Y2K Problems Abroad Could Hurt U.S., Study Finds

WASHINGTON — The failure of other countries to fix their Year 2000 computer problems could cause global disruptions that would “wash up on our shores,” creating the potential for higher energy prices, supply shortages and even a mild economic downturn, a Senate panel said Wednesday.

In its final report before the end of the year on the state of Y2K readiness, the Senate Special Committee on the Year 2000 Technology Problem reported particular concern about possible breakdowns in China, Russia, Italy and several oil-producing nations.

The committee praised U.S. industries and institutions generally for making substantial progress in preparing for the Y2K glitch but said that it remains concerned about the status of health care providers, small businesses and educational institutions.

But even if the remaining domestic problem areas are addressed adequately, the panel warned, Americans cannot be shielded entirely from the effect of foreign computer failures.

“It’s a mistake to believe that disruptions abroad won’t hurt us here,” said Sen. Robert F. Bennett (R-Utah), chairman of the committee.

The Y2K problem would be caused by the fact that many older computers were programmed to identify years only by their last two digits. If they read the arrival of 2000 as 1900, programs could lock up and computers could crash.

The federal government has estimated that it will spend $8.6 billion and private industry has said that it will spend more than $50 billion to fix the problem. In many other countries, however, efforts to eradicate the millennium bug have been far slower and less aggressive. Americans could pay a price for foreign delinquency in the form of lost jobs, a temporary recession or requests for emergency aid, according to the report, which was released 100 days before the end of the year.

“Severe long- and short-term disruptions to supply chains are likely to occur. Such disruptions may cause a low-to-moderate downturn in the economy, particularly in those industries that depend on foreign suppliers,” the report predicted.

Oil is a major concern.

“The committee also expects that the Y2K-induced disruptions in the flow of imported oil may be significant enough to impact gasoline prices,” the report said.

The committee noted that three major suppliers of oil to the United States are at high risk of Y2K-related production disruptions. First among them is Venezuela, from which the United States imports 14.7% of its oil supplies. Nigeria, the fifth-largest source of U.S. oil imports, and Colombia, the seventh-largest, are also considered highly vulnerable.

Not all experts share the Senate committee’s concerns, however. The Energy Department, for example, does not believe that Y2K problems will have an effect on oil prices.

The impact of oil disruptions would become evident during the early months of 2000, as existing supplies begin to diminish, Bennett said.

“If Venezuela as a country were suddenly to go down . . . , that would cause serious problems,” Bennett told reporters. “But if it is more isolated than that, then we will have warning [and] there will be opportunities to try to deal with it.”

Italy has lagged far behind the rest of Western Europe in launching its preparedness efforts, the report said. With 11,500 U.S. troops based in Italy and hundreds of thousands of people expected to converge on Rome to celebrate the new millennium, the committee said it is concerned about the vulnerability of Italy’s water, electric utilities, transportation, airports and health care facilities.

The committee is concerned about the effect of Y2K on Russia’s critical infrastructure--especially its Chernobyl-style nuclear plants--and the security of the former Soviet nuclear arsenal.

“Both countries agree that the likelihood of Y2K failures in these systems is extremely remote and that sufficient safeguards are in place to handle these situations.”

The Energy Department has worked with Russia on preparing its civilian nuclear plants for the millennium and has found no problems with the primary plant safety systems. However, the plants’ process computers and their related information displays and data storage systems face Y2K challenges, the panel said.

Neighboring Ukraine, which relies on nuclear power for 46% of its electricity, faces much the same challenge as Russia.

The American economy could feel the effect of China’s failure to prepare for the glitch. China is the fourth-largest exporter to the United States and the 12th-largest importer of American goods.

“Because of improper planning, insufficient resources and a very late start in addressing the Y2K problem, the committee believes that a substantial portion of Chinese companies and the government will experience several failures in their computers,” the report said.

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How Ready?

Rating for meeting Y2K deadlines in the U.S.

Source: Senate special committee, ratings for meeting deadlines for remediation, testing and planning