- The Washington Times - Wednesday, January 20, 2010

The White House National Security Council recently directed U.S. spy agencies to lower the priority placed on intelligence collection for China, amid opposition to the policy change from senior intelligence leaders who feared it would hamper efforts to obtain secrets about Beijing’s military and its cyber-attacks.

The downgrading of intelligence gathering on China was challenged by Director of National Intelligence Dennis C. Blair and CIA Director Leon E. Panetta after it was first proposed in interagency memorandums in October, current and former intelligence officials said.

The decision downgrades China from “Priority 1” status, alongside Iran and North Korea, to “Priority 2,” which covers specific events such as the humanitarian crisis after the Haitian earthquake or tensions between India and Pakistan.

The National Security Council staff, in response, pressed ahead with the change and sought to assure Mr. Blair and other intelligence chiefs that the change would not affect the allocation of resources for spying on China or the urgency of focusing on Chinese spying targets, the officials told The Washington Times.

White House National Security Council officials declined to comment on the intelligence issue. Mike Birmingham, a spokesman for Mr. Blair, declined to comment. A CIA spokesman also declined to comment.

But administration officials, speaking on the condition of anonymity, said the new policy is part of the Obama administration’s larger effort to develop a more cooperative relationship with Beijing.

A U.S. official who defended the policy change said “everybody involved understood the absolute importance of China as an intelligence priority.”

“This is a case in which the assignment of a relative number — one or two — wouldn’t mean, or change, a damn thing. And it didn’t.” The official said the U.S. government “has to keep its eyes on a host of threats, challenges and opportunities overseas. That’s how it works.”

Critics within the government, however, said the change will mean that strategic intelligence on China — the gathering of data and analysis of information — will be reduced over time, undermining what officials said are urgently needed efforts to know more about China’s political, economic, military and intelligence activities.

Rep. Peter Hoekstra of Michigan, the ranking Republican on the House Permanent Select Committee on Intelligence, expressed concern about the change.

“For those who say changing from Priority 1 to Priority 2 doesn’t make any difference — well then, why do it?” he asked. “China should be at the top of the priority list, not moving down.”

Officials said the lower intelligence priority for China is a subtle but significant change that will affect an array of intelligence activities.

Although the effect is not expected to be immediate, a change in priority number generally means that projects regarding that country are scrutinized more skeptically on budgetary and other grounds. Agencies likely will reduce spending for intelligence operations on China, whether carried out by spies or by photographic and electronic-intercept satellites.

Critics of the decision also fear that the lower priority will cause CIA and Defense Intelligence Agency operatives to take fewer risks in the field when spying on Chinese targets.

One new area that has been given a higher intelligence priority under the Obama administration is intelligence collection on climate change, a nontraditional mission marginally linked to national security. The CIA recently announced that it had set up a center to study the impact of climate change.

One U.S. official said the NSC intelligence policy change followed protests from China’s government about the publication in September of the National Intelligence Strategy, produced by Mr. Blair’s DNI office. The strategy report identified China as one of four main threats to U.S. interests, along with Russia, Iran and North Korea.

At the time of its release, Mr. Blair was asked by reporters about the strategy report’s harsh assessment of China and efforts to increase intelligence gathering on China.

“I would say that it is a muscular intelligence response to meet the nations responsibilities so that we can provide good advice to the policymakers and in the field,” he said.

The Chinese government reacted harshly to the strategy report, both in public and in diplomatic channels, the official said.

A Chinese government spokesman in September stated that “we urge the United States to discard its Cold War mindset and prejudice, correct the mistakes in the [National Intelligence Strategy] report and stop publishing wrong opinions about China which may mislead the American people and undermine the mutual trust between China and the United States.”

The NSC downgrading of China from so-called “Pri-1” to “Pri-2” was a political decision by the Obama administration that was designed to assuage Chinese concerns that intelligence agencies were exaggerating the threat from Beijing, the official said.

John Tkacik, a former State Department intelligence official, said the demotion of China to a second-tier priority reflects bias within the NSC staff.

“It means that the Obama administration doesn’t understand the profound challenge that China has become or, even more disturbing, it cannot understand that China’s challenges to America’s policies are becoming even more threatening with each passing week,” he said.

The intelligence downgrade was disclosed as civilian and military leaders were calling U.S. intelligence collection and analysis on China deficient.

Adm. Robert Willard, the new commander of U.S. Pacific Command, indirectly criticized U.S. intelligence estimates on China last fall, telling reporters in November that during the past decade “China has exceeded most of our intelligence estimates of their military capability and capacity every year. They’ve grown at an unprecedented rate in those capabilities.”

Mr. Hoekstra said he had not been briefed in advance about the NSC’s new policy on China intelligence gathering.

But the shift sends the wrong signal to the 16 agencies that make up the U.S. intelligence community that China is not important, he said in an interview.

“That’s a wrong analysis,” Mr. Hoekstra said. “The current situation with China is that they are cheating on trade agreements, aggressively pursuing military capabilities and aggressively conducting cyber-attacks.”

A military official also said recently that Army, Air Force and Navy intelligence components are just beginning to understand the growing need to focus more intelligence assets on the challenges posed by China’s military buildup and aggressive intelligence activities.

Counterintelligence officials also were surprised at the decision to lower the intelligence priority on China, noting that China’s espionage, technology theft and economic spying continue to dominate scarce resources, including people and funds.

Michelle Van Cleave, former national counterintelligence executive, also said the priority change was ill-advised and will hurt personnel, funding and intelligence assets devoted to Chinese targets.

“Chinese intelligence is going after us with a vengeance,” she said, noting that the problem includes industrial espionage, technology diversion and stealing defense and other national security secrets, in addition to a global campaign of cyber-espionage.

“So why are they doing this?” she asked. “I am very troubled by how little U.S. intelligence really knows about the Chinese, in part because they have been so successful against us. Our national leadership should be pushing to close this intelligence gap, because if they dont, they will risk making serious miscalculations in dealing with China.”

• Bill Gertz can be reached at bgertz@washingtontimes.com.

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