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[Senate Hearing 109-61]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 109-61

  CURRENT AND PROJECTED NATIONAL SECURITY THREATS TO THE UNITED STATES

=======================================================================

                                HEARING

                               BEFORE THE

                    SELECT COMMITTEE ON INTELLIGENCE
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 16, 2005

                               __________

      Printed for the use of the Select Committee on Intelligence

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate

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                    SELECT COMMITTEE ON INTELLIGENCE

           [Established by S. Res. 400, 94th Cong., 2d Sess.]

                     PAT ROBERTS, Kansas, Chairman
          JOHN D. ROCKEFELLER IV, West Virginia, Vice Chairman
ORRIN G. HATCH, Utah                 CARL LEVIN, Michigan
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
CHRISTOPHER S. BOND, Missouri        RON WYDEN, Oregon
TRENT LOTT, Mississippi              EVAN BAYH, Indiana
OLYMPIA J. SNOWE, Maine              BARBARA A. MIKULSKI, Maryland
CHUCK HAGEL, Nebraska                JON S. CORZINE, New Jersey
SAXBY CHAMBLISS, Georgia
                   BILL FRIST, Tennessee, Ex Officio
                     HARRY REID, Nevada, Ex Officio
                   JOHN WARNER, Virginia, Ex Officio

                              ----------                              

             Bill Duhnke, Staff Director and Chief Counsel
               Andrew W. Johnson, Minority Staff Director
                    Kathleen P. McGhee, Chief Clerk

                                CONTENTS

                              ----------                              

                                                                   Page

Hearing held in Washington, DC:
    February 16, 2005............................................     1

Witness Statements:

    Goss, Hon. Porter J., Director of Central Intelligence.......     7
        Prepared statement.......................................    14
    Jacoby, Vice Admiral Lowell, USN, Director, Defense 
      Intelligence Agency........................................    45
        Prepared statement.......................................    46
    Loy, Admiral James, Deputy Secretary, Department of Homeland 
      Security...................................................    36
        Prepared statement.......................................    39
    Mueller, Hon. Robert S. III, Director, Federal Bureau of 
      Investigation..............................................    18
        Prepared statement.......................................    23
    Rodley, Carol, Principal Deputy Assistant Secretary of State 
      for 
      Intelligence and Research..................................    59

Supplemental Materials:

    Prepared Statement for the Record from Hon. Thomas Fingar, 
      Assistant Secretary of State for Intelligence and Research.    59
    Prepared Statement for the Record from Senator Olympia J. 
      Snowe......................................................    69

 
  CURRENT AND PROJECTED NATIONAL SECURITY THREATS TO THE UNITED STATES

                              ----------                              

                      WEDNESDAY, FEBRUARY 16, 2005

                      United States Senate,
           Senate Select Committee on Intelligence,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SH-216, Hart Senate Office Building, the Honorable Pat 
Roberts, Chairman of the Committee, presiding.
    Committee Members Present: Senators Roberts, Hatch, Bond, 
Lot, Snowe, Chambliss, Warner, Rockefeller, Levin, Feinstein, 
Wyden, Bayh, and Mikulski.

        OPENING STATEMENT OF THE HONORABLE PAT ROBERTS, 
                            CHAIRMAN

    Chairman Roberts. The hearing will come to order.
    Today, the Senate Committee on Intelligence meets in open 
session to conduct its annual worldwide threat hearing. I would 
like to inform Members that traditionally we have a closed 
hearing in the afternoon, but Secretary of State Rice is coming 
to the Senate to brief all Members this afternoon.
    We will follow up with individuals at our weekly 
intelligence hearings, and then, obviously, a hearing or 
briefing at any Member's request. So we will see all of these 
people back again in a classified session at another time.
    The Committee traditionally begins its annual oversight of 
the U.S. intelligence community with an open hearing, so that 
the public will have the benefit of the intelligence 
community's best assessment of the current and projected 
national security threats to the United States.
    Our witnesses today are Mr. Porter Goss, the Director of 
Central Intelligence. Welcome back, Mr. Director.
    Director Goss.  Thank you, Mr. Chairman.
    Chairman Roberts. Mr. Robert Mueller, the Director of the 
Federal Bureau of Investigation; Admiral James Loy, the Deputy 
Secretary of the Department of Homeland Security; Vice Admiral 
Lowell Jacoby, the Director of the Defense Intelligence Agency; 
and Ms. Carol Rodley, the Principal Deputy Assistant Secretary 
of State for Intelligence and Research. The acronym for that, 
by the way, is INR.
    The Committee thanks all of our distinguished witnesses for 
being here today. We thank you for your commitment, for your 
perseverance on your job, and for helping to keep America safe.
    Before we begin the testimony, I would like to take this 
opportunity to discuss an issue that has concerned and 
frustrated me since I joined this Committee over 8 year ago, 
and all Members of this Committee from time to time.
    While we meet today in open session, the Members of this 
Committee and our witnesses will be limited in what they can 
say because the vast majority of the information with which 
this Committee and our witnesses deal is classified. The issues 
which we cover are not necessarily secret, but the details that 
surround them generally are.
    Our goal today is to have as open a discussion as possible, 
recognizing that there are simply some things that we cannot 
and must not discuss publicly. The dynamics surrounding what we 
can and cannot say represents one of the most frustrating 
aspects of membership on this Committee, especially when secret 
intelligence activities find their way into public discourse.
    How do we as a Committee assure the American people that we 
are even aware of something when we cannot discuss it publicly? 
How, without confirming or denying a particular story, do we 
explain that concerns are misplaced, on point or off point? 
Where do we draw the line between the public's right to know 
and our Nation's security interests in keeping something 
secret? These remain very difficult questions.
    In 1976, the U.S. Senate established this Committee to 
conduct vigorous oversight of the intelligence activities of 
the United States government. And that is exactly what we do, 
day in and day out--with, I might add--what the Vice Chairman 
and I consider to be an outstanding and most capable staff.
    Unfortunately, but necessarily, the Members of this 
Committee are rarely at liberty to respond to public stories or 
to inquiries. This does not mean, however, that we are not 
aware of or deeply involved in the issue that is being 
discussed.
    Much of this Committee's work gets done behind closed doors 
with little fanfare. And open public discussion about all of 
the issues on which our Committee works is just not possible. 
If we were to discuss some of the ingenious ways this Nation 
does collect intelligence and protects our citizens, our 
adversaries would and could develop simple countermeasures that 
would eliminate these advantages, which were developed at great 
cost or high risk. This secrecy does protect lives and helps us 
to keep safe.
    The Vice Chairman and I will, however, continue to work 
together to keep the American people as informed as possible. 
And when we can, we will do our best to clarify any 
misconceptions that may exist. With that in mind, I will now 
briefly discuss some of our plans for this Committee's 
oversight in the coming months.
    First, we look forward to the naming of a Director of 
National Intelligence. As soon as the President nominates this 
individual, we will schedule a confirmation hearing as soon as 
practicable.
    Second, we will monitor closely the implementation of the 
Intelligence reform bill. We will focus a great deal of 
attention on how this Committee can support the new DNI in the 
exercise of his or her authorities. And, because no legislation 
is perfect, we will also look at whether any legislative fixes 
are necessary.
    Third, in the area of oversight, we will focus on the 
intelligence community's collection and analytical 
capabilities, especially in regard to our capabilities. Do we 
have the adequate collection? Do we have the adequate analysis? 
Do we have the information access to make a consensus threat 
analysis that is both credible and helpful to the policymakers 
and the Congress?
    This Committee learned from our Iraq WMD inquiry that we 
cannot and should not always take the intelligence community's 
assessments at face value. The Vice Chairman and I have 
therefore decided to change the way the Senate Intelligence 
Committee does our work.
    We haven't launched anything. We haven't really begun an 
investigation or an inquiry. Nor have we ruled them out. We 
have simply adjusted our approach based on the lessons we 
learned while reviewing the assessment by the community on 
Iraq's WMD programs.
    Applying the methodologies that we used in that review, we 
will now look deeper into the intelligence community's work on 
the very critical threats that face our Nation. Instead of 
examining these issues after the fact, as we did on the Iraq 
WMD question and many other matters in the past, we are going 
to be more proactive, to try to identify our strengths and our 
weaknesses ahead of time. We have already begun to examine our 
intelligence capabilities with respect to nuclear terrorism and 
also the country of Iran.
    In closing, I want to say something about the limitations 
of intelligence. Even the best intelligence will not be 
absolutely precise and tell us what to do. However, 
intelligence is a necessary and crucial tool used by 
policymakers to make very difficult decisions that do directly 
affect those who defend our freedoms and our national security.
    With that said, I look forward to the testimony of our 
witnesses, and also the questions by our Members. I now turn to 
the distinguished Vice Chairman for any comment he may wish to 
make.
    Senator Rockefeller.

      STATEMENT OF THE HONORABLE JOHN D. ROCKEFELLER IV, 
                         VICE CHAIRMAN

    Vice Chairman Rockefeller. Thank you, Mr. Chairman.
    It's customary at the beginning of our hearings to welcome 
everybody, and I certainly do so, and very much look forward to 
your testimony. I have to say, though, I think there is a 
significant absence or an empty spot at the table, at the 
witness table. And I want to talk about that.
    There should be another chair before us. And the little 
sign in front of it should read Director of National 
Intelligence, DNI. Last summer, the Congress made reforming the 
intelligence community its top legislative priority. We worked 
through our August recess. We came back in a lame duck session 
after the election.
    And we eventually passed landmark legislation fundamentally 
reforming the intelligence community for the first time in 50 
years. The Congress made this extraordinary effort because it 
believed that our Nation was at risk, and we take that 
seriously.
    More specifically, the Congress--eventually joined by the 
President--understood that without one individual in charge of 
the 15-agency intelligence community, America's war on 
terrorism would continue to be hampered by bureaucratic 
infighting and by budgetary tug-of-wars, that in turn inhibit 
the sharing of information--or, as we like to say, the access 
to information--and limit our ability to bring all of our 
resources to bear on what is a fairly ghastly threat on a 
worldwide basis.
    When the President signed the intelligence reform bill in 
December, I really expected that when this hearing came the new 
Director of National Intelligence would be here to talk about 
threats.
    It took 3 months for the Senate and the House to pass 
separate intelligence bills--that's not really very much time--
and then resolve a multitude of differences in conference and 
all kinds of back-and-forth in a way which was agreeable to the 
Administration.
    Two months have now passed since the bill-signing ceremony. 
And the position of Director of National Intelligence remains 
vacant--not even a person nominated. To me, this is 
unacceptable. It's unacceptable that the Administration has not 
shown the same urgency in dealing with that question that the 
Congress took the trouble to create. Some agree, some don't 
agree with the decision, but it was not a particularly close 
vote in either house.
    With absolutely no disrespect--and, in fact, a great deal 
of respect to Director Goss--or any of our other witnesses, it 
is unacceptable that we cannot hear from and question the one 
person under the new law that is supposed to be responsible for 
the overall management of how the intelligence community is 
responding to the national security threats that we will be 
discussing this morning.
    There are other troubling consequences to the 
Administration's lack of action. In recent weeks, I visited 
most of the principal agencies that comprise our intelligence 
community. The message I heard over and over, through words or 
body language, was that the senior leadership at these agencies 
was--that action on how best to carry out some key provisions 
on the intelligence reform bill was being held up pending the 
arrival of the new Director of National Intelligence. The delay 
in appointing a DNI has kept implementation of the reform bill, 
therefore, in my judgment, in idle.
    So, what are the practical consequences of this delay, in 
the context of today's threat hearing? I'll highlight three.
    The first and most obvious is that delaying the appointment 
of the DNI places that individual at a growing disadvantage in 
establishing his or her team--the new directorate--and 
selecting his or her supporting team of deputies within the 6 
months prescribed by law, 2 months already having gone by, or 
more. It's prescribed by law, has to have it done.
    The second consequence of delay pertains to the 
intelligence community's counterterrorism program. In addition 
to establishing the position of DNI, the intelligence reform 
bill mandated the creation of the National Counterterrorism 
Center, or NCTC. Initially created by Executive Order, the NCTC 
is chartered to be the primary organization in the U.S. 
Government responsible for analyzing and integrating all 
intelligence pertaining to terrorism and counterterrorism.
    As is the case with the DNI, the head of the NCTC is a 
Senate-confirmed position and the Administration has yet to 
nominate a person to carry out those crucial tasks. One could 
say one has to do the DNI before the NCTC, but let's get going.
    One of the primary missions of the NCTC--and I'm reading 
the law now--is to conduct strategic operational planning for 
counterterrorism activities, integrating all instruments of 
national power, including diplomatic, financial, military, 
intelligence activities, as well as homeland security and law 
enforcement activities, and to assign roles and 
responsibilities as part of its strategic operational planning.
    My understanding is that the operational planning mission 
at NCTC is not being undertaken, pending confirmation of the 
new DNI. We can discuss that. So when we talk about going after 
terrorists, after their organizations, where they plot and 
where they train and where they keep their money, the question 
is, who is carrying out this strategic operational planning 
mission on this day?
    In the wake of our war against the al-Qa'ida terrorist 
network and its operational bases in Afghanistan and Pakistan, 
the fundamentalist Islamic terrorist threat has splintered and 
decentralized its operations. We need a person in charge, we 
need an organization in place, that can coordinate 
counterterrorist operations across agencies against this 
multiplying terrorist threat.
    The third immediate consequence of not having a DNI in 
place is the area of proliferation of weapons of mass 
destruction. The proliferation activity of North Korea and 
Iran, along with the damage done by Pakistani scientist A.Q. 
Khan, has reduced any confidence that the nuclear genie is 
contained.
    The combination of these two threats--a decentralized, but 
determined terrorist threat and growing proliferation 
activity--present the intelligence community with a sobering 
challenge, now and for the foreseeable future.
    The Congress recognized the importance of this challenge in 
crafting the intelligence reform bill, by authorizing the 
establishment of a National Counterproliferation Center. The 
new intelligence center would generally follow the blueprint of 
the National Counterterrorism Center. Again, I am told and 
troubled by the fact that the decision on whether or not to 
establish the National Counterproliferation Center and, if so, 
in what form, is being held up pending the DNI's appointment.
    The proliferation activities of North Korea are a threat to 
our security and the security of our allies today, as well as 
down the road. And the same, of course, is true with Iran, and 
we discover others as we go along. Iran, as a nuclear aspirant 
and supporter of terrorism, is also center stage and very much 
needs to be pursued in this manner.
    Policymakers and, most importantly, the President, but also 
the Congress, need the best intelligence possible on North 
Korea, Iran and other hotspots around the world--Africa being 
one which I may ask a question about.
    The faulty intelligence used by the Administration to 
invade Iraq has harmed our credibility with our allies and has 
given Islamic jihadists a powerful recruiting tool around the 
world that is not to anybody's advantage. We must learn from 
these mistakes, as the Chairman has indicated, and get better 
in how we produce timely, objective and accurate intelligence 
for U.S. policymakers.
    The Chairman and I have directed that the Intelligence 
Committee undertake review of how intelligence on Iran is 
collected, analyzed and produced. The review will be similar to 
what we did before with weapons of mass destruction in Iraq. 
But it's going to be very proactive. The same sort of rigorous 
oversight ought to apply to North Korea also, and there are 
some other countries that come to mind.
    I am hopeful that the Committee can also focus the efforts 
of its very talented staff on the growing controversy 
surrounding the collection of intelligence through the 
interrogation and rendition of detainees. We need to probe the 
fundamental legal, jurisdictional and operational questions, 
both retrospectively and prospectively, in my mind, at the 
heart of how the intelligence community collects such 
intelligence.
    It's undeniable that the intelligence community has made 
enormous strides in the past 3 years and that some reform has 
occurred. The tireless efforts of hardworking men and women at 
the CIA, FBI and other intelligence agencies, like the work of 
those in uniform, have been a linchpin in the effort to protect 
every American against the murderous intentions of terrorists.
    But there is an acknowledgement among the people I have 
spoken with that we can do better and that we must get better. 
The intelligence reform bill addressed that issue of 
authorities, resources and organization. But the promise of 
reform will not be realized without strong leadership and 
management acumen--the sort of skills the DNI must bring to the 
table.
    Challenges abound, as the Chairman knows, for the current 
and future leadership of the intelligence community. There's a 
lot of work to be done on how we collect intelligence, 
particularly in the arena of human intelligence, analytical 
workforce problems, language problems. Our intelligence 
community needs to establish a global presence that is not only 
capable, but lithe, for our adversaries are increasingly mobile 
and use much more sophisticated technology as they do their 
work.
    I know we're limited as to what we can discuss in an open 
hearing, but I hope to the extent possible that our witnesses 
will address some of the questions that I have raised.
    I thank the witnesses and I thank you, Mr. Chairman.
    Chairman Roberts. Before I recognize Director Goss, I would 
like to speak to the Vice Chairman's comments in regard to the 
appointment of a DNI. I think this is what we used to hear on 
``Perry Mason,'' with extenuating circumstances.
    The intelligence reform bill was passed on December 17. The 
bill says that a DNI will be appointed no later than 6 months--
that is, June 17. I think, or at least it is my opinion, that 
the Administration is also awaiting the report of the 
independent WMD commission, part of whose job or task is to 
take a look at the intelligence reform bill and make some 
recommendations.
    In addition, while I share the Vice Chairman's frustration 
that we wish we had here the Director of National Intelligence 
and that he or she was well down the road to implementing the 
reform bill, it is, I think, crucially important, not only in 
terms of timing, but to get the right person. And that person 
should have managerial experience, obviously, expertise in 
intelligence, obviously, expertise and experience perhaps in 
the military. As the Vice Chairman has pointed out, we have 
certainly people in the Washington area or, for that matter, 
within the United States, that certainly fit that description.
    So, I hope that the Administration will move in an 
expeditious fashion, but in a fashion that gets the right 
person for the job.
    Director Goss, you may proceed, sir.

          STATEMENT OF THE HONORABLE PORTER J. GOSS, 
                DIRECTOR OF CENTRAL INTELLIGENCE

    Director Goss. Thank you very much, Mr. Chairman. Good 
morning, Mr. Vice Chairman and Members of the Committee, and 
thank you for the hospitable welcome here.
    The challenges that you've mentioned in your opening 
remarks that face the United States of America and its citizens 
and our interests literally do span the globe. My intention 
today is to tell you what I believe are those challenges in 
terms of the most threatening and identify briefly where we 
think our service as intelligence professionals is needed most 
on behalf of the United States taxpayers.
    We need to make some tough decisions about which haystacks 
deserve to be scrutinized for the needles that can hurt us 
most. And we know in this information age that there are 
literally endless haystacks everywhere. There's an awful lot of 
material out there.
    I do want to make several things clear. Our officers are 
taking risks, and I will be asking them to take more risks--
justifiable risks--because I would be much happier here 
explaining why we did something than why we did nothing.
    I'm asking for more competitive analysis, more co-location 
of analysts and collectors--in fact, that's underway--and 
deeper collaboration with agencies throughout the intelligence 
community.
    Above all, our analysts must be objective. Our credibility 
rests there, as you pointed out well in this Committee's report 
to the community issued on the WMD.
    We do not make policy. We do not wage war. I am emphatic 
about that. I testified to that during my confirmation, and it 
is still true and it will always be. We do collect and analyze 
information. With respect to the CIA, I want to tell you that 
my first few months as Director have served only to confirm 
what I and, I think, Members of Congress have known about CIA 
for years. It is a special place. It's an organization of 
dedicated, patriotic people who are doing their best.
    In addition to taking a thorough, hard look at our own 
capabilities, we're working to define CIA's place in the 
restructured intelligence community--a community that will be 
led by a new DNI, as we've heard--to make the maximum possible 
contribution to American security at home and abroad that 
uniquely the CIA can make.
    The CIA is and will remain the flagship agency, in my view, 
and each of the other 14 elements of the community will 
continue to make their unique contributions, as well. I say 
that as the DCI, not as the Director of Central Intelligence 
Agency.
    I turn to threats. I will not attempt, obviously, to cover 
everything that could go wrong in the year ahead. We must and 
do concentrate our efforts, experience and expertise on the 
challenges that are most pressing. And they are, of course, 
defeating terrorism, protecting the homeland, stopping 
proliferation of weapons of mass destruction and drugs, 
fostering stability, freedom and peace in the most troubled 
regions of the world.
    My comments today will focus on these duties. I know well 
from my 30 years in public service that you and your colleagues 
have an important responsibility with these open sessions to 
get information to the American people, as the Chairman has 
stated.
    I also know too well, as the Chairman has stated, that as 
we are broadcasting to America, enemies are also tuning in. In 
open session, I feel that I will and must be very prudent in my 
remarks as DCI.
    Mr. Chairman, on the subject of terrorism, defeating 
terrorism must remain one of our intelligence community's core 
objectives, and it will, as widely dispersed terrorist networks 
will present one of the most serious challenges to the U.S. 
national security interests at home and abroad in the coming 
year. That's not startling news, but it's important.
    In the past year, aggressive measures by our intelligence, 
law enforcement, defense and homeland security communities, 
along with our key international partners, have, in fact, dealt 
serious blows to al-Qa'ida and other terrorist organizations 
and individuals.
    Despite these successes, however, the terrorist threat to 
the U.S. in the homeland and abroad endures. I'd make four 
points.
    Al-Qa'ida is intent on finding ways to circumvent U.S. 
security enhancements to strike Americans in the homeland, one.
    Number two, it may be only a matter of time before al-
Qa'ida or another group attempts to use chemical, biological, 
radiological or nuclear weapons. We must focus on that.
    Three, al-Qa'ida is only one facet of the threat from a 
broader Sunni jihadist movement.
    And four, the Iraq conflict, while not a cause of 
extremism, has become a cause for extremists.
    We know from experience that al-Qa'ida is a patient, 
persistent, imaginative, adaptive and dangerous opponent. But 
it is vulnerable and displaced. We and other allies have hit it 
hard. Jihadist religious leaders preach millennial, 
aberrational visions of some kind of a fight for Islam's 
survival. Sometimes they argue that the struggle justifies the 
indiscriminate killing of civilians, even with chemical, 
biological, radiological and nuclear weapons. And, fortunately, 
they have a small audience.
    Our pursuit of al-Qa'ida and its most senior leaders, 
including bin Laden and his deputy, Ayman al-Zawahiri, is 
intense. However, their capture alone would not be enough to 
eliminate the terrorist threat to the U.S. homeland or 
interests overseas. Often influenced by al-Qa'ida's ideology, 
members of a broader movement have an ability to plan and 
conduct operations. We saw this last March in the railway 
attacks in Madrid, conducted by local Sunni extremists.
    Other regional groups connected to al-Qa'ida or acting on 
their own also continue to pose a significant threat. In 
Pakistan, terrorist elements remain committed to attacking U.S. 
targets. In Saudi Arabia, remnants of the Saudi al-Qa'ida 
network continue to attack U.S. interests in the region.
    In Central Asia, the Islamic Jihad Group, a splinter group 
of the Islamic Movement of Uzbekistan, has become a more 
virulent threat to U.S. interests and local governments there. 
Last spring, the group used female operatives in a series of 
bombings in Uzbekistan, as you know.
    In Southeast Asia, the Jemaah Islamiyah continues to pose a 
threat to U.S. and Western interests in Indonesia and the 
Philippines, where JI is colluding with the Abu Sayyaf Group 
and possibly the MILF group, as well.
    In Europe, Islamic extremists continue to plan and cause 
attacks against U.S. and local interests. Some of them may 
cause significant casualties. In 2004, British authorities 
dismantled an al-Qa'ida cell--much reported. And in the 
Netherlands, an extremist brutally killed a prominent Dutch 
citizen--not as widely reported.
    Islamic extremists are exploiting the Iraqi conflict to 
recruit new, anti-U.S. jihadists. Those jihadists who survive 
will leave Iraq experienced and focused on acts of urban 
terrorism. They represent a potential pool of contacts to build 
transnational terrorist cells, groups and networks in Saudi 
Arabia, Jordan and other countries.
    Zarqawi has sought to bring about the final victory of 
Islam over the West, in his version of it. And he hopes to 
establish a safe haven in Iraq from which his group could 
operate against the ``infidel Western nations, the apostate 
Muslim governments.''
    Other groups spanning the globe also pose persistent and 
serious threats to U.S. and Western interests. Hizbollah's main 
focus remains Israel. But it could conduct lethal attacks 
against U.S. interests quickly upon a decision to do so. It has 
that capability, we estimate.
    Palestinian terrorist organizations have apparently 
refrained from directly targeting U.S. or Western interests in 
their opposition to Middle East peace initiatives, but they do 
pose an ongoing risk to U.S. citizens that could be killed or 
wounded in attacks intended to strike Israeli interests.
    Extremist groups in Latin America are still concerned with 
the FARC--the Revolutionary Armed Forces of Colombia--
possessing capability and clear intent to threaten U.S. 
interests in that region.
    The Horn of Africa, the Sahel, the Mahgreb, the Levant and 
the Gulf States are all areas where pop-up terrorist activity 
can be expected and needs to be monitored and dealt with.
    Afghanistan, Mr. Chairman, once the safe haven for Usama 
bin Ladin, has started on the road to recovery after decades of 
instability and civil war. Hamid Karzai's election to the 
presidency was a major milestone. Elections for a new national 
assembly and local district councils, tentatively scheduled for 
this spring--though that's an ambitious schedule--will complete 
the process of electing representatives this year, hopefully. 
President Karzai still faces a low-level insurgency, aimed at 
destabilizing his country and raising the cost of 
reconstruction, and ultimately forcing coalition forces to 
leave before the job is done. The development of the Afghan 
national army and the national police force is going well, 
although neither can yet stand on its own.
    In Iraq, low voter turnout in some Sunni areas and the 
post-election resumption of insurgent attacks--most against 
Iraqi civilian and security forces--indicate that the 
insurgency achieved at least some of its election day goals and 
remains a serious threat to creating a stable, representative 
government in Iraq.
    Self-determination for the Iraqi people will largely depend 
on the ability of the Iraq forces to provide their own 
security. Iraq's most capable security units have become more 
effective in recent months, contributing to several major 
operations, and helping to put an Iraqi face on security 
operations. Insurgents are determined and still trying to 
discourage new recruits and undermine the effectiveness of 
existing Iraqi security forces by grotesque intimidation 
tactics.
    The prolonged lack of security would hurt Iraq's 
reconstruction efforts and economic development, causing 
overall economic growth to proceed at a slower pace than many 
analysts expected and, certainly that the Iraqi people deserve.
    Alternatively, the larger, uncommitted moderate Sunni 
population and the Sunni political elite may seize the post-
electoral moment to take part in creating Iraq's new political 
institutions, if victorious Shia and Kurdish parties include 
Sunnis in the new government and the drafting of the 
constitution. That is a hopeful opportunity.
    On the subject of proliferation, Mr. Chairman, I will now 
turn to the worldwide challenge. Last year started with 
promise, as Libya had just renounced its WMD programs, North 
Korea was engaged in negotiations with regional states on its 
nuclear weapons program, and Iran was showing greater signs of 
openness regarding its nuclear program after concealing 
activity for nearly a decade.
    Let me start with Libya, which is a bit of a good news 
story and one that reflects the patient perseverance with which 
the intelligence community--writ large--can tackle a tough 
intelligence problem.
    In 2004, Tripoli followed through with a range of steps to 
disarm itself of WMD and ballistic missiles. Libya gave up key 
elements of its nuclear weapons program and opened itself to 
the IAEA. Libya gave up some key CW assets, and opened its 
former CW program to international scrutiny.
    After disclosing its Scud stockpile and extensive ballistic 
and cruise missile R&D efforts in 2003, Libya took the 
important step to abide by its commitment to limit its missiles 
to the 300-kilometer range threshold of the Missile Technology 
Control Regime.
    Today, the U.S. continues to work with Libya to make sure 
that any discrepancies in the declarations they have made are 
clarified.
    In North Korea, on the other hand, on 10 February 2005--not 
long ago--Pyongyang announced it was suspending participation 
in 6-party talks under way since 2003, declared it had nuclear 
weapons and affirmed it would seek to increase its nuclear 
arsenal. The North had been pushing for a freeze on its 
plutonium program in exchange for significant benefits rather 
than committing to the full dismantlement that we and our 
partners seek.
    In 2003, the North claimed it had reprocessed the 8,000 
fuel rods from the Yongbyon reactor, originally stored under 
the agreed framework, with the IAEA monitoring in 1994. The 
North claims to have made new weapons from its reprocessing 
effort.
    We believe North Korea continues to pursue a uranium 
enrichment capability, drawing on the assistance it received 
from A.Q. Khan before his network was shut down.
    North Korea continues to develop, produce, deploy and sell 
ballistic missiles of increasing range and sophistication, 
augmenting Pyongyang's large operational force of Scud and 
Nodong-class missiles. North Korea could resume flight testing 
at any time, including longer range missiles, such as the Taepo 
Dong-2 system. We assess the TD-2 is capable of reaching the 
United States with a nuclear weapon-size payload.
    North Korea continues to market its ballistic missile 
technology, trying to find new clients now that some 
traditional customers--read Libya--have halted such trade.
    We believe North Korea has active CW and BW programs, and 
probably has chemical and possibly biological weapons ready for 
use.
    Iran. In early February, the spokesman of Iran's Supreme 
Council for National Security publicly announced that Iran 
would never scrap its nuclear program. This came in the midst 
of negotiations with EU-3 members--that would be Britain, 
Germany and France--seeking objective guarantees from Tehran 
that it would not use nuclear technology for nuclear weapons.
    Previous comments by Iranian officials, including Iran's 
supreme leader and its foreign minister, indicated that Iran 
would not give up its ability to enrich uranium. Certainly, it 
would be right for Iran to have the capability to produce fuel 
for power reactors. But, we're more concerned about the dual-
use nature of the technology that could also be used to achieve 
a nuclear weapon. We do not have transparency.
    In parallel, Iran continues its pursuit of long-range 
ballistic missiles, such as an improved version of a 1,300-
kilometer range Shahab-3 MRBM, to add to the hundreds of short-
range Scud missiles it already has.
    Even since 9/11, Tehran continues to support terrorist 
groups in the region, such as Hizbollah--it is a state 
sponsor--and could encourage increased attacks in Israel and 
the Palestinian territories to derail progress toward peace 
there. Iran reportedly is supporting some anti-coalition 
activities in Iraq and seeking to influence the future 
character of the Iraqi state.
    Conservatives are likely to consolidate their power in 
Iran's June 2005 presidential elections, further marginalizing 
the reform movement of last year. Iran continues to retain, in 
secret, important members of al-Qa'ida, causing further 
uncertainty about Iran's commitment to bring them to justice 
one way or another.
    Moving to China, Beijing's military modernization and 
military buildup could tilt the balance of power in the Taiwan 
Strait. Improved Chinese capabilities threaten U.S. forces in 
the region. In 2004, China increased its ballistic missile 
forces deployed across from Taiwan and rolled out several new 
submarines. China continues to develop more robust, survivable, 
nuclear-armed missiles, as well as conventional capability for 
use in regional conflict.
    Taiwan continues to promote constitutional reform and other 
attempts to strengthen local identity. Beijing judges these 
moves to be a ``timeline for independence.'' If Beijing decides 
that Taiwan is taking steps toward permanent separation that 
exceed Beijing's tolerance, we assess China is prepared to 
respond with varying levels of force.
    China is increasingly confident and active on the 
international stage, trying to ensure it has a voice on major 
international issues, to secure access to natural resources, 
and to counter what it sees as United States efforts to contain 
or encircle it.
    New leadership, under President Hu Jintao, is facing an 
array of domestic challenges in 2005, including the potential 
for a resurgence in inflation, increased dependence on exports, 
growing economic inequalities in the country, increased 
awareness of individual rights, and popular expectations for 
his new leadership.
    In Russia, the attitudes and actions of the so-called 
``siloviki''--the ex-KGB men that Putin has placed in positions 
of authority throughout the Russian government--may be critical 
determinates of the course Putin will pursue in the year ahead. 
Perceived setbacks in Ukraine are likely to lead Putin to 
redouble his efforts to defend Russian interests abroad, while 
balancing cooperation with the West.
    Russia's most immediate security threat is terrorism. And 
counterterrorism cooperation undoubtedly will continue.
    Putin publicly acknowledges a role for outside powers to 
play in the confederate states, but we believe he is 
nevertheless concerned about further encroachment by the U.S. 
and NATO into that region.
    Moscow worries that separatism inside Russia and radical 
Islamic movements beyond their borders might threaten stability 
in southern Russia. Chechen extremists have increasingly turned 
to terrorist operations in response to Moscow's successes in 
Chechnya, and it's reasonable to predict they will carry out 
attacks against civilian or military targets elsewhere in 
Russia in 2005.
    Budget increases will help Russia create a professional 
military by replacing conscript with volunteer servicemen and 
focus on maintaining, modernizing and extending the operational 
life of strategic weapons systems, including the nuclear 
missile force.
    Russia remains an important source of weapons technology, 
material and components for other nations. The vulnerability of 
Russian WMD materials and technology to theft or diversion is a 
continuing concern.
    On other areas of potential instability, Mr. Chairman, I 
would briefly go to the Middle East.
    The election of the Palestinian President, Mahmoud Abbas, 
marks an important step, and Abbas has made it clear that 
negotiating a peace deal with Israel is a very high priority. 
That's extraordinarily good news. Nevertheless, there are 
hurdles ahead.
    Redlines must be resolved while the Palestinian leaders try 
to rebuild damaged PA infrastructure and governing 
institutions, especially the security forces, the legislature 
and the judiciary--those things that will help stability. 
Terrorist groups, some of whom benefit from funding from 
outside sources, could step up attacks to derail peace and 
progress and need close monitoring.
    In Africa, chronic instability will continue to hamper 
counterterrorism efforts and impose heavy humanitarian and 
peacekeeping burdens on us.
    In Nigeria, the military is struggling to contain militia 
groups in the oil-producing south and ethnic violence that 
frequently erupts throughout the country. Extremist groups are 
emerging from the country's Muslim population of about 65 
million. Nigeria is a big oil producer for us.
    In Sudan, the peace deal signed in January will result in 
de facto southern autonomy and may inspire rebels in provinces 
such as Darfur to press harder for a greater share of resource 
and power. Opportunities exist for Islamic extremists to 
reassert themselves in the north, unless the central government 
stays unified.
    Unresolved disputes in the Horn of Africa--Africa's gateway 
to the Middle East--create vulnerability to foreign terrorists 
and extremist groups. Ethiopia and Eritrea still have a 
contested border. And armed factions in Somalia indicate they 
will fight the authority of a new transitional government.
    In Latin America, the region is entering a major electoral 
cycle in 2006. Brazil, Colombia, Costa Rica, Ecuador, Mexico, 
Nicaragua, Peru and Venezuela hold presidential elections.
    Several key countries in the hemisphere are potential 
flashpoints in 2005. In Venezuela, Chavez is consolidating his 
power by using technically legal tactics to target his 
opponents and meddling in the region, supported by Castro.
    In Colombia, progress against counternarcotics and 
terrorism under President Uribe's successful leadership may be 
affected by an election.
    The outlook is very cloudy for legitimate, timely elections 
in November 2005 in Haiti, even with substantial international 
support.
    Campaigning for the 2006 presidential election in Mexico is 
likely to stall progress on fiscal, labor and energy reform.
    And in Cuba, Castro's hold on power remains firm. But a bad 
fall last October has rekindled speculation about his declining 
health and the succession scenarios.
    In Southeast Asia, three countries bear close watching. In 
Indonesia, President Yudhoyono has moved swiftly to crack down 
on corruption. But reinvigorating the economy, burned by the 
cost of recovery in the tsunami-damaged area, will likely be 
affected by continuing, deep-seated ethnic and political 
turmoil exploitable by terrorists.
    In the Philippines, Manila is struggling with prolonged 
Islamic and Communist rebellion. The presence of Jemaah 
Islamiyah, terrorists seeking safe haven and training bases in 
the south, adds volatility and capability to terrorist groups 
already in place.
    And finally, Mr. Chairman, Thailand is plagued with an 
increasingly volatile Muslim separatist threat in the 
southeastern provinces and the risk of escalation remains very 
high.
    I thank you very much for that opportunity to give a brief 
overview.
    [The prepared statement of Director Goss follows:]

                Prepared Statement of Hon. Porter Goss, 
                    Director of Central Intelligence

     Good morning, Mr. Chairman, Mr. Vice Chairman, Members of the 
Committee.
    It is my honor to meet with you today to discuss the challenges I 
see facing America and its interests in the months ahead. These 
challenges literally span the globe. My intention is to tell you what I 
believe are the greatest challenges we face today and those where our 
service as intelligence professionals is needed most on behalf of the 
U.S. taxpayer.
    We need to make tough decisions about which haystacks deserve to be 
scrutinized for the needles that can hurt us most. And we know in this 
information age that there are endless haystacks everywhere. I do want 
to make several things clear:
     Our officers are taking risks, and I will be asking them 
to take more risks--justifiable risks--because I would much rather 
explain why we did something than why we did nothing,
     I am asking for more competitive analysis, more 
collocation of analysts and collectors, and deeper collaboration with 
agencies throughout the Intelligence Community. Above all, our analysis 
must be objective. Our credibility rests there.
     We do not make policy. We do not wage war. I am emphatic 
about that and always have been. We do collect and analyze information.
    With respect to the CIA, I want to tell you that my first few 
months as Director have served only to confirm what I and Members of 
Congress have known about CIA for years. It is a special place--an 
organization of dedicated, patriotic people. In addition to taking a 
thorough, hard look at our own capabilities, we are working to define 
CIA's place in the restructured Intelligence Community--a community 
that will be led by a new Director of National Intelligence--to make 
the maximum possible contribution to American security at home and 
abroad. The CIA is and will remain the flagship agency, in my view. And 
each of the other 14 elements in the community will continue to make 
their unique contributions as well.
    Now, I turn to threats. I will not attempt to cover everything that 
could go wrong in the year ahead. We must, and do, concentrate our 
efforts, experience and expertise on the challenges that are most 
pressing: defeating terrorism; protecting the homeland; stopping 
proliferation of weapons of mass destruction and drugs; and fostering 
stability, freedom and peace in the most troubled regions of the world. 
Accordingly, my comments today will focus on these duties. I know well 
from my 30 years in public service that you and your colleagues have an 
important responsibility with these open sessions to get information to 
the American people. But I also know all too well that as we are 
broadcasting to America, enemies are also tuning in. In open session I 
feel I must be very prudent in my remarks as DCI.

                               TERRORISM

    Mr. Chairman, defeating terrorism must remain one of our 
intelligence community's core objectives, as widely dispersed terrorist 
networks will present one of the most serious challenges to U.S. 
national security interests at home and abroad in the coming year. In 
the past year, aggressive measures by our intelligence, law 
enforcement, defense and homeland security communities, along with our 
key international partners have dealt serious blows to al-Qa'ida and 
others. Despite these successes, however, the terrorist threat to the 
U.S. in the Homeland and abroad endures.
     Al-Qa'ida is intent on finding ways to circumvent U.S. 
security enhancements to strike Americans and the Homeland.
     It may be only a matter of time before al-Qa'ida or 
another group attempts to use chemical, biological, radiological, and 
nuclear weapons (CBRN).
     Al-Qa'ida is only one facet of the threat from a broader 
Sunni jihadist movement.
     The Iraq conflict, while not a cause of extremism, has 
become a cause for extremists.
    We know from experience that al-Qa'ida is a patient, persistent, 
imaginative, adaptive and dangerous opponent. But it is vulnerable and 
we and other allies have hit it hard.
     Jihadist religious leaders preach millennial aberrational 
visions of a fight for Islam's survival. Sometimes they argue that the 
struggle justifies the indiscriminate killing of civilians, even with 
chemical, biological, radiological, or nuclear weapons.
    Our pursuit of Al-Qa'ida and its most senior leaders, including Bin 
Ladin and his deputy, Ayman al-Zawahiri is intense. However, their 
capture alone would not be enough to eliminate the terrorist threat to 
the U.S. Homeland or U.S. interests overseas. Often influenced by al-
Qa'ida's ideology, members of a broader movement have an ability to 
plan and conduct operations. We saw this last March in the railway 
attacks in Madrid conducted by local Sunni extremists. Other regional 
groups--connected to al-Qa'ida or acting on their own--also continue to 
pose a significant threat.
     In Pakistan, terrorist elements remain committed to 
attacking U.S. targets. In Saudi Arabia, remnants of the Saudi al-
Qa'ida network continue to attack U.S. interests in the region.
     In Central Asia, the Islamic Jihad Group (IJG), a splinter 
group of the Islamic Movement of Uzbekistan, has become a more virulent 
threat to U.S. interests and local governments. Last spring the group 
used female operatives in a series of bombings in Uzbekistan.
     In Southeast Asia, the Jemaah Islamiyah (JI) continues to 
pose a threat to U.S. and Western interests in Indonesia and the 
Philippines, where JI is colluding with the Abu Sayyaf Group and 
possibly the Mff.F.
     In Europe, Islamic extremists continue to plan and cause 
attacks against U.S. and local interests, some that may cause 
significant casualties. In 2004 British authorities dismantled an al-
Qa'ida cell and an extremist brutally killed a prominent Dutch citizen 
in the Netherlands.
    Islamic extremists are exploiting the Iraqi conflict to recruit new 
anti-U.S. jihadists.
     These jihadists who survive will leave Iraq experienced in 
and focused on acts of urban terrorism. They represent a potential pool 
of contacts to build transnational terrorist cells, groups, and 
networks in Saudi Arabia, Jordan and other countries.
     Zarqawi has sought to bring about the final victory of 
Islam over the West, and he hopes to establish a safe haven in Iraq 
from which his group could operate against ``infidel'' Western nations 
and ``apostate'' Muslim governments.
    Other terrorist groups spanning the globe also pose persistent and 
serious threats to U.S. and Western interests.
     Hizballah's main focus remains Israel, but it could 
conduct lethal attacks against U.S. interests quickly upon a decision 
to do so.
     Palestinian terrorist organizations have apparently 
refrained from directly targeting U.S. or Western interests in their 
opposition to Middle East peace initiatives, but pose an ongoing risk 
to U.S. citizens that could be killed or wounded in attacks intended to 
strike Israeli interests.
     Extremist groups in Latin America are still a concern, 
with the FARC--the Revolutionary Armed Forces of Colombia--possessing 
the greatest capability and the clearest intent to threaten U.S. 
interests in the region.
     Horn of Africa, the Sahel, the Mahgreb, the Levant, and 
the Gulf States are all areas where ``pop up'' terrorist activity can 
be expected.

                              AFGHANISTAN

    Mr. Chairman, Afghanistan, once the safe haven for Usama bin Ladin, 
has started on the road to recovery after decades of instability and 
civil war. Hamid Karzai's election to the presidency was a major 
milestone. Elections for a new National Assembly and local district 
councils--tentatively scheduled for this spring--will complete the 
process of electing representatives.
    President Karzai still faces a low-level insurgency aimed at 
destabilizing the country, raising the cost of reconstruction and 
ultimately forcing Coalition forces to leave.
     The development of the Afghan National Army and a national 
police force is going well, although neither can yet stand on its own.

                                  IRAQ

    Low voter turnout in some Sunni areas and the post-election 
resumption of insurgent attacks--most against Iraqi civilian and 
security forces--indicate that the insurgency achieved at least some of 
its election-day goals and remains a serious threat to creating a 
stable representative government in Iraq.
    Self-determination for the Iraqi people will largely depend on the 
ability of Iraqi forces to provide security. Iraq's most capable 
security units have become more effective in recent months, 
contributing to several major operations and helping to put an Iraqi 
face on security operations. Insurgents are determined to discourage 
new recruits and undermine the effectiveness of existing Iraqi security 
forces.
    The lack of security is hurting Iraq's reconstruction efforts and 
economic development, causing overall economic growth to proceed at a 
much slower pace than many analysts expected a year ago.
     Alternatively, the larger uncommitted moderate Sunni 
population and the Sunni political elite may seize the post electoral 
moment to take part in creating Iraq's new political institutions if 
victorious Shia and Kurdish parties include Sunnis in the new 
government and the drafting of the constitution.

                             PROLIFERATION

    Mr. Chairman, I will now turn to the worldwide challenge of 
proliferation. Last year started with promise as Libya had just 
renounced its WMD programs, North Korea was engaged in negotiations 
with regional states on its nuclear weapons program, and Iran was 
showing greater signs of openness regarding its nuclear program after 
concealing activity for nearly a decade. Let me start with Libya, a 
good news story, and one that reflects the patient perseverance with 
which the Intelligence Community can tackle a tough intelligence 
problem.

                                 LIBYA

    In 2004, Tripoli followed through with a range of steps to disarm 
itself of WMD and ballistic missiles.
     Libya gave up key elements of its nuclear weapons program, 
opened itself to the IAEA.
     Libya gave up some key CW assets and opened its former CW 
program to international scrutiny.
     After disclosing its SCUD stockpile and extensive 
ballistic and cruise missile R&D efforts in 2003, Libya took important 
steps to abide by its commitment to limit its missiles to the 300-km 
range threshold of the Missile Technology Control Regime (MTCR).
    The U.S. continues to work with Libya to clarify some discrepancies 
in the declaration.

                              NORTH KOREA

    On 10 February 2005, Pyongyang announced it was suspending 
participation in the six-party talks underway since 2003, declared it 
had nuclear weapons, and affirmed it would seek to increase its nuclear 
arsenal. The North had been pushing for a freeze on its plutonium 
program in exchange for significant benefits, rather than committing to 
the full dismantlement that we and are our partners sought.
     In 2003, the North claimed it had reprocessed the 8,000 
fuel rods from the Yongbyong reactor, originally stored under the 
Agreed Framework, with IAEA monitoring in 1994. The North claims to 
have made new weapons from its reprocessing effort.
     We believe North Korea continues to pursue a uranium 
enrichment capability drawing on the assistance it received from A.Q. 
Khan before his network was shutdown.
    North Korea continues to develop, produce, deploy, and sell 
ballistic missiles of increasing range and sophistication, augmenting 
Pyongyang's large operational force of Scud and No Dong class missiles. 
North Korea could resume flight-testing at any time, including of 
longer-range missiles, such as the Taepo Dong-2 system. We assess the 
TD 2 is capable of reaching the United States with a nuclear-weapon-
sized payload.
     North Korea continues to market its ballistic missile 
technology, trying to find new clients now that some traditional 
customers, such as Libya, have halted such trade.
    We believe North Korea has active CW and BW programs and probably 
has chemical and possibly biological weapons ready for use.

                                  IRAN

    In early February, the spokesman of Iran's Supreme Council for 
National Security publicly announced that Iran would never scrap its 
nuclear program. This came in the midst of negotiations with EU-3 
members (Britain, Germany and France) seeking objective guarantees from 
Tehran that it will not use nuclear technology for nuclear weapons.
     Previous comments by Iranian officials, including Iran's 
Supreme Leader and its Foreign Minister, indicated that Iran would not 
give up its ability to enrich uranium. Certainly they can use it to 
produce fuel for power reactors. We are more concerned about the dual-
use nature of the technology that could also be used to achieve a 
nuclear weapon.
    In parallel, Iran continues its pursuit of long-range ballistic 
missiles, such as an improved version of its 1,300 km range Shahab-3 
MRBM, to add to the hundreds of short-range SCUD missiles it already 
has.
    Even since 9/11, Tehran continues to support terrorist groups in 
the region, such as Hizballah, and could encourage increased attacks in 
Israel and the Palestinian Territories to derail progress toward peace.
     Iran reportedly is supporting some anti-Coalition 
activities in Iraq and seeking to influence the future character of the 
Iraqi state.
     Conservatives are likely to consolidate their power in 
Iran's June 2005 presidential elections, further marginalizing the 
reform movement last year.
     Iran continues to retain in secret important members of 
Al-Qai'ida--the Management Council--causing further uncertainty about 
Iran's commitment to bring them to justice.

                                 CHINA

    Beijing's military modernization and military buildup is tilting 
the balance of power in the Taiwan Strait. Improved Chinese 
capabilities to threaten U.S. forces in the region.
     In 2004, China increased its ballistic missile forces 
deployed across from Taiwan and rolled out several new submarines.
     China continues to develop more robust, survivable 
nuclear-armed missiles as well as conventional capabilities for use in 
a regional conflict.
    Taiwan continues to promote constitutional reform and other 
attempts to strengthen local identity. Beijing judges these moves to be 
a ``timeline for independence''. If Beijing decides that Taiwan is 
taking steps toward permanent separation that exceed Beijing's 
tolerance, we believe China is prepared to respond with various levels 
of force.
    China is increasingly confident and active on the international 
stage, trying to ensure it has a voice on major international issues, 
secure access to natural resources, and counter what it sees as U.S. 
efforts to contain or encircle China.
    New leadership under President Hu Jintao is facing an array of 
domestic challenges in 2005, such as the potential for a resurgence in 
inflation, increased dependence on exports, growing economic 
inequalities, increased awareness of individual rights, and popular 
expectations for the new leadership.

                                 RUSSIA

    The attitudes and actions of the so-called ``siloviki''--the ex-KGB 
men that Putin has placed in positions of authority throughout the 
Russian government may be critical determinants of the course Putin 
will pursue in the year ahead.
     Perceived setbacks in Ukraine are likely to lead Putin to 
redouble his efforts to defend Russian interests abroad while balancing 
cooperation with the West. Russia's most immediate security threat is 
terrorism, and counterterrorism cooperation undoubtedly will continue.
     Putin publicly acknowledges a role for outside powers to 
play in the CIS, for example, but we believe he is nevertheless 
concerned about further encroachment by the U.S. and NATO into the 
region.
     Moscow worries that separatism inside Russia and radical 
Islamic movements beyond their borders might threaten stability in 
Southern Russia. Chechen extremists have increasingly turned to 
terrorist operations in response to Moscow's successes in Chechnya, and 
it is reasonable to predict that they will carry out attacks against 
civilian or military targets elsewhere in Russia in 2005.
    Budget increases will help Russia create a professional military by 
replacing conscripts with volunteer servicemen and focus on 
maintaining, modernizing and extending the operational life of its 
strategic weapons systems, including its nuclear missile force.
     Russia remains an important source of weapons technology, 
materials and components for other nations. The vulnerability of 
Russian WMD materials and technology to theft or diversion is a 
continuing concern.

                    POTENTIAL AREAS FOR INSTABILITY

    Mr. Chairman, in the Middle East, the election of Palestinian 
President Mahmud Abbas, nevertheless, marks an important step and Abbas 
has made it clear that negotiating a peace deal with Israel is a high 
priority. There nevertheless are hurdles ahead.
     Redlines must be resolved while Palestinian leaders try to 
rebuild damaged PA infrastructure and governing institutions, 
especially the security forces, the legislature, and the judiciary.
     Terrorist groups, some of who benefit from funding from 
outside sources, could step up attacks to derail peace and progress.

                                 AFRICA

    In Africa, chronic instability will continue to hamper counter-
terrorism efforts and pose heavy humanitarian and peacekeeping burdens.
     In Nigeria, the military is struggling to contain militia 
groups in the oil-producing south and ethnic violence that frequently 
erupts throughout the country. Extremist groups are emerging from the 
country's Muslim population of about 65 million.
     In Sudan, the peace deal signed in January will result in 
de facto southern autonomy and may inspire rebels in provinces such as 
Darfur to press harder for a greater share of resources and power. 
Opportunities exist for Islamic extremists to reassert themselves in 
the North unless the central government stays unified.
     Unresolved disputes in the Horn of Africa--Africa's 
gateway to the Middle East--create vulnerability to foreign terrorist 
and extremist groups. Ethiopia and Eritrea still have a contested 
border, and armed factions in Somalia indicate they will fight the 
authority of a new transitional government.

                             LATIN AMERICA

    In Latin America, the region is entering a major electoral cycle in 
2006, when Brazil, Colombia, Costa Rica, Ecuador, Mexico, Nicaragua, 
Peru, and Venezuela hold presidential elections. Several key countries 
in the hemisphere are potential flashpoints in 2005.
     In Venezuela, Chavez is consolidating his power by using 
technically legal tactics to target his opponents and meddling in the 
region supported by Castro.
     In Colombia, progress against counternarcotics and 
terrorism under President Uribe's successful leadership, may be 
affected by the election.
     The outlook is very cloudy for legitimate, timely 
elections in November 2005 in Haiti--even with substantial 
international support.
     Campaigning for the 2006 presidential election in Mexico 
is likely to stall progress on fiscal, labor, and energy reforms.
    In Cuba, Castro's hold on power remains firm, but a bad fall last 
October has rekindled speculation about his declining health and 
succession scenarios.

                             SOUTHEAST ASIA

    In Southeast Asia, three countries bear close watching.
     In Indonesia, President Yudhoyono has moved swiftly to 
crackdown on corruption. Reinvigorating the economy, burdened by the 
costs of recovery in tsunami-damaged areas, will likely be affected by 
continuing deep-seated ethnic and political turmoil exploitable by 
terrorists.
     In the Philippines, Manila is struggling with prolonged 
Islamic and Communist rebellions. The presence of Jemaah Islamiyah (JI) 
terrorists seeking safe haven and training basses adds volatility and 
capability to terrorist groups already in place.
     Thailand is plagued with an increasingly volatile Muslim. 
separatist threat in its southeastern provinces, and the risk of 
escalation remains high.

    Chairman Roberts. We thank you, Mr. Director, for a very 
comprehensive statement.
    Director Mueller.

          STATEMENT OF THE HONORABLE ROBERT MUELLER, 
           DIRECTOR, FEDERAL BUREAU OF INVESTIGATION

    Director Mueller. Good morning, Mr. Chairman. Thank you. 
Thank you, Mr. Chairman and Senator Rockefeller and the Members 
of the Committee. I appreciate this opportunity to discuss our 
current view of threats to the United States and the FBI's 
efforts to address these threats.
    Mr. Chairman, over the past year, through unprecedented 
cooperation, particularly with our other Federal agencies, but 
most particularly with State and local law enforcement, and 
with enhanced intelligence capabilities, we have achieved 
considerable victories against national security and criminal 
threats facing the United States.
    However, at the same time, I must also report that these 
threats continue to evolve and to pose new challenges to the 
FBI and to our partners. It remains the FBI's overriding 
priority to detect and prevent terrorist attacks. And the 
threat posed by international terrorism, and in particular from 
al-Qa'ida and from related groups, continues to be the gravest 
threat that we face.
    In 2004, we learned that terrorist cell members had 
conducted detailed surveillance of financial targets in New 
York, Washington, DC and New Jersey. In response to this threat 
and in coordination with the Department of Homeland Security, 
the threat level was raised. And we mobilized a substantial 
contingent of agents and analysts to review the massive amount 
of information connected with the attack planning and to 
uncover any additional information that would give us insight 
into that plot.
    Later in the year, we received information suggesting that 
there would be an attack. There was an attack being planned, 
possibly timed to coincide with the period before the 2004 
Presidential election.
    To counter that threat, the FBI created a task force in May 
2004, and with thousands of FBI personnel working together with 
hundreds of individuals from other agencies--Federal, State and 
local--we brought to bear every possible resource in an effort 
to identify the operatives and to disrupt the attack plan.
    As part of the initiatives of this task force, field 
offices conducted a thorough canvas of all of our 
counterterrorism investigations, as well as all of our 
sources--not only counterterrorism sources, but other sources--
in an effort to develop any further information that could help 
us find these individuals.
    During the 7 months that the task force was up and running, 
we also checked every substantive lead provided in the threat 
intelligence. It was indeed an extraordinary effort, and while 
we may never know if an operation was indeed being planned, I 
am certain that our response to the threat played an integral 
role in disrupting any operational plans that may have been 
under way.
    Mr. Chairman, since we last spoke, the FBI has identified 
various extremists located throughout the United States and is 
monitoring their activities. My prepared statement sets forth a 
number of instances in which we have taken legal action against 
individuals engaged in terrorism-related activities in 
Virginia, Minneapolis and New York. Although these efforts have 
made us safer, they are also a sobering reminder of the threat 
we continue to face.
    There are three areas that cause us the greatest concern. 
First is the threat from covert al-Qa'ida operatives inside the 
United States who have the intention to facilitate or to 
conduct an attack. Finding them is the top priority for the 
FBI, but it is also one of our most difficult challenges. The 
very nature of a covert operative, trained not to raise 
suspicion and to appear benign, is what makes their detection 
so difficult.
    Whether we are talking about a true sleeper operative who 
has been in place for years, waiting to be activated to conduct 
an attack, or a recently deployed operative who has entered the 
United States to facilitate or to conduct an attack, we are 
continuously adapting our methods to reflect newly received 
intelligence and to ensure we are as proactive and as targeted 
as we can be in detecting their presence.
    Second, we are also extremely concerned with the growing 
body of sensitive reporting that continues to show al-Qa'ida's 
clear intention to obtain, and to ultimately use, some form of 
chemical, biological, radiological or nuclear material in its 
attacks against the United States.
    While we still assess that a mass casualty attack using 
relatively low-tech methods will be their most likely approach, 
we are concerned that they are seeking weapons of mass 
destruction, including chemical weapons, so-called dirty bombs 
or some form of biological agent such as anthrax.
    Third, we remain concerned about the potential for al-
Qa'ida to leverage extremist groups with peripheral or 
historical connections to al-Qa'ida, and particularly its 
ability to exploit radical American converts and other 
indigenous extremists. While we still believe that the most 
serious threat to the homeland originates from al-Qa'ida 
members located overseas, the bombings in Madrid last March 
have heightened our concern regarding the possible role that 
indigenous Islamic extremists already in the United States may 
play in future terrorist plots.
    We are also concerned about the possible role that 
peripheral groups with a significant presence in the United 
States may play, if called upon by members of al-Qa'ida to 
assist them with attack planning or logistical support. The 
potential recruitment of radicalized American Muslim converts 
continues to be a concern and poses an increasingly challenging 
issue. The process of recruitment can be subtle, and many times 
self-initiated. And radicalization tends to occur over a long 
period of time and under very many different circumstances.
    Efforts by extremists to obtain training inside the United 
States is also an ongoing concern. Although there are multiple 
reports and ongoing investigations associated with paramilitary 
training activities, I would suspect that extremists 
nationwide, the majority of these cases involve small groups of 
like-minded individuals who are inspired by the jihadist 
rhetoric found in radical mosques or in prison proselytizing or 
on the Internet.
    Fortunately, the recent amendment to Title 18 adding a 
provision prohibiting individuals from receiving military-type 
training from a designated foreign terrorist organization makes 
it possible now to prosecute individuals who participate or 
assist individuals in receiving this type of training.
    Mr. Chairman, al-Qa'ida and the groups that support it are 
still the most lethal threat we face today. However, other 
terrorist groups that have a presence in the United States 
require careful monitoring.
    It is the FBI's assessment at this time that there is a 
limited threat of a coordinated terrorist attack in the United 
States from Palestinian terrorist organizations such as Hamas 
and the Palestine Islamic Jihad, and the al-Aqsa Martyrs 
Brigade. These groups have maintained a longstanding policy of 
focusing their attacks on Israeli targets in Israel and the 
Palestinian territories. We believe that the primary interest 
of Palestinian terrorist groups in the United States remains 
the raising of funds to support their regional goals.
    We are committed to cutting off the flow of these funds 
from the United States to Palestinian terrorist organizations. 
As an example of this effort, the former leadership of the Holy 
Land for Relief and Development, a Hamas front organization, 
was indicted this past year. And in another case, the Elashi 
brothers, who owned and ran InfoCom, another Hamas front 
organization, were prosecuted and convicted.
    Of all the Palestinian groups, Hamas has the largest 
presence in the United States, with a strong infrastructure 
primarily focused on fundraising, propaganda for the 
Palestinian cause and proselytizing. Although it would be a 
major strategic shift for Hamas, its United States network is 
theoretically capable of facilitating acts of terrorism in the 
United States.
    And like Hamas, but on a much smaller scale, the United 
States-based Palestine Islamic Jihad members and supporters are 
primarily engaged in fundraising, propaganda and proselytizing 
activities. In 2003, the Palestine Islamic Jihad, or PIJ, 
activities and capabilities in the United States were severely 
undercut by the arrests of the PIJ leader Sami al-Arian and his 
lieutenants. And there have been two additional arrests of 
suspected PIJ activists on charges unrelated to terrorism, 
which I believe are set forth in my accompanying statement.
    Currently, the most likely threat of a terrorist attack 
from Palestinian groups in the United States--in the United 
States homeland--is from a lone-wolf scenario. In this 
scenario, a terrorist attack would be perpetrated by one or 
more individuals who may embrace the ideology of a Palestinian 
terrorist group, but act without assistance or approval of any 
established group.
    And then, the Lebanese Hizbollah retains the capability to 
strike in the United States, although we have no credible 
information to indicate that United States-based Hizbollah 
members have plans to attack American interests within the 
United States or, for that matter, abroad.
    I might add in 2004 we had successes in uncovering 
individuals providing material support to Hizbollah, many of 
those individuals involved in various criminal schemes to 
provide the monies that could be sent to Lebanon, to the 
coffers of Hizbollah.
    Mr. Chairman, while the national attention is focused on 
the substantial threat posed by international terrorists to the 
homeland, the FBI must also dedicate resources to defeating a 
number of other threats, as detailed in my prepared statement--
for example, domestic terrorists, motivated by a number of 
political or social agendas, including white supremacists, 
black separatists, animal rights/environmental terrorists, 
anarchists, anti-abortion extremists and self-styled militia 
groups; foreign intelligence activity, often using non-
traditional collectors such as students and business visitors, 
targeting WMD information and technology, penetration of the 
United States government and compromise of critical, national 
assets.
    There is the cyber threat from foreign governments, from 
terrorist groups and from hackers with the ability and the 
desire to utilize computers for illegal and harmful purposes.
    And finally, there are the continuing threats posed to the 
fabric of our society by organized crime, human smuggling and 
trafficking, violent gangs, public corruption, civil rights 
violations, crimes against children and corporate fraud.
    Mr. Chairman, in combating all these threats, from 
international terrorists to child predators, the FBI must 
effectively collect, analyze and share intelligence. As a 
result, over the past year we have continued to strengthen the 
FBI's enterprise-wide intelligence program. It began in 2001, 
with a dedicated analysis section in the Counterterrorism 
Division.
    In 2002, we created the Office of Intelligence in the 
Counterterrorism Division. That structure has enhanced our 
capability significantly for purposes of our counterterrorism 
operations as well as the counterterrorism operations of our 
partners.
    In 2003, we extended this concept across all FBI programs--
criminal, cyber, counterterrorism and counterintelligence--and 
unified intelligence authorities under a new FBI Office of 
Intelligence, led by an Executive Assistant Director. The 
Office of Intelligence has adopted the intelligence community's 
best practices to direct all of our FBI intelligence 
activities. Congress and the 9/11 Commission reviewed these 
efforts, and provided recommendations to strengthen our 
capabilities.
    In the last years, in intelligence reform legislation, 
alluded to by Senator Rockefeller, Congress directed us to 
create the Directorate of Intelligence--a dedicated national 
intelligence workforce within the FBI--and we are doing so. 
This workforce consists of intelligence analysts, language 
analysts, physical surveillance specialists and special agents 
who can pursue an entire career in intelligence.
    This integrated intelligence service leverages the core 
strengths of the law enforcement community, such as reliability 
of sources and fact-based analysis, while ensuring that no 
walls exist between collectors, analysts and those who must act 
upon the intelligence information.
    The Directorate also benefits from the strong FBI history 
of joint operations by unifying FBI intelligence professionals 
and integrating all partners, but most particularly, State, 
local and tribal law enforcement into our intelligence 
structures.
    Mr. Chairman, my prepared statement provides additional 
information about the Directorate of Intelligence and the many 
steps that the Bureau has taken to expand and to strengthen its 
intelligence capabilities.
    We continue to make progress, but there is still much work 
to do. We do not underestimate the challenges we face, but we 
are confident in our strategy and in our plans to protect the 
American people.
    I again would like to thank you and the Committee for your 
support, and I look forward to working with you and the staff 
in the months--and hopefully the years--ahead. And I'm happy to 
answer any questions that you might have.
    Thank you, sir.
    [The prepared statement of Director Mueller follows:]

     Prepared Statement of Hon. Robert S. Mueller, III, Director, 
                    Federal Bureau of Investigation

    Good afternoon, Mr. Chairman, Senator Rockefeller, and Members of 
the Committee. I appreciate this opportunity to discuss our current 
view of threats to the United States and the FBI's efforts to address 
them.
    Before I begin, I would like to take a moment to thank all of our 
partners in the Law Enforcement and Intelligence Communities. They have 
shared their information and expertise, and in many cases worked side-
by-side with us, and together we made great progress over the past year 
to protect our Nation and our communities from terrorism and crime.
    I would also like to thank the men and women of the FBI for 
continuing to embrace our changing mission, for working to enhance our 
intelligence capabilities, for adapting to new technologies and new 
ways of doing things, and for doing all of this without ever pausing in 
our forward push to protect this country from active threats.
    Mr. Chairman, over the past year, through unprecedented 
cooperation, enhanced intelligence capabilities, and continued 
unwavering commitment to protect the American people, we have achieved 
considerable victories against national security and criminal threats 
facing the U.S. However, I must also report that these threats continue 
to evolve and to pose new challenges to the FBI and our partners.
    It remains the FBI's overriding priority to predict and prevent 
terrorist attacks. The threat posed by international terrorism, and in 
particular from al Qa'ida and related groups, continues to be the 
gravest we face.

                 AL-QA'IDA AND RELATED TERRORIST GROUPS

    In 2004, our efforts in the War on Terrorism grew more 
intelligence-driven, more coordinated, and produced many tangible 
results.
    In 2004 we learned that operatives had conducted detailed 
surveillance of financial targets in New York, Washington DC, and New 
Jersey. In response to this threat, in coordination with DHS, the 
threat level was raised from yellow to orange for the cities referenced 
in the threat and we mobilized a large contingent of analysts and 
agents to review the massive amount of information connected with the 
attack planning, and to uncover any additional information that would 
give us insight into the plot.
    Previously, in the Spring of 2004, our allies in the United Kingdom 
arrested a group of terrorists who were plotting an imminent attack 
inside the UK. In response, we immediately formed a task force of 
analysts and agents to determine if there was a U.S. nexus to the plot 
or if any of the UK subjects had links to individuals in the U.S.
    Later in the year, we received information suggesting that there 
was an attack being planned--possibly timed to coincide with the 2004 
Presidential Election. To counter the threat, the FBI created the 2004 
Threat Task Force in May 2004. With thousands of FBI personnel, 
supported by individuals from outside agencies, it was the largest task 
force created since 9/11, and it brought to bear every possible 
resource in an effort to identify the operatives and disrupt the attack 
plan.
    As part of the Task Force's initiatives, field offices conducted a 
thorough canvass of all counterterrorism investigations and FBI sources 
to develop any further information that could help us find these 
individuals. During the 7 months the task force was up and running, we 
also checked every tangible lead provided in the threat intelligence. 
It was an extraordinary effort and while we may never know if an 
operation was indeed being planned, I am certain that the FBI's 
tremendous response to the threat played an integral role in disrupting 
any operational plans that may have been underway.
    Mr. Chairman, since we last spoke, the FBI has identified various 
extremists located throughout the U.S. and is monitoring their 
activities. Although these efforts have made us safer, they are also a 
sobering reminder of the threat we continue to face.
     In Virginia, Mohammed Ali al-Timimi, the spiritual leader 
of the Virginia Jihad training group disrupted last year, was indicted 
for his involvement in the recruitment of U.S. citizens for extremist 
training and jihad preparation. Al-Timimi, the primary lecturer at a 
northern Virginia Islamic center, preached jihad to a small core group 
of followers, provided them paramilitary training and facilitated their 
travel to Pakistan in the days after September 11th to attend Lashkar-
e-Taiba training camp in preparation to fight the United States in 
Afghanistan.
     In Minneapolis, we arrested Mohamad Kamal El-Zahabi, a 
Lebanese citizen who admitted to serving in Afghanistan and Chechnya as 
a sniper and to providing sniper training at Khalden camp in 
Afghanistan and in Lebanon in the 1990s. We first learned of El-Zahabi 
during our investigation of Boston-based Sunni extremists Ra'ed Hijazi, 
convicted for his role in the Millennium plot in Jordan, and Bassain 
Kanj, who was killed in a plot to overthrow the Lebanese government in 
2000.
     In New York, Yassin Muhiddin Aref was arrested on money 
laundering charges connected to a possible terrorist plot to kill a 
Pakistani diplomat.
    Unfortunately, in spite of these accomplishments, al-Qa'ida 
continues to adapt and move forward with its desire to attack the 
United States using any means at its disposal. Their intent to attack 
us at home remains--and their resolve to destroy America has never 
faltered.
    Al-Qa'ida's overall attack methodology has adapted and evolved to 
address the changes to their operating environment. While we still 
assess that a mass casualty attack using relatively low-tech methods 
will be their most likely approach, we are concerned that they are 
seeking weapons of mass destruction including chemical weapons, so-
called ``dirty bombs'' or some type of biological agent such as 
anthrax.
    Every day, personnel in our Counterterrorism Division and in 100 
Joint Terrorism Task Forces around the country, work to determine 
where, when, and how the next attack will occur. The fact remains--
America is awash in desirable targets--those that are symbolic like the 
U.S. Capitol and the White House--as well as the many infrastructure 
targets, like nuclear power plants, mass transit systems, bridges and 
tunnels, shipping and port facilities, financial centers, and 
airports--that if successfully hit, would cause both mass casualties 
and a crippling effect on our economy.
    We continue to be concerned that U.S. transportation systems remain 
a key target. The attacks in Madrid last March show the devastation 
that a simple, low-tech operation can achieve and the resulting impact 
to the government and economy, which makes this type of attack in the 
U.S. particularly attractive to al-Qa'ida.
    Another area we consider vulnerable and target rich is the energy 
sector, particularly nuclear power plants. Al-Qa'ida planner Khalid 
Sheikh Mohammed had nuclear power plants as part of his target set and 
we have no reason to believe that al-Qa'ida has reconsidered.
    Looking ahead, there are three areas that cause us the greatest 
concern.
    First is the threat from covert operatives who may be inside the 
U.S. who have the intention to facilitate or conduct an attack. Finding 
them is a top priority for the FBI, but it is also one of the most 
difficult challenges. The very nature of a covert operative--trained to 
not raise suspicion and to appear benign--is what makes their detection 
so difficult.
    Mr. Chairman, while we are proud of our accomplishments this year 
and the additional insight we have gained into al-Qa'ida's activity, I 
remain very concerned about what we are not seeing.
    Whether we are talking about a true sleeper operative who has been 
in place for years, waiting to be activated to conduct an attack or a 
recently deployed operative that has entered the U.S. to facilitate or 
conduct an attack, we are continuously adapting our methods to reflect 
newly-received intelligence and to ensure we are as proactive and as 
targeted as we can be in detecting their presence.
    Second, because of al-Qa'ida's directed efforts this year to 
infiltrate covert operatives into the U.S., I am also very concerned 
with the growing body of sensitive reporting that continues to show al-
Qa'ida's clear intention to obtain and ultimately use some form of 
chemical, biological, radiological, nuclear or high-energy explosives 
(CBRNE) material in its attacks against America.
    Third, we remain concerned about the potential for al-Qa'ida to 
leverage extremist groups with peripheral or historical connections to 
al-Qa'ida, particularly its ability to exploit radical American 
converts and other indigenous extremists. While we still believe the 
most serious threat to the Homeland originates from al-Qa'ida members 
located overseas, the bombings in Madrid last March have heightened our 
concern regarding the possible role that indigenous Islamic extremists, 
already in the U.S., may play in future terrorist plots. Also of 
concern is the possible role that peripheral groups with a significant 
presence in the U.S. may play if called upon by members of al-Qa'ida to 
assist them with attack planning or logistical support.
    The potential recruitment of radicalized American Muslim converts 
continues to be a concern and poses an increasingly challenging issue 
for the FBI because the process of recruitment is subtle and many 
times, self initiated and radicalization tends to occur over a long 
period of time and under many different circumstances.
    As part of our continued efforts to identify populations that may 
be a target for extremist recruitment, the FBI has been involved in a 
coordinated effort between law enforcement and corrections personnel to 
combat the recruitment and radicalization of prison inmates. Prisons 
continue to be fertile ground for extremists who exploit both a 
prisoner's conversion to Islam while still in prison, as well as their 
socio-economic status and placement in the community upon their 
release.
    Extremist recruitment at schools and universities inside the United 
States also poses a particularly difficult problem. Because the 
environment on campuses is so open and isolated, schools provide a 
particularly impressionable and captive audience for extremists to 
target.
    Additionally, keeping in mind al-Qa'ida recruitment efforts occur 
primarily overseas, we are closely monitoring any possible methods for 
moving individuals to extremist-linked institutions overseas, 
specifically religious schools and mosques that have overt ties to al-
Qa'ida or other terrorist organizations.
    We are also concerned about the possibility that individuals who 
are members of groups previously considered to be peripheral to the 
current threat, could be convinced by more radical, external influences 
to take on a facilitation or even worse--an operational role--with 
little or no warning. Individual members of legitimate organizations, 
such Jama'at Tabligh, may be targeted by al-Qa'ida in an effort to 
exploit their networks and contacts here in the United States.
    Efforts by extremists to obtain training inside the U.S. is also an 
ongoing concern. Although there are multiple reports and ongoing 
investigations associated with the paramilitary training activities of 
suspected extremists nationwide, the majority of these cases involve 
small groups of like-minded individuals who are inspired by the 
jihadist rhetoric experienced in radical mosques or prison 
proselytizing.
    Fortunately, the recent amendment to Title 18 adding a provision 
whereby an individual knowingly receiving military-type training from a 
designated foreign terrorist organization is committing an offense, 
makes it possible to now prosecute individuals who participate or 
assist individuals in receiving this type of training.
    Another area of concern is the recent merging of Iraqi jihadist 
leader Abu Mu'sab alZargawi with al-Qa'ida. Zarqawi has a demonstrated 
capability of directing external operations while maintaining his focus 
on Iraq as noted with the disrupted Jordan plot in April.
    Another aspect of extremist activity in the U.S. is the extensive 
fundraising efforts by various terrorist groups. We continue to 
identify and block funding conduits, freeze assets of terrorists and 
those who support them, protect legitimate charities, and disrupt the 
movement of money through peripheral financial systems such as Hawalas.
    As part of this effort, the FBI has engaged in extensive 
coordination with authorities of numerous foreign governments in 
terrorist financing matters, leading to joint investigative efforts 
throughout the world. The FBI's participation in a U.S.-Saudi Arabia 
Joint Terrorism Task Force, the U.S.-Swiss Terrorism Financing Task 
Force and the International Working Group on Terrorist Financing has 
enhanced cooperation between these agencies and the U.S. and allowed 
the FBI unprecedented access that has increased our understanding of 
these complex financing networks. Since 2002, we have provided 
terrorism financing training and technical assistance to liaison 
partners in almost 50 countries.

          THE THREAT FROM OTHER INTERNATIONAL TERRORIST GROUPS

    Mr. Chairman, al-Qa'ida and the groups that support it are still 
the most lethal threat we face today. However, other terrorist groups 
that have a presence in the U.S. require careful monitoring.
    It is the FBI's assessment, at this time, that there is a limited 
threat of a coordinated terrorist attack in the U.S. from Palestinian 
terrorist organizations, such as HAMAS, the Palestine Islamic Jihad, 
and the al-Agsa Martyr's Brigade. These groups have maintained a 
longstanding policy of focusing their attacks on Israeli targets in 
Israel and the Palestinian territories. We believe that the primary 
interest of Palestinian terrorist groups in the U.S. remains the 
raising of funds to support their regional goals.
    The FBI is committed to staunching the flow of funds from the U.S. 
to Palestinian terrorist organizations. As an example of this effort, 
the former leadership of the Holy Land for Relief and Development, a 
HAMAS front organization, was indicted this past year and convictions 
were won against the Elashi brothers who owned and ran Infocom, another 
HAMAS front organization.
    Of all the Palestinian groups, HAMAS has the largest presence in 
the U.S. with a robust infrastructure, primarily focused on 
fundraising, propaganda for the Palestinian cause, and proselytizing. 
Although it would be a major strategic shift for HAMAS, its U.S. 
network is theoretically capable of facilitating acts of terrorism in 
the U.S.
    Like HAMAS, but on a much smaller scale, U.S.-based Palestine 
Islamic Jihad members and supporters are primarily engaged in 
fundraising, propaganda and proselytizing activities. In 2003, the 
Palestine Islamic Jihad, or PIJ, activities and capabilities in the 
U.S. were severely undercut by the arrests of the U.S. PIJ leader, Sami 
al-Arian, and three of his top lieutenants. There have also been two 
additional arrests of suspected PIJ activists on charges unrelated to 
terrorism. There has been no indication of a new U.S. PIJ leadership 
since the arrest of al-Axian.
    Currently, the most likely threat of terrorist attacks from 
Palestinian groups to the U.S. homeland is from a ``lone wolf 
'scenario. In this scenario, a terrorist attack would be perpetrated by 
one or more individuals who may embrace the ideology of a Palestinian 
terrorist group, but act without assistance or approval of any 
established group.
    Lebanese Hizballah retains the capability to strike in the U.S., 
although we have no credible information to indicate that US-based 
Hizballah members have plans to attack American interests within the 
U.S. or abroad. In 2004, we had some success in uncovering individuals 
providing material support to Hizballah.
     In Detroit, Mahmoud Youssef Kourani was indicted in the 
Eastern District of Michigan on one count of Conspiracy to Provide 
Material Support to Hizballah. Kourani was already in custody for 
entering the country illegally through Mexico and was involved in 
fundraising activities on behalf of Hizballah.
     Also in Detroit, Fawzi Assi was arrested in May of 2004 
and was charged under the 1996 Antiterrorism and Effective Death 
Penalty Act for providing material support to Hizballah. Assi was 
initially arrested in 1998 after an outbound U.S. Customs search at the 
Detroit Metro Airport discovered night vision goggles, one thermal 
imaging scope and two Boeing Global Positioning System devices. Assi 
later fled the country after being released by the court on bail, but 
was later turned over to us in Lebanon to face U.S. criminal charges.

                   THE THREAT FROM DOMESTIC TERRORISM

    While national attention is focused on the substantial threat posed 
by international terrorists to the homeland, law enforcement officials 
must also contend with an ongoing threat posed by domestic terrorists 
based and operating strictly within the U.S. Domestic terrorists 
motivated by a number of political or social agendas--including white 
supremacists, black separatists, animal rights/environmental 
terrorists, anarchists, anti-abortion extremists, and self-styled 
militia--continue to employ violence and criminal activity in 
furtherance of these agendas.
    Animal rights and environmental extremists, operating under the 
umbrella of the Animal Liberation Front (ALF) and Earth Liberation 
Front (ELF) utilize a variety of tactics against their targets, 
including arson, sabotage/vandalism, theft of research animals, and the 
occasional use of explosive devices.
    Serious incidents of animal rights/eco-terrorism decreased in 2004, 
a fact we attribute to a series of law enforcement successes that are 
likely deterring large-scale arsons and property destruction. Following 
a rash of serious incidents of animal rights/eco-terrorism, including a 
$50 million arson in San Diego and two bombing incidents in the San 
Francisco area, law enforcement authorities achieved several 
significant successes which have likely deterred additional terrorist 
activity. Despite these successes, we anticipate that animal rights 
extremism and eco-terrorism will continue to threaten certain segments 
of government and private industry, specifically in the areas of animal 
research and residential/commercial development.
    The potential for violence by anarchists and other emerging 
revolutionary groups, such as the Anarchist Black Cross Federation 
(ABCF), will continue to be an issue for law enforcement. The stated 
goals of the ABCF are ``the abolishment of prisons, the system of laws, 
and the Capitalist state.'' The ABCF believes in armed resistance to 
achieve a stateless and classless society. ABCF has continued to 
organize, recruit, and train anarchists in the tactical use of 
firearms.
    U.S.-based black separatist groups follow radical variants of 
Islam, and in some cases express solidarity with al-Qa'ida and other 
international terrorist groups.
    Incidents of organized white supremacist group violence decreased 
in 2004. This is due to several high profile law enforcement arrests 
over the last several years, as well as the continued fragmentation of 
white supremacist groups because of the deaths or the arrests of 
leaders. We judge that violence on the part of white supremacists 
remains an ongoing threat to government targets, Jewish individuals and 
establishments, and non-white ethnic groups.
    However, the right-wing Patriot movement--consisting of militias, 
common law courts, tax protesters, and other anti-government 
extremists--remains a continuing threat in America today. Sporadic 
incidents resulting in direct clashes with law enforcement are possible 
and will most likely involve State and local law enforcement personnel, 
such as highway patrol officers and sheriff's deputies.
    Potential violent anti-abortion extremists linked to terrorism 
ideologies or groups pose a current threat. The admiration of violent 
high-profile offenders by extremists highlight continued concerns 
relating to potential or similar anti-abortion threat activity.

        WMD PROLIFERATION AND OTHER FOREIGN INTELLIGENCE THREATS

    Although the impact of terrorism is more immediate and highly 
visible, espionage and foreign intelligence activity are no less a 
threat to the U.S. national security. Many countries consider the U.S. 
to be their primary intelligence target; so long as the U.S. maintains 
its position in world affairs, it will continue to be targeted. As part 
of its reinvigorated and refocused foreign counterintelligence (FCI) 
program, the FBI has applied a more rigorous methodology to its efforts 
to assess and articulate the current threat environment.
    One of the key elements of the FBI's National Strategy for 
Counterintelligence (adopted in August 2002) is the threat assessment. 
Over the past 2 years, the FBI has produced comprehensive threat 
assessments on several countries deemed to be of particular CI concern. 
The National Strategy for Counterintelligence identified five 
categories of foreign intelligence activity as being especially harmful 
to the U.S. national security. These five categories of activity are 
weighted in terms of importance, the in the following order:
     Proliferation of chemical, biological, radiological, 
nuclear, and high-energy explosives (CBRNE) information and technology:
     Penetration of the U.S. Intelligence Community (USIC)
     Penetration of U.S. Government entities and contractors
     Compromise of Critical National Assets (CNAs), defined as 
any information, policies, plans, technologies, or industries that, if 
stolen, modified, or manipulated by an adversary would seriously 
threaten U.S. national or economic security; and
     Conduct of clandestine foreign intelligence activities in 
the U.S.
    Several countries have traditionally considered the U.S. to be 
their primary intelligence target, as well as an adversary or threat. 
This prioritization is manifested through their continued large and 
active intelligence presence in the U.S. and their aggressive targeting 
of U.S. persons, information and technology. Other countries, while not 
necessarily viewing the U.S. as an adversary or threat, seek 
information to help them compete economically, militarily, and 
politically in world affairs. As the current leader in all three areas, 
the U.S. becomes their primary target. For still other countries, 
rather than being an intelligence target, the U.S. represents an 
operating environment in which to conduct intelligence-related 
activities focused on their domestic security.
    Some foreign countries are becoming increasingly sophisticated in 
their CI awareness, training and capabilities. Also of growing concern 
is the asymmetrical threat posed by certain intelligence services that 
supplement their collection capabilities in the U.S. by using non-
traditional collectors. These collectors include students, delegations, 
business visitors, emigres, and retired intelligence officers who are 
collecting against targets of opportunity or responding to ad hoc 
requests from the intelligence services. Such non-traditional 
collectors pose a potential threat across the US, requiring a 
coordinated response by all FBI field offices.
    The FBI does not foresee any significant changes in the official 
foreign intelligence presence in the U.S. over the next two to 3 years. 
However, in addition to using non-traditional collectors, several 
countries appear to be exploiting their military liaison officers, who 
are in the U.S. on overt, legitimate intelligence-sharing missions, to 
target and collect sensitive defense information that is outside the 
scope of their official access. Most difficult to identify and assess 
is the intelligence collection activity being directed and/or conducted 
by non-intelligence organizations, such as other foreign government 
agencies and/or foreign companies. The FBI sees this type of activity 
most frequently in the targeting and collection of CBRNE information 
and technology.
    Another challenge the FBI will face is the tendency of some foreign 
intelligence services to leverage liaison relationships for 
intelligence collection purposes. U.S. Government representatives 
participating in international conferences and exchanges, or whose 
duties include routine liaison with foreign intelligence 
representatives, frequently report that their contacts engage in 
elicitation, sometimes to a surprisingly aggressive level.
    The FBI expects to see a continued increase in the use of 
technology as an enabler for intelligence operations, such as 
contacting, tasking; and debriefing sources and agents in the US.
    Over the near term, the priority collection targets for these 
countries will be:
     The effects of the recent 2004 U.S. elections on U.S. 
foreign and domestic policies;
     U.S. military actions in Iraq and Afghanistan;
     U.S. counterterrorism policy;
     U.S. dual use technologies; and
     U.S. policy vis-a-vis particular countries or regions of 
the world.
    The FBI expects to see continued lobbying, political influence, 
and/or perception management activities by countries hoping to affect 
U.S. policy.
    Many foreign intelligence services will also continue to exploit 
their presence in the U.S. to target and collect against third 
countries. Most will also engage in defensive intelligence activities, 
targeting their own expatriate and ethnic communities in the US, 
especially those groups deemed to be a threat to the current regime.
    The FBI's National Strategy for Counterintelligence sets forth 
national priorities and strategic objectives as well as changes in 
management and organizational culture intended to redirect and 
significantly enhance the overall performance of the FBI's FCI program. 
Program objectives and outcomes include:
     Identify intelligence service objectives, officers, 
assets, and operations;
     Disrupt the operations of intelligence services; and
     Change the behavior of exploited institutions and 
individuals.
    To that end, the FBI has identified five program strategies: Know 
the Domain; Understand the Threat; Engage in Strategic Partnerships; 
Conduct Sophisticated Operations; and Inform Policymakers.
    During fiscal year 2004, the FBI FCI program accomplished the 
following:
     Six foreign intelligence officers and/or agents were 
arrested;
     67 requests for persona non grata actions and visa denials 
were issued;
     1,667 Intelligence Information Reports were disseminated.
    In addition, the Asset Validation Review process was implemented in 
July 2002, and the FBI began providing mandatory asset validation 
training for Asset Coordinators in the field regarding procedures and 
policies. The FBI also implemented the Agents in Laboratories 
Initiative (AILI) in February 2003, through which FBI agents have been 
placed in Department of Energy nuclear weapons and science 
laboratories.
    The FBI has also developed several strategic partnerships, to 
include the Regional CI Working Group (RCIWG) Initiative, which was 
established in October 2003 to implement the National Strategy for 
Counterintelligence, leverage the RCIWGs in tasking our USIC partners, 
address intelligence gaps, identify CI trends and priorities in the 
operational arena among USIC agencies at the field level, and ensure 
that all CI operational initiatives and projects across agencies are 
coordinated through the FBI.
    Similarly, the National CI Working Group (NCIWG) was established 
and is led by the FBI and consists of other CI agency head-level 
representatives. The mission is to establish ongoing interagency 
planning discussions to better coordinate CI operations USIC-wide. 
Domain Task Forces are CI project level task forces led by the FBI, in 
vulnerabilities associated with at-risk national security projects, 
i.e., sensitive technologies, information, and research and 
development.
    FBI field offices are developing ``business alliances'' to build 
executive-level relationships and foster threat and vulnerability 
information sharing, with private industries and academic institutions 
located within their territories having at-risk and sensitive national 
security and economic technologies, research and development projects.
    Finally, the FBI has reinvigorated its CI training process. For 
example, field agents are trained in the key components of basic CI 
operations through an intensive 4-week Basic CI Operations course. 
Other advanced, highly specialized CI courses and seminars provide 
training to agents and analysts through a variety of innovative 
instructional methods and include inservices and conferences, the 
Interactive Multimedia Instruction and Simulation (IMIS) computer-based 
training program, and the FBI Intranet.

                             CYBER THREATS

    The cyber-threat to the U.S. is serious and continues to expand 
rapidly the number of actors with both the ability and the desire to 
utilize computers for illegal and harmful purposes rises.
    Cyber threats stems from both State actors, including foreign 
governments that use their vast resources to develop cyber technologies 
with which to attack our networks, and non-state actors such as 
terrorist groups and hackers that act independently of foreign 
governments. The increasing number of foreign governments and non-state 
actors exploiting U.S. computer networks is a major concern to the FBI 
and the Intelligence Community as a whole.
    State actors continue to be a threat to both our national security 
as well as our economic security because they have the technical and 
financial resources to support advanced network exploitation and 
attack. The greatest cyber threat is posed by countries that continue 
to openly conduct computer network attacks and exploitations on 
American systems.
    Terrorists show a growing understanding of the critical role that 
information technology plays in the day-to-day operations of our 
economy and national security. Their recruitment efforts have expanded 
to include young people studying mathematics, computer science and 
engineering in an effort to move from the limited physical attacks to 
attacks against our technical systems.
    Fortunately, the large majority of hackers do not have the 
resources or motivation to attack the U.S. critical information 
infrastructures. Most targets of the hacker are viewed as 
``challenges'' to break into a system. These individuals do not 
introduce malicious code to the system, but usually leave their ``cyber 
signature.'' Although a nuisance, the single hacker does not pose a 
great threat; however, the increasing volume of hacking activity 
worldwide does inadvertently disrupt networks, including that of the 
U.S. information infrastructures. Hackers that plant malicious code or 
upload bots that are designed to steal information are the main threats 
in this group. These individuals have the ability to take down a system 
or steal trade secrets, either of which can be devastating to a company 
or agency.
    The growing number of hackers motivated by money is a cause for 
concern. If this pool of talent is utilized by terrorists, foreign 
governments or criminal organizations, the potential for a successful 
cyber attack on our critical infrastructures is greatly increased.
    To combat these and other cyber threats, the FBI established a 
national cyber program with a Cyber Division at FBI Headquarters and 
dedicated cyber squads in the field offices. The program enables us to 
coordinate and facilitate investigations of those Federal criminal 
violations using the Internet, computer systems, or networks. It also 
helps us to build and maintain public/private alliances to maximize 
counterterrorism, counterintelligence, and law enforcement cyber 
response capabilities. We are also working to aggregate the 
technological and investigative expertise necessary to meet the 
challenges that lie ahead. We are recruiting and hiring individuals who 
possess degrees and experience in computer sciences, information 
systems, or related disciplines. We are looking for specialists who 
possess a bedrock of experience and a profound understanding of the 
cyber world.

                      CONVERGING CRIMINAL THREATS

    It is increasingly the case that counterterrorism, 
counterintelligence, cyber, and criminal investigations are 
interrelated. There are rarely clear dividing lines that distinguish 
terrorist, counterintelligence, and criminal activity. Recognizing this 
trend toward convergence, the first priority of the FBI's Criminal 
Investigative Program is to leverage criminal investigative resources 
to enhance the FBI's Counterterrorism, Counterintelligence and Cyber 
programs.
    Terrorists use criminal enterprises and criminal activities to 
support and fund terrorist organizations. The FBI's criminal 
investigations of these crimes and criminal enterprises, often in task 
forces in conjunction with other Federal, state, and local law 
enforcement, continue to develop invaluable intelligence, as well as to 
initiate investigations, which further identify the United States' 
vulnerability to attack and directly support the FBI's and the 
Intelligence Community's counterterrorism, counterintelligence, and 
cyber crime efforts.
    One of the FBI's first investigations to utilize the material 
support of a terrorist organization statute evolved from a criminal 
investigation of Hizballah operators utilizing credit card scams, 
cigarette smuggling and loan fraud to support the purchase of dual use 
equipment for Hizballah procurement leaders in Lebanon. The FBI used 
the criminal RICO statute to fully neutralize this terrorist cell.
    In combatting converging threats, the FBI's Criminal Program is 
placing greater emphasis on the collection, analysis, dissemination and 
effective use of intelligence, including intelligence derived from 
criminal investigations, including intelligence derived from human 
sources and the use of sophisticated investigative techniques. We are 
using intelligence to identify crime problems and trends, to conduct 
threat assessments, and to drive investigative efforts. Currently, we 
are aggressively pursuing intelligence collection and threat 
assessments on Organized Crime, Human Smuggling and Trafficking, 
Violent Gangs, Public Corruption, Civil Rights, and Middle Eastern 
Criminal Enterprises.
    After CT, CI, and Cyber, the Criminal Investigative Program's other 
priorities in descending order are Criminal Intelligence, Public 
Corruption, Civil Rights, Violent Gangs, Criminal Enterprises, 
Corporate and Securities Fraud, Health Care Fraud, Mortgage Fraud, 
Major Financial Institution Fraud, and Crimes Against Children and 
other Violent Crimes.

Public Corruption
    Public Corruption continues to pose the greatest threat to the 
integrity of all levels of government. Recent investigative efforts 
have been intensified to identify and convict Immigration, Department 
of State, and DMV officials illegally selling visas or other 
citizenship documents and drivers licenses to anyone with enough money. 
Their illegal activities potentially conceal the identity and purpose 
of terrorists and other criminals, facilitating their entry, travel, 
and operation without detection in the U.S. Other investigations have 
convicted numerous law enforcement officers, including those who formed 
criminal organizations involved in drug trafficking. Many major 
metropolitan areas in the U.S. have witnessed the indictment and 
conviction of corrupt public officials who betrayed the public trust 
for profit or personal gain. Over the last 2 years alone, the FBI has 
convicted more than 1050 corrupt government employees, including 177 
Federal officials, 158 State officials, 360 local officials, and more 
than 365 police officers. In addition to pursuing criminal 
investigations against corrupt law enforcement officers, the FBI has 
initiated awareness and training efforts to deter corruption, such as 
``Project Integrity.''

Civil Rights
    During fiscal year 2004, the FBI initiated 1,744 civil rights 
investigations and obtained 154 convictions, focusing its efforts on 
Hate Crimes, Color of Law, and Involuntary Servitude and Slavery 
matters. The FBI and the United States depend on the support, 
cooperation and assistance of the Arab, Muslim and Sikh Communities in 
the United States to fight terrorism and to fight crime. These 
communities are entitled to the same civil rights of every citizen and 
person in the United States. The FBI has worked with these communities 
to ease their fears concerning the FBI's interest in securing their 
help in the fight against terrorism and to address the backlash of hate 
crimes directed against them following 9/11 and the war in Iraq. Since 
9/11, more than 500 hate crime investigations have been initiated, 
where the victims were Arab, Muslim, Sikh, or perceived to be as such, 
resulting in more than 150 Federal and local prosecutions. During 2004, 
the FBI initiated 53 hate crime investigations where the victims were 
of Arab, Muslim, or Sikh descent or were perceived to be such. Thirteen 
of those cases resulted in criminal charges being filed by either State 
or Federal law enforcement authorities. Other groups also continue to 
be the victims of Hate Crimes, including African American and Jewish 
communities.
    Human trafficking and modern day slavery are a worldwide crime and 
human rights problem, due to global, economic, and political factors. 
Approximately 17,000 victims each year are lured to the United States 
with false promises of good jobs and better lives and then forced to 
work under brutal and inhumane conditions. Many trafficking victims, 
including women and children, are forced to work in the sex industry, 
prison like factories, and migrant agricultural work.

Violent Gangs
    Violent gangs are more organized, larger, more violent, and more 
widespread than ever before, and they pose a growing threat to the 
safety and security of Americans. The Department of Justice estimates 
there are approximately 30,000 gangs with more than 800,000 members in 
the U.S.
    Our communities continue to experience devastating incidences of 
murder, drive-by shootings, and assaults by gangs mainly involved in 
the sale and distribution of illicit drugs. However, gang activity 
extends far beyond protection of turf. It impacts innocent citizens who 
have no connection or involvement with gangs, and it increasingly 
transcends municipal boundaries. Gang members travel from city to city, 
between states and, on occasion, between countries to commit their 
crimes.
    In response, the FBI is implementing a coordinated, intelligence-
driven National Gang Strategy to disrupt and dismantle gangs that pose 
the greatest threats to America's communities. In the past year, we 
have increased the number of Safe Street Task Forces from 78 to 107 and 
we are seeking to increase the number by an additional 10 to 20 percent 
in the coming year. We are also centralizing gang investigations at FBI 
Headquarters with a new $10 million National Gang Intelligence Center 
(NGIC). The NGIC will collect intelligence on gangs from across the 
U.S., analyze this intelligence, and disseminate it to help law 
enforcement authorities throughout the country plan and execute 
strategies to prevent further gang activity and violence.
    The FBI has reclassified gang matters from ``violent criminal 
offenders'' to ``criminal organizations and enterprises''--a higher 
priority area. The new classification also allows the U.S. Department 
of Justice to charge gang members under Federal racketeering statues 
which can result in stiffer prison sentences for convicted subjects. 
This approach is similar to the successful strategy used by the FBI to 
dismantle traditional organized crime groups.
    Under the National Gang Strategy, priority is given to efforts to 
disrupt and dismantle gangs that are national in their scope and 
exhibit significant connectivity and internal alliances. Among the 
first to be targeted is Mara Salvatrucha (MS-13), a violent gang which 
originated in Los Angeles comprised primarily of Central American 
immigrants. We have created a National Gang Task Force specifically to 
address MS-13.

Criminal Enterprises
    Organized criminal enterprises operating in the U.S. and throughout 
the world pose increasing concerns for the international law 
enforcement and intelligence communities. Their skill in using 
international monetary systems to conduct and conceal their criminal 
activity, their use of State of the art communications encryption to 
further safeguard their illegal activity, and their transnational 
mobility increases the likelihood they will escape detection or 
otherwise cover their illegal activities with a cloak of legitimacy. 
Although the FBI prioritizes its efforts on criminal enterprises with 
possible connections to terrorist and counterintelligence activities, 
public corruption, human smuggling of Special Interest Aliens and women 
and children, or violent and pervasive racketeering activity, the 
impact from just one criminal activity alone, theft, is staggering. 
Annual property losses from cargo/high tech/retail theft is estimated 
at $30 billion, from vehicle theft $8 billion, from art/cultural 
heritage artifact theft $500 million, and from jewelry and gem theft 
$135 million. However, theft by criminal enterprises often represents a 
multifaceted threat. For example, Middle Eastern Criminal Enterprises 
involved in the organized theft and resale of infant formula pose not 
only an economic threat, but a public health threat to infants, and a 
potential source of material support to a terrorist organization.
    The FBI is increasing its intelligence collection and assessment 
efforts on criminal enterprises, as well as its joint efforts with the 
intelligence and law enforcement services of other nations, to combat 
the criminal activities of the La Cosa Nostra, Italian, Russian, 
Balkan, Albanian, Asian, African, Middle Eastern, Colombian/South 
American and other criminal enterprises. The FBI/Hungarian National 
Bureau of Investigation Organized Crime Task Force in Budapest, 
Hungary, which is investigating a Russian Criminal Enterprise engaged 
in murder, extortion, prostitution, and other significant racketeering 
activity, represents an unprecedented cooperative effort between the 
FBI and the Hungarians.
    Although new criminal enterprises continue to emerge, the LCN 
remains a formidable and ever changing criminal threat. This year, in 
just one criminal scheme, identified by the Federal Trade Commission as 
the largest consumer fraud investigated in the history of the United 
States, members of the Gambino LCN family were convicted for using 
pornographic websites and adult entertainment 1 800 numbers to defraud 
thousands of individuals of $750,000,000. Asian Criminal Enterprises 
also pose a continued threat, as exemplified by one which was 
dismantled earlier this year during a coordinated arrest operation with 
Canada, which resulted in the arrest of 36 subjects in Canada and 102 
subjects in the U.S. for drug trafficking and money laundering. 
Millions of dollars and 21 firearms, including an AK 47 assault rifle 
and a sawed off shotgun were seized during the operation.

Corporate/Securities Fraud
    Corporate fraud can cost Americans their jobs and rob them of hard-
earned savings. It shakes the public's confidence in corporate America 
to its foundation. Since the initiation of the FBI Corporate Fraud Task 
Force in December 2001, there have been 480 indictments and 305 
convictions of corporate executives and their associates. The FBI's 
efforts have also resulted in over $2 billion in restitutions, 
recoveries and fines, in addition to over $30 million in seizures and 
forfeitures. In the Enron, HealthSouth, Cendant Corporation, Credit 
Suisse First Boston, Computer Associates International, Worldcom, 
Imclone, Royal Ahold, Perigrine Systems, and America Online cases the 
FBI obtained 119 indictments/informations and 79 convictions. The 
former Chief Executive Officer (CEO) of Worldcom is on trial in New 
York and the former CEO of HealthSouth is on trial in Alabama. Several 
additional high profile trials are anticipated in the near future, to 
include the trial of Enron's former CEOs and Chief Accounting Officer 
anticipated to be scheduled for August or September 2005.
    The FBI is currently pursuing 334 Corporate Fraud cases throughout 
the U.S. This is more than a 100 percent increase from fiscal year 
2003. Eighteen of the pending cases involve losses to public investors 
which each exceed $1 billion. Unfortunately, the volume of cases has 
yet to reach a plateau, and the FBI continues to open three to six new 
cases each month, each case averaging a loss exceeding $100 million.

Health Care Fraud
    Americans' health care expenditures continue to climb at rates 
higher than inflation and will soon consume more than 17 percent of the 
Gross Domestic Product. It is estimated that health care fraud costs 
consumers, Medicare, Medicaid, and private insurers tens of billions of 
dollars each year in blatant fraud schemes in every sector of the 
industry. The FBI recently instituted the Out Patient Surgery and 
Pharmaceutical Fraud Initiatives to combat blatant fraud identified in 
those health care programs. During fiscal year 2004, the FBI had 2,468 
pending health care fraud investigations, obtained 693 indictments and 
informations, 564 convictions or pre trial diversions, $1.05 billion in 
restitution, $543 million in fines, $28.8 million in seizures, $19.05 
million in forfeitures and disrupted 186 and dismantled 105 criminal 
organizations.

Mortgage Fraud
    The number of FBI mortgage fraud investigations, including major 
undercover operations, rose from 102 in fiscal year 2001 to 
approximately 550 in fiscal year 2004. This rise is expected to 
continue. During FYs 2001-2004 the FBI received over 17,000 mortgage 
fraud related Suspicious Activity Reports from federally insured 
financial institutions alone. The FBI worked with the Mortgage Bankers' 
Association (MBA), the National Notary Association (NNA), as well as 
FINCEN, the Department of Housing and Urban Development, and major 
mortgage lending institutions, to improve the reporting and detection 
of potential mortgage fraud.

Crimes Against Children/Violent Incident Crime
    Of all violent crime, crimes against children and child 
prostitution are of particular concern. Over 300,000 children per year 
are forced into prostitution. The FBI's Lost Innocence, Child 
Prostitution Initiative, has opened 13 cases in 11 field offices, 
emphasizing the use of sophisticated investigative techniques, to 
obtain 135 arrests/locates, 3 complaints, 13 indictments/informations, 
11 convictions/pre trial diversions, and 4 child locates. Major violent 
crime incidents, such as sniper murders, serial killings and child 
abductions can paralyze whole communities and require the cooperative 
efforts of the FBI and local, State and other Federal law enforcement 
agencies. The FBI also continues to address the 6,218 bank robberies, 
resulting in 153 injuries, and 15 deaths, that occurred within the 
first 10 months of 2004, albeit with a greater reliance on other 
agencies and a lesser use of its own resources where possible.

                    ENHANCING THE FBI'S CAPABILITIES

    Mr. Chairman, you will notice that our accomplishments over the 
past year consistently have two things in common, the effective 
collection and use of intelligence and inter-agency cooperation. The 
improvements that made these accomplishments possible result from the 
continued efforts of the men and women of the FBI to implement a plan 
that fundamentally transforms our agency and enhances our ability to 
predict and prevent terrorism.

Intelligence
    As set forth above, threat information crosses both internal and 
external organizational boundaries. Counterterrorism efforts must draw 
from, and contribute to, counterintelligence, cyber and criminal 
programs. In order to most effectively address all threats, we are 
continuing to strengthen the FBI's enterprise-wide intelligence 
program.
    We began in 2001 with a dedicated analysis section in the 
Counterterrorism Division and, in 2002, we created an Office of 
Intelligence in the Counterterrorism Division. The structure and 
capability significantly enhanced our CT operations and those of our 
partners. In 2003, we extended this concept across all FBI programs--
Criminal Cyber, Counterterrorism and Counterintelligence--and unified 
intelligence authorities under a new FBI Office of Intelligence led by 
an Executive Assistant Director. The Office of Intelligence adopted 
Intelligence Community best practices to direct all FBI intelligence 
activities. Congress and the 9/11 Commission reviewed these efforts and 
provided recommendations to further strengthen the FBI's intelligence 
capability.
    The newly established Directorate of Intelligence is the dedicated 
national security workforce that the Congress established within the 
FBI. It comprises a dedicated Headquarters element and embedded 
intelligence entities in each FBI field office called Field 
Intelligence Groups (FIGs). The FIGs are central to the integration of 
the intelligence cycle into field operations. The FIGS include Special 
Agents, Intelligence Analysts, Language Specialists, and Surveillance 
Specialists, as well as officers and analysts from other intelligence 
and law enforcement agencies. They are responsible for coordinating, 
managing, and executing all of the functions of the intelligence cycle 
and have significantly improved the FBI's intelligence capability. This 
integrated intelligence service leverages the core strengths of the law 
enforcement culture--such as reliability of sources and fact-based 
analysis--while ensuring that no walls exist between collectors, 
analysts and those who must act upon intelligence information. The 
Directorate also benefits from the strong FBI history of joint 
operations by unifying FBI intelligence professional and integrating 
all partners, particularly state, local, and tribal law enforcement, 
into our intelligence structures.
    The central mission of the Directorate is to optimally position the 
FBI to meet current and emerging national security and criminal threats 
by: (1) assuring that the FBI proactively targets threats to the US, 
inhibiting them and dissuading them before they become crimes; (2) 
providing useful, appropriate and timely information and analysis to 
the national security, homeland security, and law enforcement 
communities; and (3) building and-sustaining FBI-wide intelligence 
policies and capabilities.
    In 2004, we made substantial progress to expand and strengthen our 
intelligence workforce. For the first time, the FBI offered recruitment 
bonuses for Intelligence Analysts. As a result of these and other 
efforts, the FBI received over 80,000 applications and hired over 650 
Intelligence Analysts.
    We built on the College of Analytic Studies, created in October 
2001, with the addition of two new courses based on intelligence 
community best practices: ACES 1.0, a new basis intelligence analytic 
course, and ACES 1.5, a course for experienced, on-board analysts that 
provides information on the latest analytic resources and techniques. 
To ensure a consistent level of knowledge across the workforce on 
intelligence concepts and processes, ACES Training is now mandatory for 
all FBI Intelligence Analysts. We have increased our training expertise 
and capacity and are on track to deliver basic training to 1,000 
Intelligence Analysts by December 2005. In addition, we have 
incorporated intelligence training into New Agents class, including a 
joint exercise with Intelligence Analysts and joint evening seminars.
    The Intelligence Analyst career path, with multiple work roles and 
cross-training requirements not only provides career development 
opportunities, it also creates a workforce with the agility and 
flexibility needed to respond to the changing threat environment.
    In addition, we implemented several initiatives to enhance the 
analyst career path and improve retention. We extended the promotion 
potential for analysts in the field from GS-12 to GS-14. We created an 
Intelligence Analyst Advisory Board, leveraging the strong FBI culture 
of creating advisory groups to provide advocacy for specific career 
fields. At the same time we worked with Congress and were granted pay 
flexibilities, such that FBI intelligence professionals now can be 
compensated at a rate equal to that of their Intelligence Community 
peers. These and other initiatives have helped us to stabilize our 
attrition rate between 8 percent and 9 percent and FY05 statistics to 
date look promising.
    We have also taken steps to strengthen the Special Agent component 
of our intelligence workforce. In March 2004 we established a new 
career path for Special Agents with three objectives. First, the career 
path gives all Agents experience in intelligence collection, analysis 
and dissemination. Second, the career path will give Agents an 
opportunity to develop specialized skills, experience and aptitudes in 
one of four areas: 1) Intelligence, 2) Counterterrorism/
Counterintelligence, 3) Cyber or 4) Criminal. Third, it makes 
Intelligence Officer Certification a prerequisite for advancement to 
senior supervisory ranks. The Special Agent career path will produce a 
cadre of Agents who are proficient in both intelligence and law 
enforcement operations. This is key to achieving the full integration 
of law enforcement and intelligence operations.
    To improve our foreign language capabilities, we have recruited and 
processed more than 50,000 translator applicants. These efforts have 
resulted in the addition of 778 new Contract Linguists (net gain of 493 
after attrition) and 109 new Language Analysts (net gain of 34 after 
attrition). The FBI has increased its overall number of linguists by 67 
percent, with the number of linguists in certain high priority 
languages increasing by 200 percent or more.
    We have integrated management of the FBI's Foreign Language Program 
(FLP) into the Directorate of Intelligence. This integration fully 
aligns F13I foreign language and intelligence management activities and 
delivers a cross-cutting platform for future improvements across all 
program areas, including translation quality controls.
    We also established the Language Services Translation Center 
(LSTC), a command and control structure at FBI Headquarters to ensure 
that our finite translator resource base of over 1,300 translators, 
distributed across 52 field offices, is strategically aligned with 
priorities set by our operational divisions on a national level.
    We have built a secure network that allows us to efficiently route 
FISA audio collection to any FBI field office. This technology allows 
us to more effectively utilize our national translator base.
    We now possess sufficient translation capability to promptly 
address all of our highest priority counterterrorism intelligence, 
often within 12 hours. Of the several hundred thousand hours of audio 
materials and several million pages of text collected in connection 
with counterterrorism investigations over the last 2 years, a nominal 
level of backlog exists only because of obscure languages or dialects.
    We have instituted a national translation quality assurance 
program. Countervailing operational pressures, however, limit our 
ability to fully comply with instituted translation review procedures 
in those languages for which demand continues to outpace supply. In 
those languages for which we have already achieved excess translation 
capacity, e.g., Farsi, Pashto, and Vietnamese, 100 percent quality 
assurance compliance is expected by April 2005.
    Translation backlogs continue to exist within our 
counterintelligence program. To target these deficiencies, we have 
implemented a highly successful workforce planning model which links 
field-wide workload measurements, trend analysis, and geo-political 
indicators to our recruitment and applicant processing efforts.
    In 2005, we plan to strengthen the integration of the entire 
intelligence cycle (requirements management; planning and direction; 
collection; processing and exploitation of collected information; 
analysis and production; and dissemination) into field office 
operations.
    We will incorporate the recently developed new critical element 
entitled, ``Intelligence,'' into the performance plans of all Special 
Agents and Supervisory Special Agents; this new element emphasizes 
participation in intelligence cycle functions, in particular human 
source development and contributions to intelligence production.
    We will also establish ``fly teams'' of Agents with intelligence 
experience, Intelligence Analysts, Language Specialists, and 
Surveillance Specialists to travel to five field offices and provide 
hands-on guidance and training for the full integration of the 
intelligence cycle within the office.

Partnerships
    Our ability to coordinate and communicate with other members of the 
Intelligence Community has never been better. Our face-to-face 
interaction with the National Counterterrorism Center and members of 
the CIA and DHS has positively impacted our ability to come together on 
a common problem and the results of the cooperation are evident. Case 
in point--during the election threat, analysts were able to meet daily 
to discuss assessments and develop theories that were fundamental to 
understanding the threat, and from those meetings, online forums were 
created to facilitate continued sharing of ideas and new intelligence 
finds--all from the desktop.
    The FBI's Information Sharing Policy Group, chaired by the FBI's 
EAD--Intelligence, brings together the FBI entities that generate and 
disseminate law enforcement information and intelligence to implement 
the FBI's goal of sharing as much as possible consistent with security 
and privacy protections.
    Within the Intelligence Community, the FBI has a two-level 
approach:
    1. For those agencies that operate at the Top Secret-SCI level, we 
are investing in secure facilities for an FBI network (SCI On-Line, or 
SCION) that is linked to the DoD-based JWICS network used by CIA, NSA, 
and other national agencies.
    2. For those agencies that operate at the Secret level, we have 
connected the FBI's internal electronic communications system to the 
DoD-based SIPRNET network that serves. As a result, all FBI Agents or 
analysts who need to communicate at the Secret-level with other 
agencies can do so from their desktop.
    Within the law enforcement community, the FBI's National 
Information Sharing Strategy (HISS) is part of the DOJ Law Enforcement 
Information Sharing Program and builds upon the FBI Criminal Justice 
Information (CJIS) Services program.
    1. The Law Enforcement National Data Exchange (N-DEx) will provide 
a nationwide capability to exchange data derived from incident and 
event reports. Data from incident and arrest reports--name, address, 
and non-specific crime characteristics--will be entered into a central 
repository to be queried against by future data submissions. The 
national scale of N-DEx will enable rapid coordination among all strata 
of law enforcement.
    2. The Law Enforcement Regional Data Exchange (R-DEx) will enable 
the FBI to join participating Federal, state, tribal, and local law 
enforcement agencies in regional fulltext information sharing systems 
under standard technical procedures and policy agreements.
    3. The FBI makes national intelligence more readily available to 
state, tribal, and local law enforcement agencies through the Law 
Enforcement Online (LEO) network.
    4. The Terrorist Screening Center (TSC) also leverages the CJIS 
backbone to provide realtime actionable intelligence to State and local 
law enforcement.

Information Technology
    Recognizing that the ability to assemble, analyze and disseminate 
information both internally and with other intelligence and law 
enforcement agencies is essential to our success in the war on 
terrorism, the FBI has made modernization of its information technology 
(IT) a priority.
    Under the centralized leadership of the Chief Information Officer 
(CIO), the FBI is now taking a coordinated, strategic approach to IT. 
We have a Strategic IT Plan, a baseline Enterprise Architecture, and a 
system for managing IT projects at each stage of their ``life cycle'' 
from planning and investment, through development and deployment, 
operation and maintenance, and disposal. This involves regular 
technical reviews to see if milestones are met.
    The first two phases of the Trilogy IT modernization program have 
been completed. The FBI is now modernized with:
    1. Deployment of a high-speed, secure network that enables 
personnel in FBI offices around the country to share data, including 
audio, video and image files.
    2. More than 30,000 new desktop computers with modern software 
applications 3,700 printers, 1600 scanners, 465 servers and 1400 
routers.
    3. An IT infrastructure that provides for secure communication with 
our Intelligence Community partners.
    The third phase of Trilogy, which includes the Virtual Case File 
(VCF) has not yet been completed. Plans for VCF have changed both in 
response to identified technical problems and because the FBI's 
refocused mission created requirements that did not exist when VCF was 
originally envisioned, such as requirements related to information 
sharing. Last June, after we determined that the product delivered did 
not meet our needs, we decided to move forward with a two-track action 
plan for VCF.
    1. In accordance with this plan, we asked a new contractor to 
examine the latest working version of the VCF as well as available off-
the-shelf software applications and those designed for other agencies, 
to determine the best combination to meet the FBI's needs. In many 
ways, the pace of technological innovation has overtaken our original 
vision for VCF, and there are now existing products to suit our 
purposes that did not exist when Trilogy began.
    2. As we move forward, we will apply all that we have learned and 
leverage what we have already developed, including a critical interface 
to our existing data systems that will be a key component of our final 
solution.
    Separate from the Trilogy Program, we have successfully developed 
and deployed a number of new investigative and information sharing 
capabilities.
    The Investigative Data Warehouse (IDW) offers Agents and analysts 
alike the technology to perform link analysis, while also providing 
enhanced search and analytical tools. IDW provides FBI users with a 
single access point to more than 47 sources of counterterrorism data, 
including information from FBI files, other government agency data, and 
open source news feeds, that were previously available only through 
separate, stove-piped systems. Most of these users are with the 
Directorate of Intelligence, Counterterrorism or Counterintelligence 
Divisions. These users provide search and analysis services using the 
IDW for personnel throughout the Bureau.
    The FBI Automated Messaging System (FAMS) began operations in 
December and now provides more than 300 users with the capability to 
send and receive critical organizational message traffic to any of the 
40,000+ addresses on the Defense Messaging System (DMS). The FBI is the 
first civilian agency to operate a classified DMS.
    The FBI Intelligence Information Reports Dissemination System 
(FIDS) is a web-based software application that allows all FBI 
personnel with access to the FBI's Intranet to create and disseminate 
standardized Intelligence Information Reports (IIRs) quickly and 
efficiently. FIDS allows the Directorate of Intelligence to automate 
and standardize IIR creation and dissemination functions.

                               CONCLUSION

    Looking forward, we expect certain trends to continue. Our 
adversaries will keep evolving, national security and criminal threats 
will further converge, and old jurisdictional boundaries will become 
less and less relevant. If we are to address these trends successfully, 
we must be willing and able to evolve ourselves. The FBI must continue 
to build our intelligence capabilities, including a strong intelligence 
workforce. We must continue hiring and training personnel with 
technical expertise and foreign language skills. We must continue to 
seek new ways to share information and collaborate with partners in the 
Intelligence and Law Enforcement Communities. Above all, we must be 
agile, and encourage creativity, innovation, and strategic thinking. If 
we do all of these things, I am confident that we will out-network, 
out-think, and ultimately defeat our adversaries.
    Mr. Chairman, I thank you again for this opportunity. I look 
forward to working with this Committee as we continue our efforts to 
address threats to the U.S. I would be happy to take any questions you 
might have.

    Chairman Roberts. Mr. Mueller, we thank you for your 
statement as well and thank you for the job you're doing, in a 
very difficult challenge in changing the mission of the FBI and 
still keeping the mission in regards to crime and in regards to 
law enforcement.
    I would say to all Members that Ms. Rodley and Admiral 
Jacoby are here to answer questions. And so, Admiral Loy will 
give the last prepared statement.
    And I neglected to tell all of you that each and every word 
of your testimony will be in the record and preserved for all 
time. And so, feel free to summarize your statements.
    I apologize. That's not an admonition, that's just a 
statement.
    Admiral Loy. And I'm not trying to pick on you.

STATEMENT OF ADMIRAL JAMES LOY, U.S. COAST GUARD, RET., DEPUTY 
           SECRETARY, DEPARTMENT OF HOMELAND SECURITY

    Admiral Loy. Thank you, Mr. Chairman. Good morning, 
Chairman Roberts and Vice Chairman Rockefeller and 
distinguished Members of the Committee. I'm pleased to have the 
chance to appear before you today to discuss the threats 
against the U.S. homeland, as well as some of the capabilities 
we've developed and must continue to develop to confront these 
threats.
    That important link between the intelligence we process and 
the systems we develop in response cannot be understated. For 
every possible action we uncover, there must be an 
intentionally focused reaction designed to secure our homeland 
against that threat.
    In so many areas of greatest concern, vulnerabilities we've 
identified, such as our transportation systems, particularly 
air travel, our border functions and our critical 
infrastructure, such as ports and energy facilities, we've made 
very real, measurable progress that has made our Nation more 
secure.
    The topic of our hearing is very straightforward. What is 
the nature of the worldwide threat? And from the DHS 
perspective, I would make simply five, basic points.
    First, the threat is unclear and complex, but enduring. The 
condition is not expected to change. We continue to note 
attempted entry into the U.S. by aliens who, according to 
intelligence, pose a threat to our homeland.
    Second, we assess that al-Qa'ida continues to be the 
primary transnational threat group, although we are seeing the 
emergence of other threatening groups and gangs, like MS-13, 
that will also be destabilizing influences.
    Third, we think we are most likely to be attacked with a 
vehicle-borne improvised explosive device, because that's the 
weapon of choice around the world. However, it remains very 
clear that our primary adversaries continue to seek weapons of 
mass effects with which they intend to strike us if they 
acquire them.
    Fourth, at DHS we continue to make progress in acquiring 
analysts and improving our capabilities, just 2 years into our 
existence. However, we have not yet fully achieved the 
capability in people, facilities and technical capability we 
think is necessary to protect our homeland. We can, and we are 
doing the job, through extraordinary effort on the part of our 
intelligence professionals and through the collegial efforts of 
all of those at this table and many other agencies in the 
Federal sector.
    And last, the intelligence community interaction with DHS 
has markedly improved over this past year and we continue to 
work toward full integration and interoperability. The 
aftermath of the Intelligence Reform Act is being treated as an 
opportunity to complete that work, to earn the respect of our 
colleagues as a full and deserving player in the intelligence 
community, and to allow that respect to serve as the foundation 
DHS needs to fulfill its responsibilities to secure our 
homeland.
    Thankfully, we have not experienced another attack on our 
soil since September 11, 2001. But the rest of the world has 
not been so fortunate. If you ask the residents of Madrid or 
Beslan or Bali or Jakarta or many others, they will assure you 
that not only the threat, but also the harsh daily reality of 
terrorism is alive and well around the world.
    We realize that an attack here could come in any form at 
any place on any timetable. Terrorist groups--even ones whose 
capabilities may have been weakened by arrests and 
interdictions worldwide--are patient, strategic and methodical 
in their operational planning. At home, we must prepare 
ourselves for any attack, from IEDs to weapons of mass 
destruction, from soft targets like malls to national icons.
    Intelligence suggests that al-Qa'ida may have specific 
tendencies or certain intentions, both small- and large-scale. 
And our efforts must stay directed to this full range of 
threats. We must assume that they are assembling, or 
reassembling, the capabilities they don't currently have or 
those that have been taken from them. So our plan of action, 
like theirs, must be even more deliberate and even more 
enduring, and it is.
    We have built new tools to help in each of the five 
strategic areas of operational emphasis in our department. Our 
charter runs from maximum domain awareness, if you will, 
through prevention and protection efforts to response and 
recovery planning. We have published an all-hazards, all-
threats National Response Plan and its sister document, the 
National Incident Management System.
    We have dramatically improved our technical ability to 
share information. Tools such as the Homeland Security 
Operations Center, the Homeland Security Information Network 
and the Homeland Security Advisory System are steps toward full 
capacity and capability. We know the end state we want to reach 
and we are methodically designing the path to get there.
    We have greatly improved systems to keep track of persons 
who cross the border and we have begun to apply technology to 
monitor the border where there is no human presence. We're 
operating the US-VISIT Program to verify the identity of 
travelers and stop criminals and terrorists before they can 
enter our society.
    We have signed Smart Border accords with our neighbors to 
the north and south, Canada and Mexico, to help the highly 
trained customs officers, border agents, Coast Guardsmen and 
many others who monitor and patrol our Nation's nearly 7,500 
miles of land border and 95,000 miles of coastline and 
waterways.
    We now require unprecedented scrutiny of high-risk 
travelers and flights landing in or flying over the United 
States, including requiring volumetric information on visas and 
passports and agreeing to share passenger data with our 
European allies. These are important strides to keep the doors 
of our country open to legitimate visitors, but firmly shut to 
terrorists.
    We know that al-Qa'ida would like to impact our economy 
with attacks on our financial systems, our cyber networks and 
the vital elements of our global supply chain. So we've taken 
measures to secure cargo and protect the infrastructure that 
supports the free and safe movement of goods and people and 
money around the world.
    We launched the Container Security Initiative to target and 
screen high-risk cargo before it reaches our shores. And today 
we operate that program alongside our allies in 34 ports around 
the world in 22 different countries with a growth posture 
scheduled for 2005 and on into 2006. We are in the process of 
finalizing, with the input from private sector stakeholders as 
well as many others, a national cargo security strategy.
    We included a special section on cyber security in the 
newly released National Response Plan to enhance governmentwide 
collaboration and coordination to prevent an attack on the 
backbone of our electronic economy.
    And most important, we've been careful to consider the 
economic impacts and the privacy implications of any additional 
security efforts, and worked to ensure that added protections 
do not detract from our competitiveness or from our way of 
life.
    In ways large and small, seen and unseen, with advanced 
technologies and additional vigilance, with the help of 
countless agencies and allies at every level of government, in 
the private sector and throughout the world, we have made it 
harder for terrorists to attack our country, more difficult for 
them to defeat our systems and reduce large gaps they once saw 
in our security posture.
    As the President has said, we are safer than ever before, 
but we are still not safe enough. This experiment called DHS is 
astonishingly complex and some dimensions of the challenge are 
further along than others. That's the nature of culture and 
transformational change. I'm proud to hand over a 2-year-old 
department with a solid foundation and a solid sense of 
direction to our incoming leadership team.
    I'm deeply appreciative of the support, constructive 
criticism and the resources that have come our way over the 
past 2 years from the Congress. This Committee's continued 
focus and review must remain our Nation's conscience until we 
get this work accomplished.
    Last night, I spoke to a group of 400 young people--high 
school people--in a program geared to encouraging public 
service. I promised them that we would do all we could to 
lighten their burden when it's their turn on watch. And we can 
only meet that promise when our national intelligence 
capability is sound, inclusive, whole. Anything short of that 
is simply unsatisfactory.
    Thank you, Mr. Chairman. I'll happily answer your 
questions.
    [The prepared statement of Admiral Loy follows:]

      Prepared Statement of Admiral James Loy, Deputy Secretary, 
                  U.S. Department of Homeland Security

    Good morning Chairman Roberts, Vice Chairman Rockefeller, and 
distinguished Members of the Committee. I am privileged to appear 
before you today to discuss the primary threats currently facing the 
United States homeland, as well as their probability, immediacy, and 
severity.
    Most current threats to the homeland continue to be directed by al-
Qaida and its affiliated elements within the broader Sunni extremist 
movement. Despite the successes the United States and our coalition 
partners have had against al-Qaida and other extremists, al-Qaida 
leaders and operational planners continue to think about--if not 
actively plot--the next dramatic attack in the United States. We 
believe that attacking the homeland remains at the top of al-Qaida's 
operational priority list, despite the fact that more than 3 years have 
passed since September 11, 2001. We judge that al-Qaida continues to 
view the homeland as an attractive target for a variety reasons, and 
that the next dramatic attack will attempt to replicate the 9/11 
``model'' of multiple attacks against geographically distant and 
symbolic targets that cause unprecedented economic damage, mass 
casualties, and physical destruction. While al-Qaida and its affiliated 
elements currently appear more capable of attacking United States 
interests outside of the homeland, we believe that their intent remains 
strong for attempting another major operation here.
    While there are other transnational terrorist groups that possess 
noteworthy capabilities to conduct attacks against United States 
interests, we currently do not believe these groups are ready for or 
oriented toward conducting attacks inside the homeland. However, there 
is a legitimate threat posed by groups and persons who are present in 
the country today (not necessarily connected to transnational terrorist 
groups), including multi-national gangs and domestic groups that engage 
in violence to achieve political and economic goals. These groups range 
from single-issue groups such as the Earth Liberation Front to violent 
criminal gangs like MS-13 to right-wing or neo-Nazi groups to ``lone-
wolf' threats. Additionally, the threat from criminal groups and 
persons who engage in criminal enterprise that supports or contributes 
to terrorism and which has homeland security implications remains of 
concern. Examples of such activity include narcotics trafficking, money 
laundering, people smuggling, contraband smuggling, illegal arms 
transfers, illegal technology transfers, currency counterfeiting, 
document forgery, and false identity provision. However, none of these 
threats currently rises to the level of threat posed by al-Qaida and 
its affiliates.
    While there is no single ``crystal ball'' that allows intelligence 
analysts to perfectly determine which terrorist threats are the most 
probable, we believe the al-Qaida and affiliated extremist threat 
remains the most likely in the near term. The strategic intent of al-
Qaida's remaining leaders and planners to attempt another dramatic 
homeland attack is clear. What is less clear are al-Qaida's current 
operational capabilities to execute such an attack. Though al-Qaida's 
current capabilities for dramatic attacks inside the United States 
might seem reduced, we also assess, based on past activity, that a1-
Qaida is patient, deliberate, and methodical in operational planning 
for major attacks. Al-Qaida operates on a very long timeline.
    Thus, the probability of an attack in the United States is assessed 
to be high, but very much conditional and circumstantial. We believe 
that while several attacks may have been considered inside the U.S. 
since 9/11, and some moved forward beyond initial planning, none of 
these plots was ever successfully executed due to the attackers' 
operational limitations and the heightened intelligence and security 
measures employed since that time.
    The cyber risk from various types of malicious actors is more 
significant than previously understood, and could be used to increase 
the impact of a physical attack by disrupting emergency communications.
    The National Intelligence Council released last year its first 
National Intelligence Estimate (NIE) for worldwide cyber security since 
9/11, and the DHS/National Cyber Security Division's law enforcement 
and intelligence branch participated in that assessment. It assessed 
the cyber threat, and the result showed a significant capability and 
threat from various actors.
    Adding to our concern over the possibility of the next al-Qaida 
attack is the potential threat of individuals inspired by al-Qaida and 
its affiliates who are not in any way directly connected to the al-
Qaida core. In early 2004, several individuals in the United Kingdom 
attempted to conduct attacks there, but none of these individuals was 
considered an active al-Qaida member. This and other examples of 
similar activity in Europe demonstrate how individuals or small groups, 
who previously had provided only financial or logistical support to 
Islamic extremist activities, themselves attempted to transition into 
active operational roles.
    The key locales that we currently judge as being at risk for attack 
by al-Qaida and affiliated terrorist organizations include key person 
and large group assemblages, major events as judged by the Department 
of Homeland Security (DHS) and the United States Intelligence 
Community, ports, depots, stations, and related infrastructure, and 
stadiums, auditoriums, and large buildings. Additionally, critical 
infrastructure of primary importance includes nuclear, chemical, 
biological, and other hazardous material facilities, bridges, tunnels, 
dams, and power generation/transfer stations, energy facilities 
including petroleum refining and related industries, and iconic cities 
and facilities, large buildings, and complex high-density 
infrastructure.
    The possible means of attacking such national interests are far 
ranging. We know from operational activity around the world that al-
Qaida can execute mass-casualty attacks using improvised explosive 
devices (IEDs) combined with suicide operatives. The capture of 
operatives overseas this past summer led to the identification of 
detailed casing reports prepared prior to 9/11. The specific tactics 
recommended in these reports highlights al-Qaida's ongoing interest and 
preference for using vehicle-borne improvised explosive devices 
(VBIEDs) to attack high-profile or symbolic targets.
    Al-Qaida has demonstrated operational proficiency in using aircraft 
as weapons, in particular hijacking operations, and has explored the 
idea of bringing down aircraft in flight through the use of several 
different IED configurations. Al-Qaida has also demonstrated a 
capability to use man-portable air-defense systems (MANPADs) in 
operations against aircraft overseas, although there are no indications 
that it plans to use this capability for attacks inside the United 
States. .
    Al-Qaida and its affiliated groups have demonstrated an operational 
capability to conduct dramatic, mass-casualty attacks against both hard 
and soft targets inside the United States and abroad. Within this broad 
operational spectrum, the most severe threats revolve around al-Qaida 
and its affiliates' long-standing intent to develop, procure, or 
acquire chemical, biological, radiological, and even nuclear, weapons 
for mass-casualty attacks. Al-Qaida and affiliated elements currently 
have the capability to produce small amounts of crude biological toxins 
and toxic chemical materials, and may have acquired small amounts of 
radioactive materials. However, we currently assess that al-Qaida has 
not been able to acquire or develop a functioning nuclear weapon (i.e., 
one that generates a nuclear yield).
    Despite al-Qaida's intent to strike us with Weapons of Mass Effect 
(WME), we assess that the United States is a ``harder target'' for the 
terrorist and for the illegal migrant than it was in the past because 
of improvements in information sharing and security measures since 9/
11. There remain, of course, difficulties in securing the over 95,000 
miles of coastline and 7,000 miles of border shared with Canada and 
Mexico. Indeed, the efforts of DHS have been successful, and the 
determination of the 180,000 plus Department personnel working around 
the country and around the world day in and day out is strong and 
completely dedicated to securing our homeland.
    There is much evidence to convince us that interdiction measures 
have improved; intelligence is working, technology has helped, and far 
fewer illegal immigrants are now able to enter our ports of entry or 
cross our borders than in the past. However, we still see persons using 
fraudulent documentation; many are already on our watch lists, 
attempting to enter the United States at the borders and at ports of 
entry. Thus, we assess that the threat of illegal and even covert entry 
is still present and likely will be for the foreseeable future.
    On land, we now have greatly improved systems to keep track of 
persons who cross the border and we have begun to apply technology to 
monitor the border where there is no direct border patrol presence. We 
also believe that fraudulent documentation is far more likely to be 
discovered than in the past--owing in part to improved technology, 
better training, more comprehensive data bases, the increased use of 
biometrics, and better coordination among agencies.
    However, entrenched human smuggling networks and corruption in 
areas beyond our borders can be exploited by terrorist organizations. 
Recent information from ongoing investigations, detentions, and 
emerging threat streams strongly suggests that al-Qaida has considered 
using the Southwest Border to infiltrate the United States. Several al-
Qaida leaders believe operatives can pay their way into the country 
through Mexico and also believe illegal entry is more advantageous than 
legal entry for operational security reasons. However, there is 
currently no conclusive evidence that indicates al-Qaida operatives 
have made successful penetrations into the United States via this 
method.
    In addition to the problems posed by the southwestern border, the 
long United States-Canada border, often rugged and remote, includes a 
variety of terrain and waterways, some suitable for illicit border 
crossings. A host of unofficial border crossings can be utilized when 
employing the services of alien smugglers, especially those winding 
through mountain ranges and across the vast western prairie.
    In addition to the threats posed at the extensive United States 
land border, we believe al-Qaida remains focused on targeting civil 
aviation. Since the creation of the Department in March 2003, DHS has 
led Federal Government effort to harden and protect the aviation 
infrastructure. The barriers and checks put in place since 9/11 at 
airports and the system of baggage and cargo checks for air transported 
materials have proven very effective in identification and interdiction 
of unauthorized items and in the identification of persons engaged in 
air travel. However, al-Qaida operatives have received flight training, 
and we believe al-Qaida continues to consider new and novel methods for 
planning and conducting attacks against civil aviation in the United 
States. Al-Qaida still views the hijacking of commercial passenger 
aircraft inside the United States as a primary objective.
    Other aviation threats include the possible use of ultra-light 
aircraft or remotely piloted vehicles (RPVs), although we have no 
specific or credible information suggesting that terrorists have 
considered these platforms for attacks in the Homeland. Additionally, 
while al-Qaida has considered conducting an attack against United 
States interests overseas using helicopters packed with explosives, 
there is no specific or credible evidence supporting the use of 
helicopters in aerial attacks within the United States. There have been 
recent media reports about lasers being visible to pilots in commercial 
aircraft in the United States. Although no specific or credible 
information suggests terrorists plan to use high-powered lasers in the 
United States, groups overseas have expressed interest in using these 
devices against human sight.
    At sea, we see positive changes and advances in the control system 
similar to those made in land border crossing and aviation. These 
advancements include improving vessel registration documentation and 
identification capabilities and better search technologies and 
procedures. While the complex problem with sea-transported cargo and 
the checking especially of containers and container vessels remains, 
significant improvements have been made since 9/11.
    Al-Qaida remains the preeminent organization with both intent and 
capabilities to targets United States maritime assets. A variation of 
the familiar VBIED, the small, explosiveladen boat usually piloted by a 
suicide operative, remains al-Qaida's weapon of choice in the maritime 
environment. In addition to threats posed by terrorist attack, the 
smuggling of illegal migrants via maritime means continues to be a 
major concern for homeland security. This threat is expected to grow as 
organized criminal groups continue to expand their operations 
throughout the world. The huge profit potential in this trade will 
ensure that it will remain a lucrative venture for the foreseeable 
future. The inability of Central American nations to control their 
borders is also an important factor favoring the smugglers.
    Additionally, a small but increasing threat to homeland security is 
represented by stowaways on merchant vessels and by crewmen jumping 
ship. Most of these individuals are economic migrants and account for a 
small fraction of illegal migration. However, their illegal activity 
highlights persistent border security vulnerabilities that may be 
exploited by contraband smugglers and terrorist organizations, as well 
as concerns for merchant vessel and crew safety. When acting alone, 
stowaways take advantage of poor security in foreign ports to simply 
walk on board vessels and attempt to stay hidden for the duration of 
the voyage. However, many stowaway incidents are part of criminally 
organized attempts to traffic people and require the complicity of 
merchant ship crewmembers. The threat posed by merchant seamen 
illegally entering the United States includes deserters who depart the 
ship legally, but do not return and absconders who illegally depart the 
ship once in port. The use of these methods by criminals or terrorists 
to enter the United States is probable.
    The bottom line is that the best efforts of the DHS, of the United 
States Intelligence Community, and of the entire Federal Government are 
allied against terrorist efforts to stage attacks in the homeland. 
However, despite these efforts and innumerable advances in information 
sharing, technology, communication, and organization, any attack of any 
kind could occur at any time. While we have not seen a trend by any 
terrorist group to tie an act of terrorism to a particular date or 
time, or even place, beyond the obvious goal of striking a locale or 
transportation mode when a larger number of people might be present, we 
do not believe we can predict timing unless we are somehow inside the 
decisionmaking mechanism used by the terrorists.
    An attack against the homeland with the most severe ramifications 
would include the use of a WME, especially nuclear. We also give due 
respect to the potential for some forms of biological attack to 
generate high casualty numbers. Beyond that, most attacks would be 
locally severe and would have larger implications psychologically, 
culturally, and economically even if their immediate destructive impact 
was very limited. While we have not seen such methods employed in the 
homeland to date, we do worry about the possibility of small attacks--
the grenade into the outdoor restaurant, the small bomb in the public 
place, the random shooting on the street--that would ostensibly be 
carried out to influence U.S. authorities to react strongly in the 
context of preventing such acts from occurring.
    There is a risk of cyber or combined physical-cyber attacks from 
various malicious actors, though it is difficult to quantify that risk. 
However, the Intelligence Community believes there is sufficient risk, 
and while there is no known information that anyone is preparing a 
significant cyber attack, there appears to be circumstantial evidence 
that terrorists are using a variety of illegal Internet behaviors to 
finance their activities.
    Given the anecdotal and imprecise nature of information in this 
regard, it is important to focus on the whole risk picture, including 
threat, vulnerabilities, and potential consequences. Accordingly, the 
government is enhancing its interagency coordination through the 
National Cyber Response Coordination Group (NCRCG) formalized by the 
Cyber Annex to the National Response Plan to prepare for and respond to 
national level cyber attacks from any sources and in the Interagency 
Security Plan (ISP) to reduce our vulnerability to attacks that might 
cause a major Internet disruption.
    Which is the largest of the potential threats to the homeland? 
Which is the most severe? Which is the most probable? These are 
questions that cannot realistically be answered beyond the information 
provided here. We are hesitant to make an attempt to answer these 
questions beyond stating that, conditionally and circumstantially, any 
event and any terrorist action is worthy of, and will continue to 
receive, our full attention and interest.
    Chairman Roberts, Senator Rockefeller, and Members of the 
Committee, this concludes my prepared statement. I would be happy to 
answer any questions you may have at this time.

    Chairman Roberts. Well, we thank you, Admiral, for a very 
comprehensive statement.
    I would tell the witnesses that we're having a closed 
hearing on the threat of nuclear terrorism as of tomorrow. It's 
my personal belief that if al-Qa'ida could obtain a nuclear 
weapon or any material and could get it into the U.S., that 
they would use it. The question is not whether al-Qa'ida would 
use a nuclear weapon, but can they get one?
    Pakistani scientist A.Q. Khan passed secrets and equipment 
to a host of rogue nations. The Pakistani government has 
cooperated in our efforts to stop this activity and Mr. Khan is 
under house arrest in Pakistan.
    This is for Director Goss, Admiral Loy. What is your 
assessment of the current status of the Khan network? Does the 
fact that he is in custody mean the network is shut down? Are 
there any other non-state actors that are potential Khans?
    And especially for Admiral Loy, what is the Department of 
Homeland Security's assessment of that threat? You have touched 
on it in your statement. And more particularly, if you could be 
very succinct, what steps has your department taken to prevent 
or to mitigate a terrorist attack utilizing any nuclear weapon?
    Director Goss.
    Director Goss. Mr. Chairman, thank you.
    Actually, it's timely that you ask that question, because 
we are further exploring our opportunities to learn about Mr. 
Khan and what he has done. I am unable to give you the details 
of that. They would be suitable for a closed hearing. But I can 
assure you that, virtually as we speak, efforts--active, 
appropriate direct efforts--are underway on that matter.
    We have found, from a variety of sources, following the 
leads of what we've known already, that we've uncovered many 
new things. And we have found that in uncovering those things 
we have not got to the end of the trail. Getting to the end of 
that trail is extremely important for us.
    It is a serious proliferation question. I'm pleased you're 
having a closed hearing. I'd be very happy to make available 
those experts in our business who can contribute to your wisdom 
in a closed session.
    Chairman Roberts. What about the non-state actors that are 
potential Khans?
    Director Goss. The potential Khans are a very nervous worry 
for us, obviously. If there were a way--and that's the big 
question, how would they go about getting it--would we know and 
could we stop it?
    In some cases, the regimes we have are good enough to 
understand most of the issue and most of the stocks and where 
things are supposed to be and how they're supposed to work. But 
most isn't good enough. You need 100 percent to get to the 
guarantee that you want.
    So, the answer for non-state actors being able to get these 
kinds of materials, either nuclear, chem or bio, is a reality.
    Chairman Roberts. Admiral Loy, your assessment of the 
nuclear terrorism threat? You touched on it in your statement.
    Admiral Loy. Briefly, sir, certainly there are three or 
four that we would categorize as those concerns that keep us 
awake nights the most. They certainly would include nuclear, 
chemical, bio and cyber. With respect directly to nuclear, 
Director Goss has the inside track. I would offer--to offering 
the most insight to the worldwide nature, with respect to 
proliferation--our concerns at DHS go more directly to the 
ability to detect those materials as they might be coming in 
our direction.
    In the President's budget for 2006, there is an initiative 
that we're referring to as the National Nuclear Detection 
Office, to be established inside the Department of Homeland 
Security--not a DHS initiative, but literally a national 
initiative--wherein the offices and the good capabilities of 
DoD and DOJ and DOE and all others with equities in the issue 
can be pooled, such that we can make some kind of an effort 
that does two things--one, optimizes the deployment of current 
capability in the areas of detection and, second, fences a 
significant amount of money--almost a mini-Manhattan Project, 
if you will--to offer us a chance to break through toward next-
generation capability of detection.
    Those are the efforts that we have underway, Mr. Chairman. 
And, again, if there is a closed hearing, we'd be happy to 
participate.
    Chairman Roberts. I'm going to change the subject. In the 
last few years we've had the Joint Inquiry, the 9/11 
Commission, this Committee's review in regards to WMD in Iraq--
all of which highlighted the failure to share intelligence 
information across the intelligence community.
    For every intelligence failure, you hear another 
recommendation for more information sharing. That's the 
buzzword. For too many times, when we hear about a consensus 
threat, we find out there's not a consensus. I believe, 
however, that information sharing is a rather limited idea that 
falsely implies that the intelligence collectors own the 
information that they collect.
    The Vice Chairman and I also think that information sharing 
means that the collectors push information to the analysts they 
believe have a need to know.
    I think we need to change our thinking on this issue. It's 
time to be working toward a more powerful concept. We call it 
information access. No one agency of the U.S. Government owns 
intelligence information and any cleared analyst with a need to 
know should be able to access it.
    While sensitive information must still be managed--I know 
that--cleared analysts should be able to pull that information 
by searching all intelligence databases without having to wait 
for any one agency to push the information to them, as we do it 
today.
    What do you think--and I'm addressing, basically, Director 
Goss here--about this idea of information access, as well as 
Director Mueller. Do we need to take the classification 
authority away from the collection agencies and put it in the 
hands of an authority, i.e., the DNI, who is neither a 
collector or an analyst, who can more honestly balance the need 
to know with the need to protect the sources and methods?
    Director Goss. Thank you, Mr. Chairman.
    The sources and methods question I am clear on. We do need 
to protect our sources and methods. The degree that some of our 
sources and methods are revealed in the media from time to 
time, through leaks and other matters, does not necessarily 
mean we shouldn't continue to protect them. Just because it's 
reported in the paper doesn't mean we're going to confirm it. 
Sometimes we are able to still get further utility out of 
sources and methods, even though they have been discussed, 
because not everybody may read that particular paper.
    But it is harmful to us, in our efforts to broaden the 
product in the community, that not everybody is playing by 
exactly the same rules. We find that different people treat 
classifications different ways and have different reactions to 
it. So I do believe you would be right in focusing some 
attention on the classification and declassification process. 
It is clearly an area that needs attention, something we've 
talked about in the past. And it is still somewhat of a 
neglected stepchild.
    In the area of getting the information to who needs to 
know, that's exactly on target. The trick is, who needs to 
know? It was always a question of sharing with who needs to 
know. The question of who makes that decision of who needs to 
know has always been the problem.
    We find that the audience of who needs to know is, in fact, 
larger as we bring our community and its many, many elements 
together that are being asked to do things--more things--not 
only overseas, but particularly now at home.
    Our domestic agencies--as Admiral Loy has just testified, 
and as Director Mueller has testified--clearly are doing things 
in the war on terrorism that require sharing of information. 
Well, the foreign intelligence program, which is where the 
intelligence program has always operated, is doing new business 
with domestic agencies to deal with terrorism in a domestic 
way, because, as you know, the foreign intelligence program is 
prohibited from spying on Americans.
    So, getting that piece just right has been part of the 
effort, as we have gone along since 9/11. And I am pleased to 
report we are doing exceedingly well, in my view, on that. And 
I would hope that my colleagues would agree. There's still room 
to go, but I believe we are sharing much better. I certainly 
agree analysts should be driving collection and not the other 
way around.
    Chairman Roberts. I ask for the patience of my colleagues. 
My time is up, but I would like for Director Mueller to address 
this, and also Admiral Jacoby.
    If you can be short and succinct, sir.
    Director Mueller. I certainly agree with the premise that 
those responsible for acting should have access to the 
information in whatever database it resides, in whatever 
agency.
    I think TTIC, the Terrorist Threat Integration Center, and 
the National Counterterrorism Center, when it comes to 
terrorism information, has taken us well along that way to give 
us access to the information, regardless of in which database 
it resides. Co-location, as we've co-located out in Tyson, has 
helped immeasurably to break down some of those barriers.
    So, I agree with the premise. I also agree with, I think, 
the second premise. And that is the importance of the analysts 
having access to at least information relating to the 
motivations of underlying sources, the access that the 
underlying source may have to the information. Having more 
clarity as to what moves the person to provide the information, 
to whether it be the FBI, CIA or elsewhere. And that, I think, 
is something we have to work on.
    Last, in terms of moving the authority from the agency to 
the DNI, I do think the agency, at the outset, needs the 
authority to protect its sources and methods, but it should be 
reviewed by the DNI. I don't think that moving it up to the DNI 
would work all that well. But I do believe that the DNI ought 
to review how we classify, how we describe our sources and 
methods.
    Chairman Roberts. Admiral Jacoby.

         STATEMENT OF VICE ADMIRAL LOWELL JACOBY, USN, 
             DIRECTOR, DEFENSE INTELLIGENCE AGENCY

    Admiral Jacoby. Sir, your ownership of information 
statement is just right on the mark, sir. I think that's a 
desperately important area for this Committee and for our 
community to continue to work hard on.
    Part of it that comes along with the need to know is, the 
way we do business today, the collector decides who needs to 
know in many cases. We need to swap that and have the analysts 
who are charged with discovering information and generating 
knowledge be the driver in the process.
    The other part that's desperately important to this is 
putting in place the Smart Network that is talked about so 
concisely in the 9/11 Commission report, because applying 
modern commercial information management kinds of tools will 
help us to separate the content from neglected information 
while still protecting the sourcing of the information. That's 
a desperately important part of this whole discussion and needs 
to be pursued very aggressively.
    [The prepared statement of Admiral Jacoby follows:]

         Prepared Statement of Vice Admiral Lowell E. Jacoby, 
            U.S. Navy Director, Defense Intelligence Agency

    Good morning Mr. Chairman, Mr. Vice Chairman and Members of the 
Committee. It is my honor and privilege to represent Defense 
Intelligence and present what we know and believe to be the principal 
threats and issues in today's world. The dedicated men and women of 
Defense Intelligence work around the clock and around the world to 
protect our country. Many of these active duty, reserve and civilian 
intelligence professionals are working in remote and dangerous 
conditions. Our mission is simple, but rarely easy. It is to discover 
information and create knowledge to provide warning, identify 
opportunities and deliver overwhelming advantage to our warfighters, 
defense planners and national security policymakers.
    This is the third time I report to you that Defense Intelligence is 
engaged in a war on a global scale. Most of the forces and issues 
involved in this war were addressed in my testimony last year. Several 
increased in severity or changed in composition. Few, unfortunately, 
decreased.
    The traditional Defense Intelligence focus on military capabilities 
is insufficient to identify and gauge the breadth of these threats. We 
are working hard to access ``all'' information to better understand and 
counter these threats. Defense Intelligence is engaged with foreign and 
domestic counterparts to better integrate our capabilities. We remained 
focused on information sharing and creating the ``smart networks'' 
described in the 9/11 Commission report. I am anxious to work with the 
new Director of National Intelligence, my fellow intelligence agency 
heads and others to forge a more cohesive and comprehensive 
Intelligence Community.

                        GLOBAL WAR ON TERRORISM

    We continue to face a variety of threats from terrorist 
organizations.
    Al-Qaida and Sunni Extremist Groups. The primary threat for the 
foreseeable future is a network of Islamic extremists hostile to the 
United States and our interests. The network is transnational and has a 
broad range of capabilities, to include mass-casualty attacks. The most 
dangerous and immediate threat is Sunni Islamic terrorists that form 
the ``al-Qaida associated movement.''
    Usama bin Ladin and his senior leadership no longer exercise 
centralized control and direction. We now face an ``al-Qaida associated 
movement'' of like-minded groups who interact, share resources and work 
to achieve shared goals. Some of the groups comprising this movement 
include Jemaah Islamiyya, responsible for the 9 September bombing of 
the Australian Embassy in Jakarta and Hezb-e-Islami-Gulbuddin. Some of 
the groups in the movement provide safe haven and logistical support to 
al-Qaida members, others operate directly with al-Qaida and still 
others fight with al-Qaida in the Afghanistan/Pakistan region.
    Remnants of the senior leadership still present a threat. As is 
clear in their public statements, Bin Ladin and al-Zawahiri remain 
focused on their strategic objectives, including another major 
casualty-producing attack against the Homeland.
    CBRN Terrorism. We judge terrorist groups, particularly al-Qaida, 
remain interested in Chemical, Biological, Radiological and Nuclear 
(CBRN) weapons. Al Qaida's stated intention to conduct an attack 
exceeding the destruction of 9/11 raises the possibility that planned 
attacks may involve unconventional weapons. There is little doubt it 
has contemplated using radiological or nuclear material. The question 
is whether al-Qaida has the capability. Because they are easier to 
employ, we believe terrorists are more likely to use biological agents 
such as ricin or botulinum toxin or toxic industrial chemicals to cause 
casualties and attack the psyche of the targeted populations.
    Pressures in the Islamic World. Various factors coalesce to 
sustain, and even magnify the terrorist threat.
    Islam is the world's second largest religion with over 1 billion 
adherents, representing 22 percent of the world's population. Due to 
high birth rates, it is also the world's fastest growing religion. Only 
twenty percent of Muslims are ethnic Arabs. The top four nations in 
terms of Muslim population, Indonesia, Pakistan, Bangladesh and India, 
are non-Arab. While the vast majority of Muslims do not advocate 
violence, there are deeply felt sentiments that cross Muslims sects and 
ethnic and racial groups.
    Our policies in the Middle East fuel Islamic resentment. Multiple 
polls show favorable ratings for the United States in the Muslim world 
at all-time lows. A large majority of Jordanians oppose the War on 
Terrorism, and believe Iraqis will be ``worse off' in the long term. In 
Pakistan, a majority of the population holds a ``favorable'' view of 
Usama bin Ladin. Across the Middle East, surveys report suspicion over 
U.S. motivation for the War on Terrorism. Overwhelming majorities in 
Morocco, Jordan, and Saudi Arabia believe the U.S. has a negative 
policy toward the Arab world.
    Usama bin Ladin has relied on Muslim resentment toward U.S. 
policies in his call for a defensive jihad to oppose an American 
assault on the Islamic faith and culture. He contends that all faithful 
Muslims are obliged to fight, or support the jihad financially if not 
physically capable of fighting. Another goal is the overthrow of 
``apostate'' Muslim governments, defined as governments which do not 
promote Islamic values or support or are friendly to the U.S. and other 
Western countries. The goals also call for withdrawal of U.S. and other 
Coalition forces from Muslim countries, the destruction of Israel and 
restoration of a Palestinian State and recreation of the caliphate, a 
State based on Islamic fundamental tenets.
    Underlying the rise of extremism are political and socio-economic 
conditions that leave many, mostly young male adults, alienated. There 
is a demographic explosion or youth bubble in many Muslim countries. 
The portion of the population under age 15 is 40 percent in Iraq, 49 
percent in the Gaza Strip and 38 percent in Saudi Arabia. Unemployment 
rates in these countries are as high as 30 percent in Saudi Arabia and 
about 50 percent in the Gaza Strip.
    Educational systems in many nations contribute to the appeal of 
Islamic extremism. Some schools, particularly the private ``madrasas,'' 
actively promote Islamic extremism. School textbooks in several Middle 
East states reflect a narrow interpretation of the Koran and contain 
anti-Western and anti-Israeli views. Many schools concentrate on 
Islamic studies focused on? memorization and recitation of the Koran 
and fail to prepare students for jobs in the global economy.
    Groups like al-Qaida capitalize on the economic and political 
disenfranchisement to attract new recruits. Even historically local 
conflicts involving Muslim minorities or fundamentalist groups such as 
those in Indonesia, the Philippines and Thailand are generating new 
support for al-Qaida and present new al-Qaida-like threats.
    Saudi-Arabia. Al Saud rule is under significant pressure. In 2004, 
15 significant attacks occurred against the regime, U.S. and other 
Western targets in the Kingdom, an increase from 7 in 2003. Attacks in 
2004 included the 6 December 2004 attack on the U.S. Consulate in 
Jeddah.
    Attacks since May 2003 against housing compounds, an Interior 
Ministry facility, a petroleum facility and individual assassinations 
caused Riyadh to attempt to aggressively counter the threat. We expect 
continued assassinations, infrastructure attacks and operations 
directed at Westerners in the Kingdom to discredit the regime and 
discourage individuals and businesses, especially those affiliated with 
the Saudi military, from remaining in the Kingdom.
    Last year Saudi security forces killed or captured many of their 26 
most wanted militant extremists and discovered numerous arms caches. 
However, we believe there may be hundreds, if not thousands of 
extremists and extremist sympathizers in the Kingdom.
    Pakistan. President Musharraf continues to be a key ally in the War 
on Terrorism and provides critical support against Al-Qaida and Taliban 
operating in Pakistan. The economy has displayed strong growth over the 
past 2 years. Indigenous and international terrorist groups have 
pledged to assassinate Musharraf and other senior Pakistan government 
officials and remain a significant threat. Unless Musharraf is 
assassinated, Pakistan will remain stable through the year; however, 
further political and economic reform is needed to continue positive 
trends beyond that time.
    Pakistan significantly increased its military operations and 
pacification efforts in tribal areas along the Afghanistan border in 
2004. These operations affected al-Qaida, Taliban, and other threat 
groups by disrupting safe-havens and, in some cases, forcing them back 
into Afghanistan where they are vulnerable to Coalition operations. 
Pakistan also secured agreements with several tribes by successfully 
balancing military action with negotiations and rewards to encourage 
cooperation and limit domestic backlash. Pakistan must maintain and 
expand these operations in order to permanently disrupt insurgent and 
terrorist activity.
    We believe international and indigenous terrorist groups continue 
to pose a high threat to senior Pakistani government officials, 
military officers and U.S. interests. The Prime Minister and a corps 
commander have been the targets of assassination attempts since last 
summer. President Musharraf remains at high risk of assassination, 
although no known attempts on his life have occurred since December 
2003. Investigations into the two December 2003 attempts revealed 
complicity among junior officers and enlisted personnel in the 
Pakistani Army and Air Force.
    Our assessment remains unchanged from last year. If Musharraf were 
assassinated or otherwise replaced, Pakistan's new leader would be less 
pro-US. We are concerned that extremist Islamic politicians would gain 
greater influence.

                            CONFLICT IN IRAQ

    The insurgency in Iraq has grown in size and complexity over the 
past year. Attacks numbered approximately 25 per day 1 year ago. Today, 
they average in the 60s. Insurgents have demonstrated their ability to 
increase attacks around key events such as the Iraqi Interim Government 
(IIG) transfer of power, Ramadan and the recent election. Attacks on 
Iraq's election day reached approximately 300, double the previous 1 
day high of approximately 150 reached during last year's Ramadan.
    The pattern of attacks remains the same as last year. Approximately 
80 percent of all attacks occur in Sunni-dominated central Iraq. The 
Kurdish north and Shia south remain relatively calm. Coalition Forces 
continue to be the primary targets. Iraqi Security Forces and Iraqi 
Interim Government (IIG) officials are attacked to intimidate the Iraqi 
people and undermine control and legitimacy. Attacks against foreign 
nationals are intended to intimidate non-government organizations and 
contractors and inhibit reconstruction and economic recovery. Attacks 
against the country's infrastructure, especially electricity and the 
oil industry, are intended to stall economic recovery, increase popular 
discontent and further undermine support for the IIG and Coalition.
    Recent polls show confidence in the Iraqi Interim Government 
remains high in Shia and Kurdish communities and low in Sunni areas. 
Large majorities across all groups opposed attacks on Iraqi Security 
Forces and Iraqi and foreign civilians. Majorities of all groups placed 
great importance in the election. Sunni concern over election security 
likely explains the relatively poor showing by the Sunni electorate in 
comparison with the Shia and Kurdish groups. Confidence in Coalition 
Forces is low. Most Iraqis see them as occupiers and a major cause of 
the insurgency.
    We believe Sunni Arabs, dominated by Ba'athist and Former Regime 
Elements (FRE), comprise the core of the insurgency. Ba'athist/FRE and 
Sunni Arab networks are likely collaborating, providing funds and 
guidance across family, tribal, religious and peer group lines. Some 
coordination between Sunni and Shia groups is also likely.
    Militant Shia elements, including those associated with Muqtada al 
Sadr, have periodically fought the Coalition. Following the latest 
round of fighting last August and September, we judge Sadr's forces are 
re-arming, re-organizing and training. Sadr is keeping his options open 
to either participate in the political process or employ his forces. 
Shia militants will remain a significant threat to the political 
process and fractures within the Shia community are a concern.
    Jihadists, such as al-Qaida operative Abu Musab al Zarqawi, are 
responsible for many high-profile attacks. While Jihadist activity 
accounts for only a fraction of the overall violence, the strategic and 
symbolic nature of their attacks, combined with effective Information 
Operations, has a disproportionate impact.
    Foreign fighters are a small component of the insurgency and 
comprise a very small percentage of all detainees. Syrian, Saudi, 
Egyptian, Jordanian and Iranian nationals make up the majority of 
foreign fighters. Fighters, arms and other supplies continue to enter 
Iraq from virtually all of its neighbors despite increased border 
security.
    Insurgent groups will continue to use violence to attempt to 
protect Sunni Arab interests and regain dominance. Subversion and 
infiltration of emerging government institutions, security and 
intelligence services will be a major problem for the new government. 
Jihadists will continue to attack in Iraq in pursuit of their long-term 
goals. Challenges to reconstruction, economic development and 
employment will continue. Keys to success remain improving security 
with an Iraqi lead, rebuilding the civil infrastructure and economy and 
creating a political process that all major ethnic and sectarian groups 
see as legitimate.

                        CONFLICT IN AFGHANISTAN

    The people of Afghanistan achieved a major milestone by electing 
Hamid Karzai president in October 2004 election. Approximately 70 
percent or just over 8 million registered Afghans disregarded scattered 
attacks by the Taliban and al-Qaida and voted. Karzai garnered 55 
percent of the vote in a field of 18 candidates. The election dealt a 
blow to insurgents and provides new momentum for reform, such as the 
demobilization of private militias and increased government 
accountability.
    President Karzai has since assembled a cabinet of reform minded and 
competent ministers who are ethnically and politically diverse. Most 
significantly, he removed Afghanistan's most powerful warlord, Marshal 
Fahim Khan, as Defense Minister.
    Despite the overwhelming voter turn-out, the election's results 
highlighted ethnic divisions. Karzai received a majority of the Pashtun 
vote, but failed to do so within any of the other ethnic groups. 
Continued ethnic divisions remain a challenge to political stability. 
National Assembly elections, scheduled for later this year, will 
provide the opportunity for non-Pashtuns to increase their 
participation in the government.
    The security situation improved over the past year. Insurgent 
attacks precipitously dropped after Afghanistan's presidential 
election. The primary targets remain Coalition Forces and facilities in 
the southern and eastern provinces. Voter registration teams and 
polling sites were attacked in these areas, reflecting the Taliban's 
concern over legitimate elections. Similar attacks in the same 
geographic areas are expected for elections later this year, but are 
unlikely to have a significant impact.
    We believe many Taliban leaders and fighters were demoralized by 
their inability to derail the election and have seen their base of 
support among Pashtun tribes decrease. Loss of support, plus continued 
Coalition and Pakistani military operations, have prompted some to 
express an interest in abandoning the insurgency and pursuing political 
alternatives. Nevertheless some factions will likely remain committed 
to the insurgency and seek funding to continue operations.

         WEAPONS OF MASS DESTRUCTION AND MISSILE PROLIFERATION

    Nuclear Weapons. Immediately behind terrorism, nuclear 
proliferation remains the most significant threats to our Nation and 
international stability. We anticipate increases in the nuclear weapons 
inventories of a variety of countries to include China, India, Pakistan 
and North Korea.
    Iran is likely continuing nuclear weapon-related endeavors in an 
effort to become the dominant regional power and deter what it 
perceives as the potential for U.S. or Israeli attacks. We judge Iran 
is devoting significant resources to its weapons of mass destruction 
and ballistic missile programs. Unless constrained by a nuclear non-
proliferation agreement, Tehran probably will have the ability to 
produce nuclear weapons early in the next decade.
    With declining or stagnant conventional military capabilities, we 
believe North Korea considers nuclear weapons critical to deterring the 
U.S. and ROK. After expelling IAEA personnel in 2002, North Korea 
reactivated facilities at Yongbyon and claims it extracted and 
weaponized plutonium from the 8,000 spent fuel rods. Only last week, 
Pyongyang publicly claimed it had manufactured nuclear weapons. Kim 
Chong-il may eventually agree to negotiate away parts of his nuclear 
weapon stockpile and program and agree to some type of inspection 
regime, but we judge Kim is not likely to surrender all of his nuclear 
weapon capabilities. We do not know under what conditions North Korea 
would sell nuclear weapons or technology.
    India and Pakistan continue to expand and modernize their nuclear 
weapon stockpiles. We remain concerned over the potential for 
extremists to gain control of Pakistani nuclear weapons. Both nations 
may develop boosted nuclear weapons, with increased yield.
    Chemical and Biological Weapons. Chemical and biological weapons 
pose a significant threat to our deployed forces, international 
interests and homeland. Numerous states have chemical and biological 
warfare programs. Some have produced and weaponized agents. While we 
have no intelligence suggesting these states are planning to transfer 
weapons to terrorist groups, we remain concerned and alert to the 
possibility.
    We anticipate the threat posed by biological and chemical agents 
will become more diverse and sophisticated over the next 10 years. 
Major advances in the biological sciences and information technology 
will enable BW agent--both anti-human and anti-agricultural--
development. The proliferation of dual use technology compounds the 
problem. Many states will remain focused on ``traditional'' BW or CW 
agent programs. Others are likely to develop non-traditional chemical 
agents or use advanced biotechnology to create agents that are more 
difficult to detect, easier to produce, and resistant to medical 
countermeasures.
    Ballistic Missiles. Moscow likely views its strategic forces, 
especially its nuclear armed missiles, as a symbol of great power 
status and a key deterrent. Nevertheless, Russia's ballistic missile 
force will continue to decline in numbers. Russia is fielding the silo-
variant of the SS-27 Intercontinental Ballistic Missile (ICBM) and is 
developing a road-mobile variant and may be developing another new ICBM 
and new Submarine Launched Ballistic Missile (SLBM). It recently 
developed and is marketing anew Short Range Ballistic Missile (SRBM). 
Russia also is trying to preserve and extend the lives of Soviet-era 
missile systems.
    China is modernizing and expanding its ballistic missile forces to 
improve their survivability and war-fighting capabilities, enhance 
their coercion and deterrence value and overcome ballistic missile 
defense systems. This effort is commensurate with its growing power and 
more assertive policies, especially with respect to Taiwan. It 
continues to develop three new solid-propellant strategic missile 
systems--the DF-31 and DF-31A road-mobile ICBMs and the JL-2 SLBM. By 
2015, the number of warheads capable of targeting the continental 
United States will increase several fold.
    China also is developing new SRBMs, Medium Range Ballistic Missile 
(MRBMs), and Intermediate Range Ballistic Missile (ICBMs). They are a 
key component of Beijing's military modernization program. Many of 
these systems will be fielded in military regions nearTaiwan. In 2004, 
it added numerous SRBMs to those already existing in brigades near 
Taiwan. In addition to key Taiwanese military and civilian facilities, 
Chinese missiles will be capable of targeting U.S. and allied military 
installations in the region to either deter outside intervention in a 
Taiwan crisis or attack those installations if deterrent efforts fail.
    We judge Iran will have the technical capability to develop an ICBM 
by 2015. It is not clear whether Iran has decided to field such a 
missile. Iran continues to field 1300-km range Shahab III MRBMs capable 
of reaching Tel Aviv. Iranian officials have publicly claimed they are 
developing a new 2000-km-range variant of the Shahab III. Iranian 
engineers are also likely working to improve the accuracy of the 
country's SRBMs.
    North Korea continues to invest in ballistic missiles to defend 
itself against attack, achieve diplomatic advantage and provide hard 
currency through foreign sales. Its Taepo Dong 2 intercontinental 
ballistic missile may be ready for testing. This missile could deliver 
a nuclear warhead to parts of the United States in a two stage variant 
and target all of North America with a three stage variant. North 
Korean also is developing new SRBM and IRBM missiles that will put U.S. 
and allied forces in the region at further risk.
    Pakistan and India continue to develop new ballistic missiles, 
reflecting tension between those two countries and New Delhi's desire 
to become a greater regional power. Pakistan flighttested its new 
solid-propellant MRBM for the first time in 2004. The Indian military 
is preparing to field several new or updated SRBMs and an MRBM. India 
is developing a new IRBM, the Agni III.
    Syria continues to improve its missile capabilities, which it 
likely considers essential compensation for conventional military 
weakness. Syria is fielding updated SRBMs to replace older and shorter-
range variants.
    Several nations are developing technologies to penetrate ballistic 
missile defenses.
    Cruise Missiles. Land-Attack Cruise Missiles (LACMs) and Lethal 
Unmanned Aerodynamic Vehicles (LUAVs) are expected to pose an increased 
threat to deployed U.S. and allied forces in various regions. These 
capabilities are already emerging in Asia.
    The numbers and capabilities of cruise missiles will increase, 
fueled by maturation of land-attack and Anti-Ship Cruise Missile (ASCM) 
programs in Europe, Russia, and China, sales of complete systems, and 
the spread of advanced dual-use technologies and materials. Countering 
today's ASCMs is a challenging problem and the difficulty in countering 
these systems will increase with the introduction of more advanced 
guidance and propulsion technologies. Several ASCMs will have a 
secondary land-attack role.
    China continues developing LACMs. We judge by 2015, it will have 
hundreds of highly accurate air- and ground-launched LACMs. China is 
developing and purchasing ASCMs capable of being launched from 
aircraft, surface ships, submarines, and land that will be more capable 
of penetrating shipboard defenses. These systems will present 
significant challenges in the event of a U.S. naval force response to a 
Taiwan crisis.
    In the next 10 years, we expect other countries to join Russia, 
China, and France as major exporters of cruise missiles. Iran and 
Pakistan, for instance, are expected to develop or import LACMs. India, 
in partnership with Russia, will begin production of the PJ-10, an 
advanced anti-ship and land attack cruise missile, this year.
    Major Exporters. Russia, China and North Korea continue to sell WMD 
and missile technologies for revenue and diplomatic influence. The 
Russian government, or entities within Russia, continues to support 
missile programs and civil nuclear projects in China, Iran, India and 
Syria. Some of the civil nuclear projects can have weapons 
applications. Chinese entities continue to supply key technologies to 
countries with WMD and missile programs, especially Pakistan, North 
Korea and Iran, although China appears to be living up to its 1997 
pledge to limit nuclear cooperation with Iran. North Korea remains the 
leading supplier of missiles and technologies. In recent years, some of 
the states developing WMD or ballistic missile capabilities have become 
producers and potential suppliers. Iran has supplied liquid-propellant 
missile technology to Syria, and has marketed its new solid-propellant 
SRBM.
    We also are watching non-government entities and individual 
entrepreneurs. The revelations regarding the A.Q. Khan nuclear 
proliferation network show how a complex international network of 
suppliers with the requisite expertise and access to the needed 
technology, middlemen and front companies can successfully circumvent 
international controls and support multiple nuclear weapons programs.

                          NATIONS OF INTEREST

    Iran. Iran is important to the U.S. because of its size, location, 
energy resources, military strength and antipathy to U.S. interests. It 
will continue support for terrorism, aid insurgents in Iraq and work to 
remove the U.S. from the Middle East. It will also continue its weapons 
of mass destruction and ballistic missile programs. Iran's drive to 
acquire nuclear weapons is a key test of international resolve and the 
nuclear non-proliferation treaty.
    Iran's long-term goal is to see the U.S. leave Iraq and the region. 
Another Iranian goal is a weakened, decentralized and Shia-dominated 
Iraq that is incapable of posing a threat to Iran. These goals and 
policies most likely are endorsed by senior regime figures.
    Tehran has the only military in the region that can threaten its 
neighbors and Gulf stability. Its expanding ballistic missile inventory 
presents a potential threat to states in the region. As new longer 
range MRBMs are fielded Iran will have missiles with ranges to reach 
many of our European allies. Although Iran maintains a sizable 
conventional force, it has made limited progress in modernizing its 
conventional capabilities. Air and air defense forces rely on out-of-
date US, Russian and Chinese equipment. Ground forces suffer from 
personnel and equipment shortages. Ground forces equipment is also 
poorly maintained.
    We judge Iran can briefly close the Strait of Hormuz, relying on a 
layered strategy using predominately naval, air, and some ground 
forces. Last year it purchased North Korean torpedo and missile-armed 
fast attack craft and midget submarines, making marginal improvements 
to this capability.
    The Iranian government is stable, exercising control through its 
security services. Few anti-government demonstrations occurred in 2004. 
President Khatami will leave office in June 2005 and his successor will 
almost certainly be more conservative. The political reform movement 
has lost its momentum. Pro-reform media outlets are being closed and 
leading reformists arrested.
    Syria. Longstanding Syrian policies of supporting terrorism, 
relying on WMD for strategic deterrence, and occupying Lebanon remain 
largely unchanged. Damascus is providing intelligence on al-Qaida for 
the War on Terrorism. Its response to U.S. concerns on Iraq has been 
mixed. Men, material and money continue to cross the Syrian-Iraqi 
border likely with help from corrupt or sympathetic local officials.
    Damascus likely sees opportunities and risks with an unstable Iraq. 
Syria sees the problems we face in Iraq as beneficial because our 
commitments in Iraq reduce the prospects for action against Syria. 
However, Damascus is probably concerned about potential spill-over of 
Iraqi problems, especially Sunni extremism, into Syria. We see little 
evidence of active regime support for the insurgency, but Syria offers 
safe-haven to Iraqi Baathists, some of whom have ties to insurgents.
    Syria continues to support Lebanese Hizballah and several 
rejectionist Palestinian groups, which Damascus argues are legitimate 
resistance groups.
    Syria is making minor improvements to its conventional forces. It 
is buying modern antitank guided missiles and overhauling some 
aircraft, but cannot afford major weapon systems acquisitions.
    President Bashar al-Asad is Syria's primary decisionmaker. Since 
becoming President in 2000 upon the death of his father, Asad has 
gradually replaced long-serving officials. Potential domestic 
opposition to his rule--such as the Muslim Brotherhood--is weak and 
disorganized. We judge the Syrian regime is currently stable, but 
internal or external crises could rapidly threaten it.
    China. We do not expect Communist Party Secretary and President Hu 
Jintao's succession to chairman of the Central Military Command (CMC) 
to significantly alter Beijing's strategic priorities or its approach 
to military modernization. The commanders of the People's Liberation 
Army (PLA) Air Force, Navy, and Second Artillery (Strategic Rocket 
Forces) joined the CMC in September, demonstrating an institutional 
change to make China's military more ``joint.'' The CMC traditionally 
was dominated by generals from PLA ground forces.
    China remains keenly interested in Coalition military operations in 
Afghanistan and Iraq and is using lessons from those operations to 
guide PLA modernization and strategy. We believe several years will be 
needed before these lessons are incorporated into the armed forces. We 
judge Beijing remains concerned over U.S. presence in Iraq, Afghanistan 
and Central Asia. Beijing may also think it has an opportunity to 
improve diplomatic and economic relations, to include access to energy 
resources, with other countries distrustful or resentful of U.S. 
policy.
    China continues to develop or import modern weapons. Their 
acquisition priorities appear unchanged from my testimony last year. 
Priorities include submarines, surface combatants, air defense, 
ballistic and anti-ship cruise missiles and modern fighters. China 
recently launched a new conventional submarine and acquired its first 
squadron of modern Su30/FLANKER aircraft for the naval air forces from 
Russia. The PLA must overcome significant integration challenges to 
turn these new, advanced and disparate weapon systems into improved 
capabilities. Beijing also faces technical and operational difficulties 
in numerous areas. The PLA continues with its plan to cut approximately 
200,000 soldiers from the Army to free resources for further 
modernization, an initiative it began in 2004.
    Beijing was likely heartened by President Chen Shui-bian 
coalition's failure to achieve a majority in the recent Legislative 
Yuan elections. We believe China has adopted a more activist strategy 
to deter Taiwan moves toward independence that will stress diplomatic 
and economic instruments over military pressure. We believe China's 
leaders prefer to avoid military coercion, at least through the 2008 
Olympics, but would initiate military action if it felt that course of 
action was necessary to prevent Taiwan independence.
    Beijing remains committed to improving its forces across from 
Taiwan. In 2004, it added numerous SRBMs to those already existing in 
brigades near Taiwan. It is improving its air, naval and ground 
capabilities necessary to coerce Taiwan unification with the mainland 
and deter U.S. intervention. Last fall, for instance, a Chinese nuclear 
submarine conducted a deployment that took it far into the western 
Pacific Ocean, including an incursion into Japanese waters.
    North Korea. After more than a decade of declining or stagnant 
economic growth, Pyongyang's military capability has significantly 
degraded. The North's declining capabilities are even more pronounced 
when viewed in light of the significant improvements over the same 
period of the ROK military and the US-ROK Combined Forces Command. 
Nevertheless, the North maintains a large conventional force of over 
one million soldiers, the majority of which we believe are deployed 
south of Pyongyang.
    North Korea continues to prioritize the military at the expense of 
its economy. We judge this ``Military First Policy'' has several 
purposes. It serves to deter US-ROK aggression. Nationwide conscription 
is a critical tool for the regime to socialize its citizens to maintain 
the Kim family in power. The large military allows Pyongyang to use 
threats and bravado in order to limit US-ROK policy options. 
Suggestions of sanctions, or military pressure by the U.S. or ROK are 
countered by the North with threats that such actions are ``an act of 
war'' or that it could ``turn Seoul into a sea of fire.'' Inertia, 
leadership perceptions that military power equals national power and 
the inability for the regime to change without threatening its 
leadership also explains the continuing large military commitment.
    The North Korean People's Army remains capable of attacking South 
Korea with artillery and missile forces with limited warning. Such a 
provocative act, absent an immediate threat, is highly unlikely, 
counter to Pyongyang's political and economic objectives and would 
prompt a South Korean-CFC response it could not effectively oppose.
    Intemally, the regime in Pyongyang appears stable. Tight control 
over the population is maintained by a uniquely thorough 
indoctrination, pervasive security services and Party organizations, 
and a loyal military.
    Russia. Despite an improving economy, Russia continues to face 
endemic challenges related to its post-Soviet military decline. Seeking 
to portray itself as a great power, Moscow has made some improvements 
to its armed forces, but has not addressed difficult domestic problems 
that will limit the scale and scope of military recovery.
    Russian conventional forces have improved from their mid-1990s low 
point. Moscow nonetheless faces challenges if it is to move beyond 
these limited improvements. Significant procurement has been postponed 
until after 2010 and the Kremlin is not spending enough to modernize 
Russia's defense industrial base. Russia also faces increasingly 
negative demographic trends and military quality of life issues that 
will create military manning problems.
    Moscow has been able to boost its defense spending in line with its 
recovering economy. Russia's Gross National Product averaged 6.7 
percent growth over the past 5 years, predominately from increased 
energy prices and consumer demand. Defense should continue to receive 
modest real increases in funding, unless Russia suffers an economic 
setback.
    Russia continues vigorous efforts to increase its sales of weapons 
and military technology. Russia's annual arms exports average several 
billion dollars. China and India account for the majority of Russia's 
sales, with both countries buying advanced conventional weapons, 
production licenses, weapon components and technical assistance to 
enhance their R&D programs. Efforts to increase its customer base last 
year resulted in increased sales to Southeast Asia. Russian sales are 
expected to remain several billion dollars annually for the next few 
years.
    Russia's struggle with the Chechen insurgency continues with no end 
in sight. Chechen terrorists seized a North Ossetian primary school 
where over 330 people were killed and two Russian civilian airliners 
were bombed in flight last summer. Rebels continue targeting Russians 
in Chechnya and Chechen officials cooperating with Moscow. While Moscow 
is employing more pro-Russian Chechen security forces against the 
insurgents, the war taxes Russian ground forces. Although the Chechnya 
situation remains a minor issue to the average Russian, concerns over 
spreading violence prompted new government security initiatives and 
offered cover for imposition of authoritarian political measures.
    Russian leaders continue to characterize Operation IRAQI FREEDOM 
and NATO enlargement as mistakes. They express concerns that U.S. 
operations in Iraq are creating instability and facilitating terrorism. 
Russian leaders want others to view the Chechen conflict as a struggle 
with international terrorism and accuse those who maintain contact with 
exiled Chechen leaders or criticize Moscow's policies toward Chechnya 
as pursuing a double standard. Russian officials are wary of potential 
U.S. and NATO force deployments near Russia or in the former Soviet 
states. Concern that Ukraine under a President Yushchenko would draw 
closer to NATO and the EU was a factor motivating Russia's involvement 
in Ukraine's presidential election.

                            CLOSING THOUGHTS

    This year my testimony focuses on what I believe to be the most 
immediate threats to our Nation and challenges to our interests. The 
threat from terrorism has not abated. While our strategic intelligence 
on terrorist groups is generally good, information on specific plots is 
vague, dated or sporadic. We can and must do better. Improved 
collection and analysis capabilities can make a significant difference. 
We are increasing our ability to provide that timely, relevant 
intelligence.
    The Intelligence Community as a whole needs to improve its 
collection and focus more analytic resources on pressures in the 
Islamic world so that we can better understand the drivers for 
extremism. We also need greater collection and more analytic resources 
devoted to certain key Islamic countries. We have taken steps to 
improve our collection and analysis, hiring more individuals with 
Arabic and Farsi language skills. Nevertheless, more needs to be done 
across the Intelligence Community, particularly in the area of 
meaningful, penetrating collection and making the content of that 
collection available to all who need it.
    Proliferation of Weapons of Mass Destruction and Missiles is my 
second priority. Collection must be improved. Additionally, improving 
our analytic techniques, adoption of true ``all-source'' analysis 
approaches and greater information sharing will help us avoid problems 
similar to those in our pre-war analysis of Iraq's WMD program.
    We also must not let our focus on numerous nations of interest 
wane. Traditional military intelligence disciplines must remain robust 
if we are to provide our national security policymakers, defense 
planners and warfighters the information they need to successfully 
execute their missions. We need improved collection so that we are 
stealing our true secrets. There are significant gaps in our 
understanding of several nations' leaderships' plans and intentions. 
Additionally, more collection and analysis is needed to provide 
adequate warning of attack and a more complete understanding of the 
military capability, doctrine and war plans of numerous countries. We 
are working to better target collection against these hard targets.
    As I mentioned, the threats and challenges I briefed today are the 
most significant and immediate. They are certainly not the only ones. 
In previous years, I have spoken about the security situation in 
Africa, Latin America and South and Southeast Asia. I also addressed my 
concerns on information operations, international crime, problems 
associated with globalization, uneven economic development and 
ungoverned states. Those issues remain significant concerns and the 
focus of collection and analytic resources for defense intelligence. We 
will be requesting additional funding and billets to ensure we retain 
coverage and reporting on global coverage. We are reallocating our 
analytic capabilities, implementing the ``Master, Measure and Monitor'' 
concept in the Defense Intelligence Analysis Program to better address 
many of these threats and disturbing trends.
    Let me conclude by making two points. First, DIA is focused on 
transforming its capabilities in all of its mission areas to operate in 
a true ``all-source'' environment. We are committed to incorporating 
all relevant information into our analyses, integrating analysts with 
collectors and precisely targeting our analytic and collection 
capabilities against complex threats and tough issues. More opportunity 
for ``discovery,'' greater penetration of hard targets and higher 
confidence in our judgments are our goals. Second, we are aggressively 
reengineering our information management approach and architecture. We 
are focused on harvesting non-traditional sources of data and 
positioning ourselves to exploit information from new and future 
sources. We are convinced commercial sector ``content management 
practices'' and data standards hold the key to upgrading our 
information management capability and providing the ``smart network'' 
we need. Much more work is required in the area if we are to realize 
our potential and fundamentally improve our capabilities. These efforts 
follow the Director of Central Intelligence and the Secretary of 
Defense guidance and reflect the letter and spirit of the intelligence 
reform act. Thank you. I look forward to your questions.

    Chairman Roberts. Admiral Loy and Ms. Rodley, I apologize 
for not asking for your response in the interest of time. But I 
would just say, from the INR aspect, I know the Vice Chairman 
and I and Members of this Committee want to thank you. You're 
one agency that got it right in regards to the WMD situation. 
And both of you have a very strong interest in this.
    Senator Rockefeller and I apologize to my colleagues.
    Vice Chairman Rockefeller. Thank you, Mr. Chairman.
    I just second what the Chairman has indicated. I refer to 
sharing and access. If you share, it's the decision to give. 
It's a decision on the part of the holder. If it's access, then 
it is the right of the receiver. So, sharing out/getting in. 
And I think that will be worked out over the years.
    Director Goss, the National Intelligence Council recently 
issued its annual report to Congress on the safety and the 
security of Russian nuclear facilities and military forces. The 
report is both classified and unclassified. One excerpt from 
the unclassified version is as follows:
    ``Russian officials have reported that terrorists have 
targeted Russian nuclear weapons storage sites. Security was 
tightened in 2001, after Russian authorities twice thwarted 
terrorist efforts to reconnoiter nuclear weapon storage sites.
    ``We find it''--this is a continuation of the report, 
unclassified--``we find it highly unlikely that Russian 
authorities would have been able to recover all the material 
reportedly stolen. We assess that undetected smuggling has 
occurred and we are concerned about the total amount of 
material that could be diverted or stolen in the last 13 
years.''
    Now, I'd ask you, sir, is the material missing from Russian 
nuclear facilities sufficient to construct a nuclear weapon?
    Director Goss. Senator, the way I would prefer to answer 
that question, is there is sufficient material unaccounted for, 
so that it would be possible for those with know-how to 
construct a nuclear weapon. I hope that's sufficiently clear.
    Vice Chairman Rockefeller. We'll wait for a closed session.
    On the same subject, the National Intelligence Council 
assessment, can you assure the American people--and I think 
this is a yes-or-no type thing--can you assure the American 
people that the material missing from Russian nuclear sites has 
not found its way into terrorist hands?
    Director Goss. No. I can't make that assurance. I can't 
account for some of the material, so I can't make the assurance 
about its whereabouts.
    Vice Chairman Rockefeller. Appreciate it, sir.
    Africa. Since the 1980s, a million people have died of 
starvation, enormous dislocation, poverty, hopelessness, 
despair, instability, a fertile breeding ground for terrorism, 
both east and west, a large Islamic population. Instability in 
the African continent has allowed us to intervene episodically 
back and forth.
    But the whole prospect of the concept that this is the next 
great threat, and that being something called a failed 
continent, General James Jones made that point to the Chairman 
and me three times in a presentation in London, when he was 
stationed there. He said, this is the continent that you in the 
intelligence world need to be looking at--a failed continent, 
because we are consumed by challenges in Iraq, necessarily, 
Afghanistan and other world hotspots.
    Again, Director Goss, are we facing the possibility, do you 
think, of the collapse of civil society throughout much of 
Africa? Shouldn't we be addressing the problems in these 
countries now, rather than at a future date when our options 
will be more likely to be military?
    Director Goss. Senator, thank you.
    As you know, I've made the statement many times that I 
don't want to get into the Department of State's policy areas, 
and the question you've asked me gets into actually a much 
bigger question than just the intelligence community. But it's 
a great question. And you are right on the mark, that this is 
an over-neglected area that is under-resourced for American 
interests, from my perspective.
    I can tell you that I have read Kaplan's piece about the 
resurgence of anarchy and I've read Friedman's pieces on this. 
We have have seen all kinds of very nasty people, Foday Sankoh, 
people like that in the past, who have taken advantage of 
exploitation of the processes there.
    We find that we are going backwards in some areas where we 
should be going forwards. You heard me mention in my remarks a 
whole series of bands, of arcs, as it were, of different kinds 
of problems in Africa. I think it is a rich seabed for people 
who have a mission on their mind to go and try and recruit 
people. We have found that. And we are making efforts there.
    And I would say we would be wise to solve problems sooner, 
before they get more troublesome later. I do think that that is 
an area that needs more attention in the intelligence community 
and all other efforts that we make.
    Vice Chairman Rockefeller. Thank you, sir.
    Admiral Jacoby, I can't imagine that you wouldn't have some 
comment.
    Admiral Jacoby. Senator Rockefeller, you know in past 
conversations we've talked about sort of the global spread of 
issues. Certainly, there's a fertile ground in the Muslim 
populations in Africa for recruitment to extremist causes. 
Disaffected youth, the youth bulge, socioeconomic situation, 
education shortfalls, unemployment and so forth make inviting 
recruiting targets. And obviously, as we look at the Madrid 
bombing and some of the things that have happened, particularly 
the North African crescent is an area of concern.
    Sir, we take the Africa situation seriously in the sense 
that we have plussed up our presence in our defense attache 
offices and will continue to do that with some new initiatives 
that go in place here in 2005 and 2006.
    We view Africa as place that needs to be monitored 
carefully. Trends need to be carefully described and assessed 
and that the intelligence assessments reach policymakers in 
that part of the world as a sense of urgency.
    Vice Chairman Rockefeller. I would follow through to both 
of you that I think we all know that we have an enormous 
scarcity of resources, of facilities, of capabilities, simply 
because of what's going on elsewhere. And I hear what you both 
say. And I hear the sense of urgency behind what you say.
    But I also would guess that there's some frustration on 
your part that we may not have the financial capability or the 
trained personnel capability to be able to get to those areas 
to get that intelligence. Those are difficult languages, and it 
takes, as Director Goss has often said, 5 years to train a good 
agent.
    Director Goss. I think you've said it well, Senator.
    Admiral Jacoby. I agree completely, sir. Absolutely.
    Vice Chairman Rockefeller. Thank you, Mr. Chairman.
    Chairman Roberts. Let me just say that, in reference to the 
Vice Chairman's concern about the situation in Russia in 
regards to loose nukes or loose bioweaponry or loose scientists 
or loose anything in terms of security, that we should give a 
lot of credit to the Armed Services Committee and its 
distinguished Chairman, who is sitting over here to my left and 
everybody's right--Senator Warner--for taking such a strong 
interest in the CTR program, the Nunn-Lugar program.
    And knowing something about that on the Emerging Threats 
Subcommittee, we learned right away the most important thing is 
to provide the security. We want to eliminate the stockpiles 
and we want to safeguard the scientists and make sure they're 
not, you know, going somewhere else. But we have made some 
progress, and we have put some conditions and some of our 
allies need to step up. And the Russians have stepped up. So 
I'm very hopeful we'll continue to see additional funding and 
really address that security issue.
    Senator Bond.
    Senator Bond. Thank you, Mr. Chairman.
    Director Mueller, you noted that the third concern was the 
recruitment of radical American converts. And this is something 
that I've become increasingly concerned about.
    I don't know if you've seen it, but recently, the Freedom 
House put out a report on Saudi publications on hate ideologies 
filling American mosques. And as you read through it, you see 
the hate-filled language that is officially sponsored by the 
cultural offices of the embassy of Saudi Arabia.
    And mosques supported by the king has admonitions: be 
dissociated from the infidels; hate them for their religion; 
leave them; never rely on them; do not admire them; and always 
oppose them in every way, according to Islamic law.
    The list of documents and the list of publications goes on. 
And it appears that the bargain with the devil they made about 
25 years ago, that the Saudi government would support Wahhabism 
if they stayed out of Saudi Arabia, is coming back to haunt us.
    I would ask the question, number one, how serious a threat 
that is? And I would ask you and Admiral Loy to respond to it.
    And also, it seems to me if our doctrine is that a country 
that harbors terrorists is guilty, what about a country that 
fosters terrorists within our own country?
    Director Mueller. Well, it certainly, as I think I 
indicated in my opening remarks, it is an issue--the 
radicalization of individuals within the United States. And it 
can be done any number of ways.
    We are looking, for instance, at the prison systems, not 
just the Federal system but, through our 100 joint terrorism 
task forces, working with State and local law enforcement to 
address the possibility that radicalization can occur 
throughout our prison system, as it has in the past in a 
variety of ways.
    Through our joint terrorism task forces, we also understand 
that persons absolutely have the right to practice religion in 
whichever way they want. But by the same token----
    Senator Bond. That's not the question, Mr. Director. It's 
what they are----
    Director Mueller. But I'm going to say, on the other hand, 
we have the obligation to determine and identify those persons 
who are becoming radicalized and become a threat to the United 
States.
    And through our working with State and local law 
enforcement, building up our intelligence capacity, working 
through our joint terrorism task forces, we continuously seek 
sources and information and intelligence as to those 
individuals who may become radicalized in a variety of ways.
    The last point I would make--and I think others would agree 
with me--is that there has been a shift in the attitude of 
Saudi Arabia in the wake of the May 2003 bombings--a 
substantial shift, and an understanding and a recognition of 
the threat not only to Saudi Arabia, but to Saudi Arabia's 
interests around the world from those elements who have been 
radicalized.
    Senator Bond. Thank you, Mr. Director. They noted that 
these documents were still, as of December 2004, were still in 
the King Fahd mosque. They're still being handed out.
    Admiral Loy, any thoughts about how, from the homeland 
security standpoint, how dangerous is Saudi Arabia's supplying 
of this literature?
    Admiral Loy. Indeed, Senator Bond, there are three or four 
points that I would make.
    Number one, regardless of the sponsorship, the notions that 
you are citing in the things that you read are dramatic 
evidence of the challenge in front of us here, whether it's 
pure Saudi from the implication of that particular set of 
materials, or what that line of logic is as a pervasive notion 
throughout not only Saudi Arabia, but the rest of the world.
    I sit on a couple of joint contact groups with allies--with 
the Brits, with Canada. And there has been over the last year a 
growth of an agenda item referring to radicalization as a 
significant issue that we have to grapple with.
    Senator Bond. Admiral Loy, if I may interrupt. I apologize; 
the light's on--I needed to ask Director Goss, Ms. Rodley and 
maybe Admiral Jacoby, I think that Southeast Asia is the second 
front of the war on terrorism.
    Director Goss mentioned that. I've recently come back from 
there. Jemaah Islamiyah, Moro Liberation Front, others, Abu 
Sayyaf, are posing significant dangers. Singapore, Malaysia and 
Indonesia have been aggressive.
    Number one, I'd like to know whether you think these have 
become a threat to the U.S. homeland and are our restrictions 
on U.S. aid--IMET aid--to Indonesian military hurting our 
ability to work cooperatively with that country?
    Mr. Goss.
    Director Goss. On the IMET question, there is no question 
that--I can't speak specific to the particulars there. Maybe 
Admiral Jacoby can.
    But I will tell you that, in fact, we do have liaison 
relationships in the war on terror, of course, on a global 
basis. And they are affected by other matters such as that that 
you have specifically mentioned.
    In this case I can't answer your direct question, but I can 
tell you there is a relationship, and it's important that we 
understand that.
    The second thing I would tell you is, I think you are right 
to focus on Southeast Asia. It is an escalating area. We find 
that the degree of capability to deal with the problem there is 
the sophistication of dealing with the problem of terrorism 
there by the governments, the states that are there, is not 
adequate. Consequently, I would say it is a growth industry, 
regrettably.
    Yes, it is a threat.
    Admiral Jacoby. Senator Bond, the key countries in the area 
are the ones that Director Goss identified--Indonesia, 
Philippines, Thailand. Two of those countries we've had very 
longstanding IMET and other interactions and it makes it far 
easier to work not only with their military forces, but also 
with their military intelligence, with my counterparts.
    The situation in Indonesia is quite different, where the 
senior officers in that country, particularly in, again, my 
case, the intelligence area, have not had those kinds of 
interactions with the U.S. military.
    It does create barriers for close interaction and 
interoperation. And Southeast Asia in general is an area that 
needs that kind of attention. And I'm going back to my days in 
the Pacific command as a J-2 to say authoritatively that more 
needs to be done there, sir.

          STATEMENT OF CAROL RODLEY, PRINCIPAL DEPUTY 
   ASSISTANT SECRETARY OF STATE FOR INTELLIGENCE AND RESEARCH

    Ms. Rodley. We really see it the same way as my colleagues 
have outlined. Indonesia as the main problem.
    Chairman Roberts. Speak right in the microphone.
    Ms. Rodley. Indonesia has the most serious problem with 
Jemaah Islamiyah and, to a lesser extent, the Philippines, 
Thailand and some of the other nations in the region.
    This is of particular concern because of Jemaah Islamiyah's 
affiliation with al-Qa'ida. So the question of targeting U.S. 
interests is one that we are very concerned about.
    [The prepared statement of Hon. Thomas Fingar, Assistant 
Secretary of State for Intelligence and Research follows:]

          Prepared Statement of the Honorable Thomas Fingar, 
       Assistant Secretary of State for Intelligence and Research

    Mister Chairman, Members of the Committee. It is an honor to be 
asked to participate in this important review of threats to our Nation 
and the challenges they present to the Intelligence Community. INR has 
taken to heart your admonition to describe the spectrum of threats to 
the United States and its interests, and to assess the probability, 
immediacy, and severity of the dangers we face, but I will do so in a 
way intended to complement the judgments presented by our colleagues in 
other agencies by focusing on the way threats appear when viewed 
through the lens of diplomacy.
    The subject of this hearing is one on which there is broad 
consensus in the Intelligence Community. INR concurs with the judgment 
that terrorism is the single greatest threat to Americans, both at home 
and abroad, and that the proliferation of weapons of mass destruction 
(WMD), missiles, and certain types of advanced conventional weapons is 
a close and dangerous second. We also share most of the other threat 
judgments presented by our colleagues. But rather than merely echoing 
their assessments, I will approach the subject reflecting INR's unique 
perspective and responsibilities as the Secretary of State's in-house 
intelligence unit.
    As Secretary Rice has made clear in recent statements, diplomacy is 
critical to U.S. efforts to contain, counter, and diminish the threats 
we face. On February 8 she told her audience in Paris, ``We agree on 
the interwoven threats we face today: terrorism, and proliferation of 
weapons of mass destruction, and regional conflicts, and failed states, 
and organized crime.'' She added that America stands ready to work with 
other countries in ``building an even stronger partnership'' to address 
these threats.
    To combat the twin scourges of terrorism and proliferation requires 
more than just the effective collection of hard to obtain intelligence. 
At a minimum, it also requires deep understanding of the motivations 
and objectives of those who resort to terrorism and/or pursue WMD. It 
also takes sophisticated analysis of all-source information, informed 
judgments about what we do not know, and detailed knowledge of other 
countries, cultures, political systems, and the underlying causes of 
discontent and radicalization. The prerequisites for meeting all these 
requirements include global coverage, deep analytical expertise, and 
Intelligence Community commitment to providing policymakers what they 
need, when they need it, and in a form that they can use day in and day 
out.
    Why are terrorism and proliferation at the top of the threat list? 
The short and conventional answer is that the normalization of 
relations with China and demise of the Soviet Union dramatically 
reduced the danger of nuclear war and eliminated or transformed 
fundamentally a wide array of associated threats. But the end of the 
cold war also brought many changes to other aspects of international 
life, including the erosion of constraints on ``client'' states, the 
re-emergence of long repressed political aspirations, and the rise of 
ethnic and religious hatreds. Former DCI Jim Woolsey described the 
change as the displacement of a few big dragons by lots of dangerous 
snakes. But it was, and is, more than that. Globalization and the 
information revolution have changed expectations and aspirations and 
made it possible for nations and non-state actors, including 
individuals, to do things that would have been unthinkable just a few 
years ago.
    One of the many resultant developments has been the emergence of 
vast differences in coercive capabilities. This, in turn, has 
exacerbated the dangers of both terrorism and proliferation. The 
inability of all but a few nations to deter the most powerful countries 
(including, but not limited to the United States) has reinforced the 
determination of states that feel threatened (whether justifiably or 
not) to seek asymmetric solutions to the disparity of power. For some, 
this means pursuit of WMD and delivery capabilities because they know 
they have no hope of deterring or defeating the attacks they fear with 
conventional armaments. Perhaps the clearest illustration of this can 
be found in DPRK public statements after Operation Iraqi Freedom 
intended to reassure its public and warn potential adversaries that, 
unlike Saddam, it had a (nuclear) deterrent; a claim reiterated 
February 10. Pakistan pursued-and obtained nuclear weapons and delivery 
systems to compensate for India's vastly superior conventional military 
power and nuclear weapons.
    Terrorism is at the other end of the spectrum of asymmetric 
responses. State sponsors, most notably Iran, seem implicitly to warn 
potential enemies that the response to any attack will include resort 
to terror. They seem to be saying, in effect, ``You may be able to 
defeat us militarily, but you cannot protect all your people, 
everywhere, all the time.'' Such a porcupine defense/deterrent posture 
is an unfortunate, but not irrational response to wide disparities of 
power. The situation is somewhat analogous for non-state actors 
frustrated by their inability to achieve their (however reprehensible) 
goals by other means. Terror and guerrilla warfare are long-standing 
measures of choice (or last resort) for weak actors confronting a much 
stronger adversary. The targets vary widely, from established 
democracies to authoritarian regimes. However, in some cases, 
terrorists also direct their attacks against those who are seen as 
responsible for-by imposition or support the actions or existence of 
the regime they oppose. That appears to be one of the reasons al-Qaida 
has targeted the United States in Saudi Arabia and terrorists in Iraq 
have used suicide bombers and improvised explosive devices to attack 
Iraqis and others supportive of the Iraqi government. The use of terror 
tactics in liberal democracies is especially problematic because in 
open societies, self-restraint under the rule of law and commitment to 
respect human rights and dignity complicate the challenges of mounting 
an effective response.
    Attacking a distant country is difficult, even in the era of 
globalization, and would-be assailants must choose between difficult, 
high profile attacks, like those on 9/11, and easier to accomplish, but 
probably lower impact incidents (like sniper attacks on random 
individuals or small explosions in crowded public places). We remain 
vulnerable to both types of terror attack, but arguably we are now less 
vulnerable to relatively largescale, high profile attacks than we were 
before 9/11. Nevertheless, it is extremely difficult to penetrate the 
tight knit groups that are most capable of carrying out such attacks on 
our country and our people. We have achieved great success in 
disrupting alQaida, but may be witnessing a repeat of the pattern found 
in the wars on illegal drugs and organized crime, namely, that we are 
fighting a ``hydra'' with robust capabilities of resurgence and 
replacement of lost operatives. The bottom line is that terrorism 
remains the most immediate, dangerous, and difficult security challenge 
facing our country and the international community and is likely to 
remain so for a long time. Despite the progress we have made, it would 
be imprudent to become complacent or to lower our guard.
    The quest for WMD, missiles (or unmanned aerial vehicles), and 
advanced conventional arms has become more attractive to, and more 
feasible for, a small but significant set of State and non-state 
actors. This poses major challenges to the security of the United 
States and our friends and allies, but it is important to put this 
threat in perspective.
    Nuclear Threats. The nuclear sword of Damocles that hung over our 
national existence during the cold war remains largely a concern from a 
different era. Russia and China still have nuclear weapons (the number 
is declining in Russia and increasing only modestly in China), but the 
hostility of the past is no longer a pressing concern and neither 
threatens to use them against our country. North Korea has produced 
sufficient fissile material to make a small number of nuclear weapons, 
but, despite its February 10 statement, there is no evidence that it 
has produced such weapons and mated them to a missile capable of 
delivering them to the United States. However, if it has made such 
weapons, it could reach U.S. allies, our armed forces, and large 
concentrations of American citizens in Northeast Asia. India and 
Pakistan have nuclear weapons and the capability to deliver them to 
targets in the region, but both nations are friends and neither 
threatens the territory of the United States. Iran seeks, but does not 
yet have nuclear weapons or missiles capable of reaching the United 
States. INR's net assessment of the threat to U.S. territory posed by 
nuclear weapons controlled by Nation states is that it is low and lacks 
immediacy. But this should not be grounds for complacency. The 
existence of such weapons and the means to deliver them constitutes a 
latent, but deadly threat. Ensuring that it remains latent is a key 
diplomatic priority.
    The so-far theoretical possibility of nuclear weapons falling into 
the hands of terrorists constitutes a very different type of threat. We 
have seen no persuasive evidence that al-Qaida has obtained fissile 
material or ever has had a serious and sustained program to do so. At 
worst, the group possesses small amounts of radiological material that 
could be used to fabricate a radiological dispersion device (``dirty 
bomb''). The only practical way for non-state actors to obtain 
sufficient fissile material for a nuclear weapon (as opposed to 
material for a so-called dirty bomb) would be to acquire it on the 
black market or to steal it from one of the current, want-to-be, or 
used-to-be nuclear weapons states. The ``loose nukes'' problem in the 
former Soviet Union continues to exist but is less acute than it once 
was, thanks to the Nunn-Lugar cooperative threat reduction program and 
diligent efforts by Russia to consolidate and protect stockpiles. North 
Korea's possession of weapons-grade fissile material adds a new layer 
of danger and uncertainty. There is no convincing evidence that the 
DPRK has ever sold, given, or even offered to transfer such material to 
any State or non-state actor, but we cannot assume that it would never 
do so.
    Chemical and Biological Weapons. Despite the diffusion of know-how 
and dual-use capabilities to an ever-increasing number of countries, 
the number of states with known or suspected CW programs remains both 
small and stable. Most of those that possess such weapons or have the 
capability to produce quantities sufficient to constitute a genuine 
threat to the United States or Americans (civilian and military) 
outside our borders are not hostile to us, appreciate the significance 
of our nuclear and conventional arsenals, and are unlikely to transfer 
such weapons or capabilities to terrorists. There are nations that 
might use CW against invading troops, even American forces, on their 
own territory, but we judge it highly unlikely that Nation states would 
use CW against the American homeland or specifically target American 
citizens except as an act of desperation. Terrorists, by contrast, have 
or could acquire the capability to produce small quantities of chemical 
agents for use against selected targets or random individuals. We judge 
the chances of their doing so as moderate to high. One or a few 
disgruntled individuals or a small terrorist cell could do so in a 
manner analogous to the 1995 Aurn Shinrikyo sarin gas attack on a Tokyo 
subway. The severity of such an attack would be small in terms of 
lethality, but the psychological and political impact would be huge.
    The risk posed by Nation states with biological weapons is similar 
to that for CW; many nations have the capability, but few have programs 
and even fewer would be tempted to use them against the United States. 
The danger of acquisition and use by terrorists, however, is far 
greater. Though hard to handle safely and even harder to deliver 
effectively, BW agents have the potential to overwhelm response 
capabilities in specific locations, induce widespread panic, and 
disrupt ordinary life for a protracted period, with resulting economic 
and social consequences o# uncertain magnitude.
    Conventional Attack. INR considers the danger of a conventional 
military attack on the United States or American military, diplomatic, 
or business facilities abroad to be very low for the simple reason that 
no State hostile to the United States has the military capability to 
attack the U.S. with any hope of avoiding massive retaliation and 
ultimate, probably rapid, annihilation. The only way to reach a 
different conclusion, it seems to us, is to posit an irrational actor 
model in which either all key decisionmakers in a hostile country are 
irrational or there are no systemic constraints on a totally irrational 
dictator. We judge that such conditions exist nowhere at present and 
hence that U.S. military might is, and will be, able to deter any such 
suicidal adventure for the foreseeable future. Here again, ensuring 
that this situation continues is a major goal of American diplomacy.
    A far more dangerous threat is the possibility, even the 
likelihood, that advanced conventional weapons will be obtained--and 
used--by terrorists. For example, the danger that groups or individuals 
antithetical to the United States will obtain MANPADs or advanced 
explosives is both high and immediate. The number of Americans likely 
to be killed or maimed in such an attack would be small in comparison 
with the casualties in a conventional war or nuclear attack, but would 
be unacceptably large no matter how small the number of casualties and 
could have a major economic and psychological impact. Attacks on 
American nationals, whether they are aimed at workers in an American 
city, American tourists abroad, U.S. diplomatic facilities, U.S. 
businesses at home or abroad, or U.S. military facilities at home or 
abroad, are possible and unacceptable. The fact that State Department 
personnel, family members, and facilities have been frequent targets of 
attack makes us acutely aware of this danger and determined to do 
everything possible to thwart it. This determination is magnified 
severalfold by the fact that it is an important part of the State 
Department's mission, and the Secretary of State's responsibility, to 
protect American citizens everywhere around the globe. We take this 
responsibility very seriously, and an important part of INR's support 
to diplomacy involves providing information and insights that 
contribute directly to the success of this mission.
    States of Concern. It has become something of a convention in 
threat testimony to list a number of countries that, for one reason or 
another, are judged to warrant special attention from the Intelligence 
Community. A few countries on this list engage in activities that 
directly or indirectly threaten American lives (e.g., North Korea's 
deployment of massive military power close enough to Seoul to put at 
risk our ally as well as American troops and tens of thousands of 
American civilians). Most countries on the list do not threaten the 
United States militarily, but are important to the success of policies 
to protect and promote other American interests.
    Rather than enumerate a long list of countries, I will simply 
provide a series of generic examples to illustrate the kinds of 
conditions and concerns germane to diplomatic efforts to protect and 
advance American interests. The State Department needs good 
intelligence on some countries primarily because their actions could 
lead to internal instability that could, in turn, threaten other 
American interests. Others belong on the list because they do not or 
cannot prevent the growth and export of narcotics, harbor or assist 
terrorist groups, have leaders who make anti-American pronouncements, 
or have conditions conducive to the rise of extremist movements. Still 
others illicitly traffic in persons, weapons, conflict diamonds, or 
other commodities; control critical energy resources; or have fragile 
political institutions, large and dynamic economies, or any of myriad 
other attributes.
    What states on this long and varied list have in common is the 
capacity to affect American interests and the efficacy of U.S. foreign, 
economic, and security policy. Most do not and will not ``threaten'' 
the United States in the way that we were once threatened by the Soviet 
Union and the Warsaw Pact, but something, or many things, about them 
pose challenges and/or opportunities for American diplomacy. The 
problems of failing states and the tremendous drain on resources in 
developing countries from AIDS and other pandemics, environmental 
stress, and corruption affect our ability to partner with allies and 
friends to meet humanitarian needs in the interest of promoting 
stability and democracy. This, in turn, poses challenges and 
requirements for the Intelligence Community that extend far beyond the 
collection and analysis of information germane to the suppression of 
terrorism and limiting the spread of WMD, delivery systems, and 
advanced conventional weapons. Meeting these challenges requires global 
coverage, deep expertise, extensive collaboration, and, above all, 
acceptance of the idea that the mission of the Intelligence Community 
demands and entails more than collecting and interpreting covertly 
acquired information on a relatively small number of narrowly defined 
threats. Focusing on known threats and concerns is necessary, but could 
prove to be very dangerous if we are not equally vigilant in trying to 
anticipate unknowns and surprises.
    Intelligence is, or should be, about more than addressing 
``threats.'' The Intelligence Community has been justifiably criticized 
for serious failings and shortcomings, but we should not lose sight of 
what we do well and must continue to do well. For example, America's 
unrivaled military preeminence, demonstrated so dramatically in our 
elimination of the Taliban regime in Afghanistan and the destruction of 
Saddam's regime in Iraq, is inextricably linked to the capabilities and 
accomplishments of our Intelligence Community. Intelligence collection, 
analytic tradecraft, insights gained through years of experience, and 
close ties among collectors, analysts, weapons designers, military 
planners, and troops on the ground are all and equally critical to the 
military successes we have achieved, the predominance we enjoy, and the 
fact that conventional military threats to our Nation and our citizens 
are low and almost certain to remain so for many years. Preserving this 
State of affairs will be neither automatic nor easy, but our efforts 
and the allocation of resources to do so must not foreclose equally 
committed efforts to address other threats and challenges.
    Terrorism and proliferation are at the top of every agency's list 
of threats, and the Intelligence Community is committing substantial 
effort and resources to provide the intelligence support required to 
contain and reduce those dangers. In part, this requires and involves 
penetration of highly restricted and suspicious organizations and 
secure systems of communication, including sophisticated measures to 
hide financial transactions, obscure relationships, and deceive human 
and technical collectors. But collection is only one of many essential 
factors in the equation. To place the intelligence we collect in 
context, to distinguish between what is true and useful and what is 
not, and to develop strategies to detect and disrupt activities 
inimical to American interests requires expert analysts and information 
on a very wide array of critical variables. Stated another way, it is 
not possible to identify, anticipate, understand, and disrupt 
terrorists and proliferatitios without broad and deep understanding of 
the countries, cultures, contexts, social networks, economic systems, 
and political arenas in which they spawn, develop, and operate. Without 
broad and deep expertise and information that goes far beyond what we 
can or should collect through clandestine means, we will not be able to 
judge accurately the information we collect, and will ultimately be 
reduced to reliance on lucky guesses and chance discoveries. That isn't 
good enough. We can and must do better.

    Senator Bond. Thank you. Thank you, Mr. Chairman. I 
apologize to my colleagues.
    Chairman Roberts. Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman.
    Let me begin by thanking each of you. I think those of you 
that particularly head large departments, it is a most 
difficult time to give your service. And I just want you to 
know how much I appreciate it. So, thank you very much.
    I view a worldwide threat to be our borders. And I'd like 
to explain that a little bit. Let me begin by quoting the 
Homeland Security statement today, Admiral Loy. On page four of 
your statement: ``Recent information from ongoing 
investigations, detentions, and emerging threat streams 
strongly suggest that al-Qa'ida has considered using the 
southwest border to infiltrate the United States. Several al-
Qa'ida leaders believe operatives can pay their way into the 
country through Mexico and also believe illegal entry is more 
advantageous than legal entry for operational security 
reasons.''
    I think that is a very important statement, particularly 
when you consider the fact that a half-a-million other-than-
Mexican intrusions have been made on our borders since 2000. 
Specifically, with respect to the southwest border, in 2003 
there were 30,147 other-than-Mexican intrusions. The next year, 
2004, which is the latest year that we have figures for, there 
were 44,617. That's a 48 percent increase.
    Now, let me take you to a hearing--because I sit on the 
Judiciary Immigration Subcommittee--and a response by Mr. 
Hutchinson to Senator Grassley's questions in February 2004. 
This was a hearing held about a year ago. And let me read an 
answer.
    ``At present, DHS has no specific policy regarding OTMs 
apprehended at the southern border. While OTMs, as well as 
Mexicans, are permitted to withdraw their applications for 
admission and can be returned voluntarily to their country of 
nationality, as a practical matter this option is not readily 
available for them, as it is for Mexicans, whose government 
will accept them back into the Mexican territory. Thus, when 
apprehended, OTMs are routinely placed in removal proceedings 
under Immigration and Nationality Act 240. It is not practical 
to detain all non-criminal OTMs during immigration proceedings. 
And thus, most are released. A majority of OTMs later fail to 
appear for their immigration proceedings and simply disappear 
into the United States.
    ``DHS is reviewing the possibility of extending its 
expedited removal authority and means of addressing this 
problem. DHS is also considering a variety of alternatives to 
detention, especially for asylum seekers.''
    Now, I've looked at the statistics for each country. And 
the so-called countries of concern--Syria, Iran, others--the 
numbers are up of penetrations through our southwest border. 
Clearly we are deficient in a mechanism to deal with these.
    Could you please comment and could you please indicate what 
actions are being taken? I view this as a very serious 
situation.
    Admiral Loy. Thank you, Senator Feinstein. And, indeed, we 
view it in exactly the same way you do, as a very serious 
situation.
    There have been a number of initiatives over the course of 
the last year, many of which I know you're familiar with. For 
example, the opportunity for deep repatriation of people back 
into--not just across the border where the recidivism rate is 
that they'll be back, coming our direction that night or the 
next night.
    The whole notion of being able to take the repatriation 
decision and take Mexican nationals, illegal aliens back to----
    Senator Feinstein. I'm not talking about--none of these are 
Mexican nationals. These are all OTMs--other-than-Mexicans--
44,000 OTMs came across the southwest border last year.
    Admiral Loy. Yes, ma'am. I'm just trying to array a set of 
tools that could be potentially of use, not only in Mexico, but 
wherever the OTMs might be from.
    The challenge here is a lengthy border, as you well know. 
We are introducing technology along that border that'll 
substitute for what has historically been a very human-
intensive effort along the border, to make a difference in 
terms of comings and goings.
    So, US-VISIT, the notion of using UAVs on the border as 
plugs between those portals of entry that we have worked so 
hard to harden, if you will. But the entry-exit system that has 
been now deployed by the Department of Homeland Security after, 
I would offer, 20 years or so of effort on the part of INS 
beforehand in failed efforts to establish some kind of a 
legitimate, biometrically based entry-exit system into the 
country, that we have some confidence in in terms of our 
abilities to say who is here and who is not, and what are we 
going to do about those who we can track and find.
    Senator Feinstein. Let me have a little discussion on this. 
Because essentially, there is no detention for these people. 
They don't show up for their hearings and they disappear. So we 
really don't know who comes into this country illegally over 
that southwest border.
    I have two cases that the FBI was involved in, one actually 
in Michigan, where the gentleman was clearly a terrorist. He 
pled guilty. He got 6 months. This is a big problem in the 
United States. And I really don't think that the mechanical 
aspect of it is going to solve it. You're not detaining these 
people. They're released, essentially.
    Admiral Loy. Well, there certainly is a prioritization 
process to those with any degree of a connection against the 
national terrorism database that has now been forged for us to 
be able to bounce names against. So, to the degree we are 
releasing because of the resource implications attendant to 
keeping them and bedding them and detaining them until 
resolution can come of their individual cases.
    Those without any apparent criminal and/or terrorist 
connection are obviously those that are on the high end of the 
release order and the low end of the detention order.
    Senator Feinstein. Can you give us a number of how many are 
being detained?
    Admiral Loy. I don't have that with me at the moment, but 
I'll be happy to provide it to you.
    Senator Feinstein. I would appreciate it. Out of the 44,000 
that came in in 2004, how many are detained. I appreciate that.
    Admiral Loy. We'll provide that.
    Senator Feinstein. Thank you, Mr. Chairman.
    Chairman Roberts. Senator Chambliss.
    Senator Chambliss. Thank you, Mr. Chairman.
    Director Goss, because of our longstanding relationship 
going back to our House days, you know how keen my interest has 
been in this area of information sharing. I was very pleased to 
hear you, as well as Director Mueller, say that things are 
improving. But at the same time, you both recognize we still 
have a long way to go.
    Donnie Harrelson, the Sheriff of Criss County, Georgia, 
happened to be in the back a little earlier, and I visited with 
him for a minute. He was keenly interested in a number of 
things that were being said. And I told him that we really 
can't let this issue of information sharing rest until his 
office and every other local law enforcement office has the 
information in real time that they need to help us win this war 
on terrorism domestically. So, I appreciate the continued 
effort of everybody at the table on this issue, but obviously 
especially you two.
    Director Goss and Admiral Jacoby, there was a report on Fox 
News this morning in which it stated that the Iranians have 
alleged that an aerial vehicle of some sort fired a missile and 
it did not explode, but it was fired in the area of a nuclear 
facility owned by the Iranians.
    Would either of you care to comment on the information that 
has come out of Iran this morning relative to that issue?
    Director Goss. Senator, thank you for your comments about 
vertical integration of information and your patience on 
letting us get the technology and our architecture, our 
enterprise, together on that. There is progress since we last 
talked, and that's good news.
    On the subject of Iran, I know nothing in my official 
position. What I do know is, I think, from press reports that 
something did fall out of the sky and came down somewhat near 
Bushehr, their ongoing building of their nuclear power plant in 
that area.
    I also heard a subsequent report--and I have no idea 
whether I'm spreading a rumor or not--that it was a gas tank 
that fell off an aircraft and exploded. And I have no idea 
whether that's true or not. It just came into my ear.
    Admiral Jacoby. Senator Chambliss, I have no knowledge of 
the report or any incidents involving Iran.
    Senator Chambliss. Director Mueller, I have had the 
opportunity to visit with your joint terrorism task force folks 
in Atlanta and intend to do so again in the very near future. 
And I will tell you, I am very impressed by the work that's 
ongoing with that operation.
    Every time I meet with them, I am told by some of your FBI 
agents in the field, as well as other local law enforcement 
officers, of the importance of the PATRIOT Act, and their 
ability to fight terrorism as well as fight crime with the 
tools that they have under the PATRIOT Act.
    Now, as you know, the PATRIOT Act, or certain provisions of 
it, are going to be expiring at the end of this year. Would you 
care to comment on what your thoughts are relative to the 
reauthorization of those provisions that are set to expire, and 
how useful the PATRIOT Act has been to your organization in 
fighting crime and fighting terrorism?
    Director Mueller. Let me just start off by saying that the 
provisions of the PATRIOT Act are indispensable to the 
protection of the American public against further terrorist 
attacks.
    And the heartland of the bill that is so important--and 
it's not just important to the FBI, but it's important to the 
CIA, the DIA and others in the intelligence community, as well 
as State and local law enforcement--is the breaking down of 
walls that inhibited our ability to share information across 
our agencies and across our disciplines and across our 
programs. And the safety of the United States depends on the 
ability of all of us together to be able to accumulate the 
information, share the information.
    And I don't mean just in pushing, but having access, equal 
access to the information, and having the opportunity to act on 
that information and all the information, whether it be act 
within the United States, in a city, in a town, in a State or 
nationally, or overseas, by having access to information that 
may have been collected within the United States or outside the 
United States.
    And the PATRIOT Act has been instrumental in breaking down 
those walls and enabling us to do it. It has given us new 
authorities. That has given us the ability to obtain 
information that will allow us to identify persons who present 
a threat against the United States with adequate predication of 
their interest and motivation in so doing.
    It has given us access to records that we previously did 
not have, but often are instrumental pieces of a puzzle that'll 
give us a broader vision, a broader view of the intentions of 
an individual or of a group of individuals in the United 
States.
    And I know myself and others who live day in and day out 
trying to prevent terrorist attacks will be here before 
Congress on a number of occasions, asking Congress to please 
continue to let us have those tools to protect the American 
public.
    Senator Chambliss. Thank you. Thank you, Mr. Chairman.
    Chairman Roberts. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    Mr. Goss, we were given information on an unclassified 
basis in January of 2002, as follows. This is a CIA assessment. 
``We assess that North Korea has produced enough plutonium for 
at least one, and possibly two, nuclear weapons.'' I'm 
wondering, Director, if you could give us the current CIA 
assessment.
    Director Goss. I'm honestly not sure whether or not the 
assessment is classified that we have. But our assessment is 
that they have a greater capability than that assessment. In 
other words, it has increased since then.
    I would also point out there are other agencies that are 
making assessments, and there is a range. And I think that the 
range we're fairly comfortable on--and I know that is 
classified. Be happy to share that with you in closed session.
    Senator Levin. If you also could tell us for the record if 
there's any unclassified numbers you can give us--for the 
record, if you can do that. I'm not asking----
    Director Goss. Senator, I will.
    Senator Levin. If you can give us numbers the way that 
number was given. And also, Director Goss, this is for you.
    The 9/11 Commission included a number of recommendations 
for realigning the Executive Branch, including the following. 
``Lead responsibility for directing and executing paramilitary 
operations, whether clandestine or covert, should shift to the 
Defense Department.'' Do you agree?
    Director Goss. I recall the issue very well.
    Senator Levin. Just briefly, do you agree with that?
    Director Goss. I do not agree with that conclusion. We have 
studied it, and the Secretary of Defense and I have a memo 
which I anticipate signing today.
    Senator Levin. Is that going to be public?
    Director Goss. Certainly the conclusion of it will be.
    Senator Levin. I think as much public as you can make, 
obviously.
    Director Goss. It's in everybody's interest to know, I 
think, how we are dividing up the responsibility.
    Senator Levin. I think it is.
    Director Goss. I can tell you we spent a lot of time 
looking at this. And the Secretary feels that he has 
capabilities that are important, and I agree. And I feel I have 
capabilities that are important, and he agrees. There's not a 
lot of disagreement on this. We just didn't come out the same 
place the 9/11 Commission did.
    Senator Levin. Thank you, Director.
    I understand that your CIA's Inspector General's report on 
treatment of detainees by members of the intelligence community 
is somewhere in the pipeline. Can you tell us where it is?
    Director Goss. Yes, sir.
    Senator Levin. When is it going to be available?
    Director Goss. The IG, or the inspector general of the 
agency, has indeed got all of the complaints and the referral 
on that matter in hand. As you know, it's an independent 
position. I have checked.
    There is one report that was ordered by my predecessor, 
which has come back, which had 10 recommendations or so in it. 
About, I think, eight of those have been done.
    We are now into the process of looking at some of the 
specific cases that have been brought to the IG. I cannot tell 
you what his timetable is, but I'm sure he would be very happy 
to tell you. I am assured that the work is ongoing, as it 
should be appropriately.
    Senator Levin. Well, if he'd be happy to tell us, wouldn't 
he be happy to tell you?
    Director Goss. Sure.
    Senator Levin. Well, what is the timetable? I mean, is 
there a time?
    Director Goss. I haven't asked him what day he's going to 
finish all these cases.
    Senator Levin. Or a month?
    Director Goss. As soon as they are through. I know one case 
has been dismissed. I know one case has been prosecuted. You've 
read about it in the paper, in North Carolina. know there are 
still a bunch of other cases. What I can't tell you is how many 
more might come in the door.
    Senator Levin. OK. Thank you.
    Director Mueller, this is for you. It relates also to the 
interrogation question. The FBI documents which were released 
under a FOIA request include e-mails from FBI agents expressing 
their deep concerns, that during late 2002 and mid-2003, overly 
aggressive and coercive interrogation techniques were being 
used by the Defense Department people at Guantanamo's detention 
facility which ``differed drastically from the FBI's authorized 
practices.''
    Those memos described the Department of Defense's methods 
as, quote: ``Torture techniques,'' expressed disbelief over the 
military's interviews, telling their colleagues back in 
Washington--this is in the FBI--that ``you won't believe it.''
    The FBI agents also described heated exchanges and battles 
with the commanding generals at Guantanamo over the Department 
of Defense's interrogation techniques, which FBI agents ``not 
only advised against, but questioned in terms of their 
effectiveness.'' Incidents described included detainees being 
chained hand and foot in fetal positions, no chair, food or 
water for long periods, ended up defecating on themselves. One 
detainee apparently had been literally pulling his own hair out 
throughout the night.
    Another major concern of the FBI agents present at 
Guantanamo was that the Defense Department interrogators were 
impersonating FBI agents in order to gain intelligence. FBI 
agents were deeply worried that should detainees ever publicly 
report their treatment at Guantanamo the FBI would be left 
``holding the bag,'' because it would be appear falsely that 
``those torture techniques were done by FBI interrogators.''
    Those documents make clear that the FBI was so concerned 
about the Department of Defense's interrogation techniques that 
it issued guidance to FBI agents at Guantanamo to stand clear 
and to keep away from those techniques when the DoD took 
control of interrogation.
    I assume that because of the serious and extensive 
objections that were lodged by FBI agents against those 
techniques, and particularly given the heated discussions at 
which your personnel were present and engaged in, that you or 
your senior advisers were aware of the concerns of those 
members of your staff.
    And I'm just wondering--this is my question--did you raise 
those concerns with either senior officials at the Department 
of Defense, the Attorney General or the head of the criminal 
division at the Justice Department, or higher-ups in the 
Administration, including the National Security Council?
    Director Mueller. Senator, I know that those concerns were 
raised with the Department of Defense by persons within the 
FBI. At least some of those were, at least three incidents 
early-on.
    Certainly after the issues were raised about Abu Ghraib 
there were additional memoranda that were generated as a result 
of an inquiry to the field that you may have been alluding to 
there. Those also have been brought to the attention of the 
military.
    I will also say that our inspector general is doing a 
review of when the information came in and what happened to 
that information once it came into the FBI.
    Senator Levin. You personally did not raise those concerns 
with senior officials at the Department of Defense or with the 
Attorney General or the head of the criminal division?
    Director Mueller. I was not aware of those concerns until 
May of 2004.
    Let me just be precise on that, Senator. I was not aware of 
the concerns that you raised, that you allude to there, in 
Guantanamo until May of 2004.
    Senator Levin. Thank you. Thank you, Mr. Chairman.
    Senator Levin. Thank you.
    Chairman Roberts. Senator Snowe.

         STATEMENT OF THE HONORABLE OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman. I want to welcome 
all of our panelists here today.
    Director Goss, just to follow up on one of the questions 
that the Chairman raised with respect to A.Q. Khan, there's no 
question that he masterminded a far-reaching, wide-ranging, 
global in scope operation in dispersing nuclear information 
activities and technology.
    Have we pressed the Pakistani government to allow a U.S. 
representative to directly have access to A.Q. Khan for 
questioning to determine the extent of his network of elicit 
nuclear activities?

         Prepared Statement of the Honorable Olympia J. Snowe, 
                        U.S. Senator from Maine

    Mr. Chairman, thank you again for holding this vital hearing that 
will give us an opportunity to examine the threats currently arrayed 
against our Nation as well as a look at those threats that may endanger 
our society in the future. Identifying these threats each year is 
crucial to our ability to gauge our progress in defeating or mitigating 
those threats and to understanding this Committee's role in providing 
the oversight and resources required by the Intelligence Community to 
help defeat those who wish us harm.
    This hearing will also give us an opportunity to examine the 
progress of the changes initiated since passing the Intelligence 
Community reform in the last Congress and the confirmation of the new 
Director of Central Intelligence. But, in the end, it is the current 
and emerging threats to the Nation that drives our investments in, and 
the development of priorities for, the Intelligence Community's 
collection and analytic capabilities. I intend to look at a wide 
spectrum of these threat scenarios--from the threat posed by nuclear-
capable terrorists to the future emergence of a regional peer-
competitor, as well as to our abilities to protect the homeland.
    I also want to thank Mr. Goss, Director of Central Intelligence and 
Mr. Mueller of the FBI for once again appearing before the Committee to 
describe to us their view of the world and how their respective 
agencies are facing the many challenges before them.
    I especially want to acknowledge Admiral James Loy's appearance 
here today. Although he has announced his departure from public life 
later this spring, he remains committed to the nation's defense, as he 
has been for his entire career, and has come before us today to 
describe the Department of Homeland Security's efforts to counter the 
threats arrayed against the homeland. On a personal note, as Chair of 
the Senate's Subcommittee on Oceans, Fisheries and Coast Guard, I was 
able to work closely with Admiral Loy when he was Commandant of the 
Coast Guard. His charge to protect the Nation has always been a part of 
his personal code of honor and he has been unwavering in accomplishing 
his mission. For that and his many years of public service, I thank 
him--the Nation is not only grateful, but safer, for his loyalty and 
dedication.
    I would be remiss if I didn't comment directly about the dedication 
and professionalism of the thousands of Americans who make up our 
Intelligence Community. Each day, across this country and around the 
world, they labor, often without recognition, to keep this country safe 
from harm. It is their vigilance upon which we rely to give us the 
forewarning necessary to counter the many dangers present in our world. 
Although it is impossible to directly express our deep appreciation for 
their efforts, I charge our witnesses to relay our eternal gratitude to 
those who serve America so well.
    It has been an extremely challenging year for the Intelligence 
Community; one in which we saw two major reports detailing the actions 
and failures of our collective intelligence community to provide 
national decisionmakers with the timely and quality intelligence they 
must have to prepare America for the threats faced by the Nation and 
the need to go to war. On the heels of those reports, we in Congress 
undertook the largest revamping of the intelligence community since its 
inception with the 1947 National Security Act. This self-examination 
and correction is a hallmark of our democracy and will serve to make us 
stronger. It is my fervent hope that the professionals of the community 
see this reorganization as an opportunity to renew their dedication and 
take on the challenges to strengthen their craft. In these perilous 
times, the Nation needs them now more than ever.
    We on this Committee have spent a great deal of the past 2 years 
poring over the intelligence provided to decisionmakers before the 
commencement of Operation Iraqi Freedom and, of course, we all learned 
many things and reached many conclusions. In my analysis of that 
information, I became more and more convinced that while Saddam's 
nuclear programs may have been defunct, our Nation continues to face 
the very real threat of nuclear terrorism.
    Terrorists are known to be seeking nuclear technologies and have 
already displayed a proclivity for catastrophic destruction on a 
massive scale. For terrorists, attacking a U.S. city with a nuclear 
device would likely be their ``dream come true.'' In the February 6 
Washington Post, Steve Coll, author of ``Ghost Wars,'' notes that Osama 
bin Laden's inspiration, repeatedly cited in his writings and 
interviews, is the American atomic bombing of Hiroshima and Nagasaki, 
which he says shocked Japan's fading imperial government into a 
surrender it might not otherwise have contemplated. Bin Laden has said 
several times that he is seeking to acquire and use nuclear weapons not 
only because it is ``God's will,'' but because he wants to do to 
American foreign policy what the United States did to Japanese imperial 
surrender policy.
    I intend to focus my work on the Committee on this specific threat 
to the United States because I believe it is time for us to look 
closely at how we can prevent and deter such a threat. I am also 
acutely aware from my work on the Commerce Committee in the area of 
transportation, maritime and port security that we must look to the 
seas as a very likely path of introduction of such a weapon into the 
United States. The 9/11 Commission found that ``Opportunities to do 
harm are as great, or greater, in maritime or surface transportation 
(compared to commercial aviation).''
    Recognizing these vulnerabilities, I included a number of 
provisions and acted as a conferee to the Maritime Transportation 
Security Act signed into law in 2002. One of my provisions included a 
requirement that foreign shippers send their cargo manifest before 
arriving at a U.S. port so the Department of Homeland Security can more 
efficiently evaluate individual container shipments for risks of 
terrorism. I have also held several port security hearings at the 
Subcommittee on Oceans, Fisheries and Coast Guard and will continue to 
do so because I do not believe we are anywhere near finished with fully 
securing our maritime borders.
    That is why I was encouraged by the President's announcement in 
December of his Maritime Security Policy National Security/Homeland 
Security Presidential Directive, which outlined his vision for a fully 
coordinated U.S. Government effort to protect U.S. interests in the 
maritime domain. The directive charges the Department of Defense and 
the Department of Homeland Security with the alignment of all U.S. 
Government maritime security programs and initiatives into a 
comprehensive and cohesive national effort involving appropriate 
Federal, State, local and private sector entities.
    This move comes at a critical time. As we sit here right now, the 
Department of Defense is proceeding with the 2005 Base Realignment and 
Closure (BRAC) process, which I continue to believe is the wrong thing 
to do while we are engaged in a global war on terrorism. We must ensure 
that in the DoD's drive to meet an arbitrary 25 percent reduction 
figure in infrastructure, we do no harm. For example, Brunswick Naval 
Air Station on the coast of my home State of Maine is home to one of 
four remaining maritime patrol bases remaining in the Navy and, in 
fact, possesses the only remaining fully capable active runways in the 
entire Northeast.
    While many say that the maritime patrol community, whose chief 
mission is anti-submarine warfare, is not relevant in the post-cold war 
world, the community has reinvented itself as the warfighting 
commander's premiere manned, long-range intelligence, surveillance and 
reconnaissance (ISR) platform and is performing admirably in direct 
support of Operation Enduring Freedom and Operation Iraqi Freedom.
    But this community also has a role in the President's maritime 
security policy. We have been talking to the Coast Guard and it is 
clear that if we want to be able to conduct ISR operations against 
inbound maritime traffic farther than 200 miles from our shores, the 
maritime patrol community offers a ready and proven capability. These 
points are made eloquently in a white paper written by retired Navy 
Captain Ralph Dean who concludes that optimum basing for maritime 
interdiction assets is as important as the assets themselves. We must, 
therefore, carefully factor in future requirements for maritime 
interdiction before closing any of the maritime patrol bases, which are 
located in the four corners of the continental U.S.--Maine, Florida, 
Washington state, and California.
    The use of conventional forces to interdict the asymmetric threats 
facing the Nation leads me to my final point. The Nation cannot afford 
to develop tunnel-vision when it comes to the threat we face. Just as 
the U.S. failed to adequately counter the developing threat of 
terrorism as we focused solely on the cold war threat, I am concerned 
that we do not now focus solely on terrorism and ignore the growing 
likelihood of a regional peer competitor in the Pacific region. Like 
many, I am alarmed by the rapid and unprecedented buildup of naval 
forces, particularly destroyers and submarines, by the Chinese People's 
Liberation Army Navy.
    Last month members of the House Armed Services Committee visited 
China and came away deeply concerned. Representative Randy Forbes said, 
``We're seeing China really make huge moves in the area of its navy. . 
.There's no question our Navy is the best in the world. . .but at some 
point, sheer numbers start to matter.''
    So I am doubly concerned when the Navy sends Congress a budget that 
radically cuts the number of next generation destroyers and submarines 
to be built by the Navy. I believe that in the future we will need 
conventional ``blue-water'' ships to maintain our global presence in 
the Northern and Western Pacific. I look forward to hearing from VADM 
Jacoby as to the Defense Intelligence Agency's assessment of the 
Chinese naval threat and what we are doing now to counter that threat 
before we wake up one morning to yet another ``new normalcy,'' just as 
we did on September 12, 2001.
    I look forward to hearing the testimony of our witnesses and 
working with them as part of this Committee to ensure that our 
intelligence community has the resources and structure it needs to meet 
the national security challenges we face today and in the future.
    Thank you.

    Director Goss. Senator Snowe, I want to be very careful how 
I answer your question. I think my definition of ``pressed'' 
and yours would be the same. And I would say yes.
    I can tell you that there is continuous attention to this 
matter. And I believe that is being done with the necessary 
urgency and fortitude, to make sure our interests are 
completely understood.
    Senator Snowe. So, could you characterize the cooperation 
on the part of the Pakistani government, sharing information?
    Director Goss. Yes.
    Senator Snowe. I think it is disconcerting. I'm sure you 
saw the article in Time Magazine recently citing a source close 
to the Khan research laboratories in Islamabad. And he's quoted 
as saying, ``even though its head has been removed, Khan's 
illicit network of supplies and middlemen is still out there.''
    Director Goss. Senator, in about 2 minutes in a private 
conversation, I think I could satisfy your answers to these 
questions.
    Let me just simply say, there is an understanding that A.Q. 
Khan enjoyed a certain amount of celebrity status in his 
country because he was the man who brought them the bomb, which 
was very critical to that culture and their national pride and 
so forth.
    It has been a difficult prospect. And understanding the 
problem there, have to dealing with it, is useful in 
negotiating our interests, which are to get all the information 
possible.
    I think that those discussions are understood and 
appropriate steps by the right people are taking place. I can 
be more specific in private.
    Senator Snowe. I appreciate that.
    Admiral Loy, I'm sure you're familiar with this report from 
the inspector general of the Department of Homeland Security 
regarding the visa waiver program and the use of stolen 
passports from the visa waiver countries.
    And it's pretty troubling and disconcerting the extent to 
which aliens have applied for admissions into the United States 
with stolen passports from these specific countries and have 
been admitted, even when information has been submitted to the 
lookout system, all the more disconcerting, I think, when you 
consider--and I think we all agree--the greatest threat to this 
country is having terrorists have access to nuclear weapons or 
the materials to manufacture them.
    And this report indicates ``aliens applying for admission 
to the United States using stolen passports have little reason 
to fear being caught and are usually admitted. Our analysis 
showed that it only made a small difference whether the stolen 
passports were posted in the lookout system.''
    They reviewed two groups. Of the first group, 79 of the 98 
aliens attempting entry were admitted. The second group had 
lookouts posted for their stolen passports prior to their 
attempted entries. And from the second group, 57 out of the 78 
aliens who attempted entry were admitted.
    Thirty-three of these admissions occurred after September 
11, 2001. And then 136 successful entries using stolen 
passports were allowed.
    I mean, obviously, this is significant and disturbing, to 
say the least, that obviously we haven't made much headway with 
respect to this issue regarding stolen passports. And when you 
think that worldwide there are 10 million stolen passports, it 
only takes one to gain admission into the United States.
    You know, when you think about the fact on June 6, 2001, 
according to this report, 708 blank passports were stolen from 
the visa waiver program. The IG reported that this was 
significant because the passports were stolen in a city that 
also was the location of the al-Qa'ida cell that played a 
significant role in providing financial and logistical support 
for the September 11th terrorists.
    It's interesting as well because there is little attempt by 
law enforcement officials to follow up and to try to locate 
these individuals, even when they have learned--even when 
officials have learned--that they have come into this country 
illegally.
    So, one, what are we doing to investigate these activities 
of these aliens that have used stolen passports? What are we 
doing to determine their whereabouts? And what are we doing to 
improve our ability to locate, investigate and remove these 
individuals from the United States, who have stolen passports 
to gain entry?
    Admiral Loy. Thank you, Senator Snowe. It's a very serious 
issue. The ICE agency is following up dramatically as a result 
not just of the IG's investigation but, rather, of their 
recognition of this, I'll call it, chink in the armor, so to 
speak.
    We must recall that, of course, over the course of a couple 
of hundred years of our country's openness to people coming to 
our borders, our exit-entry control system attendant to those 
borders was, frankly, very weak.
    The fact that the last year-and-a-half that we have 
established US-VISIT as an entry-exit control system, that we 
have engaged internationally to try to use Interpol as a 
database storage for stolen passport information, so that 
there's a database that can be used internationally, not just 
by folks of concern coming to the United States, but crossing 
any borders anywhere.
    The visa waiver program in and of itself now is required--
any folks coming into our country from visa waiver countries go 
through US-VISIT, and we begin to gain the biometric value of 
the fingerprints and the facial imagery that we capture as they 
come into our country each time they enter.
    We are conducting reviews of the visa waiver countries as 
we speak. There are 25 of the 27 countries being reviewed, as 
the Congress biannually, with a report due back to provide you 
a solid status report on the visa waiver countries as it 
relates to the issue that you're describing.
    Furthermore, that review process always has the opportunity 
for sanctions attendant to it, as to whether or not one stays 
in the visa waiver program at the other end of the day.
    There have been rather dramatic, public reflections of both 
Germany and France and other countries having this nightmarish 
problem of not tens or twenties, but literally thousands of 
their brand-new, machine-readable passport blanks finding their 
way into the status that you were describing. So it is a 
significant international issue that we're trying to fight on 
all those fronts.
    Senator Snowe. Well, it's clear that we need to do 
something very expeditiously.
    Admiral Loy. Including the enforcement.
    Senator Snowe. I think it's a huge challenge and the 
countries better be cooperating in that regard.
    Admiral Loy. Exactly.
    Senator Snowe. Thank you, Mr. Chairman.
    Chairman Roberts. Senator Wyden.
    Senator Wyden. Thank you, Mr. Chairman and gentlemen. 
Sorry, we've got multiple hearings going on this morning and I 
didn't get to hear all of your testimony.
    But I did understand that several of you made the point 
that information sharing is improving. And I will tell you that 
I'm still concerned that the walls that have prevented 
information sharing still have not been brought down. And to 
some extent what has happened, the pre-9/11 walls that prevent 
information sharing seem to have been replaced with a new set 
of walls that prevent information sharing. And I want to give 
you an example that revolves around the area that you all 
talked about, the National Counterterrorism Center, NCTC, where 
you all feel things have gotten better.
    Now, our Committee has been told that, while information 
can be shared among those who work at the center, an analyst 
has to go out and seek approval before sharing information that 
may be of value with the home agency, and the approval may or 
may not be granted and it's sort of a bureaucratic shuffle to 
get it done.
    My question would be to you, Director Goss. Are you aware 
of the problem? And if so, how do you believe it ought to be 
addressed?
    This is something that our Committee has heard about now 
several times. And it sort of caught my attention when you all 
were talking about information sharing improving.
    Director Goss, your response?
    Director Goss. Yes, I'd be very happy to, Senator. Thank 
you.
    I do believe that the across-the-board information sharing 
is improved. There are still areas--and this is one of them.
    Senator Wyden. I want to make sure I got that you say this 
is an area that you will still be willing to work with us on.
    Director Goss. Oh, absolutely. This is not finished 
business yet.
    We have the question of how do you protect an individual 
agency's sources and methods? How do you get assurance for that 
agency when they are making a contribution?
    And the question of how we use either TAGINTs or tearlines, 
or how we make this available, it's easier if you're just 
talking about a customer. But if you're talking about an 
analyst that wants to go further in and probe further and 
perhaps do tasking, then you come to the questions of some of 
the things we're trying to use, like co-location, getting the 
analysts and the collectors to talk together, changing things 
with agencies, setting up different rules.
    Part of that is going to be the business of the new DNI. As 
you know, the NCTC reports to the DNI. And the NCTC is now run 
very, very effectively, I would say, but on an acting basis, by 
John Brennan.
    They have absorbed the TTIC into the NCTC. And I think 
they've gone just about as far down the road as they can go 
without stepping on the prerogatives of a new DNI, whose main 
function, in my view, is going to have to be sorting out the 
authorities and the interface between the DNI's job and 
responsibilities and the individual agencies--and those 
interfaces between the 15 agencies in the community.
    Because until you do that and make those lines clear, the 
question of sharing proprietary--and excuse me for using the 
word, but it does fit--information is going to be difficult, 
because everybody is charged with preserving their sources and 
methods.
    Senator Wyden. I think what concerns me is that there are a 
finite number of people working the terrorism issue for the 
entire intelligence community. They all hold security 
clearances. They're all trained.
    And it just seems to me that these analysts ought to have 
access to all the information that can help our side. And I 
would like to talk about this with you all further, talk about 
it more, perhaps, in a private session.
    But it seemed to me, what we ought to have is the 
equivalent of a terrorism analyst program--a special terrorism 
analyst program--that would allow all of these analysts access 
to all the same data.
    And until we get there, we're still going to be trying to 
break down these walls. And time is short. We'll talk about it 
some more, but I think, Mr. Director, your answer is 
constructive. The acknowledgment that there is more work to do 
is what I was interested in hearing.
    It just seems to me there's only so many people in this 
community. Let's make sure they all can get access to the same 
kind of information. And there's an awful lot of shuffling 
going on, just with NCTC. And I'm just not going to take this 
further, but I saw Bob Mueller nod, and I consider that 
constructive, as well.
    The second area that I'd like to touch on involves 
accountability. If there's one thing my constituents are 
frustrated about as it relates to government is the absence of 
accountability. And still after 9/11, I keep looking for 
anybody who lost a job, was demoted, was reprimanded--any kind 
of consequences--and I can't find any. I can't find any 
anywhere.
    And my question would be to you, Director Goss, in that you 
all apparently have a report from the Inspector General, as a 
result of input from this Committee, the Joint Inquiry on the 
terrorist attacks, where there was clear interest in the 
Inspector General conducting a review to determine if any CIA 
officials ought to actually be held accountable for the 
mistakes that led to the attacks. And I'm trying to figure out 
where this Inspector General report is. I gather there are just 
layers and layers of review.
    But where are we on this Inspector General report? What can 
you tell us today? When are we going to get it on this 
Committee, so that we can get serious about some 
accountability?
    Director Goss. Senator, thank you. You will get the IG 
report as soon as it is finished. I've made the same pledge 
yesterday to HPSCI. It was commissioned, I think, by Congress, 
and you'll get it. And the IG is independent.
    Now, as for where is it right now, the IG came to me 
shortly after I came in and said that this matter was under 
review and he would be presenting it shortly to me, for the 
next step, because there is a process, apparently, in how this 
works.
    And I asked him a very simple question. I said, if you are 
naming names, are you giving those names the opportunity to 
express their views? And it turned out that in the process he 
had not taken that option. I suggested to him that in the 
interest of what I would just simply call American fair play, 
if you're going to start bandying people's names about, you 
might let them know what it is you're saying about them. And he 
agreed. I did not instruct him to do that, please understand. 
We just had a discussion about how this process would unfold. 
This is somewhat new.
    And so I understand that he has done that. And individuals 
have been advised of what this report says about them, on a 
confidential basis. I also understand that some of these 
individuals have hired attorneys because they wish to, for 
whatever reason, have that kind of advice. When attorneys come 
into the issue like this, I understand that the timing becomes 
a little uncertain of when matters will be concluded.
    I do not feel it appropriate for me to demand a deadline at 
this point, since the process has elements of due process in 
it. And I view that the IG is capable of making the decisions 
of when he's ready to present that to me. That has not happened 
at this point.
    When he does, I have already got two staffers I've 
selected, who are in the process or I suspect have probably 
read the report. So we will be able, when it comes to my level, 
as the Director of the Central Intelligence Agency, to decide 
whether or not it is appropriate to convene boards in the 
agency, in-house, to deal with accountability or not. And that 
is apparently what my responsibility will be.
    Either way, this Committee and the other Oversight 
Committee--the House Oversight Committee--will get the IG's 
report. And it is understood, it will be classified.
    Senator Wyden. Do I have time for one additional question, 
Mr. Chairman?
    Chairman Roberts. I think Senator Mikulski has been waiting 
very patiently throughout the whole hearing. And if we have 
time for a second round, I would be delighted to recognize the 
Senator. And I don't mean to pick on him, in that most Senators 
have gone red.
    I think I'll probably leave that comment alone.
    The patient, but always accommodating, Senator from 
Maryland.
    Senator Mikulski. Patient. Yes, a signature characteristic 
of myself, well known to all.
    [Laughter.]
    Senator Mikulski. Good morning, and thank you really for 
what you do everyday. I think all of us appreciate the fact 
that the job of everybody here is to prevent predatory attacks 
against the homeland, against U.S. assets abroad, against our 
troops, and even to help predatory attacks against allies.
    I'm going to focus on the issue of terrorism and want to 
come back to this whole issue of how we have gotten better at 
connecting the dots and focus really on threats to our ports.
    So these are really questions for Directors Mueller, Goss, 
and Admiral Loy. There's considerable concern that sea-based or 
ship-borne terrorist attacks are big concerns and big 
possibilities. Many analysts are concerned about the security 
of U.S. ports, foreign ports, but in my case, like Baltimore 
and other coastal Senators.
    So my question is: Of the various scenarios, which do we 
fear attacks on our ports? Do we fear nuclear weapons being 
smuggled in and detonated at a U.S. port? And what are we doing 
about it? And how did the three of you work together?
    And Admiral Loy, of course, we know you from your Coast 
Guard days, and you've adapted to a new transportation mode 
pretty quick. But you see where we are. So there's Goss, you 
know, looking at the world. You know, Loy's got Mr. Homeland 
Security. And there's Mueller, and he's got the domestic 
whatever. So where are we on the threat to the ports, and what 
are we doing to prevent the threat? And how do you all 
coordinate this information so that Governors, and mayors, and 
the people can feel pretty good about it?
    Director Goss. Thank you, Senator. I'll start.
    I will tell you that my normal day starts in the company of 
these two gentlemen. And matters of this urgency are discussed 
between us. But, not only that, we have close working 
relationships between our agencies. And it is well understood, 
the danger of which you speak, properly.
    In terms of our part, from the national foreign 
intelligence program, obviously, leaning overseas and getting 
all the information we can to stop it over there and to get 
information before something's put on a ship, or to understand 
a plot, is very, very important. I would point out--somebody 
can correct the statistic--but it's a very high percentage of 
success, perhaps 95 percent, of all drug interdictions come 
from good tips from information, not from random searches.
    But you have to do the gates-guns-guards approach 
domestically to take care of the ports. And you have to do the 
information approach. Am I satisfied they're as plugged in as 
they can be? Yes, under the circumstances that we have.
    Now, with the DHS and with the FBI, law enforcement people, 
people with new responsibilities dealing with homeland 
security, and our very clear understand that this is part of 
the target for our operatives overseas, I think we have done as 
good as we can do, in terms of understanding information that's 
critical.
    Senator Mikulski. I appreciate that the three of you meet, 
but I'm talking about all the way down, are we really 
communicating?
    Director Goss. I think it goes pretty far down for us.
    Director Mueller. For us, in every city that there's a 
port, there's a Joint Terrorism Task Force with a specific 
responsibility to work closely with the elements of the port to 
exchange information and provide what can be done to enhance 
the port security. In several of the ports around the country, 
we have--particularly where there's substantial ferry traffic, 
for instance--we have done intelligence analyses of 
vulnerabilities of the ferry services.
    Each port has a little different mixture of the type of 
shipping that comes in. And consequently, the Joint Terrorism 
Task Forces, working with the Coast Guard and other elements, 
work closely with State and local law enforcement as well as 
the other Federal components, to come up with a plan to assure 
that we have the intelligence that's necessary to focus on the 
threat of a potential attack. And then, if there's an attack, 
how we are going to respond to it.
    And perhaps I can turn that over to Admiral Loy to pick up 
on.
    Admiral Loy. Thank you, Senator Mikulski.
    The information flow into this challenge is as was just 
described by Director Goss and Director Mueller. At the other 
end, I would offer that the chair I was sitting in on 9/11 was 
still in uniform as the Commandant of the Coast Guard. And, 
frankly, we spent the rest of the time that I was in that great 
service focusing on domestic maritime strategy--domestic 
maritime security strategy.
    We also recognized that it was enormously important to see 
that this was an international challenge immediately, because 
all of those 9 million containers a year, 20,000 a day, that 
find their way to Baltimore and many other ports come from 
overseas. And so one of the first things we did was literally 
take a delegation to the International Maritime Organization to 
start a process which has become a standard-setting effort for 
international commerce as it relates to facilities, crews, 
ships that ply the waters of the United States, to meet those 
international standards.
    Second, there have been excellent resource plus-ups 
attendant to the Coast Guard's capability to shift gears from 
emphasizing what it has always been able to emphasize as an 
array of responsibilities it has for the Nation and focus on 
port security in this particular time of need.
    I think one of the greatest strengths of that service is 
its agility to reshape its focus on what Nation needs it to 
focus on now. And it certainly has done so over the course of 
these last 3 years.
    We have also recognized the legitimacy through port 
security grants and Operation Safe Commerce. The requirements 
that we have to look down the supply chain, literally from the 
point of origin to the point of destination, with a sense of 
transparency all the way through that, in order to see and be 
able to apply the insights we gain from the intelligence 
community as to what we should be doing operationally in those 
various responsibilities.
    The notion of pushing our borders out so that they don't 
become the first portal that we look at things under concern 
about, the Container Security Initiative, as I mentioned in my 
opening comments, is now alive and well in 34 different ports 
where customs agents, side by each with their host nation 
counterparts, are watching the stuffing of those boxes, the 
sealing of those boxes, as it relates to cargo security.
    One of the most dramatic initiatives that we had already 
underway for what then Vern Clark and I, as the Chief of Naval 
Operations, viewed as an asymmetric array of threats, which 
shifted focus to the terrorism piece of that asymmetric array 
after 9/11, had already been underway in Suitland with a joint 
effort, with respect to intelligence reviews that the two sea-
going services of this Nation jointly conduct there day after 
day after day.
    That has developed into two initiatives today. One of them 
attended to something I termed maritime domain awareness and 
has become almost a term of art in this look that the two 
services take. With NORTHCOM's responsibility reaching 500 
miles out to sea on the Pacific side and literally almost 1,700 
miles to sea on the Atlantic side, we have joined forces, the 
Navy and the Coast Guard, to truly understand what's going on 
and how do we assure that we know what's going on in the domain 
we're responsible for.
    Senator Mikulski. Let me come back.
    First of all, this was really, I think, very helpful, and I 
hope enlightening to the Committee. I know my time's up. But 
number one, how real is this threat?
    And number two, Admiral Loy, homeland security is the 
ultimate user of the intelligence, the ultimate customer, of 
course, along with the FBI. But, you know, you're Coast Guard. 
You're Customs. That's the battle line.
    Admiral Loy. We hold the bag. Yes, ma'am.
    Senator Mikulski. Yes. One, how real is this threat? And 
number two, do you really feel that what has been described is 
really working well?
    Admiral Loy. The gathering and the sharing of the 
information, this is, I think, working extraordinarily well in 
this particular domain. I think, to go back to the Chairman's 
commentary about information access as opposed to information 
pushing and the comments that the Vice Chairman made attendant 
to that, are absolutely right on point.
    We discussed, though, there just two operatives. You talked 
about the analyst and you talked about the collector. And I 
would offer that the operator is the other absolutely crucial 
ingredient to keep in that algorithm. The requirements that the 
operator can express to the collector and the analyst go a long 
way to figuring out the workload of those people on any given 
day, any given week, for any given purpose or project.
    So I would ask you to have the operators articulate their 
requirements, those things that they're going to be able to use 
properly to do the work they're required to do. Let the 
analysts and the collectors then get about that business to 
meet those operators' requirements.
    Senator Mikulski. Threat?
    Admiral Loy. The threat is as real here. We have the same 
kind of exercise program to think our way through the nightmare 
scenarios on the maritime sector, as in any other sector. Ports 
represent that place where it all comes together. Ninety-five 
percent of what comes and goes to this country comes and goes 
by the water. So the port complexes are clearly a targeted area 
for the terrorists.
    Senator Mikulski. Mr. Chairman, I presumed my time was up. 
That was a lengthy conversation, but I think really is crucial, 
because that's where it all comes together.
    Chairman Roberts. As usual, the Senator raised an important 
point. Has the Senator finished her comments?
    Senator Mikulski. My time is up.
    Chairman Roberts. The distinguished Chairman of the Senate 
Armed Services Committee.
    Senator Warner. I thank you, Mr. Chairman and the Ranking 
Member. We've had a good hearing. I'm sorry I had to step out 
for a moment.
    Sixty years ago this month, at age 17, I started my very 
modest and inauspicious military career. And I had over a half 
century of the privilege of being associated with the men and 
women of the United States military. And this afternoon, like 
so many of our colleagues, I go to Arlington for the burial of 
a brave Marine who lost his life in Iraq.
    As I sit through these ceremonies quietly, the thought 
always occurred to me, ``Senator, have you failed to do 
anything in your official capacity either to equip or train 
this individual or to provide him the intelligence, or his 
superiors the intelligence, which could have prevented this 
death?''
    There is an issue here, I say to my distinguished Chairman 
and Ranking Member and colleagues on the Committee, which I 
think we've got to address, both in my Committee and in this 
Committee. And that is the manner in which we gain intelligence 
from those that are captured, either on the battlefield or in 
other areas.
    There has been a good deal written, and I draw the 
attention of my colleagues to an article today in The New York 
Times entitled, ``CIA is Seen as Seeking New Role on 
Detainees.'' And so my question to you is as follows.
    America has always been a Nation that follows the rule of 
law, and we must preserve that. And the Geneva Convention, as 
such, is a part of our body of law. But we recognize other 
nations have other laws, traditions, whatever. And there could 
well be means by which they gain intelligence which we can't, 
following the rule of law. And I'm not suggesting we deviate 
from the rule of law.
    But when an individual is apprehended in Iraq, should we 
turn him over to the Iraqis, who may have a different system, 
and from that individual we gain information that not only 
preserves the opportunity to protect our coalition forces, but 
indeed the terrible and tragic killing of so many Iraqi 
citizens and their own security forces.
    I think largely this issue has to be addressed in closed 
session. But I wonder, Mr. Director, to what extent you can 
talk about what your hope is in this area to gain the maximum 
intelligence that we need to not only bring to, hopefully, a 
successful conclusion of the Iraqi campaign, but other 
campaigns on other fronts and, at the same time, carefully 
preserve the traditions of this country by following the rule 
of law.
    And most specifically, what should we do in dealing with 
other countries in terms of sharing the burdens of captivity 
and interrogation of a witness or a captive or whatever we may 
have in our possession? And then I'll ask the Department of 
State, Ms. Rodley, to give the views of State on that.
    Director Goss. Thank you, Mr. Senator.
    The subject is of critical importance to us. You are 
correct to point out that we are dealing in a life-and-death 
business, and you are correct to point out that interrogation 
is a mainstream of information. Having enough professional 
interrogators operating the proper way, that would be within 
the rule of law, and professional interrogators will tell you 
that torture is not something they would wish to have, because 
it doesn't work. There are better way to deal with captives.
    So I don't think there is any inconsistency with the idea 
of professional interrogation of combatants, whether they're 
conventional or unconventional, taken off the field of 
hostility and brought into our captivity, being subject to a 
professional interrogation. I do not think that's an impossible 
job.
    The question of who does it and under what circumstances 
does get us into some legalities. I'm not a lawyer, an 
attorney. And I will obviously be guided by what they say. But 
that is not going to be a deterrent to a professional program. 
It's just going to affect the mode a little bit.
    Clearly, as Americans, we are concerned with legality, the 
rule of law. We are concerned with human rights because we are 
compassionate human beings, and what we stand for is what we're 
fighting for. And we're not going to abrogate that.
    We have an immediacy of protection of forces and protection 
of innocent lives in the interrogation process. We do not want 
to forego that opportunity. Nor would we ask another country to 
do something that we would not do ourselves as a cute way of 
end-running our commitment to the law and decency.
    I believe that we have most of that in hand. There are some 
parts of that that I cannot answer with you yet that are sort 
of down-the-road pieces of it that I need to talk to you about 
in closed session.
    But if you asked me today, is interrogation vitally 
important to saving lives, and disrupting terrorists, and 
protecting our forces, the answer is unequivocal. Yes.
    If you are asking me today if we are handling interrogation 
within the proper norms and bounds, the answer is yes. If you 
are asking me today if I would like to get more information 
from some of our captives that I still think have information 
we would like to have, the answer is yes. And if you asked me 
would I like to have more captives tomorrow to interrogate, the 
answer is yes.
    Senator Warner. Let's take it to one last subject. When 
you're given the option that you could transfer this prisoner 
to another nation, recognizing that nation employs methods 
different than we, how would deal with that?
    Director Goss. I would require safeguards, if that captive 
were going back, either as a non-interrogee or as an 
interrogee. If that individual is being returned to a nation, a 
judgment should be made that nothing beyond, I would say, due 
process punishment, if that is deserved, would happen to that 
individual, even though they may not have the same standards in 
that nation.
    As you know, many nations will claim their citizens back. 
And we have a responsibility of trying to ensure that they are 
properly treated. And we try and do the best we can to 
guarantee that. But, of course, once they're out of their 
control, there's only so much we can do. But we do have an 
accountability program for those situations.
    Senator Warner. Thank you.
    Chairman Roberts. Senator Bayh.
    Senator Warner. I hadn't finished.
    Chairman Roberts. I beg your pardon.
    Senator Warner. Could the witness from the Department of 
State give their perspective from their department?
    Chairman Roberts. Certainly.
    Ms. Rodley. Thank you, Senator Warner.
    One of our key policy goals in Iraq, obviously, has been to 
build and to build up institutions in Iraq--government 
institutions, government services--that will adhere to the rule 
of law. This is a long-term process. Mr. Goss's agency has been 
involved in this project with us in the stand-up of the new 
Iraqi intelligence service.
    It's a long-term process, obviously. But we are, of course, 
heartened by the results of the election in Iraq. And we are 
following closely the formation of the new government there. 
And we are hopeful that the new government in Iraq will be a 
government that respects the rule of law, and that the Iraqi 
people, who suffered horribly for a long time under a brutal 
dictatorship, won't be subject to the kind of abuses that 
routinely went on under Saddam Hussein.
    So I wouldn't automatically assume that detainees turned 
over to the Iraqi services now would suffer the same fate that 
has been the case very commonly in the past.
    Senator Warner. But, Mr. Chairman, if I could just ask a 
question for the record, such that they can, I guess, given my 
time's up, have to answer for the record.
    But I'm following carefully initiatives by Secretary of 
Defense Rumsfeld as he begins to augment his gathering of 
intelligence which he deems essential. And, frankly, thus far, 
in my examination, he's acting within the guidelines of the 
law, including the newest law that passed the Congress, in 
establishing a greater ability to collect, I think, largely 
tactical intelligence.
    And if the Director would provide for the record his 
views--because I'm sure you're following this--as to whether or 
not you're of the mind that he is acting within the bounds of 
the law and not in any way conflict with the objections of the 
new law in establishing these units.
    The distinguished Chairman and Ranking Member have begun to 
look at this. We both, our Committees, have had hearings or 
briefings on this subject. And it's a matter of active 
consideration here in the Senate side.
    Director Goss. If I'm permitted----
    Senator Warner. You'll have to take it for the record, 
because I don't want to interfere.
    Director Goss. I'm very happy to answer if the time is 
permitted.
    Chairman Roberts. Let me just say that the distinguished 
Chairman has asked the question that I was going to ask in 
reference to the encroachment stories that we have been seeing, 
both in reference to the FBI and the Department of Defense, in 
augmenting their intelligence operations in cooperation with 
you. You don't look encroached upon as of this morning.
    And that we have had a hearing with Admiral Jacoby and with 
Dr. Cambone in the Intelligence Committee about Title 10, Title 
50, and the legalities involved. They have, in fact, kept the 
Committee informed through the staff and through this hearing, 
but I do think that if you could submit that answer to the 
record, you know, for the Chairman, I think it would be very 
helpful, because I think this is a subject we're all interested 
in.
    Senator Warner. Thank you, Mr. Chairman.
    Director Goss. Mr. Chairman, Mr. Chairman, I am completely 
comfortable with where we are in terms of forward-leaning 
efforts by all of the elements in the intelligence community to 
do the best they can with the missions that we have been 
assigned. It is quite clear to me that there has been a lot of 
speculation and RUMINT and so forth, and comment in the paper, 
which is unfounded or badly founded.
    The truth is that I believe that the efforts that the 
Department of Defense is trying to undertake are entirely 
appropriate. They are looking forward to the best ways to get 
the information they need to accomplish their objectives with 
the maximum protection for their warfighters. I think that is 
excellent.
    What it involves is some coordination overseas and some 
understanding about who's doing what where. I go to the analogy 
that the leader of our country team in any overseas situation 
is the Ambassador, the chief of mission, that the person who is 
normally in charge of intelligence, all intelligence 
activities, is the representative of the Central Intelligence 
Agency.
    That does mean there's no other intelligence going on 
except under the Central Intelligence Agency's immediate 
direction. It means it's coordinated there. And I believe that 
we understand that. Those details, in some cases, yet to be 
worked out, because there is forward-leaning, which we have not 
seen forward, which is entirely appropriate.
    I can say on the domestic front exactly the same thing. 
There have been a lot of stories about who is doing what. There 
is no question that the intelligence community has the 
experience to do--it's the National Foreign Intelligence 
Program overseas. There's also no question that occasionally 
agencies like the FBI need to be overseas doing things that 
they do very well in pursuit of their role in counterterrorism. 
We ask that it be coordinated.
    Equally, I think that the FBI wants to be assured, as do I, 
that we are not usurping our authorities in the domestic 
homeland. We all know Americans do not spy on Americans. And 
that is our absolute pledge. It is equally true, however, we 
need some support. And we do have a support base that we use in 
the United States. It is critical that we keep that coordinated 
with Director Mueller.
    These are questions of working out details. Perhaps a DNI 
would have done it faster than we are doing it. But I frankly 
think we're doing it quite well, considering we've got 15 
agencies doing very intense things that we haven't done before.
    I realize that the DCI, which is one of my titles, is an 
endangered species. But I will be handing off my thoughts to 
the DNI. And my thoughts are forward-leaning by all agencies is 
good, and we can coordinate it and make it work.
    Senator Warner. Mr. Chairman, I'm very impressed by the 
responses you've given to both of my questions. I wish you 
well, and we're fortunate you've taken on this task.
    Director Goss. Thank you, sir.
    Senator Warner. You could have been basking in that sunny 
clime of Florida.
    Director Goss. Thank you, Senator.
    Chairman Roberts. Senator Bayh.
    Senator Bayh. Senator Warner, sometimes the heat in 
Washington is just as warm.
    Thank you very much, all of you, for your service to our 
country. I really do appreciate it. These are issues of 
profound importance, the resolution to which is often not 
clear. I wouldn't be surprised if all of you didn't lose a 
significant amount of sleep over your service to our country 
and dealing with what you're dealing with, so I thank you for 
that.
    I also apologize, Mr. Chairman, to you and the panel for 
having to shuttle back and forth. Alan Greenspan, Chairman 
Greenspan, was testifying before the Banking Committee today, 
so we are trying to simultaneously deal with our Nation's 
economic security and prosperity and our physical security 
here. So I apologize for my absence.
    Let me begin by asking a question that involves 
credibility. And I want to make very clear that it doesn't 
involve personal credibility. No one would question any of your 
personal credibility. But I think we do have a national 
credibility problem.
    And so what I want to ask specifically is, for the 
Americans watching us today and hearing about assessments 
involving Iran and North Korea and what is maybe going on there 
that could be threatening our country, what has improved over 
the last couple of years since the assessments about weapons of 
mass destruction in Iraq that would give greater assurance to 
the American people that what we're hearing today is accurate?
    Without getting into obviously classified specifics, have 
our collection capabilities improved significantly? Have our 
analytical capabilities improved significantly? Why should 
people place, you know, credibility behind what we're saying 
here today, given the history with regard to WMD in Iraq?
    Director Goss. That's actually the perfect question, and 
that's what we do. That's, I think, why we all go to work.
    How do we take what we were using and make it better and 
more appropriate? And I think I can report back that we have 
more collectors, better technology being properly applied and 
more focused in the application, more analysts who understand 
the language, who understand the pitfalls of group-think, more 
systems that put this together to make the information come out 
more timely, more flexibility in our systems to deal with 
problems as they pop up--and the nature of our enemy is pop-up, 
quite often--and a greater understanding of each other's 
problems.
    We have all walked a little in everybody else's shoes, and 
I think we see it a little differently. And I think that that's 
been a helpful exercise. We need to get on with the 
architecture of what the community is going to look like, and 
we need to make sure that each unique contribution of each of 
the elements of the community is provided for in a way that it 
is still unique and adding value to the total product.
    I think that we are moving well.
    Senator Bayh. Are we encouraging contrarian analysis? You 
mentioned group-think.
    Director Goss. Indeed, we are. And we're publishing it, 
too, right on the same page.
    Senator Bayh. Any of the rest of you care to comment about 
capabilities having improved? If not, that's OK, too.
    Admiral Jacoby. I'd like to just echo the Director's words 
and talk about a couple of other things, processes, processes 
that you bring, you know, the different views together, 
processes that have made more sourcing of information available 
as we go to community products, and in my agency, a tremendous 
emphasis on training and retraining all the way through the 
senior levels to make sure that we are reinforcing good 
analytical, logical source utilization kinds of capabilities 
that are available to us.
    Senator Bayh. Thank you.
    Yes, Director Mueller.
    Director Mueller. I would say our capabilities have 
dramatically increased. We had a little bit over 1,300 
counterterrorism agents before September 11th. We now have 
3,000-plus. We've established an intelligence directorate which 
has a total complement of 3,787. Of those, 438 are agents, 490 
translators, 2,273 analysts.
    We have, in each of our field offices, a field intelligence 
group that was not there before. Our ability to obtain the 
intelligence, analyze the intelligence, and getting the 
intelligence to the operators has improved dramatically since 
September 11th.
    Senator Bayh. One of the things I think we've all realized 
is that in some of these areas there is just an irreducible 
level of ambiguity. And we try and minimize that, but in some 
of these areas it's still there. And so a certain level of 
humility in reaching conclusions is, I think, in order in all 
of our parts.
    Let me ask you about North Korea and what you assess to be 
the likely reaction to our current strategy in North Korea and 
the role that China might play. But let me back up for a 
second. At least in 2000, with regard to their plutonium 
effort, it seemed to have been in stasis. Now they may have 
been cheating on the uranium side, but cameras were in place. 
Those have been removed. Inspectors were in place. Those have 
been removed.
    There were published reports that plutonium has been 
reprocessed and possibly devices have been created. There are 
even published reports that perhaps in some other areas they 
may have proliferated. This is not a happy course of events 
over the last several years, and at least the initial strategy, 
which seemed to be threaten and ignore, does not seem to have 
worked too well.
    Now we currently have a strategy of engagement through the 
6-party talks, trying to encourage the neighbors to take charge 
of their own neighborhood. My question is: What do you assess 
the North Koreans' likely response to be to our current sort of 
sticks and carrots approach, number one? And number two, might 
a cynic not think that China, which is in a very good position 
to be helpful on this, that there might be an interest there in 
not resolving this problem, because as long as North Korea is 
there and of concern to us, that gives them leverage over us in 
a variety of other areas.
    So, my question is, what do you assess the likely response 
of North Korea to our current approach? And second, how do you 
assess the role that China will play in trying to reach a 
positive conclusion?
    Director Goss. I'm going to try and avoid a policy comment.
    My view is that we are seeing what is the traditional 
bluster diplomacy by North Korea, trying to threaten something 
terrible and get something concrete back. They're dealing with 
nothing to get something, and they do it very effectively. And 
this has been their MO, in my view.
    As to their response, I think that their responses are 
predictable. They are going to continue to do what they want to 
do. Their number-one goal is survivability of the regime. And 
that is where they are going to go. And whatever it takes, 
that's what they'll do. How ridiculous they look on the world 
stage does not seem to bother them.
    Senator Bayh. Forgive me for interrupting, Director. Is 
there anything, in your estimation, or anybody else's 
estimation, that could convince them that the survival of their 
regime--since that's their top priority--is inconsistent with 
the creation and possession of nuclear weapons? They seem to 
have concluded that those two things have to go hand-in-hand. 
What, in your estimation, could lead them to a different point 
of view?
    Director Goss. I do not know the answer to that question. I 
just simply don't have that information. I could make a guess 
and say for them to be relevant, they feel that they have to be 
in the nuclear club.
    There is another aspect that's practical. That's the way 
they make their money. Their bread-and-butter money is selling 
this stuff, proliferating.
    The Chinese response that you ask, I think the Chinese 
understand they have got a very troublesome child right there 
in the nest of the family, and they can't go anywhere. The real 
estate's not going to change. They've got to deal with the 
problem.
    They have border problems, refugee problems, all kinds of 
things. I think the Chinese are genuinely interested in not 
having this be a worse problem. Now, I'm not going to practice 
diplomacy. I'm going to yield to the Department of State. Much 
of that was my personal view, not an informed intelligence 
response.
    Senator Bayh. Thank you, Director.
    Ms. Rodley. I'm just going to pick up on that point about 
the Chinese. We agree with that assessment, that the Chinese 
are genuinely interested and have concluded that it is in their 
interest to resolve the problem with North Korea. We don't see 
any indications that they think it is somehow in their interest 
in dealing with us to have North Korea continue to be a 
problem.
    Senator Bayh. But they seemed to be in denial for such a 
long time, I'm glad they finally found religion on this issue.
    Just two quick things, just very, very quickly.
    Hizbollah, you report their capabilities in terms of 
striking U.S. interests, if provoked. Should we assume that if 
it was ever in our national--if we ever felt compelled to act 
against Iran, that might be the sort of triggering event that 
we would have to anticipate, Hizbollah taking some sort of 
action against us?
    Director Goss. I would certainly recommend that any 
policymaker considering that take that calculation.
    Senator Bayh. My final question is with regard to FARC, 
kind of looking out beyond the horizon. Any assessment by any 
of you about--obviously, they have capabilities of striking our 
interests in Colombia. Are you at all concerned about their 
potential for striking us here in the homeland?
    Director Goss. Well, I used to represent southwest Florida. 
And I have perhaps a different view than others. But I do feel 
there is an immediacy to making sure we understand what is 
going on there. There are, obviously, dialog and communications 
going on between the countries. That means there can be between 
the bad players. And I think it's very important for our law 
enforcement people to be absolutely on top of that. And, as far 
as I know, they are.
    Senator Bayh. Director Mueller.
    Director Mueller. We have not seen, I do not believe, any 
indications or preparations for FARC to launch an attack in the 
United States. However, there are ties between individuals 
associated with FARC and persons in the United States. And 
they're something we have to keep an eye on.
    Senator Bayh. Thank you. Again, I appreciate your service. 
Thank you all.
    Chairman Roberts. Let me just say that, in reference to 
Senator Bayh's comment, if Kim Jong-Il would suddenly get 
religion, having been to North Korea and trying to deal with 
that regime in regards to the famine--and they always have a 
famine, but it was a more severe famine several years ago--he 
is the religion. He is a deity in his own mind, and the people 
believe that, as was his father. So it's a little difficult.
    And I would agree with Director Goss. That's the only card 
he has to play on the world stage, and they're going to play 
it. And they're going to continue. I still think our best 
opportunity is to do exactly what the Director said with China 
in the 6-party talks. But I have no illusions of all of a 
sudden him getting a light bulb to go off. They don't have any 
light bulbs, by the way, in North Korea.
    And following on your statement, I'd like to ask a question 
about Iran. And by your statement, I mean Senator Bayh.
    Admiral Jacoby, your written statement says that Iran is 
likely continuing nuclear weapon-related endeavors, is devoting 
significant resources to its WMD programs, and that, unless 
constrained by a nuclear non-proliferation agreement, Tehran 
will probably have the ability to produce a weapon early in the 
next decade.
    Director Goss, your statement notes that the CIA is 
concerned about the dual-use nature of the technology that 
could also be used to achieve a nuclear weapon.
    Ms. Rodley, your statement notes that Iran seeks, but does 
not yet have, any nuclear weapons.
    It sounds like to me you all agree that, just like Iraq 
before 2004, Iran has troubling dual-use nuclear capabilities. 
What I'm interested in, and both the Vice Chairman and I want 
to get into capabilities and whether or not we have the 
capabilities to determine some intelligence analysis on intent. 
As far as Iran's intent to build a nuclear weapon, it sounds 
like there might be a difference of opinion between you three. 
I'm not suggesting that, but at least that might be the case.
    I would ask all three of you to give us your assessment of 
Iran's intent, to characterize your confidence in that 
judgment, and if you feel that should be better handled in a 
classified section, I certainly appreciate it.
    Director Goss. Mr. Chairman, I would limit my answer. I 
think there is something I would say that is obvious. There are 
other players in the neighborhood that are very concerned that 
also have views about what Iran is up to. And it's important 
that we understand what that might lead to.
    I believe that, having watched the pride of some countries 
in acquiring the world-stage status of having nuclear weapons 
and what that has meant for nationalism and leadership, is that 
it becomes almost a piece of the holy grail for a small country 
that otherwise might be victimized living in a dangerous 
neighborhood to have a nuclear weapon.
    So, in my view, there is an inclination, a very strong 
inclination, by the conservative leadership, present 
conservative leadership of Iran to make sure that they can live 
up to the same levels as some of their neighboring countries. 
And some of those neighboring countries--indeed, Pakistan comes 
to mind--have the bomb.
    Chairman Roberts. Admiral Jacoby.
    Admiral Jacoby. I would join Director Goss, in terms of the 
intent part. We did some work recently looking at the direction 
that threats were going. And they are going away from 
conventional force-on-force confrontation strategy with the 
United States toward terrorism on one end and nuclear weapons 
and not only the status, but the perceived deterrent value, 
that comes with them.
    So I would join the Director, in terms of intent in Iran, 
and would also say that we're engaged in a hard look at 
sequentially nuclear programs or suspected nuclear programs in 
various countries. Iran is next on our agenda, and I believe 
that our look and the Committee's look will probably coincide. 
And we look forward to working that together.
    Chairman Roberts. Ms. Rodley.
    Ms. Rodley. I don't disagree with anything that's been 
said. I would merely add that another element that makes this 
harder to get at is the advantage of ambiguity when it comes to 
nuclear programs.
    In a sense, the Iranians don't necessarily have to have a 
successful nuclear program in order to have the deterrent 
value. They merely have to convince us, others and their 
neighbors that they do. This is a lesson that hasn't been lost 
on them, and it merely complicates both the collection and the 
analysis on this issue.
    Chairman Roberts. I thank all three of you for your 
comment.
    I'm enjoying the red light--I'm now a member of the red 
light club. Have patience, Senator Wyden.
    This is a parochial question, but it's really not. It's a 
national question. Tommy Thompson, the former secretary of HHS, 
left and said his was worried about the Nation's food supply. 
And all of us who are privileged to represent States who are 
involved in agriculture were asked time and time again--I just 
heard it again on the radio as of yesterday. I'm not sure why 
Tommy said that.
    But, at any rate, Admiral Loy, can you tell me how the 
Department of Homeland Security views the threat of what we 
call agroterrorism. The Emerging Threats Subcommittee of the 
Armed Services Committee 4 or 5 years ago got into this subject 
area, knowing how serious it could be, but not many people were 
really thinking about it.
    They had an exercise, or one of the many exercises that has 
been held, called Crimson Sky. Six States were infected by 
foot-and-mouth with an attack from Iraq. Devastating results 
happened, utter chaos. We lost our markets. The herds had to be 
destroyed. People panicked in urban areas. Our food supply 
was--and I'm not talking about 1 year. I'm talking several 
years.
    So are those efforts now really being coordinated well with 
other agencies, specifically the Department of Agriculture? Are 
you getting the intelligence you need? What kind of a priority 
are you putting on this? This is sort of the Mikulski port/
Roberts agriculture question.
    Admiral Jacoby. Yes, sir, Mr. Chairman.
    Without a doubt, the Homeland Security Presidential 
Directive 7 first of all directs the Secretary of Homeland 
Security to be the collaborate effort to pull together the 
critical infrastructure protection of our Nation writ large. 
One of the economic sectors cited in that directive is the food 
sector. And so that has caused the Secretary of Homeland 
Security to challenge that designated lead-sector agency in the 
Department of Agriculture to develop a plan attendant to 
becoming a piece of this puzzle that will be the additive piece 
for food, as it relates to the whole critical infrastructure 
protection of our Nation.
    So there has been very good work undertaken with the 
Department of Agriculture in agricultural operations, the meat-
poultry-eggs world, and in the HHS/FDA world responsible, if 
you will, for the rest of the food production and distribution 
chain that they're responsible for.
    We're at a point where this critical national 
infrastructure protection plan, the base plan, has been 
completed and submitted to the White House. Each of these 
sector plans, we have taken stock--we at the Department have 
taken stock of how we felt their original plan submission met 
the specifications that were outlined in HSPD-7 and have 
offered that commentary back to, in this case, the Secretary of 
Agriculture, with a bit of a challenge to go back to the 
drawing boards a bit and resubmit such that the thresholds are 
reached with what we think are the right concerns to allow not 
only that to be a free-standing sector and plan attended to 
food protection for our country.
    Chairman Roberts. OK. When did you send that over?
    Admiral Jacoby. That's back just before the holidays, sir.
    Chairman Roberts. So that would be under the auspices of 
the new Secretary of Agriculture, obviously. How many people do 
you have on board in regards to homeland security that either 
are on loan from, or consulting with, or are a regular employee 
that are dealing with this? I know that's a tough question to 
ask you right here. I think I know the answer. There's one, at 
least that I know of.
    Admiral Jacoby. There's one as a detailee, if you will, 
into the Department in this business.
    Chairman Roberts. Yes.
    Admiral Jacoby. And, of course, we've got those elements 
from Agriculture that came into the border portal validation 
process.
    Chairman Roberts. Yes.
    Admiral Jacoby. But the effort is to allow the Agriculture 
Secretary to take the lead with respect to developing these 
plans for our country and make sure that they fit well, because 
we could have 13 perfect plans, and I'm convinced that it's the 
interdependencies between and among them that are the real 
challenge.
    Chairman Roberts. It's a very hard thing to develop a 
contingency plan to try to mitigate this. Well, OK, I'll stop 
at that point, because I've already gone way over my time. But 
I need to visit with you and the new Director about this as we 
can determine.
    Chairman Roberts. Senator Rockefeller.
    Vice Chairman Rockefeller. Director Goss, just a very 
specific and one short question. Before the election, we went 
up a color.
    Director Goss. I'm sorry?
    Vice Chairman Rockefeller. On imminent threat, we went up 
from yellow to orange, and nothing happened. And there has been 
no talk or consideration, at least that I'm aware of, of 
similar elevations since then. I'm wondering if, to the extent 
that you're involved with it, sir, to the extent that Homeland 
Security, FBI is involved with it, has there been attempt to go 
back and review the nature of that intelligence and whether or 
not it was a psychological move or whether--I don't mean by 
that political. I mean psychological simply as a warning to 
others--or whether it was, in fact, justified. Has there been 
an effort to go back and re-look at that intelligence?
    Director Goss. Senator, in part, the answer's yes. I don't 
know all of the things that have been looked at. But part of 
that, and again, I'm not--that's not my decision area. We 
provide the information. Part of that, I think, was an 
assessment of the Usama bin Ladin statement that came out, that 
there was a question, was that trying to interfere, and some of 
the questions of propaganda began to really take shape. Exactly 
how that figured into the decisions that were made by others on 
raising the elevation, I don't know.
    Have we gone back and taken a look? The answer is yes. And 
I'll tell you why. One of the things that Senator Bayh was 
pointing out--I should have answered and I neglected to--is 
that we have learned the difference between a worst-case 
scenario and a most-likely scenario. We need to be very careful 
how we need to present these things so people are hearing 
things not as worst-case scenarios, but as most-likely 
scenarios, if that's what we believe.
    We find that, when the chatter level goes up--that's an 
expression we like to use because it sort of covers up what 
we're really talking about--but it means there's something to 
be tuned into. All of our sensors out there, the system is 
blinking red, all of those kinds of statements that we've 
heard. What it means is that we're getting a huge flow of 
information.
    The problem is, how much of that is just wishful thinking 
and how much of it is real planning? That is a very hard 
question to make a judgment on. We are going back, as part of 
our process of how do we get our product better, how do we make 
sure our customer understands what we're saying.
    And that process is very clearly part of the overall 
process that Senator Bayh was asking about. Are we attending to 
correcting not only the collection piece, but the analytical 
piece, including operators, incidentally, when they're 
available?
    Director Mueller. I think there has been an effort to go 
back and look at the--well, we continuously review the threat 
posture day in and day out. And I convinced, given the 
information we had at the time, that we made the right 
decision, in terms of the actions we took, given the 
intelligence at the time.
    Subsequent to that there has been further development in 
that intelligence that may call into question at least some of 
that intelligence. But you also have to reflect upon the fact 
that we had al-Hindi, we had the surveillance documents, the 
Prudential, the stock exchange, a number of things back in this 
time prior to the election, along with intelligence that 
indicated that we can expect a threat or an attack in that 
period before the election.
    As I indicated in my opening statement remarks, we 
undertook substantial efforts to assure that such an attack did 
not take place. We will never know whether those efforts, our 
efforts, the efforts of the CIA, the efforts of DHS, the 
efforts of our counterparts overseas, were effective in 
reducing or removing that threat of an attack before the 
elections.
    But in reflecting upon what we knew at the time, I believe 
that we took the right steps. That doesn't mean that we can't 
do it better the next time, but I'm comfortable with the 
decision that was made back then.
    Admiral Loy. Sir, I think that's a very good capture of the 
time. One thing I would offer is that, over the last 2 years 
and certainly in the last year, where we are with respect to 
capability, where we are with respect to stature of an 
interagency security plan that we keep track of day after day 
after day, I would offer that today's yellow is probably much 
closer to yesterday's orange as it relates to the constancy of 
capability that is there 24 by 7/365 around our country.
    So we have simply grown and matured, both as a brand-new 
department trying to coordinate and collaborate on many of 
these things. And the absolute value of some of the 
contributions that are being made by many yield an attitude, if 
you will, that has the country sort of at a level significantly 
stronger than it ever was before.
    That offers us a chance to keep from the going up and down 
road, so to speak, when the net evaluation of all the players 
at a SVTC or a series of weekly and daily meetings that we 
conduct, rates the flow going by as not being ``worthy'' of 
adjusting the homeland security advisory system to a greater 
level.
    I think the country should take great assurance that the 
level of capability attendant to these things is significantly 
higher day after day after day. And that simply is a result of 
us learning lessons going back from each of the experiences of 
up-and-down that we've undertaken and then ratcheting up, as 
appropriate, the prevention, the protection, and the response 
capabilities of the Nation across the board.
    Vice Chairman Rockefeller. I thank you.
    Chairman Roberts. Let me just say--and Senator Wyden, I'll 
have to buy you lunch or something or, for that matter, 
probably all of you, but we don't need to get in any food 
depravation here. And so I'll try to make this quick. I hope 
there's a look-back on this.
    Admiral Loy. Indeed, there is.
    Chairman Roberts. The same people, same table, same threat, 
no consensus before our Committee in regards to access to 
information. That was the problem. Same representatives 
testifying before us that you're in charge of, that do this on 
a day-to-day basis. And then, 30 days later, a lot of questions 
about the credibility of the sources.
    Now, if you're going to err, you're going to err on the 
side of safety, for goodness sakes. I know that. And if you 
take certain steps, you can't come back. We even had one 
Senator leave this place as a result of this. He did come back. 
But I'm saying that the leadership and this Senate and this 
House were informed in such a way with a very aggressive kind 
of consensus that was not shared when we had them before the 
Committee.
    That's not been too long ago. And then, 30 days later, 
because of detainee information that's been so highlighted 
here, why, then we decided, well, you know, we just didn't have 
a consensus. Now, damn, that's got to quit. Now I know that you 
can't have every source and have a consensus threat analysis 
that's perfect. I'm not asking that.
    But at the time, when you had the same people at same 
table, you know, one of my questions is, do you people know 
each other? And again it was information access. Now I feel 
very strongly about that. And I think it was a classic example 
of why you have to go back--the Vice Chairman calls it red 
teaming--and take a look at this, and say, well, what in the 
heck went wrong? Because we panicked, the entire Congress, not 
to mention Washington, DC., so on and so forth.
    Thank God it didn't happen. You know, maybe I'm wrong. 
Maybe there was an element there that we missed. But it 
certainly was not present in regards to the presentation that 
we received.
    Senator Wyden.
    Senator Wyden. Thank you, Mr. Chairman. As you know, I 
share your concerns about this whole question of how 
information is shared, and that's one of the reasons I raised 
the questions I did on the last round.
    I'd like to go into another area, though, that goes to the 
heart of what I think the challenge is in America. I believe 
strongly in the proposition that our country has got to fight 
terrorism relentlessly and ferociously. And it's got to be done 
in a way that's consistent with protecting the privacy of law-
abiding people, innocent people.
    Now it's been 2 years since the Congress closed down the 
Operation Total Information Awareness program, but the Congress 
is still totally in the dark with respect to what kind of 
information your agencies collect on citizens and how it's 
used. And I want to be very specific and talk about data 
mining.
    Data mining, by the way of shorthand, is essentially 
technology that your agencies use to sift through the records 
and information that involves millions and millions of American 
citizens. I can't find any rules on data mining anywhere.
    And so what I'd like to ask each of you is, what do your 
agencies do with respect to data mining, A? B, are there any 
rules at all? And, C, how are the rules enforced? Because I've 
spent a lot of time on this. And I cannot find any rules at all 
on data mining.
    So maybe if we just go right down the row.
    Admiral Loy.
    Admiral Loy. Sir, you and I have spoken about this a lot, 
as it's been perhaps 18 months or 2 years ago associated with, 
at that point, the Computer Assisted Passenger Pre-Screening 
second program, then known as CAPPS II. As you know, I have 
worked very, very hard to work with the privacy community and 
with many others attendant to recognizing what then became a 
list of eight absolutes that the GAO report initiated for CAPPS 
II and is now ten items that the Congress put in the 
appropriations bill last year for this department, attendant 
to, ``You're not going any further with CAPPS II--and it's now 
Secure Flight, the new program--until all ten of those concerns 
that we have as a Congress are taken care of.''
    We have very diligently gone to great lengths to explore 
each and every one of the eight, each and every one of the now 
ten, and are right on the cusp, I believe, of satisfying the 
Congress and satisfying GAO that it is the right thing for us 
to press on with that particular program, because it has come 
to represent three things.
    Senator Wyden. Admiral, are you saying that that's the only 
program that involves data mining at your agency? I appreciate 
what you've tried to do, and you've certainly been a 
straightshooter on it.
    What I'm concerned about is whether there are any rules 
with respect to data mining generally. I do know what happens 
when Congress picks up on one thing or another and suddenly the 
travel records get out on somebody. You all work with us. We 
try to get something to deal with that specific problem. But I 
don't see any rules with respect to data mining generally. And 
that's what troubles me.
    Admiral Loy. I do not have a management directive in force, 
if you will, in the Department that I'm aware of covering data 
mining.
    Senator Wyden. Are there plans to do that?
    Admiral Loy. I'll be happy to take that on and work with 
you, sir.
    Senator Wyden. All right. Let me just go right down the 
row. We've established at least one agency, other than the 
computer-assisted travel records, doesn't have it.
    Yours, sir?
    Admiral Jacoby. Senator, we have very clear, definitive 
restrictions on what the Department of Defense can do with 
respect to having any information having to do with U.S. 
persons in our files. And those are very conservative 
interpretations and they are regularly inspected by inspectors 
general at all levels inside the departments.
    When we apply data mining tools against the information 
that we have available, there's no U.S. person's data in there 
to begin with. So it's a bit different situation than maybe 
some of the other departments.
    Senator Wyden. So you get no data, for example, from non-
governmental sources, sir?
    Admiral Jacoby. We are not permitted to maintain 
information on U.S. persons, sir.
    Senator Wyden. OK.
    Director Goss.
    Director Goss. As you know, the National Foreign 
Intelligence Program was specifically set up to make sure that 
Americans do not spy on Americans and our work is done 
overseas. And I think that the proposition you have given us is 
one that, when I left Congress, was still red-hot after a 
couple of years of debate, which I think will go on. And that 
is the crossroads between privacy and protection.
    As far as I know, our agency is not a relevant agency to 
answer your question, because we don't do data mining on U.S. 
persons unless it's under some safeguarded procedure which is 
properly notified and so forth.
    Senator Wyden. That's what I'm curious about. I know there 
are areas where you do it, and I'm wanting to know what the 
safeguards are. You're saying you don't do----
    Director Goss. The safeguards are notification of this 
Committee, sir.
    Senator Wyden. Director Mueller.
    Director Mueller. Well, we have one entity in the 
counterterrorism area called the Foreign Terrorist Tracking 
Task Force that, accomplishes certain data--I wouldn't call it 
data mining, but requesting from sources outside the Bureau 
information relating to possible locations of terrorists in the 
United States. And that has been briefed to Congress on a 
number of occasions. It's transparent. We're happy to have you 
come over and brief on it.
    Senator Wyden. That's the only set of rules you have with 
respect to data mining?
    Director Mueller. Well, it's not the only set of rules in 
terms of data mining. You're definition of data mining----
    Senator Wyden. That's what I'm asking.
    Director Mueller. We have information that's brought into 
the Bureau.
    Senator Wyden. Right.
    Director Mueller. When information is brought into the 
Bureau, it's brought in on predication. We have some reason to 
bring the data in. It may be telephone numbers. It may be 
addresses of potential terrorists. Now, we data mine that data. 
But it's data that we have a basis for bringing into our 
databases, whether it comes from our cases or from the 
collection of intelligence that is based on adequate 
predication.
    Senator Wyden. The reason I'm asking the question is that 
there are a lot of people in this country who believe that a 
lot of this information, you know, data mining, takes place 
without predication. And that's why I'm trying to figure out 
what the rules are. And I'm going to let Ms. Rodley answer the 
question. Then I'm going to ask something of all of you, and 
let my colleagues wrap up.
    Ms. Rodley. Senator Wyden, as you know, the State 
Department is not an intelligence collection agency. To my 
knowledge, the only information that we collect and maintain on 
American citizens is passport information. And passport 
information is held very closely and has a very strict set of 
rules regarding its use. I believe, but I will confirm to you 
later, that that's restricted to use for notifying next-of-kin 
when an American citizen is injured or dies abroad and 
cooperation with law enforcement.
    Senator Wyden. Thank you.
    What I'd like from each of you is to confirm in writing 
what policies exist with respect to the sifting of information 
on Americans. And I would like it also to include how 
information is used, if it's used at all--and I understood that 
the Pentagon they had nothing--how it's used when it comes from 
non-governmental agencies where there, I think, is really the 
Wild West.
    I mean, it's one thing if it comes from a Government 
agency. It's quite another if it comes from a non-government 
body. And having spent a fair amount of time digging into this 
area, I can't find what the ground rules are for data mining.
    Can I ask, then, that each one of you will get us the 
ground rules you use for data mining within the next 30 days?
    Director Goss. Absolutely, sir.
    Senator Wyden. Thank you, Mr. Chairman.
    Chairman Roberts. We thank you for your patience, your 
perseverance and your commitment to our country. Thank you very 
much.
    This hearing is adjourned.
    [Whereupon, at 1:17 p.m., the hearing adjourned.]
  

                                  
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