President Reagan, responding to congressional urging, is expected today to announce severe economic sanctions against Nicaragua, including an embargo on all trade, a halt to airline traffic between Nicaragua and the United States and the formal abrogation of a long-ignored friendship treaty.
The measures, which need no action by Congress, mark a further deterioration in U.S. relations with the leftist Sandinista government of Nicaragua, which Reagan has denounced as an extension of Soviet power in the hemisphere.
Secretary of State George P. Shultz acknowledged yesterday that the sanctions will have a limited effect on the already shaky economy of Nicaragua, where U.S. sales have plummeted since the 1979 Marxist-led revolution and now provide only 17 percent of the country's export income.
"Nicaragua has other places to sell goods . . . . It's not going to be an overpowering event," Shultz said in an interview with Washington Post reporters, "but there's a certain sense of feeling that regardless of the effect, certain kinds of relationships with countries we think are doing a lot of damage are undesirable."
Shultz compared the sanctions against Nicaragua with those on U.S. trade with Libya, where U.S. firms continue to operate but travel by Americans is banned. "Even if it's not that meaningful, we'd prefer not to have any trade with them, and I think we've got to that point with Nicaragua," he said.
The Nicaraguan Embassy, reacting in a statement last night, said the sanctions "will have a profound impact, primarily on the Nicaraguan private sector . . . . " and are "consistent with overall U.S. strategy since the overthrow of the Nicaraguan government . . . . "
Shultz recommended the sanctions to Reagan on Monday and the president agreed that afternoon, administration sources said. Members of Congress were briefed on them later that day and yesterday. Reagan was expected to make the details public after his arrival today in Bonn for the European economic summit.
Sen. Richard G. Lugar (R-Ind.), chairman of the Foreign Relations Committee, said the sanctions will be expressed in the form of an executive order that will go into effect this Tuesday.
Nicaragua, Lugar said, "is not a country we wish to have a trading relationship with until it fulfills its promises" for democratic processes.
Sen. Lloyd Bentsen (D-Tex.), who submitted legislation for trade actions against Nicaragua and last week urged them on the administration, said he was "pleased by the speed with which they seem to be responding to my suggestion."
Bentsen was one of many senators and House members who urged during debate on Reagan's policy toward Nicaragua that economic measures replace military support for anti-government rebels.
Congress refused to provide military aid, but some kind of aid is considered to have a good chance of passing within the next few weeks.
Bentsen joined Democratic Sens. Sam Nunn (Ga.), J. Bennett Johnston (La.) and David L. Boren (Okla.) in offering a joint resolution yesterday that would provide $14 million in humanitarian aid to the rebels under certain conditions along lines suggested in the debate.
According to congressional and State Department sources, the trade measures will deny U.S. docking rights to Nicaraguan ships and landing rights to its national airline, AeroNica, and will bar U.S. airlines and shipping from visiting Nicaragua.
The U.S.-Nicaraguan Treaty of Friendship, Commerce and Navigation is to be formally broken, but diplomatic ties will remain intact.
Critics within the administration argued unsuccessfully that trade sanctions have had little impact wherever they have been tried, and that they will most weaken Nicaragua's middle class.
That group has been resisting Sandinista efforts to consolidate a Marxist economy but depends upon imported U.S. machine parts, fertilizer and pesticides to maintain the banana, coffee and sugar crops it sells to the United States. Nicaragua will also be able to blame further economic collapse on the United States, the critics argued.
The United States cut off economic aid to Nicaragua in 1980 and later eliminated Nicaragua's sugar quota, dropping its U.S. sugar sales from $28 million in 1980 to $2 million last year.
According to State Department figures, the United States imported $57 million worth of goods from Nicaragua last year, led by $23.5 million in bananas and $9.8 million in Grade B beef.
Nicaragua's 1984 U.S. imports totaled $111.5 million, mainly in agricultural chemicals, fertilizers, farm machinery and spare parts. U.S. pressure has been blocking loans to Nicaragua in the Inter-American Development Bank, and such efforts are expected to continue.
Other economic measures still under consideration, the sources said, include a freeze on Nicaraguan assets in the United States, a ban on American travel there and a declaration that Nicaragua is in default on its debts to U.S. banks.
Nicaragua owes about $4.5 billion worldwide and has made no payments on either the interest or the principal of its U.S. debts since June 1983.