President Reagan's decision to extend a ban on U.S. technology for a planned natural gas pipeline between the Soviet Union and Western Europe is seen here not only as a slap at Moscow but also as an intolerable rebuff to West European governments that had made known their strong interest in the project.
While Washington justifies the sanctions as retaliation for continued repression in Poland, European officials contend that the U.S. action demonstrates indifference to West European economic and political interests.
Senior West German and French officials, applying some of the strongest public criticism of U.S. policy heard in recent years, warned this week that the Reagan administration is attacking the foundation of transatlantic cooperation.
Differences about how to balance economic and security interests have been a source of conflict within the Atlantic Alliance for months. But resentment boiled over this week, when several newer disputes erupted alongside other, long-running ones.
In addition to the renewed U.S. attack on the pipeline, Europe is upset by new U.S. countervailing duties on European steel imports and by quarrels over what new higher interest rates are to be charged on officially subsidized loans to the Soviet Union.
There is continuing irritation as well over persistent high U.S. interest rates and the strengthening of the dollar, which Europeans say adds to their import costs and unemployment and prolongs recession.
Reflecting a general sense of indignation, the Frankfurter Rundschau, a newspaper often sympathetic to the government of West German Chancellor Helmut Schmidt, concluded this week: "For all practical purposes, U.S. policy after the recent summits of Western economic leaders in Versailles and NATO leaders in Bonn has taken on a form that suggests an end to friendship and partnership."
The paper said the Reagan administration is not only girded for confrontation with the Soviets. "Now it apparently wants to obtain control of the allies and compel them to fall in," the paper observed. "This is not what partnership among democratic countries should be. This is sheer imperialism."
France's Le Matin, a socialist daily close to the government of President Francois Mitterrand, ran a headline saying: "U.S.-European economic cold war: first the currency, now the industry, the Americans pursue their escalation."
One worry voiced privately by a senior Bonn government adviser is that the outbreak of new tensions may spill over into the ability of the United States and its allies to coordinate an arms-control approach to the Soviet Union just as U.S.-Soviet talks on reducing strategic nuclear weapons are getting under way in Geneva.
Feeling injured, Europe may be less inclined than ever to respond now to U.S. calls for a tougher anti-Soviet stance.
French officials in particular note the unusually strong support Mitterrand has expressed for strengthening Western defense and the signs his government has given of closer accommodation with NATO.
This serious new round of allied disunity was apparently triggered by mutual public backpedaling on the balancing compromise formulas that had been reached at Versailles. Irritated by Secretary of Treasury Donald T. Regan's public dismissal of an agreement on currency market intervention, Mitterrand publicly disagreed with the U. S. interpretation of the agreement limiting Western trade credits for the Soviets.
This in turn upset administration hawks and reportedly contributed to the mood around Reagan's decision to block foreign firms under U.S. licenses from sending energy equipment to the Soviet Union.
Just what the allies agreed to at the summits in Versailles and Bonn is a central problem. European leaders assumed that they had steered the alliance away from waging economic warfare with the Soviets by winning an affirmation of continued East-West trade. In return, the Europeans promised to observe "prudence" in doing business and granting credits to the Soviets.
"The compromise," an informed West German aide said, "was that there would be some limitation on credits to the East. For the United States, this would be for political reasons. For Europe, it would be for economic reasons."
Schmidt told parliament today: "For me, there is one central statement in the Versailles Declaration, which says that every country must heed the effect of its economic policy measures on the others. Every country must keep in mind the consequences for the other countries that results from its actions."
On the pipeline embargo, Schmidt warned against a "new epoch of cold war," which he suggested could result from the U.S. action.
"What should not occur, and what we also will not accept after Versailles, is a trade war with the Soviet Union," he said.
He said Bonn and its European partners will stand by the gas pipeline deal. "We will and must keep our agreement. At no time did we leave our American partner in doubt about this attitude."
Several hours after Schmidt spoke, however, Richard Burt, assistant secretary of state for European affairs, who is in Bonn, told reporters that European governments had known that an extension of the ban was "an option available to the president."
The misunderstanding and sense of crisis that has resulted could reinforce European efforts to achieve greater autonomy from the United States, several Western diplomats said. This in turn could lead to more strains not just in trade and East-West policy areas but particularly now in the drafting of a new Middle East plan.