* Trying to protect U.S. military computers from daily attacks
* Budget cuts spare cyber efforts, which get more money
* Russia, China biggest cyber threats
By Andrea Shalal-Esa
COLORADO SPRINGS, Colorado, April 17 (Reuters) - The Pentagon says it is making progress in developing weapons for its newest battleground - cyberspace - but still faces funding, technology and policy challenges.
U.S. Air Force Lieutenant General Michael Basla, vice commander of Air Force Space Command, told industry officials on Monday the service was approaching its work on cyber capability as it would any other major weapons system.
"We have made measurable progress in defensive and offensive capabilities" in the past year, Basla said at a space conference.
He talked about teams of cyber "hunters" and listed several new programs - all part of the Pentagon's new drive to be more transparent about its work on cyber warfare and push back against daily attacks on its computer systems.
A watershed U.S. intelligence report in November said China and Russia are using cyber espionage to steal U.S. trade and technology secrets. Last week, the head of intelligence at U.S. Cyber Command described what he called an accelerating "global cyber arms race."
Basla said Washington was keeping a close eye on cyber skills being developed by Russia and China, and the U.S. government has made it clear that it reserved the right to protect itself from cyber attacks, just like other attacks.
He said those countries had clearly penetrated U.S. networks.
Basla said escalating threats meant the cyber area was one of few that might see a slight increase in funding in coming years even as projected U.S. military spending is due to decline by $487 billion over the next 10 years.
But he said military leaders would have trouble meeting all their cyber mission priorities if U.S. lawmakers don't avert an extra $500 billion in defense spending cuts, or sequestration.
"The Air Force or the department may have to make some hard choices about giving up resources in other areas," if spending is cut further, Basla told reporters. The Air Force's primary mission - to safeguard the country's nuclear weapons - would be protected from the cuts, he said.
Basla said U.S. computer networks were under constant attack, and the military's dependence on those networks for every aspect of war fighting was recognized by the country's adversaries, who saw it as the country's "soft underbelly."
"This is a journey versus a short sprint here," he said. "This is a marathon that we'll continue to work."
He described technical stumbling blocks in Air Force efforts to create a single, more defensible computer work environment - it had to replace brand-new computer servers to handle it - and said service members needed to take precautions using the Internet, even away from work.
The Defense Department announced a new cyber strategy last year and each of the armed services has a cyber division.
Madelyn Creedon, assistant secretary of defense for global strategic affairs, told the Space Foundation conference the United States viewed efforts by other countries to sneak into its computer networks and steal U.S. weapons development plans "one of the most serious long term threats" it faces.