Judging from the media hoopla in Geneva, one might have thought it was Anwar Sadat returned to Jerusalem. Yet while the network anchors camped in Geneva, the real story of the week was developing in Managua. The Socialist world was gathering for its biggest gala since Ethiopia's $100 million party for Col. Mengistu. Yesterday, the blessed event: Daniel Ortega was sworn in as Nicaragua's first Leninist president.

Geneva is the place where the United States manages a bilateral relationship of fixed hostility. Managua is the place where another such relationship, this time with a country on the American mainland, is about to be born. For Americans, that is worrying. It means a permanent foreign policy headache. For Nicaraguan democrats it is worse. It means losing their country.

That prospect has become so imminent since Nicaragua's elections last November that the country's most respected opposition leader has made a momentous about-face. In one of the least appreciated, but most important Central American developments of 1984, Arturo Cruz -- life-long anti- Somocist, former junta member and ambassador to the United States -- has come out in support of the contras.

Cruz had broken with the Sandinistas in 1982, as their rule became increasingly totalitarian. He returned to Nicaragua last year to challenge Ortega for the presidency. He was received by tumultuous crowds, but finalns when Sandinista harassment convinced him they were designed for show only.

Cruz's conversion is particularly significant because he represents the best of Nicaragua's once vital democratic center. Unlike El Salvador, where constructing a center is like creating life in a test tube, Nicaragua had a developed middle class, widespread commercial activity and an independent peasantry. But the political center, anti-Somocist and anti-communist, is now being destroyed. Only last week, another exile: Pedro Joaqim Chamorro, editor of the opposition paper, La Prensa.

For Cruz, the final step, support for civil war, was not easy. But after the phony election and the severe repression that followed, he decided that the only remaining obstacle to a Leninist dictatorship was the contras. He is now asking Congress not to cut off their aid.

The last Congress did just that. It took its reasons where it could find them. An early charge, that the contras are Somocistas, is hardly heard these days. Not just because a man of Cruz's credentials declares they represent "the revolt of Nicaraguans against oppression by other Nicaraguans," but because it is evident that one doesn't raise an army of 10,000- 15,000 peasants with promises of restoring a universally despised dictatorship.

The size of that army blunts a second argument: the contras cannot win. So large a force (about twice the size of the Salvadoran guerrilla force, in a country with a bit more than half the population) is a measure of the depth of popular discontent with the repression and economic ruin brought about by the Sandinistas. (The can't-win complaint is doubly curious in that Congress legally forbids the administration to support the overthrow of the Sandinistas, i.e., win.)

A further fear is that the contras will draw the United States into war. But as the recent MiG scares show, nothing is more likely to force American military intervention than the consolidation of an aggressive, highly militarized, pro-Soviet regime in the area. The contras want to do their own fighting. Cut them off and the only body in the hemisphere able to restrain the Sandinistas will be the U.S. Army.

To deal with this obvious dilemma, congressional Democrats have taken up a chant: Contadora. If it means anything, it means this: Nicaragua's frightened neighbors are to solve for themselves the problem of taming its enormous military. They are to do so with a parchment barrier: The Sandinistas are given free rein within their borders, and in return, they promise not to trespass on anyone else's.

Now, we have experience with Sandinista parchment. In 1979 they pledged to the OAS to establish an open, democratic and pluralistic society. "One can Finlandize a democracy," says a former Sandinista foreign policy adviser. "To think one can Finlandize a totalitarian country is pure fantasy."

The administration, on the other hand, engages in surrealism. It justifies its support of the contras on the truly absurd grounds of interdicting arms shipments to El Salvador. After four years and millions of dollars, an army of thousands has yet to produce so much as a smuggled rifle for its efforts. So the administration is gear- ing up to focus on the Soviet arms buildup, surely an important issue. But not the primary one. To build a case on Soviet weaponry is to make the argument unnecessarily circular: many of those arms are needed to fight the contras!

Why can't the administration give it straight? Say it supports the contras because there is no other conceivable way to move Ortega's Nicaragua to pluralism. And because a pluralist Nicaragua is the only conceivable guarantor of peace in the region. Is it so hard, at a time when anti-communist guerrillas are fighting in at least four parts of the world, for Americans, of all people, to develop a theory of legitimate, democratic revolution? And is it so hard to see the connection between a Leninist Nicaragua and chronic instability in Central America?

The objective need not be overthrow. What Cruz and his fellow democrats hope for is an opening for the center. A place, forced if necessary, for democrats in the governance of the country. Cruz calls it national reconciliation. Others call it power sharing. By whatever name, it means genuinely free elections, and a constitution that ensures that power is not monopolized by one party.

That, not Contadora, not a temporary deal with Ortega -- that and nothing else short of the Marines -- will ensure stability in Central America.

The great moral dilemmas of American foreign policy arise when the pursuit of security and the pursuit of democracy clash. Contra aid is not such a case. That is Cruz's message. Is anyone listening?