11 February 2003
Source: http://usinfo.state.gov/cgi-bin/washfile/display.pl?p=/products/washfile/latest&f=03021101.plt&t=/products/washfile/newsitem.shtml


US Department of State
International Information Programs

Washington File
_________________________________

11 February 2003

Tenet Says Terror Threat Information "Most Specific We Have Seen"

(Reports cite potential terrorist attacks in U.S., on Arabian
peninsula) (7590)

CIA Director George Tenet says the United States raised its terrorist
threat advisory to the second highest level because of multiple
intelligence reports that are "the most specific we have seen,"
warning of potential terrorist attacks in the United States and on the
Arabian peninsula from groups with strong al Qaeda ties.

Tenet told a Senate committee February 11 that the reports are based
on intelligence that is "not idle chatter on the part of terrorists
and their associates. The information we have points to plots aimed at
targets on two fronts -- in the United States and on the Arabian
peninsula. It points to plots timed to occur as early as the end of
the Hajj" in mid-February.

Additionally, the terrorist plots point to the use of a radiological
dispersion device, or "dirty bomb," as well as poisons and chemicals,
Tenet said.

"This latest reporting underscores the threat that the al Qaeda
network continues to pose to the United States," the CIA director
said. "It is consistent with both our knowledge of al Qaeda doctrine
and our knowledge of plots this network -- and particularly its senior
leadership -- has been working on for years."

The Senate Select Intelligence Committee was conducting its annual
hearings on the U.S. intelligence community and national security
threats in both open and closed sessions. In addition to hearing
testimony from the CIA, the committee heard from FBI Director Robert
Mueller and Vice Admiral Lowell Jacoby, director of the Defense
Intelligence Agency. It was also expected to hear testimony from Carl
Ford, assistant secretary of state for intelligence and research.

More than 100 nations have become involved in the apprehension of more
than 3,000 suspected terrorists or sympathizers, Tenet said, and the
detained suspects have provided a "trove of information" on terrorist
plans and activities.

Tenet also told the committee that the international terrorist group
al Qaeda remains the single greatest terrorist threat to the United
States even though important strides have been made in the global war
on terrorism.

"The network is extensive and adaptable," he said. "It will take years
of determined effort to unravel this and other terrorist networks and
stamp them out."

While al Qaeda's refuge in Afghanistan was disrupted when U.S. special
operations forces and Taliban opposition forces won control of the
country, the terrorist group continues to operate in portions of
Afghanistan, Pakistan, Iran and Iraq, Tenet said. Intelligence
analysts are seeing "disturbing signs that al Qaeda has established a
presence in both Iran and Iraq. In addition we are concerned that al
Qaeda continues to find refuge in the hinterlands of Afghanistan and
Pakistan," and that it "is living in the expectation of resuming the
offensive," he said.

Tenet also testified that Saddam Hussein's regime continues to deceive
U.N. weapons inspectors and deny them access to weapons facilities and
information on his weapons programs.

Tenet told the committee that he believes North Korea is trying to
negotiate a fundamentally different relationship with the United
States by using its nuclear weapons program as political leverage.

Following is the text of Tenet's remarks, as prepared:

(begin text)

George Tenet
Director, Central Intelligence Agency
Washington, D.C.

DCI's Worldwide Threat Briefing
(As Prepared for Delivery)

The Worldwide Threat in 2003: Evolving Dangers in a Complex World

11 February 2003

Mr. Chairman, last year -- in the wake of the September 11 attack on
our country -- I focused my remarks on the clear and present danger
posed by terrorists who seek to destroy who we are and what we stand
for. The national security environment that exists today is
significantly more complex than that of a year ago.

-- I can tell you that the threat from al-Qa'ida remains, even though
we have made important strides in the war against terrorism.

-- Secretary of State Powell clearly outlined last week the continuing
threats posed by Iraq's weapons of mass destruction, its efforts to
deceive U.N. inspectors, and the safe haven that Baghdad has allowed
for terrorists in Iraq.

-- North Korea's recent admission that it has a highly enriched
uranium program, intends to end the freeze on its plutonium production
facilities, and has stated its intention to withdraw from the
Nonproliferation Treaty raised serious new challenges for the region
and the world.

At the same time we cannot lose sight of those national security
challenges that, while not occupying space on the front pages, demand
a constant level of scrutiny.

-- Challenges such as the world's vast stretches of ungoverned areas
-- lawless zones, veritable "no man's lands" like some areas along the
Afghan-Pakistani border -- where extremist movements find shelter and
can win the breathing space to grow.

-- Challenges such as the numbers of societies and peoples excluded
from the benefits of an expanding global economy, where the daily lot
is hunger, disease, and displacement -- and that produce large
populations of disaffected youth who are prime recruits for our
extremist foes.

TERRORISM

Mr. Chairman, as you know, the United States Government last week
raised the terrorist threat level. We did so because of threat
reporting from multiple sources with strong al-Qa'ida ties.

The information we have points to plots aimed at targets on two fronts
-- in the United States and on the Arabian Peninsula. It points to
plots timed to occur as early as the end of the Hajj, which occurs
late this week. And it points to plots that could include the use of a
radiological dispersion device as well as poisons and chemicals.

The intelligence is not idle chatter on the part of terrorists and
their associates. It is the most specific we have seen, and it is
consistent with both our knowledge of al-Qa'ida doctrine and our
knowledge of plots this network -- and particularly its senior
leadership -- has been working on for years.

The Intelligence Community is working directly, and in real time, with
friendly services overseas and with our law enforcement colleagues
here at home to disrupt and capture specific individuals who may be
part of this plot.

Our information and knowledge is the result of important strides we
have made since September 11th to enhance our counterterrorism
capabilities and to share with our law enforcement colleagues -- and
they with us -- the results of disciplined operations, collection, and
analysis of events inside the United States and overseas.

Raising the threat level is important to our being as disruptive as
possible. The enhanced security that results from a higher threat
level can buy us more time to operate against the individuals who are
plotting to do us harm. And heightened vigilance generates additional
information and leads.

This latest reporting underscores the threat that the al-Qa'ida
network continues to pose to the United States. The network is
extensive and adaptable. It will take years of determined effort to
unravel this and other terrorist networks and stamp them out.

Mr. Chairman, the Intelligence and Law Enforcement Communities
aggressively continue to prosecute the war on terrorism, and we are
having success on many fronts. More than one third of the top
al-Qa'ida leadership identified before the war has been killed or
captured, including:

-- The operations chief for the Persian Gulf area, who planned the
bombing of the USS Cole.

-- A key planner who was a Muhammad Atta confidant and a conspirator
in the 9/11 attacks.

-- A major al-Qa'ida leader in Yemen and other key operatives and
facilitators in the Gulf area and other regions, including South Asia
and Southeast Asia.

The number of rounded-up al-Qa'ida detainees has now grown to over
3000 -- up from 1000 or so when I testified last year -- and the
number of countries involved in these captures has almost doubled to
more than 100.

-- Not everyone arrested was a terrorist. Some have been released. But
the worldwide rousting of al Qa'ida has definitely disrupted its
operations. And we've obtained a trove of information we're using to
prosecute the hunt still further.

The coalition against international terrorism is stronger, and we are
reaping the benefits of unprecedented international cooperation. In
particular, Muslim governments today better understand the threat
al-Qa'ida poses to them and day by day have been increasing their
support.

-- Ever since Pakistan's decision to sever ties with the Taliban -- so
critical to the success of Operation Enduring Freedom -- Islamabad's
close cooperation in the war on terrorism has resulted in the capture
of key al-Qa'ida lieutenants and significant disruption of its
regional network.

-- Jordan and Egypt have been courageous leaders in the war on
terrorism.

-- A number of Gulf states like the United Arab Emirates are denying
terrorists financial safe haven, making it harder for al-Qa'ida to
funnel funding for operations. Others in the Gulf are beginning to
tackle the problem of charities that front for, or fund, terrorism.

-- The Saudis are providing increasingly important support to our
counterterrorism efforts -- from arrests to sharing debriefing
results.

-- SE Asian countries like Malaysia and Indonesia, with majority
Muslim populations, have been active in arresting and detaining terror
suspects.

-- And we mustn't forget Afghanistan, where the support of the new
leadership is essential.

Al-Qa'ida's loss of Afghanistan, the death and capture of key
personnel, and its year spent mostly on the run have impaired its
capability, complicated its command and control, and disrupted its
logistics.

That said, Mr. Chairman, the continuing threat remains clear.
Al-Qa'ida is still dedicated to striking the U.S. homeland, and much
of the information we've received in the past year revolves around
that goal.

Even without an attack on the US homeland, more than 600 people were
killed in acts of terror last year -- and 200 in Al-Qa'ida-related
attacks alone. Nineteen were United States citizens.

-- Al-Qa'ida or associated groups carried out a successful attack in
Tunisia and -- since October 2002 -- attacks in Mombassa, Bali, and
Kuwait, and off Yemen against the French oil tanker Limburg. Most of
these attacks bore such al-Qa'ida trademarks as intense surveillance,
simultaneous strikes, and suicide-delivered bombs.

Combined US and allied efforts thwarted a number of Al-Qa'ida-related
attacks in the past year, including the European poison plots. We
identified, monitored, and arrested Jose Padilla, an al-Qa'ida
operative who was allegedly planning operations in the United States
and was seeking to develop a so-called "dirty bomb." And along with
Moroccan partners we disrupted al-Qa'ida attacks against US and
British warships in the straits of Gibraltar.

Until al-Qa'ida finds an opportunity for the big attack, it will try
to maintain its operational tempo by striking "softer" targets. And
what I mean by "softer," Mr. Chairman, are simply those targets
al-Qa'ida planners may view as less well protected.

-- Al-Qa'ida has also sharpened its focus on our Allies in Europe and
on operations against Israeli and Jewish targets.

Al-Qa'ida will try to adapt to changing circumstances as it regroups.
It will seek a more secure base area so that it can pause from flight
and resume planning. We place no limitations on our expectations of
what al-Qa'ida might do to survive.

We see disturbing signs that al-Qa'ida has established a presence in
both Iran and Iraq. In addition, we are also concerned that al-Qa'ida
continues to find refuge in the hinterlands of Pakistan and
Afghanistan.

Al-Qa'ida is also developing or refining new means of attack,
including use of surface-to-air missiles, poisons, and air, surface,
and underwater methods to attack maritime targets.

-- If given the choice, al-Qa'ida terrorists will choose attacks that
achieve multiple objectives -- striking prominent landmarks,
inflicting mass casualties, causing economic disruption, rallying
support through shows of strength.

The bottom line here, Mr. Chairman, is that al-Qa'ida is living in the
expectation of resuming the offensive.

We know from the events of September 11 that we can never again ignore
a specific type of country: a country unable to control its own
borders and internal territory, lacking the capacity to govern,
educate its people, or provide fundamental social services. Such
countries can, however, offer extremists a place to congregate in
relative safety.

Al-Qa'ida is already a presence in several regions that arouse our
concern. The Bali attack brought the threat home to Southeast Asia,
where the emergence of Jemaah Islamiya in Indonesia and elsewhere in
the region is particularly worrisome.

-- And the Mombassa attack in East Africa highlights the continued
vulnerability of Western interests and the growing terrorist threat
there.

Although state sponsors of terrorism assume a lower profile today than
a decade ago, they remain a concern. Iran and Syria continue to
support the most active Palestinian terrorist groups, HAMAS and the
Palestine Islamic Jihad. Iran also sponsors Lebanese Hizballah. I'll
talk about Iraq's support to terrorism in a moment.

Terrorism directed at U.S. interests goes beyond Middle Eastern or
religious extremist groups. In our own hemisphere, the Revolutionary
Armed Forces of Colombia, or FARC, has shown a new willingness to
inflict casualties on U.S. nationals.

Mr. Chairman, let me briefly turn to a grave concern: the
determination of terrorists to obtain and deploy weapons of massive
destructive capability, including nuclear, radiological, chemical, and
biological devices.

The overwhelming disparity between US forces and those of any
potential rival drives terrorist adversaries to the extremes of
warfare -- toward "the suicide bomber or the nuclear device" as the
best ways to confront the United States. Our adversaries see us as
lacking will and determination when confronted with the prospect of
massive losses.

-- Terrorists count on the threat of demoralizing blows to instill
massive fear and rally shadowy constituencies to their side.

We continue to receive information indicating that al-Qa'ida still
seeks chemical, biological, radiological, and nuclear weapons. The
recently disrupted poison plots in the U.K., France, and Spain reflect
a broad, orchestrated effort by al-Qa'ida and associated groups to
attack several targets using toxins and explosives.

-- These planned attacks involved similar materials, and the
implicated operatives had links to one another.

I told you last year, Mr. Chairman, that Bin Ladin has a sophisticated
BW capability. In Afghanistan, al-Qa'ida succeeded in acquiring both
the expertise and the equipment needed to grow biological agents,
including a dedicated laboratory in an isolated compound outside of
Kandahar.

Last year I also discussed al-Qa'ida's efforts to obtain nuclear and
radiological materials as part of an ambitious nuclear agenda. One
year later, we continue to follow every lead in tracking terrorist
efforts to obtain nuclear materials.

-- In particular, we continue to follow up on information that
al-Qa'ida seeks to produce or purchase a radiological dispersal
device. Construction of such a device is well within al-Qa'ida
capabilities -- if it can obtain the radiological material.

IRAQ

Before I move on to the broader world of proliferation, Mr. Chairman,
I'd like to comment on Iraq. Last week Secretary Powell carefully
reviewed for the U.N. Security Council the intelligence we have on
Iraqi efforts to deceive U.N. inspectors, its programs to develop
weapons of mass destruction, and its support for terrorism. I do not
plan to go into these matters in detail, but I would like to summarize
some of the key points.

-- Iraq has in place an active effort to deceive U.N. inspectors and
deny them access. This effort is directed by the highest levels of the
Iraqi regime. Baghdad has given clear directions to its operational
forces to hide banned materials in their possession.

-- Iraq's BW program includes mobile research and production
facilities that will be difficult, if not impossible, for the
inspectors to find. Baghdad began this program in the mid-1990s --
during a time when U.N. inspectors were in the country.

-- Iraq has established a pattern of clandestine procurements designed
to reconstitute its nuclear weapons program. These procurements
include -- but also go well beyond -- the aluminum tubes that you have
heard so much about.

-- Iraq has recently flight tested missiles that violate the UN range
limit of 150 kilometers. It is developing missiles with ranges beyond
1,000 kilometers. And it retains -- in violation of UN resolutions --
a small number of SCUD missiles that it produced before the Gulf War.

-- Iraq has tested unmanned aerial vehicles to ranges that far exceed
both what it declared to the United Nations and what it is permitted
under U.N. resolutions. We are concerned that Iraq's UAVs can dispense
chemical and biological weapons and that they can deliver such weapons
to Iraq's neighbors or, if transported, to other countries, including
the United States.

-- Iraq is harboring senior members of a terrorist network led by Abu
Musab al-Zarqawi, a close associate of Usama Bin Ladin. We know
Zarqawi's network was behind the poison plots in Europe that I
discussed earlier as well as the assassination of a U.S. State
Department employee in Jordan.

-- Iraq has in the past provided training in document forgery and
bomb-making to al-Qa'ida. It also provided training in poisons and
gasses to two al-Qa'ida associates; one of these associates
characterized the relationship he forged with Iraqi officials as
successful.

Mr. Chairman, this information is based on a solid foundation of
intelligence. It comes to us from credible and reliable sources. Much
of it is corroborated by multiple sources. And it is consistent with
the pattern of denial and deception exhibited by Saddam Hussein over
the past 12 years.

PROLIFERATION

Mr. Chairman, what I just summarized for you on Iraq's WMD programs
underscores our broader concerns about of proliferation. More has
changed on nuclear proliferation over the past year than on any other
issue. For 60 years, weapon-design information and technologies for
producing fissile material -- the key hurdles for nuclear weapons
production -- have been the domain of only a few states. These states,
though a variety of self-regulating and treaty based regimes,
generally limited the spread of these data and technologies.

In my view, we have entered a new world of proliferation. In the
vanguard of this new world are knowledgeable non-state purveyors of
WMD materials and technology. Such non-state outlets are increasingly
capable of providing technology and equipment that previously could
only be supplied by countries with established capabilities.

This is taking place side by side with the continued weakening of the
international nonproliferation consensus. Control regimes like the
Non-Proliferation Treaty are being battered by developments such as
North Korea's withdrawal from the NPT and its open repudiation of
other agreements.

-- The example of new nuclear states that seem able to deter threats
from more powerful states, simply by brandishing nuclear weaponry,
will resonate deeply among other countries that want to enter the
nuclear weapons club.

Demand creates the market. The desire for nuclear weapons is on the
upsurge. Additional countries may decide to seek nuclear weapons as it
becomes clear their neighbors and regional rivals are already doing
so. The "domino theory" of the 21st century may well be nuclear.

-- With the assistance of proliferators, a potentially wider range of
countries may be able to develop nuclear weapons by "leapfrogging" the
incremental pace of weapons programs in other countries.

Let me now briefly review, sector by sector, the range on non-nuclear
proliferation threats.

In biological warfare (BW) and chemical warfare (CW), maturing
programs in countries of concern are becoming less reliant on foreign
suppliers -- which complicates our ability to monitor programs via
their acquisition activities. BW programs have become more technically
sophisticated as a result of rapid growth in the field of
biotechnology research and the wide dissemination of this knowledge.
Almost anyone with limited skills can create BW agents. The rise of
such capabilities also means we now have to be concerned about a
myriad of new agents.

-- Countries are more and more tightly integrating both their BW and
CW production capabilities into apparently legitimate commercial
infrastructures, further concealing them from scrutiny.

The United States and its interests remain at risk from increasingly
advanced and lethal ballistic and cruise missiles and UAVs. In
addition to the longstanding threats from Russian and Chinese missile
forces, the United States faces a near-term ICBM threat from North
Korea. And over the next several years, we could face a similar threat
from Iran and possibly Iraq.

-- Short- and medium-range missiles already pose a significant threat
to US interests, military forces, and allies as emerging missile
states increase the range, reliability, and accuracy of the missile
systems in their inventories.

And several countries of concern remain interested in acquiring a
land-attack cruise missile (LACM) capability. By the end of the
decade, LACMs could pose a serious threat to not only our deployed
forces, but possibly even the U.S. mainland.

Mr. Chairman, I turn now to countries of particular concern,
beginning, as you might expect, with North Korea.

The recent behavior of North Korea regarding its longstanding nuclear
weapons program makes apparent to all the dangers Pyongyang poses to
its region and to the world. This includes developing the capability
to enrich uranium, ending the freeze on its plutonium production
facilities, and withdrawing from the Nonproliferation Treaty. If, as
seems likely, Pyongyang moves to reprocess spent fuel at the
facilities where it recently abrogated the 1994 IAEA-monitored freeze,
we assess it could recover sufficient plutonium for several additional
weapons.

-- North Korea also continues to export complete ballistic missiles
and production capabilities along with related raw materials,
components, and expertise. Profits from these sales help Pyongyang to
support its missile and other WMD development programs, and in turn
generate new products to offer to its customers.

Indeed, Mr. Chairman, Kim Chong-il's attempts this past year to parlay
the North's nuclear weapons program into political leverage suggest he
is trying to negotiate a fundamentally different relationship with
Washington -- one that implicitly tolerates the North's nuclear
weapons program.

-- Although Kim presumably calculates the North's aid, trade, and
investment climate will never improve in the face of U.S. sanctions
and perceived hostility, he is equally committed to retaining and
enlarging his nuclear weapons stockpile.

Mr. Chairman, I want to mention our renewed concern over Libya's
interest in WMD. Since the suspension of sanctions against Libya in
1999, Tripoli has been able to increase its access to dual-use nuclear
technologies. Qadhafi stated in an Al-Jazirah interview last year that
Arabs have "the right" to possess weapons of mass destruction because,
he alleges, Israel has them.

-- Libya clearly intends to reestablish its offensive chemical weapons
capability and has produced at least 100 tons of chemical agents at
its Rabta facility, which ostensibly reopened as a pharmaceutical
plant in 1995.

China vowed in November 2000 to refrain from assisting countries
seeking to develop nuclear-capable ballistic missiles, and last August
Beijing promulgated new missile-related export controls. Despite such
steps, Mr. Chairman, Chinese firms remain key suppliers of ballistic-
and cruise missile-related technologies to Pakistan, Iran, and several
other countries.

-- And Chinese firms may be backing away from Beijing's 1997 bilateral
commitment to forego any new nuclear cooperation with Iran. We are
monitoring this closely.

We are also monitoring Russian transfers of technology and expertise.
Russian entities have cooperated on projects -- many of them dual-use
-- that we assess can contribute to BW, CW, nuclear, or ballistic- and
cruise- missile programs in several countries of concern, including
Iran. Moscow has, however, reexamined at least some aspects of
military-technical cooperation with some countries and has cut back
its sensitive nuclear fuel-cycle assistance to Iran.

-- We remain alert to the vulnerability of Russian WMD materials and
technology to theft or diversion. Russia has the largest inventory of
nuclear materials that -- unless stored securely -- might be fashioned
into weapons that threaten U.S. persons, facilities, or interests.

-- Iran is continuing to pursue development of a nuclear fuel cycle
for civil and nuclear weapons purposes. The loss of some Russian
assistance has impeded this effort. It is also moving toward
self-sufficiency in its BW and CW programs.

-- Tehran is seeking to enlist foreign assistance in building entire
production plants for commercial chemicals that would also be capable
of producing nerve agents and their precursors.

-- As a supplier, Iran in 2002 pursued new missile-related deals with
several countries and publicly advertises its artillery rockets,
ballistic missiles, and related technologies.

I should also note, Mr. Chairman, that India and Pakistan continue to
develop and produce nuclear weapons and the means to deliver them.

CHINA

I'd like to turn now from the transnational issues of terrorism and
proliferation to countries and regions of the world where the United
States has important interests, beginning with China.

I have commented for the past several years on China's great power
aspirations and in particular Beijing's efforts to maximize its
influence within East Asia relative to the U.S. This is both despite
and because global strategic shifts unfolding since 9/11 have
impressed upon the Chinese the limits of their international
influence.

And despite Beijing's continuing skepticism of U.S. intentions in
Central and South Asia and its concern that the United States is
gaining regional influence at China's expense, Beijing is emphasizing
developing a "constructive relationship" with us. Both before and
since President Jiang's visit to Crawford last fall, Chinese leaders
have been actively seeking a degree of engagement in areas of mutual
interest, such as counterterrorism and regional security issues like
North Korea.

China's chosen path to long-term regional and global influence runs
through economic growth and Chinese integration into the global
economy. Beijing calculates that, as China's economic mass increases,
so too will the pull of its political gravity. To date, China's
successes have been dramatic -- and disconcerting to its neighbors.

Despite China's rapid growth, it remains vulnerable to economic
fluctuations that could threaten political and social stability. China
is increasingly dependent on its external sector to generate GDP
growth. And without rapid growth, China will fall even further behind
in job creation.

The recent Congress of the Chinese Communist Party marked a leadership
transition to a younger political generation but also created a
potential division of authority at the top -- and, in light of China's
profound policy challenges, an additional leadership challenge.

-- The former party chief, Jiang Zemin, who is also scheduled to hand
over the Presidency to his successor in both positions, Hu Jintao, is
determined to remain in charge. He retains the Chairmanship of the
party's Central Military Commission. The new leadership contains many
Jiang loyalists and protégés.

-- The "next generation" leaders offers policy continuity, but the
current setup probably guarantees tensions among leaders uncertain of
their own standing and anxious to secure their positions.

Such tensions may well play out on the issue of Taiwan, the matter of
greatest volatility in U.S.-China relations. For now the situation
appears relatively placid, but recent history shows this can change
quickly, given the shifting perceptions and calculations on both
sides.

-- Chinese leaders seem convinced that all trends are moving in their
favor -- Taiwan is heavily invested in the mainland and Chinese
military might is growing.

-- From its perspective, Beijing remains wary of nationalist popular
sentiment on Taiwan and of our arms sales to and military cooperation
with Taipei.

As for Taiwan President Chen's part, he may feel constrained by
internal political and economic problems and by Beijing's charm
offensive. As he approaches his reelection bid next year, Chen may
react by reasserting Taiwan's separate identity and expanding its
international diplomacy.

In this regard, our greatest concern is China's military buildup. Last
year marked new high points for unit training and weapons integration
-- all sharply focused on the Taiwan mission and on increasing the
costs for any who might intervene in a regional Chinese operation. We
anticipate no slowdown in the coming year.

RUSSIA

Moving on to Russia, Mr. Chairman, I noted last year that well before
9/11, President Putin had moved toward deeper engagement with the
United States. I also observed that the depth of domestic support for
his foreign policy was unclear and that issues such as NATO
enlargement and U.S. missile defense policies would test his resolve.
Since then, Putin has reacted pragmatically to foreign policy
challenges and has shown leadership in seeking common ground with the
United States while still asserting Russia's national interests.

-- This was apparent in Russia's low-key reaction to the decision to
invite the Baltics into NATO and in its serious attitude toward the
new NATO-Russia Council, and in reconsidering some of it
military-technical cooperation with proliferation states of concern.

-- Moscow eventually supported U.N. Security Council resolution 1441
on Iraq and has been a reliable partner in the war on terrorism.

International terrorist groups' presence and activities in and around
Russia are influencing Russia's policies, sometimes in ways that
complicate Moscow's relations with neighboring states. For example,
the presence in Georgia's Pankisi Gorge of Chechen fighters and some
of their foreign Mujahideen backers have generated new tensions in
Russian-Georgian relations. These tensions were highlighted on the
one-year anniversary of the September 11 attacks, when Putin
threatened unilateral force against Georgia because he was not
satisfied Tbilisi had, in his words, taken action to prevent
Georgian-based terrorists from entering Russia.

Similarly, the war in Chechnya is complicated by the continued
influence of radical Chechen and foreign Islamists -- some of whom
have ties to al-Qa'ida. The takeover of the Moscow theater in October
proved counterproductive to the terrorists' aim of forcing Russia to
withdraw from Chechnya. Indeed, the Kremlin has turned this to its
advantage by tying the Chechen opposition to international terrorism.

-- Meanwhile, over the past year the war in Chechnya entered a new,
brutal phase. Russian security service units have targeted suspected
guerrillas and their supporters and punished their families. Chechen
guerrillas, for their part, continued to kill pro-Moscow officials and
their families.

Putin has no clear domestic rivals for power as he enters an election
season that culminates in parliamentary elections in December and
presidential elections in March 2004.

Putin has sought to recentralize power in Moscow. He exercises
considerable influence over both houses of parliament and the national
electronic news media.

-- While Putin has reined in some powerful political figures -- a few
of the governors and so-called "oligarchs" -- in many cases he has
negotiated a balance of interests.

Putin still hopes to transform Russia over the long term into a power
of global prominence, but his comments since late 2001 have contained
more emphasis on raising the country's economic competitiveness. To
this end, his government has set out a goal of narrowing the huge gap
in living standards between Russians and Europeans and seeks to
advance an ambitious structural reform program.

-- Over the past three years, the Russian government has made real
progress on reform objectives by cutting tax and tariff rates,
legalizing land sales, and strengthening efforts to fight money
laundering.

-- Moscow has used its largely oil-driven revenue growth to pay down
the country's external public sector debt to a moderate level of 40
percent of GDP, half the level of only a few years ago.

Such reforms are promising, but success ultimately hinges upon the
sustained implementation of reform legislation. A risk exists that the
government will delay critical reforms of state-owned monopolies and
the bloated, corrupt bureaucracy -- which Putin himself has
highlighted as a major impediment -- to avoid clashes with key
interest groups before the March 2004 Presidential election. Moreover,
Russia's economy remains heavily dependent on commodity exports, which
account for 80 percent of all Russian exports and leaves future growth
vulnerable to external price shocks.


IRAN

We watch unfolding events in Iran with considerable interest, Mr.
Chairman, because despite its antagonism to the United States,
developments there hold some promise as well. Iranian reformers
seeking to implement change have become increasingly frustrated by
conservatives efforts to block all innovation. We see the dueling
factions as heading for a showdown that seems likely to determine the
pace and direction of political change in Iran. Within the next
several weeks a key test will come as reformers try to advance two
pieces of legislation -- bills that would reform the electoral process
and significantly expand presidential powers -- they claim will
benchmark their ability to achieve evolutionary change within the
system.

-- Some reformist legislators have threatened to resign from
government if conservatives block the legislation. Others have argued
for holding a referendum on reform if opponents kill the bills.

-- Comments from the hardline camp show little flexibility -- and
indeed some opponents of reform are pressing hard to dismantle the
parties that advocate political change.

As feuding among political elites continues, demographic and societal
pressures continue to mount. Iran's overwhelmingly young population --
65 percent of Iran's population is under 30 years old -- is coming of
age and facing bleak economic prospects and limited social and
political freedoms. Strikes and other peaceful labor unrest are
increasingly common. These problems -- and the establishment's
inflexibility in responding to them -- drive widespread frustration
with the regime.

-- Weary of strife and cowed by the security forces, Iranians show
little eagerness to take to the streets in support of change. The
student protests last fall drew only 5,000 students out of a student
population of more than one million.

-- But more and more courageous voices in Iran are publicly
challenging the right of the political clergy to suppress the popular
will -- and they are gaining an audience.

Given these developments, we take the prospect of sudden, regime
threatening unrest seriously and continue to watch events in Iran with
that in mind. For now, our bottom line analysis is that the Iranian
regime is secure, but increasingly fragile. The reluctance of
reformist leaders to take their demands for change to the street,
coupled with the willingness of conservatives to repress dissent,
keeps the population disengaged and maintains stability.

-- We are currently unable to identify a leader, organization, or
issue capable of uniting the widespread desire for change into a
coherent political movement that could challenge the regime.

-- In addition, we see little indication of a loss of nerve among the
opponents of reform, who have publicly argued in favor of using deadly
force if necessary to crush the popular demand for greater freedom.

Although a crisis for the regime might come about were reformers to
abandon the government or hardliners to initiate a broad suppression
on leading advocates of change, the resulting disorder would do little
to alleviate U.S. concern over Iran's international behavior.
Conservatives already control the more aggressive aspects of Iranian
foreign policy, such as sponsoring violent opposition to Middle East
peace.

-- No Iranian government, regardless of its ideological leanings, is
likely to willingly abandon WMD programs that are seen as guaranteeing
Iran's security.

SOUTH ASIA

On the Pakistan-India border, the underlying cause of tension is
unchanged, even though India's recent military redeployment away from
the border reduced the danger of imminent war. The cycles of tension
between Indian and Pakistan are growing shorter. Pakistan continues to
support groups that resist India's presence in Kashmir in an effort to
bring India to the negotiating table. Indian frustration with
continued terrorist attacks—most of which it attributes to Pakistan --
causes New Delhi to reject any suggestion that it resume a dialogue
with Islamabad.

-- Without progress on resolving Indian-Pakistani differences, any
dramatic provocation -- like 2001's terrorist attack on the Indian
parliament by Kashmir militants -- runs a high risk of sparking
another major military deployment.

I also told you last year, Mr. Chairman, that the military campaign in
Afghanistan had made great progress but that the road ahead was full
of challenges. This is no less true today. Given what Afghanistan was
up against at this time last year, its advances are noteworthy, with
impressive gains on the security, political, and reconstruction
fronts.

-- Milestones include establishing the Afghan Interim Authority,
holding the Emergency Loya Jirga in June 2002 to elect a President and
decide on the composition of the Afghan Transitional Authority (ATA),
and establishing judicial, constitutional, and human rights
commissions.

-- The country is relatively stable, and Kabul is a safer place today
than a year ago. The presence of coalition forces has provide security
sufficient for aid organizations and NGO's to operate. Six battalions
of what will be the Afghan National Army have been trained by the U.S.
and coalition partners to date.

-- The Afghan Government also has made great strides in the
reconstruction of the beleaguered economy. More than $1 billion in
foreign aid has helped repatriate Afghan refugees, re-opened schools,
and repaired roads. The ATA introduced a new currency, and instituted
trade and investment protocols.

That said, daunting, complex challenges lie ahead that include
building institutional barriers against sliding back into anarchy.
Opposition elements, such as Taliban remnants and Hezbi-Islami and
al-Qa'ida fighters, remain a threat to the Afghan Government and to
coalition forces in the eastern provinces. At the same time, criminal
activity, such as banditry, and periodic factional fighting continue
to undermine security. Sustained U.S. and international focus is
essential to continue the progress we and the Afghans have made.

-- The Afghans will also have to decide politically contentious issues
such as how the new constitution will address the role of Islam, the
role sharia law will play in the legal system, and the structure of
the next Afghan government. Other major hurdles include bringing local
and regional tribal leaders into the national power structure.

-- Several Bonn agreement deadlines are looming, including the
convening of a constitutional Loya Jirga by December 2003 (within
eighteen months of the establishment of the ATA) and holding free and
fair elections of a representative national government no later than
June 2004.

-- And much effort is needed to improve the living standards of Afghan
families, many of whom have no steady source of income and lack access
to clean drinking water, health care facilities, and schools.

What must be avoided at all costs is allowing Afghanistan to return to
the internecine fighting and lawlessness of the early 1990s, which
would recreate conditions for the rise of another fanatical movement.

TRANSNATIONAL THREATS

Mr. Chairman, I'd like to address now a range of key transnational
issues that have an immediate bearing on America's national security
and material well-being. They are complex, evolving, have far-reaching
consequences.

Globalization -- while a net plus for the global economy -- is a
profoundly disruptive force for governments to manage. China and
India, for example, have substantially embraced it and retooled
sectors to harness it to national ends, although in other countries it
is an unsought reality that simply imposes itself on society. For
example, many of the politically and economically rigid Arab countries
are feeling many of globalization's stresses -- especially on the
cultural front -- without reaping the economic benefits.

-- Latin America's rising populism exemplifies the growing backlash
against globalization in countries that are falling behind. Last year
Brazil's President, "Lula" da Silva, campaigned and won on an
expressly anti-globalization populist platform.

-- UN figures point out that unemployment is particularly problematic
in the Middle East and Africa, where 50 to 80 percent of those
unemployed are younger than 25. Some of the world's poorest and often
most politically unstable countries -- including Afghanistan,
Pakistan, Haiti, Iraq, Yemen, and several nations in Sub-Saharan
Africa -- are among the countries with the youngest populations in the
world through 2020.

Among the most unfortunate worldwide are those infected with HIV. The
HIV/AIDS pandemic continues unabated, and last year more than 3
million people died of AIDS-related causes. More than 40 million
people are infected now, and Southern Africa has the greatest
concentration of cases.

-- That said, the Intelligence Community recently projected that by
2010, we may see as many as 100 million HIV-infected people outside
Africa. China will have about 15 million cases and India will have 20
to 25 million -- higher than estimated for any country in the world.

-- The national security dimension of the virus is plain: it can
undermine economic growth, exacerbate social tensions, diminish
military preparedness, create huge social welfare costs, and further
weaken already beleaguered states. And the virus respects no border.

But the global threat of infectious disease is broader than AIDS. In
Sub-Saharan Africa the leading cause of death among the HIV-positive
is tuberculosis. One-third of the globe has the tuberculosis bacillus.
And at least 300 million cases of malaria occur each year, with more
than a million deaths. About 90 percent of these are in Sub-Saharan
Africa -- and include an annual 5 percent of African children under
the age of 5.

Mr. Chairman, the world community is at risk in a number of other
ways.

-- The 35 million refugees and internally displaced persons in need of
humanitarian assistance are straining limited resources. Substantial
aid requirements in southern Africa, the Horn of Africa, Afghanistan,
and North Korea, plus expected needs this year in Iraq, Cote d'Ivoire,
and elsewhere in Africa will add up to an unprecedented demand for
food and other humanitarian assistance. Worldwide emergency assistance
needs are likely to surpass the record $8-10 billion donors provided
last year for humanitarian emergencies.

-- Food aid requirements this year will rise more sharply than other
categories of humanitarian assistance, particularly in Sub-Saharan
Africa, because of drought, instability, HIV/AIDS, and poor
governance. Preliminary estimates put the total food aid needed to
meet emergency appeals and long-term food aid commitments at about 12
million metric tons, 4 million tons greater than estimated aid
supplies.

OTHER HOTSPOTS

Mr. Chairman, Sub-Saharan Africa's chronic instability will demand
U.S. attention. Africa's lack of democratic institutionalization
combined with its pervasive ethnic rifts and deep corruption render
most of the 48 countries vulnerable to crises that can be costly in
human lives and lost economic growth. In particular, the potential is
high for Nigeria and Kenya to suffer setbacks in the next year.

-- Growing ethnic and religious strife, rampant corruption, and a weak
economy will test Nigeria's democracy before and after the April 2003
election. Its offshore oil areas provide 9 percent of U.S. crude oil
imports and are insulated from most unrest, but relations with
Washington could rupture if yet another military regime assumes power
in Nigeria during a domestic upheaval.

-- After 24 years of President Moi's rule, the new president and
ruling coalition in Kenya face many challenges, including preserving
their shaky alliance while overhauling the constitution. Kenyans'
severe economic woes and sky-high expectations for change do not bode
well for the coalition's stability this year.

In addition, other failed or failing African states may lead to calls
for the United States and other major aid donors to stabilize a range
of desperate situations. In Zimbabwe, President Mugabe's mismanagement
of the economy and clampdown on all political opposition may touch off
serious unrest and refugee flows in coming months.

-- Cote d'Ivoire is collapsing, and its crash will be felt throughout
the region, where neighboring economies are at risk from the fall-off
in trade and from refugees fleeing violence.

Regarding Latin America, Mr. Chairman, Colombian President Uribe is
off to a good start but will need to show continued improvements in
security to maintain public support and attract investment. He is
implementing his broad national security strategy and moving
aggressively on the counterdrug front -- with increased aerial
eradication and close cooperation on extradition. And the armed forces
are gradually performing better against the FARC. Meanwhile, the
legislature approved nearly all Uribe's measures to modernize the
government and stabilize its finances.

-- Although Uribe's public support is strong, satisfying high popular
expectations for peace and prosperity will be challenging. Security
and socioeconomic improvements are complex and expensive. And the drug
trade will continue to thrive until Bogotá can exert control over its
vast countryside.

-- FARC insurgents are well-financed by drugs and kidnappings, and
they are increasingly using terrorism against civilians and economic
targets -- as they demonstrated last weekend in a lethal urban attack
-- to wear away the new national will to fight back.

Venezuela -- the third largest supplier of petroleum to the United
States -- remains in mid-crisis. The standoff between Hugo Chavez and
the political opposition appears headed toward increased political
violence despite the end of the general strike, which is till being
honored by oil workers.

-- Because many oil workers have returned to work, the government is
gradually bringing some of the oil sector back on line. Nevertheless,
a return to full pre-strike production levels remains months. Oil
production through March will probably average less than 2 million
barrels per day -- one million barrels per day below pre-strike
levels.

-- Meanwhile, Chavez, focused on crippling longtime enemies in the
opposition, states he will never resign and has balked at requests for
early elections.

Finally, Mr. Chairman, after several years of modest progress toward
normalization in the Balkans, the situation is beginning to
deteriorate. Although we are unlikely to see a revival of large-scale
fighting or ethnic cleansing, the development of democratic government
and market economies in the region has slowed. Moreover, crime and
corruption remain as major problems that are holding back progress.

-- International peacekeeping forces led by NATO exert a stabilizing
influence, but the levels of support provided by the international
community are declining.

-- The real danger, Mr. Chairman, is that the international community
will lose interest in the Balkans. If so, the situation will
deteriorate even further.

Thank you, Mr. Chairman. I welcome any questions you and the members
of the Committee may have for me.

(end text)

(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)