U.S. Breaks Off Relations With Panama : But It Delays Tougher Sanctions as Noriega Friend Is Inaugurated

The Bush Administration severed diplomatic relations with Panama on Friday, but declined to adopt any stronger sanctions to further its stalled campaign to remove Gen. Manuel A. Noriega from power.

“As a practical matter, things haven’t changed a great deal,” National Security Adviser Brent Scowcroft told reporters. U.S. sanctions against Panama have failed to drive Noriega from office, he said, but “we’re going to continue (them) until Noriega is willing to acquiesce to the will of the Panamanian people.”

The United States has been seeking to oust the Panamanian strong man ever since he was indicted in Florida 18 months ago on drug trafficking charges.

The break in relations came as Panama inaugurated a new president, Francisco Rodriguez, a career bureaucrat and longtime Noriega friend who was appointed Thursday by Panama’s Council of State to fill a constitutional void created in May when the Noriega-controlled government nullified the results of an election.

Until Friday, the United States had recognized Eric A. Delvalle as president, even though Delvalle had not held power since he tried to oust Noriega early last year. The formal expiration of Delvalle’s term Friday left Washington with no one it was willing to recognize as head of Panama’s government.

“The United States,” Bush said in a statement, “will not recognize any government installed by Gen. Noriega.” He said that the U.S. ambassador to Panama, currently in Washington for consultations “will not return, and we will not have any diplomatic contact with the Noriega regime.”

“We will continue to stand by the people of Panama until their fight for self-determination is respected,” Bush said.

Although U.S. Ambassador Arthur Davis will not return to Panama, lower-level U.S. diplomatic personnel will stay on there, and the U.S. troops stationed in Panama to protect the Panama Canal will remain as provided for under the terms of the Panama Canal Treaty.

The United States will also continue sanctions now in force against Panama, including placing in escrow hundreds of thousands of dollars in payments for services related to the canal and tax payments owed by U.S. officials. Any further sanctions, a senior official said, would “cut both ways,” hurting Panama but harming U.S. interests as well.

The Administration rejected several proposed alternatives that would have gone further. For example, Bush decided not to adopt a proposal to forbid Panamanian-registered ships to visit U.S. ports. Such a ban could cut deeply into Panama’s revenue from shipping registry fees but could also hamper U.S. trade, much of which is carried out with Panamanian-registered vessels.

The United States also has no intention of taking any steps to try to change the canal treaty, under which the United States is responsible for the defense of the waterway and retains a key role in its day-to-day operation until Dec. 31, 1999. The treaty, a senior U.S. official said, is the only legal basis for keeping U.S. troops in Panama.

This autumn the two countries will face another major deadline when Panama nominates a new managing director for the canal’s operating company. Until now, the director has been appointed by the United States, but under the treaty, the Panamanian government is scheduled to fill the post.

U.S. officials said that because Washington does not recognize a Panamanian government, Panama’s choice for director will not be accepted. They said this will not require a change in the treaty because the treaty specifies that the director must be approved by the U.S. Congress.

The two governments are expected to be in an uneasy standoff for some time. U.S. officials have expressed the hope that eventually Panama’s military will decide that Noriega’s presence is causing too much economic trouble for the country and will move against him.

Scowcroft reiterated this hope Friday, telling reporters that the Administration hopes that if Noriega does not resign, the army will eventually “realize that the only impediment to removing all this tension and pressure is Noriega.”

U.S. officials conceded, however, that there is no sign that this is about to happen.