Security threat No. 1: Economic crisis

by Greg Miller

The nation's new intelligence chief warned today that the global economic crisis is the most serious security peril facing the United States, threatening to topple governments, trigger waves of refugees and undermine the ability of America's allies to help in Afghanistan and elsewhere.

"Though we do not know its eventual scale, it already looms as the most serious global economic and financial crisis in decades," said Dennis C. Blair, the director of national intelligence, in his first appearance before Congress as the top intelligence official in the Obama administration.

Blair's focus on the economic meltdown represents a sharp contrast from the testimony of his predecessors in recent years, who devoted most of their attention in the annual threat assessment hearing to the issues of terrorism and the ongoing wars in Afghanistan and Iraq.

Blair's prepared testimony was released in advance of a hearing before the Senate Intelligence Committee. His conclusions are likely to bolster President Obama's case for swift action on a nearly $800 billion stimulus package nearing final approval in Congress.

"Time is probably our greatest threat," Blair said. "The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests."

Blair said that one-quarter of the world's nations have already experienced low-level instability attributed to the economic downturn, including shifts in power. He cited anti-government demonstrations in Europe and Russia, and warned that much of Latin America and the former Soviet satellite states lack sufficient cash to cope with the spreading crisis.

(Read more, and see the DNI's threat assement here: threat assessment.pdf

"The most likely potential fallout for U.S. interests will involve allies and friends not being able to fully meet their defense and humanitarian obligations," Blair said. "Potential refugee flows from the Caribbean could also impact homeland security."

The decline in oil prices in recent months may benefit consumers in the short-term and "put the squeeze on the adventurism of producers like Iran and Venezuela," Blair said. But he warned that it could also lead to a "serious supply crunch" later if prolonged price drops lead to cuts or delays in investment in oil development and infrastructure.

Because the crisis started in the United States, spy agencies also fear there could be a backlash against U.S. efforts to promote free markets overseas. The severe downturn "has already increased questioning of U.S. stewardship of the global economy," Blair said.

Blair also surveyed other security threats in his written testimony. The United States' most dangerous enemy remains Al Qaeda, but Blair said the terrorist network "is less capable and effective than it was a year ago" because of the toll that U.S. missile strikes and other measures have taken on Al Qaeda's sanctuary in Pakistan.