EMBARGO: U.S. to Bar Trade : Reagan Embargo to Halt U.S. Trade With Nicaragua

President Reagan, acting unilaterally against leftist Nicaragua after Congress rejected his request for aid to Nicaraguan rebels, decided Tuesday to impose a total trade embargo against the Central American nation, Administration officials said.

Reagan also decided to cancel a U.S.-Nicaraguan friendship treaty, suspend landing rights for Nicaraguan airliners and bar Nicaraguan ships from American ports, the officials said.

White House officials said Reagan planned to issue a formal embargo order today during his visit to the West German capital of Bonn, along with a statement declaring that the Sandinista regime’s “aggressive activities in Central America, supported by the Soviet Union and its allies, are incompatible with normal commercial relations.”

The action was part of a long-term shift in U.S. pressure against Nicaragua from officially covert tactics like the CIA’s aid to the anti-Sandinista rebels to more overt measures. Further actions are still under consideration, State Department officials said.

‘Only Effective Means’

“Direct pressure represents the only effective means of moderating Nicaraguan behavior,” a draft of Reagan’s statement said.

Although the United States is Nicaragua’s largest trading partner, the officials said they do not expect the embargo to have a major long-term impact on the Central American country’s already depressed economy.

The Sandinistas’ trade with the United States has declined sharply since 1981 and now represents an estimated 20% of their imports--mostly insecticides, tractors and soybean oil--and 12% of their exports--mostly agricultural products that can be sold elsewhere on the world market. Their share of total U.S. trade is minuscule; Nicaragua imported only $111 million in U.S. goods and exported only $57 million to the United States last year.

“Undoubtedly, these sanctions will have a profound impact, primarily on the Nicaraguan private sector that presently controls 60% of the economy of the country,” the Nicaraguan Embassy said in a statement issued late Tuesday. “This new decision of the U.S. Administration is consistent with its overall strategy that seeks the overthrow of the Nicaraguan government. . . . “

Political, Not Economic

The American officials said that the sanctions represent an attempt to demonstrate that Reagan still intends to put as much pressure on the Sandinistas as he can--despite Congress’ refusal to provide funds for the rebels, known as contras.

“It’s more a question of political impact than economic impact,” a senior State Department official said. “There were demands for this from both Democrats and Republicans in Congress. . . . And we have a situation in Central America where a demonstration of will on our part is very important.”

The trade embargo will go into effect formally next Tuesday, one official said. In deciding to cut off trade, Reagan rejected a set of other options, including freezing Nicaragua’s assets in the United States, seeking a default declaration against Nicaragua’s official debt, restricting travel by U.S. citizens to Nicaragua and barring all financial transactions between the two nations, State Department officials said. “But the door is still open to all of those later,” one said.

The President also rejected a proposal that he withdraw the U.S. ambassador and other diplomats from the Nicaraguan capital of Managua, because he did not want to appear to be closing off the possibility of negotiations with the Sandinistas, the officials said.

The State Department actually fought the idea of a trade embargo for months. “As a general proposition . . . I think the use of trade sanctions as an instrument of diplomacy is a bad idea,” Secretary of State George P. Shultz said in 1982. “It basically has not worked.”

In the case of Nicaragua, Shultz aides said, they opposed an embargo because it would have little real effect and would allow the Sandinistas to blame their economic troubles on the United States.

But increasing calls in Congress from both Republicans and moderate Democrats, who said they did not understand why the Administration was asking for aid to the rebels if it did not feel strongly enough to try trade sanctions, persuaded the State Department to switch after last week’s votes against U.S. aid for the contras.

Liberals Remain Silent

Sen. Richard G. Lugar (R-Ind.), chairman of the Senate Foreign Relations Committee, said Shultz informed him of Reagan’s decision Tuesday afternoon. “It’s the best approach we can take right now,” Lugar said, but he indicated that he hopes to see further actions.

Sen. Lloyd Bentsen (D-Tex.), one of the Democrats who had called for economic sanctions, said: “I am pleased by the speed with which they seem to be responding to my suggestion.”

Liberal Democratic critics of the Administration’s policies in Central America remained silent. “There are some who don’t like the idea, who think it can’t accomplish anything, but they talked themselves into a corner last week,” said a Senate Democratic aide who asked not to be identified.

One State Department official said the Administration hopes the bipartisan support for the embargo, along with concern over Nicaraguan President Daniel Ortega’s official visit to the Soviet Union this week, will create more support for a renewal of aid to the contras. “And we are definitely going to ask for it again,” he said.

Ortega promised several members of Congress that he would take conciliatory action toward the United States if Reagan’s request for $14 million in military aid to the contras were rejected. His failure to follow through--other than setting a date for the return home of 100 Cuban advisers--and his trip to seek Soviet aid touched off an angry reaction from Congress. On Monday, the Senate unanimously approved a resolution “to condemn the actions of the Sandinista regime.”

The Reagan Administration imposed a number of economic sanctions against the Sandinistas after it entered office in 1981, including a sharp cutback in purchases of Nicaraguan sugar under a price-support program and actions to block Nicaraguan loan requests in the Inter-American Development Bank.

Those actions, along with the guerrilla war and the Sandinistas’ often-clumsy attempts at instituting socialism, have sent Nicaragua’s economy into a tailspin of declining production and increasing inflation. The country suffers shortages of products ranging from basic foodstuffs to gasoline and machine parts.

‘Sanctions Have Not Worked’

But experts believe a unilateral U.S. trade embargo is unlikely to do Nicaragua much further damage.

“More often than not, sanctions simply have not worked,” said Richard Feinberg, a former Carter Administration official at Washington’s Overseas Development Council. “The Sandinistas are too strong, in terms of internal security, to be affected by this.”

“For something like this to succeed, you almost have to have multilateral participation, but I can’t see the Europeans and the Latin Americans joining us,” said John Yochelson, director of international economics programs at Georgetown University’s Center for Strategic and International Studies. “And it’s hard for me to imagine the Soviets letting the Sandinistas go down the tube.

“But you also have to consider the kind of message this sends to the Soviets,” he said. “If we don’t do this, right in our backyard, what kind of resolve do we have? And we are upping the ante to the Soviet Union in terms of what it costs them to support Nicaragua.”