Economic Sanctions : Reagan Steps Up Pressure on Panama

President Reagan imposed harsher economic sanctions against Panama Friday, shutting off the flow of U.S. dollars to the Central American nation in an effort to force Gen. Manuel Antonio Noriega out of power.

Reagan, in a statement, announced that he had invoked the International Emergency Economic Powers Act to increase economic pressure on Noriega, who is under indictment in the United States for drug trafficking.

The measures would block assets of the Panamanian government in the United States, prohibit payments by all U.S. organizations and individuals to the Noriega-dominated government and prohibit payments by all U.S. organizations in Panama.

Law Used in Past

Reagan, in a letter to House Speaker Jim Wright (D-Tex.), said he authorized the steps “in response to the unusual and extraordinary threat posed by the actions” of Noriega “to challenge the duly-constituted authorities of the government of Panama.”

Acting under the 1977 law--used against Iran, Libya, South Africa and Nicaragua in the past--Reagan issued an executive order, effective at 1 p.m. PDT Friday, that Noriega’s policies and actions “constitute an unusual and extraordinary threat to the national security, foreign policy and economy of the United States and (I) hereby declare a national emergency to deal with the threat.”

The law allows Reagan wide authority to act on his own to impose sanctions, which could have included a total trade embargo, but must keep key congressional leaders advised.

The executive order effectively bars all U.S. dollars from Panama in a tightening of sanctions imposed almost four weeks ago.

It sets up an account at the Federal Reserve Bank in New York to be held “for the benefit of the Panamanian people.” The escrow account would take in any direct or indirect payments owed to the government of Panama.

“In taking these measures, we have acted in cooperation with the authorized representatives of the government and in support of the efforts of the Panamanian people to foster constitutional democratic government in Panama,” Reagan said.

In the confrontation with Noriega, U.S. efforts to date have concentrated on creating a cash crunch, including putting payments for the use of the Panama Canal into an escrow account and giving U.S. corporations ways to avoid directly paying taxes to Panama without losing U.S. tax breaks.

White House Chief of Staff Howard A. Baker, in California where the President is vacationing, revealed in a briefing Friday that new measures to bring pressure on Noriega were imminent, but would not offer specifics.

While refusing to say that present economic sanctions against Panama have failed, Baker nonetheless confirmed that stricter measures were necessary.

‘Remarkable Success’

Noriega is “much-beleaguered,” Baker said, and the general’s support is eroding daily thanks to the “remarkable success” of U.S. action that began almost four weeks ago.

“What happens next is a matter the President will address and will address promptly,” Baker said.

The planned action comes after a week of Administration statements that more stringent military, political and economic measures were under consideration.

The next logical step in squeezing Noriega to the point of abandoning his self-imposed rule was invoking IEEPA, which gives the President broad authority to restrict trade and commerce, officials said.

More Troops Sent

More than 10,000 U.S. troops are stationed permanently in Panama at the U.S. Southern Command. Earlier last week, the Administration dispatched 1,300 additional U.S. troops to Panama to shore up protection for U.S. citizens as pressure against Noriega mounted with bank closings and street demonstrations.

In recent days, however, the economic crunch appeared to be easing and reports surfaced that Eric Arturo Delvalle, the man the United States recognizes as Panama’s president, was dissatisfied with U.S. efforts.

Shortly after Noreiga was indicted in February and Reagan declared that Noriega should relinquish his de facto control of the Central American nation, Delvalle directed him to resign as head of the Panamanian Defense Force. Instead, on Feb. 26, Noriega’s supporters in the National Assembly ousted Delvalle, who went into hiding.

Still Backs Delvalle

Baker said the United States continues to recognize Delvalle as president and added:

“The policy of the government of the United States is still that there must be a return of democratic government in Panama, that Gen. Noriega has usurped the power of the president.

“It is our position that he should leave and desist from this illegal effort to rule that country.”

Sanctions under IEEPA can constitute a virtual trade embargo. In the case of Libya, for example, Reagan prevented payments by U.S. companies, individuals and subsidiaries, thus blocking all U.S. dollars from the country.

President Carter invoked the act during the Iran hostage crisis.