Japanese Foreign Minister Masayoshi Ito expressed concern yesterday that the Western economic sanctions imposed on the Soviet Union following its intervention in Afghanistan may be breaking down, citing the decision by a French company to construct a steel mill south of Moscow.
The mill originally was to have been built by Nippon Steel of Japan and Armco Co., a U.S. steel company, but the two firms dropped out of the project to comply with the Carter administration's economic reprisals against the Soviets. The project included two sets of computers, which were among the items on the embargo list announced by the Carter administration following the Soviet incursion into Afghanistan. General Electric Co. and Honeywell Inc. also were involved in the steel project.
Last week, however, Creusot Loire Group, a major French steel producer, announced it has signed a $300 million contract to build a mill for cold-rolled steel products at Novolipetsk in the Soviet Union's steel center 300 miles south of Moscow.
The decision has provoked a series of sharp private protests from top Carter administration officials, particularly because the announcement of the Creusot Loire contract reportedly followed assurances from the French government that French firms would not step in and take over the project following the departure of Armco and Nippon Steel, administration sources said.
Speaking at a press conference here, Ito said the Carter administration should seek a meeting with its Western allies to assure that the policy of economic sanctions is not being breached. Ito urged that the Western allies reaffirm their commitment to the reprisal policy and not permit ventures like the Creusot Loire contract to "mushroom and spread. That would cause us a great deal of concern," he said.
Creusot Loire officials have denied that their proposed plant is a replacement for the $348 million plant planned by Armco and Nippon Steel -- although the French firm had finished behind the U.S.-Japanese consortium in the original bidding on the project last fall.
According to French officials, the Creusot Loire plant will be smaller and less sophisticated technologically than the Armmco-Nippon-Steel proposed plant. U.S. steel industry sources contend there is little difference. Both plalnts are designed to produce "dynamo" steel, a cold-rolled product used in the manufacture of large electrical motors and related products.
The United States also has objected to the decision by a West German firm, Klockner-Werke, to build a $311 million aluminum plant in Siberia, a project that was to have been built by Aluminum Co. of America until it dropped out in response to the Carter administration's Soviet embargo.
The West German contract is reportedly not quite as galling as the French steel venture because the West German firm is playing a much smaller role in the project than Alcoa would have and because the deal was not preceeded by a chorus of promises to the contrary, as was the case in the Creusot Loire deal, U.S. officials said.
Ito yesterday concluded a series of meetings with administration and congressional leaders before heading to the United Nations. The issue of Japanese auto exports to the United States was the central subject of the meetings, he reported.