Nicaragua Raising the Stakes

By George Russell.

It was a gesture, by virtually everyone's assessment, of symbolism rather than of substance. Nonetheless, Reagan Administration strategists felt that it was time to raise the diplomatic stakes in Central America. Within hours of the President's arrival in Bonn last week, the Administration had certainly done that. At a press conference, White House Spokesman Larry Speakes revealed that beginning this week, the U.S. would put into effect an economic embargo against Nicaragua. The sanctions, as President Ronald Reagan put it in a formal message to Congress, "should be seen by the government of Nicaragua, and those who abet it, as unmistakable evidence that we take seriously the obligation to protect our security interests and those of our friends."

With that, relations between the U.S. and the Sandinista government sank to a new low. The change came at the stroke of a presidential pen, under the 1977 International Emergency Economic Powers Act. The law allows the President to impose sanctions without congressional approval on declaration of a "national emergency."

Specifically, the moves against Nicaragua include:

-- An embargo on U.S.-Nicaraguan trade.

-- Suspension of service to the U.S. of Nicaragua's airline and of vessels flying the Nicaraguan flag.

-- Notification to Nicaragua of Washington's intention to terminate the 1956 Treaty of Friendship, Commerce and Navigation between the two countries. That document prohibits either country from restricting mutual trade; a year's written notice is needed for cancellation.

The Administration claimed that an emergency had indeed arisen from Nicaragua's "aggressive activities in Central America." It laid out a litany of accusations to back up the contention. Among them: "Nicaragua's continuing efforts to subvert its neighbors, its rapid and destabilizing military buildup, its close military and security ties to Cuba and the Soviet Union and its imposition of Communist totalitarian internal rule." The embargo would end, said Speakes, when the Sandinistas took "concrete steps" to moderate their behavior.

None of the charges was new. All had been invoked repeatedly by the Administration only a week earlier during its unsuccessful bid to win the congressional release of $14 million in U.S. assistance for the contra rebels who are fighting against the Managua regime. In effect, Speakes charged the Sandinistas with more of the same.

In fact, what had changed was less the situation in Central America than the atmosphere on Capitol Hill. The idea of an embargo against Nicaragua had come up for presidential consideration six or seven times over the past few years. Most recently, beginning last January, it was raised by some Senate Republicans and Democrats. Secretary of State George Shultz had been cool to such a step on the grounds that it would not bring enough pressure for change in Nicaragua. Reagan has long maintained that embargoes are ineffective (see box): his Administration called off Jimmy Carter's 1981 grain-sales ban against the Soviet Union and rejects economic sanctions against South Africa's apartheid regime as counterproductive.

Even as Reagan suffered his contra bill defeat on Capitol Hill and thus, in the Administration view, lost leverage vis-a-vis both Managua and the rebels, the White House picked up on the embargo signals from the Senate. Administration officials also felt that use of nonmilitary restrictions could temper the Administration's saber-rattling image in the region. Most important, the embargo would serve notice that Reagan was not about to give up his anti-Sandinista campaign.

Two days before Speakes announced the sanctions, Nicaraguan President Daniel Ortega Saavedra made a symbolic gesture of his own--from inside the Kremlin. As television cameras whirred, he shook hands and chatted amiably with Soviet Leader Mikhail Gorbachev, from whom Ortega reportedly was seeking $200 million in new economic aid. The Soviet Union had carefully refrained from mentioning Ortega's planned visit--his fourth since the Sandinista takeover in July 1979 --until the day of Reagan's contra reversal in Congress. When news of the impending journey became public in the U.S., it came as a shock to many legislators who had opposed the contra aid proposal.

Shortly after Ortega's Kremlin appearance, the Soviet news agency TASS announced the establishment of a Soviet-Nicaraguan commission on economic, trade and scientific-technical cooperation. But the Kremlin provided no figures on trade and aid concessions for Nicaragua. In general, Moscow has been reluctant to make extensive economic commitments to the Sandinistas, largely because of their commitments elsewhere, for example in Cuba. Nothing was said publicly during Ortega's two-day visit about the volume of Soviet military assistance to Nicaragua, which last year amounted to an estimated 18,000 metric tons.

Later, as Ortega left Moscow for visits to Yugoslavia and six East bloc countries, he delivered a pointed comparison of Soviet and U.S. actions toward his country. Said Ortega: "The Soviet Union has been cooperating with Nicaragua in support of life. What the U.S. has been doing is to send death to Nicaragua."

The U.S. sanctions, however, are impressive mainly on paper. In 1984, Nicaraguan exports to the U.S.--shellfish, bananas, coffee and other agricultural products--came to only $58 million. During the same period, U.S. exports to Nicaragua--insecticides, fertilizers and farm equipment--totaled $110 million. Only 18% of Nicaragua's trade today is with the U.S., vs. 60% six years ago. About 40 U.S. firms that maintain offices in Nicaragua (including IBM, Texaco, Coca-Cola and Xerox) will be affected by the embargo, but foreign subsidiaries of U.S. companies elsewhere will be permitted to deal with Managua. Nor is the Administration pressing other countries to follow its lead. Indeed, at the Bonn economic summit, White House Chief of Staff Donald Regan admitted that the major U.S. allies "are not satisfied with our course of conduct, but it was something we felt we had to do."

As a senior U.S. diplomat suggests, the embargo is "hardly enough by itself to make the Sandinistas cry uncle." Said Secretary Shultz: "It's an incremental proposition. It's not the big swing item." But the Managua government faces plenty of other economic problems already. To all intents and purposes, the country is bankrupt: its foreign debt amounts to about $4 billion, and it recently failed to repay $12 million to the World Bank. Inflation is running at an estimated 100% annual rate, and consumers have long faced shortages of everything from food to gasoline to toilet paper. While erratic economic policies--price and currency controls and unpredictable land expropriations--have sapped the economy, as have low international commodity prices, the warring contras have also taken their toll, particularly in agriculture. The government estimates losses from the guerrilla war to be $220 million.

Nicaragua will respond to the embargo by trying to sell its wares somewhere else. Doubtless, the Soviet Union will be one target: trade between Moscow and Managua has already risen from about $60 million in 1983 to $165 million last year, not counting military aid. Outside the Communist orbit, Western Europe and Japan now buy more than 40% of Nicaraguan exports, vs. about 30% in 1983. Thus Nicaraguan Vice President Sergio Ramirez Mercado sounded confident last week when he declared that "no commercial or economic blockade, whatever its magnitude, is going to put in danger the social, economic and political projects of the revolution." Ramirez warned that the sanctions would most seriously affect Nicaragua's private sector, which the Sandinistas say still constitutes around 60% of the economy.

For Washington, the biggest drawbacks of the sanctions may be that they push the Sandinistas closer to the Soviet Union and give the Nicaraguans an excuse to blame the U.S. more than ever for their economic failings and their continuing pro-Moscow tilt. Says Democratic Representative Michael Barnes of Maryland, a consistent critic of the Administration's Central American policy: "The President has managed the difficult feat of justifying Daniel Ortega's economic mission to Moscow and Eastern Europe by showing that the U.S. does indeed intend the economic strangulation of Nicaragua."

Barnes' point is debatable. The timing of Ortega's Moscow journey suggested that the possibility of continuing U.S. support for the rebels might have had some restraining influence on the Sandinistas, at least in terms of their diplomatic discretion. Indeed, Administration supporters argue, Nicaragua's concessions over the past two years--the reduction of aid to the guerrilla movement in nearby El Salvador, the reluctant agreement to hold presidential elections (even if they were flawed) last November, the acceptance of regional peace proposals made under the so-called Contadora process by Panama, Venezuela, Mexico and Colombia--came while U.S. aid to the contras was flowing. Despite the congressional refusal for the past six months to continue that assistance, the contra forces, funded in the meantime by some Latin American countries and by private supporters in the U.S., have in fact continued to grow: they now number roughly 15,000. Last week some 5,000 contras were reported to be moving back into northern Nicaragua in the face of a fierce antiguerrilla offensive mounted by the Nicaraguan army.

The Sandinistas provided their own acknowledgment that the contra issue remains important. In Managua, they bade farewell last week to 100 uniformed Cuban military advisers, who boarded a jetliner for Havana. The Cubans were leaving in fulfillment of a promise made by Ortega last February as part of a Nicaraguan "peace offensive" aimed at influencing the contra debate. But the ceremony was strictly for public consumption: an additional 85 Cubans either had arrived or were on their way to Nicaragua. The Sandinistas say that slightly under 700 Cuban military advisers remain in the country. U.S. estimates run to as many as 3,500.

The Sandinistas clearly felt that the public departure ritual was necessary to reassure Congress that the vote against contra aid was the right decision. For all its newfound enthusiasm concerning embargoes, the Administration is equally convinced that support for the rebels remains essential. As one of his last official acts last week Langhorne A. Motley, Assistant Secretary of State for Inter-American Affairs, declared that "the President still firmly believes in support for the freedom fighters." Motley, a former Alaska real estate developer who resigned in order to return to business, has had his . differences with both hard-liners and "ultra liberals," but had no fundamental disagreements with Administration policy on Nicaragua. His replacement, Elliott Abrams, currently Assistant Secretary of State for Human Rights and Humanitarian Affairs, is known as an articulate conservative.

The White House fully intends to raise the contra aid issue in Congress again, perhaps in two to three weeks. Increasingly uneasy as they pondered Ortega's East bloc journey, Democrats led by House Speaker Thomas P. O'Neill met late last week to consider that prospect. Afterward, O'Neill reiterated his opposition to direct contra aid and pronounced the embargo to be premature. "Economic embargoes," said the Speaker, "should follow the failure of diplomacy rather than following the failure of the Reagan Administration to get its way in Congress." Nonetheless, as the impact of Ortega's Moscow pilgrimage continued to spread, it seemed that the contra aid issue might be resurrected sooner than anyone expected.

With reporting by June Erlick/Managua and Johanna McGeary/Washington