IBM Fined $8.67 Million for Supercomputer Sale

On July 31 a federal district court judge imposed an $8.6 million fine on the Russian subsidiary of International Business Machines (IBM) after the firm pled guilty to selling 17 high-speed computers to a Russian nuclear weapons lab in Sarov (formerly known as Arzamas-16). The fines, the maximum criminal ($8.5 million) and civil ($171,000) penalties allowable, will be paid by IBM East Europe/Asia Ltd. Additionally, the Commerce Department's Bureau of Export Administration placed the company's export privileges on probation for a two-year period. During its probation, IBM East Europe/Asia has agreed it will not engage in transactions involving any nuclear or military end-users and will not use certain Commerce Department license exceptions to export high-performance computers. U.S. export laws restrict the sale of supercomputers to nuclear or military end-users in countries of security or proliferation concern, including Russia.

The case against IBM developed after Viktor Mikhailov, Russia's minister of atomic energy, announced in January 1997 that Russia had acquired several high-performance computers from IBM and Silicon Graphics for use in maintaining the safety and reliability of Moscow's nuclear arsenal. (See ACT, March 1997.) According to the U.S. Attorney, the ensuing investigation revealed that IBM East Europe/Asia, with the aid of two Russian companies, Jet InfoSystems and Ofort, had sold 16 IBM RS/6000 computers in September 1996 and 1 RS/6000 computer in November 1996 for a total of $2.1 million. Although Arzamas-16 claimed to want the computers for peaceful purposes, IBM admitted it had "reason to believe" the machines would be used for nuclear or military purposes. IBM had begun negotiating with Arzamas-16 in early 1995 and in February 1996 had requested Commerce Department approval for sale of a different model of the RS/6000, but Commerce rejected the license application in mid-October 1996.

Russia has refused to return the group of 16 RS/6000 computers and claims to have no knowledge of the whereabouts of the remaining IBM machine. U.S. officials, including Vice President Al Gore, have approached Moscow on the issue without result. Assistant Secretary of Commerce Amanda DeBusk said on July 31, "We are in extensive engagement with the Russian government and are trying to get those [supercomputers] back." The case involving Silicon Graphics, which allegedly sold four "Power Challenge L" servers to Chelyabinsk-70, another Russian nuclear weapons lab, remains under investigation by the Justice and Commerce departments. [Back to top]