President Reagan's sale of arms to Iran continues to transform his foreign policy in immense and unexpected ways. First it was the decision to raise the American stake in the Persian Gulf -- a decision taken to earn back the Arab confidence put at risk by secret American dealings with Iran. Now in a more promising vein it is the succession of Central America peace plans -- a sequence reflecting nothing so much as the president's loss of political standing in the Iran-contra affair.

Voices inside the Reagan administration as well as on the right outside it are more or less openly criticizing the president for failing to take advantage of what they see as the Oliver North dividend to nail down continued contra aid and to hold to the earlier presidential course in Central America.

But the president's new interest in negotiations suggests a more realistic judgment that the summer surge in pro-contra feeling is a flashy but shallow asset whose wasting leaves the president compelled to make the best of a bad situation in the limited time and reduced circumstances remaining to him.

This was the political reality on which House Speaker Jim Wright seized to draw the president into the kind of negotiating initiative he had previously spurned. Without the felt need to conciliate the congressman who can make or break contra aid, the administration emissaries who reached out to Wright could not have sold the president the Wright argument that the moment was ripe for a new diplomatic bid.

It was ripe because the Sandinistas, though holding on, are hurting. The other Latins, desperate to block further deterioration, were getting their diplomatic act together. And Reagan could read the Iran-contra handwriting on the wall.

No one could have foreseen what happened next. As an American Mideast initiative in 1977 unlocked Anwar Sadat's strike for peace, so Reagan-Wright broke the Central American stalemate. One holdout, Nicaragua, decided to take its chances on the democratization that the Arias plan demanded in return for a cutoff of contra aid. The other important holdout, El Salvador, apparently figured it could piggyback on terms that, though drawn first to meet Nicaragua's requirements, also serve El Salvador's by demanding a halt to outside support of guerrillas and by requiring the guerrillas to join existing legal internal opposition parties or to disperse.

One result of this turn was to give alarmed American conservatives a clearer target. While a plan with Reagan's name on it was front and center, they could not easily voice their suspicions that it did not ensure the continued contra aid they regard as essential leverage to keep the Sandinistas decently honest.

Once the Arias plan was born, however, conservatives had an easier target. They are saying that the plan is flabby and invites Sandinista contempt and that it sells out the contras and could produce the very ''second Cuba'' it has been Ronald Reagan's passion to prevent.

I don't dismiss this warning. It has plenty of substance to it. But what the conservatives ignore is that the policy they commend was failing and that, Oliver North notwithstanding, the congressional bottom seemed about to fall out of it in the fall.

In these circumstances, democracy is the right hope, but damage limitation is the right policy.

Privately and not so privately in Washington, the Latins are belittled for their supposed naivete' and fascination with fine words. But a little humility is in order. What too many Americans cannot bring themselves to recognize is that Arias and company are, in the course of doing what they can for themselves, pulling American chestnuts out of the fire.

Moral pressure, of the sort Arias applies when he demands that Daniel Ortega open up the Nicaraguan press and cut off arms to the Salvadoran guerrillas, can seem a toy notion to officials and observers captivated by the equations and instruments of power.

But the reason there is a call now to exercise moral pressure in Central America is because the material pressure that Ronald Reagan had more than six years to bring to bear was demonstrably insufficient to do the job