Sanction Russia? Reagan Tried It With No Luck

Mar 17, 2014 8:52 AM ET
By James Gibney

As the U.S. and the European Union consider the expansion of sanctions against Russia for its likely annexation of Crimea, a potential Santayana moment looms: in this case, a possible repeat of the imbroglio that ensued in 1981-82 between the U.S. and Europe over the building of the Soviet Union’s Siberian Gas Pipeline. It’s an episode with sobering lessons for both sides.

At the time, the deal to build a 3,000-mile pipeline to bring Siberian gas to Europe was the biggest East-West project yet undertaken. European leaders saw it as a chance to diversify Europe’s energy sources away from the Organization of Petroleum Exporting Countries while advancing Ostpolitik -- the German strategy of engagement with the USSR.

Cold Warriors in Washington, however, were nervous and unhappy. During the summer of 1981, the Reagan administration’s National Security Council tried to forge a coordinated response to the pipeline, which also represented a commercial opportunity for market-leading U.S. firms and technology. U.S. Secretary of Defense Caspar Weinberger, Central Intelligence Agency director William Casey and ambassador to the United Nations Jeane Kirkpatrick didn’t want to give the USSR either know-how or hard currency, and fretted about European energy dependence. Secretary of State Alexander Haig, however, worried that stiff restrictions would be ineffective and split the Atlantic alliance. Treasury Secretary Donald Regan and Office of Management and Budget Director David Stockman argued that the pipeline would help the global economy by boosting energy supplies. Others pushed for expanded export controls. Bombarded by options and opinions, President Ronald Reagan complained in an October meeting, “I’m the most confused person of anyone.”

Backed by the Soviet Union, the Polish Army’s declaration of martial law in Poland on Dec. 13, 1981, forced the Reagan administration to clarify its thinking. As part of the ensuing sanctions against Poland's military regime and the USSR, the administration ordered U.S. companies to abandon work on the Siberian pipeline, but made no decision on extending the ban to U.S. subsidiaries or licensees of U.S. technology. A rift between the U.S. and Europe on pipeline sanctions began to widen. When the U.S. decided in late June 1982 to apply sanctions to any U.S. technology or licensee, France’s foreign minister said the decision “could well go down as the beginning of the end of the Atlantic alliance.” France, among other countries, refused to go along. A few months later, in a face-saving compromise, the U.S. agreed to withdraw the pipeline sanctions in return for tighter general controls on the transfer of technology to the USSR.

Haig thus turned out to be right when he argued that, “by pursuing our maximum objectives, we run the risk of coming away with very little, severely weakening the alliance and isolating us from our Allies.” Even Margaret Thatcher went wobbly: In a September 1982 meeting with Weinberger, she told him that she didn’t think sanctions would help ease the repression in Poland, and that England faced the possibility that the U.S. pipeline decision would result in four or five U.K. firms going bankrupt. It didn’t help matters that the U.S. had little to propose to Europe as alternatives to Soviet natural gas, especially given the nasty energy shocks that the Europeans had endured at the hands of Middle Eastern suppliers.

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http://www.bloombergview.com/articles/2014-03-17/sanction-russia-we-ve-tried-this-before