EXPORT ADMINISTRATION REVIEW BOARD (EARB) MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001800030004-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: April 20, 2007
• Sequence Number: 4
• Content Type: MEMO

CIA-aBPa$BOi
049R001 800033,9,ACFIENT A
THE SECRETARY OF COMMERCE
Washington, D.C. 20230
e"Jrf t'Z2~ G ~la~
MEMORANDUM FOR: Secretary of State
Secretary of Defense
Secretary of Energy
Assistant to the President for
National Security Affairs
Director of Central Intelligence
SUBJECT: Export Administration Review Board (EARB) Meeting
I will hold a meeting of the EARB in my office on Thursday,
November 5 at 4:30 pm. The EARB has not met since 1976. I wish to
reactivate this body to obtain your views on these export control
matters due to their national security and major policy implications.
The three export control cases listed below require Board review.
FOR DECISION NOW:
International Harvester's export license application for
agricultural combine plant technology to the U.S.S.R.;
FOR DISCUSSION ONLY:
Caterpillar Tractor Company's export license
application for pipelayers for oil and gas projects in
the U.S.S.R.;
Ingersoll-Rand's inquiry (not through a license
application) as to our policy on the export of gas
turbine compressors for the Siberia-Western European
gas pipeline.
A short paper on each of these cases is attached as background for
the discussion.
Secretary of Commerce
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Background Paper
Export Advisory Review Board (EARB) Meeting
November 5, 1981, 4:30 pm.
International Harvester
In February 1981, International Harvester (IH) submitted an
application for export license for the sale of agricultural grain
combine technology to the U.S.S.R., valued at $274 million. The
technology will be delivered over five years.
As a joint effort with the U.S.S.R., IH would supply combine
specifications, plant layout and equipment specifications. The
Soviets would design the plant, provide the engine and power train
and use their own metallurgy. IH will not supply any equipment.
The plant's production is expected to be 30,000 combines a year, or
roughly 23 percent of total Soviet production. According to the
Central Intelligence Agency, the Soviets harvest some 130 million
hectares of grain crops, or roughly double the U.S. total of 68
million hectares (1 hectare = 2.5 acres).
At the same time, the total number of combines in use by the Soviets
? is only one-third greater than that in the United States. One
Soviet grain combine covers approximately 185 hectares, compared to
one U.S. combine which covers roughly 125 hectares.
If the Soviets hope to achieve the U.S. ratio of combines per
hectare they would have to increase their inventory by more than 50
percent'.
Most of the new grain combines currently produced by the Soviets are
required for replacement of existing stocks, which are rapidly
depleted because of relatively heavy use, poor design and production
quality and improper maintenance.
In September, the technical side (USDRE) of the Department of
Defense recommended approval of the sale. Defense's policy side
(IETSP), however, has not.
Defense's primary concerns are that:
o The manufacturing know-how learned from IH could be
employed in Soviet Defense Priority Industries, in which
the transfer of combine manufacturing know-how could be
applied to making armored personnel carriers (APCs).
o The new plant could free up other combine plants for
military manufacturing, leaving a question about use of the
plant.
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Technology for the combines can be purchased elsewhere should the IH
license not be granted. It is rumored that the West German firm,
Claas, also may be negotiating with the Soviets to provide technical
assistance should the IH project collapse.
What IH will supply are the blueprints for the factory. The plant
layout consists only of the "work flow" diagram with all equipment
to be supplied by the Soviets. There will be no transfer of
information relating +-o the power train, transmission and engine or
of metallurgy technology. No advanced manufacturing know-how, such
as industrial robots will be transferred. IH will also be
prohibited from transferring any technical data specifically
relating to military vehicles by terms of the license.
The Department of State gave its approval to the license on
September 8 and Commerce has found no reason, from either a
technical or national security basis, to disapprove the license.
Defense continues to have reservations. More than eight months have
elapsed since receipt of the IH application. It is an imperative
that this case be decided.
Caterpillar Tractor
The President in July approved an export license for 100 large
diameter pipelayers to the Soviet Union. Provisions on the license
prohibited usage of these pipelayers on the Yamal natural gas
pipeline from Siberia to Western Europe.
On September 21, 1981, Caterpillar submitted a license application
for another 200 pipelayers, valued at up to $90 million, for
delivery in the first half of next year.
Although exact locations for the equipment's use have not been
revealed by the Soviet Union, Caterpillar has been told that the
equipment would not be used on the Siberian gas pipeline. The
Caterpillar application simply notes that the pipelayers will be
"used for laying pipe in the U.S.S.R." Caterpillar has indicated it
will provide end-use assurances that the equipment will not be used
on the Siberia pipeline once the Administration provides a signal
that a license will be granted and acceptable assurances regarding
the pipeline are negotiated.
The Commerce Department circulated the case for interagency advice
and guidance on October 5. On.October 7, Defense "advised against"
approval of the proposed sale, as it did for the previous
Caterpillar application. "These pipelayers are obviously intended
to be used for a major oil and gas project," a letter by Deputy
Assistant Secretary Stephen D. Bryen said..
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The Soviets won't sign a contract until Caterpillar gives assurance
of a license approval. Because Caterpillar plans to close out its
production of line Model 594 pipelayers by mid-1982, the company
needs to make a decision soon. Otherwise, it may temporarily lay
off 12,000 employees in November due to declining worldwide sales.
Caterpirllar must make supplier commitments in the coming weeks if
they are to keep their line open and sell any additional Model 594
pipelayers.
The efficiency of technology transfer is considered low. The
pi pelaye rs are end-items produced by conventional machine shops and
assembly procedures which are well known in industrialized
countries. Technical data would be in the form of Service Manuals,
Operations Manuals, Lubrication and Maintenance Guides and an
addend wn for cold weather operation to be supplied in Russian and
parts books to be supplied in English. There would be no other
technical data, training or technical assistance provided.
We consider that the significance of this sale to Soviet production
is low. The machines would be used to build pipelines for
transmitting oil or natural gas. While the potential for diversion
to uses other than constructing pipelines is minimal, the machines
could be diverted to the Siberian-West European gas project, even if
the license is granted with conditions to discourage potential
diversion.
The Japanese firm of Komatsu, LTD., is competing as an alternate
supplier. Komatsu could fill the order without expanding its
facilities, although the rumors are that the Japanese would not have
filled the order if the United States had not approved the first 100
pipelayers.
Ingersoll Rand
Ingersoll-Rand has asked they could compete for the gas turbine
compressor units for the West Siberia Pipeline. Although these
items are so called G-DEST (exported freely to most destinations,
including the USSR), we have told them that one. of the options
before the President is to stop.any sales targeted for the
Pipeline. Ingersoll-Rand has not competed for the sale, although
there is good evidence to suggest that the French, Japanese and
Italians have at least signed letters of intent to sell similar
equipment. Ingersoll-Rand,, and probably other U.S. firms, would
like to compete but are he4itant to go ahead wthout a signal from
the Administration.
Deriv. Classified by Lawrence J. Brady
AS/TA
Review on
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