During the past month, faint hints of flexibility on the part of both Nicaragua and the United States have introduced some hope into what many observers see as a steadily deteriorating situation in Central America.
In early December, Nicaragua made a series of conciliatory gestures toward its internal opposition and the US. It issued a partial amnesty to political exiles, started a dialogue with opposition and church leaders, relaxed somewhat on press censorship, announced the likelihood of some sort of elections in 1985, and announced the departure of 2,000 Cuban teachers and advisers.
These moves were greeted privately with some skepticism by US officials who felt they might be easily reversible and propaganda ploys. They suggested the Cuban teachers could be returning to Havana merely as part of a normal vacation rotation.
But Secretary of State George Shultz broke out of the pattern of official distrust with an announcement cautiously hailing the moves, stating that - if sincere - they could be a ''ray of light.''
As a high-level US government official put it, the heart of the problem is not that there are no solutions to the differences between the US and the ruling Sandinistas, but rather that ''each side, for very good reasons, completely mistrusts the other.''
Commenting after the Shultz statement, the official said, ''They (the Nicaraguans) have sent out peace signals, easily reversible. In response, they got a peace signal from us with Shultz's statement. This could easily be escalated.''
''They could start taking concrete action to meet some of our demands and they would get concrete actions in return,'' the official said.
He stated the areas in which the US had demanded Nicaraguan concessions:
1. Ending support for insurrection in El Salvador.
2. Cutting back on armed forces.
3. Loosening ties with Cuba and the Soviet Union.
4. Making the government legitimately dependent on popular support for free elections.
The US official said the US wanted the Sandinistas not only to hold free elections in 1985 - which they probably will win - but also to commit themselves to holding elections in the future, even if it looked like they would lose.
When asked if the US would settle for something less than a long-term commitment to perfect electoral democracy and tolerate the kind of system Mexico has (opposition parties and a free press are permitted but the government party always wins elections), the official replied: ''There is a difference between what we want and what we might have to settle for. If the Nicaraguans are prepared to stop aiding Salvadorean guerrillas and throw out Cuban advisers from the key areas, like military intelligence and state security, they would have all the cards in their hands.
''Given the state of public opinion in Congress and this country, if the Sandinistas did that, they could dictate what the US consensus would be. Those of us in the Reagan administration who want to see the Nicaraguans make concessions on all points would have to back down. The Nicaraguans could, by making concessions in the key areas of Salvador and Cuba, undercut our political support at any time.''
The official said that in the face of such moves by Nicaragua, those in the administration pushing a hard line would automatically lose out.
Another lower-level government official said the US would respond to positive Sandinista moves, but initially with some caution. He stated that behind this caution lay a sense that US concessions would be harder to retract than Nicaragua's. The Sandinistas could send Cubans back home, but Fidel Castro could easily send more; and the Sandinistas could liberalize relations with the opposition but crack down whenever convenient.
However, once the US made its major concessions - to stop financing and even disband the Somocista counterrevolutionary forces in Honduras, it would be very difficult to reverse, since these groups could probably not survive without US support. Thus, said these officials, the US would respond to Sandinista moves, but cautiously. Being the stronger country of the two, it could afford to move more slowly.
Yet another mid-level US government official stated that if the Nicaraguans were serious and continued with their concessions, the US would respond. If they were not, US policies of steady pressure would continue. This official discounted the possibility of a US invasion, but said continued pressure would eventually split the Sandinistas, provoking a coup that would either moderate or further radicalize them. This, he said, would be to US advantage. If they moderated, ''we could live with them,'' he said. If they radicalized, they would so isolate themselves from their own people that they could be easily overthrown , he added.
A Latin American observer with high-level Sandinista connections stated that the Sandinista leadership realized significant concessions were necessary to ''save the revolution.'' They were, he said, particularly worried by the counterrevolutionaries' new policy of striking at economic targets. Not only did these strikes cause heavy losses, but also they expanded the area of conflict, making it necessary to guard not only the Atlantic coast and the Honduran and Costa Rican borders, but also the Pacific coast and major installations.
The observer predicted this situation would lead to further Sandinista concessions, the most probable being expansion of the amnesty to include top non-Somocista exile leaders centered around a former Sandinista hero, Eden Pastora Gomez, in Costa Rica. Thus, men like opposition leaders Alfonso Robelo Callejas and Alfredo Cesar Aguirre could return and participate in eventual elections.
He predicted that more moderate Sandinista elements would be successful in pushing the measure through.
The observer further stated that, of the other concessions demanded by the US , a Cuban withdrawal would be the most easily obtained, since Nicaraguan military and intelligence forces were already well trained and the ''revolution'' could survive without foreign advisers.
He indicated that ties with El Salvador could present greater difficulties. He felt direct military aid to the Salvadorean guerrillas could be stopped, but said that although the guerrilla command centers might be disbanded, the Sandinistas would never ask all Salvadorean guerrillas to leave the country. Nor would they abandon ideological solidarity with the guerrillas.
Other analysts of Nicaragua stress the different lines within the Sandinista directorship pointing to the widening split between two leading directorate members: Tomas Borge, who calls for a hard line domestically, and Jaime Wheelock Roman, who wants internal liberalization although he stresses the necessity of ideological solidarity with the Salvadorean left.
Some worry about US hard-liners. According to Rep. Michael Barnes (D) of Maryland, ''I think there is a debate going on in the administration as to whether or not we can live with the Sandinistas. Although the issue has not been resolved, the dominant voices in the administration are of the view that we can't, but no decision has been made yet.''
Observers supporting this view point to the influence of administration hard-liners such as Jeane Kirkpatrick and Undersecretary of Defense Fred Ikle. Others stress the role of Secretary of State Shultz and the growing power of Assistant Secretary of State Langhorne Motley, who is viewed as ambitious but intelligent and basically open to moderate positions.
One Latin diplomat stated that if progress toward peace was not made before the November elections, the situation would degenerate. If, as he expected, Reagan is reelected, the administration would likely take a much harder line, perhaps intervening directly.
Observers both in and out of government stress that if peace is not achieved rapidly, open hositilities could break out beacuse: (1) Border tensions between Honduras and Nicaragua could lead to war, (2) a deteriorating military situation in Salvador, rather than Nicaragua could lead to direct US military intervention there.