In an effort to prevent a major rupture with U.S. allies over the Soviet natural gas pipeline, State Department officials are backing a proposal that would allow 21 General Electric rotors shipped to Europe before last Dec. 29 to be used for testing the giant turbines destined for the pipeline project.
The face-saving formula would stick to the letter of anti-Soviet sanctions announced Dec. 29, since no American-made equipment would actually be sent to Russia.
But it would permit companies in Britain, West Germany and Italy to go ahead with plans to deliver more than $1 billion worth of turbines and compressors to the Soviet Union for installation in the 3,600-mile Urengoi natural gas pipeline connecting western Siberia with Europe. European industrialists and government officials have said that these sales are vitally important to employment and economic recovery.
Under what industry sources describe as a "European solution," the European-built turbines would be installed in the pipeline as construction proceeded, but without the GE rotors that serve as the movable parts.
Instead, rotors would be fitted into the turbines as fast as they could be supplied by a French company, Alsthom-Atlantique, the only European company licensed by GE to manufacture those parts.
The Reagan Cabinet has been unable to resolve its internal differences over the pipeline, and a final decision on how far the United States will go in delaying or blocking it rests with the president.
Officials at the Defense Department and the National Security Council reportedly want to delay or even block construction of the pipeline because of the increased European dependence on Soviet energy supplies.
However, Assistant Secretary of State for Economic Affairs Robert D. Hormats noted in remarks last week to the Overseas Writers group that the Europeans were far along in planning to supply equipment and receive natural gas from the pipeline.
"We are anxious to make our concerns felt, but there's no point in creating cracks in the alliance when alliance unity is needed for our strategy to get the lifting of martial law in Poland," he said.
Hormats said that in his personal opinion, "I think the pipeline was a mistake. The real question is whether you rupture the alliance in order to prevent it."
On Dec. 29, President Reagan, citing "heavy and direct" Soviet responsibility for martial law in Poland, announced economic sanctions that among other things prevented GE from selling rotors made in Greenville, S.C., and Schenectady, N.Y., to European firms under contract to the Russians.
The GE rotors were to be used in 125 25-megawatt turbines and compressors manufactured for the Soviets by AEG-Kanis of West Germany, Nuovo Pignone of Italy and John Brown Engineering of Scotland, all three of which hold GE licenses.
Still under study in the Reagan administration is the possibility of trying to extend the U.S. sanctions to these European licensees. However, opposition to such extraterritorial controls has been voiced by the U.S. Chamber of Commerce, which has warned that it would set a bad precedent and call into question the reliability of the United States as a supplier of technology.
The "European solution" envisions that the Soviet sanctions problem would be overcome by having the French company Alsthom-Atlantique step into GE's role as the supplier of the turbine rotors.
At the same time, the State Department reportedly favors some kind of western restrictions on new western credits and credit guarantees for the Soviets--a step that would create difficulties for them since they are suffering from shortages of hard currency to pay for western technology and grain.
Hormats last week described the terms at which European banks are extending credit to the Russians for the pipeline project as "ridiculously soft," meaning low interest rates.