IT IS JAN. 17, 2001, the 10th anniversary of the U.S. bombing campaign against Baghdad, Iraq.
Suddenly, an hour after the opening bell, the computers at the New York Stock Exchange flicker off. A jumbo jet landing at Chicago's O'Hare airport crashes when a bogus tower message tells it to land on a crowded runway. On board the USS Eisenhower in the Persian Gulf, angry sailors demand to know why their bank accounts back home have been emptied.
For the first time in the history of warfare, the American mainland has been invaded - but not by troops. A hostile nation has attacked with the silent and invisible weapons of cyberspace.
The Pentagon strategists who once pondered the effects of a Soviet nuclear strike now are studying such a scenario: How real is the threat? Where does it come from? As it builds America's defense against the new threat from "information warfare," the Pentagon has turned to its electronic brain trust: the National Security Agency.
Still reorganizing after the demise of its Cold War mission - and showing the keen survival instincts of any government bureaucracy - NSA has been eager to oblige. At a gathering of intelligence officers in June, the agency's director, Vice Adm. John M. "Mike" McConnell, sounded the alarm.
"We're more vulnerable than any nation on earth," he said. "The things that are vulnerable are U.S. banks, global finance, the stock market, the Federal Reserve, air traffic control, all those things."
NSA's efforts to seize the lead on information warfare is only one of its moves since the end of the Cold War to preserve its paramount role in intelligence. Even as it has slashed coverage of the former Soviet Union and cut personnel by 10 percent in three years, NSA has shifted resources to make itself useful to U.S. policy-makers. The agency has:
* Scrambled to retrain hundreds of Russian linguists to keep pace with shifting crises in other countries.
* Moved swiftly to expand coverage of negotiations by foreign trade officials, bribery attempts by foreign businesses competing with U.S. companies and money transfers by
* Ended its long reluctance to become involved in the war on drugs by working closely with the Drug Enforcement Administration and the FBI on dismantling South American cocaine cartels.
* Increased its role in tracking terrorists and their financial backers, especially since the 1993 bombing of the World Trade Center in New York.
* Used its supercomputing ability to sift millions of transactions for evidence of rogue nations purchasing nuclear, biological and chemical weapons components.
A 21st-century war
Nothing better illustrates NSA's dramatic break with its Cold War past than the agency's move into information warfare.
In an era of shrinking budgets, the threat of terrorist hackers wielding software weapons with such names as worms, Trojan horses, logic bombs, packet sniffers and malicious code may be sufficiently alarming to conjure money from a deficit-minded Congress.
The new field is a boon for NSA's information security experts who traditionally have labored on mundane tasks while the eavesdroppers captured the glory. Now NSA's "INFOSEC" specialists are sought after by worried managers throughout the federal government and corporate America.
By building a computerized society, the United States has left itself wide open to electronic attack. From bank machine networks and the telephone system to electric power companies and steel manufacturers, the U.S. economy is supported by a web of computers.
Admiral McConnell acknowledges it's difficult to persuade the public and Congress to spend hundreds of millions of dollars on a threat that sounds like science fiction.
Yet the first shots already have been fired in this 21st-century war.
In August, a computer hacker in St. Petersburg, Russia, stole $400,000 from Citibank. Earlier this year, a British teen-ager used his personal computer to break into sensitive U.S. Air Force files on North Korean nuclear inspections.
In 1993, critical Defense Department computer systems were penetrated by outsiders 134 times. Last year the number was 256. This year it may approach 500, according to Pentagon officials, who believe that hundreds more intrusions go undetected.
Such intrusions lead some experts to fear a far more devastating surprise attack, the electronic equivalent of Pearl Harbor. Neither America's nuclear missiles nor formidable armed forces can protect it from a malevolent foe with a computer and modem.
Fiction has recently discovered the dramatic possibilities. The new James Bond movie, "Goldeneye," revolves around a villain's electronic attack on England. Author Tom Clancy's latest thriller, "Debt of Honor," tells of Japan taking down U.S. financial markets.
While NSA for decades has worked to make America's most classified computer systems tamperproof, it has spent the last several years focusing on the vulnerable Pentagon systems containing such sensitive information as medical records and supplies.
"They're very big on the defensive side, developing security products, research and development," says Daniel T. Twomey, a Pentagon information warfare planner.
NSA computer experts are working to foil increasingly clever attack programs that invade a computer, capture secret passwords as they are typed in, and store them in a hidden file for the hacker to retrieve later. Other malicious programs assault a system by trying hundreds of possible passwords a second.
One of the most worrisome characteristics of information attacks is that they can be done cheaply. Spending far less than the cost of one missile, a hostile nation or terrorist group could mount a crippling information attack against sensitive U.S. targets.
"I think you could drop the financial system in this country pretty fast by hiring a [Kevin] Mitnick or two," says Nebraska Sen. Bob Kerrey, a member of the Intelligence Committee and a computer buff, referring to the notorious hacker charged with using his skills to sabotage computers all over America and steal thousands of credit-card numbers before his arrest in February.
Experts say one of the most menacing traits of information warfare is its anonymity. When the computers go down at Andrews Air Force Base outside Washington, operators have no way of knowing whether it's a teen-ager fooling around or the first shot in a attack from a foreign power.
"It's the intelligence problem of the next decade and a half," says George Kraus, a security consultant and former naval intelligence officer.
One fear is that computer scientists from the former communist states could offer their services to the highest bidder. In 1992, a group of former Soviet KGB agents tried to extort $1 million from a U.S. computer company by threatening to unleash a computer virus into their system.
Some private-sector computer specialists say the worst attacks on a nation's computers can be among the most subtle.
"Don't think in terms of obvious destruction," says Michel E. Kabay, director of education for the National Computer Security Association and a Montreal computer consultant. "The most harmful viruses are not the ones that stop your computer."
A virus that randomly changes numbers on a spreadsheet over time could wreak havoc in the economy, Dr. Kabay says: "How'd you like a car that was manufactured perfectly - but to the wrong specifications?"
The Pentagon is working electronic weapons into its strategic planning, while NSA recently established an Information Warfare Support Center to serve the armed forces.
In July, NSA technicians joined top U.S. military commanders to weave information warfare into battle plans. For the first time since it began war games in 1887, the Naval War College introduced computer attacks into its annual two-week exercise in Newport, R.I.
In "Global '95," hundreds of military planners, diplomats and even members of Congress played roles in a scenario involving simultaneous attacks by North Korea on South Korea, and Iraq on Saudi Arabia. Using computers, the enemies attacked transportation and health systems inside the United States.
"We always thought ... the U.S. was a sanctuary," says Capt. Martin Sherrard, a Navy information warfare expert who participated in Global '95. "That's not true anymore."
A changing target list
Rerouting Iraqi trains and taking down North Korean computers during the war simulation was not difficult for NSA. To eavesdrop on other nations, the agency must know the technical layout of their communications systems - just what it would need to attack those systems.
But that eavesdropping target list itself has been changing. While once the prime targets were Soviet submarines and Russian generals, now NSA has moved deeply into more varied and trickier territory: global trade, Islamic terrorism, narcotics interdiction, nuclear proliferation. A secret post-Cold War review of intelligence increased the list of targets by 60 percent, a former CIA official says.
Surplus Russian linguists who once could recognize individual Soviet fighter pilots by their voices have had to retrain in higher-priority tongues: Serbo-Croatian, Arabic, Japanese. Hardware costing billions has been junked or retargeted, with massive listening posts along Soviet borders dismantled and satellites shifted to other regions.
The transition has not always gone smoothly. A billion-dollar eavesdropping satellite, code-named Trumpet, sat for months as officials debated whether it should be launched at all, according to congressional sources. Its orbit and electronic equipment had been designed to pick up military communications in the Soviet far north.
In the end, the notion of a satellite sitting idle, like a costly paperweight, proved too embarrassing. Trumpet was launched in May 1994, and by one account the southern swing of its orbit can pick up the conversations of Colombian drug cartels.
That kind of target changing is NSA's greatest post-Cold War adjustment.
The State Department demands intercepts from a shifting list of world hot spots - Somalia, Rwanda, Haiti, Chechnya, Bosnia. With each crisis, NSA has had to scramble to find linguists skilled in obscure tongues.
"If I were the head of NSA today, I'd be over in Kyrgyzstan buying up a couple of Kyrgys or whatever they're called," says former Director of Central Intelligence Adm. Stansfield Turner. "You go out like Noah and you get two of everything and bring them over here."
In some Third World nations NSA has been stumped by a problem it never saw in the former East Bloc: primitive communications its dishes and satellites can't pick up. As U.S. transport planes landed at Mogadishu airport in 1993, Somali militiamen alerted their bosses by pounding in code on a drum.
"The country was so devastated they didn't even have a phone system that worked," says a senior Defense Department official.
Fortunately for NSA, most of the world's hot spots still offer plenty to pick up. In Bosnia, the agency reported to the Pentagon the missile site that would shoot down Air Force Capt. Scott F. O'Grady, though the information was not acted upon in time, Admiral McConnell said in his June talk.
The FBI and CIA have pushed for more eavesdropping on terrorists, and NSA has kept its ear close to Peshawar, Pakistan, in an effort to find the shadowy financiers of the World Trade Center blast.
But while Soviet generals talked for years on the same schedule and the same channels, terrorists move constantly and use multiple aliases. This sometimes frustrates the intelligence agency's standard tactic - programming computers to scan phone traffic for selected phone numbers and names.
NSA computers searched the airwaves for the notorious terrorist known as Carlos the Jackal for two decades before picking up information last year that led to his arrest in the Sudan, according to congressional sources.
Drug dealers can prove just as elusive. Until recently, the agency was wary about getting involved in counternarcotics, fearing that sensitive methods could be exposed in court or that drug rings would include Americans, whom NSA cannot legally target.
But one veteran DEA official says the flow of information has dramatically increased since the Soviet collapse and is now "a godsend."
All of NSA's tips come with strings attached, however: Prosecutors must be willing to drop a case - no matter how important - rather than permit NSA eavesdropping to be revealed in court.
Of all NSA's post-Soviet missions, the most controversial is economic spying, which often targets the perfectly legal activities of traditional U.S. allies.
Australia, New Zealand and Canada - which along with Britain and the United States have for five decades shared their signals intelligence - recently built their own intercept sites to pick up commercial satellites, according to one intelligence expert.
With so much competitive economic information flowing over commercial satellites, the old allies have become rivals and no longer want to share business intelligence, this expert says.
President Clinton has responded in kind. Declaring a sound economy the key to national security, he has pressed the spies for data on America's trade competitors and evidence of unfair trade practices.
When the Mexican peso collapsed late last year and the United States contemplated a bailout, NSA informed American policy-makers that Mexican officials were not being candid about currency reserves. The United States confronted Mexico and demanded straight information.
For now, NSA apparently is not passing foreign companies' commercial secrets to their American competitors. In an era of Tennessee-built Hondas and Chinese-made AT&T; phones, the eavesdroppers are understandably uncertain about whom to spy for and whom to spy on. But a few voices say NSA should do more to help U.S. industry.
"If we were willing to spy for the military security of our country during the Cold War, I see no reason morally, ethically, logically that you won't spy to protect the economic security of the country in the non-Cold War," says Admiral Turner, the former CIA chief.
"There are practical problems with it and I acknowledge all of them. I only say, don't turn your back on it on some silly moral principle."
For now, NSA seems to have steered a middle course, targeting corrupt foreign practices that put U.S. companies at a disadvantage. Last year, Raytheon Co. beat out the French high-tech company Thompson for a big contract in Brazil after NSA tipped off American negotiators that Thompson was trying to bribe Brazilian officials.
"Intelligence on bribery let's us know what we're up against," says a senior Clinton administration official. "You're better prepared."
'Dramatic change' ahead
It was evident that times had changed when NSA held its annual worldwide awards ceremony in May. The Distinguished Station Award was abolished, because so many listening posts had closed. And funding cuts had eliminated the Army band that usually played, so the agency had to make do with the fez-topped Boumi Temple Shrine Drum Corps.
"Very, very dramatic change is upon us," Admiral McConnell told the employees gathered. A panel of scientists had just completed a classified review of NSA research and development, he said. A more sweeping assessment of NSA by a commission on the future of American intelligence had begun, and its report to Congress and the White House in the spring is likely to shape NSA's budget and direction.
But the message was no surprise to the audience. Three years of early retirements and buyouts already have reduced NSA's work force by about 10 percent, or 2,000 people. A 1993 agreement between the Clinton administration and Congress would cut personnel and spending by about 25 percent by the year 2000.
Now, there is a move to slow the pace of those cuts. The overall intelligence budget is expected to increase 1.3 percent during the next year, the first increase this decade, says one congressional source. One of the new items Congress is pushing for is a fleet of smaller, less expensive eavesdropping and picture-taking satellites. These so-called "small sats" would replace some of the pricey behemoths used by NSA.
"I think we've built down too far in intelligence and we've built down too far in defense," says Republican Rep. Larry Combest of Texas, chairman of the House Intelligence Committee. "There are some things ... we need to be doing that today we cannot do."
Some Democrats object, noting that intelligence spending soared during the Reagan years, so that even a 25 percent cut merely takes NSA and the CIA back toward pre-Reagan budgets.
"We doubled the amount of money in the last 14, 15 years, and do we have double the quality?" asks former Sen. Dennis DeConcini, who chaired the Senate Intelligence Committee until January. "The answer is no."
Determining how much intelligence collection is enough is by all accounts a subjective business. For example, NSA recorded miles of tape during the Iran-Iraq war even though U.S. interests were not directly involved.
One former NSA linguist recalls: "We just watched them kill one ** another and put it in the database."
It all might have been considered a waste. Then came the Persian Gulf war - and every scrap of intelligence on Iraqi weaponry, tactics and personnel suddenly became extremely valuable. Subsequently, the linguist says, many of the military figures identified during the Iran-Iraq war turned up in various terrorist groups in the Middle East.
For NSA's work force, accustomed for decades to flush budgets and stable jobs, the last few years have been demoralizing.
"There is definitely a very stressful atmosphere because of the uncertainty," says one NSA staffer, who arrived just after the Cuban missile crisis in 1962. "People are very edgy."
There are indications the commission on intelligence, chaired by former Defense Secretary Harold Brown, may prescribe further reductions.
"With all due respect, I believe the magnitude of the threat to this country of a strategic nature is so much less than it was just four years ago," says former Sen. Warren B. Rudman, commission vice chairman, who served on the Intelligence Committee.
Mr. Rudman makes his point with a homespun analogy. When cities were built of wood, there was a fire station on every block. Now that buildings are made of brick and equipped with sprinklers, "I'm sure the firemen's union would find a lot of reasons to say you still need 100 fire stations. But common sense says you don't.
"We're going to have smaller intelligence agencies," Mr. Rudman says. "The world has changed."