1997 Congressional Hearings
Intelligence and Security


STATEMENT BY
ASSISTANT SECRETARY OF STATE
FOR INTELLIGENCE AND RESEARCH
TOBY T. GATI
BEFORE THE SENATE SELECT COMMITTEE ON INTELLIGENCE
HEARING ON CURRENT AND PROJECTED NATIONAL SECURITY THREATS
TO THE UNITED STATES
FEBRUARY 5, 1997

Chairman Shelby, Senator Kerrey, Members of the Committee. I appreciate this opportunity to present the views of the State Department's Bureau of Intelligence and Research (INR) on current and projected threats to our national interests. Decades of diplomatic and military effort have greatly reduced the magnitude of traditional -- primarily military -- threats to the security of our nation and the well-being of our people. The specter of global war and nuclear annihilation has receded, both in fact and in our national psyche. But, as we all know, the world remains a dangerous place. Threats to our survival as a nation have been replaced by new perils which may jeopardize other vital national interests and the safety of American citizens everywhere.

The transition from military mega-dangers to smaller scale but more insidious threats is a positive development ~ the danger of short-warning, large-scale attacks on US territory is much less than at any time since World War II -- but it does not diminish the need for preparedness, prudence, and preventive diplomacy.

For the United States is a "global power" in more than one way. We have security and military interests and a global political and economic presence, but we also have American citizens in every part of the world -- living, working, or travelling. Among these Americans are those kidnapped and being held hostage for ransom by guerrilla groups in South America and South Asia; targeted by terrorists in Europe, the Middle East, and Central

Asia; and those serving in the Peace Corps and humanitarian organizations vulnerable to communal strife and to rival factions seeking bargaining chips. American tourists and residents abroad are susceptible to random acts of terrorism and live within range of terror weapons controlled by rogue states. The Department of Defense has responsibility for the safety of American troops abroad, but the first line of defense, support, and protection for the roughly 8 million American non-US Government civilians (3 million residing; 5 million travelling) who are outside the United States at any one time is the Department of State.

The end of the Cold War removed the need to deal always in "crisis mode" with a single antagonist, but it also has had the collateral effect of removing constraints on ethnic, religious, territorial, historical, and other conflicts. None of these conflicts te.g., Bosnia, the Great Lakes region of Central Africa, the Aegean, or the Indian subcontinent) threaten US territory, but all of them, and many others, pose real dangers for America. We cannot afford to play down the threats that come from widespread human rights abuses, chronic humanitarian crises, and deteriorating environmental conditions in many regions. By providing global leadership, maintaining our military superiority, and adjusting our intelligence capabilities accordingly, we can diminish all these dangers as well as a different kind of threat, one that too often goes unrecognized -- the threat of missed or unexploited diplomatic opportunities to advance our national agenda.

Intelligence support to diplomatic operations (SDO) can help prevent or reduce conflict. It can play a vital role in identifying opportunities for diplomatic intervention to prevent military conflict, protect our interests, promote our values, and preserve our environment. It can assist policymakers in determining which diplomatic steps may be most effective and inform US approaches in bilateral and multilateral negotiations; intelligence also is essential for monitoring compliance with treaties and agreements intended to control the spread of weapons of mass destruction (e.g., the Nuclear Non-proliferation Treaty [NPT] and Chemical Weapons Convention [CWC]), reduce arsenals (START and Conventional Forces in Europe [CFE]), and combat terrorism. It can be as critical to saving American lives and treasure as is intelligence support to the conduct of military operations.

Secretary Albright said in her confirmation hearing that we need a full range of foreign policy tools to cope with the complex threats facing us today. Real interests need to be protected from real threats. It matters to Americans whether our government can protect them and service their needs when they travel abroad for business or pleasure. To do this takes real money. The United States needs not only a first-class military, but also first-class diplomacy. To be effective in protecting Americans and American interests at home and abroad, force and diplomacy must complement and reinforce each other. In today's world, when American interests and overseas activities are more global than ever, the defense of our interests and the protection of our people from the "small" threats is a big issue. The "small" crises that escalate quickly present real dangers to Americans abroad now, just as the mega-dangers of years past.

I would like to turn now to the central focus of this hearing -- the current and projected threats to our national interest. They are grouped topically, followed by comments germane to specific countries and geographic regions.

TERRORISM

International terrorism poses an enormous danger to the security of US government personnel, to private American citizens and property, and to US national interests such as progress in the Middle East peace process. The risk is still greater outside than inside the United States, but the threat to American lives and property from groups able to take advantage of our open society is growing. We have been spared the agony of additional World Trade Center-like attacks because we have collected, correctly interpreted, and courageously acted on counterterrorism intelligence. INR's TIPOFF database plays a critical role by ensuring that counterterrorism intelligence is readily available to those directly responsible for border security.

In June 1996, 19 Americans were killed and 500 Americans and others injured in the bombing of the US military housing facility, Khobar Towers, near Dhahran, Saudi Arabia. Responsibility for this act has not yet been determined, but several Islamic extremist groups have claimed credit. Others, including international terrorist financier Usama bin Ladin, have publicly threatened US facilities in the Middle East.

The Middle East peace process remains vulnerable to efforts by several terrorist groups and some state sponsors to derail it with violence. Hamas, for example, has claimed responsibility for suicide bombings in Israel during February and March 1996 in which more than 50 persons were killed or injured.

Iran remains foremost among the states which sponsor terrorism. During the ongoing "Mykonos" murder trial in Germany, the German prosecutor accused Tehran of sanctioning at the highest level the 1992 murders of four oppositionists, and the German court issued an arrest warrant for an Iranian government minister. In May of 1996, another Iranian oppositionist was killed in Paris. An Iranian with alleged links to Iran's Ministry of Intelligence and Security was charged in France with the crime and extradited to Germany. Iran continues its support for terrorist organizations such as Hizballah and Hamas and continues to host offices of other terrorist groups in Tehran. While it is the most active, Iran is not the only state sponsor. Iraq, Libya, Syria, Sudan, Cuba and North Korea remain on the US list of state sponsors of terrorism.

The proliferation of new, more internationally active terrorist groups continues. Such groups typically enjoy several sources of support, allowing them greater flexibility and autonomy in their actions. The welfare of an American citizen kidnapped by one such group in Kashmir in 1995 remains unknown. Many of these emerging groups also benefit from experience in Afghanistan's terrorist training camps or from the largess of private patrons, such as Usama bin Ladin.

Around the world, Americans can be in the wrong place at the wrong time. In Lima, Peru, American diplomats were among those captured and later released by the Tupac Amaru Revolutionary Movement (MRTA) at the Japanese ambassador's residence. The MRTA's bold operation constitutes a major challenge to an otherwise successful antiterrorist program in Peru. In Colombia, leftist guerrillas have threatened to attack US interests, and are holding four US citizens for ransom. They frequently attack oil pipelines owned jointly by the Colombian Government and an international consortium that includes US firms.

PROLIFERATION CONCERNS

The spread of weapons of mans destruction (WMD) poses another serious threat to US national interests at home and abroad. Alert and focused diplomatic intervention, ably assisted by targeted and -timely intelligence, is the key to limiting acquisition of sensitive technologies and halting proliferation before military options are considered. The United States continues to lead international efforts to establish and secure an effective and comprehensive nonproliferation regime.

To succeed in these efforts, the United States and its partners must address regional tensions and instabilities that provide political incentives and opportunities for WMD proliferation. Diplomatic efforts are especially intense in the Persian Gulf, the Korean Peninsula, and South Asia. The United States is working to ensure that WMD material and know-how in the former Soviet Union are safely secured and kept out of the reach of irresponsible regimes and terrorists. Preventing and limiting proliferation requires integrating global and regional efforts.

Russia. Russia has consolidated all its nuclear-tipped strategic missiles, formerly located in several states of the former Soviet Union, onto its own territory. We and Russia no longer target one another's territory. It continues to ,be a central concern of the intelligence community to provide assurance that Russia's strategic forces remain under responsible control and do not pose the threat of unwarned attack on the US.

Fissile Material in the Former Soviet Union. We regard any vulnerabilities of materials and technology to acquisition by aspiring proliferators as a very real threat with potentially catastrophic consequences.

Although we are heartened by reports of enhanced security at several installations, and by the decline since 1994 in known smuggling incidents, we are by no means at a point where we can speak of the problem in the past tense. Diplomatic initiative and persistence will be essential to ensuring the full cooperation of the governments of the Newly Independent States in cutting off the availability of material and technology at the source, and in stopping illicit trafficking before it begins. We will be expanding our efforts on the basis of the initiatives embraced at last year's nuclear summit in Moscow.

Building on initiatives supported by "Nunn-Lugar" emergency assistance funding and the transfer of responsibility for nuclear materials protection, control, and accounting programs to the Department of Energy, more than 40 Russian facilities are now engaged in national laboratory-led efforts to put in place modern nuclear material security systems, with many more facilities in the preparatory phase. At April's nuclear summit, the P-8 committed to greater information sharing and expanded law enforcement to combat nuclear smuggling. The United States objective is to control the problem as close to the source as possible. This means bringing an array of expertise and assistance to bear, from material security installation to law enforcement and information, as well as customs and border control assistance. In this spirit we are placing greater emphasis on preventing illicit trafficking through the southern tier of the Newly Independent States.

China. China continues to be a worrisome supplier of materials and technology to countries of proliferation concern. The United States maintains an active dialogue with China aimed at bringing it into full observance of all international supplier norms, including adoption of a more effective national export control system. The Chinese have agreed to conduct regular dialogues at the senior level on arms control, global security, and nonproliferation. These dialogues will provide the opportunity to review Chinese commitments on a regular basis. With respect to missile proliferation issues, the USG has had several contacts with China over the past year. Discussions last November between Undersecretary Davis and Vice Foreign Minister Li Zhaoxing were the most detailed talks between our two governments on this topic since 1993. With respect to nuclear proliferation issues, our discussions with China on establishing national nuclear export controls and our close monitoring of Chinese behavior should provide a basis for evaluating China's compliance with its stated policy of not providing assistance to unsafeguarded nuclear facilities and of not assisting non-nuclear weapon states to acquire or develop a nuclear explosive device.

North Korea. The North Korean nuclear weapons program remains frozen under the Agreed Framework, an achievement that demonstrates what can be done to stop proliferation through sustained and multifaceted diplomatic intervention. North Korea also has been a leading seller of SCUD missiles and missile technology in the Middle East since the mid-1980s and has been attempting to develop longer range missile systems. Our engagement to ensure regional stability and reduction of political tensions includes a strong reminder to North Korea that addressing our concerns on missile proliferation is required for bilateral relations to improve.

Discussion of North Korea's missile program raises the issue of the ballistic missile threat to the United States. Intensive analysis by the intelligence community on this issue, coupled with several reviews by experts outside the community, judged the threat to be low. But we must not become complacent; the situation could change and compel new conclusions. The IC certainly will continue to monitor the potential threat of ballistic missiles to the United States, and report on any significant changes in that threat.

Iraq. US leadership has ensured that the UN Special Commission (UNSCOM) and the International Atomic Energy Agency (IAEA) continue to reveal the extent and operational details of Iraq's quest for WED capabilities. Saddam Hussein will try to evade accountability as long as he can in order to preserve a residual WED capability and to test the coalition's staying power over sanctions. International diplomatic and intelligence efforts limit Saddam's options, but only if the international community sustains its pressure on Saddam's ambitions.

Iran. Iran continues to seek a full range of WMD capabilities, but US-led efforts have made it more difficult to acquire the technologies and equipment needed to pursue its WMD programs. Iran has developed a chemical weapons capability and short-range missiles, both of which pose regional threats. Its efforts to procure nuclear equipment, materials, and technology have been circumscribed by US-led diplomatic efforts. Regional rivalries between Iran and Iraq could easily lead to renewed fighting in which some of these weapons might be employed.

South Asia. As the negotiations over the Comprehensive Test Ban Treaty amply demonstrated, the stakes for nuclear arms control are also critical in South Asia. India and Pakistan view each other warily, insist on retaining their nuclear options, and continue to pursue an increasingly more public missile race., For different reasons, each has a weak government and strong WMD constituencies, a volatile mix. If they could reach a domestic and then a bilateral consensus to abandon their nuclear and missile programs, this regional volatility would be reduced. If they choose to isolate themselves and accelerate their weapons programs, they will jeopardize the region'" fragile balance.

DRUG TRAFFICKING AND INTERNATIONAL CRIME

Illegal Drug Trafficking. Major drug-producing and smuggling organizations make a continuous effort to circumvent US and host- nation counternarcotics strategies aimed at stopping the flow of drugs into this country. New trafficking groups and delivery routes spring up as old ones are blocked, saturating the United States with illegal drugs. These groups take advantage of the vulnerability of poorly paid police, local officials, and farmers, and complicate our efforts to promote democratization abroad. The inability or unwillingness of some countries to impose severe punitive sanctions or criminal penalties against drug bosses undermines popular confidence in government.

The flow of cocaine out of source countries in the Andes (Bolivia, Peru, Colombia) and into the United States through a number of transit points poses a continuing threat to the social fabric of all these countries. Though much of the public focus has been on cocaine produced in Latin America, heroin from Southeast Asia's Golden Triangle of Burma, Laos, and Thailand and more recently from Colombia -- is also a growing threat. Progress in the war on drugs is not attainable without the cooperation of producing nations. Obtaining that cooperation is a task for diplomacy backed by effective programs for countries that are committed to fighting narcotraffickers.

International Crime. International organized crime disrupts the transition to democracy and market economies, corrupts fragile democracies, threatens the operations of international business, and affects the distribution and effectiveness of US assistance. Criminal groups in some of the former Soviet republics and Central European states take advantage of privatization to corrupt government officials, and then use illegally acquired wealth and intimidation to gain control of banks and commercial enterprises. As Russian organized crime groups have gained strength, they have reached out to form alliances with well-established criminals in Europe, South America, and Asia.

COUNTRIES with GLOBAL IMPACT: RUSSIA and CHINA

Russia and China are each undergoing dramatic social transitions that complicate our efforts to assess trends and anticipate their future roles. We have had successes in building constructive relations with both countries, but there are many potential problems. We need to monitor events in these nations and continuously evaluate our relationship with them.

Russia. Elections in Russia in 1996, both presidential and regional, strengthened the prospects for democratization. In opting for continuation of political and economic reform, Russia turned its back on communism, almost certainly forever. However, President Yeltsin's recurring illness has delayed important decisions on economic and military reform, NATO enlargement, and START II ratification. The danger is that half-formed democratic structures will begin to atrophy as those who benefitted most from earlier reforms dig in to prevent further changes that could erode their privileged status.

Many observers inside Russia and abroad have identified the key tasks Yeltsin faces. He must give new impetus to economic and political reform, broaden participation in the process of governing beyond current elites, and set in motion badly needed military reform. If, as appears increasingly likely, Yeltsin does not reassert all his presidential prerogatives -- whether because he is physically weak or because the system has learned to live without a strong President -- drift and delay could engender unpredictability and instability.

Russians increasingly speak of "stagnation," a term from the Brezhnev period when Russian leaders also failed to move forward on key issues. This time the task is even more formidable: to work with a restive Duma on land, tax, and legal reforms; to begin a major overhaul of the military when resources are inadequate and readiness lacking; to force payment of massive wage arrears and collection of huge tax shortfalls; and to manage the growing conflicts between federal and regional constitutions and laws. All of these issues pose risks, but politicization of a disaffected and demoralized military is potentially the most dangerous problem.

Russia has ended the terrible war in Chechnya, but only after enormous cost to the nation -- and only by postponing final decisions on Chechnya's status. There is now a chance to begin negotiations on reconstruction and the shape of future economic links, as well as on Chechnya's future political relationship to Russia. How this is done will strongly influence the likelihood of future ethnic and regional discontent and the tactics of other potential separatist movements.

While the last year has seen sharper, more nationalist rhetoric -- in part because of the presidential elections -- there have been no great surprises or shocks in Russian foreign policy. The Yeltsin government -- including Foreign Minister Primakov -- continues to see Russian influence and interests better served by engagement and cooperation than by isolation or confrontation. Russia continues to meet its obligations under START I and CUE. On the nonproliferation and arms sales front, we and Moscow still have differences -- for example, sales of nuclear reactors to Iran and SA-10 antiaircraft missiles to Cyprus -- an the Russians search for new arms markets.

Russia now has far less ability to project power beyond its borders -- even into the Commonwealth of Independent States (CIS) - - and to challenge Western interests than did the USSR. This will be so into the next century. The domestic levers of control that once harnessed the country's economic wealth to serve political, ideological, and military goals continue to erode; investment in military R&D and modernization is many times reduced; local and regional leaders have gained new power and keep more of the tax money they collect; and the Newly Independent States (NIS) and Central European nations the USSR once dominated are determined to remain independent.

The economic reality is such that arms remain the most lucrative export commodity for the Russians and other states of the former USSR. Only this fall Russian officials indicated they hoped to double arms exports over the next five years. Other NIS states -- Belarus and Ukraine in particular -- continue to seek markets for their surplus military hardware. In addition, Russia's weakness - especially in conventional arms in the European theater -- has lead to discussion of revising military doctrine to place greater emphasis on nuclear weapons, including first-use to deal with regional conflicts that could expand beyond the ability of Russia's conventional forces to handle. Moreover, while financial restraints can provide powerful incentives for arms control -- witness interest to follow-one to START II -- they can also provide excuses for not joining international regimen. The Federation Council's recent expression of concern about the CWC was, to a large extent, a recognition of what it would cost to sign on.

The next few months will be shaped by the way in which NATO expansion is accomplished and how it is perceived in Moscow. Russian officials have already said Russia's continued compliance with CFE and ratification of START II depend on this. Some Russian observers have correctly concluded that NATO expansion will occur and that Russia's interests need not suffer. Others have threatened retaliatory measurer if their interests are not sufficiently taken into account. Unsuccessful handling of NATO expansion will add credibility to more conservative, nationalistic voices in Russia.

China. Development of a cooperative relationship that began with the normalization of relations between the United States and China in 1972 is central to the peace and prosperity of the Asia- Pacific region. We still have many unresolved issues and continue to hold sharply different views on important matters, but China can be a partner, and need never become an enemy. Despite plans to reduce its military forces by another half-million men and women, China continues to have the largest standing army in the world and is steadily modernizing its ground, air, and naval weapons and tactics. We must be attentive to China's growing military capabilities, as demonstrated last year during combined-forces exercises in and around the Taiwan Strait, which remains a potentially volatile spot. The PRC is deeply concerned about any actions which appear to move Taiwan away from eventual reunification. We will be monitoring actions by either the PRC or the authorities on Taiwan that, intentionally or otherwise, could provoke a crisis.

China is modernizing its military through acquisition of more sophisticated weapons and the expansion of an indigenous production capability. China's imports of arms and technology from Russia have grown substantially, adding to uncertainties in the region. Assistant Secretary Lord pointed out in January that we do not think it has reached alarming proportions. But as intelligence analysts we must constantly assess capabilities and be alert to China's intentions -- always remembering that those intentions will be shaped by the full spectrum of its interactions with us and its neighbors.

China's neighbors are wary of China's re-emergence as a major regional power and nervous about its growing military capabilities, but they worry also about the state of US-China relations. No nation in the region wants to be forced to choose between the powerful, friendly, but distant superpower, and the emerging, neighboring giant. No nation wants to return to the uncertainties, instabilities, and ruinous military budgets that would be triggered by hostility between Washington and Beijing.

As Secretary Albright pointed out in her confirmation testimony, "There should be no doubt about the importance of this relationship and the need to pursue a strategy aimed at Chinese integration, not isolation." That means engaging China on a wide range of issues as China continues to emerge as a great power.

Much is in flux internally. China's leaders will face momentous decisions in coming months and years as to how they manage the economy, deal with population pressures, increasing food needs, and protection of the environment, and respond to the growing and persistent demands from the people for greater political openness. We and the Chinese have much to gain if China engages its neighbors and us in the pursuit of peace, and prosperity; we all stand to lose if China chooses a path of domestic repression, outward aggression, and isolation.

We anticipate that the many transformations underway in China for the past two decades will continue into the next century. The cumulative effect of economic, political, societal, technological, and military change will produce a China that is more powerful and, if we are successful, more tightly integrated into global systems. If the past is precedential, changes initiated from the top by China's political leaders will prove less important then will the impact of participation in the global economy, exposure to information and ideas from around the world, and the proliferation of shared interests which is intrinsic to modernization everywhere.

This year we will be paying particularly close attention to the way in which Beijing manages the reversion of Hong Kong. Over the longer term, there are a host of territorial disputes with Japan, South Korea, and most of China's Southeast Asian neighbors which it is in everyone's interest to resolve in the spirit of cooperation.

PROBLEM STATES: Iran, Iraq, Syria, Libya, North Korea, Cuba

The Middle Eastern ''rogue" states threaten us by maintaining programs for weapons of mass destruction, sponsoring terrorism, often targeted specifically at Americans, and by their hostility toward and active opposition to our political and social systems and those of our friends and allies.

Iraq. Iraq will remain a threat to regional stability and a country of egregious human rights abuses as long as the regime of Saddam Hussein remains in power. Saddam's 1994 movement of troops toward Kuwait and his 1996 move into Irbil demonstrate his aggressive ambitions and offensive capabilities. Despite the efforts of Chairman Rolf Ekeus and UNSCOM, Iraq has not yet complied with UNSCR 687 with respect to WMD and almost certainly retains residual missile and CBW capabilities. In recent years, Iraq has supported terrorism in the form of Mujaheddin e-Khalq (MEK) operations against Iran and, at times, terrorism directed against foreigners and others in northern Iraq.

Baghdad's hostility toward the United States stems from Washington's leadership in marshalling the international community against Iraq's 1990 invasion of Kuwait and our key role in sustaining the coalition that thwarts Iraq's regional ambitions. In northern Iraq, Saddam wishes to exclude the international community's involvement, and at the UN he has sought to undermine every effort to ensure UN enforcement of, and Iraqi compliance with, various aspects of UNSCR 687.

Iran. Iran's clerical regime regards the United States as its principal global adversary. It opposes all aspects of the US presence in the region and seeks to undermine governments enjoying good relations with Washington. Although the Iranian leadership can show considerable pragmatism and caution on specific issues, it remains active in a number of areas that pose a threat to US interests and is responsible for serious human rights abuses. Foremost among these is its opposition to the Arab-Israeli peace process and its direct support of terrorism. Its opposition to the peace process is more determined than that of any other regional actor; its support for violent opposition to the process -- through, for example, its support for Hizballah in southern Lebanon and the Palestine Islamic Jihad (PIJ) more generally -- has facilitated terrorists attacks in Israel that have taken American lives. Iran has considerable WMD capabilities, particularly in the areas of missiles and CW, and is actively seeking to enhance those capabilities, which already pose a substantial threat to neighboring states.

Libva. Despite repeated disclaimers and deceptions, the Qadhafi regime continues to support terrorist groups -- including support for the PIJ and the Abu Nidal Organization (ANO). It continues to develop WMD, particularly CW and missiles. Libya opposes the Middle East peace process, although not with the zeal and effectiveness of Iran. Libya also seeks to exploit differences between Washington and allied capitals on how to bring to trial those implicated in the destruction of Pan Am 103.

Syria. Syria has been engaged in the Arab-Israeli peace process since the 1991 Madrid conference and has not been directly involved in planning or executing international terrorist attacks since 1986. Nevertheless, Syria continues to support international terrorism by allowing terrorist groups to maintain a presence in Damascus and operate from Syria-controlled areas of Lebanon. Some of these groups include fundamentalist and secular Palestinian organizations, such as Hamas, the Palestine Islamic Jihad (PIJ) and the Popular Front for the Liberation of Palestine-General Command (PFLP-GC), as well as non-Palestine groups, such as the Kurdistan Workers' Party (PKK). Syria acquired from the former Soviet Union standard SCUD-B missiles, with a range of 300 kilometers and a smaller number of 500-kilometer SCUD-Cs from North Korea; it has had a chemical warfare program since the mid-l980s. While there is no indication Syria is planning to initiate a conflict with Israel, there is always a danger that Syrian-Israeli tensions could result in the outbreak of hostilities through miscalculation by either side, particularly over the fighting in southern Lebanon.

North Korea. There remains a continuing threat to US and South Korean forces from the North Korean military. But domestic economic pressures are narrowing the Pyongyang regime's room for maneuver. We remain uncertain about many aspects of the domestic situation in the North, but it is clear that the economy is in even more serious trouble than last year, including a chronic food shortage. Kim Jong Il appears to be both actively and effectively in charge, even though he has not formally succeeded to his father's official positions, but new and growing internal pressures could change the decisionmaking calculus that has long prevented conflict. The submarine grounding incident heightened tensions between Pyongyang and Seoul and put aspects of the Agreed Framework on hold, but - largely because of the intensive efforts of State Department and NSC officials in close coordination with South Korea -- North Korea agreed on December 29 to issue a statement of regret. This move by Pyongyang cleared the way for renewed progress. North Korea's postponement of the scheduled briefing on proposed four-party talks appears to be primarily an attempt to highlight its food needs. We believe North Korea's unprecedented statement of regret concerning the submarine incident reflects a commitment by the regime to remain engaged in the negotiating process.

Cuba. Cuba's economic free fall has bottomed out and it is showing signs of slow recovery, but economic conditions remain grim and human rights problems persist. Without Soviet aid and lacking resources of its own, Cuba no longer represents a significant threat for subversion of the region, nor is it seen as a model to follow. Its threat to US interests stems from the substantial probability that when its aging leader departs -- by whatever means -- a period of instability may follow, leading to another mass migration and violence.

HOT SPOTS and UNCERTAINTIES: BOSNIA; THE AEGEAN; SOUTH ASIA; CENTRAL AFRICA

Bosnia/Balkans. NATO has demonstrated its ability to deal with post-Cold War problems by its successful leadership of the international military intervention in support of the Dayton Peace Agreement. The main threat to peace comes not directly from the three formerly warring armies, but rather from the too slow pace of implementing the civilian portions of the peace agreement, in particular the repatriation of displaced people and refugees, the apprehension of war criminals, economic rehabilitation, and settlement by arbitration of Brcko's fate. Bringing intelligence to bear on these issues has been difficult, but the need is critical if US troops are going to be able by mid-1998 to leave behind a stable and enduring peace in Bosnia.

The situation in Serbia also requires watching, in particular the development of a democratic opposition to the last remaining Communist regime in Europe and the potential for conflict between Serbs and Albanians in Kosovo. Milosevic's options are narrowing as the Church, parts of the military establishment, and the general public grow weary of the continuing turmoil. Other concerns are the situation in the former Yugoslav Republic of Macedonia, where US troops are deployed, as well as the completion of democratic transitions in Romania and Bulgaria, and the current ethnic conflict in Albania.

The Aegean. Tensions between Greece and Turkey have in the past almost led to open conflict and the same is true today, whether over the installation of air defense missiles on Cyprus by the Greek Cypriots, competing claims involving tiny islets, or accidental clashes and hair-trigger military plans. Failure to find a real, long-term solution on Cyprus and in the Aegean could push Turkey toward the East, undermine both NATO and ED expansion (because of Turkish and Greek vetoes), and cause serious problems in the Middle East peace process and in US relations with Russia, which is becoming a major arms supplier to Cyprus.

South Asia. South Asia is an area of varied and growing US interests. Tension between India and Pakistan, centered on their dispute over Kashmir, contributes to concerns over regional instability. The proximity of two populous, mutually suspicious states, each seemingly convinced that nuclear weapons are an essential attribute of major power status, makes this one of the world's more troubling regions. The original motive for India's acquisition of a nuclear weapons capacity -- a perceived threat from China -- remains salient to Delhi. Pakistan continues its own nuclear program because of its security fears of a larger India.

India continues to charge that Pakistan supports Kashmiri Muslim secessionists, while Islamabad contends it provides only moral support. The Kashmir dispute remains a possible flashpoint for regional war with the potential to escalate into a nuclear exchange.

Intense fighting continues in Afghanistan, a country riven by ethnic, tribal, ideological, and regional differences. International mediation efforts have not yet resulted in a political settlement; the United States continues to support the ongoing UN-led effort. Afghanistan remains a focus for meddling by neighbor states, a narcotics trafficking center, a source for international terrorist training and equipment, and hence a major source of regional instability.

Central Africa. As civil and regional conflict has intensified in the continent's center, it has threatened the existence of Africa's second-largest state, Zaire, and the stability of the entire Great Lakes region. For the first time, there is a line of interconnected hostilities running from the Sudanese-Eritrean frontier, Ethiopia, and Somalia through southern Sudan, northern and western Uganda, Rwanda, Burundi, and Zaire, and touching the Angolan border. Arms are flowing into these regions from outside, mercenary troops are appearing, and political divisions are forming which seem poised not only to divide us from some of our Western allies but also to exacerbate continuing humanitarian tragedies affecting millions of Africans, particularly those in eastern Zaire. In some cases, such as in Zaire and the Central African Republic, the state is scarcely able to respond to any reasonable claim to services or physical protection, much less be an advocate and guarantor of human rights and the rule of law.

From another, broader, perspective, we are looking at a range of complex problems with high-stakes outcomes for all of Africa, problems that challenge American leadership, diplomacy, and the ability of the intelligence community to provide adequate warning and timely analysis to support creative diplomatic initiatives. There probably is no way out of the central African imbroglio without sustained outside involvement, leadership. and ideas, though effective mediation will require steering a careful course among opposing forces. An African-organized and led contact group has formed to relate to key parties in the central African conflict. This initiative offers an opportunity to develop peacekeeping partnerships and other forms of regional and bilateral economic cooperation as well as to underpin US initiatives like the African Crisis Response Force.

Working for peace and durable democratic systems in these complex political, social, and cultural systems and stressed physical environments not only is worth the effort in humanitarian terms and as a reflection of our principles, but also is necessary to fill the political vacuums which nourish the organized crime and narcotics networks burgeoning in many parts of Africa. it is clearly in our interest to remain vigorously engaged; comparatively modest resources are required to remain ahead of the intelligence curve on African political and economic developments.

ENVIRONMENTAL SECURITY

National security threats come in varied forms. Some are obvious. Others, such as the effects of climate change and environmental degradation, are more subtle. If unaddressed, slowly but surely, citizens and foreign policy interests will be affected.- Environmental stress and competition over Dwindling natural resources increase poverty and can fuel ethnic tensions and civil unrest in poor countries. They can also lead to ecomigration -- large scale movements of people to escape deforestation, soil erosion, water shortages, pollution, or other environmental problems. The Department of State's environmental diplomacy initiative recognizes the seriousness of this threat and is laying out a strategy for better coordinating international responses. Similarly, global climatic changes are another long-term global threat that can only be addressed in close diplomatic and scientific collaboration with other countries.

HUMANITARIAN CRISES and REFUGEE FLOWS

We have seen that most recent humanitarian crises are not only caused by isolated natural disasters, but also by civil wars, internecine ethnic violence, extreme population pressure, and misguided government policies that can suddenly leave large populations either forcibly displaced within their own country or in a neighboring land. Potential migration flows from countries like Cuba and Haiti, as wolf as increasingly sophisticated and persistent alien-smuggling operations, tax the response capabilities of US Government agencies at all levels and create the potential for costly humanitarian disasters. Mass migrations are a product, not a cause, of regional instability; indeed, they can serve as one indicator of political instability. WE have seen that when political crises are ignored, the frustrations of long-staying exiled groups become a source of cross-border violence.

HUMAN RIGHTS ABUSES and WAR CRIMES

Countries with widespread human rights abuses are generally those that are the moat mismanaged, insecure, or undemocratic. These are states that are likely to be a source of instability in their region and a catalyst for humanitarian crises. Genocide in Bosnia and Rwanda has focused international attention on the need for vigorous prosecution of war criminals to serve the cause of justice as well as stability and security. A firm stance on human rights protection and war crimes prosecutions reinforces the pursuit of our national ideals and vital interests globally.

THREATS AGAINST OUR ECONOMIC INTERESTS

Economic Espionage. The overseas operations of US corporations are increasingly vital to this country's prosperity. This decade has seen extraordinary growth in exports and investment overseas. Exports now constitute over one-ninth of US GDP, and US foreign direct investment--having doubled since 1989--now stands well over $700 billion.

Increased overseas exposure involves new risks, with implications for US corporate profits and jobs, as well as for US technological leadership in many fields. US proprietary secrets are vulnerable to targeting by domestic corporate spies and overseas intelligence agents, either performing classic private industrial espionage or linked to foreign government attempts to boost national technical knowledge. The recently passed Economic Espionage Act of 1996 gives the Administration new tools to fight economic and industrial espionage when there is evidence of any foreign government's sponsorship or coordinated intelligence gathering activity.

Unfair Foreign Competition. Unfair foreign competition is another threat to our interests overseas. The profits involved in large infrastructure, military, and aircraft contracts lead to cutthroat and unfair competition. American corporations do not shrink from tough, fair competition, but we object to a government's supporting its firms with nontransparent political linkages or permitting bribery and corruption. Our industrial country competitors are only slowly coming to realize the benefits of joint action to combat these practices, for example, in the UN, the Organization for Economic Cooperation and Development (OECD), and the World Trade Organization (WTO).

Economic Sanctions. To further our foreign-policy goals, the United States has turned to sanctions as an alternative to pure diplomatic suasion and the use of armed force. Sanctions are most likely to be effective when high-priority national interests are at stake, when strategic objectives are defined, and when they are multilateral. We have growing evidence of skepticism and opposition from our partners and allies, especially when we are perceived as asserting the extraterritorial reach of US laws. Moreover, the concern of other nations that US-imposed unilateral sanctions could make American companies unreliable suppliers on critical projects (for example, in the energy sector) could cause otherwise competitive US firms to be shut out of world markets-- another reason to favor multilateral sanctions, which share the risks among all competing firms.

CONCLUDING OBSERVATIONS

Threats to our national security may be divided into three broad categories: threats to our territory and our survival as a nation, threats to our interests and objectives in the global arena, and threats to American citizens and American companies. The dangers of nuclear war and large-scale conventional attacks on US soil and American forces have diminished greatly, but our global presence and global interests make us vulnerable to an array of smaller scale hut still pernicious threats.

Rogue states pursue weapons of mass destruction; others seek opportunities to thwart American efforts to protect human rights, promote democracy and market economies and preserve the environment. Millions of American citizens living, working, or simply travelling abroad are potentially at risk of deliberate or random violence initiated by terrorists, international criminals, rival ethnic groups, political insurgents, and other subnational actors.

At the macro level, the world has surely become much safer for Americans; at the level where individual citizens and corporations face the world the threats have become more varied, more pernicious, and more difficult to address. The stakes for the nation as a whole may be smaller, but the potential danger to all of us as Americans remains unacceptably high. We must do everything necessary to protect our people, our open society, and our interests everywhere in the world.