U.S. Cuts Off $26 Million Panama Aid : Limits Contact With Noriega to Protest Rising Military Role

The Reagan Administration has halted $26 million in assistance to Panama and is limiting contact with Gen. Manuel Antonio Noriega, the defense chief, to register U.S. dissatisfaction with an expanded military role in governing the country, State Department officials said today.

The Administration also turned down a request for the purchase of tear gas to be used to control demonstrators who last month poured into the streets to oppose Noriega, said the officials, who demanded anonymity.

The general, who took power as commander of the Panamanian armed forces in August, 1983, is widely regarded as the country’s most powerful leader, although President Eric Arturo Delvalle leads Panama’s civilian government.

Economic, Military Aid

Panama was to receive $20 million in economic aid and $6 million in military assistance. All new contracts have been suspended, the officials said.

The country’s latest political crisis erupted in June, when Noriega’s former second-in-command, Col. Robert Diaz Herrera, accused the general of corruption, election fraud and conspiring to murder political opponents.

The U.S. Embassy was stoned and smeared with paint by a pro-Noriega mob earlier this month in an attack the State Department said had been orchestrated by the Panamanian government. The attack occurred after the U.S. Senate passed a resolution calling for a return to democracy and suggesting Noriega resign.

New Commitments Suspended

The State Department officials confirmed a report in today’s Washington Post that new commitments of U.S. military and economic aid to Panama were quietly suspended following the embassy attack.

The officials said the U.S. goal is a restoration of democracy in the country. Even replacement parts for military equipment are being withheld, they said.

Shunning Noriega is part of the U.S. policy of registering displeasure with his role. “We sometimes have to deal with him, but we are keeping these contacts very discreet,” a State Department official said.

The suspension originally had been expected to last until Panama reimbursed the United States for an estimated $106,000 in damage to its property, but the Administration now is considering whether to continue the freeze once the United States is reimbursed, the officials said.

High-level U.S. officials, including William G. Walker, deputy assistant secretary of state for Central America, who visited Panama on a fact-finding trip last week, avoided contact with Noriega.