President Reagan ordered the expulsion of Nicaragua's ambassador to the United States and seven other Nicaraguan diplomats Tuesday, retaliating swiftly against the Sandinista regime for ousting eight American diplomats in Managua and continuing a spiral of escalating hostilities between the two governments.
The action and reaction made the prospects of negotiations between the United States and Nicaragua even more remote than before and revived discussions within the Reagan Administration of a possible break in diplomatic relations, officials said.
Reagan, asked by reporters whether he is ready to sever diplomatic ties with Managua, replied: "No, I have told the State Department to send their ambassador and seven comrades back to Managua."
"We're going to return the favor," he said. "We're going to do to him (Nicaraguan President Daniel Ortega) what he did to us."
But he added that breaking relations with Managua "is a possibility always that we could do" and noted that it "remains always an option."
A State Department official said that breaking relations with the Sandinista regime "would make it easier for us to be taken seriously when we ask the other Central Americans to put pressure on Nicaragua."
The expulsion of Ambassador Carlos Tunnermann and seven other Nicaraguan diplomats occurred less than a day after the Sandinista regime ordered U.S. Ambassador Richard Melton and seven other Americans to leave Managua. The Sandinistas charged that Melton and his staff had been secretly organizing internal political opposition to the regime.
State Department spokeswoman Phyllis Oakley denied those charges and called the Nicaraguan action "outrageous and completely without justification."
Ortega, speaking shortly after Melton's departure, said he would fight the expulsion of Tunnermann, because he also serves as Managua's representative before the Organization of American States.
Calling the Reagan Administration order to Tunnermann and the Nicaraguan diplomats a "clear reprisal," Ortega said he would likely call for an urgent meeting of the OAS permanent council--the regional version of the U.N. Security Council--to defend Tunnermann's right to remain in Washington before the OAS.
"The United States is trying to violate, to interfere, in the OAS and decide who can represent Nicaragua in that organization," Ortega told reporters in Managua. "We will not accept interference in the heart of the OAS. It would be a very serious precedent for Latin American countries."
White House spokesman Marlin Fitzwater on Tuesday blamed Ortega for the increasing tension and suggested that Sandinista actions have demonstrated that peace negotiations with Managua are futile.
'Won't Give Ground'
"Our bottom-line question is: How many black eyes does the peace process have to take before people realize Daniel Ortega won't give an iota of ground for freedom or democracy?" Fitzwater said.
"The Sandinistas appear to have given up on the peace process," he charged. "We find it appalling that Ortega would turn his back on the peace process in such a flagrant fashion."
State Department officials confirmed that the Administration opposes resuming the current round of negotiations between the Sandinistas and the U.S.-backed Contras. The peace talks broke up June 9, when the Contras said that they could no longer accept the conditions under which the negotiations were taking place.
Instead, officials said, the Administration hopes that recent Sandinista actions will improve the chances of winning military aid for the rebels in Congress this summer. Among the actions taken by the Managua regime were the jailing of opposition leaders and closing of the Catholic Church's radio station, as well as Monday's order expelling the U.S. ambassador and seven other diplomats.
Asked about the implications of the diplomatic expulsions on additional military aid for the Contras, Reagan said: "That's being worked right now in the Senate."
Contra Aid Moves
A group of senators is working on a proposal for about $30 million in aid for the rebels, including as much as $9 million in military assistance. However, some Administration officials have said privately that they do not believe the Democrat-led House will approve military aid, an issue that has been hotly debated for almost seven years.
House Speaker Jim Wright (D-Tex.) joined the White House in condemning the Sandinista actions but said he did not believe that the House would support military aid for the rebels.
"Congress is prepared to continue humanitarian (non-military) aid, but I don't discern a desire on the part of Congress to rekindle hostilities," Wright said. "We tried that for six years. and it did us no good. We ought to give peace every chance we can."
42 Dissidents Arrested
The Sandinista government expelled the Americans as part of a broad crackdown on the internal political opposition. On Sunday, after an opposition-led demonstration against the government turned into a melee, police arrested 42 opposition leaders and charged them with inciting violence. On Monday, the government closed the Catholic Church's radio station and shut the anti-Sandinista newspaper La Prensa for 15 days.
The U.S. decision to expel the eight Nicaraguans will cut the size of the Nicaraguan Embassy nearly in half--but ironically, it may not force Tunnermann himself to leave. Reagan can revoke Tunnermann's credentials as ambassador to the United States but not his appointment at the OAS.
State Department officials said it was not clear whether either Nicaragua or the United States would be permitted to name other diplomats to replace those expelled.
Asked why the Administration was maintaining diplomatic relations with Nicaragua, Fitzwater said: "We felt it was important to have a listening post there . . . Whether or not that issue has changed now or not is something that will have to be evaluated. Unquestionably, there will be those who will suggest we cut off diplomatic relations with Nicaragua."
Times staff writers William J. Eaton and James Gerstenzang, in Washington, and Tracy Wilkinson, in Managua, contributed to this article.