Secretary of State George P. Shultz, putting top priority on U.S. efforts to break Gen. Manuel Antonio Noriega's control over Panama, yesterday called the strongman "bad news" and warned that the Reagan administration is "considering carefully" possible new economic sanctions against Panama.
"Noriega is bad news for Panama; he's bad news for the region," Shultz told a news conference concluding the Atlantic Alliance summit in Brussels. President Reagan, asked at a photo opportunity there whether he thought Noriega should quit, replied, "Yes."
Such remarks were described by State Department officials here as an attempt to keep pressure on Noriega.
The United States has cut off all economic and military aid to Panama and disqualified it from receiving any more on grounds that Panama has not helped the U.S. drug fight. The administration also is cooperating with efforts to bar Panamanian funds in U.S. banks from being withdrawn by Panama. Noriega was indicted last month by two federal grand juries on narcotics trafficking charges. U.S. officials also said it is likely that forthcoming installments of the $80 million that the United States pays Panama annually under the Panama Canal treaties will be put in escrow.
But Shultz, while acknowledging that other economic sanctions are possible, stressed that no decisions have been made. Administration officials say there are unanswered legal questions about some steps under consideration, and they also have cautioned that getting too tough could create a backlash of public support for Noriega in Panama.
"We want to do it properly, we want to do it right, we want to do it effectively," Shultz said.
In Washington yesterday, a bipartisan group of senators, expressing impatience at what they called the slow pace of administration efforts, introduced legislation to impose a trade, currency and air-travel embargo on Panama. One sponsor, Sen. Alfonse M. D'Amato (R-N.Y.), said the idea was "to go for the jugular" with a campaign whose impact would be "immediate, dramatic and devastating to Noriega and his cohorts."
Panamanian supporters here of Eric Arturo Delvalle, the civilian figurehead ousted as president by Noreiga last week, claimed progress yesterday in efforts to bottle up what they say is about $50 million in Panamanian government funds held by U.S. commercial banks.
On Wednesday, the administration certified to the Federal Reserve System that the United States recognizes Delvalle as the legitimate president of Panama and Juan B. Sosa, the Panamanian ambassador here who has remained loyal to Delvalle, as his authorized representative. The effect was to put banks holding Panamanian deposits on notice that they could be sued if they release the funds to anyone other than Sosa.
Ken Juster, one of the lawyers advising the opposition forces, said that temporary restraining orders had been obtained yesterday barring until Monday release of the funds held by three New York banks -- Irving Trust Co., Marine Midland and Bankers Trust Co. -- and the First National Bank of Boston.
It is not clear whether the Noriega regime will fight the opposition bid to keep the funds blocked. On Wednesday, Republic National Bank in New York agreed to put an estimated $10 million in Panamanian government funds in escrow until the question of Panamanian political authority is clarified.
In giving its backing to such moves, the administration appears to be hoping for a quick knockout punch of Noriega by squeezing Panama financially so Panamanian masses will rise up and force the military to depose him.
But U.S. officials also are aware that if they do not get results in the next few days, the opposition may face a protracted, unpredictable campaign of attrition against the entrenched, corrupt military rulers. This concern has spurred D'Amato and other senators to advocate the "strong medicine" of a total embargo to force Noriega out quickly rather than settling for gradual measures that are less likely to work.
The other sponsors of the embargo bill are Sens. John F. Kerry (D-Mass.), Jesse Helms (R-N.C.), David F. Durenberger (R-Minn.), Edward M. Kennedy (D-Mass.), Bob Graham (D-Fla.) and Howell Heflin (D-Ala.).