Category: Business

Annual Threat Assessment of the
Intelligence Community
for the Senate Select Committee on Intelligence

Dennis C. Blair
Director of National Intelligence
12 February 2009

February 2009

February 2009

FEBRUARY 2009

INTELLIGENCE COMMUNITY
ANNUAL THREAT ASSESSMENT

UNCLASSIFIED

STATEMENT FOR THE RECORD

Chairman Feinstein, Vice Chairman Bond, Members of the
Committee, thank you for the invitation to offer my assessment
of threats to US national security. As in previous years, the
judgments I offer the Committee in these documents and
remarks 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 would like to
acknowledge the assistance provided by all the intelligence
agencies in preparing this report, in particular the National
Intelligence Council and CIA’s Directorate of Intelligence,
which contributed a substantial portion.

SSCI ATA FEB 2009-IC STATEMENT FOR THE RECORD
Far-Reaching Impact of Global Economic Crisis

Far-Reaching Impact of Global Economic Crisis

Forecasts differ significantly over the depth of the downturn. Industrialized countries are
already in recession, and growth in emerging market countries, previously thought to be immune
from an industrialized country financial crisis, has also faltered, and many are in recession as
well. Even China and India have seen their dynamic growth engines take a hit as they grapple
with falling demand for their exports and a slowdown in foreign direct and portfolio investments.
Governments worldwide are initiating monetary and fiscal stimulus programs designed to
stabilize and recapitalize their financial sectors, cushion the impact of stalling economic activity,
and eventually jumpstart a recovery, perhaps as early as late 2009. The IMF, which recently
released its revised forecast for 2009 projecting an anemic 0.5 percent increase in the global
economy, warns that the risks to the global economy are on the downside.

The financial crisis and global recession are likely to produce a wave of economic crises
in emerging market nations over the next year, prompting additional countries to request IMF or
other multilateral or bilateral support. Since September 2008, ten nations committed to new IMF
programs intended to provide balance of payments support. All face the task of tackling
economic problems in a less benign global economic environment. Unlike the Asian financial
crisis of 1997-98, the globally synchronized nature of this slowdown means that countries will
not be able to export their way out of this recession. Indeed, policies designed to promote
domestic export industries-so-called beggar-thy-neighbor policies such as competitive currency
devaluations, import tariffs, and/or export subsidies-risk unleashing a wave of destructive
protectionism.

Time is probably our greatest threat. The longer it takes for the recovery to begin, the
greater the likelihood of serious damage to US strategic interests. Roughly a quarter of the
countries in the world have already experienced low-level instability such as government
changes because of the current slowdown. Europe and the former Soviet Union have
experienced the bulk of the anti-state demonstrations. Although two-thirds of countries in the
world have sufficient financial or other means to limit the impact for the moment, much of Latin
America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access
to international aid or credit, or other coping mechanism. Statistical modeling shows that
economic crises increase the risk of regime-threatening instability if they persist over a one to
two year period. Besides increased economic nationalism, the most likely political fallout for US
interests will involve allies and friends not being able to fully meet their defense and

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humanitarian obligations. Potential refugee flows from the Caribbean could also impact
Homeland security.

humanitarian obligations. Potential refugee flows from the Caribbean could also impact
Homeland security.

The crisis presents many challenges for the United States. It started in the United States,
quickly spread to other industrial economies and then, more recently, to emerging markets. The
widely held perception that excesses in US financial markets and inadequate regulation were
responsible has increased criticism about free market policies, which may make it difficult to
achieve long-time US objectives, such as the opening of national capital markets and increasing
domestic demand in Asia. It already has increased questioning of US stewardship of the global
economy and the international financial structure.

The November G-20 financial summit in Washington also elevated the influence of large,
emerging market nations. As was the case in the Asian financial crisis, China has an opportunity
to increase its prestige if Beijing can exert a stabilizing influence by maintaining strong import
growth and not letting its currency slide. But the United States also has opportunities to
demonstrate increased leadership domestically, bilaterally, and in multilateral organizations such
as the WTO, APEC, and ASEAN. Recessions are a relative game, and historically the United
States has proven more adroit at responding to them than most. The US tradition of openness,
developed skills, and mobility probably puts it in a better position to reinvent itself. Moreover, in
potentially leading recovery efforts in coordination with the G-20, Washington will have the
opportunity to fashion new international global structures that can benefit all. Global
coordination and cooperation on many fronts will be required to rebuild trust in the global
financial system and to ensure that the economic and financial crises do not spiral into broader
geopolitical tensions.

Turning the Corner on Violent Extremism

I next want to focus on extremist groups that use terrorism. The groups with the greatest
capability to threaten are extremist Muslim groups. In 2008 terrorists did not achieve their goal
of conducting another major attack in the US Homeland. We have seen notable progress in
Muslim opinion turning against terrorist groups like al-Qa’ida. Over the last year and a half, alQa’ida
has faced significant public criticism from prominent religious leaders and fellow
extremists primarily regarding the use of brutal and indiscriminate tactics-particularly those
employed by al Qa’ida in Iraq (AQI) and al-Qa’ida in the Lands of Islamic Maghreb (AQIM)-
that have resulted in the deaths of Muslim civilians. Given the increased pressure posed by these
criticisms, al-Qa’ida leaders increasingly have highlighted enduring support for the Taliban and
the fight in Afghanistan and Pakistan and in other regions where they portray the West being at

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war with Islam and al-Qa’ida as the vanguard of the global terrorist movement. A broad array of
Muslim countries is nevertheless having success in stemming the rise of extremism and
attractiveness of terrorist groups. No major country is at immediate risk of collapse at the hands
of extremist, terrorist groups, although a number-such as Pakistan and Afghanistan-have to
work hard to repulse a still serious threat. In the next section I will discuss at length the
challenges facing us in Pakistan and Afghanistan where militant have gained some traction
despite the successes against al-Qa’ida.

war with Islam and al-Qa’ida as the vanguard of the global terrorist movement. A broad array of
Muslim countries is nevertheless having success in stemming the rise of extremism and
attractiveness of terrorist groups. No major country is at immediate risk of collapse at the hands
of extremist, terrorist groups, although a number-such as Pakistan and Afghanistan-have to
work hard to repulse a still serious threat. In the next section I will discuss at length the
challenges facing us in Pakistan and Afghanistan where militant have gained some traction
despite the successes against al-Qa’ida.
Qa’ida
today is less capable and effective than it was a year ago.

In Pakistan’s Federally Administered Tribal Areas (FATA), al-Qa’ida lost significant
parts of its command structure since 2008 in a succession of blows as damaging to the group as
any since the fall of the Taliban in late 2001. Key leaders killed over the past year include
Khalid Habib, al-Qa’ida’s military chief and the fourth man in its chain of command; Abu Layth
al-Libi, who directed cross-border attacks against our forces in Afghanistan and was a rising star
in the organization; Abu Khabab al-Masri, the group’s leading expert on explosives and chemical
attacks and a driving force behind its terrorist plotting against the US Homeland and Europe; and
Usama al-Kini who was involved in the bombings of our Embassies in East Africa in 1998 and
later became the chief planner of al-Qa’ida’s terrorist attacks in Pakistan.

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The loss of these and many other leaders in quick succession has made it more difficult for
al-Qa’ida to identify replacements, and in some cases the group has had to promote more
junior figures considerably less skilled and respected than the individuals they are replacing.
Sustained pressure against al-Qa’ida in the FATA has the potential to further degrade its
organizational cohesion and diminish the threat it poses. If forced to vacate the FATA and locate
elsewhere, the group would be vulnerable to US or host-country security crackdowns as well as
local resistance, and probably would be forced to adopt an even more dispersed, clandestine
structure, making training and operational coordination more difficult. Without access to its
FATA safehaven, al-Qa’ida also undoubtedly would have greater difficulty supporting the
Taliban insurgency in Afghanistan. It is conceivable al-Qa’ida could relocate elsewhere in South
Asia, the Gulf, or parts of Africa where it could exploit a weak central government and close
proximity to established recruitment, fundraising, and facilitation networks, but we judge none of
these locations would be as conducive to their operational needs as their location in the FATA.

In Iraq, we judge the maturation of the Awakening movement, Iraqi Security Forces
gains, and the subsequent spread of Sons of Iraq (SOI) groups, in combination with Coalition
operations against AQI leaders, have reduced AQI’s operational capabilities and restricted the
group’s freedom of movement and sanctuaries. Nevertheless, we judge the group is likely to
retain a residual capacity to undertake terrorist operations for years to come. I will focus on AQI
in greater detail when I discuss Iraq.

Saudi Arabia’s aggressive counterterrorism efforts since 2003 have rendered the
Kingdom a harsh operating environment for al-Qa’ida, but Riyadh is now facing new external

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threats from al-Qa’ida elements in the region, particularly from Yemen. Senior al-Qa’ida leaders
are focused on resurrecting an operational presence due to Saudi security actions over the past
five years that have resulted in the death or capture of most identified Saudi-based al-Qa’ida
senior leaders and operatives. Senior al-Qa’ida leaders view the Kingdom as a strategic target
owing to Bin Ladin’s longstanding objective of unseating the al-Saud family and the symbolic
value of attacking Western and Saudi targets in the land of the two holy mosques.

threats from al-Qa’ida elements in the region, particularly from Yemen. Senior al-Qa’ida leaders
are focused on resurrecting an operational presence due to Saudi security actions over the past
five years that have resulted in the death or capture of most identified Saudi-based al-Qa’ida
senior leaders and operatives. Senior al-Qa’ida leaders view the Kingdom as a strategic target
owing to Bin Ladin’s longstanding objective of unseating the al-Saud family and the symbolic
value of attacking Western and Saudi targets in the land of the two holy mosques.

Counterterrorism efforts by Indonesia, in some cases with US assistance, have led to the
arrests and deaths of hundreds of Jemaah Islamiya (JI) operatives, including top leaders and key
operatives. In November, Indonesia executed three JI terrorists-Imam Samudra, Mukhlas, and
Amrozi-for their role in the 2002 Bali bombings. While the Intelligence Community continues
to assess that JI in Indonesia and the Abu Sayyaf Group (ASG) in the Philippines are the two
terrorist groups posing threats to US interests in Southeast Asia, efforts by Southeast Asian
governments against both groups in the past few years have degraded their attack capabilities.

The primary threat from Europe-based extremists stems from al-Qa’ida and Sunni
affiliates who return from training in Pakistan to conduct attacks in Europe or the United States.
We have had limited visibility into European plotting, but we assess that al-Qa’ida is continuing
to plan attacks in Europe and the West. Al-Qa’ida has used Europe as a launching point for
external operations against the Homeland on several occasions since 9/11, and we believe that
the group continues to view Europe as a viable launching point. Al-Qa’ida most recently
targeted Denmark and the UK, and we assess these countries remain viable targets. Al-Qa’ida
leaders have also prominently mentioned France, most likely in reprisal for the 2004 headscarf
ban.

The social, political, and economic integration of Western Europe’s 15 to 20 million
Muslims is progressing slowly, creating opportunities for extremist propagandists and recruiters.
The highly diverse Muslim population in Europe already faces much higher poverty and
unemployment rates than the general population, and the current economic crisis almost certainly
will disproportionately affect the region’s Muslims. Numerous worldwide and European Islamic
groups are actively encouraging Muslims in Europe to reject assimilation and support militant
versions of Islam. Successful social integration would give most ordinary Muslims a stronger
political and economic stake in their countries of residence, even though better educational and
economic opportunities do not preclude radicalization among a minority. Visible progress
toward an Arab-Israeli settlement, along with stability in Iraq and Afghanistan, would help
undercut radicals’ appeal to Muslim foreign policy grievances.

European governments are undertaking a wide range of policies to promote Muslim
social integration and counter radicalization. In addition to pursuing socioeconomic initiatives
aimed at all immigrants, France, Germany, Italy, and several smaller European countries have

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established various types of religious-based consultative councils composed of leading Muslim
groups. Additionally, the United Kingdom has established the most diversified and energetic
official outreach program to Muslims, largely reflecting concern about homegrown terrorism
since the July 2005 London attacks. Among other initiatives, the UK Government has promoted
the creation of an advisory board on mosque governance, a committee of Muslim theologians,
and consultative bodies of Muslim women and youth. It also has held multiple high profile
conferences with Islamic scholars and government representatives from the Muslim world.
British police have made a conscious decision to seek the cooperation of non-violent radicals
even while political authorities have encouraged former radicals and Sufis to speak out against
hardline political Islam.

established various types of religious-based consultative councils composed of leading Muslim
groups. Additionally, the United Kingdom has established the most diversified and energetic
official outreach program to Muslims, largely reflecting concern about homegrown terrorism
since the July 2005 London attacks. Among other initiatives, the UK Government has promoted
the creation of an advisory board on mosque governance, a committee of Muslim theologians,
and consultative bodies of Muslim women and youth. It also has held multiple high profile
conferences with Islamic scholars and government representatives from the Muslim world.
British police have made a conscious decision to seek the cooperation of non-violent radicals
even while political authorities have encouraged former radicals and Sufis to speak out against
hardline political Islam.

Despite these successes, al-Qa’ida and its affiliates and allies remain dangerous and
adaptive enemies, and the threat they could inspire or orchestrate an attack on the United States
or European countries. Under the strategic direction of Usama Bin Ladin and his deputy, Ayman
al-Zawahiri, al-Qa’ida remains intent on attacking US interests worldwide, including the US
Homeland. Although al-Qa’ida’s core organization in the tribal areas of Pakistan is under
greater pressure now than it was a year ago, we assess that it remains the most dangerous
component of the larger al-Qa’ida network. Al-Qa’ida leaders still use the tribal areas as a base
from which they can avoid capture, produce propaganda, communicate with operational cells
abroad, and provide training and indoctrination to new terrorist operatives.

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We lack insight into specific details, timing, and intended targets of potential, current US
Homeland plots, although we assess al-Qa’ida continues to pursue plans for Homeland attacks
and is likely focusing on prominent political, economic, and infrastructure targets designed to
produce mass casualties, visually dramatic destruction, significant economic aftershocks,
and/or fear among the population.
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Increased security measures at home and abroad have caused al-Qa’ida to view the West,
especially the United States, as a harder target than in the past, but we remain concerned
about an influx of Western recruits into the tribal areas since mid-2006.
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Al-Qa’ida and its extremist sympathizers in Pakistan have waged a campaign of deadly and
destabilizing suicide attacks throughout Pakistan, including the bombing of the Marriott
Hotel in Islamabad in September, which killed 60 people and wounded hundreds.
AQIM. Al-Qa’ida’s other robust affiliate, al-Qa’ida in the Lands of the Islamic Maghreb,
is the most active terrorist group in northwestern Africa and, in our assessment, represents a
significant threat to US and Western interests in the region. AQIM has continued to focus
primarily on Algerian Government targets, but since its merger with al-Qa’ida in September
2006 the group has expanded its target set to include US, UN, and other Western interests and
has launched progressively more sophisticated attacks, employing vehicle-borne improvised
explosive device (VBIEDs), near-simultaneous bombings, and suicide bombings.

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AQIM has conducted nearly a dozen attacks against Western targets to include a near-
simultaneous VBIED attack against United Nations facilities and the Algerian Constitutional
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Court in Algiers in December 2007, killing at least 47 and wounding more than 100. AQIM

Court in Algiers in December 2007, killing at least 47 and wounding more than 100. AQIM

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AQIM Europe-based cells act as financial support and facilitation nodes, but these cells could
possibly become operational at the direction of AQIM leadership.
We assess that over the next year AQIM will continue to demonstrate its increased
capability and commitment to senior al-Qa’ida leadership by attacking local and Western
interests throughout North Africa and the Sahel. AQIM traditionally has operated in Algeria and
northern Mali and has recruited and trained an unknown number of extremists from Tunisia,
Morocco, Nigeria, Mauritania, Libya, and other countries. We assess some of these trainees may
have returned to their home countries to plot attacks against local and Western interests.

Al-Qa’ida in Yemen. Yemen is reemerging as a jihadist battleground and potential
regional base of operations for al-Qa’ida to plan internal and external attacks, train terrorists, and
facilitate the movement of operatives. Al-Qa’ida leaders could use al-Qa’ida in Yemen and the
growing presence of foreign jihadists there to supplement its external operations agenda,
promote turmoil in Saudi Arabia, and weaken the Salih regime.

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Al-Qa’ida in Yemen on 17 September 2008 conducted an attack against the US Embassy in
Sana’a. The coordinated attack used two explosives-laden vehicles, suicide bombers, and
small-arms fire and killed six guards and four civilians. As of September 2008, the group
had conducted 20 attacks against US, Western, and Yemeni targets, most carried out by the
splinter faction, Jund al-Yemen.
East Africa. We judge the terrorist threat to US interests in East Africa, primarily from
al-Qa’ida and al-Qa’ida-affiliated Islamic extremists in Somalia and Kenya, will increase in the
next year as al-Qa’ida’s East Africa network continues to plot operations against US, Western,
and local targets and the influence of the Somalia-based terrorist group al-Shabaab grows. Given
the high-profile US role in the region and its perceived direction-in the minds of al-Qa’ida and
local extremists-of foreign intervention in Somalia, we assess US counterterrorism efforts will
be challenged not only by the al-Qa’ida operatives in the Horn, but also by Somali extremists
and increasing numbers of foreign fighters supporting al-Shabaab’s efforts.

The Homegrown Threat

We judge any homegrown extremists in the United States do not yet rise to the numerical
level or exhibit the operational tempo or proficiency we have seen in Western Europe. A range
of factors inside the United States may contribute to a lower incidence of homegrown cells
developing. Nevertheless, we remain concerned about the potential for homegrown extremists
inspired by al-Qa’ida’s militant ideology to plan attacks inside the United States, Europe, and
elsewhere without operational direction from the group itself. In this regard, over the next year
we will remain focused on identifying any ties between US-based individuals and extremist
networks overseas. Though difficult to measure, the spread of radical Salafi Internet sites that
provide religious justification for attacks; aggressive and violent anti-Western rhetoric; and signs
that self-generating cells in the US identify with Bin Ladin’s violent objectives all point to the
likelihood that a small but violent number of cells may develop here.

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command,
Ayman al-Zawahiri, such as with his November 2008 video message following
the US Presidential elections. US-born al-Qa’ida members such as Adam Gadahn, who was
indicted by a US grand jury in October 2006 on charges of treason, providing material
support to a designated foreign terrorist organization, and aiding and abetting terrorists, also
participated in making these English-language propaganda messages.
The Threat from Lebanese Hizballah

Lebanese Hizballah continues to be a formidable terrorist adversary with an ability to
attack the US Homeland and US interests abroad. Hizballah is a multifaceted, disciplined
organization that combines political, social, paramilitary, and terrorist elements, and we assess
that any decision by the group to resort to arms or terrorist tactics is carefully calibrated. At the
same time, we judge armed struggle, particularly against Israel, remains central to Hizballah’s
ideology and strategy.

We assess Lebanese Hizballah, which has conducted anti-US attacks overseas in the past,
may consider attacking US interests should it perceive a direct US threat to the group’s survival,
leadership, or infrastructure or to Iran. However, we judge Hizballah would carefully weigh the
decision to take any action against the United States. Hizballah probably continues to support
proxy groups and individuals, which could provide the group plausible deniability for possible
attacks against the West or Israel.

We assess Hizballah anticipates a future conflict with Israel and probably continues to
implement lessons learned from the conflict in the summer of 2006. In a potential future
conflict, Hizballah is likely to be better prepared and more capable than in 2006.

The “Arc of Instability”

The large region from the Middle East to South Asia is the locus for many of the
challenges facing the United States in the twenty-first century. While we are making progress
countering terrorism, the roots and the issues related to the many problems in this region go
deeper and are very complicated. The United States has strong tools-from military force to
diplomacy in the region and good relationships with the vast majority of states. There is almost
universal recognition that the United States is vital to any solutions, and these can be brought to
bear in ways that benefit the United States and the region. I will begin with looking at individual
states, but the Intelligence Community analysis I present here emphasizes the regional linkages
exacerbating problems and providing opportunities that are available for tackling the problems.

The Changing Geopolitical Landscape in the Middle East

In the Middle East, the revival of Iran as a regional power, the deepening of ethnic,
sectarian, and economic divisions across much of the region, and looming leadership succession
among US allies are shaping the strategic landscape. Hizballah and HAMAS have successfully
seized the mantle of resistance to Israel from moderate regimes with secular Arab nationalists
being discredited in the popular mind. Battle lines are increasingly drawn not just between Israel

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and Arab countries but also between secular Arab nationalists and ascendant Islamic nationalist
movements inside moderate Arab states. Iran’s influence in Iraq, its enduring strategic ties to
Syria, pursuit of a nuclear weapons capability, and the success of Tehran’s allies-HAMAS and
Hizballah-are fueling Iran’s aspirations for regional preeminence. Arab Sunni leaders are
struggling to limit Iran’s gains; Saudi Arabia’s more activist regional diplomacy falls short of
significantly constraining Iran’s freedom of maneuver. Iran’s ambitions combined with
unresolved conflicts in Iraq, Lebanon, and the Palestinian territories represent the principal
flashpoints for intensified conflict in the region.

and Arab countries but also between secular Arab nationalists and ascendant Islamic nationalist
movements inside moderate Arab states. Iran’s influence in Iraq, its enduring strategic ties to
Syria, pursuit of a nuclear weapons capability, and the success of Tehran’s allies-HAMAS and
Hizballah-are fueling Iran’s aspirations for regional preeminence. Arab Sunni leaders are
struggling to limit Iran’s gains; Saudi Arabia’s more activist regional diplomacy falls short of
significantly constraining Iran’s freedom of maneuver. Iran’s ambitions combined with
unresolved conflicts in Iraq, Lebanon, and the Palestinian territories represent the principal
flashpoints for intensified conflict in the region.

In Tehran, Iran’s conservative faction continues to dominate the government. Supreme
Leader Khamenei has consolidated political power in his office, but his reliance on hardline
conservative elements-the IRGC, war veterans turned politicians such as President Mahmud
Ahmadi-Nejad, and selected clerics-to bolster his authority has upset the earlier factional
balance in Iranian politics.

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Although the regime still comprises many competing factions, only those that support the
concept of a powerful Supreme Leader and advocate revolutionary values now have a
significant voice in decisionmaking.
President Ahmadi-Nejad faces less than certain prospects for reelection in June because
his management of the economy and aggressive foreign policy rhetoric have become sources of
significant domestic criticism and political friction. Ahmadi-Nejad’s economic policies have
reduced unemployment marginally, but have fueled significant inflation, providing his critics
ample ammunition to question his competence. The sharp fall in global oil prices will add to
Iran’s economic problems, but Tehran has a substantial cushion of foreign reserves to support
social and other spending priorities. Less energy revenues may also help to dampen its foreign
policy adventurism.

We expect Khamenei will attempt to manipulate the presidential election, largely by
limiting the range of candidates. As he has in past elections, the Supreme Leader probably will
attempt to influence the decisions of individuals to run, monitor the vetting and approval of
candidates, and influence media coverage of the campaign.

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Although we expect that whoever is elected will be a strong supporter of the Islamic
Republic, we note that the election of a more pragmatic figure may, over time, produce some
moderation of Iranian behavior by introducing into the decisionmaking process a wider range
of options than those presented under Ahmadi-Nejad.
Militarily, Iran continues to strengthen the three pillars of its strategic deterrence:
surface-to-surface missiles, long-range rockets and aircraft for retaliation; naval forces to disrupt
maritime traffic through key waterways; and unconventional forces and surrogates to conduct
worldwide lethal operations. Although many of their statements are exaggerations, Iranian
officials throughout the past year have repeatedly claimed both greater ballistic missile
capabilities that could threaten US and allied interests and the ability to close the Strait of
Hormuz using unconventional small boat operations, anti-ship cruise missiles, and other naval
systems. Some officials, such as Islamic Revolutionary Guard Corps Commander Major General
Mohammad Ali Jafari-Najafabadi, have hinted that Iran would have a hand in attacks on
“America’s interests even in far away places,” suggesting Iran has contingency plans for
unconventional warfare and terrorism against the United States and its allies.

Iran’s goals in Iraq include preventing the emergence of a threat from Iraqi territory,
either from the government of Iraq itself, or from the United States. To achieve this, Iran
probably seeks a government in Baghdad in which Tehran’s Shia allies hold the majority of
political, economic, and security power. Iran also has sought to make the United States suffer
political, economic, and human costs in order to limit US engagement in the region and to ensure
that Washington does not maintain a permanent military presence in Iraq or use its military to
pressure or attack Iran.

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Iranian efforts to secure influence in Iraq encompass a wide range of activities, including
using propaganda, providing humanitarian assistance, building commercial and economic
ties, and supporting Shia elements fighting the Coalition. Iran has provided a variety of Shia
militants with lethal support including weapons, funding, training, logistical and operational
support, and intelligence training.
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We judge Iran will continue to calibrate its lethal aid to Iraqi Shia militants based on the
threat it perceives from US forces in Iraq, the state of US-Iran relations, Tehran’s fear of a
Ba’thist resurgence, Tehran’s desire to help defend Iraqi Shia against sectarian violence, and
to maintain the ability to play a spoiler role in Iraq if Iran perceives the government of Iraq
has become a strategic threat.
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Despite Tehran’s efforts, we judge Iraqi nationalism and the growing capabilities of the Iraqi
government will limit Iranian influence in Iraq. Baghdad, for example, signed the US-Iraq
security agreement despite Iranian opposition.
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In Afghanistan, Iran has focused on promoting a friendly central government in Kabul
and limiting Western power and influence. Iran’s policy in Afghanistan follows multiple tracks,
including providing political and economic support to the Karzai government and developing
relationships with actors across the political spectrum.

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Iran has opposed Afghan reconciliation talks with the Taliban as risking an increase in the
group’s influence and legitimacy.
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We judge Iran distrusts the Taliban and opposes its return to power but uses the provision of
lethal aid as a way to pressure Western forces, gather intelligence, and build ties that could
protect Iran’s interests if the Taliban regains control of the country.
In the Levant, Tehran is focused on building influence in Lebanon and expanding the
capability of key allies. Tehran continues to support groups such as Hizballah, HAMAS, and
Palestine Islamic Jihad (PIJ), which it views as integral to its efforts to challenge Israeli and
Western influence in the Middle East.

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Hizballah is the largest recipient of Iranian financial aid, training, and weaponry, and Iran’s
senior leadership has cited Hizballah as a model for other militant groups. We assess Tehran
has continued to provide Hizballah with significant amounts of funding, training, and
weapons since the 2006 conflict with Israel, increasing the group’s capabilities to pressure
other Lebanese factions and to threaten Israel.
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Iran’s provision of training, weapons, and money to HAMAS since the 2006 Palestinian
elections has bolstered the group’s ability to strike Israel and oppose the Palestinian
Authority.
Worsening Conflict in the Levant

The Palestinian Territories and Lebanon are two places where the multifaceted
connections of which I spoke are most pronounced in this arc of instability. Two non-state
actors, HAMAS and Hizballah, play prominent roles, while individual states that oppose US
interests, such as Iran and Syria, also are prominent. In both these countries, we worry about
worsening conflict and the potential for growing violent extremism.

Fighting between Israel and HAMAS in the Gaza Strip subsided in mid-January, leaving
in its wake hardened attitudes among Israelis and Palestinians, deepened Palestinian political
divisions, and a widened rift between regional moderates-led by Egypt, Saudi Arabia, and
Jordan-and hardliners, including Iran, Hizballah, and Syria. A key challenge for US policy in
the coming year will be finding ways to strengthen moderates and renew the potential for peace
negotiations, lest post-conflict division and anger in the region further diminish prospects for
peace.

With HAMAS in control of Gaza and Hizballah growing stronger in Lebanon, progress
on a Palestinian- Israeli accord is growing more difficult. With Iran developing a nuclear
weapon capability and Israel determined not to allow it, there is potential for an Iran-Israeli
confrontation or crisis on that issue as well. Moderate Arab states fear a nuclear-armed Iran,

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want progress on Palestinian settlement-the absence of which deprives US Arab allies of
crucial political capital to defend strategic ties to the US and wish to sustain a moderate, state-
centered politics for the region. Progress on the Israeli-Palestinian peace track would increase
opportunities for the US to broaden its engagement with Arab publics, including those aligning
with the growing ideology of Islamic nationalism.

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The Israeli public appears broadly supportive of Israel’s military action and believes Israel
must act decisively to prevent attacks from Palestinian-controlled territory. At the same
time, Israel’s military actions in Gaza have deepened Palestinian anger towards Israel, both
in the Gaza Strip and in the West Bank, and sparked outrage and protests throughout the
Arab and Muslim world.
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HAMAS and the Palestinian Authority are engaged in an intense competition, with both sides
seeking to emerge from the conflict in a stronger political position, but relations between the
two organizations have been further embittered by the crisis. The Palestinian Authority (PA)
accused HAMAS of needlessly provoking an Israeli attack and HAMAS, which has argued it
“won” by surviving the operation and continuing its control of Gaza, accused the PA of
essentially collaborating with the Israeli assault.
•
The moderate Arab states and regional hardliners are competing to shape the regional
developments and public attitudes in the aftermath of the Gaza crisis. The moderates seek a
reconciliation of the Palestinian factions and the resumption of peace talks between Israel
and the Palestinians, while hardliners are encouraging HAMAS to retain its uncompromising
stance toward Israel. These opposing regional blocs are competing to take the lead in
delivering humanitarian aid to Palestinians in Gaza. Moderate states support US efforts to
establish a ceasefire and border security regime that will prevent the rearming of HAMAS,
while Iran is likely to lead an effort to provide weapons to HAMAS to build the group’s
military capabilities.
Tensions between HAMAS and Fatah have been elevated since HAMAS seized control
of the Gaza Strip in June 2007, and efforts to achieve reconciliation have failed. Both factions
continue to attack, harass, and detain members of the other group in the West Bank and the Gaza
Strip, deepening mutual resentment and making an accord between them difficult.
Reconciliation talks between Fatah and HAMAS scheduled for November in Cairo did not occur
because HAMAS refused to attend the meetings, in part to protest ongoing PA security measures
in the West Bank targeting its members.

•
Disagreement between Fatah and HAMAS about a range of issues such as the timing of
national elections and formation of a unity government could lead HAMAS to challenge the
legitimacy of Abbas’s government and will remain obstacles to Fatah-HAMAS
reconciliation.
In 2008, longstanding tensions worsened between anti-democratic Fatah elements, mostly
but not exclusively the so-called “old-guard” and typically younger elements demanding internal
reforms within the faction, worsened in 2008 amid discussions over the location of and
attendance at Fatah’s long-delayed sixth General Congress. These internal conflicts threaten to

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fracture the party and damage its prospects in the run-up to PA presidential and legislative
elections in 2009 or early 2010. There is no consensus among Fatah officials regarding a
replacement for President Abbas, who has not groomed a successor, and no potential leader has
gained Fatah’s full support.

fracture the party and damage its prospects in the run-up to PA presidential and legislative
elections in 2009 or early 2010. There is no consensus among Fatah officials regarding a
replacement for President Abbas, who has not groomed a successor, and no potential leader has
gained Fatah’s full support.

•
The Lebanese political scene has enjoyed a period of relative calm and reconciliation since
May, probably because all Lebanese parties are focused on preparing and forging alliances
for the National Assembly election in June 2009. Lebanese Christian voters, divided
between the two political camps, will be decisive in determining who wins a majority in the
election.
The security situation remains fragile in Lebanon, especially in the north, which saw
fighting between the Sunni and Alawi communities last summer. The Hizballah-initiated
violence in May has left all sectarian groups-the Sunnis in particular-concerned about their
security. The LAF’s limited response and the Hizballah-led opposition’s military strength have
reinforced the view that sectarian communities must defend themselves. All sides are working to
develop sectarian-based militia forces. Hizballah continues to bolster its military strength; since
the 2006 war, the group has rearmed and trained additional personnel in preparation for possible
future conflict with Israel.

Hizballah’s attempts to reconcile with other Lebanese parties are an effort to show the
group’s commitment to a Lebanese nationalist agenda in preparation for the election. They are
also meant to reduce the damage done to Hizballah’s image by its armed takeover of parts of
Beirut in May.

Since becoming President of Syria in June 2000, Bashar al-Asad has strengthened his
hold on power in Syria. Asad’s standing has been augmented by his perceived success in
weathering regional crises and international pressure and by the regime’s ability to highlight
Syria’s relative insulation from violence in Iraq and Lebanon. Within Syria, Asad has preserved
the pillars of regime control established by his father while gradually using personnel turnover to
appoint loyalists and expand his power base.

•
Syrian leaders continue to exploit “resistance” to Israel and rejection of US pressure to unify
Syrians in support of the regime, despite broad dissatisfaction with economic conditions,
some disappointment at the lack of political reforms, and quiet resentment by some Sunnis at
domination by the Alawi minority.
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Damascus continues efforts to cement its influence in Lebanon by providing economic
and other support to its allies in the Lebanese opposition. Syria has exploited its role in helping
secure the May 2008 Doha agreement, which ended Lebanon’s political violence last spring and
ushered in a unity government, to improve relations with Europe and moderate Arab states.
Syria is poised to appoint an ambassador to Lebanon, and we judge Syria will continue to
interfere in Lebanese affairs in pursuit of its own interests.

Damascus continues efforts to cement its influence in Lebanon by providing economic
and other support to its allies in the Lebanese opposition. Syria has exploited its role in helping
secure the May 2008 Doha agreement, which ended Lebanon’s political violence last spring and
ushered in a unity government, to improve relations with Europe and moderate Arab states.
Syria is poised to appoint an ambassador to Lebanon, and we judge Syria will continue to
interfere in Lebanese affairs in pursuit of its own interests.

Syria probably will adjust its approach to the Iraq insurgency as Iraq’s situation evolves.
As the United States withdraws, we assess Damascus will seek improved political and economic
ties to Baghdad and is likely to support oppositionists opposed to a long-term US presence in
Iraq. Syria will remain the primary gateway for foreign fighters entering Iraq. Syria condemned
the 26 October 2008 US raid that targeted AQI foreign fighter facilitator Abu Ghadiyah and
staged a temporary removal of some border guard forces. Damascus also closed US institutions
in Syria, including the Damascus Community School and the American Cultural Center.

A More Stable Iraq as Counterbalance

The positive security trends over the past year have endured and expanded, and a more
stable Iraq could counterbalance other negative trends in the region. Extremists in Iraq have
been largely sidelined by Coalition and Iraqi operations and dwindling popular tolerance for
violence, and their attacks are no longer a major catalyst for sectarian violence. Iraqis now are
less inclined to resolve their differences through unsanctioned violence, and fewer Iraqis are
dying at the hands of their countrymen than at any time in the past two years. Indeed, communal
violence is now at the lowest sustained levels since Prime Minister Nuri al-Maliki’s government
came to power. Improving security conditions in Iraq have given the Prime Minister an
opportunity to assert authority in previously denied areas of the country. Meanwhile, the
maturation of the Awakening movement, Iraqi Security Forces (ISF) gains, and the subsequent
spread of Sons of Iraq groups, in combination with Coalition operations against AQI leaders,
have weakened AQI by largely forcing it out of strongholds such as Al Anbar and much of
greater Baghdad.

The main factors that have contributed to these positive trends are as follows:

•
First, Coalition operations and population security measures have been critical to reducing
violence in Iraq. We judge Coalition support in the form of a credible, politically neutral
security guarantor also has facilitated the ISF’s ability to deal with ethnosectarian issues.
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•
•
•
Third, the threat from AQI has continued to diminish. AQI, although still dangerous, has
experienced the defection of members, lost key mobilization areas, suffered disruption of
support infrastructure and funding, and been forced to change targeting priorities. Indeed,
the pace of suicide bombings countrywide, which we consider one indicator of AQI’s
operational capability, fell significantly during the last year.
•
Fourth, the threat of violence from most Shia militants has declined. Many Shia who looked
upon Sadr’s Jaysh al-Mahdi (JAM) in early 2008 as defenders against Sunni extremists
eventually came to see the JAM as pariahs, leading Muqtada al-Sadr to announce last
summer that most of his thousands-strong militia would set aside their weapons to become a
cultural organization and a counterweight to Western influence. Some Shia militant groups
such as Sadrist-affiliated groups and Kata’ib Hizballah (KH) probably will continue anti-
Coalition attacks and may engage in sporadic violence against Iraqi Government targets.
•
Lastly, the capabilities of the ISF have continued to improve. The ISF’s increasing
professionalism and improvements in warfighting skills have allowed it to assume more
responsibility for Iraq’s internal security, as demonstrated by the successful operations
against Shia militants in Al Basrah, Sadr City, and Al ‘Amarah, and against Sunni extremists
in Diyala and Mosul. Despite these improvements, the ISF remains dependent on the US for
enabling capabilities such as logistics, fire support, and intelligence.
We assess political and security progress could be halted or even reversed by a number of
factors, particularly if these challenges occur in combination.

•
Disputed internal boundaries. Resolving disputed boundaries, primarily in northern Iraq,
probably will be the most fiercely contested political issue to face Iraq in the next several
years and poses the greatest threat to government stability.
•
Perceptions of Iraqi Government repression. Policies or actions of the Iraqi Government
perceived by segments of Iraq’s ethnosectarian population to represent a broad and enduring
campaign of repression could lead to widespread violence.
•
Increased foreign support to insurgent or militia groups. We judge a large infusion of
foreign support could deepen and intensify the ensuing conflict if Iraqi militants and
insurgents sought external assistance to challenge or destabilize the Iraqi Government.
In addition to these challenges, Baghdad will confront more difficult choices about
spending priorities as a result of declining oil revenues as it simultaneously grapples with
security force modernization, infrastructure investment, and expanding public payrolls. Iraq’s

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economy will continue to depend heavily on hydrocarbon exports, government spending, and
continued security improvements.

economy will continue to depend heavily on hydrocarbon exports, government spending, and
continued security improvements.

•
Turkish officials met with Kurdistan Regional Government President Barzani in October
2008, opening the prospect of closer ties between Turkey and the KRG. Like the rest of
Europe, the Turkish economy is feeling the effects of the global financial crisis. In mid-
November, Standard and Poor’s downgraded Turkey’s credit outlook from stable to negative.
Iraq’s Sunni Arab neighbors are starting to reestablish an Arab presence in Baghdad, but
Arab engagement is likely to be slow and halting over the next year. Jordan’s King Abdallah in
August became the first Arab head of state to travel to Baghdad since the fall of Saddam; he
dispatched an Ambassador to Iraq in October.

Afghan-Pakistani Linkages

In the past year, Afghanistan’s Taliban-dominated insurgency has increased the
geographic scope and frequency of attacks. Taliban reaction to expanded Afghan and NATO
operations account for some of the increase in violence, but insurgents also have demonstrated
greater aggressiveness and more lethal tactics. Efforts to improve governance and extend
development were hampered in 2008 by a lack of security in many areas and a general lack of
government capacity and competency. The ability of the Afghan government, NATO, and the
United States to push back the Taliban and deliver security, basic governance, and economic
development will determine the continued support of the Afghan people for the government and
the international community. Afghan leaders also must tackle endemic corruption and an
extensive drug trade, which erode the capacity of the government while diminishing public
confidence in its already fragile institutions.

Specifically, the security situation has deteriorated in many eastern areas of the country
and in the south and northwest. Taliban and affiliated insurgent groups have expanded
operations into previously peaceful areas of the west and around Kabul. The Taliban-dominated
insurgency has expanded in scope despite International Security Assistance Force (ISAF) and
Operation Enduring Freedom military operations targeting insurgent command and control
networks.

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Continued progress has been made in expanding and fielding the Afghan National Army,
but the shortage of international trainers in the field, high operational tempo, attrition, and
absenteeism hamper efforts to make units capable of independent action. The Afghan National
Police remains a largely untrained force with high rates of corruption and absenteeism.
Limitations to training, mentoring, and equipping combined with an ineffective Ministry of
Interior and large parts of the country that have not been effectively “cleared” hinder the
progress and effectiveness of the policy.

Continued progress has been made in expanding and fielding the Afghan National Army,
but the shortage of international trainers in the field, high operational tempo, attrition, and
absenteeism hamper efforts to make units capable of independent action. The Afghan National
Police remains a largely untrained force with high rates of corruption and absenteeism.
Limitations to training, mentoring, and equipping combined with an ineffective Ministry of
Interior and large parts of the country that have not been effectively “cleared” hinder the
progress and effectiveness of the policy.

Kabul’s inability to build effective, honest, and loyal provincial and district level
institutions capable of providing basic services and sustainable, licit livelihoods erodes its
popular legitimacy and increases the influence of local warlords and the Taliban. The Afghan
government has launched some initiatives, such as the Independent Directorate of Local
Governance (IDLG), to address governance shortcomings, but corruption has exceeded culturally
tolerable levels and is eroding the legitimacy of the government. Both law enforcement and
judicial capacity, although somewhat improved, remain limited, and Kabul remains constrained
in its ability to deploy programs at the provincial and local levels.

The Afghan government has no coherent tribal engagement strategy, but where Pashtun
tribal and government interests intersect, gains in local security, stability, and development are
possible. At the provincial level, governors who have proven themselves effective mediators of
local disputes among tribes and other local groups in their respective jurisdictions garner support
from Afghan audiences and the donor community.

The Afghan drug trade is a major source of revenue for corrupt officials, the Taliban and
other insurgent groups operating in the country and is one of the greatest long-term challenges
facing Afghanistan. The insidious effects of drug-related criminality continue to undercut the
government’s ability to assert its authority outside of Kabul, to develop a strong, rule-of-law
based system, and to rebuild the economy. Despite decreases in poppy cultivation in 2008,
opium production in Afghanistan remains historically high, and the country produces over 90
percent of the world’s supply with 95 percent of the crop grown in five contiguous provinces of
southwestern Afghanistan and over 60 perce3nt in one province alone, Helmand. In 2008,
farmers grew 157,300 hectares of poppy, potentially producing an estimated 7,700 metric tons of
opium. Almost every province outside the southwest was either poppy-free or had a dramatic
decrease in cultivation, due to a combination of effective local anti-poppy campaigns, better
security unfavorable weather, and decreased opium prices relative to other crops, and improved
governance and security in key provinces. The United Nations estimates that the total value to
agricultural producers of Afghan opium in 2008 was $730 million-although the gap in

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profitability has narrowed. No improvement in the security in Afghanistan is possible without
progress in Pakistan.

profitability has narrowed. No improvement in the security in Afghanistan is possible without
progress in Pakistan.

In 2008 Islamabad intensified counterinsurgency efforts, but Islamabad’s record in
dealing with militants has been mixed as it navigates conflicting internal and counterterrorist
priorities. Pakistan’s leaders are facing enormous socio-economic challenges. Economic
hardships are intense, and the country is now facing a major balance of payments challenge.
Islamabad needs to make painful reforms to improve overall macroeconomic stability.
Pakistan’s law-and-order situation is dismal, affecting even Pakistani elites, and violence
between various sectarian, ethnic, and political groups threatens to escalate. Pakistan’s
population is growing rapidly at a rate of about 2 percent a year, and roughly half of the
country’s 172 million residents are illiterate, under the age of 20, and live near or below the
poverty line. Among the needed reforms are measures to improve the transparency of
government expenditures and impose taxes on wealthy landowners. Such reforms would reduce
the opportunities for corruption among Pakistani political leaders, help to establish a more level
political playing field, and help build the confidence of average Pakistanis in their government.

The Pakistani Government’s current plans will require intensified and sustained efforts to
orchestrate the administrative, economic, educational, legal, and social reforms required to create
an environment that discourages Islamic extremism and encourages the development of human
capital. This, in turn, requires effective political leadership focused on improving the capabilities
of Pakistani institutions for effective governance.

WMD Proliferation Exacerbating Prospects for Middle East

The ongoing efforts of nation-states to develop and/or acquire dangerous weapons and
delivery systems in the Middle East and elsewhere constitute another major threat to the safety of
our nation, our deployed troops, and our allies. (The threat posed by North Korea’s WMD
program is assessed below, in the section on Asia.) We are most concerned about the threat and
destabilizing effect of nuclear proliferation. The threat from the proliferation of materials and
technologies that could contribute to both existing and prospective biological and chemical
weapons programs also is real. Most of the international community shares these concerns.

WMD use by most nation states traditionally has been constrained by the logic of
deterrence and by diplomacy, but these constraints may be of less utility in preventing the use of
mass-effect weapons by terrorist groups. Moreover, the time when only a few states had access
to the most dangerous technologies is long over. Technologies, often dual-use, circulate easily in
our globalized economy, as do the personnel with scientific expertise who design and use them.
Therefore, it is difficult for the United States and its partners to track efforts to acquire
components and production technologies that are widely available.

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We assess countries that are still pursuing WMD programs will continue to try to
improve their capabilities and level of self-sufficiency over the next decade. Nuclear, chemical,
and/or biological weapons or the production technologies and materials necessary to produce
them may also be acquired by states that do not now have such programs; and/or by terrorist or
insurgent organizations; and by criminal organizations, acting alone or through middlemen.

We assess countries that are still pursuing WMD programs will continue to try to
improve their capabilities and level of self-sufficiency over the next decade. Nuclear, chemical,
and/or biological weapons or the production technologies and materials necessary to produce
them may also be acquired by states that do not now have such programs; and/or by terrorist or
insurgent organizations; and by criminal organizations, acting alone or through middlemen.

I want to be very clear in characterizing the Iranian nuclear program. First, there are
three key parts to an effective nuclear weapons capability:

(1)
Production of fissile material,
(2)
Effective means for weapon delivery, and
(3)
Design, weaponization, and testing of the warhead itself.
We assessed in our 2007 NIE on this subject that Iran’s nuclear weapon design and
weaponization work was halted in fall 2003, along with its covert uranium conversion and
enrichment-related activities. Declared uranium enrichment efforts were suspended in 2003 but
resumed in January 2006 and will enable Iran to produce weapons-usable fissile material if it
chooses to do so. Development of medium-range ballistic missiles, inherently capable of
delivering nuclear weapons, has continued unabated.

We assess Iranian military entities were working under government direction to develop
nuclear weapons until fall 2003. Iranian entities are continuing to develop a range of technical
capabilities that could be applied to producing nuclear weapons, if a decision were made to do
so.

•
Iran continues its efforts to develop uranium enrichment technology, which can be used both
to produce low-enriched uranium for power reactor fuel and to produce highly enriched
uranium for nuclear weapons.
•
As noted, Iran continues to deploy and improve ballistic missiles inherently capable of
delivering nuclear weapons.
•
We assess Iran since fall 2003 has conducted research and development projects with
commercial and conventional military applications, some of which would be of limited use
for nuclear weapons.
We judge in fall 2003 Tehran halted its nuclear weapons design and weaponization
activities and that the halt lasted at least several years. We assess Tehran had not restarted these
activities as of at least mid-2007. Although we do not know whether Iran currently intends to

ATA FEB 2009-IC STATEMENT FOR THE RECORD
develop nuclear weapons, we assess Tehran at a minimum is keeping open the option to develop
them.

develop nuclear weapons, we assess Tehran at a minimum is keeping open the option to develop
them.

We do not have sufficient intelligence reporting to judge confidently whether Tehran is
willing to maintain indefinitely the halt of its previously enumerated nuclear weapons-related
activities while it weighs its options, or whether it will or already has set specific deadlines or
criteria that will prompt it to restart those activities. We assess Iran has the scientific, technical,
and industrial capacity eventually to produce nuclear weapons. In our judgment, only an Iranian
political decision to abandon a nuclear weapons objective would plausibly keep Iran from
eventually producing nuclear weapons-and such a decision is inherently reversible. I reiterate
that two activities of the three relevant to a nuclear weapons capability continue: development of
uranium enrichment technology that will enable production of fissile material, if Iran chooses to
do so, and development of nuclear-capable ballistic missile systems.

We assess convincing the Iranian leadership to forgo the eventual development of nuclear
weapons will be difficult given the linkage many within the leadership see between nuclear
weapons and Iran’s key national security and foreign policy objectives, and given Iran’s
considerable effort from at least the late 1980s to 2003 to develop such weapons. Our analysis
suggests that some combination of threats of intensified international scrutiny and pressures,
along with opportunities for Iran to achieve its security and goals might-if perceived by Iran’s
leaders as credible-prompt Tehran to extend the halt to the above nuclear weapons-related
activities. It is difficult to specify what such a combination might be.

We continue to assess Iran does not currently have a nuclear weapon. We continue to
assess Iran probably has imported at least some weapons-usable fissile material but still judge it
has not obtained enough for a nuclear weapon. We cannot rule out that Iran has acquired from
abroad or will acquire in the future a nuclear weapon or enough fissile material for a weapon.
Barring such acquisitions, if Iran wants to have nuclear weapons it would need to produce
sufficient amounts of fissile material indigenously. We judge it has not yet done so.

Iran made significant progress in 2007 and 2008 installing and operating centrifuges at its
main centrifuge enrichment plant, Natanz. We judge Iran probably would be technically capable
of producing enough highly enriched uranium (HEU) for a weapon sometime during the 20102015
time frame. INR judges Iran is unlikely to achieve this capability before 2013 because of
foreseeable technical and programmatic problems.

Iranian Missile Threat. Beyond its WMD potential, Iranian conventional military power
threatens Persian Gulf states and challenges US interests. Iran is enhancing its ability to project
its military power, primarily with ballistic missiles and naval power, with the goal of dominating
the Gulf region and deterring potential adversaries. It seeks a capacity to disrupt the operations
and reinforcement of US forces based in the region, potentially intimidating regional allies into

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withholding support for US policy, and raising the political, financial, and human costs to the
United States and our allies of our presence.

•
Iran’s growing inventory of ballistic missiles-it already has the largest inventory in the
Middle East-and its acquisition of anti-ship cruise missiles provide capabilities to enhance
its power projection. Tehran views its conventionally armed missiles as an integral part of its
strategy to deter and if necessary retaliate against forces in the region, including US forces.
Its ballistic missiles are inherently capable of delivering WMD and if so armed would fit into
this same strategy.
The Terrorist CBRN Threat. Over the coming years, we will continue to face a
substantial threat, including in the US Homeland, from terrorists attempting to acquire
biological, chemical, and possibly nuclear weapons and use them to conduct large-scale attacks.
Conventional weapons and explosives will continue to be the most often used instruments of
destruction in terrorist attacks; however, terrorists who are determined to develop CBRN
capabilities will have increasing opportunities to do so, owing to the spread of relevant
technological knowledge and the ability to work with CBRN materials and designs in
safehavens.

•
Most terrorist groups that have shown some interest, intent, or capability to conduct CBRN
attacks have pursued only limited, technically simple approaches that have not yet caused
large numbers of casualties.
In particular, we assess the terrorist use of biological agents represents a growing threat
as the barriers to obtaining many suitable starter cultures are eroding and open source technical
literature and basic laboratory equipment can facilitate production. Terrorist chemical attacks
also represent a substantial threat. Small-scale chemical attacks using industrial toxins have been
the most frequent type of CBRN attack to date. The chlorine attacks in Iraq from October 2006
through the summer of 2007 highlighted terrorist interest in using commercial and easily
available toxic industrial chemicals as weapons.

Al-Qa’ida is the terrorist group that historically has sought the broadest range of CBRN
attack capabilities, and we assess that it would use any CBRN capability it acquires in an anti-US
attack, preferably against the Homeland. There also is a threat of biological or chemical attacks
in the US Homeland by lone individuals.

Rising Asia

As the terrorism and proliferation threats persist across the “arc of instability,” East and
South Asia are poised to become the long-term power center of the world. China and India are
restoring the positions they held in the eighteenth century when China produced approximately
30 percent and India 15 percent of the world’s wealth. These two countries are likely to surpass
the GDP of all other economies except the United States and Japan by 2025, although the current
financial crisis may somewhat slow the momentum. Japan remains the second largest global

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economy and a strong US ally in the region, but the global economic slowdown is exacting a
heavy toll on Japan’s economy. To realize its aspirations to play increased regional and global
roles will require strong leadership and politically difficult decisions. All together-Japan, the
“tiger” economies like South Korea and Taiwan as well as the rising giants of China and India
point to the “rise of Asia” as a defining characteristic of the 21economy and a strong US ally in the region, but the global economic slowdown is exacting a
heavy toll on Japan’s economy. To realize its aspirations to play increased regional and global
roles will require strong leadership and politically difficult decisions. All together-Japan, the
“tiger” economies like South Korea and Taiwan as well as the rising giants of China and India
point to the “rise of Asia” as a defining characteristic of the 21 century. China’s reemergence
as a major power with global impact is especially affecting the regional balance of power.

As in the Middle East, the United States has strong relationships in East Asia-a network
of alliances with Japan, South Korea, the Philippines, Thailand, and Australia, and close
partnerships with other countries-and a longstanding forward military presence. Countries in
the region look to the United States for leadership and for ways to encourage China to become a
constructive and responsible player in the regional and global communities. Although China will
have ample opportunity to play a positive role, it also poses a potential challenge if it chooses to
use its growing power and influence in ways counter to US or broader international interests.

China’s Transformation

China is thirty years into a fundamental transformation that will take many more decades
to complete. Although there have been moments when the government’s effort to maintain
control seemed on the verge of failure-notably the crisis on Tiananmen Square in 1989-the
government has been remarkably successful in guiding reform. China has avoided the fate of
most other socialist countries, suffering neither the economic and political collapse of the Soviet
Union nor the stagnation of Cuba and North Korea.

We judge China’s international behavior is driven by a combination of domestic
priorities, primarily maintaining economic prosperity and domestic stability, and a longstanding
ambition to see China play the role of a great power in East Asia and globally. Chinese leaders
view preserving domestic stability as one of their most important internal security challenges.
Their greatest concerns are separatist unrest and the possibility that local protests could merge
into a coordinated national movement demanding fundamental political reforms or an end to
Party rule. Security forces move quickly and sometimes forcefully to end demonstrations. The
March 2008 protests in Tibet highlighted the danger of separatist unrest and prompted Beijing to
deploy paramilitary and military assets to end the demonstrations.

These same domestic priorities are central to Chinese foreign policy. China’s desire to
secure access to the markets, commodities, and energy supplies needed to sustain domestic
economic growth significantly influences its foreign engagement. Chinese diplomacy seeks to
maintain favorable relations with other major powers, particularly the US, which Beijing
perceives as vital to China’s economic success and to achieving its other strategic objectives.
But Beijing is also seeking to build its global image and influence in order to advance its broader
interests and to resist what it perceives as external challenges to those interests or to China’s
security and territorial integrity.

Taiwan as an area of tension in US-China relations has substantially relaxed since the
2008 election of Ma Ying-jeou. The new Taiwanese President inaugurated in May has resumed
dialogue with Beijing after a nine-year hiatus, and leaders on both sides of the Taiwan Strait are
now cautiously optimistic that a new period of less confrontational relations has begun. Many

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outstanding challenges remain, however, and the two sides eventually will need to confront
issues such as Taiwan’s participation in international organizations. Beijing has not renounced
the use of force against the island, and China’s leaders see maintaining the goal of unification as
vital to regime legitimacy.

outstanding challenges remain, however, and the two sides eventually will need to confront
issues such as Taiwan’s participation in international organizations. Beijing has not renounced
the use of force against the island, and China’s leaders see maintaining the goal of unification as
vital to regime legitimacy.

Preparations for a possible Taiwan conflict continue to drive the modernization goals of
the People’s Liberation Army (PLA) and the Chinese defense-industrial complex. It will likely
remain the primary factor as long as the Taiwan situation is unresolved.

At the same time, we judge that China over the past several years has begun a
substantially new phase in its military development by beginning to articulate roles and missions
for the PLA that go well beyond China’s immediate territorial interests.

•
For example, China’s leaders may decide to contribute combat forces to peacekeeping
operations, in addition to expanding the current level of command and logistic support.
•
China’s national security interests are broadening. This will likely lead China to attempt to
develop at least a limited naval power projection capability extending beyond the South
China Sea. This already has been reflected in Beijing’s decision in December to participate
in anti-piracy operations off the coast of Somalia.
Missile Capability. China continues to develop and field conventional theater-range
ballistic and cruise missile capabilities that can reach US forces and regional bases throughout
the Western Pacific and Asia, including Guam. China also is developing conventionally armed
short- and medium-range ballistic missiles with terminally guided maneuverable warheads that
could be used to attack US naval forces and airbases. In addition, counter-command, control,
and sensor systems, to include communications satellite jammers, are among Beijing’s highest
military priorities.

Counterspace Systems. China continues to pursue a long-term program to develop a
capability to disrupt and damage critical foreign space systems. Counterspace systems, including
antisatellite (ASAT) weapons, also rank among the country’s highest military priorities.

Nuclear Capability. On the nuclear side, we judge Beijing seeks to modernize China’s
strategic forces in order to address concerns about the survivability of those systems in the face
of foreign, particularly US, advances in strategic reconnaissance, precision strike, and missile
defenses. We assess China’s nuclear capabilities will increase over the next ten years.

Indian Pragmatism

Like China, India’s expanding economy will lead New Delhi to pursue new trade
partners, gain access to vital energy markets, and generate the other resources required to sustain
rapid economic growth. To sustain rapid growth, Indian governments also must maintain the
political support for economic reforms needed to drive the expanding economy.

On the global stage, Indian leaders will continue to follow an independent course
characterized by economic and political pragmatism. New Delhi will not automatically support

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or oppose positions favored by the United States or any other major power. Nonetheless, good
relations with the United States will be essential for India to realize its global ambitions. Indian
leaders will seek benefits from American influence, trade, and technology. Strong ties to
Washington also will give India more confidence in dealing with China and in mitigating the
dangers posed by its long-time adversary, Pakistan. However, Indian leaders often will adopt
positions contrary to those favored by Washington. India will be concerned about China during
the coming decade because of Beijing’s political and economic power and its ability to project
military force regionally, but Indian leaders will strive to avoid confrontation with China.

or oppose positions favored by the United States or any other major power. Nonetheless, good
relations with the United States will be essential for India to realize its global ambitions. Indian
leaders will seek benefits from American influence, trade, and technology. Strong ties to
Washington also will give India more confidence in dealing with China and in mitigating the
dangers posed by its long-time adversary, Pakistan. However, Indian leaders often will adopt
positions contrary to those favored by Washington. India will be concerned about China during
the coming decade because of Beijing’s political and economic power and its ability to project
military force regionally, but Indian leaders will strive to avoid confrontation with China.

India also will look for ways to safeguard its interests in light of the concluding civil war
in Sri Lanka and political uncertainty in Bangladesh and Nepal, which have experienced
dramatic transformations in government during the past year. New Delhi generally will be
supportive of democratic forces in its smaller neighbors, while also being sensitive to the
opinions of the Tamil and Bengali communities within India.

North Korea’s Nuclear Ambitions

In addition to a possible India-Pakistan conflict, Pyongyang’s nuclear ambitions and
proliferation behavior threaten to destabilize East Asia. The North’s October 2006 nuclear test is
consistent with our longstanding assessment that it had produced a nuclear device. Prior to the
test, we assessed that North Korea produced enough plutonium for at least a half dozen nuclear
weapons. The IC continues to assess North Korea has pursued a uranium enrichment capability
in the past. Some in the Intelligence Community have increasing concerns that North Korea has
an ongoing covert uranium enrichment program.

Pyongyang probably views its nuclear weapons as being more for deterrence,
international prestige, and coercive diplomacy than for warfighting and would consider using
nuclear weapons only under certain narrow circumstances. We also assess Pyongyang probably

ATA FEB 2009-IC STATEMENT FOR THE RECORD
would not attempt to use nuclear weapons against US forces or territory unless it perceived the
regime to be on the verge of military defeat and risked an irretrievable loss of control.

would not attempt to use nuclear weapons against US forces or territory unless it perceived the
regime to be on the verge of military defeat and risked an irretrievable loss of control.

On the proliferation side, North Korea has sold ballistic missiles and associated materials
to several Middle Eastern countries, including Iran, and, in our assessment, assisted Syria with
the construction of a nuclear reactor. We remain concerned North Korea could again export
nuclear technology. In the October 3 Second Phase Actions agreement, the DPRK reaffirmed its
commitment not to transfer nuclear materials, technology, or know-how. We assess Pyongyang
is less likely to risk selling nuclear weapons or weapons-quantities of fissile material than
nuclear technology or less sensitive equipment to other countries or non-state actors, in part
because it needs its limited fissile material for its own deterrent. Pyongyang probably also
perceives that it would risk a regime-ending military confrontation with the United States if the
nuclear material was used by another country or group in a nuclear strike or terrorist attacks and
the United States could trace the material back to North Korea. It is possible, however, that the
North might find a nuclear weapons or fissile material transfer more appealing if its own
stockpile grows larger and/or it faces an extreme economic crisis where the potentially huge
revenue from such a sale could help the country survive.

We assess that poor economic conditions are fueling systemic vulnerability within North
Korea. Public statements by the regime emphasize the need for adequate food supplies. A
relatively good fall harvest in 2008, combined with the delivery of substantial US food aid-
500,000 tons of grain have been promised and about one-third of this has been delivered-
probably will prevent deterioration in the food security situation during the next few months.
However, we assess North Korea is still failing to come to grips with the economic downturn
that began in the early 1990s and that prospects for economic recovery remain slight. In addition
to food, shortages in fertilizer and energy continue to plague the economy. Investment spending
appears is negligible, trade remains weak, and we see little progress toward economic reforms.
Pyongyang has long been in default on a relatively large foreign debt and we assess that badly
needed foreign investment will not take place unless the North comes to terms with its
international creditors and conforms to internationally accepted trade and financial norms, badly
needed foreign investment will not take place.

•
Pyongyang’s strategic posture is not helping its economy. Trade with Japan has fallen
precipitously since the nuclear and missile tests of 2006, and, while commercial trade with
South Korea rose in 2008, South Korean aid and tourism to the North declined due to
increased North-South tensions.
Despite this poor economic performance and the many privations of the North Korean
public, we see no organized opposition to Kim Jong Il’s rule and only occasional incidents of

ATA FEB 2009-IC STATEMENT FOR THE RECORD
social disorder. Kim probably suffered a stroke in August that incapacitated him for several
weeks, hindering his ability to operate as actively as he did before the stroke. However, his
recent public activities suggest his health has improved significantly, and we assess he is making
key decisions. The state’s control apparatus by all accounts remains strong, sustaining the
dismal condition of human rights in North Korea.

social disorder. Kim probably suffered a stroke in August that incapacitated him for several
weeks, hindering his ability to operate as actively as he did before the stroke. However, his
recent public activities suggest his health has improved significantly, and we assess he is making
key decisions. The state’s control apparatus by all accounts remains strong, sustaining the
dismal condition of human rights in North Korea.

Russian challenges to US interests now spring more from Moscow’s perceived strengths
than from the state weaknesses characteristic of the 1990s. US involvement in Iraq and
Afghanistan and general anti-Americanism have created openings for Russia to build alternative
arrangements to the US-led international political and economic institutional order. Russia is
actively cultivating relations with regional powers, including China, Iran, and Venezuela to
increase its ability to influence events. Moscow also is trying to maintain control over energy
supply and transportation networks to Europe to East Asia, and protect and further enhance its
market share in Europe through new bilateral energy partnerships and organizing a gas cartel
with other major exporters. Russia appears to believe the continued heavy dependence of
European countries and former Soviet states on Russia’s state gas monopoly, Gazprom, provides
Moscow with political and economic leverage.

Russia continues to rely on its nuclear deterrent and retaliatory capability to counter the
perceived threat from the United States and NATO. Moscow for the past several years has also
been strengthening its conventional military force to make it a credible foreign policy instrument,
both to signal its political resurgence and to assert its dominance over neighboring states, like
Georgia. Moscow has actively engaged in foreign military cooperation with countries such as
China and Venezuela, in part to remind the United States and others of Russia’s global military
relevance. Despite persistent challenges, including a long-term decline in the numbers and
quality of recruits and difficulties in keeping pace with the demands of weapons modernization,
the Russian military defeated the Georgian military last August.

Russian leaders recently have spoken positively about the possibilities for change in the
US-Russia dynamic, but issues such as NATO enlargement, the conflict over Georgia’s
separatist regions, and Missile Defense will continue to pose difficulties for the relationship and
underscore the challenges of finding ways to engage with Russia. Even as it seeks to negotiate a
robust post-START agreement, Moscow consistently stresses that the accession to NATO of
Georgia and Ukraine would put existing arms control regimes and negotiations at risk and could
prompt Russian military countermeasures as well as increased pressure against Tbilisi and Kyiv.
Russia’s strong engagement with countries like Iran and Syria, including advanced weapons
sales, also has implications for US nonproliferation interests.

Eurasia/Caucasus/Central Asia

Six months after the fighting between Russia and Georgia over Abkhazia and South
Ossetia last August, the separatist regions remain potential flashpoints. Moscow’s expanded
military presence in and political-economic ties to these regions, along with continuing violence
increase the risk of provocation, overreaction, or miscalculation leading to a resumption of
fighting. Although the political situation in Georgia has stabilized, President Saakashvili faces

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increasing criticism from the domestic opposition, and his reaction to that will either enhance or
set back Georgia’s democratic development.

increasing criticism from the domestic opposition, and his reaction to that will either enhance or
set back Georgia’s democratic development.

An increasingly assertive Russia and the fallout from the global financial crisis will
combine to amplify the challenges facing Ukraine as it heads for a presidential election in Winter
2009-2010. Ukraine has moved toward democracy and Western integration despite numerous
political tests since independence. Progress will be difficult because of weak political
institutions, ongoing conflicts with Russia over gas pricing and contracts and the new exigencies
of the global financial crisis, which has dramatically revealed the underlying weaknesses of the
Ukrainian economy and potentially Ukraine’s stability.

In Belarus, the Lukashenko regime appears willing to cooperate with Russian efforts to
counter US missile defense plans with Prague and Warsaw. However, Russia’s continuing
efforts to control key Belarusian economic sectors could prompt Minsk to improve ties with the
West to balance Moscow. Lukashenko maintains an authoritarian grip on power and could
return to repressive measures if public discontent over the worsening economy turns to protest.

The five Central Asian states-Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and
Turkmenistan-with their highly-personalized politics, weak institutions, and growing
inequalities are ill-equipped to deal with the challenges posed by Islamic violent extremism, poor
economic development, and problems associated with energy water and food distribution.
Energy helped make Kazakhstan a regional economic force, but any sustained decline in oil
prices would affect revenues, could lead to societal discontent, and will derail the momentum for
domestic reforms. Tajikistan and Kyrgyzstan have heavily depended on migrant worker
remittances from both Russia and Kazakhstan for a significant portion of their gross domestic
product-up to 45 percent in the case of Tajikistan-and will be severely affected by the
financial crisis. Tajikistan, in particular, faces increased threats to internal stability from the loss
of these critical revenue streams. Ultimately, these challenges to regional stability could threaten
the security of critical US and NATO lines of communication to Afghanistan through Central
Asia.

The Balkans

Events in the Balkans will again pose the greatest threat of instability in Europe in 2009,
despite positive developments in the last year that included Kosovo’s peaceful declaration of
independence from Serbia, the election of pro-EU leaders in Serbia, and offers of NATO
membership to Croatia and Albania. The principal challenges to stability will come from the
unresolved political status of the Serb minority in Kosovo, particularly in northern Kosovo, and
Bosnia-Herzegovina’s (BiH) continuing uneasy inter-ethnic condominium.

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More than 50 nations, including 22 of 27 EU members, have recognized the new state of
Kosovo. In the coming years Pristina will depend on the international community for economic
and development assistance and to ensure Kosovo’s territorial integrity. Belgrade openly
supports parallel Kosovo Serb institutions. It has used political and legal means to challenge and
undermine Pristina’s sovereignty and to limit the mandate of the EU’s Rule of Law mission
(EULEX) in Kosovo, which is meant to help Kosovo authorities build multi-ethnic police,
judiciary, and customs systems. This has reinforced the de facto separation of Kosovo into an
Albanian-majority south and a Serb-majority north and frustrated the Kosovo Albanians.
Kosovo Force’s (KFOR) presence will help deter widespread violence, however. Serbia’s
leaders espouse a European future, and President Tadic desires quick progress toward EU
membership, but they are unwilling to abandon Belgrade’s stake in Kosovo to achieve that end.
Belgrade still looks for Moscow’s diplomatic support on this issue and recently concluded a
significant energy deal with Moscow, including sale of a majority stake in its state oil refinery.

More than 50 nations, including 22 of 27 EU members, have recognized the new state of
Kosovo. In the coming years Pristina will depend on the international community for economic
and development assistance and to ensure Kosovo’s territorial integrity. Belgrade openly
supports parallel Kosovo Serb institutions. It has used political and legal means to challenge and
undermine Pristina’s sovereignty and to limit the mandate of the EU’s Rule of Law mission
(EULEX) in Kosovo, which is meant to help Kosovo authorities build multi-ethnic police,
judiciary, and customs systems. This has reinforced the de facto separation of Kosovo into an
Albanian-majority south and a Serb-majority north and frustrated the Kosovo Albanians.
Kosovo Force’s (KFOR) presence will help deter widespread violence, however. Serbia’s
leaders espouse a European future, and President Tadic desires quick progress toward EU
membership, but they are unwilling to abandon Belgrade’s stake in Kosovo to achieve that end.
Belgrade still looks for Moscow’s diplomatic support on this issue and recently concluded a
significant energy deal with Moscow, including sale of a majority stake in its state oil refinery.

Testing Times for Latin America

Latin American economies, following five consecutive years of solid performance, are
feeling the repercussions from the global financial crisis. We expect the region’s growth rate
will fall substantially this year to about 1 percent from 4 percent for 2008. Exports from the
region have averaged 20 percent growth for five years, but falling commodity prices and
slowdowns in major industrial markets have sharply reduced export growth in the fourth quarter
of 2008 and into 2009. Foreign direct investment flows through mid-year 2008 were on pace to
reach the record level of $110 billion in 2007, but are likely to have diminished in late 2008 and
probably will continue to do so in 2009. Finally, after 10 years of worker remittances growing at
an average annual rate of better than 15 percent, remittances grew just 7 percent in 2007 and
grew only 1 to 2 percent in 2008.

Democracy in much of Latin American has established impressive roots over the past
decade or so. In countries that comprise the bulk of the region’s GDP and population-like
Brazil, Chile, Colombia, Mexico, and Peru-pro-market policies have yielded important
economic dividends that help fortify democratic gains. Brazil is becoming a leading regional
power and, along with others like Argentina and Chile, is trying to promote greater South
American integration

Developments in the last year, however, underscore the challenge that populist, often-
autocratic regimes still pose in the region. Venezuela attracts substantial, if declining, regional
popular support, but its influence is likely to diminish as its economic problems mount. Cuba,
though an economic basket case, can still influence the Latin American left because of its so-
called “anti-imperialist” stance. Others like Bolivia, and to a lesser extent Argentina and

ATA FEB 2009-IC STATEMENT FOR THE RECORD
Ecuador, have embraced populist policies and are likely to also lag behind. Some, such as Haiti,
have become even poorer and still less governable. Basic law-and-order issues, to include rising
violent crime and powerful drug trafficking organizations also confront key hemispheric nations,
as do uneven governance and institution-building efforts and performance in confronting chronic
corruption. To maintain our political and economic influence in the region, the United States
will be called upon to help the region’s governments address their growing security problems
and to deliver greater market access. Our use of bilateral trade agreements, and foreign aid
through the Millennium Challenge Account to less developed countries, helps cement sound
economic policies and more effective governance.

Ecuador, have embraced populist policies and are likely to also lag behind. Some, such as Haiti,
have become even poorer and still less governable. Basic law-and-order issues, to include rising
violent crime and powerful drug trafficking organizations also confront key hemispheric nations,
as do uneven governance and institution-building efforts and performance in confronting chronic
corruption. To maintain our political and economic influence in the region, the United States
will be called upon to help the region’s governments address their growing security problems
and to deliver greater market access. Our use of bilateral trade agreements, and foreign aid
through the Millennium Challenge Account to less developed countries, helps cement sound
economic policies and more effective governance.

Mexico

Mexico’s sound fiscal and monetary policies will probably provide some insulation from
the current global economic volatility. With 80 percent of its exports destined for US consumers
and low international oil prices, however, Mexico would take a strong hit from a prolonged US
recession. Mexico’s Finance Secretariat cut growth estimates for 2008 to 1.5 percent, and
Finance Minister Carstens has openly acknowledged growth might contract by a percentage
point this year. Mexico last experienced a fall in GDP in 2001. Unemployment late last year
was almost 4.5 percent, up a point from 2007 and underemployment is even higher.
Employment in the construction sector dropped more than 4 percent in the same time period,
according to Mexico’s National Statistics Institute.

The sharp economic downturn as yet shows no sign of hurting Mexico’s debt posture or
spurring northward migration. Mexico’s National Statistics Institute late last year indicated that
Mexican emigration had dropped 42 percent since 2006, probably due to the decreased demand
for labor in the United States. That trend probably will lead to declines in remittances, the
second largest source of foreign currency after oil exports, and increase pressure on the
government to create jobs.

Mexico remains the most important conduit for illicit drugs reaching the United States.
As much as 90 percent of that cocaine known to be directed toward the United States, and some
Colombian heroin, eventually transits Mexico before entering the United States. Despite recent

ATA FEB 2009-IC STATEMENT FOR THE RECORD
successful efforts to counter precursor chemical diversion and drug trafficking, Mexico is the
chief foreign supplier of methamphetamine and marijuana to the US market and produces most
of the heroin consumed west of the Mississippi River. The corruptive influence and increasing
violence of Mexican drug cartels, which are among the most powerful organized crime groups in
the world, impede Mexico City’s ability to govern parts of its territory and build effective
democratic institutions.

successful efforts to counter precursor chemical diversion and drug trafficking, Mexico is the
chief foreign supplier of methamphetamine and marijuana to the US market and produces most
of the heroin consumed west of the Mississippi River. The corruptive influence and increasing
violence of Mexican drug cartels, which are among the most powerful organized crime groups in
the world, impede Mexico City’s ability to govern parts of its territory and build effective
democratic institutions.
day
cartel operations, and has started to fragment Mexico’s powerful drug cartels. We assess
that significantly more cocaine is diverting to Central America before moving into Mexico, a
shift that, in our judgment, mitigates some risks drug traffickers faced in Mexico but that also
complicates trafficking operations.

As trafficking networks have come under increasing strain from President Calderon’s
counternarcotics efforts, elements of Mexico’s most powerful cartels have become more
aggressive. The assassination of the national police commissioner last May, the grenade attack
in a crowded plaza in Michoacan State last September and the execution of Brigadier General
marco Enrique Tello Quinonez this month indicate cartel elements are increasingly willing to kill
high-level Mexican officials, retaliate against soldiers, and tolerate more collateral damage
among civilians not directly involved in the drug trade.

Calderon has demonstrated his determination to address the problem of narcotics-related
corruption at all levels of the government by launching Operation Cleanup. Most notably, this
has led to the arrest of a former Deputy Attorney General and the head of Interpol in Mexico. In
addition, Calderon won approval in November of the 2009 federal budget, which increased
outlays in real terms to the Public Security Secretariat and the Attorney General’s Office by 69
percent and 29 percent, respectively.

Colombia

President Uribe is committed to an all-out effort to defeat the Revolutionary Armed
Forces of Colombia by the time his term ends in 2010. His public statements indicate he is
determined to use Colombia’s security forces to maintain the systematic military pressure that
has kept the FARC on the run, caused the FARC to lose territory, and degraded FARC command
and control. Among the major successes in 2008 were the deaths of key FARC leaders,
including members of the ruling Secretariat, a continued high number of FARC desertions, and
the 2 July rescue of 15 hostages, including three US citizens.

Despite these reverses, the FARC leadership has shown no signs it seeks to end hostilities
or participate in serious peace talks. The group has a record of resilience, and its chances for
surviving as a viable insurgent force over the next several years will be aided by a still-cohesive
leadership structure, substantial drug revenues, and cross-border sanctuaries in Venezuela and
Ecuador.

ATA FEB 2009-IC STATEMENT FOR THE RECORD
Although the FARC is unlikely to make a sustained comeback, it will still be able to
conduct small-scale guerrilla and terrorist attacks nationwide. Official and nonofficial US
citizens remain at risk.

Although the FARC is unlikely to make a sustained comeback, it will still be able to
conduct small-scale guerrilla and terrorist attacks nationwide. Official and nonofficial US
citizens remain at risk.

Bogota’s counterdrug successes-including capture and extradition of the leaders of the
North Valley Cartel, the last remaining large-scale drug cartel (besides the FARC), the targeting
of mid-level leaders, a strong security force presence in key drug transit and coca growing zones,
and its US-backed coca eradication program-have hampered FARC drug trafficking operations.
Bogota’s strides in tackling corruption also have led to high-profile trafficker takedowns.
Bogota arrested or killed important traffickers such as the Mejia Munera brothers, known as “los
Mellizos,” in 2008 after the officials protecting them were removed from office. Colombian
interdiction efforts resulted in an increase in seizures in 2008. Still, Colombia remains the
world’s leading producer of cocaine and a key supplier of heroin to the US market. The US
Government’s 2007 imagery-based survey indicates 167,000 hectares in Colombia were planted
with coca, as compared to 157,200 in 2006, a statistically insignificant increase. Although the
total area under cultivation remained nearly constant, aerial eradication reduced yield per hectare
by killing some plants inside of areas counted as fully under cultivation and causing some
farmers to lose harvests before they could rehabilitate the field. This resulted in a reduction in
potential cocaine production from 550 metric tons in 2006 to 535 in 2007. Area under
cultivation in 2007 was slightly less than in 2001, the year when Plan Colombia support began to
take hold, but potential production is about one quarter less, due to the effects of aerial
eradication on yield. We are still compiling and assessing the data from 2008.

Venezuela

President Hugo Chavez is focusing on shoring up public support at home after his
opponents won five key states and the capital in November gubernatorial and mayoral elections.
Chavez also must deal with growing public concern about violent crime and worsening
economic conditions. Nevertheless, Chavez remains Venezuela’s most popular politician,
according to a reputable local polling company, and controls the country’s key institutions. To
consolidate his socialist “revolution,” Chavez has ordered a referendum for February aimed at
allowing indefinite reelection for all elected officials. His push probably reflects concern over
dwindling oil profits undercutting his ability to maintain popular domestic programs.

Chavez probably will struggle to maintain economic growth in the coming years as oil
prices fall from their record highs. He has been unable to control high inflation and his statist
economic policies have reduced drastically private-sector growth. Chavez also has failed to
make sufficient investments in infrastructure, especially in the vital oil sector, necessary for
sustained growth.

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•
•
•
If the price of West Texas Intermediate oil stays below $50 per barrel for most of 2009,
Chavez probably will be forced to make major cuts in domestic and foreign spending or to
devalue the Venezuelan currency and draw down government hard currency reserves to
avoid a major economic crisis.
Chavez is likely to face new constraints in 2009 as he attempts to expand his influence in
Latin America. His willingness to spend oil revenue on foreign aid and his unstinting populist
message have paid some dividends, but repeated spats with foreign leaders have tarnished his
image and falling oil prices could further undermine his ability to buy friends. Chavez’s approval
rating has been decreasing regionally, according to the 2008 Latinbarometer, a highly regarded
regional survey. Chavez has provided significant financial and political support to Evo Morales
in Bolivia and Daniel Ortega in Nicaragua.

Public disclosure of Chavez’s close ties with the Revolutionary Armed Forces of
Colombia (FARC), which were reflected in documents from the hard drives captured after the
death of a FARC Secretariat member in March, have forced Chavez, at least rhetorically, to
improve relations with Bogota. We assess Chavez is likely to maintain his decade-long ties to
the FARC by providing them safehaven because of his ideological affinity to the group and his
interest in influencing Colombian politics.
•
The United States in September designated two senior Venezuelan Government officials and
one former official under the Foreign Narcotics Kingpin Designation Act for materially
assisting the narcotics trafficking activities of the FARC.
Chavez’s efforts to expand his reach beyond Latin America continue to give priority to
Iran, Russia, and China. The personal relationship between Iran’s President Ahmadi-Nejad and
Chavez drives strengthening bilateral economic and military ties, although the two countries are
still struggling to overcome bureaucratic and linguistic obstacles to implementing accords.
Venezuela also is serving as a bridge to help Iran build relations with other Latin American
countries. Chavez has given special attention in recent months to deepening political, economic,
and military ties to Russia. In late 2008, he announced his plans to build a nuclear power plant
in Venezuela with Russian assistance.

Despite Caracas’s stated interest in purchasing more Russian, Chinese, and Spanish
armaments, worsening economic conditions probably will force Chavez to slow such
acquisitions. His $5.3 billion in military purchases since 2005 have attracted notice within the
region, although Venezuela’s overall military capabilities remain plagued by logistic,
maintenance and transportation shortfalls. Notable purchases from Russia include 24 Su-30MK2
fighters, helicopters, and assault rifles.

Chavez’s growing ties to Iran, coupled with Venezuela’s lax financial laws and border
controls, and widespread corruption have created a permissive environment for Hizballah to
exploit. In June 2008, two Venezuelan-based individuals, one a Venezuelan diplomat, were
ATA FEB 2009-IC STATEMENT FOR THE RECORD
designated by the US Treasury Department as supporters of terrorism for reportedly providing
logistical and financial support to Hizballah members.

designated by the US Treasury Department as supporters of terrorism for reportedly providing
logistical and financial support to Hizballah members.

Cuba

President Raul Castro’s record since formally taking power in February 2008 indicates
his primary objective in the coming year will be to make Cuba’s dysfunctional socialist economy
more efficient. His task has been made more difficult, however, by the extensive damage to the
country’s already weak agricultural sector and infrastructure by three major and successive
hurricanes last year. The global economic downturn will further slow growth, diminishing the
regime’s options for addressing public dissatisfaction with living conditions.

Havana’s competent and immediate response to the hurricanes underscores the
effectiveness of regime controls and indicates that it remains capable of preventing a
spontaneous mass migration. Nevertheless, we judge that at a minimum the annual flow of
Cuban migrants to the United States will stay at the same high levels of about 35,000 legal and
illegal migrants annually that have prevailed over the past several years.

Raul almost certainly will continue to proceed cautiously on any reforms to the economy
in order to maintain elite consensus and avoid raising public expectations beyond what he is able
or willing to deliver. We have seen no indication in the modest changes he has implemented that
he intends to abandon core Communist economic principles, such as state ownership of
production. On the political front, all indications are that Raul will continue to deny elements of
civil society and pro-democracy dissidents the exercise of free expression.

Venezuela’s preferential terms for oil sales and payments for Cuban medical personnel
and other technical specialists will remain Cuba’s economic lifeline, despite Cuba’s efforts to
attract other sources of foreign investment from countries such as China and Russia. President
Chavez probably will prioritize aid to Havana over other foreign policy commitments.

We assess Raul will continue his efforts to bolster Havana’s international legitimacy by
projecting a more moderate political image. Nevertheless, Cuba almost certainly will remain
heavily involved behind-the-scenes in counseling and supporting authoritarian populist
governments in Latin America and otherwise seeking to undermine US influence across the
region.

Bolivia

After nearly a year of sporadic unrest and rising tensions, President Evo Morales and
opposition legislators last October reached a compromise to allow a referendum in late January
on a draft constitution that encapsulates much of Morales’ social and economic reform agenda.

ATA FEB 2009-IC STATEMENT FOR THE RECORD
The compromise eased tensions following a string of violent protests last fall, but some leaders
in eastern departments rejected the compromise. Nevertheless, the referendum passed by a
comfortable margin. The draft constitution leaves many contentious issues vague, which several
government and opposition leaders have acknowledged probably will lead to further disputes
over implementation in the run-up to new presidential elections in December 2009.

The compromise eased tensions following a string of violent protests last fall, but some leaders
in eastern departments rejected the compromise. Nevertheless, the referendum passed by a
comfortable margin. The draft constitution leaves many contentious issues vague, which several
government and opposition leaders have acknowledged probably will lead to further disputes
over implementation in the run-up to new presidential elections in December 2009.

Chavez promised to protect Morales’s government and provided La Paz important
financial assistance. Since 2006, Venezuela has provided Bolivia more than $95 million in direct
financial aid.

Africa: Falling Further Behind

Africa has made substantial economic and political progress over the past decade.
However, the durability of the region’s recent positive growth trend, particularly among
countries dependent on commodity exports and foreign capital inflows, will be tested by the drop
in commodity prices and recessions in the United States and Europe. Even before the financial
crisis hit, the 6 percent GDP growth rate-although impressive-was insufficient to bring about
necessary structural changes in the continent’s economy. Africa’s economic growth is led by a
small number of oil-producing countries, but even those countries without oil resources have
experienced GDP growth rates far above their historical rates. Agriculture, the foundation of
most African economies, is far from achieving self-sufficiency, but technical solutions and
infrastructure enhancement have demonstrated their ability to boost production in Mali, Malawi
and Zambia. Further transformations remain uncertain in light of the EU’s continuing ban on
genetically modified foodstuffs.

In addition to fallout from the global financial crisis, Africa faces other economic,
societal and security challenges. Sub-Saharan Africa is confronting a shortage of skilled medical
personnel, deteriorating health systems, and inadequate budgets to deal with diseases like
HIV/AIDS, malaria, and tuberculosis. Transnational crime, especially the transshipment of
illegal drugs to Europe, and corruption are growing in various parts of Africa, weighing down
the continent’s economic growth, reducing government efficiency, and undermining the security
services of African states.

China’s presence has grown substantially over the past decade. Total bilateral trade
between China and the continent has increased from less than $4 billion in 1995 to $100 billion
in 2008, but the EU and US still remain far larger economic partners for the region. China’s
objectives are to secure access to African markets and natural resources, isolate Taiwan, and
enhance its international stature, all of which it has made progress on. Nevertheless, China’s role
has generated local resentment as Chinese firms are seen as undercutting African competitors in

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securing commercial contracts and falling short of standard local labor practices. Moreover,
there is little discernible evidence of Chinese investments being used to incorporate Africa into
the industrial “global value production chains” that are becoming the hallmark of integrative
trade and FDI flows, especially in manufacturing in other regions of the world.

securing commercial contracts and falling short of standard local labor practices. Moreover,
there is little discernible evidence of Chinese investments being used to incorporate Africa into
the industrial “global value production chains” that are becoming the hallmark of integrative
trade and FDI flows, especially in manufacturing in other regions of the world.

Although African governments’ political commitment to peacekeeping has increased
significantly over the last ten years, the capacities of the African Union, regional organization,
and individual African states to conduct peacekeeping operations have been stretched to the
limit. Major troop contributing countries are becoming more wary and less capable of deploying
peacekeepers to potentially dangerous operations whose mandates and missions are unclear.

The Democratic Republic of the Congo

In the Democratic Republic of the Congo, President Joseph Kabila has been unable to
consolidate his control over the turbulent Eastern border region. In that area, rebel groups,
undisciplined soldiers, and ethnic militia have operated inside and outside of the DRC largely
with impunity for many years and have been responsible for numerous acts of violence and
human rights abuses. The trouble has persisted, even with the help of the largest UN
peacekeeping operation in the world. Recently, however, Kabila has agreed to conduct joint
military operations with nearby countries in an effort to root out some of these groups. As a
result, Rwanda and Uganda have each sent forces into different parts of the border region,
Rwanda into the North and South Kivu Provinces and Uganda into the extreme northeastern
region. In the Kivus, Kinshasa and Kigali are both concerned about the remnant of the 1994
Hutu-led Force for the Democratic Liberation of Rwanda (FDLR). While not a military threat to
the Tutsi-led government in Kigali at this time, the force is a threat to local Congolese
communities. With Kinshasa’s approval, Rwanda sent several thousand soldiers into the area to
defeat, demobilize, or repatriate the FDLR. In return for Kinshasa’s cooperation, Kigali appears
to have dropped its support for a Congolese Tutsi rebel leader, General Laurent Nkunda. The
Rwandans have arrested Nkunda and have him in custody. Moreover, his forces have divided,
some joining up with Congolese government troops. In the northeast, the Ugandan-led military
operation (with both Congolese and Sudanese support) has so far been unsuccessful. Its
objective is to eliminate the threat posed by the Ugandan rebel group known as the Lord’s
Resistance Army (LRA), led by Joseph Kony. Congolese forces, in the near term, probably will
not be able to reassert sufficient control over territory occupied by the LRA and other rebels
groups or to stop sporadic outbreaks of violence.

Nigeria

Nigeria’s oil-rich Delta region, which supplies 10 percent of US oil imports and accounts
for America’s largest investment in Sub-Saharan Africa, has been engulfed in civil strife for

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nearly two decades. Widespread violence, criminality, and corruption have continued to disrupt
Nigeria’s oil and gas production, costing the country millions of dollars in lost revenue.
Inadequate governance and a total lack of accountability has put billions of dollars in the pockets
of corrupt leaders rather than in much needed development and infrastructure projects.
Opportunistic militants, many of whom are beholden to local political leaders who have armed
them in the run-up to Nigeria’s last three national elections, have attacked oil facilities,
kidnapped Nigerian and foreign oil workers, and left much of the Delta lawless and
economically ravaged. As result of the violence and criminal activity, Nigerian oil production
declined about 10 percent in 2008. Unstable political conditions and the fall in the price of crude
oil probably will slow or deter additional foreign investment in the Delta, contributing to further
production drop-offs in the future. A turnaround in the current security environment is unlikely
soon.

nearly two decades. Widespread violence, criminality, and corruption have continued to disrupt
Nigeria’s oil and gas production, costing the country millions of dollars in lost revenue.
Inadequate governance and a total lack of accountability has put billions of dollars in the pockets
of corrupt leaders rather than in much needed development and infrastructure projects.
Opportunistic militants, many of whom are beholden to local political leaders who have armed
them in the run-up to Nigeria’s last three national elections, have attacked oil facilities,
kidnapped Nigerian and foreign oil workers, and left much of the Delta lawless and
economically ravaged. As result of the violence and criminal activity, Nigerian oil production
declined about 10 percent in 2008. Unstable political conditions and the fall in the price of crude
oil probably will slow or deter additional foreign investment in the Delta, contributing to further
production drop-offs in the future. A turnaround in the current security environment is unlikely
soon.

As Sudan approaches two major landmarks in the implementation of the 2005
Comprehensive Peace Agreement (CPA), the country remains plagued by violence in Darfur,
and the ruling National Congress Party’s (NCP) confidence in President Omar Hassan al-Bashir
may be waning. The NCP and Sudanese People’s Liberation Movement (SPLM) are likely to
postpone national elections required to be held under the CPA by July 2009. Election delays are
unlikely to trigger a violent collapse of the CPA because both parties have strong incentives to
maintain the status quo until at least 2011 when the South will vote on a referendum for
independence. However, the parties will have to address critical benchmarks for wealth-sharing
and border demarcation contained in the CPA.

•
The Darfur conflict has become increasingly complicated over the course of the past five
years and is unlikely to be resolved in the near future. While bureaucratic and logistic
constraints in New York and Sudan continue to delay full deployment of a 26,000-person UN
peacekeeping force, the UN mediator’s attempt to hold inclusive peace talks remains stymied
by rebel disunity and ongoing fighting, which, to date, has displaced more than 3 million
people. Chadian-backed rebels based in Darfur have advanced on the Sudanese capital in the
past year, risking an escalated proxy war between Khartoum and N’Djamena.
•
A pending request by the International Criminal Court’s (ICC) chief prosecutor for a warrant
to arrest Sudanese President Omar Hassan al-Bashir on charges of war crimes, crimes against
humanity, and genocide has heightened Khartoum’s distrust of Western intentions, while
inducing Sudanese officials to appear cooperative with international peacemaking attempts in
the short term. The ICC charges against Bashir may undermine his support in the NCP and
among Sudan’s military leadership.
Somalia

Somalia has not had a stable, central government for 17 years and continues to be mired
in conflict. An UN-brokered agreement between the Somali Transitional Federal Government
(TFG) and key opposition leaders in mid-2008 is unlikely to bring peace to Somalia in the near
term. In January 2009 Ethiopia withdrew the troops it deployed in late 2006 to protect the TFG
and oust the Council of Islamic Courts (CIC). Resurgent Islamic extremists are now fighting to
fill the void and expand their hold on territory throughout the country. A newly elected

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pragmatic Islamist president may enhance the credibility of the TFG, but he will face multiple
challenges maintaining the new ruling coalition, including the continued dominance of clan
politics. The removal of Ethiopian troops, whose presence has alienated most Somalis, is likely
to reduce popular support for the extremist group, al-Shabaab al Islamiyah. However, the TFG
lacks a viable security service to defend its leaders and a modest African Union peacekeeping
force has limited reach in Mogadishu. Violent power struggles between Islamist militias and
emerging local resistance groups could displace thousands of additional Somalis, exacerbating
already dire humanitarian conditions.

pragmatic Islamist president may enhance the credibility of the TFG, but he will face multiple
challenges maintaining the new ruling coalition, including the continued dominance of clan
politics. The removal of Ethiopian troops, whose presence has alienated most Somalis, is likely
to reduce popular support for the extremist group, al-Shabaab al Islamiyah. However, the TFG
lacks a viable security service to defend its leaders and a modest African Union peacekeeping
force has limited reach in Mogadishu. Violent power struggles between Islamist militias and
emerging local resistance groups could displace thousands of additional Somalis, exacerbating
already dire humanitarian conditions.

Zimbabwe

Zimbabwe continues to deteriorate under the brutal and corrupt rule of President Robert
Mugabe. Over half the population is food insecure and public health facilities and schools have
been almost completely shut down. With over 60,000 infected, the recent cholera epidemic is
dramatic evidence of how far living conditions have plummeted in this once-prosperous and
relatively well-developed country. Zimbabwe’s sharp decline has generated problems
throughout southern Africa as millions of refugees have fled to South Africa, Botswana, and
Mozambique and as the region’s well-publicized economic and security concerns have
frightened foreign investors away. To date, Mugabe retains the support of his senior military
officers and has shown little commitment to the power-sharing deal signed with the opposition
Movement for Democratic Change (MDC). Mugabe also has managed to hold on to the backing
of South Africa, a key regional player. Pretoria, which recently brokered a coalition agreement
between Mugabe and the opposition Movement for Democratic Change, remains unwilling,
despite growing criticism at home and abroad, to apply stronger pressure on Mugabe to step
aside or to undertake fundamental political and economic reforms. Mugabe and his ruling elite
are likely to remain in power until he loses the support of the security forces, South Africa steps
up its pressure, or social and economic conditions in Zimbabwe become substantially worse.
With both political parties signing on to the recent power-sharing agreement, it will be up to
South Africa, the Southern African Development Community, and the African Union to carefully
watch Mugabe’s actions and ensure that power is in fact shared and the MDC is allowed to lead.

Drug Trafficking in West Africa

Drug trafficking has become a major problem in West Africa, and the emergence of
Guinea-Bissau as Africa’s first narco-state highlights the scope of the problem and what may be
in store for other states in the region. Away from the scrutiny of local and international law
enforcement, drug traffickers, often departing from Venezuela by air and sea, have transported
large quantities of drugs, predominantly cocaine, from Latin America to European markets
through the porous borders of more that a half dozen West African countries. Traffickers have
successfully co-opted government and law enforcement officials in these countries, further
undermining weak and economically impoverished governments who lack adequate law

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enforcement and judicial capacity. ECOWAS sponsored a conference in Cape Verde in late
2008 to address this issue and the governments of Great Britain and France have conducted
limited law enforcement and counternarcotics training in the region, but drug trafficking in West
Africa probably will continue to expand in volume and scope in the absence of a concerted
international effort to stop it.

enforcement and judicial capacity. ECOWAS sponsored a conference in Cape Verde in late
2008 to address this issue and the governments of Great Britain and France have conducted
limited law enforcement and counternarcotics training in the region, but drug trafficking in West
Africa probably will continue to expand in volume and scope in the absence of a concerted
international effort to stop it.

Threats to the US Information Technology Infrastructure

The US information infrastructure, including telecommunications and computer networks
and systems, and the data that reside on them, is critical to virtually every aspect of modern life.
Threats to our information technology infrastructure are an important focus of the Intelligence
Community. As government, private sector, and personal activities continue to move to
networked operations, as our digital systems add ever more capabilities, as wireless systems
become even more ubiquitous, and as the design, manufacture, and service of information
technology have moved overseas, the threat will continue to grow.

This information and communications revolution also is enabling an unprecedented
ability to spread ideas and influence large numbers of people. Nation-states and non-state groups
are taking an increasing interest in the role of mass media in shaping international opinions.
Terrorists will continue to be motivated to conduct spectacular attacks in part by the desire to
achieve maximum media exposure for their cause. Increasing global connectivity is enabling
radical groups to recruit and train new members, proliferate extremist ideologies, manage their
finances, manipulate public opinion, and coordinate attacks. In the recent conflict in Gaza, for
example, the media played an important role for both sides in shaping public perceptions of the
conflict. We can expect future adversaries to similarly employ mass media in an attempt to
constrain US courses of actions in a future crisis or conflict.

Further, the growing connectivity between information systems, the Internet, and other
infrastructures creates opportunities for attackers to disrupt telecommunications, electrical
power, energy pipelines, refineries, financial networks, and other critical infrastructures. Over
the past several years we have seen cyber attacks against critical infrastructures abroad, and
many of our own infrastructures are as vulnerable as their foreign counterparts.

•
A successful cyber attack against a major financial service provider could severely impact
the national economy, while cyber attacks against physical infrastructure computer systems
such as those that control power grids or oil refineries have the potential to disrupt services
for hours to weeks.
Network defense technologies are widely available to mitigate threats but have not been
uniformly adopted due to associated costs, perceived need, operational requirements, and
regulatory constraints. This slow rate of adoption has allowed cyber attackers to keep up with
many defensive advances. Meanwhile, advances in digital communications technology, such as
the growth in wireless connectivity and the acceleration of network convergence with a variety
data increasingly digitized and transmitted over the Internet, are creating new vulnerabilities in
our networks and new avenues for cyber attacks.

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Malicious activity on the Internet also is rapidly increasing: spam-unsolicited email that
can contain malicious software-now accounts for 81 percent of all email according to Message
Labs (Symantec); the Georgia Tech Information Security Center projects a ten-fold increase in
malicious software targeting data in the coming year; and botnets-networks of hijacked
computers used to deliver spam or launch distributed denial of service attacks-are expected to
compose 15 percent of all online computers in 2009. Ferris Research estimates that the total cost
of spam and all of the types of fraud that take advantage of spam’s impact is $42 billion in the
United States and $140 billion worldwide in last year, while McAfee estimates that global
companies may have lost over $1 trillion worth of intellectual property to data theft in 2008.

Malicious activity on the Internet also is rapidly increasing: spam-unsolicited email that
can contain malicious software-now accounts for 81 percent of all email according to Message
Labs (Symantec); the Georgia Tech Information Security Center projects a ten-fold increase in
malicious software targeting data in the coming year; and botnets-networks of hijacked
computers used to deliver spam or launch distributed denial of service attacks-are expected to
compose 15 percent of all online computers in 2009. Ferris Research estimates that the total cost
of spam and all of the types of fraud that take advantage of spam’s impact is $42 billion in the
United States and $140 billion worldwide in last year, while McAfee estimates that global
companies may have lost over $1 trillion worth of intellectual property to data theft in 2008.

We assess that a number of nations, including Russia and China, have the technical
capabilities to target and disrupt elements of the US information infrastructure and for
intelligence collection. Nation states and criminals target our government and private sector
information networks to gain competitive advantage in the commercial sector. Terrorist groups,
including al-Qa’ida, HAMAS, and Hizballah, have expressed the desire to use cyber means to
target the United States. Criminal elements continue to show growing sophistication in technical
capability and targeting and today operate a pervasive, mature on-line service economy in illicit
cyber capabilities and services available to anyone willing to pay. Each of these actors has
different levels of skill and different intentions; therefore, we must develop flexible capabilities
to counter each. We must take proactive measures to detect and prevent intrusions from
whatever source, as they happen, and before they can do significant damage.

We expect disruptive cyber activities to be the norm in future political or military
conflicts. The Distributed Denial of Service (DDoS) attacks and Web defacements that targeted
Georgia in 2008 and Estonia in 2007 disrupted government, media, and banking Web sites.
DDoS attacks and Web defacements targeted Georgian government Web sites, including that of
Georgian President Saakishvili, intermittently disrupting online access to the official Georgian
perspective of the conflict and some Georgian Government functions but did not affect military
action. Such attacks have been a common outlet for hackers during political disputes over the
past decade, including Israel’s military conflicts with Hizballah and HAMAS in 2006 and 2008,
the aftermath of the terrorist attacks in Mumbai last year, the publication of cartoons caricaturing
the Prophet Mohammed in 2005, and the Chinese downing of a US Navy aircraft in 2001.

The Comprehensive National Cybersecurity Initiative. In January 2008, the
Comprehensive National Cybersecurity Initiative (CNCI) was adopted as national policy as part
of National Security Presidential Directive 54/Homeland Security Presidential Directive 23
(NSPD-54/HSPD-23). With bipartisan support, Congress appropriated the vast majority of the
CNCI funding request in the Consolidated Security, Disaster Assistance, and Continuing
Appropriations Act of 2009.

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The CNCI addresses current cybersecurity threats, anticipates future threats and
technologies, and develops a framework for creating in partnership with the private sector an
environment that no longer favors cyber intruders over defenders. The CNCI includes defensive,
offensive, education, research and development, and counterintelligence elements, while
remaining sensitive throughout to the requirements of protecting the privacy rights and civil
liberties of US citizens. The CNCI is now making considerable progress in building a better
understanding of the cyber threat, developing concrete solutions, and approving detailed courses
of action. The Adminstration is now reviewing CNCI, to ensure it is consistent with its own
cybersecurity policy.

The CNCI addresses current cybersecurity threats, anticipates future threats and
technologies, and develops a framework for creating in partnership with the private sector an
environment that no longer favors cyber intruders over defenders. The CNCI includes defensive,
offensive, education, research and development, and counterintelligence elements, while
remaining sensitive throughout to the requirements of protecting the privacy rights and civil
liberties of US citizens. The CNCI is now making considerable progress in building a better
understanding of the cyber threat, developing concrete solutions, and approving detailed courses
of action. The Adminstration is now reviewing CNCI, to ensure it is consistent with its own
cybersecurity policy.

We cannot afford to discover successful cyber intrusions after-the-fact, accept disastrous
losses, and then seek merely to contain them. It requires a broad alliance of departments,
agencies, and industry leaders to focus on countering the threat, mitigating vulnerabilities, and
enhancing resiliency in order to preserve our national security, national economy, and public
welfare.

Growing Transnational Organized Crime Threat

Most organized criminal activities increasingly involve either networks of interconnected
criminal groups sharing expertise, skills, and resources in joint criminal ventures that transcend
national boundaries or powerful, well-organized crime groups seeking to legitimize their image
by investing in the global marketplace. Organized criminals and groups will increasingly pose a
threat to US national security interests by enhancing the capabilities of terrorists and hostile
governments.

Some organized crime networks, groups, and individuals also have invested in energy
and mineral markets in an effort to diversify and legitimize their business activities. Criminals’
coercive tactics, underhanded business practices, opaque motives, and self-serving loyalties can
undermine the normal workings and integrity of these global markets. The most powerful, high-
profile Eurasian criminal groups often form strategic alliances with senior political leaders and
business tycoons and can operate from a relative safehaven status with little to fear of
international arrest and prosecution. The leaders of many of these groups go to great lengths to
portray themselves as legitimate businessmen and use front companies that give them more
market access and leverage. They also employ some of the world’s best accountants, lawyers,
bankers, and lobbyists to deflect and frustrate the efforts of authorities.

The change in the structure and types of activities conducted by transnational criminal
groups is making it increasingly difficult to identify and attack them. In particular, the

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increasing prevalence of loosely knit networks, the use of cyberspace and global financial
systems, and political corruption have made it easier for them to hide their involvement, to
thwart law enforcement efforts, and to create images of legitimacy.

increasing prevalence of loosely knit networks, the use of cyberspace and global financial
systems, and political corruption have made it easier for them to hide their involvement, to
thwart law enforcement efforts, and to create images of legitimacy.

Climate change, energy, global health, and environmental security are often intertwined,
and while not traditionally viewed as “threats” to US national security, they will affect
Americans in major ways. The Intelligence Community has increased its focus on these three
critical issues as a result of unprecedented developments in the last year.

Access to relatively secure and clean energy sources and management of chronic food
and water shortages will assume increasing importance for a growing number of countries.
Adding well over a billion people to the world’s population by 2025 will itself put pressure on
these vital resources. An increasing percentage of the world’s population will be moving from
rural areas to urban and developed ones to seek greater personal security and economic
opportunity. Many, particularly in Asia, will be joining the middle class and will be seeking to
emulate Western lifestyles, which involves greater per capita consumption of all these resources.

The already stressed resource sector will be further complicated and, in most cases,
exacerbated by climate change, whose physical effects will worsen throughout this period.
Continued escalation of energy demand will hasten the impacts of climate change. On the other
hand, forcibly cutting back on fossil fuel use before substitutes are widely available could
threaten continued economic development, particularly for countries like China, whose industries
have not yet achieved high levels of energy efficiency.

Food and water also are intertwined with climate change, energy, and demography.
Rising energy prices increase the cost for consumers and the environment of industrial-scale
agriculture and application of petrochemical fertilizers. A switch from use of arable land for
food to fuel crops provides a limited solution and could exacerbate both the energy and food
situations. Climatically, rainfall anomalies and constricted seasonal flows of snow and glacial
melts are aggravating water scarcities, harming agriculture in many parts of the globe. Energy
and climate dynamics also combine to amplify a number of other ills such as health problems,
agricultural losses to pests, and storm damage. The greatest danger may arise from the
convergence and interaction of many stresses simultaneously. Such a complex and
unprecedented syndrome of problems could cause outright state failure, or weaken important
pivotal states counted on to act as anchors of regional stability.

Six to nine months ago we were worried about the implications of increasing high oil
prices: the situation has reversed sharply with oil prices falling to close to a third of their July
2008 peak of $147 per barrel in response to the sudden drop in world oil demand growth and
slower economic growth resulting from the global financial crisis. Although we believe the
longer-term trend is toward high oil prices, the current lower oil prices reduce pressures on the
global economy. Emerging economies previously concerned about busting their budgets on fuel
and food subsidies are breathing a sigh of relief now that prices have fallen substantially over the
last six months. Most forecasters expect global oil demand and oil prices to remain depressed

ATA FEB 2009-IC STATEMENT FOR THE RECORD
through 2009 as the financial turmoil continues to unwind. The decline in price may, however,
lead to delayed or cancelled investments in the upstream oil and gas sectors, creating the
conditions for another spike in oil prices once global oil demand recovers. We also are
concerned that lower oil prices may weaken momentum toward energy efficiency and the
development of alternative sources of energy that are important for both energy and
environmental security. The fall in energy prices also has had the side benefit of undercutting
the economic positions of some of the more troublesome producers.

through 2009 as the financial turmoil continues to unwind. The decline in price may, however,
lead to delayed or cancelled investments in the upstream oil and gas sectors, creating the
conditions for another spike in oil prices once global oil demand recovers. We also are
concerned that lower oil prices may weaken momentum toward energy efficiency and the
development of alternative sources of energy that are important for both energy and
environmental security. The fall in energy prices also has had the side benefit of undercutting
the economic positions of some of the more troublesome producers.

According to the United Nations Intergovernmental Panel on Climate Change (IPCC), a
failure to act to reduce green house gas emissions risks severe damage to the planet by the end of
this century and even greater risk in coming centuries. In a fossil fuel-intensive scenario that
IPCC examined (A1FI), global average temperatures increase by almost four degrees centigrade.
In such a scenario, water stored in glaciers and snow cover would decline significantly, reducing
water availability in regions supplied by melt water from major mountain ranges, where more
than one-sixth of the world population currently lives. Sea-level rise could be up to 59
centimeters by the end of the century and would cause substantial flooding. Individuals in
densely populated and low-lying areas, especially the mega deltas of Asian and Africa, where
adaptive capacity is relatively low, and which already face other challenges such as tropical
storms or local coastal subsidence, are especially at risk. At a four-degree rise, according to the
IPCC, up to 30 percent of plant and animal species would be at risk of extinction, global
productivity in cereals would decline, intensity of tropical cyclones would increase, and extreme
drought areas would rise from 1 percent land area to 30 percent.

The Intelligence Community recently completed a National Intelligence Assessment on
the national security impacts of global climate change to 2030. The IC judges global climate
change will have important and extensive implications for US national security interests over the
next 20 years. Although the United States itself could be less affected and is better equipped
than most nations to deal with climate change and may even see a benefit in the near term owing
to increases in agriculture productivity, infrastructure repair and replacement will be costly. We
judge the most significant impact for the United States will be indirect and result from climate-
driven effects on many other countries and their potential to seriously affect US national security
interests. We assess climate change alone is unlikely to trigger state failure in any state out to
2030, but the impacts will worsen existing problems such as poverty, social tensions,
environmental degradation, ineffectual leadership, and weak political institutions. Climate
change could threaten domestic stability in some states, potentially contributing to intra- or, less
likely, interstate conflict, particularly over access to increasingly scarce water resources. We
judge economic migrants will perceive additional reasons to migrate because of harsh climates,
both within nations and from disadvantaged to richer countries.

From a national security perspective, climate change affects lives (for example, through
food and water shortages, increased health problems including the spread of disease, and
increased potential for conflict), property (for example through ground subsidence, flooding,
coastal erosion, and extreme weather events), and other security interests. The United States
depends on a smooth-functioning international system ensuring the flow of trade and market

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access to critical raw materials such as oil and gas, and security for its allies and partners.
Climate change could affect all of these-domestic stability in a number of key states, the
opening of new sea lanes and access to raw materials, and the global economy more broadly-
with significant geopolitical consequences.

access to critical raw materials such as oil and gas, and security for its allies and partners.
Climate change could affect all of these-domestic stability in a number of key states, the
opening of new sea lanes and access to raw materials, and the global economy more broadly-
with significant geopolitical consequences.

Multilateral policymaking on climate change is likely to be highly visible and a growing
priority among traditional security affairs in the coming decades. We observe the United States
is seen by the world as occupying a potentially pivotal leadership role between Europe, which is
committed to long-term and dramatic reduction in carbon emissions, and a heterogeneous group
of developing states wary of committing to greenhouse gas emissions reductions, which they
believe would slow their economic growth. As effects of climate change begin to mount, the
United States will come under increasing pressure to join the international community in setting
meaningful long-term goals for emissions reductions, to reduce its own emissions, and to help
others mitigate and adapt to climate change through technological progress and financial
assistance.

Global Health

Considerable empirical and theoretical studies have demonstrated the links between the
health of a population and economic growth and development. Highly publicized virulent
infectious diseases-including HIV/AIDS, a potential influenza pandemic, and “mystery”
illnesses such as the 2003 outbreak of severe acute respiratory syndrome (SARS)-remain the
most direct health-related threats to the United States. The most pressing transnational health
challenge for the United States is still the potential for emergence of a severe pandemic, with the
primary candidate being a highly lethal influenza virus. The World Bank estimates that if the
next pandemic virus is similar to the one that caused the 1918 pandemic, it could kill 71 million
people worldwide and cause a major global recession with global costs exceeding $3 trillion.
Other estimates, applying the 2.5 percent fatality rate from the 1918 pandemic to today’s
population, reach 180 million deaths worldwide. Current threats include H5N1 influenza, a virus
that, while primarily a poultry disease, continues to evolve and expand its geographic range.

Infectious diseases are not the only health indicators with strategic significance. Chronic,
non-communicable diseases; neglected tropical diseases; maternal and child mortality;
malnutrition; sanitation and access to clean water; and availability of basic health-care also affect
the US national interest through their impacts on the economies, governments, and militaries of
key countries and regions.

•
Terrorists and warlords have gained local and international stature and even power by
providing health services governments could not. Widespread ill health in the youth cohort
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may reduce a country’s pool of healthy and capable military recruits, a phenomenon that is

may reduce a country’s pool of healthy and capable military recruits, a phenomenon that is

Looking at specific states, the inability of the central government of Afghanistan to
provide health-care and other services has helped to undermine its credibility while boosting
support for a resurgent and increasingly sophisticated Taliban. Wide incidence of traumatic
births, malnutrition, and disease put children there at high risk of impaired development,
undermining their prospects of attending school, engaging more productively in critical labor
such as agricultural production, and participating in other economic activity. In Iraq, a degraded
health sector, shortages of medical personnel, and infections stemming from deficient sanitary
conditions and lack of clean drinking water have undermined the credibility of the central
government.

Russia has the overall worst health indicators of any industrialized country. Poor health
of Russian children and young people combined with falling birthrates threatens Russian military
readiness with a projected halving of eligible military recruits between 2005 and 2018. China’s
high incidence of chronic disease stemming in great part from heavy tobacco use threatens to
slow economic growth by incapacitating workers and incurring heavy health-care costs. The
health effects of environmental degradation are an increasing source of discontent in China.

Venezuela and Cuba have been particularly adept at parlaying provision of charitable
medical services to nationals of other countries into support in international forums such as the
United Nations. Hizballah’s provision of health and social services in Lebanon over the past 20
years has helped to legitimize the organization as a political force in that country, while
HAMAS’s delivery of similar services was a factor in its legislative electoral success in the
Palestinian territories.

Turning to US Homeland health security issues, existing international resources and
regulations will be inadequate to control transnational disease spread at least through the next
decade. Movement of people, animals, and products through mass transportation, smuggling,
and commerce will continue to homogenize the already global environment. Incidents involving
chemical or bacterial contamination of imported food or trade goods, whether accidental or
intentional, are likely to increase as China and other developing countries struggle to implement
effective monitoring systems. A similar challenge involves ensuring the safety of imported
therapeutic drugs and precursor products, as contaminated and counterfeit pharmaceuticals
continue to be a worldwide public health threat.

Conclusion
The international security environment is complex. No dominant adversary faces the
United States that threatens our existence with military force, but the global financial crises has
exacerbated what was already a growing set of political and economic uncertainties. We are
nevertheless in a strong position to shape a world reflecting universal aspirations and values that
have motivated Americans since 1776: human rights; the rule of law; liberal market economics
and social justice. Whether we can succeed will depend on actions we take here at home-
restoring strong economic growth and maintaining our scientific and technological edge and
defending ourselves at reasonable cost in dollars without violating our civil liberties. It will also
depend on our actions abroad, not only in how we deal with regions, regimes and crises, but also

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in developing new multilateral systems, formal or informal, for effective international
cooperation in trade and finance, in neutralizing extremist groups using terrorism, in controlling
the proliferation of WMD, developing codes of conduct for cyberspace and space, and in
mitigating and slowing global climate change.

in developing new multilateral systems, formal or informal, for effective international
cooperation in trade and finance, in neutralizing extremist groups using terrorism, in controlling
the proliferation of WMD, developing codes of conduct for cyberspace and space, and in
mitigating and slowing global climate change.