Run Silent, Run to Moscow

By Gordon Bock

Don't get mad, get even. That was the cry on Capitol Hill last week, as Congress considered retaliation against two foreign companies that illicitly sold to the Soviet Union important high-tech equipment used in building submarines and aircraft carriers. The targets looming in the congressional periscope: Toshiba Machine, which is 50.1% owned by the Japanese conglomerate Toshiba Corp., and Kongsberg Vapenfabrikk, a state-owned computer and weaponmaker in Norway. Several lawmakers even suggested that Toshiba and Kongsberg be barred from selling products in the American market. "I'm talking about retribution," said Republican Senator Jake Garn of Utah.

The uproar grew out of an international scandal that has slowly been surfacing for more than six months. Concerned by apparent advances in Moscow's military technology, the Pentagon last year launched a probe to find out why the newest Soviet submarines were so much quieter and thus less vulnerable to enemy detection than their predecessors. Investigators discovered that between 1981 and 1984 Toshiba Machine and Kongsberg had falsified export documents and secretly supplied the Soviets with computer-controlled lathes used to manufacture state-of-the-art propellers for submarines and aircraft carriers. The props are particularly valuable on Soviet subs because the blades enable the vessels to slip more quietly through the sea.

The machinery shipments represent perhaps the most egregious violation yet of regulations established by the 16-nation Coordinating Committee on Export Controls, the body that oversees the sale of Western high-technology products to the Soviets and their allies. After Washington protested in March to the Japanese and Norwegian governments, Tokyo and Oslo took action. Two Toshiba Machine executives thought to have been involved in the improper deal were arrested and charged with violating Japanese export laws. In addition, Toshiba Machine was prohibited from selling any goods to 14 Communist countries for one year. Though not directly implicated in the scandal, Toshiba Machine President Kazuo Iimura and three other top executives resigned. Norway, meanwhile, closed Kongsberg's trading arm and charged its sales manager with providing false information to the country's export authorities.

As stern as these actions sound, they are apparently not enough to satisfy Congress. The House of Representatives voted 415 to 1 last week to require the State Department to "enter into discussions with Japan and Norway regarding compensation for damage to United States national security." The next day members of a Senate subcommittee on international finance raised the possibility of a long-term ban on U.S. imports of Toshiba and Kongsberg products. That would be an especially devastating blow to Toshiba (1986 revenues: $22.8 billion), which exported $1.6 billion in TV sets, VCRs and other goods to the U.S. last year.

The White House may be more conciliatory than Congress. Though a senior State Department official says Japan and Norway "took their time waking up to the problem," he contends that both countries have since responded vigorously. President Reagan probably does not want a fresh trade confrontation with Tokyo; just two weeks ago he lifted some of the tariffs he had imposed on Japanese imports after the semiconductor dispute.

Whatever action is taken, the Navy may still face a serious problem. Though the U.S. has only 96 attack submarines, in contrast to the Soviets' 265, the American fleet used to be considered stronger by virtue of superior technology. Now that the new Soviet subs are equipped with quieter propellers, that superiority is threatened. As a result, the Navy may convince Congress that the number of U.S. subs must be increased sharply. Because the newest submarines under development -- known as the Seawolf class -- will cost more than $1 billion each, it is the U.S. that could pay the highest price for Toshiba's and Kongsberg's dealings.

With reporting by Yukinori Ishikawa/Tokyo and Bruce van Voorst/Washington