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U.S. LIKELY TO FIGHT NORIEGA WITH MONEY - NOT BULLETS

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President Bush refuses to rule out military action to oust Panamanian Gen. Manuel Antonio Noriega, but the next U.S. moves are more likely to involve dollars than bullets.

The new economic strictures under consideration to step up pressure on Noriega include the withholding of about $1.5 million in taxes paid monthly to his government on behalf of Panamanian employees of U.S. agencies, officials said.The officials, who asked not to be identified, said discussions about new sanctions against Panama began well before the failed coup attempt last Tuesday. According to the Treasury Department, sanctions imposed to date have deprived Panama of about $400 million.

Other economic measures under consideration, the officials said, include limiting even further the payments U.S. companies operating in Panama can make to the government and prohibiting Panamanian-flag vessels from using U.S. ports. It was not clear what such additional sanctions would cost Panama.

Not all the options under discussion are economic in nature.

Administration officials have sounded out congressional intelligence committees on the possibility of U.S. covert actions against Noriega but none has been approved, said the sources, who declined to be more specific.

Bush talked briefly to reporters Friday and defended his decision not to commit U.S. forces to aid Panamanian rebels during last Tuesday's coup attempt. When asked whether he might authorize military action in the future, the president replied, "I would not rule out any option."

The administration is still convinced that a steady weakening of the Panamanian economy will make Noriega's rule increasingly untenable and eventually force his removal, the officials said.

The economic decline Panama has suffered since early 1988 was one of the factors cited by the coup plotters in justifying their action, the sources noted.

By a vote of 99-1, the Senate adopted a resolution proposed by Sen. Sam Nunn, D-Ga., on Thursday that expressed support for Bush's efforts to democratize Panama through a "full range of economic, diplomatic and military options."

But the administration does not appear intent on deviating too far from the policy of economic denial and diplomatic pressure instituted by former President Reagan 19 months ago.

Among other measures, the United States has withheld payments to Panama for canal operations and has frozen an estimated $300 million worth of Panamanian assets in U.S. banks. Some trade benefits, including sugar exports, also have been denied.

Bush has hoped these measures would damage the Panamanian economy to the point that the Defense Forces would move against Noriega. His actions last Tuesday at the time of the coup attempt indicate a strong preference to limit direct U.S. military involvement in efforts to oust Noriega.

The administration is not contemplating a complete trade embargo against Panama because that would put hundreds of U.S. companies operating there out of business, the officials said.

Bush has come under criticism from many members of Congress as well as from some conservative outside government for not moving more aggressively in support of the coup leaders last Tuesday.

Former Assistant Secretary of State for Inter-American Affairs Elliott Abrams said the U.S. policy of "speeches and sanctions" against Noriega is not enough.

"To borrow a slogan from Theodore Roosevelt, who was profoundly involved in Panamanian affairs, it's time for the U.S. to speak more softly but carry - and contemplate using - a big stick," Abrams says.

But former Ambassador Sol Linowitz, who helped negotiate the Panama Canal treaties, says that military action could put at risk the 50,000 American citizens in Panama.

"The military option can't be done without significant bloodshed," Linowitz told a reporter Thursday. He also opposes additional sanctions because the ones already in place have "destroyed the economy without budging Noriega."

Linowitz advocates reviving the diplomatic effort in the Organization of American States - suspended six weeks ago - aimed at negotiating a restoration of democratic rule in Panama.