FAS Intro: Following is the second Annual Report of the Director of Central Intelligence. Preparation of the these unclassified reports in required each year under the 1994 Intelligence Authorization Act, and section 109 of the amended National Security Act. This report was released in March 1996 pursuant to a request by the Federation of American Scientists.


FY 1994


September 1995


The US Intelligence Community (IC) provides timely and accurate information to policymakers and military commanders on a host of issues. This information helps policymakers prevent or respond to war and conflict; control or modify international events; and negotiate treaties on economic, political, environmental, and military issues. Intelligence also supports military commanders in peacekeeping and humanitarian relief efforts, and in armed conflicts.

President Clinton recently observed, "Most Americans never know the victories our IC achieves or the crises it helps us avoid..." This Annual Report discloses some of these successes. The report protects the sources providing the vital information and the unique methods critical to acquiring data surreptitiously, but it provides insights into the contribution US intelligence makes to support national objectives and priorities. The report also addresses the challenges facing the IC and its strategies for responding to those challenges.


The IC uses an array of collection and analytic capabilities to support policymakers as they confront new issues and form appropriate responses. Decisionmakers receive the latest and best information available in a variety of formats: from phone calls and videoconferences to formal published reports or detailed substantive briefings from interagency task forces.

Support to Military Operations and Crisis Support. Much of the IC's effort is designed to support US military needs during hostilities and other crises. When policy decisions mandate or involve the use of US military forces for combat or humanitarian and disaster relief, it is intelligence that helps protect our troops and enhances their performance. Moreover, as crises emerge, intelligence often provides the only reliable and accurate information about ongoing events and leadership intentions. Human sources on the scene, overhead reconnaissance, and technical eavesdropping provide a critical difference in the speed and accuracy with which our government can act.

During several crises in recent years, military leaders have had ready access to responsive, tactical intelligence from several joint IC endeavors. The Pentagon's National Military Joint Intelligence Center, augmented by analytic and administrative support from the National Military Intelligence Production Center and the Central Intelligence Agency's (CIA) Operations Center provided daily, around-the-clock support. In addition, interagency task forces were quickly set up to focus analytic and collection capabilities on hot spots and burning issues. Finally, National Intelligence Support Teams, comprising intelligence officers from a variety of agencies, were dispatched with the deployed forces to provide expertise and direct two-way access between the IC and military commanders. For example:

To help policymakers prepare for potential trouble, the IC cataloged and ranked the world's most dangerous nuclear reactors. The information assisted policymakers in prioritizing safety assistance programs and planning for potential disaster relief.

Treaty Monitoring. The IC monitors foreign compliance with international accords covering a variety of topics, including fair trade agreements, disarmament, and military force levels. Our efforts include:


In addition to traditional military and political collection and analysis, the IC is vigorously engaged in nontraditional targets and issues, such as economic security, counterterrorism, and counter-proliferation.

Economic Security. The IC provides policymakers with information and assessments on questionable foreign competitive business practices and financial dealings; monitors compliance with sanctions and international economic agreements; and explores new prospects for regional economic opportunities. The Community also examines illegal activities supported or condoned by foreign governments that unfairly disadvantage commercial and private interests of national concern. Surveillance activities this past year enabled US authorities to arrest and indict two Chinese, living in the United States, for stealing nearly a million dollars worth of proprietary computer source codes. Washington and Beijing subsequently negotiated new trade agreements that protect patented intellectual property rights and stop the sale of illegally copied software that already has deprived US industry of a billion dollars.

Counterterrorism. The IC plays a strong role in protecting US citizens and interests from terrorist attacks by providing threat assessments, advisories, and alerts and helping to bring terrorists to justice. It also supports the US Government engage in cooperative ventures with other governments in international efforts to combat terrorism. During 1994, these activities supported the successful prosecution of four men involved in the February 1993 bombing of the World Trade Center in New York City. Each defendant was sentenced to 240 years in prison and was fined $500,000.

Counterproliferation. The IC emphasizes the need to contain the spread of nuclear, biological (BW), and chemical weapons (CW) of mass destruction and other advanced weaponry:


Technology increasingly defines national strength. Last year intelligence informed US policymakers about foreign government programs that subsidize commercial research and development in a variety of technologies. This information helped our policymakers to develop responses to practices that provided foreign firms with an unfair competitive advantage over US industries.

The IC also sought opportunities to transfer technologies to public use. The 3 January 1995 issue of New Technology Week reported that the National Security Agency (NSA) offered fact sheets on 17 of its technologies at a fall trade show for potential transfer to US industry. Highlights included a portable fingerprint scanner, a dual speech-and-image recognition personal identification system, a portfolio of programming languages, a multimedia language training package, and a series of electronic devices for processing and storing computer data.

The Community also shared technology involving advanced imagery processing techniques with the medical community. These techniques will be used for the early detection of breast cancer. A leading medical authority assessed that this development had the potential for reducing breast cancer fatalities by a third.


The unique capabilities and skills of the IC frequently benefit other US Government agencies and activities. For example:

The IC also has expanded information sharing with our allies. NATO for the first time received reporting on the proliferation of weapons of mass destruction. Tactical intelligence also helped protect and guide the movements of US, UN, and NATO forces operating in northern Iraq and the former Yugoslavia. This included direct intelligence support for the first combat operations ever undertaken by NATO. In addition, for over 15 years, US intelligence has contributed to the Middle East peace process by reporting to all parties of the Multinational Forces and Observation mission in the Sinai.


The IC is undergoing a period of rapid transition. It is improving and modifying sources and methods for obtaining information as the needs of its customers continue to change in type, scope, precision, and timeliness. Like the rest of government, however, the IC must fulfill today's needs and prepare for tomorrow's demands amid resource constraints.

Such a dynamic climate offers challenges and opportunities, and the Community has undertaken several initiatives to improve its operating effectiveness and efficiency. It has begun implementing a National Intelligences Needs Process to enhance customer focus. Coupled with Community support for the new Presidential Decision Directive/NSC-35 on intelligence priorities- issued in January 1995-- it continued to redirect US intelligence operations and developmental activities to maintain focus on the geographic areas and substantive topics of highest importance to its consumers.

The IC has emphasized developing programs jointly with the Department of Defense (DoD). Community focal points have been designated to coordinate open source, foreign language, and research and development activities. INTELINK, a classified version of INTERNET, is being used to globally integrate information systems across the Community and its customers. Similarly, an open source information system-- an "Official Use Only" private network operating on INTERNET-- is being used to access directly unclassified sources maintained on INTERNET and other commercial systems and to disseminate that information worldwide. Finally the Community is working to implement changes recommended by a Joint Security Commission to improve security while fostering more openness with the American people.

These initiatives clearly are enhancing the quality of our performance and reducing costs. They emphasize expanding Community interactions, focusing on the customer, and streamlining operations.

Redirecting Community Attention. Collection and production capabilities previously focused on strategic military targets in the former Soviet Union now are directed primarily toward political and economic topics, weapons proliferation, force modernization, and support to military forces. Transnational organizations are increasingly important. The IC is focusing on tracking foreign terrorist groups and patrons, narcotics producers and traffickers, organized crime groups, arms dealers, and individuals, companies, and governments involved in unethical foreign commercial practices. To better address these topics, the Community is refocusing attention on:

Focusing on the Customer. In 1994, the Community began implementing the National Intelligence Needs Process to ensure a lively dialog with its customers. The Needs Process is intended to align resources with our customers' highest priorities and will help guide intelligence program planning and funding decisions. It also is used by the DoD to help assess military intelligence activities and is facilitating closer coordination across all US intelligence programs.

Last year, 18 issue areas were identified as the primary intelligence needs of policymakers and warfighters. For each area, the Director of Central Intelligence (DCI) assigned an Issue Coordinator with responsibility to identify and prioritize customer needs and guide the way intelligence programs respond to these needs.

The IC is continuing to refine the Needs Process in an effort to link resource allocation decisions explicitly with customer needs. This process will help identify activities that are critical and those that-- while important-- should be canceled, delayed, or reduced to free resources for higher priority ventures. We expect our customers to benefit from having their needs drive the way we allocate resources and set the priorities that focus our efforts.

Streamlining Operations. The Community actively participates in administration efforts to "reinvent government" and improve its efficiency and value. The Vice President concurred with over 30 actions, including enhancing responsiveness to customers, linking Community computer systems, and improving capabilities to support ground troops during combat. Nearly half of the actions have been completed and the rest are on or ahead of schedule.

The IC is streamlining organizational chains of command and reducing the number of personnel. In the largest reorganization in its history, the NSA reduced staff organizations by 50 percent and the number of second- and third-line organizations by nearly the same amount. The Defense Intelligence Agency (DIA) reduced supervisory positions by nearly a third and consolidated its human source collection activities with those of the military services into a single organization, the Defense HUMINT Service. By the end of this decade, the Community will be operating with 21 percent fewer civilians and almost 25 percent fewer military personnel than in 1990. These reductions-- which far exceed the goal of a 12-percent reduction by 1997 set by Presidential Executive Orders and the September 1993 National Performance Review-- increase the funding available for investments in future capabilities.


The Community is building on available commercial technologies and openly soliciting ideas in key areas. It is seeking advice from leading-edge scientists and technology innovators, and making "seed" investments in areas that offer potential for high payoff but have smaller chances of success.

The DCI's Advanced R&D Committee worked with the Imagery R&D Council and R&D managers from the Departments of Energy and Defense to produce a Critical Technologies List to guide investment decisions. Key areas include:

The following items highlight the breadth of Community activities:


The IC established a Quality Council to improve the efficiency and effectiveness of intelligence. Chaired by the Deputy Director of Central Intelligence, the Council oversees implementation of the actions endorsed by the Vice President and promotes quality initiatives throughout the Community. Components are independently conducting self-assessments based on the criteria in the President's Award for Quality and are using the results to guide actions.

Several "Reinvention Labs" were created to stimulate innovative thinking and actions:

Other examples of Community innovation include NSA's ongoing quality activities where computer and network installation time was reduced from over 100 days to just 14 days. These measures reduced general supplies and equipment purchases by $25 million per year and streamlined the bill-paying process to avoid late- payment penalties. CIA's Office of Information Technology was a finalist for the 1994 President's Quality Improvement Prototype award, the second highest quality award in government. Community- wide benefits are being derived from a badge-reciprocity system-- between CIA, NSA, DIA, the Department of State, the Central Imagery Office, and the Joint Chiefs of Staff-- that has reduced the cost and inefficiency of passing employee clearances to other agency compounds for visits.


The IC also is reviewing its personnel policies and business practices in light of the Aldrich Ames case and the sexual discrimination case against CIA's Directorate of Operations. Although Ames was eventually apprehended, we clearly missed several early warnings. Faced with the reality of this failure to protect our nation's secrets, we have renewed the emphasis on counterintelligence awareness and accountability and are working to enhance the security consciousness of our employees. The sex discrimination case filed by female case officers has prompted the CIA to renew its efforts to ensure the fair and equitable treatment of all employees.

The Community also is reviewing its efforts to keep Congress abreast of plans and activities. The concerns raised by the Senate Select Committee on Intelligence that it had not been kept fully informed about the status of the National Reconnaissance Office (NRO) building underscored the importance of providing complete and accurate information. Community components are reviewing their policies and procedures for ensuring Congressional notification and are underscoring those responsibilities to all employees.


We anticipate that the international environment will remain dynamic well into the 21st century. Such a world increases the importance of information for those who make and implement policy. US policy officials and military commanders must understand the cross-currents, pressures, plans, aspirations, and capabilities of foreign governments and entities to reduce uncertainty and maximize the ability of the United States to protect and promote its national interests. At the same time, we expect continuing constraints on resources as the government seeks to reduce the budget deficit. The IC will attempt to reconcile these needs and constraints by improving efficiency and concentrating resources on priority targets. It also will seek to ensure responsive global reach, flexible collection resources, expert and versatile personnel, and crisis or wartime surge capabilities.

As the Community proceeds with these efforts, it will face numerous challenges. The Community will need to:

Our intelligence infrastructure will need to be flexible, allowing us to redirect the substantive and geographic focus of collection and analytic resources. We no longer are able to maintain a constant global presence or provide unbroken coverage of our formerly extensive mix of issues. Establishing a flexible infrastructure will require prudent investment in collection and processing systems. These systems must be evaluated by their contribution to our overall intelligence capabilities and their ability to provide flexible global reach against all likely targets.

The commitment and professionalism of our people have always been among our strongest assets, and intelligence professionals possessing both substantive expertise and operational skills are key to the Community's successful support of policymakers and military commanders. Furthermore, changing customer needs are requiring a wider variety of substantive and language experts. Our ability to respond, however, is being hampered by personnel downsizing that affects the mix of skills brought to bear on changing targets and issues. We are stepping up efforts to cross- train and retrain our employees and draw on other expertise. One defense component, for example, is implementing an innovative program that uses military reserve personnel to provide needed language skills. Advances in technology and process improvements are enhancing each individual's productivity and versatility.

In looking ahead, it is clear that intelligence will remain integral to the US Government's ability to provide international leadership and protect US interests during peace, crisis, or war. The United States will benefit from the IC's worldwide capabilities to reduce uncertainty, provide warning, aid in crisis management, and bolster war-fighting capabilities. In the future, intelligence capabilities will continue providing the qualitative advantage required for effective international leadership. Intelligence will help policymakers anticipate and understand developing threats, manage events, and identify advantages. It will support a wide range of policy endeavors, from trade negotiations and diplomatic initiatives to humanitarian aid relief and the enforcement of UN sanctions against rogue states. Intelligence also will track foreign weapons programs and monitor force structure changes and operational planning. Our intelligence professionals and technical systems will provide rapid and effective surge capacity during crisis and war. Intelligence will remain key to the continuing ability of the United States to protect its citizens and their way of life.