The story is played out as a romance between Clara and the Nutcracker / Prince.
There is no sex or nudity at all, but Clara is notably uneasy and seems to be "creeped out" by her godfather Drosselmeyer, who has a smile which uncomfortably resembles a leer, and Clara behaves as if she were afraid he might try to make a pass at her.
Later on, in Clara's dream, Drosselmeyer turns up as a Pasha, keeper of a harem, brandishing a whip to introduce the "Russian Dance", "Chinese Dance", "Arabian Dance", and so on. The Arabian Dance is performed by what is supposed to be a peacock, but instead resembles a half-woman, half-bird that has been captured and brought to the harem in a cage.
A sexually-tinged rivalry appears to exist between the Pasha and the Nutcracker/ Prince, as the Pasha tries to get Clara to sit with him, but the Prince refuses to allow it.