U.S. Considering Sanctions Against Nicaragua

The Reagan Administration is seriously considering economic and political sanctions against Nicaragua--perhaps including a break in diplomatic relations and recognition of a rebel government-in-exile--if Congress does not renew funding of the insurgents fighting the leftist Sandinista government.

The backup plans under consideration inside the Administration were confirmed Monday by White House Chief of Staff Donald T. Regan in an interview after they were discussed earlier in the day by Sen. Richard G. Lugar (R-Ind.), chairman of the Senate Foreign Relations Committee.

Breaking off diplomatic relations, recognizing a Nicaraguan government-in-exile and imposing trade restrictions are options “being explored one way or another by the Administration,” Lugar said during a luncheon interview with a group of reporters.

‘Pretty Good Chance’

Regan said in the interview that the Administration still “has a pretty good chance” of persuading Congress to restore $14 million in covert aid to the Nicaraguan rebels, known as contras , and that he is concentrating on that effort rather than any contingency plans.

However, he acknowledged that the alternatives mentioned by Lugar are being considered and said, “Obviously, if we don’t get the funds for the contras, these (options) would be available for the State Department to (propose) if the President said, ‘What do we do now?’ ”

Regan said the President does not mind spending political capital on trying to persuade a reluctant Congress to approve the politically unpopular funding of the contras because “he feels deeply on this subject and does not want to see a Marxist state put in place in the Western Hemisphere while he’s President.”

Lugar, who opposes continued funding for covert action, predicted that Congress will not approve the funding measure. But even if it does, he said, the $14 million in the bill would not be enough to enable the contras to force the Sandinistas to share government power with them, as Reagan has demanded.

Discussions With Shultz

Lugar said he plans to discuss possible economic and political pressure with Secretary of State George P. Shultz, who returned Sunday from a trip to Montevideo, Uruguay, where he had an inconclusive, hourlong session with Nicaraguan President Daniel Ortega.

Some Administration officials privately concede that political or economic sanctions against Nicaragua would face substantial opposition not only in Congress but within the Administration.

Some intelligence officials oppose the breaking off of diplomatic relations on grounds that having an embassy in Nicaragua gives the United States a crucial avenue of information.

The mere suggestion that the United States might recognize a government-in-exile has driven one senior State Department official dealing with Latin American to exclaim: “Don’t they understand that’s tantamount to a commitment of troops?”

And there is concern that any economic sanctions would permit the Sandinistas to blame the plight of their economy--described by Lugar as “in a shambles”--on the United States.

Main Trading Partner

Despite the continuing tension between the two countries, the United States has taken almost no economic action against Nicaragua, and this country remains the Marxist-ruled nation’s main trading partner. Nora Astorga, a deputy foreign minister in the Sandinista government, said in a recent interview, “We are expecting trade problems, but so far we haven’t had any.”

Meanwhile, in the face of increasingly strong public and congressional opposition to the funding of covert action, President Reagan, Shultz and other Administration officials have stepped up their lobbying for the funding measure. Administration officials say the President is determined to have a showdown on the matter even if it means a defeat at the hands of Congress on a foreign relations issue.

Lugar predicted that by the time Congress gets around to acting on the funding measure in April or May, the Administration “will come to realize it is not adequate to implement the President’s policy.”

Reagan, who has said he will keep pressuring Nicaragua’s government until it agrees to share power with the contras, was quoted in a Business Week interview Monday as saying that the Sandinista regime “is not a government” but merely “a faction of the revolution that has taken over at the point of a gun.”

At the White House, spokesman Robert Sims said he did not believe Reagan was trying to make a legal point because “legally we do recognize the government of Nicaragua. . . . We have diplomatic relations with the Nicaragua regime.”