Siberian Gas Pipe-line (Hansard, 2 August 1982)

§ The Secretary of State for Trade (Lord Cockfield)
My Lords, with permission, I wish to make a statement about the American export embargo as it affects companies in this country which have contracts connected with the Siberian Gas Pipe-line. As I made it clear in the debate in your Lordships' House on 26th July, the embargo in the terms in which it has been imposed is an attempt to interfere with existing contracts and is an unacceptable extension of American extra-territorial jurisdiction in a way which is repugnant in international law.
On 30th June I made an order under Section 1(1) of the Protection of Trading Interests Act 1980 citing certain provisions of the Export Administration Regulations as measures which were damaging to the trading interests of the United Kingdom. I had hoped—and indeed still hope—that it would have been possible for an acceptable solution to be found to this problem; but, despite strenuous efforts made by Her Majesty's Government, the American Administration has not so far responded.
In these circumstances I have decided that the trading interests of the United Kingdom require me to issue directions under Section 1(3) of the Act to certain named British companies forbidding them to comply with the American embargo. I have therefore issued directions today to the following companies, all of which entered into contracts prior to the announcement of 545 the United States embargo. The companies are: John Brown Engineering Limited, Smith International (North Sea) Limited, Baker Oil Tools (United Kingdom) Limited, and AAF Limited.
I have at this stage limited action in this way as I have no wish to escalate this dispute. I should hope that the moderation of our approach would persuade the American Administration to think again. But I do wish to make it clear, as I said in your Lordships' House on 26th July, that in the absence of a mutally acceptable solution I am determined to defend our own national interests.

§ Lord Ponsonby of Shulbrede
My Lords, I should like to thank the noble Lord for making his Statement and for exercising his discretion in favour of the United Kingdom's trading interests by forbidding the companies concerned to comply with the American embargo. In doing so the Government have wisely followed the lead taken by the French Government, who have already openly ordered French companies to defy the American embargo, and the Italian Government, who have made clear their intention that the ban should be defied. I hope that the West German Government will follow the lead set by their other EEC partners.
As the noble Lord has said, the embargo is an unacceptable extension of American extra-territorial jurisdiction which is repugnant in international law. With this we agree, and we see it as ill-considered, unfair, and inconsistent that almost at the same time the United States Government should end its grain embargo against the Soviet Union as a result of intense pressure from United States farmers. We must wonder whether the embargo imposed by the American Government is likely to do more damage to Western Europe than to Eastern Europe. I am glad that the noble Lord has taken this action, because it has been constructive in ensuring that about 3,000 jobs will be preserved in particular parts of British industry.

§ Baroness Seear
My Lords, we also wish to thank the noble Lord for making the Statement in your Lordships' House, and to say that we support the action taken in rejecting the American embargo, and in the instruction that has been issued to the four named companies. The employment consequences of any such embargo would, of course, be serious. We also support the whole idea of the development of the pipe-line.
At the same time, we view with great concern the fact that this further disagreement has arisen with the United States at a time when it looks as if a trade war is all too close as a result of the steel dispute which is already going on. I am sure that the noble Lord will be able to tell us that Her Majesty's Government are pursuing as vigorously as they possibly can the means of finding a solution acceptable to the Americans. While we are protecting our short-term national interests in the step we are now taking, if we have further disputes with the United States our longer-term national interest could be seriously at risk.

§ Lord Cockfield
My Lords, I am most grateful to the noble Lord, Lord Ponsonby of Shulbrede, and to 546 the noble Baroness, Lady Seear, for what they say. It is, of course, true that the action taken by the American Administration has resulted in a degree of tension on trade matters. I have endeavoured to conduct our own affairs in a way which does not exacerbate that tension. It is important to underline the fact that the Western Alliance is of crucial importance to the United Kingdom, to Western Europe, and indeed to America herself, and we ought to do everything we can to avoid any damage to that alliance. It is for this reason that the action we have taken has deliberately been restrained and has set out only to protect our absolute trading interests.
It is true, as the noble Lord, Lord Ponsonby, said, that there are a large number of jobs at risk if in fact the embargo were obeyed by companies in this country. This is one of the major reasons why we have taken the action that we have. It is true also that one might be more than a little surprised that, at a time when the American Government have imposed this export embargo, they should also continue to ship large quantities of grain to the Soviet Union, and we think that it is quite inequitable that the American Government should do this while expecting its allies to bear the brunt of sanctions against the Soviet Union in the pipeline case. We do not regard this as even-handed treatment. I can assure the noble Baroness, Lady Seear, that we shall continue to do everything in our power to find an acceptable solution, not only to this dispute but to the steel dispute as well.

§ Lord Taylor of Gryfe
My Lords, from these Benches we very much welcome the Statement made by the Minister. May I assure him that the Statement will be even more than welcome in Clydebank where John Brown operates and where unemployment is close to 20 per cent. of the population of that town. I should like to ask the noble Lord one or two questions. The first is whether in fact, despite the delay in the execution and acceptance of this contract and the fact that export credit terms have changed in relation to the Soviet Union in the past few days, the contract will be recognised on the export terms on which the contract was originally based?
Secondly, I should like to encourage the noble Lord to negotiate with our American allies on a code of conduct on future contracts affecting United Kingdom and USSR or Eastern European trade applying to companies which enjoy US licensing arrangements, and perhaps the noble Lord can tell us the responsibilities of the US Government to US company subsidiaries in this country which are presently competing for trade with the USSR? Further, can the noble Lord tell us whether the US Government have any more power over US-owned companies such as Brown and Root and Highland Fabricators who are bidding for off-shore supplies business at the moment, and whether the constraints which they apply on the licensing arrangements will be similarly applicable to US subsidiaries? May I encourage the Minister to continue these negotiations so that we are not frustrated once contracts are signed and have some code recognised, so that people who are negotiating for contracts can feel secure and confident while doing so.

§ Lord Cockfield
My Lords, I am obliged to the noble Lord for what he says. So far as the first 547 point is concerned—namely, on delay in the execution of contracts—I am not aware that in fact any such delay has occurred. One of the reasons why it was necessary to issue the directions now was that if the directions were not issued such delay might occur. Therefore, I think up to date at any rate there has been no problem here. The question of the ECGD cover is a matter to be negotiated between the companies concerned and the Export Credits Guarantee Department.
The noble Lord also raised the much wider question of negotiation with our American allies on a code of conduct for dealing with commercial relations with the Soviet Union. This is an interesting suggestion but it is difficult to see just at the moment what its chances of success would be. The important thing is to dispose of the present disagreement which has arisen. The noble Lord also raised the question of United States subsidiaries who are competing for trade in the Soviet Union. Presumably he had in mind subsidiaries in this country of United States companies. Indeed, it is against such subsidiaries that the American export embargo might very well bite. This was one of the factors that we have taken into account in issuing directions.

§ The Earl of Lauderdale
My Lords, would my noble friend be able to say anything about the Government's attitude to some of the energy policy aspects of this matter, notably whether it is indeed the case that the Soviet gas component of Western European energy needs will not in fact be a critical component? Secondly, by way of restoring better relations with the United States in this area, would we not be well advised to support the proposal which has been made many times for a cross-Channel gas pipe-line so that Norwegian gas can be fed to the Continent as a sort of alternative supply? Is my noble friend aware that this is indeed one of the recommendations of the European scrutiny committee of this House published only last week?

§ Lord Cockfield
My Lords, I hope that my noble friend will forgive me if I say that I have enough difficulty dealing with the trans-Siberian pipe-line without having to deal with the cross-Channel pipeline as well. So far as the wider issue he raised is concerned, my information is that the amount of gas coming through the Siberian pipe-line, when completed, would not represent a major part of Western Europe's supplies, and of course there are strong arguments in favour of diversification of supplies in view of the uncertainties which we all know exist in this field.

§ The Earl of Lauderdale
My Lords, is my noble friend saying that the Government cannot really comment on the energy implications of the whole matter?

§ Lord Cockfield
My Lords, it is only right that I should make the point that the statement I have made relates to the American attempts to embargo supplies to the trans-Siberian gas pipe-line. I should have thought that the question of a pipe-line across the 548 English Channel was somewhat remote, both geographically and in other senses. So far as the general energy question is concerned, I think I have answered the point my noble friend raised; namely, that the supplies coming through this pipe-line, when complete, would not in fact be a major component of Western Europe's total supplies.

§ Lord Rhodes
I think this was necessary, my Lords, particularly in view of the legislation which the Reagan Government put through in June of this year covering re-exports of American strategic materials, although they were exported from a country other than the United States. Can the British Government be sued in American courts on this matter? I would comment that this is a long-standing worry to the Department of Trade; I remember in 1950 the Westinghouse argument on uranium when we were taken through the American courts. I congratulate the Minister on having done what he has.

§ Lord Cockfield
I am obliged to the noble Lord for those remarks, my Lords. I should not have thought it was open to one Government to sue another Government in its courts except by the consent of that Government.