A last-minute agreement between Nicaraguan President Enrique Bolaños and the leader of the left-wing opposition Sandinista party, former President Daniel Ortega, has evidently staved off a U.S. threat of sanctions against the impoverished Central American country.

The Bush administration had threatened to cut off millions of dollars in aid and debt relief to Nicaragua and sever its trade relations with that country if its democratically elected National Assembly voted to impeach Bolaños, a U.S. ally, for violating campaign finance rules. Enabling legislation to permit the impeachment had been passed in February with the support of the Sandinistas and the right-wing Liberal Constitutionalist Party, which formerly supported Bolaños.

Bolaños claimed that he was “the victim of a rolling coup d’etat” instigated by a political alliance formed between Arnoldo Aleman, a former conservative president, and Ortega. Aleman has been jailed since 2002, serving a 20-year sentence for stealing $100 million in public funds. Legislators had already stripped two of Bolaños’ ministers and three senior officials of their immunity from prosecution.

Deputy Secretary of State Robert Zoellick visited Managua two weeks ago to warn Nicaraguans that if the Assembly were to remove Bolaños as president, the U.S. would withdrawal $175 million in government aid and $4 billion in debt forgiveness. Bolaños “is democratically elected and for those who think they can remove him, my message is there will be consequences in terms of their relations with the U.S. and, unfortunately, for Nicaraguans, if democracy is undermined,” said Zoellick. He attacked Ortega and Aleman and what he described as a “corrupt pact” between them.

Zoellick warned Nicaraguan businessmen that if they did not cease supporting the parties that want to impeach Bolaños, they would not be allowed to do business with the U.S. “Your opportunities will be lost,” he said. He also said that those wanting to impeach Bolaños would be denied visas to enter the United States. Already, the Bush administration has prevented Nicaraguan Attorney General Julio Centeno from entering the U.S.

Zoellick also met with National Assembly deputies to encourage them to oppose efforts to impeach Bolaños.

The right-wing Liberal Party and the Sandinistas have condemned the U.S. attempt to control the actions of the National Assembly through threats of an economic embargo.

“As Nicaraguans, as Central Americans and sons of Latin America, we protest to the world about the U.S. government’s unwarranted interference in the internal affairs of our country,” the Liberals declared in a press statement. However, U.S. threats did seem to have an effect on some of that party’s senior leaders, who later told The New York Times they were backing away from the impeachment motion.

Zoellick also indicated greater U.S. involvement in Nicaragua to keep the Sandinistas from winning power in next year’s elections. Holding up an alleged threat of Sandinista dirty tricks to steal the 2006 elections, he said that the U.S. would be spending $4 million to hire two private organizations to monitor the elections. The U.S., through funds provided by the National Endowment for Democracy, has used private nongovernmental organizations to manipulate elections or to undermine popular left-wing governments in numerous countries.

Prior to Aleman’s conviction for stealing public funds in 2002, Bolaños was Aleman’s vice president. In a closely fought race with the Sandinistas in 2002, he was elected president of Nicaragua, promising to fight corruption. The U.S. made it clear to Nicaraguan voters at the time that if they did not elect Bolaños there would be serious economic repercussions for the country.

However, at the end of last week, it was not the Liberal Party that pulled out of the impeachment campaign, but the Sandinistas. After meeting with President Bolaños, Sandinista leader Ortega repudiated the impeachment effort and for now has apparently ditched his alliance of convenience with the Liberals and Aleman. The Bolaños-Ortega agreement will postpone the effectiveness of the February legislation until Bolaños leaves office after the 2006 elections.

While Ortega remains the probable Sandinista presidential candidate for next year, there is disagreement within the Sandinista party and criticism of Ortega about a number of things, most notably the alliance with the corrupt ultra-rightist Aleman, even if the new situation puts an end to that alliance.

Emile Schepers contributed to this article.