By Patricia Zengerle and Mark Hosenball
WASHINGTON (Reuters) - U.S. spy agencies believe the recent bellicose rhetoric from North Korea is mainly an effort by leader Kim Jong-un to demonstrate he is firmly in command, National Intelligence Director James Clapper said on Thursday.
U.S. intelligence also believes China, North Korea's neighbour and traditional protector, is becoming increasingly frustrated with Kim's behaviour, Clapper said.
North Korea's new leader, who is estimated to be around 30, is pursuing Pyongyang's long-standing strategy of using threats to push the international community to negotiate and provide aid, Clapper told a hearing of the House Intelligence Committee.
"I don't think he really has much of an end game other than to somehow elicit recognition from the world, specifically the United States ... of North Korea's arrival on the scene as a nuclear power," Clapper said.
"Much of the rhetoric - in fact all of the belligerent rhetoric of late - I think is designed for both an internal and an external audience. But I think first and foremost it's to show that he is firmly in control in North Korea," Clapper said.
North Korea's economy is in dire straits, he added, noting signs that some of its army has been diverted to work in agriculture. And he said there has been a "steady stream" of defectors lately, compared with prior years, when two a year would have been notable.
Pyongyang recently has threatened a nuclear strike on the United States - something it does not have the capacity to carry out - and "war" with "puppet" South Korea.
"If anyone has real leverage over the North Koreans, it is China. The indication that we have is that China itself is rather frustrated with the behaviour and the belligerent rhetoric of Kim Jong-un," Clapper told the committee.
South Korea and the United States were on high alert for a North Korean missile test-launch as the isolated state celebrated the rule of the Kim dynasty. But Pyongyang appeared to tone down recent rhetoric of impending war.
APPEALS TO CONGRESS ON BUDGET
Clapper, newly confirmed CIA director John Brennan, Defence Intelligence Agency chief Lieutenant General Michael Flynn and FBI Director Robert Mueller appeared before the committee for an annual public assessment of threats to the United States.
Clapper gave a tough assessment of the impact of the "sequestration" budget cuts that began in March on intelligence gathering, asserting they would affect 39 acquisition programs and force staff furloughs.
"The degradation to intelligence will be insidious. It will be gradual, almost invisible, until, of course, we have an intelligence failure," Clapper said.
Clapper said he planned to ask Congress for more flexibility in dealing with the budget reductions. But so far, congressional efforts to give spy agencies more leeway to deal with mandatory cuts have stalled.
A congressional aide said a budget amendment to allow more flexibility for the intelligence community in dealing with the cuts was blocked at committee level in the House.
The intelligence chiefs also discussed Syria, where they said infrastructure is deteriorating and the economy is so bad that there were signs of delayed or decreased pay to the military, which could lead to more desertions.
However, they noted that Syrian President Bashar al-Assad continues to resist calls to give up power or leave his country. "He does not seem to be interested at this point in leaving or voluntarily stepping down," Clapper said.
Some committee members questioned the intelligence officials about the use of drones for targeted killings of terrorist suspects overseas by the administration of President Barack Obama.
Brennan declined to discuss recent news reports that the strikes have killed more civilians than the United States has admitted publicly.
Brennan also declined to say when the CIA would deliver its response to a 6,000-page report that the Senate Intelligence Committee has prepared on controversial detention, interrogation and rendition procedures the agency used on captured militants during the administration of President George W. Bush.
Sources familiar with its contents have said the report, based the committee's review of 6 million CIA cables and documents, is harshly critical of the agency's use of "enhanced interrogation techniques" which human rights advocates say constituted torture.
Before Brennan took its helm last month, the CIA had been preparing a response that official sources said was expected to push back strongly against the Senate committee report's criticisms, but at his Senate confirmation hearing Brennan indicated that there were elements of the report that he found "disturbing."
At Thursday's hearing, however, Brennan hinted that when the CIA finally produces its response to the Senate panel's report, there could still be pushback. A Senate intelligence committee aide said: "We believe our report to be accurate but will review CIA's response when it comes."
(Editing by Alistair Bell and Cynthia Osterman)