Europe: Trouble in the Pipeline

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The seemingly quixotic campaign by the Reagan Administration against the pipeline is based on the view that the Soviet Union's economic vulnerability should be exploited. At Versailles, Reagan had reportedly told his partners: "If we push the Soviets, they will collapse. When will we get another opportunity like this in our lifetime?" Even observers who don't for a minute believe the Soviet Union would actually collapse think that its behavior could be influenced: that economic pressure can force a reduction in Soviet military spending, diminish aid to Cuba and Viet Nam and even, perhaps, bring about a measure of internal reform in the Communist system. Reagan's principal aim in attacking the pipeline agreement is to prevent Moscow from benefiting from a flow of hard currency (an estimated $8 billion annually by the late 1980s) that could be used for vital imports of Western technology. U.S. officials, however, have been toning down their concern that Western Europe could become overdependent on Soviet energy supplies. Western European leaders point out that even operating at full capacity, the Soviet pipeline will supply only 5% of Western Europe's total energy needs.

Reagan's eagerness to take advantage of the Soviet Union's economic failures rests on assumptions that are widely contested, not only in Western Europe but also by most independent experts in the U.S. They point out that whatever difficulties the Soviet economy may face—including a shortage of hard currency—Moscow will always find the resources for its highest priority, defense. Said Charles

Percy, chairman of the Senate Foreign Relations Committee: "It is difficult to see how this action will do any more than split the NATO alliance and give the Soviet Union an opening to divide us further."

What weakens the Reagan Administration's argument for economic pressure on Moscow is that the U.S. is going ahead with huge sales of grain that are bound to grow even larger as the Soviet Union faces its fourth bad harvest in a row. To help justify this boon for American farmers, the Reagan Administration notes that the grain is paid for in hard cash, thereby imposing real costs on the Soviets. The pipeline equipment, on the other hand, is bought on credit and then earns needed hard currency. To European ears, the argument sounds unconvincing. The U.S. grain still relieves pressure on Soviet agriculture and frees resources for other purposes, including arms production.

By extending the embargo to include U.S. licensees abroad, Washington sought, in the words of one official, to "close a loophole." But, like most economic sanctions, the U.S. curbs on pipeline technology may be easy to circumvent. France's state-owned engineering firm Alsthom Atlantique, for example, could build the rotors itself, though at the risk of an ugly legal tangle with Washington over infringement of its General Electric license. U.S. penalties include blacklisting from the U.S. market, as well as heavy fines and even the arrest in the U.S. of executives from companies that violate the ban.