Volume 2, Issue 2 April 1998

National Security Report

Background and Perspective on Important National Security and Defense Policy Issues,

Written and Produced by

From the Chairman...

Chairman, House National Security Committee

Sales or Security?

Supercomputers and Export Controls

Supercomputers

S

ince the Administration relaxed

its policy in 1996 on

supercomputer exports, there have

been numerous revelations about the

unauthorized shipment or diversion of U.S.-made

supercomputers to countries and entities of proliferation concern. We have

learned that U.S. supercomputers have

been inappropriately shipped to military

research facilities in China and nuclear

weapons laboratories in Russia. By the

admission of Russian officials, these computers will be used to help maintain

Russia’s nuclear weapons stockpile.

More recent press stories also indicate

that an additional 16 U.S.-made high performance computers were illegally obtained by a Russian nuclear weapons

laboratory using European middlemen in

violation of U.S. export control regulations.

The true impact of these transfers on

the ability of other countries to develop

weapons that pose a threat to U.S. interests may never be fully known. However, it seems to me that it is in our national interest to find out.

I am concerned that these unauthorized transfers have been facilitated by

the Administration’s relaxation of

supercomputer export controls. Under

this relaxed policy, the Administration did

not know that a U.S.-manufactured

supercomputer had been exported to one

of Russia’s premier nuclear weapons laboratories, until the Russian Minister of

– continued on page 4 –

T

he system for controlling U.S. exports

of sensitive “dual-use” technologies,

i.e., those which can be used for either military or civilian purposes, has been relaxed

substantially over the

past five years. Many

restrictions put into

effect during the Cold

War have been eased

with the collapse of

the Soviet Union and

in the pursuit of increased international

trade and U.S. exports. For example,

the Administration

has liberalized export

controls on commercial jet engine “hot

sections”, commercial

communications satellites, and encryption

software. Most significantly, the Administration has eased high performance

compter (commonly referred to as

“supercomputers”) export restrictions on

two separate occasions.

Supercomputers can be used to develop

advanced conventional munitions and refine the capabilities of nuclear weapons in

the absence of nuclear testing. Concern

over the export of U.S.-origin high-performance computing capabilities to countries

of proliferation concern has been growing

in light of press reports that such computers were inappropriately shipped without

the required export licenses to military-related facilities in Russia and China.

In September 1995, House National Security Committee (HNSC) Chairman Floyd

Spence, then-Ranking Member Ronald

Dellums, and several other members of the

Committee on National Security co-signed

a letter to President Clinton, stating that

“the acquisition of supercomputers is essential to the design and testing of highperformance weapons

systems across the entire defense spectrum.”

The letter noted that

the United States “still

commands a significant

lead in the field of

supercomputers, so the

ability of foreign governments to find

equivalent technology

elsewhere is minimal.”

The letter also warned

against “pressure to

make sales that would

place commercial gain

ahead of national security” and asked the

Clinton Administration

to forestall any further

decontrol decision until the national security implications of such a decision could

be studied.

Nevertheless, in October 1995, the Administration announced its decision to decontrol supercomputers for the second time

in four years. High-performance computers with a computing capability of between

2,000 and 7,000 Millions of Theoretical

Operations Per Second (MTOPS), were allowed to be exported license-free to civilian users, for non-military purposes, in Russia, China, and other countries of proliferation concern. This shifted the burden of

determining who is a civilian user from the

government — which previously had to

license such exports — to the exporter seeking to make the sale. The new policy obviously placed a premium on ensuring that

Photo courtesy of Intel Corporation

– continued on page 2 –

Background

Brief
2 National Security Report

Photo courtesy of Intel Corporation

any exports were not diverted to military

facilities or uses. Unfortunately, the new

policy also allowed the exporter to be the

final (and only) arbiter of whether the enduser in a foreign country was legitimate.

This decontrol decision was based in

large part on the results of a study conducted for the Department of Defense and

Department of Commerce by Stanford

University’s Center for International Security and Arms Control. The study, “An

Examination of High-Performance Computing Export Control Policy in the 1990s,”

concluded that many computing systems

are now “uncontrollable” and that efforts

to establish controls on them would likely

be “problematic and ineffective.” However, the study conceded that “it is all but

inevitable that some day, if it has not already happened, adversaries will use

American-made computers in the design

or operation of a system that harms U.S.

citizens and property.”

In April 1997, in light of reports that Silicon Graphics, Inc. (a U.S. computer company based in California) had shipped two

supercomputers without a license to a

Russian nuclear weapons research laboratory (Chelyabinsk-70), Representatives

Spence and Dellums again wrote to President Clinton urging the Administration to

refrain from any further decontrol. In response, the President noted, “I am not contemplating further revisions to our

computer export control policy at

this time” and gave his assurance

that “we will take the steps necessary to protect our national security and nonproliferation interests.”

Testifying before the HNSC Subcommittee on Procurement on April

15, 1997, William Reinsch, Under

Secretary of Commerce for Export

Administration, stated that 46 U.S.

supercomputers had been transferred to China between January

1996 and March 1997. He raised this

total to 47 in subsequent Senate testimony. Press accounts in June 1997

indicated that China was possibly

in possession of “hundreds” of U.S.

supercomputers.

The Chinese Foreign Ministry

has repeatedly denied that U.S.

supercomputers have been diverted to military use. In September 1997, press reports

indicated that China had agreed to return a

U.S. supercomputer that was diverted to

the Changsha Institute of Science and Technology — an institute run by the Chinese

military. According to Secretary Reinsch,

who testified before the HNSC on November 13, 1997, this machine was returned to

the United States on November 9, 1997.

The Administration has pointed to the

return of this computer as indicative of a

successful U.S. policy. In an October 20,

1997 letter to Chairman Spence, the

President’s National Security Advisor,

Samuel Berger, stated that “our policy has

not failed, but is, in fact, successful.” Nevertheless, Russia has reportedly refused to

return the U.S. supercomputers that it illicitly acquired. In fact, press reports indicate

that not only is one of these computers

“missing” and possibly diverted to Iran, but

that Russia has twice refused to allow the

U.S. government access to these computers. Regardless, a more fundamental question remains: can U.S. policy truly be considered a “success” when sophisticated

computers with national security implications are transferred without the necessary

export licenses, without prior governmental knowledge or review, and when the U.S.

government is forced to ask the recipient

country to return them?

Additional press reports of illicit computer transfers raise questions about the

pervasiveness of this serious problem. For

example, the New York Times reported in

October 1997 that the Russian nuclear

weapons laboratory at Arzamas-16 had

secretly obtained 16 U.S.-made IBM highperformance computers through European

middlemen in contravention of U.S. export

control regulations.

In spite of this history, a second study

conducted for the Departments of Commerce and Defense by Stanford’s Center

for International Security and Arms Control is expected to call for further decontrols on supercomputers. Secretary

Reinsch confirmed in his November 13, 1997

testimony before the HNSC that the President is likely to announce a decision shortly

on further decontrols. A January 1998

majority report of the Senate Subcommittee on International Security, Proliferation,

and Federal Services stated that the relaxation of export controls on supercomputers

has led to a situation where the United

States is contributing to the proliferation

problem rather than the solution, by exporting technologies that aid in the development of nuclear and other weapons. The

report concluded that, “nations which

threaten the security interests of the United

States should not be armed by America,

nor should America help them arm themselves.... The fight against proliferation

must include self-discipline at our own

borders.”

The Administration Reacts

Unfortunately, the Administration has

not always been forthcoming in assisting

Congressional efforts to gain a better understanding of the national security implications of supercomputer exports. Earlier

this year, Chairman Spence and Mr. Dellums

requested that the Department of Energy

(DOE) and Defense Intelligence Agency

(DIA) conduct separate assessments of the

risks to U.S. security resulting from previous exports of U.S. supercomputers. Until

very recently, the Commerce Department,

which maintains information on the capabilities of these supercomputers, refused

to share this information with either DOE

or DIA. In a letter to Commerce Secretary

William Daley, Chairman Spence stated, “I
National Security Report 3

Legislative Actions of

the 105th Congress

I

n April 1997, in response to a growing body of published

reports indicating that unauthorized diversions of

supercomputers had taken place in Russia and China,

Representatives Spence and Dellums commissioned a panel

of outside experts to review the assumptions, methodologies,

and conclusions of the Stanford University report that

formed the basis for the Administration’s October 1995

decontrol decision. Their report, delivered to the committee

in July 1997, concluded that “the

existing supercomputer control

regime is inadequate for national

security reasons.” (A copy of the

report is available on the National

Security Committee Website at

http://www.house.gov/nsc.) It

called for a Defense Intelligence Agency study of the military

significance of supercomputer exports to sensitive

destinations and enhanced capabilities to monitor and

restrict supercomputer transfers, including more stringent

licensing requirements.

On June 19, 1997, the House passed the Spence-Dellums

supercomputer amendment to the FY 1998 National Defense

Authorization Act by a vote of 332-88. The amendment

required the prior written approval of the heads of five U.S.

government agencies (Commerce, Defense, State, Energy,

and ACDA) for the export or re-export of supercomputers

with a computing capability of at least 2,000 MTOPS to

countries of proliferation concern (so-called “Tier III”

countries). The amendment did not require a formal export

license for these supercomputers unless one of the abovenamed agencies withheld their approval of the proposed

export.

On July 11, 1997, the Senate passed its version of the FY

1998 National Defense Authorization Act (S. 936). A floor

amendment co-sponsored by Senators Cochran (R-MS) and

Durbin (D-IL), which would have reinstituted a formal

licensing requirement for the export or re-export of

supercomputers of 2,000 MTOPS or more to Tier III countries,

was rejected in favor of an amendment, co-sponsored by

Senators Grams (R-MN) and Boxer (D-CA), that simply

required a General Accounting Office (GAO) study of the

national security risks of supercomputer exports to Tier III

countries. This amendment was approved on July 10, 1997

by a vote of 72-27 after an intense industry lobbying

campaign and letters from the Secretary of Defense, the

Secretary of Commerce, and the President’s National Security

Advisor.

The competing House and Senate actions were resolved

in the conference report on the National Defense

Authorization Act for Fiscal Year 1998 (Public Law 105-

85). The compromise outcome retained the Senate

requirement for a GAO study and the

House requirement that the relevant

government agencies be notified in

advance of proposed supercomputer exports above 2,000

MTOPS to Tier III countries. The

conference report also granted the

President flexibility to adjust the MTOPS threshold 180 days

after notifying Congress and to remove certain countries

from the Tier III list 120 days after Congressional notification.

It also retained the House requirement for post-shipment

verifications of supercomputer exports to Tier III countries.

The conference report passed the House on October 28,

1997 by a vote of 286-123. The Senate approved the report

by a vote of 90-10 on November 6, 1997.

In a letter to Chairman Spence on October 20, 1997, Samuel

Berger, Assistant to the President for National Security

Affairs, criticized several supercomputer provisions at issue

in the House-Senate conference. These included the

language indentifying Tier III countries, which he called “an

unacceptable limit to the President’s authority to conduct

foreign policy.” In an October 28, 1997 letter, Franklin Raines,

the Director of the Office of Management and Budget, wrote

that “we strongly object” to the conference outcome on

supercomputer exports, arguing that the final compromise

“would limit the President’s ability to adapt computer export

controls to changing security needs... (and would) impose

unrealistic Congressional notification, licensing, and postshipment verification requirements.”

On November 18, 1997, President Clinton signed and

enacted into law the National Defense Authorization Act

for Fiscal Year 1998, containing the supercomputer export

control provisions adopted by the House-Senate conference.

However, the Administration continues to object to these

provisions and ironically, the Department of Defense is

seeking their repeal this year.

find the prospect that information is being

denied to intelligence agencies that are attempting to determine the effect of illicit

exports on U.S. national security highly disturbing.”

Nevertheless, in response to Congressional pressure, the Administration has

taken some actions to make it easier for

exporters to know when a license is required

know of the weapons-related nature of the

laboratory’s work, and that the government

had a responsibility to inform exporters of

questionable end-users. In the wake of

this sale, and the unlicensed transfer of an

IBM supercomputer to another Russian

nuclear weapons laboratory at Arzamas16, pressure increased to publicize the

names of these end-users.

for the sale of supercomputers. On June

30, 1997, the Commerce Department published a list in the Federal Register of 13

entities of proliferation concern in five

countries (China, India, Israel, Pakistan, and

Russia). Publication of this list came about

as a result of the aforementioned unlicensed

sale of supercomputers by Silicon Graphics, Inc. to Chelyabinsk-70. Silicon Graphics asserted that it was not told and did not – continued on page 4 –
4 National Security Report

The National Security Report is archived on the world wide web site of the House National Security Committee at: http://www.house.gov/nsc/.

Additional background information may be obtained from Tom Donnelly (x65372) or David Trachtenberg (x60532) on the committee staff.

Atomic Energy revealed it during a press

conference. Until the National Security

Committee and others in Congress began asking questions, the Administration was unsure of how many

supercomputers had been exported to

China and apparently did not know that

at least one had been diverted to a Chinese military institute. Given this pattern, I suspect that it will be years before we have a full appreciation of how

many supercomputers may have been

exported through loopholes in the

Administration’s relaxed export policy.

Striking a balance between protecting national security interests and promoting U.S. exports has always been a

difficult task. Given the commanding

share of the global information technology market that U.S. companies currently

hold, we should not unnecessarily inhibit or damage American trade competitiveness. However, I am firmly convinced that a more appropriate balance

must be struck in the name of national

security.

From the Chairman...

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Prior to publication of the June 30 list,

the Commerce Department had publicly

identified only two entities — one in Israel

and one in India — as end-users for which

a license would be required prior to the export of U.S. supercomputers. Chelyabinsk70 and Arzamas-16 are identified on the

June 30 list as two entities of proliferation

concern. Other known entities of proliferation concern — for example, the Chinese company that transferred ring magnets to Pakistan for use in that country’s

nuclear weapons program — are not even

identified as such.

The Commerce Department has

indicated that this published list of entities

of proliferation concern is not all-inclusive

and that publication of additional lists will

be forthcoming. In a July 22, 1997 letter to

Chairman Spence, President Clinton

expressed his support for publication of

end-users of proliferation concern. Critics

– continued from page 3 – have expressed concerns that publication

of the names of bad end-users may create

more problems than it solves. Exporters

may falsely believe that if an entity is not

named on the list, then it is acceptable to

export a supercomputer to that entity

without seeking a license. Moreover, endusers of concern may operate under several

aliases. In addition, publication of the

names of end-users that require licenses

may encourage named entities to create

“front companies” for the specific purpose

of acquiring supercomputers that might

otherwise be prohibited. Finally, critics

contend, the publication of any truly

comprehensive list of bad end-users may

compromise intelligence sources and

methods.

In March 1997 the Commerce

Department asked all U.S. supercomputer

manufacturers to report supercomputer

exports (2,000 MTOPS and up) they had

made since January 25, 1996 to anywhere

in the world. From this information,

Commerce found that between January

1996 and March 1997, a total of 10

supercomputers were exported to Russia

and 47 to China. In addition, 20 U.S.

supercomputers were exported to Hong

Kong (one of which was diverted to China

and subsequently returned to the United

States). A State Department spokesman

confirmed in July 1997 that “diversions

have taken place” and that such diversions

are “against the rules, against our

agreement and improper under

international guidelines.”

Conclusion

The debate in Congress over the sale of

U.S. supercomputers to other nations is

likely to continue, and perhaps intensify,

as technology advances, American industry looks for ways to solidify its competitive advantage, and the Administration

moves toward a greater relaxation of export controls. Fundamentally, the issue

comes down to American security and

whether that security is best served by an

export control process that seeks to limit

the damage caused by the transfer of sensitive technologies to dangerous entities

or accepts it as a fait accompli.

Military Applications of

Supercomputers

The following are just some of the

many military applications of

supercomputers:

designing ballistic

missiles and

guidance systems

designing and

improving nuclear

weapons

designing more

deadly torpedo

warheads

designing quieter,

more efficient

submarines

designing advanced

supersonic missiles

designing weaponsresistant bunkers

and headquarters

designing highlyadvanced, stealthy

aircraft

unscrambling

encrypted messages

complex battlefield

simulations