The Reagan administration predicted yesterday that tough new U.S. export controls would delay completion of the Soviet Union's natural gas pipeline to Western Europe "by up to two years" if a French firm does not attempt to defy the terms of its license arrangement with an American company.
Since Alsthom-Atlantique S.A., a subsidiary of the French government-owned electric company, contends it does not need U.S. approval to sell the Soviets a key piece of equipment it produces under license from General Electric, administration sources said a major confrontation seems to be developing.
"It will be a contentious matter--no question," Commerce Undersecretary Lionel H. Olmer conceded.
Olmer, in outlining details of the new trade sanctions ordered by President Reagan last Friday in response to continued Soviet repression in Poland, said the latest measures were designed to prevent the Russians from obtaining large rotors needed for turbines that will keep gas moving through the 3,500-mile pipeline.
General Electric, which originally was scheduled to supply the rotors to three European companies that would then build the turbines, was blocked from going ahead with the deal by Reagan's Dec. 29 ban on the sale of U.S. gas or oil equipment to the Soviet Union.
But Alsthom-Atlantique, which previously had agreed to manufacture 40 spare turbines complete with rotors for the Soviets under a GE license, told Moscow it would do the entire job if the Soviets would "pay the price."
The new U.S. restrictions, which officially took effect Tuesday, would prohibit this, administration officials said, by extending the original ban to include foreign-produced products that are subject to a licensing agreement with an American company or in cases where the foreign firm has agreed to abide by U.S. export control regulations.
Olmer said yesterday that GE's licensing agreement with Alsthom-Atlantique contains a clause that provides that "the reexport of products produced by this technology is subject to U.S. export regulations."
Alsthom-Atlantique contends, however, that under its complex cross-licensing agreement with General Electric, it is free to do what it pleases with the technology. The question of whether Alsthom-Atlantique will press ahead with the Soviet deal becomes crucial, Commerce Department experts said, because it is the only company besides General Electric that produces a large rotor suitable for use in the huge 25-megawatt gas turbines that the Soviet Union wants to place in 42 pumping stations along the length of the pipeline.
Deputy Assistant Commerce Secretary Bohdan Denysyk said the only alternatives for the Soviets--if they cannot get the rotors for the 25-megawatt turbines from General Electric or Alsthom-Atlantique--would be to substitute 10-megawatt turbines, which could be purchased from Switzerland, or to abandon gas turbines and switch to electric motors.
"The problem they have is that if they switch to 10-megawatt turbines, they would need five for each pumping station instead of two of the 25-megawatt turbines, and would have to redesign the whole station," Denysyk said. "And converting to electric motors would mean they would have to build a separate new infrastructure to provide the electricity."
Thus, Olmer predicted that if the new regulations are successful in preventing the Soviets from obtaining the larger rotors, "we believe these sanctions will further delay the completion of the pipeline by up to two years."
Commerce Department officials conceded, however, that the ultimate decision as to whether Alsthom-Atlantique presses ahead with the Soviet deal is likely to be based more on political than legal considerations. The final decision, sources said, will undoubtedly be made by French President Francois Mitterrand, who has publicly opposed the U.S. sanctions policy.
"But even if Alsthom-Atlantique decides to thumb its nose at us, and even if it is possible for it to do so and get away with it--and I don't by any means concede that--I don't think there is any assurance that they could duplicate what GE was doing" in the near term, Olmer said.
He said that Alsthom-Atlantique has orders "backed up for two years," including its contract to supply 40 spare turbines to the Soviet Union.
Alsthom-Atlantique also is reported to have quoted the Soviets a price for the turbines far above the contract terms the Soviets had with the three European firms originally scheduled to fill the order. The original deal called for the Soviets to pay about $5 million for each turbine, Commerce officials said, with GE to get about $1.25 million for each rotor.
Commerce officials said GE had already shipped 22 of the rotors, which are built in Schenectady, N.Y., to the three European firms that had the orders for the turbines before the president's original trade restrictions went into effect. They said, however, that none of these has been shipped to the Soviet Union.