By Mark Hosenball and Katie Paul

If ever there were a time for Iranian chest-thumping, it would be now. The 31st anniversary of the regime's Islamic Revolution is less than a week away, but authorities anticipate the celebrations will be marred by a new round of anti-government protests led by opposition leader Mir Hossein Mousavi. Adding fuel to the fire, Monday brought news that senior officials from Russia had joined with their counterparts in the United States and France in pressing for tougher sanctions against Iran, bringing the U.N. Security Council an important step closer to implementing a sanctions program.

For their part, the leaders of the Islamic Republic are stepping up their rhetoric. Iran's defense minister announced on Monday that the military had conducted successful tests on new drones and air defenses. The same day, Iran's supreme leader, Ayatollah Ali Khamenei, told a group of Iranian air force personnel that the Iranian nation will "punch the arrogance" of Western powers on Thursday, the day of the anniversary, "in a way that will leave them stunned."

Iran analysts are scrambling to figure out how the mysterious "punch" might land. For now, most are scratching their heads. More likely than not, they say, the whole incident consists of more huffing and puffing than real brinksmanship. “The Iranians are trouble to be sure, but they’re also known to exaggerate their capabilities, especially when it comes to their military and nuclear programs," said one U.S. counterterrorism official. "They have multiple incentives to hype the facts—to try to deter a potential attack from abroad, to strike a better bargain in international negotiations, or to stoke nationalism at home."

White House counterterrorism adviser John Brennan played an unusual role Sunday when he swiped at congressional Republicans for bashing the administration's handling of the Christmas Day bombing suspect.

Normally, it is the White House political aides such as David Axelrod and Press Secretary Robert Gibbs, both seasoned veterans of the 2008 Obama campaign, who take the offensive against the president's GOP critics on the Sunday talk shows.

But this week, it was Brennan─a professional U.S. intelligence official who now serves on the president's national-security staff─who played the attack-dog role. While national-security aides─like Richard Clarke after 9/11─have been used in the past to rebut political attacks by providing "background" briefings, and Brennan himself did the Sunday talk-show circuit immediately after the Christmas Day bombing─it is extremely rare for a White House aide in his position to so directly target the president's critics, much less members of Congress by name, according to several former White House staffers and congressional staffers.

The director of national intelligence, Dennis Blair, shocked Washington last week when he told a congressional committee that U.S. spy agencies have the authority to assassinate American citizens abroad who are believed to be involved in terrorism. But he suggested that intel officials would have to follow special rules to do so: "If … we think that direct action will involve killing an American, we get specific permission to do that," he told the House intelligence committee.

Blair's testimony left behind a pile of questions: By whose authority can intel agencies kill Americans? And who in the government has the power to grant or deny the "specific permission" to carry out such operations? In interviews with NEWSWEEK, current and former U.S. national-security officials—who asked for anonymity to discuss sensitive information—filled in some of the blanks.

These officials say that, a few days after 9/11, George W. Bush signed a classified "intelligence finding" authorizing the assassination of suspected terrorists. By this order, which continues under Barack Obama, officials within the CIA and Pentagon can launch lethal strikes on suspected foreign terrorists without seeking permission from higher-ups. But, say the officials, strikes specifically targeting Americans must first be approved by a secret committee made up of senior intel officials and members of the president's cabinet (it's not known which ones). The president himself does not have to sign off on kill orders.

President Obama and senior advisers last month considered—and rejected—the notion that Umar Farouk Abdulmutallab, the accused Christmas Day underpants bomber, should be handed over to the U.S. military for interrogation and detention, NEWSWEEK has learned. The subject of whether Abdulmutallab should be transferred to military custody came up at a meeting the president held in the White House Situation Room in early January, shortly before the Justice Department announced it would proceed against him in the civilian court system, according to little-noticed statements made by one or more "senior administration officials" who gave a background briefing to White House reporters on Feb. 2.

According to a transcript of the briefing, the subject of whether Abdulmutallab ought to be turned over to the military came up at a Situation Room meeting that appears to have been held on Jan. 5, the day before the accused underpants attacker was formally charged with terrorist offenses under federal law. During the meeting, according to a White House briefer, Attorney General Eric Holder announced: "I'm going to charge him tomorrow." At that point, according to the briefer, "there was a discussion about whether or not in fact there was going to be any type of change in his custodial disposition."

Capitol Hill Republicans are accusing the White House of misusing classified information to score political points in the debate over how the U.S. government should handle captured terrorist suspects. In a letter sent on Thursday to President Obama, Sen. Kit Bond (Mo.), GOP vice chairman of the Senate intelligence committee, claimed that only 24 hours after the FBI confidentially notified his committee's "leadership" that underpants-bombing suspect Umar Farouk Abdulmutallab had started again to "provide critical information" to U.S. authorities, White House staff briefed the media "to announce Abdulmutallab's cooperation and to laud the events that led to his decision to cooperate with law enforcement personnel."

"It is deeply disturbing to me that the Intelligence Committee would be advised of sensitive information, and told of the vital imperative to keep such information secret for the sake of national security, only to see this information—less than twenty-four hours later—broadcast to the world from the White House," Bond wrote. "This distortion of the congressional notification process suggests that other considerations are taking precedence over keeping timely and sensitive information away from our enemies."

The country's top spy has begun to acknowledge publicly that U.S. intelligence agencies are changing their beliefs about Iran's secret efforts to develop nuclear weapons.

In an annual worldwide "threat assessment" presented Tuesday to the Senate Intelligence Committee, National Intelligence Director Dennis Blair said that Iran is "keeping open the option to develop nuclear weapons." Blair told the committee that since 2007, Iran has more than doubled the number of centrifuges in its main uranium-enrichment facility at Natanz. The country has also stockpiled around 1,800 kilograms of low-enriched uranium, an essential precursor for making bomb-grade fissile material. In his testimony, Blair elaborated on last year's revelation that Iran has been building a secret underground uranium-enrichment plant near the holy city of Qum. The plant, Blair noted, is "too small to produce regular fuel reloads for civilian nuclear-power plants, but is large enough for weapons purposes ..."

A single intelligence community database operated by the CIA, known by the code name "Hercules," held all the "bits and pieces" of intelligence that White House officials believe could have led U.S. authorities to Umar Farouk Abdulmutallab before last Dec. 25, according to current and former counterterrorism officials. However, even though all the raw information was in a single computer system, "all source" intelligence analysts at the CIA and National Counterterrorism Center, which both had access to "Hercules," were unable to assemble the intelligence scraps in time to prevent Abdulmutallab from boarding his Christmas Day flight from Amsterdam to Detroit with a bomb hidden in his underpants.

The current and former officials, who asked for anonymity when discussing sensitive information, assert that the fact that all the tidbits of information on Abdulmutallab and the possibility that Al Qaeda's Yemen-based affiliate was plotting an attack on a U.S. target were entered into a single intelligence community database validates assertions by White House and congressional investigators that the alleged lapses in the handling of intelligence related to Abdulmutallab did not stem from a failure of sometimes turf-conscious spy agencies to share information with each other. Instead, they point to the intelligence analysis carried out by the CIA and NCTC.

As the Obama administration struggles with the politically explosive question of where to hold the 9/11 terror trial, its options appear to be dwindling by the day.

Just days after administration officials acknowledged they were exploring alternatives to Attorney General Eric Holder's controversial decision to hold the trial in New York City, just a few blocks from Ground Zero, Sen. Charles Schumer (Democrat of N.Y.) threw a new roadblock in front of its most promising options.

Three possible sites in upstate New York suggested by administration officials late last week—West Point, Stewart Air Force Base and a federal courthouse in Newburgh, N.Y.—were all unacceptable, he told reporters on Monday.

Has the United States succeeded in killing Pakistan’s brutal Taliban leader or not? Numerous press accounts suggest that Hakimullah Mehsud—a top U.S. target-likely died in a bombing attack some time in January. But two U.S. national security officials tell Declassified that they have no confirmation that he is in fact dead.

Citing various authorities, the latest news reports offer conflicting accounts of Hakimullah’s possible demise. The New York Times version alleges he may have died as a result of injuries sustained during a missile strike on January 14. The Guardian alleges he may have been blown up in a missile strike on either January 13 or 17. As we noted earlier, reports of his death in mid-January proved difficult to confirm. The latest wave was set off by a Pakistani state television report yesterday.

The administration would certainly be eager to announce that Hakimullah is no more. He allegedly took over leadership of Pakistan-based Taliban forces after his fellow tribesman, Baitullah Mehsud (no relation) was reportedly killed a missile strike last August. (Baitullah was suspected of masterminding the assassination of Benazir Bhutto.) Hakimullah, whose fighters are believed to operate on both sides of the Afghan/Pakistan border, has been a priority target for both Pakistani and U.S. forces.

By Michael Isikoff and Daniel Klaidman

For weeks, the right has heckled Attorney General Eric Holder Jr. for his plans to try the alleged 9/11 conspirators in New York City and his handling of the Christmas bombing plot suspect. Now the left is going to be upset: an upcoming Justice Department report from its ethics-watchdog unit, the Office of Professional Responsibility (OPR), clears the Bush administration lawyers who authored the “torture” memos of professional-misconduct allegations.

While the probe is sharply critical of the legal reasoning used to justify waterboarding and other “enhanced” interrogation techniques, NEWSWEEK has learned that a senior Justice official who did the final review of the report softened an earlier OPR finding. Previously, the report concluded that two key authors—Jay Bybee, now a federal appellate court judge, and John Yoo, now a law professor—violated their professional obligations as lawyers when they crafted a crucial 2002 memo approving the use of harsh tactics, say two Justice sources who asked for anonymity discussing an internal matter. But the reviewer, career veteran David Margolis, downgraded that assessment to say they showed “poor judgment,” say the sources. (Under department rules, poor judgment does not constitute professional misconduct.) The shift is significant: the original finding would have triggered a referral to state bar associations for potential disciplinary action—which, in Bybee’s case, could have led to an impeachment inquiry.

By Mark Hosenball and Michael Isikoff

With a nudge from the White House, the Justice Department is now scrambling to find a new site to try Khalid Sheikh Mohammed and other alleged 9/11 co-conspirators. But their search may not be easy.

"We're considering our options," said a Justice Department official, amid what has turned into a full-scale political rebellion against Attorney General Eric Holder's plans to try Mohammed and other 9/11 plot suspects in U.S. district court for the southern district of New York, whose two principal courthouses are only blocks away from Ground Zero in lower Manhattan. Another official said the department may issue a public statement later on Friday, although any such announcement won't identify a new site for the trial

By Mark Hosenball and Michael Isikoff

Political support appears be collapsing on every front for the Obama administration's plan to try Khalid Sheikh Mohammed and other accused 9/11 co-conspirators in Federal Court in New York City.

Among the latest prominent Democrats to join the growing political wave urging that the trial be moved to a different location is Senate Intelligence Committee chair Sen. Dianne Feinstein, normally a fairly strong backer of the current administration's counterterrorism policies. In a letter sent today to the White House, Feinstein urges President Obama to "reconsider the decision to bring 9/11 terrorist mastermind Khalid Sheikh Mohammed to justice in New York City," citing growing concerns about the trial that have been expressed lately by New York Mayor Michael Bloomberg and other local officials.