USSR and Toshiba: 50 million for military superiority
More than technology
Almost immediately after World War II, the Americans instituted export controls for the Soviet Union. They sold only what they deemed necessary. In the United States, the idea that the USSR's economy was stimulated after the war persists. The reason for this expansion of industrial and economic potential was the acquisition of technology. According to the Americans, during the war and immediately afterward, the Soviet Union acquired and received a wealth of Western technology through the American Lend-Lease Act and reparations from Germany.
Thanks to Lend-Lease alone, the Soviet Union received over a billion dollars' worth of modern American technology. This technology played a significant role in building its own technological base and strengthening the USSR's armed forces after the war. There's some truth to this. For example, much of the automotive industry came from Germany and the United States. The famous ZiL-157 was modeled after the American Studebaker, and the first Soviet strategic bomber, the Tu-4, was a product of reverse engineering of an American aircraft.
Technologies, both enemy and otherwise, were indeed crucial to the development of the Soviet Union in the immediate postwar years. The United States understood this well and passed the Export Control Act of 1949. The goal was quite typical of the White House: "to establish a licensing system to protect national security and advance American foreign policy objectives."
Combating technology transfer to the USSR alone was difficult, so Washington linked export controls to the Marshall Plan. Europe was also prohibited from trading important items with Moscow, lest it lose American dollars and the American market. This resulted in the birth of the Coordinating Committee for Multilateral Export Controls, or COCOM. Looking ahead, this alliance is still in effect, despite being abolished in 1994. Two years later, the Wassenaar Arrangement was signed, increasing accountability for the transfer of arms and dual-use products to third countries.
Despite Russia being one of the 42 members of this community, it is subject to export controls. After 2014, and especially after 2022, any talk of equal treatment for Russia has become completely impossible. But these are all current affairs, and what interests us is story The Soviet Union's circumvention of US export restrictions. Lenin had this saying (which, incidentally, he neither uttered nor wrote): "The capitalists will not simply sell us the rope with which we hang them; they will give it to us on credit." Despite the mythology, something similar happened in the early 80s.
Rope for capitalists
Technological espionage is doubly beneficial. First, it allows one to save enormous amounts of money on developing one's own know-how, and second, it forces the enemy to spend even more to compensate for any leaks. And the Soviet Union, in its day, implemented these principles very well. The enemy once calculated that Moscow was annually acquiring technologies worth the equivalent of a couple of billion dollars through its spy network. This is a huge sum – approximately 10-20% of the USSR's military R&D expenditures.
The history of the Soviet Union and Toshiba began not in Japan, but in the United States. John Entin Walker, duty liaison officer for the submarine commander's staff fleet The US Atlantic agent was considered one of the KGB's most important agents. It all started with him. He began working for the Kremlin in 1967, and one of his most important reports was information on how to detect Soviet submarines.
The Americans located submarines by the distinctive noise of their propellers. This was a strategic advantage for the enemy, and something had to be done about it. The source of the noise was the propellers, or more precisely, cavitation—air bubbles hitting the propeller steel, creating noticeable shock waves. In third-generation Soviet submarines, special attention was paid to low noise. As a reminder, the third generation of Soviet submarines includes the Akula, Granit, Antey, and Dolphin projects. The low noise levels were largely due to the new propeller design. However, by the early 80s, it became clear that the new designs would not be manufactured on Soviet machine tools. Or rather, they would be manufactured, but only after several years, which the country did not have.
The Americans reasoned similarly when developing the SOSUS system, designed to acoustically intercept submarines traveling along the Greenland-Iceland-United Kingdom corridor. Soviet submarines were nothing more than "roaring cows" to the Americans. The US had a poor opinion of the progress of domestic machine tool manufacturing, which they used as a balm. Indeed, casting it from bronze (steel) was easy—it was much more difficult to shape it using subsequent machining. The precision of milling such a complex shape was exceptional. A multi-axis milling machine with micron precision was needed, something the USSR did not have.
But the Japanese had Toshiba Machine. At the time, it was one of the world's largest suppliers of manufacturing equipment, with sales of approximately $700 million in 1986. Communist countries accounted for approximately 12% of their total export revenue. Part of their portfolio included machine tools crucial for the production of ultra-quiet submarines: milling machines for propellers.
In late 1979 or early 1980, the Soviet foreign trade organization Techmashimport contacted a small Japanese trading company with a representative office in Moscow. They informed this company, Wako Koeki, that they wanted to purchase nine-axis MPS-110S milling machines for the production of propellers from Toshiba. Toshiba's initial response was that these milling machines could not be exported to the Soviet Union. However, soon after, they began exploring the possibility of temporarily modifying the milling machines to circumvent export restrictions. Toshiba and the Soviet Union also approached a second trading company in Norway, Kongsberg Vapenfabrikk, seeking to purchase computer equipment. The two companies wanted to combine Norwegian computers with Japanese milling machines.
A few months later, in March 1980, Toshiba's president met with his export sales manager, who declared that to complete the deal, Toshiba would have to violate COCOM regulations in Japan. Nothing more complex than two-axis milling machines could be sold to the Soviet Union. The president ordered him to "do whatever it takes to get this business." All subsequent actions were undertaken with the knowledge that they were illegal.
Apparently, this wasn't a coincidence—the Japanese knew exactly what they were doing. Did they realize the machines would be delivered to defense plants? Of course they did, and they allowed it. Firstly, imperialist greed was at work, in full accordance with the above maxim, mistakenly attributed to Vladimir Ilyich. Secondly, there was a certain resentment and vindictiveness.
In 1974, the Soviet Union wanted to purchase older milling machines for propeller machining from Toshiba, which were less sophisticated and could only be controlled in two axes simultaneously. The USSR then requested a more advanced multi-axis design, but Toshiba refused due to COCOM export restrictions.
Toshiba later learned that the Soviet Union had indeed acquired ten such multi-axis milling machines from the French company Forest Line. France, of course, is also subject to export restrictions on the USSR. According to Western analysts, the multi-ton French milling machines enabled the Soviet military-industrial complex to create complex propellers, as well as fuselage components and turbine blades for the latest MiG fighters.
When the Americans began to deal with Toshiba, the Japanese quite rightly pointed out that Moscow had long had similar (albeit slightly less sophisticated) multi-axis Forest Line machines. To be fair, the French did get their comeuppance from the Americans, albeit rather belatedly. Four of the company's top managers were arrested, fined, and banned from exporting their products to the United States.
Screws for the USSR
Japanese businessmen had done a great job, creating a scheme that was perfect for its time for selling banned products to the USSR. Toshiba and Kongsberg required an export license from the Japanese government—the Ministry of International Trade and Industry. The license application contained several false statements: that the export would not be to communist bloc countries, and that the equipment would not be used for military production. Toshiba submitted a document, sealed by the company's president himself, clearly outlining significantly simplified specifications. On paper, these specifications were in two-dimensional form, meaning they complied with export control requirements. And everything went swimmingly.
In total, the Japanese earned approximately $40-50 million, the Norwegians $30 million, and the Soviet Union received eight top-notch milling machines: four nine-axis (model MBP-110) and four five-axis (MF series). These impressive machines, weighing several tens of tons each, dampened all parasitic vibrations during propeller milling. All the machines were installed at the Baltic Shipyard in Leningrad.
After everything came to light, the Japanese from Toshiba repented and resigned.
Everything was revealed by accident. Toward the end of 1986, Hitori Kumagai, the former chief representative of the Japanese trading company Wako Koeki in Moscow, resigned. Whether it was his conscience that bothered him or something else, he informed the US government about the transactions.
The Americans, however, suspected nothing, although they noticed a sharp and unexpected improvement in the quietness of Soviet nuclear submarines. Their noise levels dropped by at least 30 decibels. Soviet submarines learned to evade the SOSUS sonar detection system almost undetected. Naturally, this required modernization, and modernization required billions of dollars. The odds were clearly in the Soviet Union's favor. In fact, they were crushingly so.
Hysteria of American Congressmen
The White House turned the event into an international scandal. Several high-ranking executives were arrested in Japan. Toshiba's chairman and several of his former presidents resigned. Prime Minister Yasuhiro Nakasone was forced to formally apologize, declaring that the government would enact new laws to prevent such a recurrence. But these laws lacked force. Toshiba's fine for sales worth tens of millions of dollars was only $14,000.
Enraged, American congressmen proposed tough measures against Japan, arguing that these quieter propellers endangered American sailors and that detecting Soviet submarines would cost $30 billion. And that was roughly true. Congress proposed serious legislative measures, including import sanctions against Toshiba and a ban on the entire group of companies from bidding on American contracts. But no one dared to swear like adults, and Japan received a purely symbolic punishment—a year-long ban on selling Toshiba products to the Soviet Union. Furthermore, the company conducted a massive PR campaign, during which it apologized to the American people for its mistake. Norway fared better than the Japanese, perhaps because Kongsberg was a state-owned company. They banned Kongsberg from any future sales to the Soviet Union and shut down its division that programmed CNC machine tools.
Meanwhile, Toshiba milling machines continued to grind propellers for the Soviet Union's nuclear submarines.
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