By Randall Mikkelsen
WASHINGTON (Reuters) - The global economic crisis has become the biggest near-term U.S. security concern, causing instability in a quarter of the world's countries and threatening destructive trade wars, U.S. intelligence agencies reported on Thursday.
The director of National Intelligence's annual threat assessment also said al Qaeda's leadership had been weakened over the last year. But security in Afghanistan had deteriorated and Pakistan had to gain control over its border areas before the situation could improve.
"The financial crisis and global recession are likely to produce a wave of economic crises in emerging market nations over the next year," said the report. It said a wave of "destructive protectionism" was possible as countries find they cannot export their way out of the slump.
"Time is our greatest threat. The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests," it said.
The report represents the evaluations of all 16 U.S. intelligence agencies and serves as a major security reference point for policymakers and Congress. In addition to reviewing potential adversaries, it also considered this year the security impact of issues including climate change, the economy and food and energy supplies.
It said a pressure campaign by the United States and allies had weakened al Qaeda's leadership, based in mountainous areas in Pakistan near Afghanistan border. But the group remained dangerous, the National Intelligence director, Adm. Dennis Blair, said in delivering the report to Congress. He told the Senate Intelligence Committee he disagreed with suggestions the victory against al Qaeda was in sight.
Al Qaeda continues to plot attacks against Europe and wants to attack the United States, but views the West "as a harder target than in the past," the report said.
In Afghanistan, where U.S. President Barack Obama is planning to beef up the U.S. troop presence, a Taliban-dominated insurgency has increased in area and frequency of attacks, the report said.
It said there can be no improvement in the situation until Pakistan gains control of its border area, but noted Pakistan was losing authority in parts of its North-West Frontier Province, the report said. Growing economic hardships and frustration with the government were also radicalizing people all over the country.
WARNING ON IRAN
The report called Iran a key Middle East flashpoint. Persuading Tehran to give up suspected nuclear weapons development would be difficult, requiring a combination of international pressure and incentives.
"With Iran developing a nuclear weapon capability and Israel determined not to allow it, there is potential for an Iran-Israeli confrontation or crisis," the report said.
Iranian President Mahmoud Ahmadinejad, an outspoken champion of Iran's nuclear program, faces uncertain prospects when he seeks re-election in June, and it is unclear whether unelected Supreme Leader Ayatollah Ali Khamenei will support him.
"Ahmadinejad's economic policies have reduced unemployment marginally, but have fuelled significant inflation, providing his critics ample ammunition to question his competence," the report said. But Blair said a change in president would not necessarily mean a change in nuclear policy.
It said stabilizing conditions in Iraq could help offset negative developments elsewhere in the region.
Regarding the Middle East, the report said the gap between moderate and hardline Middle East states had widened after the latest fighting between Israel and Hamas in Gaza, and the path towards Israeli-Palestinian peace had become more difficult. Tensions between the Palestinian groups Fatah and Hamas have also risen.
Lower oil prices since last year could crimp the "adventurism" of Iran and U.S. Latin American antagonist Venezuela, the report said. It said if oil remained below $50 per barrel for some time, it could force major spending cuts or a devaluation in Venezuela.
(Editing by Eric Beech)
