U.S. Probing Claim That Olivetti Sold High-Tech Machinery to the Soviets : Trade: Some fear that the incident could prove as damaging as Toshiba’s sale of advanced machine tools to Moscow.

In a case that could have far-reaching consequences for Western security, the Bush Administration is investigating allegations that Olivetti, the Italian computer-maker, has been selling high-tech equipment to the Soviet Union in violation of Western export restrictions.

U.S. officials said Thursday that the technology transfer involves computer-controlled manufacturing equipment that the Soviets used to build the world’s first vertical-takeoff supersonic jet fighter, known officially as the Yak-41.

Some officials speculated that the case could prove as damaging as a 1987 incident in which a Japanese firm, Toshiba Machine Co., sold advanced machine tools to Moscow. The technology ultimately enabled the Kremlin to produce nearly silent propellers for Soviet submarines, making them harder to detect.

In retaliation for the Toshiba incident, Congress passed legislation last year barring the U.S. government from buying certain Toshiba products for the following three years. The incident was viewed as a setback to U.S.-Japanese relations.

U.S. officials said the Olivetti incident may have done “very extensive” damage to Western security efforts and that it could constitute the largest single diversion of sensitive technology in recent history.

Officials said there is no ground for any confrontation between the United States and Italian governments over the incident. They said Rome appears willing to cooperate fully in pursuing the case.

Nevertheless, the incident serves to underscore the increasing difficulty that Western governments have controlling strategically sensitive technology as East-West relations improve and commerce between the two old adversaries grows.

Olivetti has issued a statement asserting that it was not violating Western rules restricting the transfer of strategically sensitive technology when it sold the items to the Soviet Union. But neither Olivetti nor the U.S. or Italian governments would elaborate.

Under rules administered by the Coordinating Committee on Multilateral Export Controls, known as COCOM, Western firms must obtain export licenses for some goods bound for Soviet Bloc countries. Other sales are barred completely.

Washington has notified Rome formally that Olivetti may have violated Western restrictions on exports of sensitive technology. Officials also said President Bush expressed concern to Italian President Francesco Cossiga, who visited the White House on Wednesday.

The Administration also is preparing to send Reginald Bartholomew, undersecretary of state for security assistance, to Rome in late October to brief Italian authorities more fully.

U.S. officials said Thursday that the Italian government has pledged its full cooperation. Some speculated that Congress is unlikely to take any retaliatory action, as it did in the Toshiba case last year. The lawmakers then were frustrated over trade frictions involving Japan.

They said the United States also plans to bring the matter to the attention of COCOM, which comprises 17 Western nations.

“There won’t be any new effort to get COCOM to tighten its rules--we think the current rules are adequate; it’s just that they apparently were breached,” a senior U.S. official said.

But he said both U.S. and Italian officials are taking the incident “seriously” and plan to pursue it to a close. Olivetti is one of Italy’s foremost corporations.

One key U.S. official said Thursday that he thought “the potential is there” for the impact of the Olivetti case to be as serious in national security terms as the Toshiba affair had been. “We’re all taking this very, very seriously,” he said.

COCOM regulations have been under continual revision over the last several years, partly at the behest of the United States, which has contended that many of the restrictions are outdated and prohibit trade in goods that are readily available in other countries.

On Wednesday, Italian Prime Minister Giulio Andreotti met for about an hour with Carlo de Benedetti, chairman of Olivetti, but neither made any statements after the meeting. Both U.S. and Italian officials have declined to discuss the case publicly.