TORONTO (CP) - The military's intelligence arm has warned the federal government that avian influenza could be used as a weapon of bioterrorism, a heavily censored report suggests.

It also reveals that military planners believe a naturally occurring flu pandemic may be imminent. The report, entitled Recent Human Outbreaks of Avian Influenza and Potential Biological Warfare Implications, was obtained under the Access to Information Act by The Canadian Press.

It was prepared by the J2 Directorate of Strategic Intelligence, a secretive branch of National Defence charged with producing intelligence for the government.

The report outlines in broad terms the methods that could be used to develop a manmade strain of influenza capable of triggering a human flu pandemic.

It notes a method called "passaging," while not entirely predictable, could be a "potentially highly effective" way to push a virus to develop virulence.

"Such forced antigenic shifts could be attempted in a biological weapons program," says the 15-page report, dated Dec. 8, 2004.

Passaging involves the repeated cycling of strains of a virus through generations of a species of animals or through cell culture. The process can be used to either ratchet up or dial down the virulence of a virus, depending on which of the ensuing offspring - the mild or the severe - are selected in each cycle for the next passage.

There is debate in the community of infectious disease experts whether influenza would make a good bioterrorism agent. For one thing, once released, the virus would not discriminate between friend or foe. Terrorists and their supporters would be as likely to fall ill and die as those they hoped to target.

But if the ultimate goal is panic, social disruption and economic losses, influenza would be a good choice, says Dr. Brian Ward, a virologist at McGill University in Montreal.

"To me it's one of the most logical viruses to use. It doesn't have to be a really bad one to throw a huge wrench," Ward said.

"I mean, if you want to hurt the world's economy, that's an awfully good way."

Canada estimates the direct and indirect health-care costs alone of a mild flu pandemic would range from $10 billion to $24 billion. That doesn't start to count societal costs such as lost productivity because of mass illness or the impact on vulnerable industries such as airlines and tourism or the insurance sector that would be hit with business losses and death claims.

But influenza expert Dr. Earl Brown suggests that while flu makes a good theoretical bioterror agent, the reality of these "delicate" viruses is that the task would be harder than it appears.

"Flu is a wimpy virus, which I think is the one knock against it. It doesn't persist in the environment (outside a human) very long," says Brown, a University of Ottawa scientist who specializes in the evolution of influenza viruses.

"You have to infect people sort of straight away, otherwise it's going to die sitting around the environment."

Brown, who has done expensive work on reassorting or mating flu viruses, says any virus bred to spread would have to meet several key criteria: it would need to jump the species barrier and have the ability both to transmit easily and cause severe disease if it did.

"If you want to see chaos and mayhem and you're not concerned about the backlash, then you just have to get to the biology. And right now nobody can do it," Brown says.

"There's a good chance that you'd make something that just would burn out. It just wouldn't spread very well."

The report also raises the spectre of a pandemic strain engineered in a laboratory using reverse genetics. That technically challenging process allows scientists to custom tailor a flu virus, taking genes from a virulent but not highly transmissible strain, for instance, and melding them with genes from a virus that transmits well from person to person.

The report notes this is a technique scientists have been using to try to decipher why the virus that caused the Spanish flu of 1918-1919 was so deadly. That pandemic, which may have claimed upwards of 50 million lives worldwide, was the worst in known history.

"It is feared that this process could be copied . . . to produce a human viral strain similar to the 1918-1919 pandemic," the report says.

It also theorizes that a naturally occurring pandemic may be imminent, unless rigorous measures are taken to contain the spread of the H5N1 avian flu strain that has been responsible for more than 45 deaths in Southeast Asia in the last 14 months.

The report says factors such as the region's inability to eradicate the virus and influenza's propensity to mutate rapidly "raises the possibility that a novel strain capable of efficient human-to-human transmission may arise in the near future, threatening Canadian operations worldwide."