Despite the administration's decision last week to pay American banks $71 million interest they are owed by a virtually bankrupt Poland, a senior administration official says the debate is continuing within the Reagan Cabinet on whether eventually to force the martial-law government of Poland into default on its debts.
Similarly, the official--who made clear his preference for calling Poland into default--also said that he was not prepared to give up trying to get West European banks and governments to back away from financing and helping build a $25 billion natural gas pipeline from the Soviet Union to Europe. This is the largest East-West project ever attempted.
The official, who met with a group of reporters over dinner Tuesday night and spoke with the understanding that he not be identified, is a major participant in defense and foreign policy issues and is close to the president. His views reflect some of the hardest-line advice being received by Ronald Reagan as his administration grapples with a fundamental question: how should the United States handle its economic relations with the Soviet Union, which many administration officials view as a grave and growing military threat?
Although the administration thus far has pursued a relatively moderate course, this influential official made clear his view that detente or a so-called "ostpolitik" policy of improved relations with the communist East "is not a policy that we should follow. There is substantial danger in it." He believes its practice by the West in the past had no effect in slowing down Moscow's military buildup.
The official talked of a total trade embargo against Moscow as an option under study as the administration continues to ponder the Polish crisis. He suggested support for this, in part because it would cut down on militarily useful technology being shipped to the Soviets.
Although Reagan has also alluded to a possible total trade embargo, other officials said this would probably only be imposed in the face of some new and especially grave Soviet action.
As this official sees it, there is a clear link between the Polish debt and the Soviet pipeline.
Declaring Poland in default on payment of its massive debts to the West would "bring the message home" to Moscow about American dismay over the crackdown in Poland and would have a "very disruptive" effect on the Soviet Union, the official said. It would "deter" construction of the pipeline because the line of western bank credit to the communist East would unravel, he indicated.
The official said what worried him most about the pipeline deal was the $10 billion a year in western currency flowing to the Soviets for their gas and furthering their military buildup.
The official described last week's decision to pay off the American creditors "just an interim thing" in the minds of many officials. Because of Poland's massive debts, the issue will be protracted and there will be opportunities to change the decision.
In defending the decision to avoid default at this time, Secretary of State Alexander M. Haig Jr. has said that it maintains the burden on both Warsaw and Moscow to pay off their debts eventually. With the exception of the Pentagon, there was unanimous support within the administration group that decided to avoid default.
Although the official claimed the Cabinet is unified in trying to stop the pipeline, it is known that there are significant divisions in the government between those taking the hardest line and those who believe the damage to American allies in Europe would outweigh the punishment to Moscow.