Stop the war with the allies

Washington is embarked on a self-defeating policy. When the whole Siberian pipeline affair started, the administration's purpose was to apply economic sanctions against the Soviet Union. Now the United States is waging economic war on its own trading partners. Meantime Western equipment for the pipeline is being shipped.

President Reagan has put himself in an awkward position on the issue. If he backs down on his economic offensive against US companies and their foreign subsidiaries supplying equipment for the pipeline, he will upset his right-wing supporters (already alienated by his action on Taiwan). If he pursues his present retaliatory course, he risks weakening the Atlantic alliance - thereby helping Moscow achieve its own objective.

How to get out of this dilemma? Fortunately, Secretary of State Shultz and the State Department are uncomfortable with the turn of events and would like to resolve the dispute. A call has gone out to the French, Germans, and other Europeans for new talks on East-West economic matters. Such talks could help get Mr. Reagan off the hook.

The fact is, the President has been justifiably irritated by the lax attitude of the Europeans on the matter of credits for East-bloc countries. This is an area where the NATO allies should toughen their policies for, as Mr. Reagan rightly argues, it is ridiculous for the West to supply the Soviets with equipment and technology on cut-rate terms. If the Europeans give on this issue , the President perhaps could ease off the pipeline issue without a loss of political face at home.

It is not clear how far the President will take his trade sanctions but the legal implications could be far-reaching. Will the US move against British and German as well as French subsidiaries of US companies involved in pipeline sales? If not, Dresser Industries can charge it is being discriminated against. And what about the French government-owned Creusot-Loire Company, which has subsidiaries in the US that now are prevented from doing business with their parent firm? Will it go to court?

Dresser Industries already is reported planning a legal challenge, once it has exhausted administrative remedies. Conceivably the firm could argue that Mr. Reagan's blacklisting of its subsidiary in France is an indirect effort to exercise jursidiction over Dresser France and to punish it. How the courts would look on the matter is uncertain. But, in cases of extraterritoriality generally, US courts have consistently ruled against the party claiming extraterritoriality.

Judicial action would, of course, take time - especially if a case went all the way to the Supreme Court. With the controversy bogged down in the courts, the issue would be out of the limelight and the administration would be in a position to let it fade away. However, Mr. Reagan would be well-advised to try to avoid litigation altogether. In the opinion of legal experts, that could prove counterproductive - by, say, tying the administration's hands when it wanted to work together with the allies in imposing sanctions.

Mr. Reagan, in short, is in a bind. From the very outset this was the wrong issue on which to confront the Soviet Union. Those in the administration who advised him to do so were less concerned about Polish martial law (they raised the pipeline issue long before the clampdown) than with pursuing their goal of curbing East-West trade. Now it remains for fresh voices in the administration - including that of Mr. Shultz - to resolve the crisis and set US policy on a more balanced course.

At stake is no less than the unity of the Atlantic alliance. There have been myriad disputes in the past - the multilateral force (MLF), the neutron bomb, Afghanistan - but previously the allies always managed to keep them from escalating to the point of angry recriminations. This appears to be far more serious. Surely the President's overriding goal must be to safeguard NATO - and not feed the view of those Europeans who are begining to think the US is not a reliable ally and therefore Europe should go its own way.

How Mr. Brezhnev would like that.