NEWS ANALYSIS : Election Leaves Issue of Power Unresolved : Nicaragua: Chamorro will have to negotiate with Sandinistas to carry out promise to reduce military.

In conceding defeat early Monday, President Daniel Ortega became the first Nicaraguan president to abide by a freely held election.

The revolutionary leader made history when he thanked “brothers, militants of the Sandinista National Liberation Front and combatants of the Sandinista Popular Army” for their role in guaranteeing the freedom of the vote.

But while Ortega solemnly vowed to turn over the government to Violeta Barrios de Chamorro and her U.S.-backed National Opposition Union (UNO), the issue of power clearly was left unresolved.

The Sandinistas fought their way into power at the front of a popular insurrection 10 years ago, and have since turned their guerrilla force into the largest army in Central America--70,000 members, battle-hardened from the war against the U.S.-backed Contras.

In addition to the army, Interior Minister Tomas Borge runs an internal security and police force of several thousand men and women, many of whom fought with him as guerrillas.

Borge, the only surviving founder of the Sandinista Front, is one of nine comandantes on the party’s National Directorate. In the Sandinista newspaper, Barricada, this month he was quoted as rejecting the idea that the military would “obey the insane orders” of an opposition government.

“Since these structures are revolutionary, the UNO would try to destroy them and that would be chaos in Nicaragua. The country would be ungovernable,” Borge said.

Chamorro’s government clearly will have to negotiate with the Sandinistas to carry out its campaign promise of reducing the military’s size by at least half.

Chamorro won the election with a sweeping 55% of the vote. The Sandinistas were stunned by the result.

Ortega was bound by the Nicaraguan constitution to hold national elections this year. The Central American peace agreement he signed in 1987 committed him to international scrutiny of the vote. And last year, he agreed on election rules with the opposition.

Ortega campaigned relentlessly for months before the election and he was dead certain he would win.

Polls had given the Sandinistas a comfortable advantage. They thought they had their finger on the pulse of the country through their extensive party structure. And they were proud of the election that would finally measure the strength of all the country’s political forces.

Before the vote, few within the party leadership would entertain the “hypothetical” question of a defeat.

“It’s not going to happen,” Sandinista officials routinely said when asked.

On election day, Nicaraguans voiced a barrage of pent-up complaints against the 10-year-old government. But first and foremost was their anger over the Sandinista military service--the draft.

Chamorro, the 60-year-old widow of a newspaper editor, promised to abolish the draft upon taking office.

The Sandinistas believed that the soldiers supported their cause against the U.S.-funded war. Now, they privately concede that many draftees voted against them.

During the campaign, the Sandinistas sought the moral high ground, preaching national dignity and peace with the United States. Most voters, however, focused on their own economic plight. They had suffered from the war-ravaged economy.

“The polls showed what was in peoples’ hearts, but they voted with their stomachs and their stomachs are empty,” said American lawyer Paul Reichler, who has represented the Sandinistas in the United States and before the World Court.

The vote was a plebiscite for change. But even in defeat, the Sandinista Party remains strong. With 40% of the vote, the Sandinista Front is still an ideologically strong party that will hold a substantial block of seats in the National Assembly.

UNO, meanwhile, is a coalition of 14 political parties and organizations that range across the political spectrum. They did not win the two-thirds majority in the Assembly that they would need to change the constitution, which was written by the Sandinistas.

While in power, the Sandinistas have shown a tremendous capacity to divide their opposition and co-opt the resulting fragments. Some of their strength was based on having the power of government patronage, but even in opposition they can be expected to forge coalitions against UNO in the Assembly to make new laws or defend their old ones.

The Sandinistas also control a large labor union and cooperatives of peasants who received land under their program of agrarian reform. They can be expected to use all their resources to defend the gains of their supporters.

“For people who have been fighting for 10 years in the mountains, to deliver power in this funny way (by election) is not easy,” said Xabier Gorostiaga, a political analyst close to the Sandinistas. “If the UNO tries to turn around the agrarian reform, forget the idea that the police would support them.”

Many returning exiles do expect to regain their confiscated lands and properties. Some of the angrier ones even toy with the idea of revenge.

“I am going to get my house back,” said Azucena Ferrey, a former Contra political leader who won an UNO seat in the Assembly. “And then maybe I’ll rent it to Daniel Ortega.”

With such tensions in mind, Chamorro set a conciliatory tone in her victory speech. She complimented “all Nicaraguans” for their peaceful vote in “the first democratic elections in the history of Nicaragua.”

Chamorro will have the immediate advantage of U.S. support. President Bush has said he will give her administration aid and lift the economic embargo imposed against the Sandinista government. Financing for the Contra war will stop, and the rebels will be disbanded.

Nicaraguans in exile will be encouraged to return and to invest the capital they have kept abroad. In Nicaragua, a country of rich soil and 3.5 million people, small changes can make a big difference.

Nonetheless, Chamorro’s advisers concede they will have to move cautiously and work with the Sandinistas toward national reconciliation if their government is to succeed.

“We have learned that war is not the road to resolving our differences,” said economist Francisco Mayorga, a likely member of Chamorro’s Cabinet.

Ortega said he was speaking for all Sandinistas when he conceded defeat Monday morning. But many Nicaraguans are waiting to hear from Borge and other militant factions of the Sandinista Front.

Normally, a losing presidential candidate loses control of his party, but on Monday, at least, Ortega’s gracious speech seemed to gain him stature and control.

“We are victorious because the Sandinistas have spilled blood, sweat and sacrifice not to hold on to posts and jobs,” Ortega said, “but to bring Nicaragua what it has been denied since independence in 1821 . . . democracy.”