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Oil Report

U.S. sees Russia, China and OPEC financial threat

WASHINGTON (Reuters) - The United States is worried that Russia, China and OPEC oil-producing countries could use their growing financial clout to advance political goals, the top U.S. spy chief told Congress on Tuesday.

Director of National Intelligence Michael McConnell testifies before the Senate (Select) Intelligence Committee on Capitol Hill in Washington February 1, 2007. Concerns about a weaker U.S. dollar could tempt more oil-producing countries to delink their currency pegs from the dollar or ask to be paid in other currencies, McConnell said on Tuesday. REUTERS/Jim Young

Such economic matters joined terrorism, nuclear proliferation and computer-network vulnerabilities as top U.S. security threats described by National Director of Intelligence Michael McConnell in an annual assessment.

McConnell said U.S. intelligence agencies had “concerns about the financial capabilities of Russia, China and OPEC countries and the potential use of their market access to exert financial leverage to political ends.”

Russia, bolstered in part by oil revenues, was positioning itself to control an energy supply and transportation network from Europe to East Asia, and the Russian military had begun to reverse a long decline, he told the Senate Intelligence Committee.

China has pursued a policy of global engagement out of a desire to expand its growing economy and obtain access markets, resources, technology and expertise, McConnell said.

It seeks a constructive relationship with the United States and other countries, but as its influence grows “Beijing probably will increasingly expect its interests to be respected by other countries,” he said.

Russia and China have long been able to target U.S. computer systems to collect intelligence, he said. “The worrisome part is, today, they also could target information infrastructure systems for degradation or destruction.”

In the energy sector, a weak U.S. dollar had prompted some oil suppliers, including Iran, Syria and Libya, to ask for payment in other currencies, or to delink their currencies from the dollar, McConnell said. “Continued concerns about dollar depreciation could tempt other producers to follow suit.”

TERRORISM THREAT

McConnell and other U.S. security officials told the committee that the global threat of terrorism remained.

Al Qaeda had suffered some setbacks and its international reputation was diminishing, they said.

But its affiliate in North Africa was gaining strength and the global network, with its leadership reconstituted in remote tribal areas, has begun to present an internal threat to Pakistan. Pakistan’s military still lacks the ability to counter an insurgency, officials said.

In Iraq, violence had declined and al Qaeda in Iraq had been weakened, but the capabilities of Iraq’s security forces remained limited while sectarian distrust was still high, McConnell said.

Among other top worries, Iran still had the potential to develop nuclear weapons, despite stopping work on nuclear warhead design, he said. A finding by U.S. intelligence agencies last year that Iran had suspended design activities led conservative critics to charge the report undermined U.S. efforts to pressure Iran over its nuclear program.

McConnell did not alter the assessment of Iran, but said he should have tried to explain it better.

“I may have put it up front with a little diagram, what are the component parts, so that the reader could quickly grasp that a portion of it, I would argue maybe even the least significant portion, was halted and there are other parts that continue.”

He said that despite North Korea’s shutting down it its Yongbyon nuclear facility, U.S. intelligence agencies “remain uncertain” about its commitment to full denuclearization. It is believed to continue uranium enrichment and proliferation activities, he said.

Discussing Cuba, McConnell said in event of Fidel Castro’s death, “the political situation is likely to remain stable at least in the initial months.”

Editing by Doina Chiacu

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