The French government, in a direct challenge to President Reagan's ban on selling U.S.-licensed technology for the Siberian gas pipeline, yesterday ordered French companies to honor contracts with the Soviet Union to provide the machinery.
The action, announced in a terse, two-paragraph statement released in Paris, is the latest episode in an increasingly acrimonious political struggle between Washington and its Western European allies. It is also certain to touch off a complex international legal dispute over U.S. authority to force foreign companies to honor its ban.
West German Chancellor Helmut Schmidt, who is in the United States on vacation, predicted that other Western European nations will join France in defying the sanctions.
"The pipeline will be built and the British, the French, the Germans and other Europeans will stick to the agreements which their firms have been making with the Soviets," Schmidt said in a CBS-television interview yesterday morning.
Reagan, on a visit to St. Louis, said he had asked the Commerce Department to report what legal steps the United States could take to counter the French action. He lamented that the pipeline would mean "$10 to $12 billion in cold, hard cash" for the Soviet Union, Washington Post staff writer Herbert H. Denton reported.
The president said he is "very concerned about our European allies making themselves dependent on the Soviet Union and putting themselves in a position to be blackmailed by the Soviet Union if they decide to shut off the gas."
Administration officials here said that while they regretted the French move, they intend to proceed in enforcing the embargo, which the president originally announced last December in response to the martial-law crackdown in Poland and which he expanded last month to include overseas subsidiaries of U.S. firms and non-American companies producing such equipment under U.S. licenses.
Deputy White House Press Secretary Larry Speakes said lawyers for the Commerce Department will study penalties available under the Export Administration Act for punishing firms violating the sanctions. "Certainly we will enforce the law," Speakes said.
Officials here refused to specify what steps the United States might take under the law, which stipulates fines of up to five times the value of the banned exports and up to five years in prison for violators. But in Paris, U.S. Ambassador Evan Galbraith told reporters Wednesday that the United States could cancel licenses under which the French firms, including Alsthom-Atlantique, were authorized to produce the equipment provided they agree to abide by U.S. export restrictions.
"It would be very difficult for Alsthom or any other company to continue to do business in the United States if they flagrantly violate the regulations," said Galbraith, who had predicted the French would not defy the embargo order because of possible U.S. retaliation.
Following the French statement yesterday morning, Galbraith was summoned to the Foreign Ministry for what The Los Angeles Times reported was a blunt, 45-minute session with French Foreign Minister Claude Cheysson. The minister reportedly lectured Galbraith on the deteriorating state of French-U.S. relations and criticized the envoy for his public statements. The ministry later announced that Cheysson would not visit Secretary of State George P. Shultz here next week, a trip officials here said had never been formally scheduled.
Two French companies appeared directly affected by the order. Alsthom-Atlantique holds a license from General Electric to manufacture turbine rotor blades for compressor pumps required to move the Siberian natural gas to Western Europe. The French firm is under contract to provide 40 of the 125 turbines required for the $15 billion project. The rest of the turbine compressors were to be manufactured by companies in Britain, West Germany and Italy using in part General Electric-supplied equipment.
The second company, Creuset-Loire, is project manager for pipeline construction along with a West German firm. It has licensing and supply agreements with Cooper Industries in the United States that also are likely to fall under the ban.
The Commerce Department here has estimated that European firms stand to lose $750 million in business if they do not honor their pipeline commitments, all of which were signed before martial law was declared in Poland last December. The department has said that U.S. firms would lose $1.2 billion. U.S. officials contend the ban could cause up to a two-year delay in completing the pipeline, due to open in 1988.
While all four European countries have indicated they would defy the ban, France is the first to issue a direct order to its companies to do so.
Under the Socialist government of President Francois Mitterrand, France has been actively seeking a warmer diplomatic relationship with the United States. But in an interview on French television Wednesday night, Cheysson characterized the growing rift between the two countries over the sanctions as "a progressive divorce . . . we no longer speak the same language."
On Capitol Hill, Sen. Charles Mathias (R-Md.) called the French action "predictable and inevitable . . . . When you take economic potshots and our friends are on the range, you can't expect them not to take action to protect themselves."
Rep. Millicent Fenwick (R-N.J.) said that while she believed ruptured relations with Western Europe would heal, she opposed the president's policy because of its adverse economic impact on U.S. workers.