and for Russia itself. Much of Chechnya is destroyed, and thousands have lost their lives. Hundreds of thousands have lost their homes and their possessions.

Even though public support for the war remains high, a protracted guerrilla war could diminish Putin’s popularity over time, and further complicate relations with the US and Europe.

Now that he is elected, perhaps President Putin will have sufficient leeway to seek a political solution. The Russians have said that political discussions with Chechen leaders are underway. This much is clear: even though Russian forces have managed to occupy much of Chechnya, they remain vulnerable to guerrilla hit-and-run attacks and insurgency for years to come.

The Russian assault will stimulate anti-Russian sentiment and Islamic militants regionally, in Russia itself, in Central Asia and worldwide.

US-Russia relations will be tested on a number of fronts. Western criticism of the Chechen war has heightened Russian suspicions about US and Western activity in neighboring areas, be it energy pipeline decisions involving the Caucasus and Central Asia, NATO’s continuing role in the Balkans, or NATO’s relations with the Baltic states. Moscow’s ties to Iran also will continue to complicate US-Russian relations, as will Russia’s objections to US plans for a National Missile Defense. There are, nonetheless, some issues that could move things in a more positive direction.

¨ For example, Putin and others have voiced support for finalizing the START II agreement and moving toward further arms cuts in START III—though the Russians will want US reaffirmation of the 1972 ABM treaty in return for start endorsements.

¨ Similarly, many Russian officials express a desire to more deeply integrate Russia into the world economy. The deal reached a while back with the London Club on Soviet-era debt suggests Putin wants to keep Russia engaged with key international financial institutions.

With regard to its nuclear weapons, Moscow appears to be maintaining adequate security and control, but we remain concerned by reports of lax discipline, labor strikes, poor morale, and criminal activities.

¨ We believe that an unauthorized launch or accidental use of a Russian nuclear weapon is unlikely as long as current technical and procedural safeguards built into the command and control system remain in place.

¨ There are few known cases of seizures of weapons-usable nuclear material since 1994. Our analysts assess that undetected smuggling has occurred, although we don’t know the extent or magnitude of the undetected thefts.

Today, there is clearly a congruence of views between the two countries on a number of issues –notably resistance to outside interference on what the two countries call strictly internal affairs, which for Russia means its brutal campaign in Chechnya and for China its ambitions regarding reunification with Taiwan.

We expect to see the relationship develop, but we do not see the emergence of a full blown alliance with coordinated positions and actions on all issues.

The part of the relationship which is most strategically significant is the Russian sale of weapons and technology to China.

Although these sales do not threaten the US, at least so far, they inevitably help to speed up the strengthening of Chinese military capabilities.

Ironically these sales are being driven not by a Russian strategic vision --indeed a number of Russian security officials are uneasy about the strengthening of their eastern neighbor-- but by pecuniary motives.

These sales are not only a foreign currency earner for Russia but for some of its defense industries the means of survival.

China is also undergoing a dramatic transformation that will engage the United States for years to come.

Some China-watchers have been prone to making grand statements about China, or quoting someone else’s grand statements. China is so immense, its history so long, its culture so rich, that only grand statements seem to suffice. But the grand statements are often less than illuminating. So I’ll resist the temptation to make a grand statement about China. Rather, I want to give you a sense of what questions we in the Intelligence Community are being asked about China, and what kinds of answers we are providing.

The Intelligence Community answers thousands of questions from various US policymakers about China, but in the end, the questions come down to two:

Neither question has a clear answer – or demands the kind of grand statement I have already promised not to make.

To take a look at China’s future, last fall the National Intelligence Council and the Federal Research Division of the Library of Congress hosted a seminar assessing the five-year outlook for China’s domestic development and international security behavior. The seminar featured presentations by prominent academic specialists and commentaries by Intelligence Community China specialists. The main thrust of the deliberations reflected cautious optimism about China’s future. The regime appears resilient enough to deal with most anticipated problems internally.

China’s economic policies, labor force, technical base, military modernization, and political leadership are clear indicators that it is becoming a national power. I’d like to address each of these elements in greater depth.

Let me start with China’s economy–– the engine by which Beijing seeks world prestige, global economic clout, and the funding for new military strength. China has been the fastest growing major economy in the world over the last decade—growing at 7 to 8 percent per year. At some point China is likely to become the largest in the world, surpassing the United States in GDP. In the past few years, China has taken steps to overcome the boom-bust cycle that has plagued it since the reforms were launched by Deng Xiaoping in 1979.

· China continues to run a trade surplus with the world; its surplus with the United States now tops $60 billion a year.

· And living standards in China have increased dramatically in less than 20 years; a trend that is likely to continue. Economic growth continues to outpace population growth.

But China still faces challenges to its economic power. During his government work report this past March, Chinese Premier Zhu Rongji stated that many problems continue to plague China’s economy, particularly lax management, inefficiency, corruption, and waste.

· What is more significant for the long term is whether China maintains the series of reform policies that address its troubled state enterprise sector. These bloated relics of the past are a major drain on state coffers and are contributing less and less to China's total industrial output.

Looking at its technological base, although China remains at heart an agricultural nation, its scientific and technological capabilities are robust and growing. We see these capabilities reflected in the composition of its exports, which include not just squirt guns and firecrackers but also fiber optics and semiconductors.

And China has a young, highly trained, and energetic labor force that values education and has a demonstrated flair for business. At the same time, China is facing an increasing number of unemployed and laid-off workers:

Manifestations of social discontent seen with demonstrating peasants, laid-off workers, and Falungong sect members are likely to continue, but these developments have a long way to go before they pose a major threat to the regime…

China's military modernization, the fourth element of national power, stands out among nations in the post-Cold War period. We see in China a military that is concentrating on building its force-projection capabilities with an eye to defending China's strategic perimeter out to the first island chain off its vast coastline. No longer reliant on Mao’s strategy of “luring the enemy in deep and drowning him in the sea of people’s war,” China is developing the means to carry out an active defense beyond its own borders.

As part of its modernization effort, China has made some high-profile purchases of military equipment from Russia––such as Su-27 aircraft , modern destroyers, and advanced submarines. Also significant for the longer term in our judgment is China's indigenous development of military hardware. It is continuing to develop new aircraft and naval systems, including attack submarines and destroyers.

China continues to improve and expand its strategic forces, including developing mobile missiles.

There are many inefficiencies and deficiencies in China’s military forces, and China is still not a global military power, but there is no question it has the potential—and the intention—to become one.

Chinese military doctrine is evolving. Beijing has indicated its willingness to use intimidation and force to achieve political ends—and, as you know––it has been sending a strong message to Taiwan.

Although Beijing today still lacks the air and sealift capability to successfully invade Taiwan:

¨ China has been increasing the size and sophistication of its forces arrayed along the Strait, most notably by deploying short-range ballistic missiles.

¨ China recently received the first of two modern, Russian-build Sovremennyy destroyers. The ship joined the East Sea Fleet, which regularly conducts operations near Taiwan.

The final element of national power is leadership, and here the picture is more mixed. Since the death of Deng Xiaoping in February 1997, we have seen a new era dawning in Chinese politics. President and General Secretary Jiang Zemin has emerged as first among equals, although with significantly less personal power than either Deng or Mao Zedong.

· He presides over a “third generation” of leaders who are younger ––in their sixties and seventies––better-educated, and more technically competent than any of their predecessors.

· The political leaders lack charisma but are much less ideologically rigid than past leaders; they are aware of the problems they must face and are prepared to deal with at least some of them.

Shortly after Jiang Zemin and his third generation of leaders replaced Deng Xiaoping, China began to face a new round of political succession. Some of the participants in the NIC-hosted seminar last fall shared some interesting observations:

Fourth-generation leaders came of age during the Cultural Revolution but often have diverse political views and lack the binding solidarity of experiences that the previous generations of leaders gained on the Long March and during the Anti-Japanese War, for example.

Collectively, fourth-generation leaders are seen as less dogmatic and confrontational, more compromising, and more highly educated than third generation leaders.

The fourth-generation––composed of a large number of lawyers and economists––is more capable and innovative than previous leaders when confronted with economic and social problems, and their behavior is more technocratic and pragmatic when dealing with domestic and foreign policies.

So, to return to my question: are the elements present that will propel China to major power status? Yes, they are. The real question, then, is not whether China will be a major regional power, but rather how big a power it will be and, more importantly, how China will use its power.

To return to my second question about China—whether it will become a friend or foe of the United States––seminar commentators were downbeat about the near-term outlook for progress in US-China relations, noting that domestic trends in both capitals make forward movement difficult, with the possible exception of an agreement on China’s entry into the WTO.

China leadership perceives a US “containment” and military “encirclement” of China, and US national and theater missile defense programs. US-China military relations were seen as likely to develop only slowly over the next few years.

Developments across the Taiwan Strait will factor prominently in US-China relations. The election of President Chen Shui-bien on Taiwan has intensified China’s approach to the United States. China is pressuring the US to limit arms sales to Taiwan and use diplomatic measures to halt Taiwan’s moves and force it to negotiate under the framework of “one China.”

A crisis over Taiwan could lead to a setback in economic and other constructive US-PRC ties, resulting in a stand-off, developing perhaps into a new cold war between the United States and China in East Asia. Several speakers at the NIC conference expressed worry that anticipated trends regarding Taiwan could lead to this scenario, though they judged it unlikely that the PRC would allow a stand-off to reach the point of cutting off advantageous economic relations with the United States.

I want to stress that Sino-US hostility is not preordained. Our interests run parallel on many issues, and we are working together very productively in many areas. Senior US officials have stated repeatedly that a stable, secure China—one that is comfortable with its neighbors and whose neighbors are comfortable with it, a China that believes it has a stake in the positive trends now under way in Asia—is in the best interests of the United States and is essential for regional peace.