Tug of war in White House over Kremlin policy

When one key administration official learned of the President's decision to stave off Polish default by paying $71 million to US banks, he was ''surprised.'' He hadn't been informed in advance.

He would have preferred to inflict as much economic hardship on the Soviet Union and Poland as possible. ''Default by Poland,'' he said, ''would hurt the Soviets very much, by depriving them of foreign exchange.''

His comments point to a philosophical fault line within the administration.

On one side of this line are those presidential aides whose overriding concern is the health of the Western alliance. On the other side are those whose primary interest is in keeping Moscow hemmed in economically and militarily.

The latter group appeared to prevail during much of the administration's first year. ''Get tough with the Soviets'' was the unifying theme of Reagan foreign policy. But the other point of view seemed to surface last fall when the President, to the delight of European allies, proposed his plan for disarmament talks.

Now, on the Polish debt issue at least, those to whom unity in the Atlantic alliance is paramount seem to have again come out on top. They persuaded the President to pay American banks $71 million owed them by Poland, thereby avoiding default.

Default would rock the international banking system, they argued, and hurt European banks more than American ones. That's because Europeans hold the bulk of the debt.

However, the contest between the two philosophical camps at the White House is far from over. Another foreign policy issue dividing them: whether the US should try to block, or at least defer, construction of a vast Soviet pipeline system designed to carry Siberian natural gas to Western Europe.

On the default issue, the hardline point of view holds that the Soviet Union likely would get no more Western credit if Poland failed to meet its debts. Moscow's economic development plans are based on the expectation of continued loans from the West.

Depriving the Soviets of hard currency, said the administration official quoted above, would make it harder for Kremlin leaders - grappling with a stagnant economy, short of consumer goods - to devote huge sums of money to the military.

''The default question,'' he said, ''is a continuing issue that will come up time and again,'' as portions of Poland's $26 billion debt to the West fall due.

The administration's internal debate continues over whether to escalate a campaign making it hard for West European countries to participate in the Soviet gas pipeline deal.

President Reagan has barred American firms from helping the Soviets build the multibillion dollar pipeline system, designed to pump more than a billion cubic feet of natural gas a year to West Germany, France, and other West European lands.

Especially hard-hit by the Reagan embargo were Caterpillar Tractor, which lost a major contract to supply pipe laying tractors, and General Electric, an exporter of turbine parts and other equipment to European suppliers involved in the pipeline deal.

The Washington debate now centers on whether or not to extend a US trade embargo against West European firms using US licenses to manufacture equipment for the pipeline.

Hard-liners advance two arguments in favor of trying by all means to block or delay the pipeline:

* Western Europe, they say, to some extent would become hostage to Soviet foreign policy, if their economies came to depend unduly on Russian natural gas.

* Massive hard-currency earnings from gas sales would boost the Kremlin's ability to expand an arms buildup, which many in the Reagan administration are convinced is a deadly threat to the US and the West.

''Deferring the pipeline is very important,'' said a top Reagan official, ''because the gas sales would give the Soviets hard currency which they could use for their military buildup.''

West German Chancellor Helmut Schmidt and French President Franccois Mitterrand insist that Europe should reduce its overwhelming reliance on Middle Eastern oil and that Soviet gas provides an answer. Also, they say, they will buy only so much Soviet gas as they could afford to lose without economic catastrophe.

Furthermore, the Europeans say, helping to build the mammoth pipeline facilities will provide thousands of jobs for Western Europe, where unemployment is uniformly high.

Allied capitals, in this situation, could be expected to react bitterly against any American effort to punish European firms taking part in the pipeline deal.

These arguments bulk large with State Department experts and others long-experienced in tending the progress of the North Atlantic alliance. To such administration officials, the probability of alliance strains over tough US measures against Moscow and Warsaw would outweigh the risk of letting Europe go ahead on the pipeline and, where Poland is concerned, trying to avoid default.

You've read  of  free articles. Subscribe to continue.
QR Code to Tug of war in White House over Kremlin policy
Read this article in
QR Code to Subscription page
Start your subscription today