Secretary of State George P. Shultz, still settling into the nation's top foreign policy job, faces an urgent challenge to avert a crumbling of trust and confidence between the United States and its closest European allies.
The immediate issue is a clash between President Reagan and the leaders of four European allies over whether or not American technology can be used to help the Soviets build a 3,600-mile pipeline to deliver Siberian natural gas to Western Europe.
Most high-ranking US officials want to stop short of open confrontation with European allies that might plummet transatlantic relations to their lowest point in many years.
Some American officials, however - centered in the Defense Department under Secretary Caspar W. Weinberger - reportedly are willing to risk allied friction in an effort to punish the Soviet Union economically.
Mr. Weinberger argues that sales of Soviet natural gas to Western Europe through the controversial pipeline would give Moscow enough money to boost its military buildup.
Against this interpretation is the widespread view among other administration officials that Soviet-West European cooperation on the pipeline is too far advanced to be halted.
This school of thought, reportedly led by Mr. Shultz and the secretaries of Treasury and Commerce, places a high priority on easing European resentments that might spill over into other fields.
European leaders have no quarrel with President Reagan's order of last December, forbidding US firms to deliver equipment for the pipeline. This is taken as an internal US concern.
What troubles Europeans is Reagan's later extension of his ban to include foreign subsidiaries of American firms and foreign companies manufacturing equipment under US license.
This centers on gas compressors and turbines, essential to the Yamal pipeline , for which General Electric holds the patent. The White House claims that it would be hard for the Soviets to find substitutes for this technology.
At stake from the European viewpoint are thousands of jobs, at a time when unemployment is running at near record levels throughout the European Community (EC), and the loss of hundreds of millions of dollars' worth of orders from Moscow.
Three European governments - the British, French, and Italian - have told companies in their jurisdictions to fulfill contracts signed with the Soviets before Reagan's order went into effect. West Germany also indicates it will ignore the Reagan ban.
Steaming down the track toward immediate collision are President Reagan and French President Mitterrand, with an American firm called Dresser Industries of Dallas and its French subsidiary caught in the middle. Last June, complying with Reagan's sanctions, the Dallas firm directed its French branch to stop work on 21 gas compressors ordered by Moscow for the pipeline.
Mr. Mitterrand's government ordered Dresser France to keep on building the compressors and to load the first three aboard the Soviet freighter Borodin at the French port of Le Havre this week.
French officials, backed by the governments of the other European countries involved, claim the US has no right to interfere with the foreign commerce of another nation.
A formal protest by the EC, delivered in Washington Aug. 12, said the Reagan ban includes ''sweeping extensions of US jurisdiction which are unlawful under international law.''
When sovereign governments give conflicting orders to a company, said a Dresser official, the firm finds itself ''between a rock and a hard place.'' Dresser is subject to stiff penalties wherever it turns.
The company has asked a US district court in Washington to rule on which government's laws must be obeyed. Dresser also asks the court to enjoin the Reagan administration from applying sanctions against the firm.
A top-level Reagan administration team, meanwhile, - including Mr. Shultz, the secretaries of Defense, Treasury, and Commerce, national security adviser William P. Clark, and US trade representative William E. Brock - is grappling daily with the US-French crisis over Dresser.
''Their problem'' said a senior official close to the negotiations, ''is to find a formula that maintains the President's credibility, yet does as little damage as possible to transatlantic ties.''
One suggested solution would preserve Reagan's ban on pipeline equipment or technology going to the Soviet Union from the US itself, while allowing European firms to fulfill existing contracts.
At this writing no agreed formula is in sight, said the senior official, partly because some Defense Department officials ''want to make a tough assault against France.''
Some administration officials, including Mr. Clark, had hoped that martial law in Poland might be relaxed sufficiently to allow President Reagan to ease up on sanctions. Soviet-backed repression in Poland had impelled Reagan's moves in the first place.
That hope now appears dim, as tension mounts in Poland over the second anniversary of Solidarity's birth and with union leader Lech Walesa in detention.
Another avenue being explored is to urge the Europeans to put together a package of future gas deliveries from Algeria, Norway, and The Netherlands that might reduce, if not eliminate, the need for supplies from the Soviet Union.