Firms Balk at Selling Nerve Gas Element to U.S. : Defense: Two chemical companies cite corporate policy and ethics. But the Pentagon may invoke an old law and force them to deliver the compound.

TIMES STAFF WRITER

The U.S. government is considering forcing two defiant chemical companies to sell the Pentagon a key ingredient for producing nerve gas, Pentagon officials said Tuesday.

The Occidental Chemical Corp. and the Mobay Corp. said company policies forbid sales that would contribute to the proliferation of chemical weapons. Both refused to fill Defense Department orders for thionyl chloride, a widely used industrial and agricultural chemical that is needed to make a lethal nerve agent.

Defense officials said the two firms are the only ones in the United States that now commercially produce the chemical agent. The firms' unwillingness to sell has brought the production of a new generation of U.S. chemical weapons, which began in 1987, to a halt.

The Army needs 160,000 pounds of the ingredient by June to proceed on schedule, the Pentagon said. Government officials said they can compel the companies to sell the chemical under the Defense Production Act, a 1950 law designed to give the Pentagon first priority on war materiel.

The stand-off between the chemical manufacturers and the government is certain to put the Bush Administration on the defensive as it works to stem the spiral of Third World chemical arms production and to negotiate a worldwide ban.

Last December, President Bush proposed to Soviet leader Mikhail S. Gorbachev that the superpowers sign an accord at their summit this June that would call for the destruction of 80% of their chemical weapons. But the Administration has said it would continue production of chemical weapons until a United Nations-sponsored accord banning them goes into effect.

The Commerce Department has the authority to enforce the provisions of the Defense Production Act. Spokesman Robert Kaylor said the matter is presently under review.

Occidental Chemical is a subsidiary of Los Angeles-based Occidental Petroleum Corp., while Mobay is a subsidiary of West German chemical giant Bayer AG.

One Administration official said the government's response to the companies' challenge is being decided at the White House, where some officials are arguing for a firm imposition of the government's will.

"If the United States invokes the Defense Production Act, the companies will get the message that this is important and that they should reconsider their policies," said one official.

The United States has said that it would need chemical weapons to deter the Soviets' use of chemical weapons during a non-nuclear conflict in Central Europe--a prospect that even Defense Secretary Dick Cheney last week called "extremely remote."

The Pentagon has said that as long as the United States must stock the weapons, it needs the new chemical warheads because they are safer than the aging ones now stored at bases throughout the United States and Europe.

In a telephone interview Tuesday, Occidental Petroleum Corp. spokesman Frank Ashley said that "as a matter of corporate policy, Occidental Petroleum Corp. will not sell or distribute chemicals that contribute to the proliferation of chemical weapons or to the manufacture of illicit drugs."

Ashley refused to say when the policy took effect or whether it was issued directly by Dr. Armand Hammer, Occidental Petroleum Corp.'s chairman and chief executive officer. Hammer is a longtime champion of improved U.S. relations with the Soviet Union and has been critical of the pace of U.S. arms control efforts.

A spokesman for Mobay, Gerd Wilcke, said the Pentagon approached Mobay with an order for 160,000 pounds of thionyl chloride last September--a small order for the firm, which can produce 18 million pounds a year.

"We have told the government . . . that we have no intentions of selling thionyl chloride for these purposes," Wilcke said, adding the policy has been in effect about a year and a half.

Neither company cited potential liability as a factor in its decision.

The Pentagon produces the nerve gas in Pine Bluff, Ark.

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