This was posted on another thread - it needs it own. Flint, anybody else, does the credibility of this source keep you silent? By the way Flint, are you going to respond to the Rossotti letter to Archer? Do you think Rossotti doesn't know what he means? Any "explainations"?

http://www.senate.gov/~y2k/hearings/990305/gershwin.htm

Opening Statement

Lawrence K. Gershwin

National Intelligence Officer

For Science and Technology,

National Intelligence Council

Mr. Chairman,

I am pleased to be able to discuss with you today the understanding that the Intelligence Community has about foreign efforts to deal with the Y2K problem. We continue to watch the problem closely, and I have our current assessment of where we see problems as most likely to occur. The Y2K situation continues to change, and our assessments will similarly evolve as more information becomes available, as countries become more aware of and deal with Y2K issues, and as incidents of Y2K failure increase.

As we have said before, Mr. Chairman, all countries will be affected-- to one degree or another--by Y2K-related failures. Global linkages in telecommunications, financial systems, air transportation, the manufacturing supply chain, oil supplies, and trade will virtually guarantee that Y2K problems will not be isolated to individual countries. No country will be completely immune from failures. Fixing the Y2K problem has proven to be labor and time intensive, as well as expensive.

There remain significant information gaps that make it difficult for us to assess how serious the Y2K problem will be around the world. In many cases, foreign countries only recently have become aware of the problem and begun to examine their critical infrastructure systems for potential Y2K failures. In comparison, the United States has made a significant effort to identify and redress Y2K problems, and it was only after the process was well underway that it was possible to get a good appreciation of the extent of the problem and its implications. Many foreign countries, particularly those that are the furthest behind, have not made such an effort, so--for our part--we can identify their likely problem areas but cannot make confident judgments at this point about what is likely to happen. Those problem areas that we have detected that have the potential to affect US interests include, among others, foreign nuclear reactors and power grids, military early warning systems, trade, the oil and gas sectors , and worldwide shipping and air transport, all of which I will elaborate on.

The consequences of Y2K failures abroad will range from the relatively benign, to problems within systems across sectors that will have humanitarian implications such as power loss in mid-winter. The coincidence of widespread Y2K-related failures in the winter of 1999-2000 in Russia and Ukraine, with continuing economic problems, food shortages, and already difficult conditions for the population could have major humanitarian consequences for these countries.

Foreign countries trail the United States in addressing Y2K problems by at least several months, and in many cases much longer. Y2K remediation is underfunded in most countries. We do see indications that countries are undertaking contingency planning for recovery from Y2K failures:

Time and resource constraints will limit the ability of most countries to respond adequately by 2000. Governments in many countries have begun to plan seriously for Y2K remediation only within the last year, some only in the last few months, and some continue to significantly underestimate the cost and time requirements for remediation and, importantly, testing. Because many countries are way behind, testing of fixes will come late, and unanticipated problems typically arise in this phase.

The largest institutions, particularly those in the financial sectors, are the most advanced in Y2K remediation. Small and medium- size entities trail in every sector worldwide.

Most countries have failed to address aggressively the issue of embedded processors. While recent understanding is that failures here will be less than previously estimated, it is nevertheless the case that failure to address this issue will still cause some highly dependent sectors with complex sensor and processing systems to have problems,centered right on the January 1 date.

The lowest level of Y2K preparedness is evident in Eastern Europe, Russia, Latin America, the Middle East, Africa, and several Asian countries, including China.

The World Bank recently noted that the Y2K problem within developing countries has been overlooked because many observers assume developing countries are less dependent on computers in everyday national life. They point out that the majority of developing countries, even the poorest, have computerized essential services such as power generation, telecommunications, food and fuel distribution, and the provision of medical care. The Bank says that a general failure of such systems could endanger the health, security, and economic well-being of people in the developing world. We agree with this assessment.

Middle Eastern countries and firms have basic awareness of the Y2K problem and have made modest progress in remediation. The business sector, especially banking, seems best prepared in that region. Egypt, Jordan, Lebanon, Saudi Arabia, Oman, Qatar, and the United Arab Emirates believe that their banks will be ready. Most government, business, and military remediation efforts are however, in general, poorly coordinated.

In Africa, efforts in South Africa are the best organized. South Africa leads the continent in recognition of the Y2K challenge and in activities to address it. As in the Middle East, most other government and military remediation efforts throughout the continent are, in general, poorly coordinated.

We see problems in Latin America. An October 1998 Gartner Group study indicated that in many nations of Latin America, at least 50 percent of companies will experience at least one mission critical failure. Even if governments and firms in Latin America devote sufficient resources to the problem, they will be hard pressed to complete remediation within the next 10 months to avoid systems failures.

Although Western Europe is in relatively better shape than most other regions, European awareness of and concern about the Y2K problem is uneven, and the Europeans lag the United States in fixing their problems. European attention was focused on modifying computer systems for the European Monetary Union conversion, which was implemented successfully on 1 January, but this was done, in many cases, by postponing coming to grips with Y2K problems.

The Asian economic crisis has hampered the Y2K remediation efforts of most of the Asia-Pacific countries. The appeal to the World Bank and others this week from eighteen Asia-Pacific nations during the Manila Y2K summit, asking for funding for Y2K remediation, was not surprising. There is much to be done. After a slow start in addressing the Y2K problem, China has stepped up efforts over the past two months in an attempt to meet a March 31 deadline imposed by the Ministry of Information for detection of Y2K problems. In mid- February 99, Chinese officials conducted the first test of several key systems in the financial, telecommunications, and electric power sectors. The civil aviation sector reportedly is also preparing for a nationwide test. While the lines of authority for Chinas Y2K effort have been established, remediation efforts in critical sectors such as electric power, transportation, and telecommunications appear to be lagging. Chinas late start in addressing Y2K issues suggests Beij ing will solve some, but not many of its Y2K problems in the limited time remaining, and will probably experience failures in key sectors. Chinas problems are exacerbated by the fact that, by some estimates, over 90% of the software used in China is pirated, including most of the software used in government offices and state owned enterprises. This could make it very difficult to approach software vendors for technical fixes and coincidentally, limits Chinas legal recourse should their software suffer Y2K-related problems.

Russia has exhibited a low level of Y2K awareness and remediation activity. While the Russians possess a talented pool of programmers, they seem to lack the time, organization, and funding to adequately confront the Y2K problem. The $3 billion estimate last month from Alexander Krupnov, Chairman of the Russian Central Telecommunications Commission, is six times the original estimate. Frankly, we do not know how they arrived at this number.

One issue we are watching in Russia relates to vulnerability of Soviet-designed nuclear plants in Central and Eastern Europe and Russia to Y2K-related problems. DOE analysts have done a systematic analysis of the safety of foreign reactors, and some of the former Soviet models are the worst. US nuclear reactor specialists know a great deal about the design and safety of these reactors, but they do not yet know what specific Y2K problems they may have. Documentation for plant equipment and software in use in Soviet-designed reactors is either poor or nonexistent. Many of the vendors who supplied this equipment or software have not been in business since the fall of the Soviet Union and are not available to help.

We envision two ways in which potential problems with Soviet-designed reactors could evolve. The first involves the operation of internal components or sensors crucial to the operation of the plant, being affected or degraded by Y2K problems. For example, a valve with a digital controller designed to automatically adjust the flow of cooling water, could potentially malfunction because the digital controller does not recognize the year 00. The second involves problems arising from the loss of off-site power to the reactor due to Y2K problems in the power grid. This could lead to a series of Y2K problems possibly occurring simultaneously, presenting an even greater challenge to the reactor operators.

While loss of electric power would in itself normally result in reactor shutdown, that process could potentially be complicated if internal Y2K problems arise within the reactor complex itself. We have not yet identified any safety-related equipment with Y2K-related problems within Soviet-designed reactors; however, other, non-safety- related equipment used to operate the plant may have problems. For example, in some Soviet-style reactors(RBMKs - 14 graphite moderated, water cooled reactors) a computer is used to control power production.

Failure of this computer would cause activation of the safety systems, the control rods would automatically be inserted, and the reactor would begin to shut down. When external power is lost, diesel generators are used to supply power to cooling pumps to remove heat from the core. These diesels must have adequate fuel supplies on hand for at least a week in order to prevent fuel melt.

While some Soviet-designed reactors are less vulnerable to problems from Y2K failures due to safety improvements incorporated into their designs, other reactors currently in use in Russia and other former Soviet states and allies, such as the remaining reactor at Chernobyl, are of more concern. While DOE has initiatives underway designed to assist the Russians in reducing the risk of Y2K-related reactor safety issues, the Russians have been slow to accept our help. DOE is sponsoring a study at Pacific Northwest Laboratories to identify the most likely Y2K failures in Soviet-designed reactors from internal Y2K problems or from electric power grid problems--and to assess the implications of potential failures.

Russias Gazprom Natural Gas Pipeline network also is susceptible to potential Y2K outages. It supplies nearly 50 percent of the total energy consumed by Russia, almost 15 percent of the total energy consumed by Eastern Europe, and 5 percent of that consumed by Western Europe. Based on the natural gas storage capacity and the drawdown capability at the storage sites, we believe that Western Europe can survive a Gazprom shutdown for over 30 days. This assumes that there are no Y2K problems associated with distribution of the gas from the storage areas. Of greater concern are Eastern Europe, Russia itself, and the other states of the former Soviet Union should Russias ability to transport and export natural gas be interrupted in mid- winter. Russia will lose virtually all of its natural gas and the information that we have on the storage capacity and drawdown capability of Eastern Europe and other states of the former Soviet Union suggests that those countries could experience severe shortages should Gazprom shut down. Like all major pipeline operators, Gazprom has emergency contingency plans to assure continued gas delivery after a pipeline shutdown or explosion. While available options include manual equipment operation, use of stored gas, and switching to backup pipe segments, it is unclear whether these measures are sufficient to deal with the scale of problems that could occur due to Y2K failures.

Potential problems include:

Soviet-era mainframes--roughly equivalent to the IBM 360 and 370 series--have been used in Gazproms pipeline operations centers and are highly likely to contain Y2K vulnerabilities.

Gazprom uses supervisory control and data acquisition (SCADA) systems to monitor and control some pipeline operations. Nearly all SCADA systems purchased prior to the late 1990s contain some degree of Y2K vulnerability.

Satellite ground stations used to transfer data between gas-producing regions to Gazproms headquarters may have Y2K problems.

Several hundred unattended equipment stations along remote Siberian sections of Gazproms pipelines may rely on vulnerable embedded processors. While most of these should work, they all need to be tested to ensure their reliability. These stations are used to relay communications and may be used to control pipeline valves. Many of them are accessible only by special convoys or helicopter, and under normal circumstances are only visited twice per year. Compressor stations--over six hundred of which pump gas through the pipeline network--also contain embedded processors that could be vulnerable.

Military systems and their command and control are particularly information-technology dependent, and thus potentially vulnerable to disruption if Y2K problems are not adequately addressed. Foreign strategic missile systems, particularly in Russia and China, may experience Y2K-related problems. Missile-related concerns involve the vulnerability of environmental control systems within silos to Y2K disruption. Sensors and controllers need to be Y2K safe. Liquid- fueled missiles within silos must be monitored for fuel leaks. Optimum temperature and humidity levels must also be maintained within the silos. I want to be clear that while local problems are foreseeable, we do not see a problem in terms of Russian or Chinese missiles automatically being launched, or nuclear weapons going off, because of computer problems arising from Y2K failures. And, our assessment remains that we currently do not see a danger of unauthorized or inadvertent launch of ballistic missiles from any country due to Y2K problems.

Based on our analysis, we think the Russians may have some Y2K problems in the early warning systems that they use to monitor foreign missile launches, and at their command centers. You may have seen Maj. General Dvorkins statement at a Moscow press conference this week that the Y2K problem does threaten early warning and space control systems. Problems within these systems could lead to incorrect information being either transmitted, received, or displayed or to complete system outages. General Dvorkin stated that tests have revealed which hardware and software needs to be remediated or replaced and that final tests of the adjusted software will take place in October of this year. DoD has been working with the Russians for months on these problems. DoD has announced plans to establish a joint US-Russian Defense Y2K Coordination Center in Colorado Springs, CO in order to share early attack warning information, thus preventing confusion should any Y2K-related false or ambiguous warnings occur. A DoD delegation visited Moscow last month to help the Russians get up to speed on potential Y2K-related nuclear early warning problems.

Regarding world trade and oil, some of our most important trading partners--including China and Japan--have been documented by, among others, the Gartner Group, as behind the US in fixing their Y2K problems. Significant oil exporters to the United States and the global market include a number of countries that are lagging in their Y2K remediation efforts. Oil production is largely in the hands of multinational corporations in the oil-producing countries, but this sector is highly intensive in the use of information technology and complex systems using embedded processors. Microprocessors and computer systems are utilized for oil and gas production, processing, and transportation. Computers and microprocessors are used to monitor, report, and store data on the status of equipment and facilities and to assist in performing or controlling operations. In more sophisticated infrastructures, operations of equipment and facilities may be highly automated to enable networks of facilities to be controlled remotely. This places that industry at risk of Y2K- related problems which could result in a slowdown of extraction, refining and delivery.

The oil sector is also highly dependent on ports, ocean shipping, and domestic infrastructures. Y2K specialists have noted that world ports and ocean shipping are among the sectors that have done the least to prepare for the Y2K problem.

Waterborne commerce carries not only oil but a significant amount of the world's goods of all types. It is difficult to predict at present the effect of Y2K on the shipping industry, however, many ships and transshipment points use higher level computer systems and equipment that contain embedded systems. Widespread failures in waterborne commerce carriers could also have significant impacts in the supply of food and commercial goods, resulting in possibly severe economic disruptions. Malfunction of navigational equipment either aboard or external to the ship may also occur, resulting in either collisions or groundings, potentially resulting in environmental problems.

Aviation has been one of the pioneers in automation and computer systems which are used on board aircraft and in control towers at airports. If global air traffic (personnel, air freight, package, and mail delivery) is seriously curtailed in 2000, this could have a significant impact on global business activity, not just the travel industry.

Problems within this sector include the existence of radar systems deemed "legacy systems" that run older software and thus may be vulnerable.

Y2K problems in the telecommunications networks could negatively impact a broad range of other sectors that rely on the networks not only for communications but also for monitoring and load management. Many countries have telecommunications equipment with components purchased elsewhere, a fact that complicates the identification and remediation of Y2K-related problems. Sectors that are heavily dependent on telecommunications include banking, defense, electric power, natural gas, water, transportation, and food distribution. In addition, a functioning telecom network is crucial in emergency situations.

Our global and domestic markets for financial securities, commodities, products, and services depend completely on the smooth functioning of the vast information technology (IT) infrastructure. The banking industry is particularly affected by the year 2000 problem because nearly every aspect of the business is dependent on computer systems for processing transactions and providing information. It is as yet unclear what effect non-remediated foreign banks will have on the international banking system when they attempt to interact with the rest of the world.

The Y2K-related litigation issue continues to grow. Concerns about litigation have, in some cases, stifled the open exchange of information on Y2K-related issues. Many foreign officials and companies who are aware of Y2K problems are looking to the West, particularly the United States, for help and technical solutions. Foreign companies or governments may blame the United States and other foreign vendors for problems in equipment and thus seek legal redress for their failures.

In closing, let me note that today we are closely monitoring a broad range of countries and sectors worldwide in terms of their susceptibility to disruption by Y2K failures. We continue to gather information from all branches of the US Government, industry sources, a vast array of open sources (including hundreds of Web sites), and our own intelligence collection efforts so that we can accurately predict failures abroad and assess the implications. We are working very closely with the rest of the government, through the Presidents Council on Year 2000 Conversion, and will continue to share relevant information on the Y2K situation abroad. As our collection continues, and awareness of and reporting on Y2K problems abroad increases, our estimates of the type and extent of failures we are likely to see around the world will become more precise.

) 1999 United States Senate. All rights reserved.

Special Committee on the Year 2000 Technology Problem

United States Senate, SD-B40, Suite 3, Washington, DC 20510 (202) 224-5224, Year2000@y2k.senate.gov

-- (dont@need.spam), November 05, 1999.

-- Gregg (g.abbott@starting-point.com), November 05, 1999

Answers

this is at least a 6 month old report. Interesting, but not up to date.

-- Taz (Taz@aol.com), November 05, 1999.

To the top.

Please note that there is a duplicate of this thread sent by accident. It should be ignored so as not to get confused with replies/posts.

-- Chris (#$%^&@pond.com), November 05, 1999.

Taz,

1) What do you suppose has changed over there in the past year?

2) Taz, an IBM 360 is a 1960's vintage architecture.

2) Taz, do you suppose that if they are having trouble heating their houses this winter they are going to be willing to pay big bucks for the fuel you will need?

Just a couple of questions?

-- (...@.......), November 05, 1999.

Yes, it's from March evidently - but in light of some recent discussions wheather considering Y2K as a systemic threat was warranted, this should add some convincing credibility.

Most of the pollies act as if to think Y2K is systemic, and worldwide, and threatens the U.S., one has to have escaped a looney bin. I suggest it's really the other way around.

If the fact that this is old, minimizes it, then I guess most of the computers of the world are also minimized, most of them are old. (Don't tell me that in 6 months they've fixed everything dandy.)

-- Gregg (g.abbott@starting-point.com), November 05, 1999.

Not anymore.

#3

-- I AM a Number # 3 (sysops@re.us), November 06, 1999.

rye, wheat, white or focaccia

#3

-- I AM a Number # 3 (sysops@re.us), November 06, 1999.

Larry Gershwin's most recent testimony in front of the Senate y2k Committee was on 10/13/1999, and can be found on the Committee's web page at: http://www.senate.gov/%7Ey2k/hearings/991013/st991013gershwin.htm

Godspeed,

-- Pinkrock (aphotonboy@aol.com), November 06, 1999.

Thanks for the link, Pinkrock. Here's the text (hope the formatting holds). Interesting to compare the information that's been taken out. Gazprom numbers, anyone?

Harl

### Testimony of Larry Gershwin National Intelligence Officer Central Intelligence Agency

Mr. Chairman and members of the Committee, I am pleased to have the opportunity to provide the Committee with the Intelligence Community's latest assessment of the status of foreign preparedness for Y2K. We recently published a comprehensive, classified National Intelligence Estimate on foreign Y2K efforts, and we are continuing to focus on this evolving issue to ensure that policy makers are as prepared as possible for the potential consequences for the US and our allies of international Y2K failures. This assessment is essentially a "snapshot" of the current state of international preparedness for Y2K. As countries continue their remediation, testing, and contingency planning activities, and as we get more information, some of our observations will change.

Efforts to address potential problems vary widely both among and within individual countries. For example, the United Kingdom has a highly successful government awareness campaign which has spurred industry, commerce and government agencies to take steps to correct Y2K problems. At the other end of the spectrum, when Indonesia's national electricity board was recently asked by an Indonesian newspaper about its Y2K preparedness, they replied that they can observe what happens at midnight 31 December 1999 in Western Samoa, New Zealand and Australia, and still have six hours to make plans.

The quality of corrective work varies greatly among countries and sectors and, in some cases, remediation work introduces new flaws that go undetected due to limited or faulty testing. Moreover, time for effective corrective action is running out. Even if remediation work has taken place, there may be insufficient time left for testing, identifying problems that emerge, and follow-up remediation. Industry experts believe, in many cases, effective testing can take two to three times as long as remediation. The availability of funding and technical expertise in foreign countries to analyze vulnerabilities and carry out remediation and testing will continue to be a major impediment. The public and private sectors will increasingly focus on contingency planning for coping with the impact of Y2K failures after 1 January and prioritizing repairs. Where effective prevention action has been taken in advance of 1 January, disruptions will likely be random, temporary, and of localized impact. In the absence of effective remediation and contingency plans, Y2K-related problems could cause widespread, possibly prolonged disruptions in vital services that could have serious humanitarian and economic consequences.

Y2K failures will occur before and as the date rollover approaches, peaking on 1 January and persisting well beyond that. In some countries, such as Russia, it will likely take a significant amount of time to overcome Y2K failures.

Russia, Ukraine, China and Indonesia are among the countries most likely to experience significant Y2K-related failures. Countries in Western Europe are generally better prepared, although we see the chance of some significant failures in countries such as Italy. Major economic powers such as Germany and Japan are making great strides in Y2K remediation, but their late start and the magnitude of the effort suggest that even these countries are at risk of some failures. Canada, the UK, Australia, Singapore, and Hong Kong are very well prepared and have a lower chance of experiencing any significant Y2K failures.

Regional Overview

The Americas. The level of Y2K preparedness varies widely among foreign countries in the Americas and even among sectors within individual countries; Canada- working closely with the United States on sectors where national interests are highly integrated such as electrical power- emerges as the best prepared.

Most national governments in Latin America have established commissions to coordinate preparations within the public sector and to increase general awareness, but efforts in many cases are late, underfunded, and weakly enforced. Some disruptions of basic public services- including utilities, telecommunications, public health, and social welfare- are likely throughout the region, but we are unable to judge their potential scope or duration. We consider it unlikely that these disruptions will affect domestic stability or US interests in this region.

Europe. European countries, with the exception of the United Kingdom, got a late start in assessing, repairing, and planning for contingencies related to the Y2K problem. Nearly all European governments have national Y2K programs in place, and most are working very hard to minimize the significance of Y2K-related problems. However, we are concerned that some have not allotted adequate resources to remediation and testing. Remediation efforts are the most advanced in the finance and telecommunications sectors and most countries are confident major disruptions in these sectors will be avoided. Small- and medium-sized enterprises are the least prepared.

The highly integrated nature of European infrastructure and economic flows increases the risk that individual countries, even the better prepared ones, will import Y2K problems from lesser prepared neighbors.

Russia and Ukraine. Russia and Ukraine are particularly vulnerable to Y2K failures. They got a late start in remediation and lack sufficient resources to identify and correct problems- virtually guaranteeing that the countries will suffer economic and social consequences for some time. Both countries have old capital stock, much of which has not been upgraded since the Soviet era. They are further impeded because of their perception that a limited computer dependence largely "protects" them. Areas of greatest risk are strategic warning and command and control, nuclear power plants, the gas industry, and the electric power grid.

Middle East & North Africa. Most countries in the Middle East and North Africa recognize Y2K as a computer hardware and software problem, but started later in dealing with the potential problems with embedded chips and interconnected systems. The oil companies, banking sector, and large multinational companies are best informed and are conducting remediation and testing. Government institutions, small businesses, the health sector, and some public utilities lag because of funding shortfalls, a late start in addressing the problem and, in some cases, a misunderstanding of the nature and scope of Y2K vulnerabilities.

Y2K-related failures will occur, especially in public utilities, although we cannot yet judge their scope or duration. Urban areas will be most affected.

Africa. With the exception of South Africa, other countries in sub- Saharan Africa were late in recognizing the Y2K problem but are developing preparations to deal with it. Because many Africans- especially in rural areas- expect little from government, interruptions in services are unlikely to spark unrest.

Asia-Pacific. Preparations for dealing with Y2K problems across the Asia-Pacific region vary greatly. The Asian countries that rely heavily on advanced technology for power generation, communications, and transportation have had comprehensive Y2K programs under way for some time. Most countries with moderate reliance on computers are aware of potential Y2K problems and have begun assessment and remediation efforts.

The sectors with the most advanced programs for dealing with Y2K are banking and finance, civil aviation, and telecommunications. The sectors least prepared, as a general rule, are railroads, ports, medical services, and small- and medium-sized enterprises.

Impact on US of Y2K Failures

Y2K-related disruptions and failures can affect US interests in three ways:

They may have a direct impact. Some foreign infrastructures and vital sectors are directly linked to those in the United States either physically or through computer networks.

They may have an indirect impact. The United States depends on the uninterrupted flow of many raw materials and finished goods for its economic security and national defense. In addition, diplomatic and military operations depend upon host-nation infrastructure support, including telecommunications and electric power.

They may have broad national security implications. Foreign Y2K-related crises have the potential to involve US military and civilian components in humanitarian relief, environmental disaster recovery, or evacuations.

The direct impact on the United States of Y2K-related disruptions and failures in foreign infrastructures will be limited. There are several reasons for this. First of all, Canada, the country to whose infrastructure we are most tightly linked, is well advanced in Y2K remediation and unlikely to export significant problems to the United States.

Second, the global payments system is unlikely to experience significant failures, because most of the developed countries appear well prepared in the banking and finance sector. Financial institutions in most emerging markets, however, as well as those in less developed countries, may experience failures because they started the remediation process later and because they are experiencing scarcities of resources and technical expertise.

Even well-prepared institutions, however, will still be impacted if disruptions occur in domestic infrastructures- especially electric power and telecommunications. They are also exposed to Y2K problems in the information systems of their customers, vendors, and smaller banks to whom they are linked.

Third, we are highly confident that Y2K failures will not lead to the inadvertent or unauthorized launch of a ballistic missile by any country. If Y2K failures do occur, we are concerned about the potential for Russia to misinterpret early warning data, especially if we were in a period of increased tensions brought on by an international political crisis. Russia and the United States have agreed to establish the Center for Year 2000 Strategic Stability at Peterson Air Force Base, Colorado. The Center will provide a venue for sharing information on missile and space launches collected by US sensors across the year 2000 date change in order to prevent any misunderstandings resulting from Russian early warning failures.

Finally, the United States is unlikely to experience a significant disruption in oil deliveries because our key suppliers appear to be Y2K ready. Major multinational firms have been in the forefront of remediation and testing efforts, and operators of oil terminals and tankers have been similarly active in correcting Y2K vulnerabilities.

While we probably will not be directly impacted by foreign Y2K failures, breakdowns in foreign infrastructure could impact US interests overseas: our official and military presence overseas, US businesses, and the welfare of countries important to us. Disruptions and failures in telecommunications, electricity generation and transmission, and transportation pose the greatest threat because of their fundamental importance to other critical services.

Sector Overview

Telecommunications. Although a high priority for most countries, efforts to remediate Y2K problems in the telecommunications sector in many countries, particularly developing countries, have been hampered by inadequate funding, a shortage of skilled personnel, a late start, and the need for lengthy remediation and testing. We estimate that only a few countries are on target in remediating and testing their telecommunications systems. Networks elsewhere are likely to experience problems ranging from minor inconveniences to serious disruptions. Experts are concerned that minor failures could cascade, causing a network to become degraded over time.

The interconnections among many time-sensitive systems make it more likely that a Y2K problem in one system will cause problems in a system with which it is connected. Problems in telecommunications would also affect other sectors, such as power and national defense.

Failure to complete Y2K remediation is likely to result in outages that could affect the United States and foreign countries in significant ways. They could cost telecommunications operators considerable money in lost revenue; affect the operations of government, the financial sector, the military, industry, and the energy sector; and exacerbate regional tensions. Communications disruptions will damage US businesses and official activities that depend on host-government support.

Many well known companies that follow Y2K preparations list countries such as Russia, China, and Italy as likely to have telecommunications problems and we have no reason to disagree with these assessments. Some countries- such as Russia- are likely to be so poorly prepared that widespread telecommunications failures will likely occur.

Electric Power. Localized blackouts lasting possibly up to a week and regional brownouts of much shorter duration are likely to occur in Russia; however, the city of Moscow is unlikely to experience serious disruptions. In western Europe, some countries are likely to experience localized blackouts; however, a cascading failure throughout the region is highly unlikely.

Each of the different elements of the electric power sector- generation facilities, transmission and distribution networks, telecommunications, protection systems, and consumers- forms a complex interrelationship that could cause a system-wide failure even if there were significant failures in only one element. Some electrical power grids in Europe and Asia- where Y2K remediation has been inconsistent at the national and local levels- are likely to experience outages.

Foreign Nuclear Power Plants.

Y2K failures affecting nuclear power plants fall into two categories: problems that occur outside the nuclear plant (for example, voltage and frequency fluctuations or the collapse of the electricity grid) or, less likely, problems that occur inside the nuclear plant that affect generation capability. Of these two, the first is by far the more serious because nuclear plants depend on off-site electricity to operate. Loss of off-site power or large fluctuations of voltage frequency on the grid would lead to an automatic shutdown. In the event that a prolonged outage occurs, this would require, among other things, that backup systems supply power to pump coolant through the reactor core for about a week until the reactor is below fuel melting temperatures. Therefore, Y2K problems impacting generation capability in conventional plants can affect nuclear plants by causing frequency or voltage fluctuations leading to a possible collapse of the electrical grid. Similarly, Y2K problems within equipment on the grid itself might cause problems leading to the disconnection and shutdown of nuclear power plants.

We judge that those Y2K problems occurring within nuclear power plants probably will pose no direct safety problem because almost all plants have analog, electro-mechanical safety systems that will shut down the reactors if anomalies are detected. Y2K problems in digital non- safety-related systems within the nuclear plants, if they occur, would most likely lead to a reduction in generation capacity or shutdowns.

These Y2K-initiated shutdowns presumably could be conducted in a safe manner, but digital systems experiencing Y2K problems could produce false data that would then be displayed to operators, increasing the chance for operator error and, potentially, accidents. Internally- generated Y2K problems that caused a shutdown could also contribute to instability of the electricity grid by removing generation capacity from the grid. Therefore, Y2K problems at one nuclear power plant could contribute to problems at surrounding power plants.

Soviet-Designed Reactors. We are most concerned about the safety of Soviet-designed nuclear plants, including Chernobyl-type reactors in Russia and Ukraine, due both to inherent design problems of these plants- for example, lack of total containment systems- and to the lack of detailed data on Y2K remediation plans and contingency plans.

Nonetheless, we judge the chance of a nuclear accident on the scale of Chernobyl is extremely low.

The combined effects of possible Y2K-generated internal failures and external power problems (loss of offsite power) increase the risk of a nuclear incident, particularly if operators believe they can compensate for Y2K malfunctions or for power supply reductions in the grid by overriding plant safety systems. Similar operator actions led to the accident at Chernobyl.

At this late date, remediating and testing all Soviet-designed nuclear power plant systems before yearend is not feasible, particularly given the age of the computer systems and the fact that many of the original manufacturers have gone out of business. However, countries possessing these systems have made significant efforts to identify their Y2K- related problems and are working hard to minimize the effects. Moreover, significant international attention and assistance has been beneficial.

The chance of a nuclear incident in Russia, Ukraine, or another state with Soviet-designed reactors during the Y2K rollover is low. It is, however, higher than normal because of the likelihood that the power grid could experience failures, leading to a reliance on emergency power supplies of questionable reliability, because of the possibility that auxiliary generators are inoperable due to maintenance problems or a lack of sufficient fuel, and the potential for erroneous data leading to operator error. In the worst case, this could cause a meltdown and in some cases, an accompanying release of radioactive fission gases causing localized contamination.

Gazprom Gas Deliveries. The dependence of Russian and European markets on gas deliveries from Russia's Gazprom is of particular concern. We know that several countries in Europe have extensive facilities to store natural gas and, in some cases, are preparing to increase their stored reserves in anticipation of possible disruptions in gas supplies at yearend. We cannot, however, estimate the sufficiency of these reserves should Gazprom deliveries be reduced due to Y2K failures. This would depend, in part, on the successful operation of the local pipeline distribution system. Locally severe gas shortages may occur in Russia, Ukraine, and in parts of Central and Eastern Europe due to reduced pipeline efficiency resulting from Y2K problems. Western Europe is at less risk due to greater attention to storage, contingency plans, and remediation of other infrastructure on which gas supply depends.

Transportation. Y2K problems can emerge in the transportation sector from failures in rail, highway, ports and shipping, and civil aviation services as well as from disruptions in electrical power, telecommunications, and the distribution of fuel. Because transportation systems cross national borders, noncompliance of neighbors can cause interruptions in the systems of compliant countries. Information on the potential impact of Y2K on foreign transport services and facilities has been particularly difficult to acquire, and much of it is still being gathered by international organizations and private groups. Moreover, much of the data is self- reported with little independent analysis. We lack critical details necessary to make confident judgments on problems likely to be encountered in the sector.

Commerce. Because of the increasing dependence of the US economy on "just-in-time" distribution systems, interruptions in trade flows are important to us. The lack of Y2K preparations- and even awareness- within small- and medium-sized businesses throughout the world indicates that larger enterprises, which have conscientiously addressed their own Y2K problems, may experience delays and disruptions due to failures in the systems of key business partners.

Lack of financial resources and technical skills in many cases is preventing companies from undertaking remediation, and failure to take timely action will put some of them out of business.

We are also concerned about possible Y2K-related disruptions in countries planning major tourist events- for example, Italy, Egypt, Brazil, and the Caribbean- should local infrastructures experience significant failures. Other countries may experience a dramatic decline in normal tourist flows- and foreign exchange- because of concerns about Y2K-related disasters.

Implications

Public Response. Public behavior in both the runup to 1 January and in response to Y2K-generated failures, whether real or perceived, will vary widely and could have significant economic and political implications.

In developing countries, populations have minimal access to Y2K- vulnerable public services, and those who do are accustomed to frequent breakdowns. But countries with crowded urban populations could experience significant unrest if outages are prolonged.

The reactions of urban populations in developed countries are harder to gauge. Because of widespread media attention and high public awareness of the issue, we expect that the risks of panic- before and after the date rollover- are higher than in countries with lower interest in Y2K. Possible risks include hoarding, heavy bank withdrawals, safehavening financial assets, and purchases of guns and other equipment to ensure personal safety. Public reactions will depend to a great extent on how the media represents the issue. Inaccurate reporting or hyping minor inconveniences could stimulate disruptive public behavior.

We judge the threat of Y2K-inspired social unrest in developed countries to be low, but protracted delays in resolving problems with basic services, especially banks and utilities, could provoke demonstrations.

Malevolent Actors. The extensive publicity surrounding the Y2K phenomenon and the millennium, the increased vulnerability of critical infrastructures, and the resultant potential for disruptions in services could invite state and nonstate actors, including mischief- makers, to conduct attacks against the United States or US interests abroad, or against other perceived adversaries.

Humanitarian Crises. Y2K-related malfunctions have the potential to cause or exacerbate humanitarian crises through prolonged outages of power and heat, breakdowns in urban water supplies, food shortages, degraded medical services, and environmental disasters resulting from failures in safety controls. Russia, Ukraine, China, Eastern Europe, Egypt, India, and Indonesia are especially vulnerable, due to their poor Y2K preparations and, in some cases, the difficulty of coping with breakdowns in critical services in the middle of winter. We are also concerned that Y2K failures in chemical plants- which are often located in urban areas- could result in environmental degradation and hazards to the nearby population.

Even the poorest countries rely on essential services that are computerized to some extent, such as power, telecommunications, food and fuel distribution, and medical care. Remediation work in these sectors, however, has proceeded slowly.

Few governments outside the West would be capable of managing widespread humanitarian needs should they arise from a breakdown of basic infrastructure in their countries, especially in urban areas. Although many have systems experienced in delivering medical and social services following natural disasters, Y2K failures present a more complex challenge because of the potential for multiple and simultaneous "disasters" within specific countries and around the world, taxing the ability of international organizations to help. Y2K failures in necessary emergency communications systems and in needed medical and social services would compound difficulties mobilizing emergency responses.

Some foreign governments and businesses will look to the United States and its better prepared infrastructure to overcome Y2K problems abroad. We expect to see "safehavening" of financial assets, routing traffic through US computer and telecommunications networks to avoid local bottlenecks, using US transportation facilities to move international trade, and calls on the US military to intervene in humanitarian crises.

Challenges for Intelligence

Y2K is a particularly challenging issue for analysis because of the uneven understanding around the world of the vulnerabilities of computer hardware and software, the unpredictability of cascading failures among interconnected systems, and the self-interest at all levels in either overstating or minimizing Y2K preparedness.

We have seen in recent months an increasing number of statements by countries and commercial enterprises that they are now prepared for Y2K, and we expect to see more such claims in the remaining three months of the year. While progress has certainly been made on many fronts since I testified to this Committee in March, not all of these readiness claims are credible, and it is a challenge for us to sort out the truth. Commercial enterprises marketing Y2K remediation services and governments soliciting external assistance have an incentive to overstate the Y2K problem. At the same time, fear of stimulating panic, sensitivity about disclosing security vulnerabilities, and concerns about legal liability are incentives to downplay the risks of Y2K failures.

In some cases, our uncertainty about Y2K preparations in a country or sector has led us to conclude that there is an increased risk of failures. For example, in open societies with high popular interest in Y2K issues, a paucity of information about efforts to prepare public services is likely to indicate that authorities have paid insufficient attention to potential problems.

Y2K has a unique capacity to produce multiple, simultaneous crises. Its probable impact, however, is difficult to assess. We have an uneven understanding about global and national infrastructures, and the reactions of decision makers, and the general public in a Y2K- stressed environment are also uncertain.

Furthermore, the impact of Y2K failures will depend, to some extent, on the context in which failures occur. While manageable under normal circumstances, some outages and breakdowns would assume much greater significance in the event of heightened political tensions, severe weather conditions, or an ongoing humanitarian emergency.

The Intelligence Community continues to work closely with key policy consumers to ensure that policy makers are kept informed of our best assessment of foreign Y2K developments between now and year's end.

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-- harl (harlanquin@aol.hell), November 06, 1999.