U.S. Seen Reduced to Few Basic Tactics on Noriega Issue : Step Up Covert Action or Try Military Force, Officials Say, or Drop Ouster Bid Entirely

The collapse of negotiations with Panamanian strongman Manuel A. Noriega, a stinging failure for U.S. diplomacy, leaves the Reagan Administration with only two basic options in Panama, officials said Wednesday: Use stepped-up covert action or military force to push Noriega out of power, or quietly abandon the goal.

Secretary of State George P. Shultz immediately made clear that he is unwilling to abandon the effort to oust Noriega. He told reporters, “We will continue to work with the people of Panama and democratic forces throughout the hemisphere to get Noriega out of power and out of Panama.”

But the Administration remains deeply divided over what measures to take against the wily Panamanian general, who still faces two U.S. drug-trafficking indictments. The Defense Department and the CIA have repeatedly turned down pleas from Shultz to threaten military intervention or escalate covert action against Noriega, Administration officials said.

The strange diplomatic confrontation has painfully demonstrated Noriega’s ability to withstand an array of U.S. diplomatic and economic pressures on Panama.

‘Tied Us Into Knots’

“We’ve thrown everything we have at him short of genuine force, but he still has the situation under control,” a State Department official mourned. “He’s tied us into knots.”

At the same time, however, the failure of the negotiations could help end the Administration’s internal division over Noriega--by forcing Reagan to decide one way or the other whether to use force against the Panamanian.

“There’s one good thing about this situation,” said a State Department official who favors tougher action against Noriega. “This means Ronald Reagan is going to have to tell (Defense Secretary) Frank Carlucci and (CIA Director) William Webster what to do.”

The strange, almost humiliating experience of negotiating with Noriega over the terms of his retirement also created a remarkable political consensus against any further compromise with the general. As it became known last week that the Administration had offered to drop Noriega’s drug indictments if he would agree to retire and leave Panama for seven months, figures across the political spectrum denounced the deal.

Massachusetts Gov. Michael S. Dukakis, the front-runner in the Democratic presidential race, criticized the negotiations as a sign of weakness in the Administration’s proclaimed war on drugs. Vice President George Bush, who has found the Noriega episode a heavy burden in his campaign for the presidency, was prodded into his first open break with Reagan over the deal and announced that he would never negotiate with drug traffickers.

By Wednesday evening, members of Congress ranging from Sen. Phil Gramm of Texas, a conservative Republican, to Sen. John F. Kerry of Massachusetts, a liberal Democrat, were criticizing the State Department and calling for stronger measures against Noriega.

“The State Department should be ashamed of itself,” said Sen. Alfonse M. D’Amato (R-N.Y.), normally an Administration ally. “Neville Chamberlain could have negotiated a better deal than what we were seeking. It’s an incredible debacle. It’s a failed, flawed policy by this Administration.”

Ironically, however, the State Department officials who are being condemned for supervising the abortive negotiations, Shultz and Assistant Secretary of State Elliott Abrams, have been the Administration’s strongest advocates of the use of force against Noriega.

“Neither Shultz nor Abrams nor anyone in (the State Department) was in favor of this kind of process,” a senior department official said. “They all wanted to do more forceful things.”

Wide Range of Actions

In March, Shultz and Abrams proposed a range of actions against Noriega ranging from the deployment of U.S. troops in Panama to CIA covert actions against the military regime and, according to several sources, kidnaping Noriega to bring him to trial in the United States.

But both Carlucci and Webster forcefully resisted those ideas, saying that they were unlikely to work and would expose U.S. bases in Panama to retaliation, officials said. Instead, Reagan approved an attempt to negotiate Noriega out of power, and that turned into the lengthy talks that broke down Wednesday.

Now, officials said, the Administration will take a new look at the proposals that were rejected before. But it is unlikely that any decision will be made before the President returns from his summit meeting in Moscow at the end of next week.

Abrams said the Administration’s first step will be to consult with other Latin American governments to seek ways of putting more pressure on Noriega.

“We will be discussing tonight and tomorrow with a number of governments in Latin America what efforts we can undertake, they can undertake, we can possibly undertake jointly with them to continue toward that goal,” he said.