The Multinational Monitor



Reagan Officials Charge: U.S. Corporations Are Selling the Rope with Which the West Will Be Hanged

"We must never forget the words of Vladimir Lenin, founder of the Soviet state, who prophesied that the caitalists would gladly sell the rope with which they would be hung."

- Lawrence J. Brady
Assistant Secretary of Commerce
for Trade Administration
January 13, 1982

When Commerce's Brady invoked the wisdom of Lenin in a speech before the National Association of Manufacturers, he was drawing attention to a problem, seldom publicly discussed, which the Reagan administration deems to be grave: the role U.S. corporations allegedly play in bolstering the Soviet Union's military capabilities.

"The USSR has utilized a variety of means to harness the energy of the free enterprise system to the engine of the Soviet military machine," said Brady. "In effect the USSR has created a veritable `Soviet lobby' in Western business and government circles that can facilitate the implementation of its objectives."

Brady was not the only senior administration official to sound the alarm. U.S. Secretary of Defense Caspar Weinberger, in a Wall Street Journal op-ed on January 12, warned that "the Soviets have organized a massive, systematic effort to get advanced technology from the West." Weinberger said, "The purpose is to support the Soviet military buildup."

Although prompted by the crackdown in Poland, the Reagan administration denunciation of business with the Soviets has been in the works for some time. Deputy Secretary of Defense Frank Carlucci, for instance, prepared a speech in early November (never delivered, for reasons unknown) which specified the U.S. goods which have aided the USSR.

"The list of technology for military use acquired from the West is a long one," read the speech, a copy of which was obtained by Multinational Monitor. "It includes high speed computers used for designing weapons systems, signals processing, command and control and intelligence gathering; semi-conductor manufacturing know-how used to make Soviet weapons more reliable and precise; guidance technology for aircraft, ships, submarines and missiles; polymers for improving fighter aircraft performance; and equipment to improve the Soviet military industrial base - ranging from precision machine tools to process know-how technology."

Angry as they are, Reagan administration officials nevertheless have been reluctant to provide many details as to which companies in particular have been involved in this transfer of technology.

Allegations, however, have surfaced over the past couple of years concerning the involvement of a number of major U.S. corporations in supplying the Soviets with technology adaptable for military use.

IBM: "The Soviet Union illegally acquired IBM 360 and 370 main frame computers from the West," states a passage from Carlucci's draft speech. A recent study by the right-wing Heritage Foundation, entitled "Strategic Trade with Moscow," claims that the "IBM 360 and 370 computers are believed to be the mainstay of the Warsaw Pact's air defense system."

IBM denies those computers ever made it to the Soviet Union. "We never have been able to confirm" that charge, says a company spokesperson. "We have no evidence to substantiate it."

The spokesperson adds, "We know of no IBM computers being used in the Warsaw Pact air defense system."

A claim IBM does not deny, however, relates to the use the Soviets made of IBM technology when the USSR invaded Afghanistan in December, 1979. "Soviet troops and materiel were being transported into the region on trucks manufactured by the KAMAZ truck factory east of Moscow," says a report by the Investor Responsibility Resource Center, a Washington-based consulting group for churches and universities. "About one-third of the equipment for the factory had been supplied by American companies, including IBM, which had supplied the computer that controls the foundry in the plant."

Citing the role of IBM in the invasion, a shareholder filed a resolution at the company's annual meeting on April 28, 1980 urging IBM to cease trading with the Soviets. The IBM board of directors issued a statement in opposition to the resolution: "IBM business outside the United States is conducted in strict compliance with U.S. law and foreign policy."

Sperry-Univac: Newsweek reported in December, 1979 That a Sperry-Univac I 100-IOC computer, first sold to a German software firm, was then resold by the German company to the Soviets, who in turn are using it to modernize their Backfire bomber. Sperry-Univac says this is just an "unconfirmed allegation."

Dresser: This company, during the Carter administration, sold "a computerized electronic beam welding machine that can be used to manufacture jet aircraft and has nuclear as well as laser applications," the Heritage study alleges. Dresser refused to comment.

Data General: A computer sold to the Soviet Union "by one of our customers," admitted a public relations officer for this firm, "was considered to be a high security product."

The Reagan administration is taking measures to curb this strategic trade by imposing limited sanctions (see side-bar). Here anti-Soviet sentiment triumphs over the love of the free market, as high-ranking government officials plead with businesspeople to act upon motives other than profit.

"Businessmen, in general, can be more supportive," Secretary of Defense Weinberger said in the Wall Street Journal, "by recognizing the fact that the long-term interests in peace and security they share with their stockholders far outweigh the short-term gains which the sales of certain equipment offer."

Reagan bans high-tech sales

On December 29, U.S. president Ronald Reagan announced limited sanctions against the Soviet Union, for what he termed a "heavy and direct responsibility for the repression in Poland."

The most significant trade restriction Reagan imposed was the suspension of export licensing for computers, electronic gear, and oil and natural gas equipment.

U.S. companies stand to lose $100 million annually in lost contracts on high technology goods, and $200 million annually on oil and gas losses, said Bo Denysyk, deputy assistant secretary for export administration at the U.S. Commerce Department. Total U.S. exports to the Soviet Union in 1981 amounted to $2.5 billion, with agriculture accounting for the bulk of the total.

The two U.S. companies hit hardest, at least at the outset, by the sanctions were Caterpillar Tractor and General Electric.

Caterpillar saw an $80 million contract to sell 200 pipelaying machines to the Soviet Union virtually snatched from its hands. "Commerce notified us verbally that a decision was made to grant a go-ahead on the 9th of December," a spokesperson for Caterpillar said. "However, we had not been provided with the black and white license." When Reagan announced the sanctions, "Commerce stopped the documentation."

Caterpillar disagreed with the imposition of sanctions. _"We are free traders," the spokesperson explained. "We believe in the broadest possible trade. We believe good trade engenders good relations."

The company also had less philosophical reasons for being upset. "If you can't buy from Caterpillar, you simply buy from Komatsu," he said, noting that the Soviet Union was already discussing a contract for 150 pipelaying machines with the Japanese company.

General Electric was prohibited by the Commerce Department from going through with a $175 million contract to supply turbine parts to three Western European companies working on the Soviet natural gas pipeline that stretches from Siberia to Western Europe. "GE will of course comply with the sanctions," a company spokesperson said, refusing to elaborate on the company's reaction to the Reagan move.

In the minds of U.S. policy makers, the Soviet gas pipeline represents a threat to Western Europe. "It throws an energy noose around the economies of Western Europe that can gradually be tightened," said Lawrence J. Brady, assistant secretary for Commerce for trade administration, in a speech on January 13.

The Soviets, who own the pipeline, will sell natural gas from it to a West German consortium, Ruhrgas A.G., Exxon owns 15% of Ruhrgas; Mobil has a 7.4% share; and Texaco, 3.5%.

Western Exports to the Soviet Union in 1980

(Billions of Dollars)

West Germany 4.37
Japan 2.77
France 2.46
U.S. 1.50
Canada 1.30
Italy 1.27
United Kingdom 1.06

Source: U.S. State Department

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