[House Document 105-41]
[From the U.S. Government Publishing Office]




105th Congress, 1st Session - - - - - - - - - - - House Document 105-41


 
  DEVELOPMENTS CONCERNING THE NATIONAL EMERGENCY WITH RESPECT TO IRAQ

                               __________

                                MESSAGE

                                  From

                   THE PRESIDENT OF THE UNITED STATES

                              TRANSMITTING

  A REPORT ON DEVELOPMENTS SINCE HIS LAST REPORT OF AUGUST 14, 1996, 
    CONCERNING THE NATIONAL EMERGENCY WITH RESPECT TO IRAQ THAT WAS 
DECLARED IN EXECUTIVE ORDER NO. 12722 OF AUGUST 2, 1990, PURSUANT TO 50 
                             U.S.C. 1703(c)




  February 10, 1997.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed


To the Congress of the United States:
    I hereby report to the Congress on the developments since 
my last report of August 14, 1996, concerning the national 
emergency with respect to Iraq that was declared in Executive 
Order 12722 of August 2, 1990. This report is submitted 
pursuant to section 401(c) of the National Emergencies Act, 50 
U.S.C. 1641(c), and section 204(c) of the International 
Emergency Economic Powers Act, 50 U.S.C. 1703(c).
    Executive Order 12722 ordered the immediate blocking of all 
property and interests in property of the Government of Iraq 
(including the Central Bank of Iraq) then or thereafter located 
in the United States or within the possession or control of a 
United States person. That order also prohibited the 
importation into the United States of goods and services of 
Iraqi origin, as well as the exportation of goods, services, 
and technology from the United States to Iraq. The order 
prohibited travel-related transactions to or from Iraq and the 
performance of any contract in support of any industrial, 
commercial, or governmental project in Iraq. United States 
persons were also prohibited from granting or extending credit 
or loans to the Government of Iraq.
    The foregoing prohibitions (as well as the blocking of 
Government of Iraq property) were continued and augmented on 
August 9, 1990, by Executive Order 12724, which was issued in 
order to align the sanctions imposed by the United States with 
United Nations Security Council Resolution (UNSCR) 661 of 
August 6, 1990.
    Executive Order 12817 was issued on October 21, 1992, to 
implement in the United States measures adopted in UNSCR 778 of 
October 2, 1992. UNSCR 778 requires U.N. Member States to 
transfer to a U.N. escrow account any funds (up to $200 million 
a piece) representing Iraqi oil sale proceeds paid by 
purchasers after the imposition of U.N. sanctions on Iraq, to 
finance Iraq's obligations for U.N. activities with respect to 
Iraq, such as expenses to verify Iraqi weapons destruction, and 
to provide humanitarian assistance in Iraq on a nonpartisan 
basis. A portion of the escrowed funds also finances the 
activities of the U.N. Compensation Commission in Geneva, which 
handles claims from victims of the Iraqi invasion and 
occupation of Kuwait. Member States also may make voluntary 
contributions to the account. The funds placed in the escrow 
account are to be returned, with interest, to the Member States 
that transferred them to the United Nations, as funds are 
received from future sales of Iraqi oil authorized by the U.N. 
Security Council. No Member State is required to fund more than 
half of the total transfers or contributions to the escrow 
account.
    This report discusses only matters concerning the national 
emergency with respect to Iraq that was declared in Executive 
Order 12722 and matters relating to Executive Orders 12724 and 
12817 (the ``Executive Orders''). The report covers events from 
August 2, 1996 through February 1, 1997.
    1. In April 1995, the U.N. Security Council adopted UNSCR 
986 authorizing Iraq to export up to $1 billion in petroleum 
and petroleum products per quarter for 6 months under U.N. 
supervision in order to finance the purchase of food, medicine, 
and other humanitarian supplies. This arrangement may be 
renewed by the Security Council for additional 6-month periods. 
UNSCR 986 includes arrangements to ensure equitable 
distribution of humanitarian goods purchased with UNSCR 986 oil 
revenues to all the people of Iraq. The resolution also 
provides for the payment of compensation to victims of Iraqi 
aggression and for the funding of other U.N. activities with 
respect to Iraq. On May 20, 1996, a memorandum of understanding 
was concluded between the Secretariat of the United Nations and 
the Government of Iraq agreeing on terms for implementing UNSCR 
986. On August 8, 1996, the UNSC committee established pursuant 
to UNSCR 661 (``the 661 Committee'') adopted procedures to be 
employed by the 661 Committee in implementation of UNSCR 986. 
On December 9, 1996, the Secretary General released the report 
requested by paragraph 13 of UNSCR 986, making UNSCR 986 
effective as of 12:01 a.m. December 10.
    2. During the reporting period, there have been three 
amendments to the Iraqi Sanctions Regulations, 31 C.F.R. Part 
575 (the ``Regulations''), administered by the Office of 
Foreign Assets Control (OFAC) of the Department of the 
Treasury. The Regulations were amended on August 22, 1996, to 
add the Antiterrorism and Effective Death Penalty Act of 1996 
(Public Law 104-132; 110 Stat. 1214-1319 (the ``Antiterrorism 
Act'')) as an authority for the Regulations (61 Fed. Reg. 
43460, August 23, 1996). Section 321 of the Antiterrorism Act 
(18 U.S.C. 2332d), which I signed into law on April 24, 1996, 
makes it a criminal offense for United States persons, except 
as provided in regulations issued by the Secretary of the 
Treasury in consultation with the Secretary of State, to engage 
in financial transactions with the governments of countries 
designated under section 6(j) of the Export Administration Act 
(50 U.S.C. App. 2405) as supporting international terrorism. 
United States persons who engage in such transactions are 
subject to criminal fines under title 18, United States Code, 
imprisonment for up to 10 years, or both. Because the 
Regulations already prohibited such transactions, with minor 
exceptions for transactions such as donations of humanitarian 
aid, no substantive change to the prohibitions of the 
Regulations was necessary. This amendment also notes the 
criminal penalties that may be imposed for violations of the 
Antiterrorism Act and implementing regulations. A copy of the 
amendment is attached.
    The Regulations were amended on October 21, 1996 (61 Fed. 
Reg. 54936, October 23, 1996), to implement section 4 of the 
Federal Civil Penalties Inflation Adjustment Act of 1990, as 
amended by the Debt Collection Improvement Act of 1996, by 
adjusting for inflation the amount of the civil monetary 
penalties that may be assessed under the Regulations. The 
Regulations, as amended, increase the maximum civil monetary 
penalty provided by law from $250,000 to $275,000 per 
violation.
    The amended Regulations also reflect an amendment to 18 
U.S.C. 1001 contained in section 330016(1)(L) of Public Law 
103-322; 108 Stat. 2147. The amendment notes the availability 
of higher criminal fines pursuant to the formulas set forth in 
18 U.S.C. 3571. A copy of the amendment is attached.
    The Regulations were amended on December 10, 1996, to 
provide a statement of licensing policy regarding specific 
licensing of United States persons seeking to purchase Iraqi-
origin petroleum and petroleum products from Iraq (61 Fed. Reg. 
65312, December 11, 1996). Statements of licensing policy were 
also provided regarding sales of essential parts and equipment 
for the Kirkuk-Yumurtalik pipeline system, and sales of 
humanitarian goods to Iraq, pursuant to United Nations 
approval. A general license was also added to authorize 
dealings in Iraqi-origin petroleum and petroleum products that 
have been exported from Iraq with United Nations and United 
States Government approval. The rule also added definitions and 
made technical amendments. A copy of the amendment is attached.
    All executory contracts must contain terms requiring that 
all proceeds of oil purchases from the Government of Iraq, 
including the State Oil Marketing Organization must be placed 
in the U.N. escrow account at Banque Nationale de Paris, New 
York (the ``986 Escrow Account''), and all Iraqi payments for 
authorized sales of pipeline parts and equipment, humanitarian 
goods, and incidental transaction costs borne by Iraq will, 
upon approval by the UNSC committee established pursuant to the 
661 Committee, be paid or payable out of the 986 Escrow 
Account.
    3. Investigations of possible violations of the Iraqi 
sanctions continue to be pursued and appropriate enforcement 
actions taken. Several cases from prior reporting periods are 
continuing and recent additional allegations have been referred 
by OFAC to the U.S. Customs Service for investigation. Several 
OFAC civil penalty proceedings are pending. Investigation also 
continues into the roles played by various individuals and 
firms outside Iraq in the Iraqi government procurement network. 
These investigations may lead to additions to OFAC's listing of 
individuals and organizations determined to be Specially 
Designated Nationals (SDNs) of the Government of Iraq.
    Since my last report, three civil monetary penalties 
totaling $102,250 have been collected from one financial 
institution and two individuals for violation of the 
prohibitions against transactions with Iraq. Additional 
administrative procedures have been initiated and others await 
commencement.
    4. Pursuant to Executive Order 12817 implementing UNSCR 
778, on October 26, 1992, OFAC directed the Federal Reserve 
Bank of New York to establish a blocked account for receipt of 
certain post-August 6, 1990, Iraqi oil sales proceeds, and to 
hold, invest, and transfer these funds as required by the 
Order. On December 13, 1996, OFAC directed the Federal Reserve 
Bank of New York to transfer the interest accrued on the 
blocked account to the U.N. escrow account established pursuant 
to UNSCR 778, to match contributions in excess of $30 million 
by other countries.
    5. The Office of Foreign Assets Control has issued a total 
of 653 specific licenses regarding transactions pertaining to 
Iraq or Iraqi assets since August 1990. Licenses have been 
issued for transactions such as the filing of legal actions 
against Iraqi governmental entities, legal representation of 
Iraq, and the exportation to Iraq of donated medicine, medical 
supplies, and food intended for humanitarian relief purposes, 
the execution of powers of attorney relating to the 
administration of personal assets and decedents' estates in 
Iraq and the protection of preexistent intellectual property 
rights in Iraq. Since my last report, 23 specific licenses have 
been issued.
    6. The expenses incurred by the Federal Government in the 
6-month period from August 2, 1996, through February 1, 1997, 
that are directly attributable to the exercise of powers and 
authorities conferred by the declaration of a national 
emergency with respect to Iraq are reported to be about $1 
million, most of which represents wage and salary costs for 
Federal personnel. Personnel costs were largely centered in the 
Department of the Treasury (particularly in the Office of 
Foreign Assets Control, the U.S. Customs Service, the Office of 
the Under Secretary for Enforcement, and the Office of the 
General Counsel), the Department of State (particularly the 
Bureau of Economic and Business Affairs, the Bureau of Near 
Eastern Affairs, the Bureau of International Organization 
Affairs, the Bureau of Political-Military Affairs, the U.S. 
Mission to the United Nations, and the Office of the Legal 
Adviser), and the Department of Transportation (particularly 
the U.S. Coast Guard).
    7. The United States imposed economic sanctions on Iraq in 
response to Iraq's illegal invasion and occupation of Kuwait, a 
clear act of brutal aggression. The United States, together 
with the international community, is maintaining economic 
sanctions against Iraq because the Iraqi regime has failed to 
comply fully with United Nations Security Council resolutions. 
Security Council resolutions on Iraq call for the elimination 
of Iraqi weapons of mass destruction, Iraqi recognition of 
Kuwait and the inviolability of the Iraq-Kuwait boundary, the 
release of Kuwaiti and other third-country nationals, 
compensation for victims of Iraqi aggression, long-term 
monitoring of weapons of mass destruction capabilities, the 
return of Kuwaiti assets stolen during Iraq's illegal 
occupation of Kuwait, renunciation of terrorism, and end to 
internal Iraqi repression of its own civilian population, and 
the facilitation of access of international relief 
organizations to all those in need in all parts of Iraq. Six 
years after the invasion, a pattern of defiance persists: a 
refusal to account for missing Kuwaiti detainees; failure to 
return Kuwaiti property worth millions of dollars, including 
military equipment that was used by Iraq in its movement of 
troops to the Kuwaiti border in October 1994; sponsorship of 
assassinations in Lebanon and in northern Iraq; incomplete 
declarations to weapons inspectors and refusal of unimpeded 
access; and ongoing widespread human rights violations. As a 
result, the U.N. sanctions remain in place; the United States 
will continue to enforce those sanctions under domestic 
authority.
    The Baghdad government continues to violate basic human 
rights of its own citizens through systematic repression of 
minorities and denial of humanitarian assistance. The 
Government of Iraq has repeatedly said it will not be bound by 
UNSCR 688. The Iraqi military routinely harasses residents of 
the north, and has attempted to ``Arabize'' the Kurdish, 
Turcomen, and Assyrian areas in the north. Iraq has not 
relented in its artillery attacks against civilian population 
centers in the south, or in its burning and draining operations 
in the southern marshes, which have forced thousands to flee to 
neighboring states.
    The policies and actions of the Saddam Hussein regime 
continue to pose an unusual and extraordinary threat to the 
national security and foreign policy of the United States, as 
well as to regional peace and security. The U.N. resolutions 
affirm that the Security Council must be assured of Iraq's 
peaceful intentions in judging its compliance with sanctions. 
Because of Iraq's failure to comply fully with these 
resolutions, the United States will continue to apply economic 
sanctions to deter it from threatening peace and stability in 
the region.

                                                William J. Clinton.
    The White House, February 10, 1997.

    

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