NOTE TO WILLIAM CASEY FROM MALCOLM BALDRIGE RE GUIDELINE TO QUESTIONS ON PRESIDENT S OIL AND GAS SANCTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000501350004-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 44
• Document Creation Date: December 20, 2016
• Document Release Date: March 5, 2008
• Sequence Number: 4
• Publication Date: September 10, 1982
• Content Type: MISC

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September 10, 1982
To : William Casey
From: Malcolm Baldrige
$aecucva Re~~-r_-s j
17
L~268
In accordance with the decision reached
yesterday in the SIG-IEP meeting, the attached
guidance is forwarded for review by members
for use in responding to questions on the
President's oil and gas sanctions.
NSC review completed
r w AN1NTTA, rO.*. COSa* IIOy71
?Rt3C RI a(O ?T OAO 21W
Not referred to DOC. Waiver applies.
USCOYM?OC 1*Ia. S
GPO: 1975 0 -216-ti'O
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ENFORCEMENT OF PRESIDENT'S FOREIGN
POLICY CONTROLS ON SOVIET PIPELINE
Subject Tab
Secretary Baldrige Press Statement . . . . . . . A
(September 9, 1982)
Questions and Answers . . . . . . . . . . . . . B
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UNITED STATES OF AMERICA
IC
DEPARTMENT OF COMMERCE
PRESS BRIEFING
WITH
MALCOLM BALDRIGE
SECRETARY OF COMMERCE
ROOM 4830
DEPARTMENT OF COMMERCE
WASHINGTON, D. C.
THURSDAY, SEPTEMBER 9, 1982
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(4.00 p.m.)
3 SECRETARY BALDRIGE- Good afternoon.
4
Today, the Department of Commerce has issued
a .temporary denial order against John Brown Engineering
6 Company, Ltd. of Scotland, and its three United Kingdom
7 subsidiaries.
I want to explain the status of the action we
have taken so far, regarding the pipeline sanctions.
On August 26, we issued temporary denial
against Dresser France and Creusot-Louire. These
orders are temporary so that we can have time to investi-
rygate and modify them, if necessary.
Those temporary orders prohibited the export
f all U.S. products, services and technology to those
two companies.
On September 7, based on facts determined in
our continuing investigations of those two companies,
twe proposed modifying the temporary orders to cover U.S.
oil and gas related products, services and technology
and to have the sanctions extend to their home-country
subsidiaries, to assure compliance with the order -- in
:effect, closing some potential loopholes.
In the Dresser case, the temporary order has
been amended and now applies only to oil and gas related
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products, services and technology.
In the Creusot-Loire case, the modifications
are pending so submissions being prepared can be reviewed,1
On September 4, we issued a temporary denial
order against Nuovo Pignone of Italy and its Italian
subsidiary, INSO. That order also covers oil and gas
related equipment, services and technology-
Today, as I've mentioned before, we've issued
a temporary denial order against John Brown Engineering,
Ltd. of Scotland and its three United Kingdom subsidi-
aries.
As with the others, the temporary order prohibits
export-of all U.S. gas and oil related equipment, service
and technology.
The modification of the sanctions, after our
investigations, fully maintains the goals laid out by the
President regarding oil and gas sanctions imposed on the
Soviets, without unduly harming our allies and friends,
and are consistent with the facts determined thus far
in our investigations of these cases.
I want to say a word about President Reagan's
purpose in implementing these foreign policy export
controls, and his resolve to maintain them throughout
the crisis in Poland.
The sanctions were imposed because of the Soviet!
rz?
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Union's complicity in the events over the past nine
months in Poland, which have resulted in the Jailing of
many thousands of innocent, patriotic citizens and the
forced solitary confinement of Lech Walesa; the imposi-
tion of martial law; and-the breakdown in communications
between the military government, the Church and Solidaritj.
Pipeline sanctions were selected because we kne
with a-fair amount of certainty that the Soviet Union
1,
would pay a high cost in time, money and effort if they
were prevented from obtaining U.S. Products and technology
related to pipeline construction.
Could any other sanctions have been selected?
Possibly. But this was the quickest, surest way to
a penalty on the Soviets for their acts.
The President intends, has intended, and will
intend to see the process of Polish. national reconcilia-
tion begin. And we, in the Commerce Department, will
continue to administer the regulations which implement
that policy as fairly'as possible.
I'd be glad to answer any questions, and I have
General Counsel here.-The Undersecretary for International
Trade is also here, so I'd be glad to take any questions.
QUESTION:. How are the sanctions consistent
with the President's originally stated policy, in light
of the fact we are easing them to the extent that they.
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really don't have the muscle that they will, or that the
President originally intended them to have?
SECRETARY BALDRIGE: No, I disagree. The polic
really, on these temporary denial orders, is this: We
start off usually with as broad an order as possible
because we have to begin an investigation of all of the
facts.
In-some of the cases, it would literally have
had the effect of forcing some of those companies into
bankruptcy, or could have had.
The fact is, as far as the Presid'ent's policy
goes, the means of carrying out the policy of Polish
reconciliation was the denial of oil and gas related
equipment to the Soviets.
And by denying, on these temporary denial order
oil and gas related equipment, technology and services,
we feel that that fully is carrying out the President's
policy.
QUESTION: You talk about these sanctions as
imposing a penalty on the Soviets for their actions. Wher
these sanctions were first imposed against the Soviet
Union, they were justified on the basis of holding back
hard currency from the Soviet Union and making it difficu
for Western dependence on the Soviet Union to occur.
It can't do both, can it? In other words, if
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they are a penalty for the Soviet Union invasion of
Poland, then the situation in Poland would have changed
when you put the sanctions, right?
SECRETARY BALDRIGE: Well, you're exactly right,
but 1 think you began with a misconception that the
original intent was denying the Soviets hard currency.
That is-the means, not the end.
The President clearly stated on December 3C,
on those sanctions, and the expansion of them on June 22,
that they were directed against the complicity of the
Soviet Union in the Polish situation.
The sanctions, themselves, are the means to
have the Soviets modify that position, but the intent
of the President in these sanctions, is to cause change
in the Polish situation because of the Soviet complicity
there.
QUESTION: Can you say which of the companies
might have gone bankrupt and, secondly, can you put a
value on the exports that are now denied John Brown and
the'other companies?
SECRETARY BALDRIGE: Well, I'm not'going to
answer your first question because I don't think that's
fair to the companies, and our-surmise is just that.-
I think that it is fair to answer your second
question, which is on the order of size. These sanctions
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- ---- - ---- __. in-
volved from perhaps $75 million, in some cases,'up to as
high as $600 million in lost sales over a three-year
period.
Those are significant sanctions, significant
preventative measures, we feel, to help. us in resolving
this issue.
QUESTION: May I follow that? Do you mean
that is a total figure for all companies in the three
countries?
SECRETARY BALDRIGE:" No. -Individual companies
involved in the temporary denial orders, which are a
preventative measure, would lose in sales, over a three-
year period, from $75 million to $600 million.
Now, one individual company could lose $75 mil-
lion in lost sales, and another one $600 million, but
that's the range.
QUESTION: As the sanctions now stand, or as
they were originally?
SECRETARY BALDRIGE: No,-no, as the sanctions
now stand. So, we feel that those are very strong
sanctions, and they can be put into place without undue
harm, "but it is significant' harm to the people involved.
QUESTION: The total runs over a billion
dollars?
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SECRETARY BALDRIGE: Yes, I would say that the
total on all companies over a three-year period would
run over a billion dollars.
QUESTION: Mr. Secretary, since Mrs. Thitrher
has spoken strongly in defense of John Brown's?right
to exports, and the French government has maintained its
position and, as far as I know, the Italian government
maintains its position, in effect, you have a small trade
war with Europe. You are not really affecting the
Russians.
Is there any prospect of getting this off
'dead center and resolving this with our allies?
SECRETARY BALDRIGE:
Well, we can always hope,
but there are no present negotiations going on. We feel
that until the Polish matter is resolved, that the
sanctions are the proper way to go.
The President has stated in the past, as you
know, that the sanctions would be lifted if he saw sig-
nificant changes in the imprisonment of the people and
in the release of the prisoners; the lifting of martial
law, and a dialogue started between the Church, Solidarity
and the Polish government.
QUESTION: My question is, is there any nego-
tiations between the United States and its European
allies, to resolve this issue, and there is no movement
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II on Poland?
SECRETARY BALDRIGE: Yes, there are no nego-
tiations going on.
QUESTION: And what happens next, with our
European allies?
SECRETARY BALDRIGE: Well, that's a good
question. We feel very strongly about the Polish situa-
tion. The President has got a firm resolve on that. We
.feel we are doing the right thing.
QUESTION: What evidence can you offer that
the sanctions are having the effect that you want then
.to, which is to say, bringing about reforms in
SECRETARY BALDRIGE: Well, we have seen no
progress in Poland on reforms yet.. We feel that the
sanctions will cause the Soviets a very significant
delay, cost them significant extra amounts of money, loss
in hard currency earnings, and we feel that that will
have an effect.
To date, we have seen no change in the Polish
situation that amounts to enough to lift them.
QUESTION: If I may follow up, though, if you
have seen no evidence that they are working, why continue
them?
SECRETARY BALDRIGE: Well, they haven't had
a chance to work yet. The pipeline completion date that
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the Soviets have given the Europeans is in 1984. Most of
that pipeline is yet to be built, so the effect of the
sanctions has not been felt yet.
QUESTION: But they've had a chance to work in
Poland, have they not?
SECRETARY BALDRIGE: Maybe I'm missing the
point of your question. Most of the pipeline is yet to
17e built. The sanctions have yet to take their effect.
And there is yet no movement in Poland.
QUESTION: Mr. Secretary, just to clarify,
since the President has said the sa nations would be
lifted if certain reforms occur in Poland, can one then
conclude that if there were these reforms in Poland and
the sanctions were lifted, the administration would not
be concerned about the hard currency that the Russians
would get from the pipeline, or the relationships which
would. be set up by the completion of the pipeline?
SECRETARY BALDRIGE: Yes, we would still be
concerned, but we would nr' put sanctions on to express
that concern. The sanctions are related to Poland. We
would still be talking to and will continue to talk to
the Europeans, about the whole East-West trade list of
problems as we see them, but we are talking now about the
sanctions, specifically.
The President has stated that if those three
LIG ? $ ., I+,,..~~
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conditions were met in Poland, he would lift those
sanctions. We would still be concerned about the amount
of East-West trade going on, and how it is financed, and
all the things that have led up to the question_
QUESTION: I wonder if you could break dow.1
that figure for the different companies involved you know, how much --
SECRETARY BALDRIGF: You would have to ask the
companies, themselves. They have stockholders, in some
cases, and I don't think that's fair to do that.
QUESTION: Is there any hope of any sort of
compromise with the Europeans? I mean, could they adopt
alternative measures that you would approve of, which
would lead to the lifting of the embargo on the pipeline?
SECRETARY BALDRIGE: That's always possible.
We haven't seen them come up with any now, but if a
unified approach that was as effective, or more effective
than the sandtions was proposed, we would have to listen
very hard.
QUESTION: Mr. Secretary, many of us have been
in Versailles, and I wonder, could you address-the ques-
tion, why the provisions of that part of the sanction
have not been made clear enough on both sides.
Secretary Haig, then Secretary, left the im-
pression at the last press briefing, that the matter of
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3.2
the pipeline has been resolved, in the positive European
sense. A decision by the President could be expected.
The opposite was the effect, as we all know.
Why this misunderstanding apparently between
the Europeans, on the one hand, and the Americans, on the
other?
SECRETARY BALDRIGE: Well, I wasn't at the.
press conference, so I can't speak to that.
QUESTION: At the meeting in Versailles.
SECRETARY BALDRIGE: I can't speak on what
Secretary Haig said there. I know that the feeling in
the United States government is that our allies were
aware, perhaps not of the exact date, but they were aware
of our great concern about this, but, beyond that, I
wouldn't care to say.
QUESTION: Mr. Secretary, do you have a figure,
an estimate of the cost to American industry, of the
December sanction -- the December order -- I'm sorry.
SECRETARY BALDRIGE: Well, we would probably
not have a precise figure because we are dealing in
estimates, but we'd see probably lost sales in the area
of $600 million.
QUESTION: From the December order?
SECRETARY BALDRIGE: Yes.
QUESTION: Over three years, or what period?`
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 4?
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SECRETARY BALDRIGE: On the orders -- well,
without regard to time, on the orders that had been
placed that could not be delivered.
QUESTION: Mr. Secretary, in view of your
remarks that this carries out the objective without
unduly harming our allies, is this intended as kind of
a move toward appeasement of the allies, in the hope
,that they will come along?
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SECRETARY BALDRIGE: No, it's not a move toward
appeasement. It is recognizing the facts after investi-
gation. Remember, as I pointed out, these are temporary
denial orders. We investigate, then we modify as the
circumstances turn out.
In this case, there is no need to -- the phrase
Fuse -- unduly harm our allies. They are our allies
and partners. We are aiming at these sanctions at oil
and gas.
If we made a total denial order on some of
these companies, it would have been, we feel, too strict
an action. Now, I don't think that's appeasement, that's
investigation and trying to do what is fair and right
in a difficult situation.
QUESTION: Mr. Secretary, have you had any
indications from the governments in Europe, of possible
retaliatory trade on their part?
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SECRETARY BALDRIGE: We haven't, officially.
There's always talk here and there,-- I don't know how
loose it is -- but I think neither our allies nor the
United States wants to see a trade war. That would help
neither one of us.
QUESTION: Mr. Secretary, isn't it a fact that
you and Secretary Schultz spoke with Mr. Clark, to have
the order modified, over the objections of the people
in the Defense Department?
SECRETARY BALDRIGE: Any advice I- give to the
President, I feel, is privileged information. He can
take it or not, and I always answer "No comment"
kinds of questions.
QUESTION: Mr. Secretary, how many more compani
who have pipeline contracts and fulfill them will therefo
be defined in the President's sanction?
SECRETARY BALDRIGE:* There are still several
possibilities in Europe. I'm talking about the major
parts of the pipeline -- it that addresses your question.
There are still ---I don't know whether it is two or
three -- but that we have not seen or heard whether they,
in fact, will ship.
And on these temporary denial orders, we are
being very careful, because we are talking about our
trading partners now, in making sure that the shipment has
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left, before we put on a temporary denial order. So, I
don't want to speculate about any particular company
and the action they take. There is always time to change
before the ship leaves the dock.
QUESTION: Mr. Secretary, the changed tone of
these new denial orders to oil and gas commodities and
services, do you expect this to be the tone of the
,potential future denial orders for a while, or do you
bxpect further modification?
SECRETARY BALDRIGE: No. I think,:: in striving
for consistency., which we want to do on this, that the
general tone of the denial orders will be denials on all
oil*and gas equipment. That is a very strong action,
as I've stated before, and we think that, at least at
this time, going beyond that, would not be worthwhile.
QUESTION; Mr. Secretary, if the Europeans
agreed to an ending of subsidized credits to the Soviet
Union and to tighten up on the transfer of high technolo
to the. Eastern Block, would this constitute a sort of
unified action which could justify the-lifting of the
temporary denials?
SECRETARY BALDRIGE: I really don't think it
is appropriate to comment on-what kinds of actions we
could consider. There are so many variables. There
are no negotiations going on now. It would be inappropri to
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Il they might be.
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QUESTION: Mr. Secretary, am I right in assumin
first off, that the whole question of enforcement on this
matter is wide open? And that being the case, down the
SECRETARY BALDRIGE: I don't know what you
mean by "wide open".
QUESTION: In terms of its being tied up in
litigation in terms of our allies challenging the posi-
tion of these sanctions and, therefore, you question
the effect of the whole thing, and we are back to square
one again, 'the purpose of the whole thing.
SECRETARY BALDRIGE: Well, we feel we are on'
firm,ground in this area. I'm sure there will be liti-
gation, but we feel that our authority and the actions
we've taken are consistent, and we feel that they will
be carried out.
QUESTION: Mr. Secretary, to follow up on that
question, when the first sanctions were announced,
think. Mr. Homer said the purpcse was to deter further
shipments. -.Well, quite evidently,*that hasn't worked,
and there is no prospect of it working.
If deterrence isn't -korking, what'is the point
of penalizing the European countries? What effect are
the penalties having if they don't seem to be stopping
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the pipeline shipments?
SECRETARY BALDRIGE: I disagree with your
I think, the underlying premise of your question, that
deterrence does not work. Most of these companies --
as a matter of fact, all of the companies that we've
put temporary denial orders on have orders in much
larger numbers -- turbines, compressors, whatever it is
left 'to ship, than the initial shipment that thev've
made. So, the deterrence, in the case of each of the
companies, is yet to be seen. S~mply because this company
in-another country has shipped is not a question of the
failure of the deterrence.
You have orders for two, and there are still
16 to ship. We have to wait and see what happens to thos
16.
QUESTION: Have you indication that':the subse-
quent orders of Dresser France-or the Italian companies
will not be shipped?
SECRETARY BALDRIGE: No, we have no indication
that they will, or that they will not.
QUESTION: If they are not shipped, will you
be dropping your orders against these companies, if
further shipments do not follow?
SECRETARY BALDRIGE: Yes. Well, of course,
we would have to have assurances from the companies, but
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I would not want to cross that bridge about when we would
drop it, or-the method, because those involve some
negotiations. I would not want to prejudge, but, obvi-
ously, we would want to ~- if people wanted to obey our
sanctions, we would want to work something out.
QUESTION: If the companies were to go ahead
and ship more turbines and compressors, would the sanctiorj
be stiffer?
SECRETARY BALDRIGE: We have to leave.open
any possibility of broadening the sanctions, if necessary,
but' the --
QUESTION: Is this the deterrence?
SECRETARY BALDRIGE: Let me say, again, that
these sanctions,. the strength of these sanctions from,
in one case, $75 million, to another case, $600 million
in lost sales over a three-year period, is a very power-
ful action on the part of the United States, and we have
(Whereupon, at 4:30 p.m., the press briefing
was concluded.)
yet to see the results coming from that.
Thank you.
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CERTIFICATE OF REPORTER
This is to certify that the foregoing transcript
n the matter of: PRESS BRIEFING- WITH MALCOLM BALDRIGE
SECRETARY OF COMMERCE
Before: DEPARTMENT OF COMMERCE
Date: THURSDAY, SEPTEMBER 9, 1982
Place: ROOM.' 4830
DEPARTMENT. OF COMMERCE
WASHINGTON, DC
represents the 'full and complete proceedings of the
aforementioned matter, as reported and reduced to type-
writing.
G /tom! d ~~:~~
( YLISSS YOU G
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Why Sanctions were Imposed
QUESTION
Why were the sanctions imposed?
ANSWER
The sanctions on oil and gas equipment and technology against
the Soviet Union were imposed by the President because of the
Soviet-backed Polish military government takeover which resulted'
in the imposition of inartial law and the imprisonment of
thousands of innocent-Polish citizens. The President
specifically chose the oil and gas sectors because the costs to
the Soviets would be the greatest in this area.
(-
Cornmerce/ITA/03413
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Lifting the Sanctions
QUESTION
Will the sanctions be lifted if the three conditions specified
by the President when he imposed the sanctions are met?
ANSWtR-
Yes, the President stated at a press conference on January 11,
1982, that he will lift the sanctions if three conditions are
met. They are: lifting of martial law in Poland, the release
of the prisoners and the opening of an honest dialogue between
the Polish government, Solidarity, and the Church. The
President stated: " Substantial progress towards those goals
would lead to a review of our sanctions".
C
Commerce/ITA/0341J
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Pipeline Negotiations
QUESTION:
Is the United States negotiating with the Europeans over the
oil and gas epxort sanctions against the USSR?
ANSWER:
No. There are no negotiations with the Europeans now
underway. We would, of course, listen to any suggestions
from our allies for unified action that would be as
' effective as the sanctions in meeting the President's
objective of reconcilation in Poland.
Commerce/ITA/0099h
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What is a temporary denial order?
A temporary denial order is requested by the Department from
ANSWER:
the Hearing Commissioner on an ex parte basis. A temporary
denial order denies export privileges to companies upon a
showing to the Hearing Commisssioner that the order is
required in the public interest to permit or facilitate
enforcement of the Export Administration Act or Export
Regulations; to avoid circumvention of any administrative or
judicial proceedings; or to permit completion of an
investigation.. It is temporary so that a fair investigation
can be made of all the circumstances involved before a final
determination is made whether to initiate formal .charges of
-'iolations.
The recent Commerce actions issuing temporary denial orders
against Creusot-Loire, Dresser (Fance), Nuovo Pignone and
John Brown Engineering have been taken to enforce the
Department's export regulations. These actions are not
punitive. They were taken with the purpose of facilitating
enforcement of the law-and of the investigations into
suspected violations by the firms. No decision regarding
any imposition of penalties has been made.
Commerce/ITA/0099h
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QUESTION:
What is a denial order?
ANSWER:
A denial order is one of several administrative sanctions which
fttay be imposed by the Department of Commerce following an
investigation and an admihistratve procedure whereby a named
party (or parties) has been found to have violated the Export
Administration Act or the Export Administration Regulations. A
denial order prohibits specified parties from participating in
any transaction involving commodities or technical data exported
or to be exported from the United States or which is produced
abroad by persons subject to the jurisdiction of the United
States, or which is subject to reexport control. A denial or
export privileges may be partial or entire, may be by commodity
or geographical area, and may be for any specified period of
time. -
The Act and Regulations provide for a range of administrative
sanctions which may be imposed against persons who have been
formally found to have violated the export control laws,
following charges and administrative proceedings. Among the
sanctions-are civil penalties and denial of export privileges.
Thus, in sharp contrast to temporary denial orders, which are
not punitive, denial orders issued against parties who are found
to have violated are, indeed, in the nature of punitive
sanctions.
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Commerce/ITA/0099h
 Initiation of Temnorarv Denial Orders
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QUESTION:
Who initiates a request for a temporary denial order?
ANSWER:
The Office of Export Enforcement of the Commerce Department is
responsible for the enforcement of the Export Administration
Act. That Office makes a recommendation to the Office of
General Counsel to initiate specified enforcement action. The
Office of General Counsel reviews the matter.for legal
sufficiency and, if appropriate, makes the formal request to the
Hearing Commissioner to issue a temporary denial-order.
Commerce/ITA/0099h
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 C
Main rnn+-ranfnrc fn,- +-ho Di n=1 in=
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QUESTION:
Who are the main contractors on the pipeline and the Western
suppliers.
ANSWER:
The prime contractors for the pipeline are a consortium of the
German firm Mannesman and the French firm Creusot-Loire for the
Northern segment and the Italian firm Nuovo Pignone for the
Southern portion.
The pipeline requires a total of 41 compressor stations (22 for
the Northern portion and 19 for the Southern). The line calls
for 125 compressors (3 compressors each for 40 stations and 5
compressors for one head station). The same number of gas
turbine engines are required to drive the compressors. Western
manufacturers of the compressors and gas turbines are:
COMPRESSORS
Creusot-Loire 42
Dresser (France) 21
Nuovo Pignone 57
Demag 5
GAS TURBINES"
AEG Kanis 47
John Brown Ltd. 21
Nuovo Pignone 57
*General Electric to provide 125 rotor sets for the gas
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turbine engines.
1The French firm Alsthom-Atlantique
1981 to supply 40 rotor sets.
Commerce/ITA/0099h
contracted in November
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QUESTION:
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What is Dresser and what is its relationship to the pipeline and
Creusot-Loire?
ANSWER:
Dresser (France) S.A., located in LeHavre, France is the
manufacturer of centrifugal gas compressors and a full range of
Dresser products and energy related equipment including:
A. Centrifugal Compressors for
1. gas pipelines
2. gathering/injection
3. plant processing -
B. Gas turbine build up and packaging using Rolls Royce
gas generators
C. Underground mining machinery
D. Drilling rigs including derricks and platform
structures
Dresser (France) S.A., is a second tier subsidiary of Dresser
Industries, Inc. in Dallas, Texas. It is the subsidiary of
Dresser AG (VADUZ.) of Vaduz, Liechtenstein whose parent is
Dresser Industries, Inc. Desser (France) received technology
from Dresser Clark Div. in Olean, N.J., for the manufacture of
the centrifugal gas compressors. This technology was exported
prior to December 30, 1981.
Dresser (France) is subcontracted to Creusot-Loire of France to.
provide 21 centrifugal gas compressor units for mating with the
25MW gas turbines, and the internal components for 5 centrifugal
gas compressor units to be mated with 10MW gas turbines for use
in gas pumping stations on the pipeline.
Dresser (France's) address is Dresser (France), S.A.
CIDEX L 192
Centre SILIC
5, Rue D'Antony
94563 Rungis, France
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 "QUESTION: Approved For Release 2008/03/05: CIA-RDP84B00049R000501350004-9
Who is Creusot-Loire S.A. and how is it hooked in the pipeline
and its relationship to Dresser (France).
ANSWER:
Creusot-Loire, S.A., located at 42 Rue d'Anjou, F75008 Parish 8,
France, is the parent of a large diversified metalworking
complex of companies with over a hundred subsidiaries in France
and other countries. The company is engaged in the manufacture
of steel products including cranes, pumps, extrusion materials
and engines. In 1979, the company had 24,247 employees.
Creusot-Loire along with Mannesman is the general contractor for
22 stations in the northern segment of the pipeline.
Creusot-Loire has ordered 21 centrifugal compressors from
Dresser (France), three of which have been completed and are
- .:Ig delivered to the USSR. These compressors are in ad :i tion
to the 42 compressors Creusot-Loire will provide. The
compressors were ordered from Dresser.(France) in
Creusot-Loire's capacity as the prime contractor for the
northern portion:of the pipeline.
Commerce is investigating the extent of.the participation of
Creusot-Loire in the Dresser violation of U.S. export
regulations.
Commerce/ITA/0099h
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Effects of Modifications on Dresser France and Creusot-Loire
QUESTION:
What effect will' the modification in the temporary denial order
have on Dresser France? On Creusot-Loire? '
ANSWER:
The modification will have a significant impact on Dresser
France. Their Le Havre facility manufactures a substantial
amount of oil and gas equipment, but up to 40 percent of their
revenues in this coming fiscal year may come from industrial
applicatiions. -
Creusot-Loire is a much more diversified company. It purchases
not only oil and gas equipment, but nuclear related items,
machine tools, and computers used for administrative purposes
and technology operations. These non oil and gas products will
be .affected by the modified TDO.
Commerce/ITA/0099h
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 Modif is Approved For Release 2008/03/05: CIA-RDP84B00049R000501350004-9 3ers
QUESTION:
Why were the temporary denial orders against Dresser France and
Creusot-Loire modified?
ANSWER:
A temporary denial order is a frequently used vehicle to protect
our national interests during the course of an investigation. When
alleged violations of our export regulations exist, the issuance of
temporary denial orders will prevent U. S. parts and technology,
still physically within U.S. borders, from beng shipped to
r violating parties. I t is not a punitive action. They are intended
9
as preventive measures to avoid additional possible violations.
Our initial'decision to prohibit export of all U.S. products,
services and technology-to Dresser France, and Creusot-Loire was
based on information we had available to us at that time, in effort
to prevent additional possible violation of our regulations toward
the USSR. As you know, these regulations are limited to oil and
gas technology and equipment.
After investigation, we believe that limiting our denial order to.
oil and gas equipment and technology is consistent with the
President's objectives of preventing, to the extent possible,
additional violations without unduly harming our allies and friends.
Our objectives remain the same. We intend to prevent violations of
our oil and gas regulations. By modifying the denial order, we are
simply refining the implementation and not the basic objective.
The President specifically chose the oil and gas sectors because
the costs to the Soviets would be the greatest in this area.
Commerce/ITA/0099h
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 C
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Difference in the Denial Orders
QUESTION
Are the temporary denial orders.against Dresser and
Creusot-Loire the same as the one against Nuovo Pignone2
ANSWER
The temporary denial orders against Dresser and
Creusot-Loire are being modified to limit them to oil and
gas equipment and technology, the same as in Nuovo
Pignone's case.
Commerce/ITA/0291)
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Secretary's Decision Regarding John Brown and Nuovo Pignone
QUESTION:
What is the Secretary's decision regarding John Brown and Nuovo
Pignone?
ANSWER:
The Secretary of Commerce announced the issuance of temporary
denial orders against John Brown Engineering (September 9, 1982)
and Nuovo Pignone (September 4, 1982) prohibiting export of all
U.S. origin equipment and technology related to oil and gas
exploration, production, transmission and refining.
Commerce/ITA/0099h
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Effects of Temporary Denial Order on Nuovo Pignone
QUESTION:
What effect will the temporary denial order. have on Nuovo Pignone?
ANSWER:
Ndovo Pignone is a diversified energy company which relies more
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heavily on Italian rather than U.S. technology except for turbine
production. It is believed that a third of their revenue is
derived from pipeline turbines, most of which are oil and gas
related. The temporary denial orer will have a significant impact
on Nuovo Pignone as over $500 million in business over the next 3
years is in oil and gas turbines, using G.E. rotors which cannot be
shipped under this order.
Commerce/ITA/0099h
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Nuovo Pignone Products Line
QUESTION
What is Nuovo Pignone, what is its product line, and how
large is it?
ANSWER
Nuovo Pignone is part of the Italian Government-owned ENI
oil company. ENI is a multi-billion dollar company with
operations world wide. Pignone's specific products fall
into three general categories: gas turbines, compressors,
and oilfield pumps, valves and coolers. Its yearly revenue
is estimated at $900 million.
Commerce/ITA/0291J
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Nuovo Pignone Contracts
QUESTION
How much of the Soviet natural gas pipeline-Is contracted
to Nuovo Pignone?
Nuovo Pignone is one of the prime contractors for the
Soviet pipeline and is contracted to deliver 19 complete
gas compressor stations, estimated at $600 million. As
part of that contract, Pignone is also scheduled to deliver
57 gas turbines and 5-7 compressors for the pipeline.
Commerce/ITA/0291)
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N uovo Pignone Ships Turbines
QUESTION
When did Nuovo Pignone start shipping their-products to the
Siberian pipeline?
ANSWER
The first shipment of gas turbines left Saturday, September
4, 1982. Consequently, the Department of Commerce issued a
temporary denial order against Nuovo Pignone Saturday
;, night. A temporary denial order prohibits the person or
company on whom'it is served from participating in exports
in the designated sectors (in this case gas and oil) from
the United States.
Commerce/ITA/0291)
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N uovo Pignone
QUESTION
Did the Italian Government order Nuovo Pignone to ship?
ANSWER
No. It is my understanding that the decision to ship was
made by the company itself.
Commerce/ITA/0291)
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l
John Brown Engineering
QUESTION:
What is John Brown Engineering Ltd and what is its relationship to
the pipeline?
ANSWER:
John Brown Engineering, located in Clydebank, Scotland, is the
manufacturer of heavy and light industrial gas turbines for power
packages and mechanical drives rated from 10 to over 100MWs. They
are a manufacturing associate of the General Electric Company and
depend completely on G.E. to provide the rotor section or core of
'the individual gas turbines for their complete gas turbine line.
John Brown Engineering manufactures most other components, and
assembles and packages the complete gas turbine unit using
technology for assembly provided also by G.E. under its
manufacturing associate agreement.
John Brown Engineering is a wholly owned subsidiary of John Brown
and Company Ltd. of London, U.K. John Brown and Company have 16
subsidiaries in the U. S. and John Brown Engineering has 3
subsidiaries, but none in the U.S. John Brown Engineering employs
approximately 1,700 people and is the major subsidiary of John
Brown and Company.
John Brown Engineering has a $182 million contract to supply 21
model MS5002 gas turbines for the Siberian natural gas pipeline
beginning in August 1982. They have 6 completed
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units on hand which were in their possession prior to 30
December 1980. These units were modified for rail shipping and
cold weather operations and have now been shipped (September 9)
to the Soviet Union.
Commerce/ITA/0107h
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John Brown and Creusot-Loire
C QUESTION:
What is John Brown Engineering's relationship to Creusot-Loire
S.A. of France and how is it connected to the pipeline?
ANSWER':
Creusot-Loire along with Mannesman of West Germany is the general
contractor for 22 pipeline compressor stations in the northern
segment of the pipeline. Creusot-Loire has ordered 21 Model
{ MS5002 gas turbine engines from John Brown Engineering, six of
which are'completed and being delivered.
DSchlechty/0107h
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 C
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Effects of Denial Order on John Brown Engineering
QUESTION:
What effect will the temporary denial order have on John Brown
Engineering?
ANSWER:
John Brown Engineering's business is both power generation and oil
and gas related turbines. The impact on John Brown Engineering's
oil and gas related areas will be substantial, since they will not
be able to complete their contracts to the Soviet Union. They can
still sell power generating equipment which is their predominant
line of business.
Commerce/ITA/0099h
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Japanese Exports to USSR for Pipeline
QUESTION:
There are reports from Tokyo that a Japanese firm, Japan
Steel Works using American technology has shipped pipeline
valves to the Soviet Union. What does the Department of
Commerce intend to do about this violation of the
President's oil and gas sanctions?
ANSWER:
I understand Japan Steel Works may have a licensing
agreement with an American firm which produces valves,
.including pipeline valves. Based on a preliminary
assessment the U. S. firm, Grove Valve and Regulator Company,
in fact manufactures conduit pipeline valves designed for
pipeline usage. Such valves would probably be covered by
the sanctions announced December 30 and extended June 22.
it that is true,.such an export to the Soviet Union. could be
a violation of the Department's regulations. The Department
of Commerce is taking steps to determine if the Japanese
shipment violates U.S. sanctions.
Commerce/ITA/0138h
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