US fails to put plug in Euro-Soviet pipeline deal

The Reagan administration has apparently all but lost it bid to get West Europe to reconsider an enormous gas pipeline deal with the Soviet Union, but will probably get a consolation prize of sorts.

West European commercial sources here, calling the gas deal virtually clinched, say the first stage of the project would be somewhat more modest than originally planned.

They also say that although this may please Washington, the Reagan administration had nothing to do with the change.

The sources see little chance Washington will manage to get the project trimmed any further.

Early in the long negotiations over the deal, the largest in East-West commercial history, the Soviets had planned to construct an enormous, single-pipe link between western Siberia and Western Europe. Later, the European sources say, the plan was to build two slightly smaller lines side by side.

More recently -- but before the latest round of US pressure on West Europe to reconsider -- the Soviets are said to have changed plans again in order to get the new gas link in operation as soon as is feasible.

The current plan, West European sources here say, is to begin with only one of the twin lines -- plus compressor stations and other infrastructure to accommodate both.

But the deal is still enormous (some $10-12 billion). And the consensus among foreign experts here is that only something on the order of Soviet intervention in Poland, seen as unlikely at least at the moment, could yet derail it.

The price of the gas still remains to be settled, with the Soviets asking more than West Europe wants to pay. But the main sticking point in the negotiations -- the terms under which West European banks would finance the deal -- seems to have been resolved.

As recently reported by the Monitor, the Soviets have softened earlier demands for highly preferential terms. In talks with one important partner in the project -- the French -- Moscow accepted an interest figure higher than originally sought. Soviet negotiators also agreed that the financing by the French would cover only 85 percent of French input, rather than all of it.

But the Western key to the deal is -- and always was -- West Germany, which is expected to provide the largest share of the financing and input and get the biggest portion of Siberian gas.

West German bankers have now announced agreement in principle on a compromise financing scheme. Business sources here say Moscow did most of the compromising.

The size of the loan agreed with a consortium of West German banks is said to have been greatly reduced -- excluding the large-diameter pipe for the gas line, whose financing will be negotiated yearly with an eye toward existing money-market conditions.

Most foreign press focus, in coverage of the pipeline deal, has so far been on gas. An energy-hungry West Europe wants it. The Soviets, for precious hard-currency earnings, want to sell it. The Americans suggest that all this makes for dangerous energy dependence on Moscow, an argument both the Soviets and West Europe reject.

But there is more to the project than gas: in particular, enormously lucrative supply contracts for various non- Soviet business concerns. Pipe, compressor stations, pipe- laying equipment, and other components. It all adds up to a multibillion-dollar bidding bonanza.

The Soviets have been talking for some time now with a lot of very eager company representatives from a variety of countries. The West Germans are almost certain to get the lion's share of the action. The French will get part. Soviet sources say the Japanese seem likely to get a share. The British are another possibility.

So are the Americans -- presumably on a smaller scale -- if the US government nods OK.

Indeed, amid the vagaries of the current US embargo on high-technology exports to the Soviet Union, some American companies may already have lent a hand.

On official US-Soviet trade breakdowns for the first four months of this year , about $10 million of an innocuous item called "pressure-sensitive tape" is listed. One possible use: helping seal the very sort of pipeline the Soviets and Western Europe hope to put between them before long.

[The Wall Street Journal reported July 30 that the Reagan administration has approved a deal whereby the Caterpillar Tractor Co. will sell 100 pipe-laying machines valued at some $40 million to the Soviet Union.]

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