[House Document 105-286]
[From the U.S. Government Publishing Office]



105th Congress, 2d Session - - - - - - - - - - - House Document 105-286


 
DEVELOPMENTS CONCERNING NATIONAL EMERGENCY WITH RESPECT TO SERBIA AND 
                              MONTENEGRO

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

A REPORT ON DEVELOPMENTS CONCERNING THE NATIONAL EMERGENCY WITH RESPECT 
  TO THE FEDERAL REPUBLIC OF YUGOSLAVIA (SERBIA AND MONTENEGRO) (THE 
  ``FRY (S/M)'') AND THE BOSNIAN SERBS, PURSUANT TO 50 U.S.C. 1703(c)





    July 17, 1998.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed


To the Congress of the United States:
    On May 30, 1992, by Executive Order 12808, President Bush 
declared a national emergency to deal with the unusual and 
extraordinary threat to the national security, foreign policy, 
and economy of the United States constituted by the actions and 
policies of the Governments of Serbia and Montenegro, blocking 
all property and interests in property of those Governments. 
President Bush took additional measures to prohibit trade and 
other transactions with the Federal Republic of Yugoslavia 
(Serbia and Montenegro) (the ``FRY (S&M)''), by Executive 
Orders 12810 and 12831, issued on June 5, 1992, and January 15, 
1993, respectively.
    On April 25, 1993, I issued Executive Order 12846, blocking 
the property and interests in property of all commercial, 
industrial, or public utility undertakings or entities 
organized or located in the FRY (S&M), and prohibiting trade-
related transactions by United States persons involving those 
areas of the Republic of Bosnia and Herzegovina controlled by 
the Bosnian Serb forces and the United Nations Protected Areas 
in the Republic of Croatia. On October 25, 1994, because of the 
actions and policies of the Bosnian Serbs, I expanded the scope 
of the national emergency by issuance of Executive Order 12934 
to block the property of the Bosnian Serb forces and the 
authorities in the territory that they controlled within the 
Republic of Bosnia and Herzegovina, as well as the property of 
any entity organized or located in, or controlled by any person 
in, or resident in, those areas.
    On November 22, 1995, the United Nations Security Council 
passed Resolution 1022 (``Resolution 1022''), immediately and 
indefinitely suspending economic sanctions against the FRY 
(S&M). Sanctions were subsequently lifted by the United Nations 
Security Council pursuant to Resolution 1074 October 1, 1996. 
Resolution 1022, however, continues to provide for the release 
of funds and assets previously blocked pursuant to sanctions 
against the FRY (S&M), provided that such funds and assets that 
are subject to claims and encumbrances, or that are the 
property of persons deemed insolvent, remain blocked until 
``released in accordance with applicable law.'' This provision 
was implemented in the United States on December 27, 1995, by 
Presidential Determination No. 96-7. The determination, in 
conformity with Resolution 1022, directed the Secretary of the 
Treasury, inter alia, to suspend the application of sanctions 
imposed on the FRY (S&M) pursuant to the above-referenced 
Executive Orders and to continue to block property previously 
blocked until provision is made to address claims or 
encumbrances, including the claims of the other successor 
states of the former Yugoslavia. This sanctions relief was an 
essential factor motivating Serbia and Montenegro's acceptance 
of the General Framework Agreement for Peace in Bosnia and 
Herzegovina initialed by the parties in Dayton on November 21, 
1995 (the ``Peace Agreement'') and signed in Paris on December 
14, 1995. The sanctions imposed on the FRY (S&M) and on the 
United Nations Protected Areas in the Republic of Croatia were 
accordingly suspended prospectively, effective January 16, 
1996. Sanctions imposed on the Bosnian Serb forces and 
authorities and on the territory that they controlled within 
the Republic of Bosnia and Herzegovina were subsequently 
suspended prospectively, effective May 10, 1996, in conformity 
with Resolution 1022. On October 1, 1996, the United Nations 
passed Resolution 1074, terminating U.N. sanctions against the 
FRY (S&M) and the Bosnian Serbs in light of the elections that 
took place in Bosnia and Herzegovina on September 14, 1996. 
Resolution 1074, however, reaffirms the provisions of 
Resolution 1022 with respect to the release of blocked assets, 
as set forth above.
    The present report is submitted pursuant to 50 U.S.C. 
1641(c) and 1703(c) and covers the period from November 30, 
1997, through May 29, 1998. It discusses Administration actions 
and expenses directly related to the exercise of powers and 
authorities conferred by the declaration of a national 
emergencyIn Executive Order 12808 as expanded with respect to 
the Bosnian Serbs in Executive Order 12934, and against the FRY (S&M) 
contained in Executive Orders 12810, 12831, and 12846.
    1. The declaration of the national emergency on May 30, 
1992, was made pursuant to the authority vested in the 
President by the Constitution and laws of the United States, 
including the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 
1601 et seq.), and section 301 of title 3 of the United States 
Code. The emergency declaration was reported to the Congress on 
May 30 ,1992, pursuant to section 204(b) of the International 
Emergency Economic Powers Act (50 U.S.C. 1703(b)) and the 
expansion of that national emergency under the same authorities 
was reported to the Congress on October 25, 1994. The 
additional sanctions set forth in related Executive orders were 
imposed pursuant to the authority vested in the President by 
the Constitution and laws of the United States, including the 
statutes cited above, section 1114 of the Federal Aviation Act 
(49 U.S.C. App. 1514), and section 5 of the United Nations 
Participation Act (22 U.S.C. 287c).
    2. The Office of Foreign Assets Control (OFAC), acting 
under authority delegated by the Secretary of the Treasury, 
implemented the sanctions imposed under the foregoing statutes 
in the Federal Republic of Yugoslavia (Serbia and Montenegro) 
and Bosnian Serb-Controlled Areas of the Republic of Bosnia and 
Herzegovina Sanctions Regulations, 31 C.F.R. Part 585 (the 
``Regulations'').
    To implement Presidential Determination No. 96-7, the 
Regulations were amended to authorize prospectively all 
transactions with respect to the FRY (S&M) otherwise prohibited 
(61 FR 1282, January 19, 1996). Property and interests in 
property of the FRY (S&M) previously blocked within the 
jurisdiction of the United States remain blocked, in conformity 
with the Peace Agreement and Resolution 1022, until provision 
is made to address claims or encumbrances, including the claims 
of the other successor states of the former Yugoslavia.
    On May 10, 1996, OFAC amended the Regulations to authorize 
prospectively all transactions with respect to the Bosnian 
Serbs otherwise prohibited, except with respect to property 
previously blocked (61 FR 24696, May 16, 1996). On December 4, 
1996, OFAC amended Appendices A and B to 31 chapter V, 
containing the names of entities and individuals in 
alphabetical order and by location that are subject to the 
various economic sanctions programs administered by OFAC, to 
remove the entries for individuals and entities that were 
determined to be acting for or on behalf of the Government of 
the Federal Republic of Yugoslavia (Serbia and Montenegro). 
These assets were blocked on the basis of these persons' 
activities in support of the FRY (S&M)--activities no longer 
prohibited--not because the Government of the FRY (S&M) or 
entities located in or controlled by the FRY (S&M) had any 
interest in those assets (61 FR 64289, December 4, 1996).
    On April 18, 1997, the Regulations were amended by adding a 
new Section 585.528, authorizing all transactions after 30 days 
with respect to the following vessels that remained blocked 
pursuant to the Regulations, effective at 10:00 a.m. local time 
in the location of the vessel on May 19, 1997: the M/V 
Moslavina, M/V Zeta, M/V Lovcen, M/V Durmitor and M/V Bar (a/k/
a M/V Inviken) (62 FR 19672, April 23, 1997). During the 30-day 
period, United States persons were authorized to negotiate 
settlements of their outstanding claims with respect to the 
vessels with the vessels' owners or agents and were generally 
licensed to seek and obtain judicial warrants of maritime 
arrest. If claims remained unresolved 10 days prior to the 
vessels' unblocking (May 8, 1997), service of the warrants 
could be effected at that time through the United States 
Marshal's Office in the district where the vesselwas located to 
ensure that U.S. creditors of a vessel had the opportunity to assert 
their claims. Appendix C to 31 CFR, chapter V, containing the names of 
vessels blocked pursuant to the various economic sanctions programs 
administered by OFAC (61 FR 32936, June 26, 1996), was also amended to 
remove these vessels from the list effective May 19, 1997. There have 
been no amendments to the Regulations since my report of December 3, 
1997.
    3. Over the past 2 years, the Departments of State and the 
Treasury have worked closely with European Union member states 
and other U.N. member nations to implement the provisions of 
Resolution 1022. In the United States, retention of blocking 
authority pursuant to the extension of a national emergency 
provides a framework for administration of an orderly claims 
settlement. This accords with past policy and practice with 
respect to the suspension of sanctions regimes.
    4. During this reporting period. OFAC issued two specific 
licenses regarding transactions pertaining to the FRY (S&M) or 
property in which it has an interest. Specific licenses were 
issued (1) to authorize U.S. creditors to exchange a portion of 
blocked unallocated FRY (S&M) debt obligations for the share of 
such obligations assumed by the obligors in the Republic of 
Bosnia and Herzegovina; and (2) to authorize certain financial 
transactions with respect to blocked funds located at a foreign 
branch of a U.S. bank.
    During the past 6 months, OFAC has continued to oversee the 
maintenance of blocked FRY (S&M) accounts and records with 
respect to: (1) liquidated tangible assets and personalty of 
the 15 blocked U.S. subsidiaries of entities organized in the 
FRY (S&M); (2) the blocked personalty, files, and records of 
the two Serbian banking institutions in New York previously 
placed in secure storage; (3) remaining blocked FRY (S&M) 
tangible property, including real estate; and (4) the 5 
Yugoslav-owned vessels recently unblocked in the United States.
    On September 29, 1997, the United States filed Statements 
of Interest in cases being litigated in the Southern District 
of New York: Beogradska Banka A.D. Belgrade  v. Interenergo, 
Inc., 97 Civ. 2065 (JGK); and Jugobanka A.D. Belgrade v. U.C.F. 
International Trading, Inc. et al., 97 Civ. 3912, 3913 and 6748 
(LAK). These cases involved actions by blocked New York Serbian 
bank agencies and their parent offices in Belgrade, Serbia, to 
collect on defaulted loans made prior to the imposition of 
economic sanctions and dispensed, in one case, to the U.S. 
subsidiary of a Bosnian firm and, in the other cases, to 
various foreign subsidiaries of a Slovenian firm. Because these 
loan receivables are a form of property that was blocked prior 
to December 27, 1995, any funds collected as a consequence of 
these actions would remain blocked and subject to United States 
jurisdiction. Defendants asserted that the loans had been made 
from the currency reserves of the central bank of the former 
Yugoslavia to which all successor states had contributed, and 
that the loan funds represent assets of the former Yugoslavia 
and are therefore subject to claims by all five successor 
states. The Department of State, in consultation with the 
Department of the Treasury, concluded that the collection of 
blocked receivables through the actions by the bank and the 
placement of those collected funds into a blocked account did 
not prejudice the claims of successor states nor compromise 
outstanding claims on the part of any creditor of the bank, 
since any monies collected would remain in a blocked status and 
available to satisfy obligations to United States and foreign 
creditors and other claimants--including possible distribution 
to successor states under a settlement arising from the 
negotiations on the division of assets and liabilities of the 
former Yugoslavia. On March 31, 1998, however, the Court 
dismissed the claims as nonjustifiable. Another case, D.C. 
Precision, Inc. v. United States, et al., 97 Civ. 9123 CRLC, 
was filed in the Southern District of New York onDecember 10, 
1997, alleging that the Government had improperly blocked Precision's 
funds held at one of the closed Serbia banking agencies in New York.
    5. Despite the prospective authorization of transactions 
with the FRY (S&M), OFAC has continued to work closely with the 
U.S. Customs Service and other cooperating agencies to 
investigate alleged violations that occurred while sanctions 
were in force. On February 13, 1997, a Federal grand jury in 
the Southern District of Florida, Miami, returned a 13-count 
indictment against one U.S. citizen and two nationals of the 
FRY (S&M). The indictment charges that the subjects 
participated and conspired to purchase three Cessna propeller 
aircraft, a Cessna jet aircraft, and various aircraft parts in 
the United States and to export them to the FRY (S&M) in 
violation of U.S. sanctions and the Regulations. Timely 
interdiction action prevented the aircraft from being exported 
from the United States.
    Since my last report, OFAC has collected one civil monetary 
penalty totaling nearly $153,000 for violations of the 
sanctions. These violations involved prohibited payments to the 
Government of the FRY (S&M) by a U.S. company.
    6. The expenses incurred by the Federal Government in the 
6-month period from November 30, 1997, through May 29, 1998, 
that are directly attributable to the declaration of a national 
emergency with respect to the FRY (S&M) and the Bosnian Serb 
forces and authorities are estimated at approximately $360,000, 
most of which represents wage and salary costs for Federal 
personnel. Personnel costs were largely centered in the 
Department of the Treasury (particularly in OFAC and its Chief 
Counsel's Office, and the U.S. Customs Service), the Department 
of State, the National Security Council, and the Department of 
Commerce.
    7. In the last 2 years substantial progress has been 
achieved to bring about a settlement of the conflict in the 
former Yugoslavia acceptable to the parties. Resolution 1074 
terminates sanctions in view of the first free and fair 
elections to occur in the Republic of Bosnia and Herzegovina, 
as provided for in the Peace Agreement. In reaffirming 
Resolution 1022, however, Resolution 1074 contemplates the 
continued blocking of assets potentially subject to conflicting 
claims and encumbrances until provision is made to address them 
under applicable law, including claims of the other successor 
states of the former Yugoslavia. The resolution of the crisis 
and conflict in the former Yugoslavia that has resulted from 
the actions and policies of the Government of the Federal 
Republic of Yugoslavia (Serbia and Montenegro), and of the 
Bosnian Serb forces and the authorities in the territory that 
they controlled, will not be complete until such time as the 
Peace Agreement is implemented and the terms of Resolution 1022 
have been met. Therefore, I have continued for another year the 
national emergency declared on May 30, 1992, as expanded in 
scope on October 25, 1994, and will continue to enforce the 
measures adopted pursuant thereto.
    I shall continue to exercise the powers at my disposal with 
respect to the measures against the Government of the Federal 
Republic of Yugoslavia (Serbia and Montenegro), and the Bosnian 
Serb forces, civil authorities, and entities, as long as these 
measures are appropriate, and will continue to report 
periodically to the Congress on significant developments 
pursuant to 50 U.S.C. 1703(c).

                                                    William J. Clinton.
    The White House, July 16, 1998.

                                
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