Ah, but it does propagate. A time varying magnetic field generates an electric field. Though as you said, the motor does not make an efficient antenna.
Free space impedance is 377 Ohms/meter; the ratio of E/H fields. Seawater is much, much lower, but the ratio is still there. If there's a propagating H field, there is a corresponding E field; that's the law according to Maxwell.
The VLF antennas on the subs are trailing wires; electrically short dipoles. Those are mostly sensitive to E fields.