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Toshiba-Kongsberg Incident

The sale by the Japanese and Norwegians to the Soviets of $17 million of computer-controlled machine tools in a period from 1981 through 1984 represented the most important military setback for the West in recent years. Norway and Japan are both American allies. Both rely heavily on the United States for protection against the threat of the Soviet Union. And yet a Japanese company, Toshiba Machine Co. and a state-formed Norwegian firm Kongsberg Vaapenfabrik, worked closely to together to export to the Soviet Union precisely the tools necessary to make the submarine propellers that would enable the Soviets to build a submarine fleet that will permit them to fabricate the propeller blades for their submarine that would in turn give them the ability to evade the present United States sonar technology and make up for much of the big disadvantage the Soviets suffered in the relative noisiness of their submarines.

Norwegian and Japanese officials falsified model numbers on the export li- cense applications and claimed the Norwegian computers and the Japanese machines were legal to export. Stephen Bryen, the head of the Export Administration for the Defense Department said "these people did terrible damage for the sake of making just one more sale." The real threat will come from superquiet Soviet subs that can cruise anywhere off America's 2,500 miles of coastline. From those subs, the Soviets could fire cruise missiles that slam in at tree top level - with maps in their computer operated brains - so they can fly around obstacles.

Early in 1983 a team of Japanese engineers from the Toshiba Machine Company arrived in Leningrad, the center of Russian shipbuilding since Peter the Great, and were whisked through the back gate of the heavily guarded Baltic Shipyard. There they painstakingly assembled more than $17 million worth of computer-controlled machine tools used to make ship propellers. Over the next 18 months the engineers returned to the Soviet Union about half a dozen times. Working alongside computer specialists from a state-owned Norwegian company, they fine-tuned the four imposing machines, each of which stands two stories high and weighs half a million pounds. As part of the deal, the Soviet Union even obtained a five-year service agreement.

The Coordinating Committee for Multilateral Export Controls (CoCom) was established during the Cold War to put an embargo on Western exports to East Bloc countries. CoCom had 17 member states: Australia, Belgium, Canada, Denmark, France, Germany, Greece, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, Spain, Turkey, Great Britain, and the United States.In addition there were a number of cooperating countries, such as Austria, Finland, Ireland, New Zealand, Sweden, and Switzerland.

It was revealed in 1987 that Japan's Toshiba Machine Company had supplied eight computer-guided propeller milling machines to the Soviet Union between 1982 and 1984; an action that violated the CoCom regulations. It was argued in the United States that this technology greatly improved the ability of Soviet submarines to evade detection, leading to a significant cost for the United States to improve its own technology once more.

The nuclear race under water between the USA and the USSR began in the 1950s. The first US nuclear submarine USS "Nautilus" SSN-571 was introduced into the fleet in 1954, the first Soviet K-3 (subsequently B-3) "Lenin Komsomol" project 627 - in 1959. The first and second generation of Soviet nuclear powered ships were very noisy. The Americans called them "roaring cows."

The importance of the submarine fleet is determined by its secrecy, and the submarines, which could be found hundreds of nautical miles, did not possess stealth. Due to geographical features, the routes to the areas of military patrols at the Soviet nuclear-powered ships were constant, as were Soviet propellers were 30 dB louder than American ones. That is why, at first, with the help of the SOSUS system, the United States controlled all movements of Soviet atomic submarines. The problem was added by the fact that industry began to design third-generation submarines (projects 971, 949, 945, 941) equipped with new weapons.

Noisiness was associated with three factors. Firstly, the noise of a nuclear submarine is always higher than the noise of a diesel-electric submarine. This is due to the fact that a nuclear turbine has a turbine whose shaft rotates at a tremendous speed. But the boat should be able to move in both small and medium speed. To make the propeller rotate at the right speed, there is a gearbox, which is the source of noise. This, so to speak, is a generic sign of the noise of a nuclear-powered ship.

But noise is also created by the propeller itself. Soviet industry could not solve this problem. As the propeller blade cuts through the water, there is a cavitation effect, in which bubbles form and create areas of low pressure, which collapse. This leads to water hammer sound. The third source of noise is the distinctive sound consisting of blade tonals caused as the propeller cuts through the wake created by appendages in the submarine's hull. To reduce noise, it was necessary to sharpen complex screw surfaces very smoothly and accurately, with minimal tolerances, and this required completely different equipment - multi-axis metalworking centers with automatic control.

In the late 1970s an employee of the US Navy - John Walker - was the key Soviet agent in the West. He provided alarming information. The information the Walkers divulged to the Soviets enabled Moscow to decipher top-secret traffic on submarine tactics that is significant for acoustic detection capabilities. In the composition of the acoustic signature with which the Americans identified the Soviet boats, they emphasized the hum of propellers. An attenuating sound wave from the propeller of the first-generation Soviet nuclear submarine was heard at a distance of 200 nautical miles (about 370 km).

Once the Soviets learned of the extent of United States detection capabilities they proceeded to purchase Western technology in order to produce quieter propeller blades. Something had to be done with the noise. To solve the problem, it was decided to involve special services.

Submarine Propeller Submarine Propeller Cavitation Submarine Noise

Japanese business had always been "flexible" in its approach to customers. In the 1970s, large Japanese corporations had a number of intermediary companies in Moscow, whose task was to track the needs of Soviet foreign trade organizations and help conclude deals. Such help was especially needed if the deal went in violation of any prohibitions. In those years, the main initiator of the bans was the so-called COCOM (Coordinating Committee for Multilateral Export Controls), an international organization in which countries participated on a voluntary basis, without signing any international treaty. The Americans understood that the Soviet Union would buy the military technology it needed, and even then they banned their sale. In fact, countries simply reaffirmed their agreement with the stated principle. There was no executive body in COCOM that would force countries to adhere to decisions made. The United States tightly controlled only its companies. Under those rules, the Americans could only hope that the government would voluntarily launch a lawsuit against the offending company.

At the beginning of 1980, representatives of the Soviet foreign trade organization Techmashimport contacted Wako Koeki, a small Japanese intermediary trading company in Moscow. By that time, Wako Koeki already had its own story. The company was created in the early 1950s and first worked in communist China. Subsequently, the geography expanded, and a representative office appeared in Moscow. The request was for the supply to the USSR of a nine-axis metalworking center — the MVR-110 milling machine. The word nine-coordinate means that this machine had 9 points (axes) of attachment of the cutting tool (spindles)for simultaneously turning the ship's propeller. This is a miracle of machine tool industry produced by "Toshiba Machines". In their 1980 catalog, this machine cost five million dollars. The weight of the machine was 220 tons, a width of 22 meters and a height of 10 meters. On the machine it was possible to process propellers with a diameter of up to 11 meters. It was supposed to buy four nine-axis and four five-axis machines. The total amount in 1981 prices was almost $100 million.

On the side of Wako Koeki, negotiations were conducted by Hitori Kumagai (aka Kazuo Kumagai). Calculating the possible profit, he immediately flew to Japan. Toshiba became interested in a possible contract. It was decided to supply the required number of processing centers in the USSR, despite the limitations of COCOM.

But Toshiba understood that the delivery was "not entirely legal", and that a cover operation was required. On the one hand, Toshiba attracted the C. Itoh & Company (Itochu). This was done so that there were no suspicions among government officials responsible for issuing export licenses. On the other hand, the Japanese attracted the Norwegian company Kongsberg Trade, a trading division of the state-owned defense company Kongsberg Vaapenfabrikk, which allegedly sold its automatic digital control system and related software to the Japanese.

For Kronsberg it was not the first time to violate the sanctions of COCOM. In 1974-1986, they conducted at least nine transactions with Soviet foreign trade organizations.

Over the year 1981, five contracts were concluded. The first was between Techmashimport and C. Itoh & Company ” (Itochu)on the supply of four indefinite milling machines, as well as maintenance for a period of five years and spare parts. The second contract was concluded between Techmashimport and Kongsberg Trade, and it concerned the purchase of an NC-2000 CNC controller, which, in essence, was a computer capable of controlling a milling machine. A third contract was signed between Kongsberg Trade and Toshiba Mashin, and in it Kongsberg Trade agreed to supply Toshiba Mashin digital controllers for their MBP-110 machine before it was delivered to the Soviet Union by Itochu. The fourth and fifth contracts dealt with the payment by Kongsberg and Toshiba of Wako Koeki's agency fee for organizing negotiations.

Japanese businessmen filed fake end-user certificates with supervisors. This document in the system of international trade in arms and military technologies defines the country in which purchased equipment and systems will be operated. Fake end-user certificates said the sale of TDP 70/110 rotary-boring machines with two axes (spindles) for civil shipbuilding and the end user was one of the shipbuilding plants of Leningrad. Norwegian controllers called parts. COCSOM accepted these papers without comment.

The first part of the delivery was along the Northern Sea Route to Leningrad in the spring of 1983, the second part - along the southern route to the port of Illichivsk in 1984. In December 1983, the first two centers were assembled at the Leningrad Baltic Plant. By the end of 1984, all the machines were mounted and were fully operational. This deal was a classic of the genre. Officials are shown one contract, they work differently, direct deliveries, no re-export.

During such complex operations, punctures always happen because of a trifle that no one can foresee. Hitori Kumagai (aka Kazuo Kumagai), the very one with whom this whole story began, found himself denied a raise. For Japanese corporate ethics, this was a tragedy. Kumagai had 22 years of work in socialist countries, 10 years worked in Moscow. It was he who organized the installation of machines at the Baltic Plant. He considered himself one of the key participants in the contract, but the promotion did not take place. Moreover, he was fired from Wako Koeki.

He threatened Wako Koeki management with exposing the deal. Toshiba did not respond, the Soviet side proposed monetary projects to Kumagai, but for some reason it was not possible to come to an agreement. Kumagai first wrote a statement to the Tokyo police. Then, in December 1985, he wrote directly to COCOM headquarters in Paris, attaching all the documents on nine-axis machines. COCOM was very surprised and began correspondence with the Japanese ministries involved in the transaction. But the Japanese did not pay much attention to COCOM letters.

Then the restless Kumagai wrote to the US Embassy in Japan. Now the US embassy began to write letters to Japanese departments, and at least 40 different requests were written. The Japanese responded “We don’t know anything. Everything was legal.” This was a rare occasion when the Americans could not do anything with the government of Japan. Then, in January 1987, the United States decided to go from the other end, and made an official request to Norway. The Norwegian government conducted its investigation, and revealed violations, both from the Japanese and the Norwegian side. Only after that, in the summer of 1987, the Japanese government recognized a violation of the requirements of COCOM.

Pentagon officials, on the other hand, maintain that rather than a letter, they received a series of clues that led them to discover the deception and link the Japanese and Norwegians to the illegal sale.

Kumagai supposedly wrote a book in which he described the standard scheme of this type of transaction. There are two contracts for the transaction - one for the goods permitted for export, the second - the actual one. The book described the methods of the transaction - delivery of goods directly to the USSR trade mission, dismantling of equipment into several parts, delivery through third countries.

Very surprised by the information received, the United States faced a dilemma - how to respond? As usual, the voices from the US Congress sounded loudest. They demanded to severely punish Toshiba and Kongsberg. Congressmen demanded to close the American market for them for up to five years. The Reagan administration was opposed, as it understood that such a reaction would only weaken SOSOM. As a result of difficult negotiations, the US market for these two companies was closed for three years, and the scandal was used to tighten the work of COCOM.

At Toshiba, two top managers resigned - President of the entire group, Sovietera Watari and Chairman of the Board of Directors of Seite Saba, . Two employees directly supervising the project were sent to prison. Toshiba Mashin was banned from trading with socialist countries for a year. "C. Itoh & Company ”(Itochu) banned trading with socialist countries for a period of three months. The Norwegians left only military production at Kongsberg, and the rest of the structures were liquidated.

The Americans were forced to invest heavily in the development of sonar systems for the detection of low-noise submarines. The third-generation Soviet nuclear submarines were noisier than American nuclear-powered submarines, which led to another tension in the underwater confrontation between the two countries. And Toshiba machines with Kongsberg controllers still work.

In 1988, Congress moved to sanction Toshiba and bar imports into the United States of Toshiba products. Sections 2442 and 2443 of Pub. L. 100–418 contained congressional statement of findings, directed President to impose, for a period of 3 years, (1) a prohibition on contracting with, and procurement of products and services from, Toshiba Machine Company and Kongsberg Trading Company, and any other foreign person whom President found to have knowingly facilitated the diversion of advanced milling machinery by Toshiba Machine Company and Kongsberg Trading Company to the Soviet Union, by any department, agency, or instrumentality of United States Government, and (2) a prohibition on importation into United States of all products produced by Toshiba Machine Company, Kongsberg Trading Company, and any such foreign person; and directed President to impose, for a period of 3 years, a prohibition on contracting with, and procurement of products and services from, the Toshiba Corporation and Kongsberg Vaapenfabrikk, by any department, agency, or instrumentality of the United States Government, with certain exceptions.

The sale of the Toshiba propeller milling machinery to the Soviets, and other submarine intelligence furnished by the Walker spy ring resulted in significantly quieter Soviet subs by the later part of the decade. As writer Neal Stevens wrote about the Akula-class Soviet boats, "The combined results generated a steep drop in broadband acoustic noise profiles." Prior to this betrayal of the Western Alliance, NATO antisubmarine warfare specialists could pick up the sounds of Soviet submarines from 200 miles away, or roughly the distance from Washington to New York). After the Toshiba incident, the distance decreased to 10 miles.




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Page last modified: 24-02-2020 18:28:18 ZULU