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– Amb. Nobuyasu Abe
Former UN Undersecretary General for Disarmament Affairs
January 28, 2004
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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]

U.S.-Russian HEU Deal Still on Track

In mid December, news sources inaccurately reported that Russia had decided to withdraw from the 1993 highly enriched uranium (HEU) purchase agreement, which requires the United States to buy over a period of 20 years Russian low enriched uranium (LEU) that has been blended down from 500 metric tons of HEU removed from dismantled former Soviet nuclear warheads. According to a December 12 statement issued by the United States Enrichment Corporation (USEC), the U.S. government's executive agent for the purchase agreement, press reports had confused the U.S. Russian HEU deal with a separate 10 year agreement reached in August 1997 between Russia and three Western companies—CAMECO (Canada), COGEMA (France) and NUKEM (Germany)—involving the purchase of Russian natural uranium. It is this latter agreement that Russia has decided to terminate.

Implementation of the U.S. Russian HEU deal is moving forward. By the end of 1997, the USEC is scheduled to have received a total of 1,038 metric tons of LEU that has been blended down from 36 metric tons of HEU—the equivalent of more than 1,600 former Soviet nuclear warheads according to USEC estimates. The USEC is expected to receive the LEU equivalent of an additional 24 metric tons of HEU in 1998.

Russia Clarifies Yeltsin Statement on Nuclear Cuts

During a December 2 news conference in Sweden, Russian President Boris Yeltsin announced that Russia would unilaterally reduce its nuclear arsenal by one third, a statement that was quickly "clarified" by his aides. Presidential spokesman Sergei Yastrzhembsky explained that Yeltsin had meant that Russia was willing to accept nuclear force reductions below the START III level of 2,000 to 2,500 deployed strategic warheads agreed to last March in Helsinki. Defense Minister Igor Sergeyev told concerned members of the Duma, the lower house of parliament, that Russia had no plans to make unilateral reductions in its nuclear arsenal. "Neither the president, nor, for that matter, we, have proposed any unilateral reductions. Everything will be done on the basis of parity," Sergeyev said December 5.

Meanwhile, Russian Deputy Foreign Minister Georgi Mamedov met with Deputy Secretary of State Strobe Talbott December 3 4 in Washington to discuss a range of security and arms control issues, including START III. Although the United States and Russia are currently holding a series of expert level discussions on START III, the Clinton administration maintains that official negotiations on a follow on treaty cannot begin until the Russian Duma approves START II.

Supercomputer Export Controls Strengthened

Despite two previous veto threats, President Bill Clinton signed into law on November 18 congressionally mandated changes to U.S. supercomputer export controls, which were contained in the fiscal year 1998 defense authorization act. The new guidelines reverse some of the modifications made by the White House in 1995, and will require the administration to expand its monitoring of proposed sales, and verify the actual uses of many U.S. high performance computers in countries of proliferation concern.

Prompted by reports that Moscow and Beijing had circumvented U.S. export controls and acquired U.S. supercomputers for use in military research facilities, including nuclear weapons labs, legislators forced three key changes to U.S. export policy. First, for unlicensed sales of computers operating at speeds above 2,000 million theoretical operation per second (MTOPS) to countries of "some security or proliferation concern"—so called tier 3 states—the determination of the buyer's legal eligibility will no longer be done by computer exporters, but through a 10 day inter departmental review process. Second, presidential changes to the list of tier 3 countries and the 2,000 MTOPS threshold will henceforth require 120 and 180 day congressional review periods, respectively. Finally, the Commerce Department will be required to conduct post shipment verification of the location and uses of all U.S. origin computers above 2,000 MTOPS in tier 3 states.

Commerce Department Undersecretary Bill Reinsch objected to the new requirements at a November 13 hearing of the House National Security Committee. According to Reinsch, the new requirements are "unrealistic both philosophically and procedurally," and infringe on the president's ability to conduct foreign policy. Reinsch added that the new verification requirements will waste scarce verification resources, overburden the intelligence community with needless license support obligations, and ultimately provide a significant competitive advantage to foreign computer companies.

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Please contact ACA for a copy of this story.

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