Despite the Sandinistas' recent announcement that they would hold elections later this year, relations between Nicaragua and the United States remain at rock bottom.
The differences between the two countries lie less in matters of substance than in a profound mutual mistrust, say well-placed observers here. This, in turn, leads to important differences in approach.
Both high-level US officials in Washington and the sources here confirm that the US has made three main demands on the Sandinistas:
1. To stop arms and munitions shipments to Salvadorean guerrillas.
2. To close the Salvadorean guerrillas' command and control centers in Nicaragua.
3. To purge Nicaraguan Army and state security units of Cuban advisers.
It is true that US officials also stress publicly the importance of fostering genuine democracy in Nicaragua. But they admit privately that this is less important than the three demands listed above. And they concede that the US could probably live with a less than perfect democracy here.
Both Sandinista and diplomatic sources stress that none of the US demands challenge the basic authority of the Sandinista rule. They say, therefore, that the US demands could be acceptable in principle to Sandinista leaders. Informed observers also emphasize that as the Salvadorean guerrilla forces become stronger, they are potentially less dependent on Nicaraguan arms and munitions.
But Sandinista sources insist their leadership will take no action on the US demands without a signed agreement in which the US agrees to end its efforts to destabilize the Sandinista government.
Washington, on the other hand, has made it clear it will not accept any such general agreement. US officials state clearly that the Nicaraguans must first show their interest in a settlement by moving to fulfill at least one of Washington's key demands.
Such a Nicaraguan move, the US officials say, would bring countermoves by the US to reduce tensions. Only after such a round of deescalation, they say, would the US consider negotiating a more general agreement with the Sandinistas.
The Sandinistas resist making any concessions before the US commits itself because, as an observer puts it, ''They would be stupid to throw away one of their two or three main playing cards, before making sure the US would respond.''
And the Sandinistas are not sure the US would respond. A well-placed Nicaraguan government source believes moderates in the Reagan administration do not determine US policy toward Nicaragua. He believes that these US moderates are convinced that Reagan administration hard-liners do not want a settlement with Nicaragua, but rather are intent on destroying the Sandinistas.
This Sandinista observer feels that because the US moderates do not control US policy, the moderates merely hope that if the Nicaraguans would take a concrete step first, the US hard-liners might be persuaded to soften their stand.
Such Sandinista sources fear that the concessions the Nicaraguan government made in December and January have been interpreted by the US as a sign of weakness - a sign that US destabilization pressures are bringing the Sandinista government to its knees.
According to these sources, ''The Reagan administration can either adopt a military solution or a political solution for relations between our two countries. All present signs, including the US military buildup in Honduras and the increasingly sophisticated regional military exercises being planned, indicate that Washington has opted for the military alternative.''
Western diplomats believe the US is not interested in a pre-negotiated settlement with the Sandinistas because it fears the Nicaraguans could easily break any such agreement.
US government officials in Washington say one of the underlying difficulties for the US is that the Nicaraguans could easily renege on their concessions - for example, bring back Cuban military advisers or resume arms shipments to Salvador - but once the US disbands the somewhat shaky Nicaraguan counterrevolutionary groups in Honduras, it would be hard to start them up again.
Diplomatic sources say verification is a central problem for Washington. The most important of the US demands is that Nicaragua agree to stop shipping arms and munitions to Salvador. It would be difficult, however, for the US to verify whether the Nicaraguans were living up to any such agreement.
According to a well-informed observer, part of the difficulty is that Nicaragua is sending its arms shipments to El Salvador across the Gulf of Fonseca on small, deep-hulled, motorized canoes, which are hard to spot.
Western sources say the difficulty of verifying shipments to Salvador leads to a Catch-22-like bind. They say US government officials believe that, since it is impossible for US intelligence to be sure whether the Nicaraguans are continuing to aid the guerrillas, they would have to rely on a substantial drop-off of guerrilla activity in El Salvador to prove the Nicaraguans were living up to their bargain.
But, these sources say, since the guerrillas could probably find other ways of getting munitions, this substantial drop-off would probably not take place even if Nicaragua acted in good faith.
''Here,'' an observer said, ''we have a real knot.''
One bright spot in this situation could be the recent Sandinista call for elections. According to a Western diplomat, if the opposition participates, and especially if a figure much respected in the US like Arturo Cruz were to run as a candidate, this would make a substantial difference.
According to this source, ''The degree to which the elections are perceived to be free and democratic'' would have a strong impact in the US. It would help show Sandinista good faith and make it much more difficult for the Reagan administration to maintain its present policies.
Rumors coming from the opposition indicate Mr. Cruz could be arriving here next week. In these accounts, he could perhaps stay at the French Embassy under an arrangement made by the Socialist government of Francois Mitterrand. Such a trip could be an exploration of his possibilities to be a candidate.
It is possible, however, that the elections will not go well in Nicaragua. In that case, the complications created by two political campaigns (in Nicaragua and the US) and the uncertainty of a deteriorating military situation in El Salvador could dim prospects for US-Nicaragua detente.