Before I talk about specific threats, I want to raise an issue of immediate importance for the functioning of the Intelligence. Community and protection of the nation. The authorities granted by the Protect America Act (PAA) — which temporarily closed gaps in our intelligence collection and allowed the Intelligence Community to conduct foreign intelligence surveillance—are critical to our intelligence efforts to protect the Nation from current threats. Briefly, some of the most important benefits include:

• Better understanding of international al-Qa’ida networks;

• Greater insight into future terrorist plans that have allowed us to disrupt attacks;

• More extensive knowledge of instructions to foreign terrorist associate about entering the United States;

• Information on efforts to obtain guns and ammunition;

• Knowledge on terrorist money transfers.

Expiration of the Act would lead to the loss of important tools the Intelligence Community relies on to discover the plans of our enemies. As reflected in your Committee report, merely extending the PAA without addressing retroactive liability protection for the private sector will likely have farreaching consequences for the Intelligence Community. At the request of members of Congress, I have provided letters discussing these matters in greater depth. I know that this bill required intense, sustained hard work of the Committee's Members and staff in a very technical and complex area to ensure a product that reflected member concerns raised about the Protect America Act, but preserved key operational needs of speed and agility in tracking hard to find enemies intent on harming our country. Over the past several weeks, proposals to modify the Senate Intelligence Committee bill have been discussed and I would ask Members to consider the impacts of such proposals on our Nation's Intelligence Community and its ability to warn leaders of threats to our Homeland and our interests. As my testimony will describe, the threats we face are global, complex, and dangerous; we must have the tools to enable the detection and disruption of terrorist plots and other threats. For almost two years, senior leaders of the IC have testified in both open and closed hearings about the critical role of private parties in ensuring our citizens are safe, and the need to provide liability protection to those who provided assistance after the attacks of September 11. If we are not able to address this issue, I believe it will severely degrade the capabilities of our Intelligence Community to carry out its core missions of providing warning and protecting the country. In turning to the threats, the judgments that I will offer the Committee in these documents and in my responses to your questions are based on the efforts of thousands of patriotic, highly skilled professionals, many of whom serve in harm’s way. I am proud to lead the world’s best Intelligence Community and pleased to report that it is even better than it was last year as a result of the continuing implementation of reforms required by the Intelligence Reform and Terrorism Prevention Act of 2004. This Statement is, in part, a product of our moving forward with the transformation of US intelligence, including more innovative and rigorous analysis and wider and more far-reaching collaboration. (…)

RUSSIA AND EURASIA

Coming at a time of uncertainty about Russia’s direction, the Medvedev-Putin “cohabitation” raise questions about the country’s future and the implications for Western interests. While many of the essential features of the current system are likely to endure, including weak institutions, corruption, and growing authoritarianism, we will be alert for signs of systemic changes such as an indication that presidential powers are being weakened in favor of a stronger prime minister.

ELEMENTS OF RUSSIA’S REVIVAL

We judge the Russian economy will continue to expand under a new leadership, although at a slower rate than over the last eight years, given capacity constraints, the slow pace of institutional change, the impact of real ruble appreciation, and developments in the international economy. Negative longer term demographic challenges loom and investment will remain a significant constraint, particularly in the energy sector. Other elements of Russian national power—from trade and energy, to diplomatic instruments and military and intelligence capabilities—are on a path to grow over the next four years. For example, Russia is positioning to control an energy supply and transportation network spanning from Europe to East Asia.
Aggressive Russian efforts to control, restrict or block the transit of hydrocarbons from the Caspian to the West—and to ensure that East-West energy corridors remain subject to Russian control—underscore the potential power and influence of Russia’s energy policy. The Russian military has begun to reverse a long, deep deterioration in its capabilities that started before the collapse of the Soviet Union. Although determined that defense spending not harm Russia’s economic performance, Putin has been committed to increases for defense commensurate with GDP growth that has averaged just under 7 percent this decade. By 2006 the military had significantly increased the number of high-readiness units from 1999 levels, ramped up ground forces training—including mobilization exercise activity—and begun to man its high-readiness units with longer-term “contract” personnel rather than conscripts.
Moscow also is making more use of its strengthened armed forces. A growing number of exercises with foreign militaries and an increased operational tempo in the North Caucasus Military District, often focusing on potential Georgian contingencies, are designed primarily to demonstrate regional dominance and discourage outside interference. Russia has used widely publicized missile launches and increased long-range aviation (LRA) training flights to the Pacific, Atlantic, and Arctic Oceans to showcase Russia’s continued global reach and military relevance.
The military still faces significant challenges, and recent activity does not approach Soviet era operations. Demographic, health problems, and conscription deferments erode available manpower. Strategic nuclear forces remain viable, but Russia’s defense industry suffers from overcapacity, loss of skilled and experienced personnel, lack of modern machine tools, rising material and labor costs, and dwindling component suppliers.

EURASIA AND BALKANS IN FLUX

The other states of Eurasia remain in a state of flux.
Unresolved conflicts in the separatist Georgian regions of Abkhazia and South Ossetia will remain potential flashpoints even if Russia—in response to Western recognition of Kosovo—does not follow through with its implicit threat to recognize the two regions as independent. President Saakashvili’s reelection in January will help renew his democratic credentials and leadership mandate. Elsewhere in the Caucasus, the stalemated Nagorno- Karabakh conflict between Azerbaijan and Armenia continues to produce dozens of casualties annually along the Line-of-Contact. Moreover, Russia’s recent suspension of its Conventional Forces in Europe obligations could lead to similar suspensions by Azerbaijan and Armenia and a subsequent arms race.
Ukraine will continue to experience an unsettled domestic political situation for months to come. The struggle for power between various factions, however, has remained within the political system since the Orange Revolution, decreasing the possibility of violence. Prospects for major political change in Belarus are dim over the next year. Lukashenko’s populist rhetoric, image as the defender of Belarus, and ability to keep the economy stable have maintained his high popularity. Opposition efforts to promote a pro-Western democratic agenda and build support for his ouster have gained little traction.
Central Asian Trends. Central Asia remains fertile ground for radical Islamic sentiment and movements, due to socioeconomic and other factors. In Uzbekistan, President Karimov is intent on retaining firm control, but faces increased public dissatisfaction over a weakened economy and higher commodity prices. He has already demonstrated the willingness to use force against his people and could move quickly to suppress protests. Kyrgyzstan and Tajikistan lack the energy resources of other Central Asian states and have weak economies, but appear relatively stable for now. In the last year, Turkmenistan has shown progress on human rights and has begun to expand contacts with the outside world, but is still recovering from years of isolation.
We judge that the Balkans will remain unsettled in 2008 as Kosovo’s drive for independence from Serbia comes to a head and inter-ethnic relations in Bosnia worsen. Kosovo leaders say they will declare independence early in 2008, a move that could trigger confrontation with rejectionist Serbs living in northern Kosovo and some retaliatory measures by Belgrade. A delay in independence could provoke a violent response from embittered Kosovo Albanian extremists.
Inter-ethnic violence that brings about intervention by NATO-led forces, is possible once Kosovo declares its independence, and any violence could spill over to neighboring states. However Kosovo’s status is resolved, ethnic Albanian minorities in Macedonia and southern Serbia are likely to continue pressing for greater autonomy, and ethnic Albanian extremists will attempt to exploit public discontent and use small-scale violence to rally support for unification with Kosovo. Serbian officials say they will not intervene with the Serbian Army in Kosovo, but they have warned of political and economic responses that would probably harden Kosovo Serb’s rejectionism of independence and hinder Kosovo’s economic development.
Fundamental differences between Bosniak and Bosnian Serb leaders over the ultimate structure of a multi-ethnic Bosnian state, fueled by increasingly strident ethnic rhetoric over the past year, have stymied most reforms required to keep Bosnia on a stabilizing path toward closer ties with the EU and NATO. However, the EU recently initialed a Stabilization and Association Agreement with Sarajevo. The international community presence in Bosnia is set to decline further in 2008. We judge the probability of interethnic violence is low absent a move by Bosnia’s Serb entity, the Republika Srpska, toward secession. Any violence would put pressure on US and NATO forces in the region to assist.(…)

GLOBAL ENERGY SECURITY

Access to stable and affordably priced energy supplies has long been a critical element of national security. Sustained increases in global demand and the interactive effects of energy with other issues have both magnified and broadened the significance of developments in the global energy system. Oil prices in late 2007 were near record levels and global spare production capacity is below the market’s preferred cushion of 3 to 4 million barrels per day (b/d).(…)

CONCLUSION

The issues that we consider here today confront responsible citizens and their governments everywhere. I, my colleagues, and the Intelligence Community we represent are fully committed to arming our policymakers, warfighters, and law enforcement officers with the best intelligence and analytic insight we can. This is necessary to enable them to take the actions and make the decisions that will protect American lives and American interests, here and around the world.


This paper is excerpted from the Annual Threat Assessment of the Director of National Intelligence of United States for the Senate Select Committee on Intelligence, February 5th, 2008