Deputy Secretary of Defense Robert Work on the Asia-Pacific Rebalance

Deputy Secretary of Defense Robert O. Work joins James E. Sciutto, chief national security correspondent at CNN, to discuss Department of Defense policy toward the Asia-Pacific region. Work notes that the rebalance to Asia is part of a global, long-term military strategy, characterized by a major shift in the way forces are deployed, and a strengthening of partnerships and alliances. Components include resizing forces to move away from the one-size-fits-all posture, and finding the minimum force needed as a deterrent to ready other forces for deployment elsewhere. At the same time, the Department of Defense will maintain security commitments in Europe and the Middle East, and continue countering global extremism and terrorism.

SCIUTTO: Hello, everyone. Thanks very much for joining. Real privilege to be here today with Deputy Secretary Work. There are a few things going on at the Pentagon, as we know, so to get some time with him is great. He's got some prepared remarks. You know the rules. This is on-the-record today. Please turn off your cellphones so that we don't interrupt the sound system.

Secretary Work has some opening comments, and then we'll dive into questions.

WORK: Thank you. Well, good morning, everybody. It's really great to be here at CFR. Every now and then, I get to escape the five sides of the Pentagon. People ask me, what is the difference between the deputy secretary and the secretary of defense? And I just asked them to think back to the movie "Jurassic Park" and the secretary is T-Rex and the deputy secretary is the tethered goat.

(LAUGHTER)

So anytime I can break free of my tether and come out and talk with people, I really enjoy it.

Now, as many of you know, I've only been the deputy secretary for about five months. And about a year and a half ago, I left as the undersecretary of the Navy, and I thought at that time that the challenges facing the Department of Defense were quite daunting. Now, however, as Jim and you all know, and as the daily headlines attest, we face even greater geopolitical challenges than I would have even dreamed of a year and a half ago and a far more frustrating and challenging budget environment here at home.

So when people ask me how I sleep at night, I tell them I sleep like a baby. I wake up crying every two hours.

(LAUGHTER)

Now, to be honest, though, really—and I believe—I really do mean this—there's no other place and no other time than I'd rather be in the Department of Defense than right now. Decisions we're making every day are really going to shape the department for the next couple decades and determine in large part on whether or not we have a future that is defined more by peace or more by crisis.

So it's an exciting time, I have to tell you. I wake up jazzed every day. It's divided by challenges that we absolutely have to get to, and it's really fun to be here.

Now, I know that the headlines are actually dominated by what's going on in Iraq and Syria, on the borders of eastern Ukraine and Crimea, and the South China Sea and in Africa, with the terrible ebola crisis. And all of them are consuming time of all of the leadership inside the department and in the White House, as you might imagine, in fact, across the entire government.

So I'm sure I'm going to get questions about all those things, and I'll be happy to take them and discuss more, but I wanted to open the aperture a bit, step back into kind of my world, and talk to you about some of the longer-term approaches that we are taking towards our defense strategy, and more specifically how we talk about our military's global posture and how we are changing the way we employ forces overseas to respond to this extremely complex and dynamic security environment in which we now find ourselves.

Now, in May, shortly after I arrived, Secretary Hagel asked that I oversee the implementation of the United States rebalance to the Asia Pacific region. And with that guidance in mind, I recently took a trip. I went to Hawaii, Guam, South Korea, and Japan. This was my first trip to Asia as the deputy secretary, and I built upon Secretary Hagel's six trips that he has made since he has been the secretary, which I think is an indication of the focus that the department has on that important region.

Now, the purpose of my trip was to observe firsthand what was going on to the adjustments we were making to our presence out there and to discuss the strategic environment with our allies, specifically the Republic of Korea and Japan.

Now, I'm going to talk more about the posture in the Asia Pacific region in just a minute, but as I was flying back, I have to tell you, I was contemplating all the questions that I got from our allies. Is this rebalance really real? Is—or do you have—do you intend to see it through?

And I realized that I couldn't really disconnect that answer from the broader context of the changes that we're trying to make to our global posture, our global operating model, the way that we engage with the world. So at the risk of being pedantic, I just wanted to tell you the way I think about our global posture, and this is how I would define it.

It's the deliberate apportionment and global positioning of our forward stationed and our forward deployed forces and the development of supporting global attack, global mobility and logistics, forcible entry, command, control, communications, and intelligence forces, and the supporting security relationships and legal agreements that we make in order to facilitate the rapid concentration of forces in time and space across transoceanic distances.

OK, that's—as I said, it's kind of a long one, but that is what our posture is about. And I have to tell you, that is what makes us the only truly global power—having each of those components and our willingness to sustain them and pay for them is what allows us to rapidly project decisive military power or capabilities, whatever is called for, across the world's oceans in support of our national interests at times and places of our own choosing. And it provides us with enormous advantages that we sometimes forget about.

It gives us advantages in global strategic reaction time, geographic positioning of our forces, and force concentration and support. And it is vital to allow us to have a favorable strategic balance in peace and war. Our global posture isn't fixed. It constantly evolves over time. And it changes shape in reaction to changes in the global security environment and the threats that we face.

So not surprisingly, the 2014 Quadrennial Defense Review said that the current extremely stressing strategic and budgetary environment compels us to think creatively and develop new ways to manage and employ the Joint Forces as we engage with the world.

Now, make no mistake: Even as we downsize under fiscal pressure and even as we reduce the size of our military, we will maintain this global posture with these seven key components that assures our allies, dissuades potential competitors, deters adversaries, and if necessary helps us either respond appropriately or defeat any foe.

Now, the global operating model that we're striving for right now is well described in the president's strategic guidance of 2012 and built out in the 2014 project Quadrennial Defense Review, has five key elements or priorities. One, we're going to rebalance our focus and our forces to the Asia Pacific region to preserve peace and stability there. Two, we're going to maintain a strong commitment to security and stability in Europe and the Middle East. A lot of people think that we're just shifting to Asia, but if you read the strategy, that was only part, an important part of our posture.

We're going to sustain a global approach to countering violent extremists and terrorist threats with an emphasis on the Middle East and Africa. We're going to invigorate efforts to build innovative partnerships and strengthen our alliances, all the while, while pursuing lower cost innovative presence approaches. Those are the five key things that we've laid out, and I would argue that we are on track to do all of them.

Now, as these objectives suggest, we are not just moving to the Asia Pacific or rebalancing our forces. It remains a true global posture, but with an emphasis in the Asia Pacific region. Now, recall that two key portions of any global posture are the—what we would call forward presence. These are the numbers of forces that are forward-stationed with their families actually on a base overseas. And the other ones are rotationally forward-deployed forces. Together, those two comprise our forward presence.

And the important goal that we're trying to wrestle with right now under intense budget pressure is to get the proper mix between the forces that are forward presence forces and those based in the United States and our U.S. territories, which are our surge forces. That's what we're trying to do.

Now, they're both two sides of the same coin. They're the yin and yang of our global posture. But as we face the twin challenges of reduced force structure and reduced readiness caused by sequestration, we are having to critically re-examine some of the assumptions that have driven the balance between these two--forward presence forces and our surge forces--that have driven us since the end of the Cold War.

In essence, what has happened for the last twenty years is we assumed that a force size for two big major regional contingencies with a force with that much slack that we could afford to have a major combat operation level of effort in shaping operations, forward presence forces trying to shape the international environment to a more peaceful conclusion, without unduly impacting the readiness of the surge forces for a potential war. That was the basic assumption we made.

Now, as early as 2001 and the 2001 QDR, we said we can't continue to do this. The 2001 QDR said you cannot sustain this model. But by God, we did. Indeed, even after we found ourselves in two major regular warfare campaigns, we strove to maintain robust shaping forces forward even while we were fighting two big fights.

So after the past twelve-plus years of war, this has become harder and harder as a department to sustain. And what happened is we gradually had to concentrate only on the forces that were next ready to go to the fight. And the forces that were out, our forward presence forces.

But the readiness of our surge continued to drop, year by year by year. And two things made this worse. The first was sequestration, which is an utterly stupid and irresponsible way to cut budgets. If you want to cut, that's OK, but to say that every single line item is exactly equal and all have to take exactly the same equal cut is totally irresponsible.

And the second is the unrelenting operating pressure that you see every day, even as we draw down from Iraq and Afghanistan, and this is on top of after a twelve year war in which we were really running hot.

So simply put, something has to give. Maintaining our military at such high tempo in this resource-constrained environment is simply no longer sustainable. Period. End of story. It prevents us from properly preparing for future contingencies across the full spectrum of conflict. Now, that is what wakes me up at night, because ultimately preparing the joint force to win wars is what the department does. It is what we are charged to do.

And as we come out more than a decade of fighting irregular warfare campaigns and our potential adversaries across the world continue to advance their inventories of advanced weapons and capabilities, our commanders are saying, hey, I need to have more fight tonight forces, so I need to have more forces forward in theater.

But that just can't happen without us balancing the readiness of the surge forces. It really, really is a tough problem, because we have to take time and money to reset, repair worn-out war equipment, upgrade our weaponry, and train for some very demanding scenarios.

So as we adopt our post-Afghanistan and post-sequestration global posture, we now have to keep an eye focused much more on the surge forces. We've always kept an eye focused on the forward-deployed, ready—high-ready forces, but now we have to really take a look at it the other way.

Said another way, ensuring that we can defeat any foe in a resource-constrained era will require us to make hard choices. We need to engage globally, differently, and that's what we're struggling to do.

Now, let me be very clear here. We are still going to maintain a robust forward-deployed forces where the strategic rationale is compelling and where our priorities tell us we must do, but our forces won't be large enough to give our combatant commanders all the forces they would want to have in theater at every single moment to be prepared for any regional contingency, because for far too long, as I've said, we've chosen to sacrifice readiness of the surge force or of the base force, instead of reallocating forces that were already out in theaters across combatant commander areas of responsibility.

Now, in the past, we've had sufficient slack in funding and force structure and flexibility to do this. But I have to tell you, based on the fiscal turbulence we face today, our forces are shrinking without question and our flexibility is under pressure, so we can't continue the way we've been doing things for the last twenty years.

So one of the key principles moving forward is that we're going to reprioritize our limited assets and develop innovative ways of maintaining forward presence as we rebuild our readiness. We think we're in a readiness crisis, a readiness trough for two or three or four years, as we try to build out. All of our program says we try to get back to full spectrum readiness at the end of the five-year defense plan. In the meantime, we have to think creatively of how and when to utilize our precious force availability to maximize our strategic imbalance.

So what are we doing? Many of you already know some of the things. First, if you can, station forces forward, because you get a very high payoff. By putting four ballistic missile defense destroyers in Rota, Spain, we no longer have to have ten of those large surface combatants tethered to a rotation to keep a ballistic missile defense posture in the east—in the eastern Mediterranean.

By putting Aegis ashore in the European, under the European phased, adaptive approach, that frees up other assets for other global contingencies. We're beginning to right-size our global posture. You probably all saw "Captain Phillips." And the thing about that movie was remarkable on what we did, but essentially you had a billion-dollar Arleigh Burke destroyer chasing a skiff, while maybe in the future it might be better to have a joint high-speed vessel or a littoral combat ship that is much cheaper—excuse me, much less expensive...

(LAUGHTER)

... and less expensive and a smaller crew so that we can still maintain overmatch. The Army is developing regionally aligned forces, tailored packages that emphasize skill sets. They're brigades, but the brigades never go out as brigades. They go out as packets of platoons. Remember, we're looking for low-cost, low-footprint approaches, and these emphasize skill sets that are particular to the regions and the world. We're all getting away from a one-size-fits-all mentality.

Another way of innovating is what Chairman Dempsey calls dynamic presence. Now, what would happen is normally what we'd do is we'd push all of our forces forward, every single bit of ready forces that we'd have, we'd push forward. And once they got into a COCOM's—a combatant commander's area of responsibility, you could shift them across borders—excuse me, the lines of responsibility—but it was difficult. It took time. We had to go through laborious discussion processes.

What we're trying to do is to try to figure out what is the minimum deterrent force that you might need in a theater and then have the rest of the force being more dynamically used across the world. This is a tough, tough problem, because it's a different way of doing.

If I could say it this way, we are going from a demand side model, where the COCOMs demand forces and we provide them everything that we possibly can, to a supply side model in which we are setting forces out that keeps the balance between readiness and the surge and forward presence and then dynamically tasking it across the world.

We also need to get back in the game of demonstrating. This drives me crazy. In the Cold War, we used to demonstrate—and demonstrations were very powerful, both to assure our allies and to deter adversaries. Nifty nugget exercises. We would take carrier battle groups, go incom (ph), and we'd shut down, and we'd try to get across the Atlantic Ocean without the Soviets seeing it. And we got pretty good at it.

We did it all the time. And we would light up when we got to a fjord in Norway and said, "Here we are." And these demonstrations were a very, very important part of our global posture. And we want to get back to doing that.

Valiant Shield exercise and Pacific Command is something very akin to what I'm thinking about, very large-scale exercise, 18,000 soldiers, sailors, airmens and Marines, two carrier strike groups from large and rapid combat exercises, really focused on being able to move out quickly, those are the type of things that we need to do more of.

Now, these innovations are going to underpin our new global posture, which has got to be more dynamic and flexible, and aims to continue to support a future force that will continue to operate across the globe. And we're aiming for what famed British naval historian Julian Corbett called elastic cohesion, a term he used to describe a fleet that could be widely dispersed, but quickly concentrated in time. So our elastic and cohesive future joint force, although smaller, we are confident will still retain an unrivaled ability to concentrate power across transoceanic distances.

Now, without—with a broader context, let me turn back to the Asia Pacific region, because a lot of people did ask me when I went to the Far East, how serious are you on this? Now, we are seeking a posture in Asia—in Asia that is geographically dispersed, operationally resilient, politically sustainable, with an aim of maintaining peace and prosperity in one of the most important regions in the world, and regardless of the level of our budget, that will go forward.

By 2020, both the Navy and the Air Force will have 60 percent of their forces in the Asia Pacific region. We may not have as many forces as we would like, but 60 percent of the forces will be in the Asia Pacific region. At the same time, PACOM is regaining Army units that were rotating through Afghanistan, and they're returning with all of their equipment now, such as attack aviation assets like Apaches in Korea. The army will have more than 100,000 soldiers when all is said and done in the Asia Pacific region, including those on the West Coast in Africa—excuse me, in Hawaii and Alaska and Japan.

And at the same time, the Marines are distributing and having four powerful Marine air-ground task force geographically dispersed around the Pacific. All of those plans continue apace, regardless of how stressed we are in the budget.

Our Pacific-based forces will all have our best and most advanced equipment, equipped with the most advanced payloads that we can possibly give them. The F-35 Joint Strike Fighter is going to go first to the Pacific. By 2018, the very stealthy and highly capable Zumwalt destroyer will be based in the Pacific, we hope. We're moving THAAD and Patriot batteries to key relocations. I visited a THAAD unit that was on Guam, quite motivational. We're putting more Aegis ballistic missile defense ships in Japan, and we've put a second TPY-2 missile defense radar in Japan, first base in Japan since—new base, since the end of World War II, which closes an important gap in our sensor net.

The Navy's new P-8 maritime patrol aircraft is going there first. It will soon be armed with different weapons. Pacific Air Forces are going to have our most advanced weapons, to include stealthy, long-range attack missiles and longer-range air defense missiles. The Navy is going after a new long-range anti-ship missile, which will allow it to engage ships at standoff ranges.

The Army is making targeted investments across the board and making itself more lethal, particularly in Korea, and we're investing heavily in electronic warfare across the board.

Now, as we're adding all of these capabilities, we're going to continue to develop new and alternative approaches. We're going to rigorously test them. We're going to do more war games. We're going to do more demonstrations. And we're also improving our Pacific basing infrastructure.

The four biggest construction projects since the end of the Cold War are going on in the Pacific. There's Camp Humphreys in Korea, where the Army is moving south of Seoul. That's a $10 billion construction project. The Futenma Replacement Facility in Okinawa, which will allow the Marines to concentrate into the North and become more politically sustainable on the island is now moving forward. Guam is already starting. That will ultimately house 5,000 Marines at a new base there. And Iwakuni, Japan, what an incredible place. Literally, the Japanese government shaved the top off of a nearby mountain, conveyored the dirt down to a bay, put it on barges, and went around and reclaimed an enormous part, expanding the area so that the Navy's carrier air wing that's right now in Atsugi can move down there. It really is impressive.

And none of this could be possible without the seventh key component, which is our legal agreements and our alliances, and I have to tell you, our alliances with Japan, with South Korea, Australia, have never been stronger and are getting stronger all the time.

As Secretary Hagel has said, it's really those treaty alliances that remain the backbone of our presence in the Asia Pacific, and it is the revitalization of all those alliances and partnerships which is a signature part of our Asia Pacific rebalance and our entire global posture.

We're also making forward-deployed forces more resilient. We haven't built a hardened aircraft shelter in thirty years. We're doing that more. We're starting to operationally disperse our Air Forces. We're operationally dispersing our Marine forces. We are sending more naval forces to theater for littoral combat ships to Singapore. We're doing selective hardening. We are actually making, as I said, geographically dispersed, more resilient, and more politically sustainable.

So in summary, the Asia Pacific rebalance is real, as part of a broader re-examination of our global posture. We might not be able to go as fast as we would want because of budgetary pressures. We might not be able to have as many forces as we would otherwise like because we wouldn't be able to afford them. But the Asia Pacific rebalance continues apace, as is evident by all of the things that I've just outlined.

So let me just conclude the most reassuring thing that I saw in my visit to the Asia Pacific was the professionalism and commitment and patriotism of our men and women. We were just leaving Guam. There was a B-52 on the tarmac—excuse me, a B-2 on the tarmac, and somebody in the traveling team said, "Let's get a picture by the B-2." "OK, let's do that."

But it's a lot harder than you think. You have to get all sorts of clearances. So people were running around, and meanwhile, Brigadier General Toth, who is the Air Force general, said, "Come on, let's go on down there."

Well, the first person we met was Airman Taylor, who is the security guard. And he said, "Who are you?" We said, "Well, I'm the deputy secretary of defense." And he says, "Well, you're not on my access list." So he turned to the general and said, "Who are you?" And General Toth said, "I'm General Toth." And he looked and he said, "You're not on my access list, either, and you're not getting through."

(LAUGHTER)

So we finally got that sorted out, but then the crew chief of the B-2 came out and saw us taking pictures. And he said, "Who gave you permission to take this picture?" "Um, well, I'm the deputy secretary of defense. I gave the permission." "You can't give permission. There's only one person who can give permission, and that's my master sergeant."

So literally, we waited there...

(LAUGHTER)

Literally, we waited there until we got permission, and my poor photographer almost got, you know, he was almost arrested and kept on Guam.

(LAUGHTER)

I got to tell you, the people that we have in the armed forces are truly our secret weapon. We talk about trying to maintain technological superiority, but the reason I go back tonight after waking up crying is because of the incredible people that we have. And they're mission—I mean, they're just a joy to be around.

So the big takeaways I would like you to have are, we are really taking a hard look at our whole global posture and the way we have employed forces over the last twenty years. The way we will do it in the future is going to be different. The way it comes about is still under debate. So I can't give you exact—exact examples. But I will tell you, what I've laid out is our vision.

And the second thing is the Asia Pacific rebalance is real. I mean, it is truly real. The four biggest construction projects since the end of the Cold War, all of our capabilities, the revitalization of our alliances, it truly is something to see.

So, thank you for all that you do for us. And I look forward to your questions.

(APPLAUSE)

SCIUTTO: Thank you very much. The image of the goat on the tether is going to cause me to approach this interview entirely differently. You connected the dots globally in a way that the president did in his speech at the U.N. the other day, talking about these various challenges to the world order, the system of laws and standards, et cetera, and he talked about Ukraine and, of course, he talked about ISIS. He had a veiled reference, without mentioning China, but clearly referencing China.

And what we see in a lot of these places is under the radar challenges to American interests--in eastern Ukraine and Crimea, a stealth invasion; around the Senkakus, you have what is in effect a land grab but happening oftentimes with, say, coastal patrol ships, fishing trawlers, et cetera. But still, it's military aggression, but it happens perhaps without the label.

And I just wonder, what is the military response to those under-the-radar challenges to American interests or American allies' interests, whether it's in Europe and in Asia? How does the U.S. respond strongly without escalating, but also defending its and its allies' interests?

WORK: Well, this is a question, obviously, that consumes us every single day in the department. What are the best ways that we can offer options to the president and to the national security team?

I think a lot of people don't really understand what's happening. This is a major, major shift not only in the way things are developing in the world, but also in the way that the president approaches a problem, which I think he has laid out several times, speeches, and the U.N. speech was, again, another one.

Since 1989, which I would call the end of the Cold War, March 12th—excuse me, May 12th, when Bush 41 said we're no longer going to use containment as a lens through which to develop forces for the Department of Defense, we've been at war more than we've been at peace. It has been the most militarily active period in our history.

We have done aggressive shaping operations. We've done nation-building operations. And the president has said, look, what I want to try to do is to use military force when appropriate, but lead with diplomacy, and I want our partners and our allies to help us shape the responses in each of the individual theaters.

And that's exactly what he's trying to do. We're working very closely with our NATO allies and Ukraine. The intent in Ukraine is to build up their ability to defend themselves, so that over time they will be able to stop this type of aggression, as you said, under the radar, and at the same time work with NATO to come up with higher reaction forces and sending signals that, OK, there are certain things that we will not tolerate.

The European reassurance initiative is part of that, which would allow us to maintain more rotationally deployed forces in Europe than we would otherwise be able to do under our base budget.

In the Far East, working with Japan, which is the cornerstone of our alliances in the Pacific, we are working with them to redo their defense guidelines, and their collective self defense has worked to allow us to do even a more robust look at defense guidelines than we otherwise would have thought we would be able to.

The lynchpin of security in Northeast Asia is South Korea. We're working very closely with them in terms of changing operational control of forces over time and also linking our capabilities closer together.

So in the Middle East, as the president said, we have to have an inclusive government in Iraq before we're really going to move. That was the first and most important thing. And then we had to have a coalition of forces that included the forces in the region, before he would move forward.

So in each of these areas, I think the president's approach, these approaches are very slow developing. They're not—they don't provide quick, wow, what did you just do?

SCIUTTO: Satisfaction.

WORK: Quick satisfaction. But we believe—I think the president and Secretary Hagel believe that thinking through these problems correctly, taking your time, and building a sustainable response is the way to go.

SCIUTTO: Do you find that there is a desire, an appetite for American leadership in these conflicts, that as much as coalition-building—I know it's a presidential priority and, frankly, when the president came on board, you know, there seemed to be a great welcome to that, right? Here's a different American posture.

But have you found—particularly, for instance, in relation to the Ukraine, but even with challenges in the South China Sea, that at the end of the day, whether you're talking about Southeast Asian nations or our NATO allies, that they want to be led or, if they don't want it, they need it for something to happen, for a tough response to Russia or for a strong response to China in Asia?

WORK: Yes. I mean, you heard the president again on "60 Minutes," his interview, he really does believe America is the indispensable nation. But what he wants is that the regional partners he expects now to take more of a leadership role. He's demonstrated that in the ebola crisis. He's demonstrated in the Middle East. He's demonstrated it in Europe, and he's demonstrated it in the Far East.

But what he wants are the regional partners to step up and say, this can't be solved by America alone, and he will not tolerate people saying, "You're the indispensable power, go fix it and tell us when you're done." He wants to have enduring partnerships, and that's what we're working for in these four big areas.

SCIUTTO: I'm going to put you on the spot here. The U.S. has clearly decided it's not going to go to war over either Crimea or Russian aggression in eastern Ukraine. It'll raise the cost, et cetera, it'll send signals—confidence-building signals to NATO allies in the region. Will the U.S. go to war, will NATO go to war over Russian aggression, say, in the Baltics?

WORK: Well, any NATO force that is attacked and is overtly attacked with automatically trigger a response by NATO. Now, one of the things that came out of the NATO summit was a very high-readiness response force that would be able to move very quickly. The European reassurance initiative is another thing where the United States has said we're going to put more forces there than we planned.

And any attack against a NATO country, yes, I believe the United States will absolutely support that country under our treaty obligations.

SCIUTTO: How about the Senkakus? You'll hear from—or the Diaoyu—you'll hear from the president a reminder, whenever he speaks publicly, and the mobile, and the secretary of state, et cetera, of our treaty obligations with Japan. Will the U.S. go to war to protect the Senkakus? Because it gets—it's particularly—and it gets back to the first question I asked you. When it's not an overt invasion, when the tanks aren't driving across the border, but it's a subtle, you know, step-by-step move that at the end of the day gets you to the same place.

What is the—because it's my sense that these countries—Russia and China—are testing. They're testing the sanctity of those NATO obligations. China is testing the sanctity of America's treaty obligations to Japan. So how do you meet that when they test it kind of subtly? They're kind of digging on their fences, right, rather than bowling them over.

WORK: Well, the United States has said over and over that we take no position as to whether—who has the long-term control of islands either in the East China Sea or in the Senkakus. But while the Senkakus are under Japanese control, Article 5 applies, and we would respond if there was an attempt to take the Senkakus, and we would support our Japanese allies.

SCIUTTO: You'd respond militarily?

WORK: It would depend upon the circumstances of what would happen, but we would definitely respond and try to maintain—I mean, support our Japanese allies, retaining administrative control of the Senkakus.

SCIUTTO: One more big picture question, because I want to get to the audience. There's a lot of talk now about the table being set like it was in 1914 for a global conflict. Now, that kind of, you know, concern can be exaggerated, certainly, but you have real challenges, you have a certain kind of leader in Moscow, right, who does not seen cowed by any sort of pressure, seems to love power, as the president has said and his advisers have said.

You have a China that's growing in military might, certainly, but also economic might and confidence. I spent a couple years there. You feel that confidence among their leaders, among their people. There's tremendous nationalism there. There's tremendous nationalism in Russia.

So you have a lot of those same ingredients. Do you see—do you think that this talk of World War III, whatever you want to put on it, is exaggerated or if there's a real concern?

WORK: I think...

SCIUTTO: Does that keep—you talk about waking up crying. But is this one of the things that keeps you up at night?

WORK: No, I don't worry about World War III. I think there's two things happening, both with Russia and China. First, they clearly are staking out their position in their near abroads. And this is one of the things that we're going to have to work out over the course of the next several years on what they consider to be areas of their vital interest, and what we have to do is find a means by which to make sure that those desires do not resort to the use of force and would require an overt response militarily from us. We have to work these out and make sure that Russia and China feel secure in their near abroads.

But both of those countries definitely believe that the current world order, as established over the last seventy years, they would like to change certain aspects of it. So that's going to be a constant point of attention. So at the strategic level, it is, how are we going to work with two very strong powers, regional powers right now? And how will we be able to work out ways in which we engage with each other over time? That's the strategic level.

Then all of this pressing in the near abroad, those are the things that could lead to miscalculations or accidents, and those are the things that we are urging all sides to continue to talk, continue to look for diplomatic solutions, but always hedging against the fact that we might have to respond militarily to any—certainly, any engagement against our allies.

SCIUTTO: Do you think that Moscow and Beijing believe that American pledge that the U.S. will respond militarily?

WORK: They should. I can't think of any place where there's been an overt response against our allies that we haven't responded. Of course, NATO responded very, very strongly after we were attacked in 2001. I believe the basic premise of NATO remains strong. And I have to tell you, the alliances in Asia have never been stronger.

So I believe any potential country should believe that the United States will always fulfill its treaty obligations, period, end of story.

SCIUTTO: They should, but do you think they do? Particularly—I mean, Crimea is in Russia's hands, right? People don't talk about Crimea anymore.

WORK: Well, again, there's a big, big difference between treaty allies and other—so there are certain times where the president has to say, what is the proper engagement? But in terms of treaty allies, there's no question in my mind that the United States would honor its treaties.

SCIUTTO: OK. Thank you very much. I want to give time to the audience. Just a brief reminder—and, again, you know the rules—stand, state your name and affiliation. Please wait for the microphone, and if you could keep your questions short, we've got just over twenty minutes to go, that'll allow us to have more questions.

So here in the front row.

WORK: Hi, Dov.

QUESTION: Just a quick—Dov Zakheim—quick question. It looks like the cost of this operation against the IS, whatever you want to call them, is starting to really mount up. And since the president said it's going to continue for quite some time, we're talking about billions of dollars in addition to whatever else we're spending. What's the strategy for finding that money? Is it the overseas contingency operations account? Or is it maybe trying to go back and get defense exempted from the sequester?

WORK: Did everybody hear the question? I mean, right now, we were able to execute the sustained operations against ISIL in both Iraq and Syria with the forces that were already forward in CENTCOM. This is another advantage of our global posture, being able to maintain forces forward, and those are largely paid for in a combination of base budget and operations—overseas contingency operations.

Right now, the cost for operations in Iraq are coming out of overseas contingency operations. And for the foreseeable future, we believe that is the case. But your point is, I have to tell you, a lot of people say, "Hey, you're spending $500 billion a year on defense. You know, you're spending more than fifteen of the next countries." I'm making that number up; I know it's close. "Why in the heck can't you just make it work?"

Well, if you want to have a global posture, we're the only nation with a global posture. If you want to have global attack forces and if you want to have over 200 C-17s and 50 C-5s and 300 C-130s, which allow you to move, and a sealift force, which probably has 95 percent of the world's military useful sealift, and if you want to have a global C4I posture, which allows you to communicate across global distances, you're going to pay a premium for that. And that provides a basis by which you cannot go below.

And now what is happening is our global command and control infrastructure is under cyber assault every single day. We have to spend more to protect it. So sequestration will not work, period. It will result in a major reevaluation of the current strategy, without question. We will not be able to execute the strategy that the president believes is necessary at the sequestration level, which is why he has asked for $115 billion more than the sequestration level.

So the long-term solution is, on OCO, one of three choices. You either—we figure there's about—well, there's a lot of money in the OCO that should probably be in base. It's not because we didn't want it to be in the base; it's just happened over twelve years. So that money either has to come into the base with a concomitant increase in our top line, which Congress has indicated, no, they're not ready to do that. Or it's got to come over where we eat it, which really constrains us. Or we agree that OCO will continue in the future and we'll establish some rules to do it.

I believe the latter one is what we're going to have to do. With the crisis in ebola, with all of these things, the European reassurance initiative, we're going to have to have operations—overseas contingency operations funding for some time. That is in debate now.

SCIUTTO: On this side, front row? It's coming.

QUESTION: I'm Mitzi Wertheim with the Naval—nice to see you again, Bob.

WORK: Hi, Mitzi.

QUESTION: This is going to sound like a nit, but it's something that really drives me crazy. There are lots of little things you could do. You're talking about it on a grandstand. We spend a lot of money on having research studies done, right? They come in eighty pages thick with an executive summary that doesn't really tell you what the new ideas are. And I'm told you're the only one in the building that could change this, which would be put into the RFP that you have to have upfront an explanation of the new things that were learned, having done this work, and how it ought to be employed by the Defense Department.

Strikes me as so simple, and yet it turns out to be so hard, unless you do something about this. But having worked on writing those things and those reports and knowing that nobody ever read them, because they were too long, you need to take advantage of all these smart minds that are doing work for you and not have to have somebody on your staff do the summaries.

Can I get you to commit to do that?

(LAUGHTER)

WORK: Well, first of all, we're trying to use the boards differently than we have in the past. In the past, for example, as you said, Mitzi, the Defense Business Board would make really good reports. They'd come in and they'd pretty much sit on the shelf.

Now, under the deputy chief management officer, I've made the DBB almost an operational arm of our deputy chief management officer, and they are assisting us do deep dives throughout the fourth estate and also to look for vertical integration opportunities.

Whenever we go somewhere, the DBB will bring in someone from the commercial side that has experience in that so that we can benchmark ourselves against—against those type of things.

On the Defense Science Board, I have to tell you, I find their reports in the main very, very thoughtful and very, very helpful, because it's an outside view, and I'm satisfied that Frank Kendall is managing that process well. Those are the two boards that I've entertained—I mean, I work with closely on most. The second one—the third one, the Defense Policy Board, the secretary works directly with them.

But I haven't really thought about setting any criteria or guidelines, and I'll be happy to go back and look at it. But I will say that, from 1 to 1,000, that's probably 999.

(LAUGHTER)

QUESTION: (OFF-MIKE) look at anything unless it was on one page, because he wanted to understand it and be able to have (OFF-MIKE)

SCIUTTO: Let me ask, if I can, a follow, because a couple months ago, in the same seat, I had General Odierno here, and he was talking about trying to control pension costs in the building. And, of course, Pentagon tried and Congress wouldn't let them, and that's a big chunk of money. How can you accomplish the broad strategic goals that you're talking about in a shrinking budget environment, even if you—even if you didn't have sequester, without being able to control your pension costs?

WORK: Wow, well, there's a—there is—as you all know, there's a military compensation and retirement commission. And in the beginning, the department did not really interact with them very closely. That changed in a big way. We've now--much more exchange of information. We want them to have a very independent review. But I now talk routinely with the commissioner, and I've offered to come over and talk with the people on the board and say, which way are you going?

Now, this whole idea of compensation is absolutely critical. We put in what we consider to be extremely modest compensation reforms in our last budget submission, and we don't have a bill yet, but reading the tea leaves between the four different committees, we have between $11 billion and $39 billion in liabilities that we're going to have to take care of, because Congress has said, no, we don't want you to do that, and that includes things like collapsing and having a single TRICARE system, taking our basic allowance for housing from 100 percent out-of-pocket to 95 percent out-of-pocket, what we consider to be pretty reasonable approaches, but Congress said no.

So if you add up all of the things that Congress told us no, after we submitted our budget, it's $31 billion in noes. No, you can't get rid of the A-10. No, you can't get rid of the U-2. No, you can't get rid of those cruisers. No, no, no, no, no, no, no. And then, no, you can't do the compensation reform, and that's another $11 billion to $39 billion.

So starting off in this fall review, we're trying to—we're trying to figure out is, do we have to reshuffle the deck to the tune of $70 billion? I mean, this is lala land. I mean, I have never been in a situation where we are faced with such strictures on the way we should go about it. And compensation is a really big deal.

So what will happen is we think we're going to be under CR when we drop our budget in February. It's not idea, but that's—unfortunately, it's the norm now. And the retirement commission reports out on the 1st of February. I believe this truly is the last chance between now and the presidential election for us to make any moves in this space. We have to do it if we're going to maintain the force structure we need, and it's going to be a tough, tough fight.

SCIUTTO: Any questions on the pivot?

WORK: Rebalance.

SCIUTTO: Rebalance, sorry.

(LAUGHTER)

Maybe back here?

QUESTION: Hi, I'm Kristine Schenck, and I work for the Navy. When you're talking about the rebalance, you talked about strengthening our alliances, but you didn't mention our relationship with China. And over the last year, we've made considerable positive momentum on our military relationship with China, but that's kind of an issue of debate. How far should we be going with our relationship?

So what is the—what is DoD's vision for what China would like to call a new type of mil-mil relations?

WORK: Well, of course, the relationship between the United States and China is going to be one of the most important relationships we have in the 21st century. And you are exactly right. We're doing an awful lot of mil-to-mil-type engagement. This is the first time that China participated in the RIMPAC, the Rim of the Pacific exercises. And we continue to have dialogue with our Chinese counterparts.

And I think what—from DoD's perspective is making sure that there are confidence-building measures and areas in which we have routine communication, so that each side knows what the other side is thinking, and that we are trying to prevent—both sides are trying to prevent accidents, miscalculations, quick escalations of problems.

So in our view, what we are looking for is a China that accepts that the United States is a Pacific power, that will remain in the Pacific throughout the 21st century, that we have important national interests there, that can coexist with China's national interests peacefully. So from the Department of Defense, I believe that's what we would hope would happen.

SCIUTTO: Over here.

QUESTION: OK, thank you very much. My name is (inaudible). I'm a reporter from (inaudible) News Agency from South Korea. U.S. military plans to deploy a THAAD missile defense battery to South Korea and conducted a site survey to determine where to place the system. Can you tell us about the status of the project, including if you decided to—where to put the system?

And I'm also wondering about what you'd say to the strong opposition China and Russia have expressed against this plan. Thank you.

WORK: The United States and our program, we're only going to have eight THAAD batteries, when all is said and done, if we stay at the president's level, not at the BCA level. I'm not certain we would be able to hold on to each of these batteries.

These batteries are strategic assets. Moving them is a very, very important national level decision. So moving one to Guam in response to North Korean provocations was made and that battery is there.

As you said, we are considering sending a THAAD to South Korea. There are other places in the world—putting them there is very difficult to move them, once there, primarily because of all of the things you have to do to get them there, to set them up, but more importantly, once there, they become an important part of the regional defense.

So as you said, we are considering very carefully whether or not to put a THAAD in South Korea. We're doing site surveys. We're working with the government of South Korea now to determine if that is the right thing to do.

We've emphasized to both China and to Russia that these are not strategic anti-ballistic missiles, that they essentially allow—I mean, they are essentially designed to address regional threats against both our allies and against U.S. territory.

So we continue to work with the Russians and the Chinese to allay any concerns that they have, but they both have indicated concerns, without question.

SCIUTTO: Does the U.S. regret acceding to Russia's demand that it not place missile defense in Eastern Europe, in light of current events?

WORK: I'm not sure I understand. We still—the phased, adaptive approach still goes forward. So we will still have Aegis ashore in Romania and Poland.

SCIUTTO: OK, was the—but what was the plan? Was there not a plan? It was aimed at Iran. This is early in Obama's term, and it was debated during the Bush administration. Didn't Aegis replace that?

WORK: Yes, I mean, the Obama administration brought in—this was under Michele Flournoy when she was the undersecretary of defense for policy—the European phased, adaptive approach, in which we put the Aegis ashore, and it is specifically designed for an Iranian attack on U.S. forces and our allies in Europe.

And Russia has objected and said they are concerned about this, but that plan continues apace. And we will have our forces in Europe, you know, by 2018. We should have all of our—the EPAA settled.

SCIUTTO: My mistake, by 2018. In the back here?

QUESTION: Thank you. Leandra Bernstein, RIA Novosti. I have spoken to a few experts recently who have said that Russian collaboration on counterterrorism in the Middle East is key in defeating the threat of ISIS. But I'd like to get your thoughts on the Russian partnership, given very differing interests in the region between the U.S. and Russia, and also how you see that squaring with the, I guess, post-Wales summit posture of U.S.-NATO allies toward Russia?

WORK: Well, one of the things the United States has always done, even when there are positions of great tension and when we disagree over big strategic matters, we continue to cooperate on areas of mutual interest. So our space program with Russia is a primary example. Even though we continue to have such a violent disagreement over what they are doing in Crimea, in the Ukraine, we continue to have a relationship in the space program.

On the counterterrorism side, on all of our allies, we try to maintain as close a relationship as we possibly can, because as the president said last year, this is a truly global problem that requires a global response and requires partners across the political spectrum. So I can't talk to any specifics on the things that we are doing with Russia right now in counterterrorism, but in all of the areas that we can continue to discuss that are mutually agreeable, even when we disagree over what is happening in Ukraine, we will continue to do so.

SCIUTTO: By my clock, I think we'll have time for two more questions. Maybe just in the back here, in the middle.

QUESTION: Thank you. Good morning, Esther Brimmer, George Washington University.

WORK: Hi.

QUESTION: Hello. Good to see you, sir. I want to take you back to a different region of the world, to the Indian Ocean. We still have Prime Minister Modi down the street and, indeed, we see India and other emerging powers building navies. But the Indian Ocean has also seen remarkable naval cooperation in fighting piracy. Could you comment on the perspective on the Indian Ocean and India in particular? Thank you.

WORK: We believe having a strategic relationship with India is very beneficial for the global international system, and particularly for security in the Indian Ocean. India believes that the Indian Ocean is an area of primary interest and core interest for them, and they are building quite impressive naval capabilities.

The U.S. Navy and the Indian Navy—or India's navy are extremely—are working more closely together probably than they ever had. One of the things that India's government has indicated is they want to have more U.S. defense engagement. And I would expect that relationship to go, to continue to expand, and it's one of the more exciting things that we're doing.

I mean, the recent change in government, as you said, in India, is opening up new vistas for us, and we hope to be able to find matters of cooperation and interest in the Indian Ocean. They are a key partner for us in maintaining security in that area.

SCIUTTO: We have time for one more question. Just a reminder, this has been on-the-record. I think you know that. But one more just way in the back here on the right-hand side.

QUESTION: Thanks very much. From one of the allies, Australia, I'm Lisa Millar from the Australian Broadcasting Corporation. Australia is certainly grappling with the ISIS threat of recruits. The government is backing the U.S. very much on this action. I was reading with interest the retired head of the British armed forces suggesting that the only way this is going to be resolved is with Western boots on the ground, with Western armies. What's your message to Australia as it throws its weight behind the U.S. action?

WORK: Well, as I said before, our alliances in the Pacific have been remarkable, and they are getting stronger all the time. Australia has fought with us in every single war since the end of World War II. They are one of our strongest allies, and we consider them the bedrock of everything that we're doing in the Pacific. And our recent agreement, which will allow Marines to rotationally deploy out of Darwin is an indication of our expanding defense cooperative relationship.

Australia has indicated in a number of ways that they will help against—in the campaign against ISIL. So the biggest message that I think we can provide to our Australian friends is, thank you. We value this relationship extremely much. We think it will get stronger over time. This is going to be a tough fight against ISIL in both Iraq and Syria. It's going to require a wide range of partners, all providing different—different capabilities to the fight. And we look forward to working with Australia as we address this threat.

SCIUTTO: On the boots question, though, because I asked General Dempsey about this on Friday. And he stood by the comment that caused so much controversy the week before during congressional testimony, saying that if he felt there was a need in certain roles—we're not talking about a large ground force—but in certain roles, to request American forward-deployed, say, advisers with units or ground controllers, that he would ask the president. Is the Pentagon—just to be clear, is the Pentagon keeping the option of U.S. ground troops—and, again, that's got a lot of meaning in that word—but folks deployed more forward than the joint operations centers where they are now? Is the Pentagon keeping that option on the table?

WORK: The Pentagon does options all the time. We provide the president with options in a wide array of different things we give, different recommendations. And as General Dempsey said, right now, as we build the coalition and we start to do the campaign, which has many, many different parts to it, lines of effort—we're going after their financing. As you've read in the paper, we're starting to target their ability to sell oil with their modular reactors inside, so we're going after the way to get money.

We're doing counterterrorism activities. We're shrinking the force. We're making it harder for them to move. And when and if Chairman Dempsey and General Austin believe that, hey, there is a point in which we might need to have troops, they're going to put that option forward, and it'll be up to the president to decide.

So all options. I mean, that's what the Department of Defense does, is tries to provide a range of options to the president and the president able to make those.

SCIUTTO: Up to him in the end.

WORK: Up to him in the end.

SCIUTTO: Deputy Secretary Work, thank you very much. I'm sure people enjoyed the coverage very much.

WORK: Thanks a lot.

END