16 January 1999
Source: http://www.odci.gov/cia/publications/fy97intellrpt/index.html

Listed on the CIA publications site on January 13, 1999

[Letter transcribed from GIF image.]

               The Director of Central Intelligence
                      Washington, D.C. 20505

                                 10 March 1998

The Honorable Richard C. Shelby
Select Committee on Intelligence
United States Senate
Washington, DC 20510

Dear Mr. Chairman,

     In accordance with authority delegated to me by the
President, I am forwarding to you the FY 1997 unclassified report
on Intelligence Community activities to fulfill the statuatory
obligations under Section 109 of the National Security Act of
1947. Also included in this submission is a classified annex
which elaborates upon specific Community accomplishments.

     The unclassified report evaluates the performance of the
Intelligence Community for FY 1997 in terms of its responsiveness
to policy objectives advanced by the Administration and reflects
the priorities articulated by the President for implementation by
the Director of Central Intelligence.

     I am sending identical letters to all Congressional
committees that have an interest in the topic.



                                 George J. Tenet

1. Unclassified Annual Report
2. Classified Annex -- REMOVED

Note:  Original classification markings and notice have been removed.
       This memo is UNCLASSIFIED.




This report responds to a Congressionally directed action contained in the Intelligence Authorization Act for Fiscal Year 1998. Referencing section 109 (as amended in 1996) of the National Security Act of 1947, the Act directs the President to submit an unclassified report ''on the requirements of the United States for intelligence and the activities of the Intelligence Community.'' In keeping with this requirement, this report identifies areas where intelligence is required to meet the national security interests of the United States, and reflects the priorities established by the Administration for implementation by the Director of Central Intelligence for FY 1997. The report includes significant accomplishments as well as initiatives that are being undertaken to strengthen the Community's performance. A classified annex also will be provided to the Congress to supplement information contained in this unclassified report.


Nineteen ninety-seven marked the 50th anniversary of the National Security Act that formally established a permanent intelligence structure. Designed to provide the United States with the best information available on the aims, intentions, and capabilities of other nations, the Intelligence Community has adapted to meet the changing needs of the President, his senior national security advisors, law enforcement officials, military commanders, and diplomats as they each faced new challenges to US interests.

During the 50th anniversary celebration of the CIA, President Clinton reiterated the importance of focusing our intelligence resources on the areas most critical to our national security-areas where we cannot afford to fail. He underscored his top intelligence priorities contained in Presidential Decision Directive-35: supporting our troops and operations; providing political, economic, and military intelligence on hostile countries; assisting policy efforts to verify arms control treaties and agreements; and protecting American citizens from new transnational threats such as drug traffickers, terrorists, organized criminals, and weapons of mass destruction (WMD).

The Director of Central Intelligence is charged with organizing and managing intelligence activities to address the priorities outlined by the President. His greatest challenge in 1997 was to focus the limited resources of the Intelligence Community where they could provide the greatest benefit. To this end, he directed the Community to focus on the following key areas:

With the establishment of corporate boards comprising representatives from across the Community, technical, human and open source collection capabilities were brought together to address high-priority targets. Concerted attempts to improve the Community's interaction with its customers resulted in better understanding and refinement of intelligence requirements. A series of initiatives (several of which are described in the Management section near the end of this report) were begun that will improve resource management as well as language skills of Intelligence Community analysts.

Despite progress on many fronts, there is still much to be done. The Intelligence Community needs to continue to build synergy across disciplines, improve collection management, and reduce duplication where prudent. It needs to plan strategically for the technology challenges of the future. It needs to address challenges presented by increasing amounts of data and reform management processes to find and keep personnel with critical skills. New relationships must be forged with the private sector, with other government agencies, and with foreign partners-while at the same time increasing the Community's awareness of the counterintelligence risks of these new arrangements.

This Annual Report outlines the challenges that confronted the Intelligence Community in 1997 and the activities that enabled it to meet mission requirements. It highlights both intelligence accomplishments and as well as new and continuing challenges.

Hard Targets

Among the Community's toughest tasks is the need to monitor developments in and behavior of countries with global reach and import, and to penetrate closed societies that have interests and ambitions that could threaten our well-being. These countries include:

The DCI formally established a process to increase the Community's collection and analysis capabilities against these difficult challenges. Over the past year, the Community's top experts on each country joined forces, developed collection plans, identified the most critical intelligence gaps, and developed strategies to close those gaps. Through such teamwork, intelligence customers gained important insights into the societies that pose the greatest threats to our own. As a consequence, the Intelligence Community is better prepared to support policymakers, military commanders, and law enforcement officials. The cross-discipline, cross- agency approach used in this process is likely to be the model for future efforts against difficult threats.

Transnational Issues

The dangers facing the United States today - ranging from chemical warfare to terrorism- are often linked and frequently span countries or continents. Dealing with them requires multiple intelligence disciplines, along with the combined tools of diplomacy, law enforcement, and at times, military force. Over the past year the Intelligence Community has improved collaboration among regional, functional, and technical intelligence experts by improving electronic connectivity, sharing databases, and providing more clearly defined requirements to intelligence collectors.

Economic Crises

Numerous events involving foreign economic developments over the past several years have demonstrated the need for US policymakers to take bold action on several fronts, including trade sanctions and the decision to provide humanitarian aid. The financial crises in Asian countries in 1997 underscored the fact that global markets today are so interconnected that economic problems in one country can have far reaching consequences for others. The troubles in Asia have economic costs for the United States, particularly in reducing US exports to the region. The crisis that began in 1997 will continue to have an impact on political stability in the region in 1998.

The potential for political instability in key countries that affect US interests--not only in Asia but in other regions as well--suggests that increased analysis of global economic security is warranted. In late 1997 the Intelligence Community began marshaling resources to support policymakers, and contributed information that was used in the US' decision to provide food aid to a particular country in crisis, and warned US decisionmakers regarding the intent of countries to engage in trade violating UN sanctions. Significantly increased intelligence support during future economic crises is expected.

Regional Trouble Spots

In 1997 tensions remained high in several of the world's trouble spots, requiring the continuing commitment of significant intelligence resources to support both diplomacy and military operations. In particular, intelligence collectors and analysts were focused on Bosnia, the Middle East, South Asia, and the Aegean.

Humanitarian Emergencies

The threat posed to US citizens and interests by humanitarian crises remained high last year. Thirty-four million people worldwide were unable to return to their homes as a result of crisis or conflict. Africa was the region most troubled by these emergencies--with US and UN resources called upon to assist relief operations and attendant risks to US citizens caught up in violence. The Intelligence Community played a pivotal role in tracking several crises in Africa, including ethnic violence and revolutionary war in the Great Lakes region. The DCI Warning Committee, working closely with the National Intelligence Officer (NIO) for Warning, alerted policymakers to the unraveling of the Mobutu regime in Zaire. An estimate on Global Humanitarian Emergencies won high praise from senior military personnel at the US Transportation Command as well as from policymakers. Parts of this estimate were based on imagery-derived products.

Customer Support

One of the DCI's top priorities in 1997 was to improve support to all Intelligence Community customers. As a result of closer interaction with its customers, the Community improved its ability to meet requirements, made plans to address unfulfilled requirements, and obtained feedback on performance. For example, the Community is applying modern measurement tools to assess the satisfaction of its customers. With the assistance of a private- sector consulting firm, a Community-customer team conducted a broad survey of intelligence customers in 1997. At the same time, this team interviewed a number of intelligence personnel who interact regularly with those customers. The assessment found that while customers were generally satisfied with intelligence support, there were still some areas that needed improvement.

The Community is now preparing to review in depth a specific customer segment to develop detailed information that could lead to improved performance and increased customer satisfaction. A number of Intelligence Community components are now embarked on similar customer service improvement initiatives. Ultimately, systematic collection and analysis of customer satisfaction information will provide greater insights for planning, budgeting, improvement activities, and performance assessment. Support to customers' in specific mission areas include:

Countering Foreign Intelligence

Over the past year the Intelligence Community has made major strides in advancing a more cohesive and efficient national counterintelligence effort. Ongoing cooperation between intelligence and law enforcement has led to a more rapid detection of espionage activities as evidenced by the arrest and conviction of Harold Nicholson, Earl Pitts, Robert Kim, and Robert Lipka. The Community now produces an annual report on the effectiveness of the national counterintelligence program and the threat from foreign economic collection and industrial espionage. It has developed and implemented new counterintelligence awareness programs for the public and private sector, interagency counterintelligence training courses, electronic communication links and a forum for counterintelligence product dissemination. More than 70 percent of over 16,000 counterintelligence reports generated by the Community during 1997 were focused on antiterrorism, force protection, and information assurance issues.

Advanced Research and Development

The Intelligence Community continues to make significant progress in applying science and technology to unique intelligence problems. This year saw the successful completion of research and transition to industry of a highly innovative technique for cooling high performance computing and electronic system components. Industry will employ these techniques in intelligence applications which require super cooling in order to perform at extremely high speeds, and to increase US commercial competitiveness. Intelligence Community investments in research on the mathematics and physics of quantum computation have nurtured this new, and potentially revolutionary, field of interest. Close interaction with other government agencies, industry, and academia on the very hard problems associated with the automated screening, filtering, and extraction of content information from written and spoken sources is resulting in a new level of performance. Bandwidth-efficient modulation technology which was developed by the Community was transitioned to the commercial sector to improve service for cellular phones. Finally, the Community worked with the life science community to seek new and effective ways of finding and evaluating materials associated with chemical and biological weapons of mass destruction.

Investment in the future is continuously challenged by the needs of today. This year some of the NFIP components have had to trade resources away from preparing for the future to assure performance against today's needs. While such trades are justifiable in the short term, they bode ill for the future health of intelligence. Efforts are underway to establish a strategic framework for advanced research and development to guide and sustain investment necessary to assure that the Intelligence Community will be the best in world, now and in the future.

Management Initiatives

Despite the end of the Cold War, the demand for Intelligence Community products has increased. The National Security Council, the military services, and civilian agencies still look to intelligence to provide timely information on a wide range of topics. This increased demand has coincided with a decline in experienced intelligence personnel and little or no growth in funding for intelligence activities. To meet this growing demand with fewer resources the DCI has sought innovative ways to improve teamwork, reduce duplication, and focus on the areas of greatest need. Some of his ideas are reflected in the management sections which follow:

Ongoing Challenges

While significant progress has been made in streamlining intelligence activities and improving work processes, more can be done. Providing a prudent level of effort against the many global challenges while ensuring in-depth expertise on the hard target countries remains a significant challenge. The ability to surge intelligence activities to support a localized crisis is largely dependent upon having the connectivity and interoperability to combine the efforts of many agencies--but compatible infrastructures capable of handling today's huge data volumes are still lacking in many cases.

Freeing up resources to invest in new technology is also difficult. The funding environment leaves little room for error in pushing the technology envelope. The Community continues to struggle with ensuring that collection, processing, forwarding, analysis, and dissemination capabilities exist to effectively handle information conveyed by the increasingly complex, higher speed technologies employed by most targets today. Many foreign technologies are being upgraded at least every 18 months, whereas the systems and analysis tools the Community uses to exploit them are many years older by comparison. We must also find ways to merge multimedia intelligence sources and deliver finished products in a more timely fashion while at the same time recognizing the counterintelligence concerns associated with increased sharing of data.

The Community is identifying innovative ways to address these challenges by forging new relationships with the private sector, with other government agencies, and with foreign partners. It is also developing a strategy for ''outsourcing'' some intelligence activities and is accelerating initiatives to reengineer and compete commercial activities. The strategy developed in 1997 introduced the basic criteria for identifying and evaluating intelligence and related activities for outsourcing. Next steps include consistent application of criteria in determining candidates for outsourcing and systematically expanding outsourcing efforts across all intelligence and related activities.

The nature of the threat will continue to change. What has not changed is the need for dedicated, experienced intelligence officers to monitor communications, process reams of data, cultivate information sources, and design new means of intelligence gathering. We still need skilled analysts who can take raw data from multiple sources and produce assessments of foreign leaders' intentions. We need technical and other support personnel to make the business of intelligence run smoothly. We made some progress in attracting and retaining people with the right skills and abilities in 1997, but this will require sustained management attention for some years to come if we are to succeed in developing the skills mix needed by the Intelligence Community.

Ultimately the Community's success depends upon the support of the public it serves and the Congress that oversees its work. The strong partnership between the legislative branch and the Intelligence Community that has developed in recent years will enable the United States to meet the intelligence challenges of the 21st Century.