[Congressional Record Volume 142, Number 46 (Friday, March 29, 1996)]
[Extensions of Remarks]
[Pages E518-E519]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       SEIZED IRAQI OIL PROCEEDS SHOULD GO TO U.N. ESCROW ACCOUNT

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                         Friday, March 29, 1996

  Mr. HAMILTON. Mr. Speaker, on September 8, 1995, I initiated an 
exchange of correspondence with the Department of State concerning 
proceeds from the sale of seized Iraqi oil. According to U.N. 
Resolution 778, all such proceeds are supposed to be turned over to the 
U.N. escrow account, which funds such activities in Iraq as 
humanitarian assistance, the U.N. Special Commission [UNSCOM] which 
carries out the destruction of Iraq's weapons programs, and the 
Compensation Fund, which was established to pay the claims of victims 
of Iraqi aggression.
  According to this exchange of correspondence, Kuwait, the United Arab 
Emirates and Saudi Arabia have yet to transfer all such proceeds from 
the sale of Iraqi oil to the U.N. escrow account. Saudi Arabia, in 
particular, has not provided what may be large sums of money to that 
account.
  Unless the governments most at risk from Iraqi aggression are 
committed to provide funds, in accordance with U.N. Resolutions, to 
support the U.N.'s important work in Iraq, other governments are 
unlikely to support U.N. efforts in Iraq, either. This is detrimental 
to the United States national interest in pressing for Iraq's full 
compliance with U.N. Security Council resolutions.
  At a hearing of the International Relations Committee this morning, I 
asked United States Ambassador to the U.N. Madeleine Albright to keep 
me informed on this issue.
  The text of my correspondence with the Department of State follows:
         Congress of the United States, Committee on International 
           Relations,
                                Washington, DC, September 8, 1995.
     Hon. Warren Christopher,
     Secretary of State, Department of State, Washington, DC.
       Dear Mr. Secretary: I write regarding the disposition of 
     oil and of the proceeds of the sale of the oil from ships 
     coming out of Persian Gulf ports with embargoed Iraqi oil.
       It is my understanding that the United States has 
     interdicted and impounded ships with Iraqi oil and has 
     removed the oil cargo before releasing the ships and crews. I 
     would like to know what we have done with the oil and with 
     the proceeds from its sale and if all the funds obtained have 
     gone into the compensation and escrow fund the United Nations 
     administers pursuant to U.N. resolutions adopted at the 
     conclusion of the Gulf War.
       I appreciate your consideration of this matter and look 
     forward to your reply.
       With best regards,
           Sincerely,
                                                  Lee H. Hamilton,
     Ranking Democratic Member.
                                                                    ____



                                     U.S. Department of State,

                                Washington, DC, November 28, 1995.
     Hon. Lee H. Hamilton,
     House of Representatives,
     Washington, DC.
       Dear Mr. Hamilton: I am writing in response to your letter 
     of September 8, 1995 regarding the disposition of diverted 
     Iraqi oil and proceeds of the sale of oil from ships diverted 
     by the Multinational Interception Force (MIF).
       The United States is participating in MIF operations with 
     the United Kingdom, Belgium, Canada, New Zealand, and Italy 
     to enforce United Nations sanctions against Iraq authorized 
     under U.N. Security Council Resolution 661. During the 
     October 1994-November 1995 MIF operating period, ships of the 
     MIF intercepted and diverted 27 vessels carrying illicit 
     cargoes: 8 carrying Iraqi petroleum products and 19 carrying 
     valuable Iraqi date cargoes. Under UN guidelines, non-oil 
     shipments, such as dates, may be dumped, sold, or given away 
     so as to deny the proceeds or benefits to Iraq.
       The petroleum cargo vessels were turned over to the United 
     Arab Emirates, Kuwait, and Saudi Arabia governments. The 
     vessels carried approximately 30,000 metric tons of Iraqi 
     gasoil cargo valued at about $6.00 million dollars. By 
     accepting these vessels, the Gulf governments have assumed 
     responsibility for carrying out sanctions enforcement 
     measures. American responsibility concluded after the vessel 
     interdiction and transfer to these states.
       Regarding the disposition of oil and proceeds of the sale 
     of the oil, UN Security Council resolution 778 invites Gulf 
     government's to transfer the proceeds from the forfeiture and 
     sales of Iraqi petroleum and petroleum products into an 
     escrow account established by resolution 706, as provided for 
     in resolution 778.
       We understand that the UAE has sold approximately 20,000 
     metric tons of seized oil cargo and deposited the proceeds in 
     a UAE special account awaiting further instructions from the 
     UN Iraq sanctions committee. Kuwait has also sold 
     approximately 5300 metric tons of seized oil cargoes and has 
     deposited the proceeds locally pending transfer to the UN 
     escrow account. Saudi Arabia is preparing to sell 
     approximately 400 metric tons of seized oil.
       We share your concern regarding the disposition of oil 
     proceeds diverted by U.S. ships participating in the MIF. The 
     UN sanctions committee continues to examine embargoed vessel 
     seizures and oil proceed disposition. The UN Compensation 
     Commission, which decides Gulf War compensation cases, is 
     also helping to coordinate the receipt of the 30 percent 
     share in sales revenue from the sale of the oil proceeds by 
     Kuwait, Saudi Arabia, and the UAE.
       If we can be of further assistance in this or any other 
     matter please do not hesitate to contact us.
           Sincerely,

                                             Wendy R. Sherman,

                                              Assistant Secretary,
     Legislative Affairs.
                                                                    ____

         Congress of the United States, Committee on International 
           Relations, Washington, DC, December 18, 1995.
     Hon. Warren Christopher,
     Secretary of State, Department of State, Washington, DC.
       Dear Mr. Secretary: I write to follow up your letter of 
     November 28, 1995 in reply to my letter of September 8, 1995 
     regarding the disposition of proceeds of intercepted Iraqi 
     oil.
       Your letter indicates that the Governments of Saudi Arabia, 
     the United Arab

[[Page E519]]

     Emirates (UAE), and Kuwait have not yet transferred all 
     proceeds from intercepted Iraqi oil to the U.N. escrow 
     account. As I understand it, all States are obligated to 
     transfer such proceeds as soon as possible to the U.N. escrow 
     account, according to Security Council Resolutions 706 and 
     778. Paragraph 2 of Security Council Resolution 778 states:
       `` . . . all States in which there are petroleum products 
     owned by the Government of Iraq, or its State bodies, 
     corporations, or agencies, shall take all feasible steps to 
     purchase or arrange for the sale of such petroleum or 
     petroleum products at fair market value, and thereupon to 
     transfer the proceeds as soon as possible to the escrow 
     account provided for in resolutions 706 (1991) and 712 
     (1991).''
       I would appreciate your clarification as to why Saudi 
     Arabia, the UAE and Kuwait have not transferred all proceeds 
     to the U.N. escrow account.
       You further indicate in your response that the U.N. 
     Compensation Commission is ``helping to coordinate the 
     receipt of the 30 percent share in sales revenue from the 
     sale of the oil proceeds by Kuwait, Saudi Arabia, and the 
     UAE''. I do not understand why the U.N. Compensation 
     Commission is coordinating the receipt of a 30 percent 
     amount, when the States are obligated to pay the full 100 
     percent of revenues to the U.N. escrow account. I would 
     appreciate your clarification of this point as well.
       Since my September 8 letter to you, I have received 
     additional information which raises further concerns about 
     this matter. I have been told that Iraqi oil intercepted by 
     the United States and turned over to the Government of Saudi 
     Arabia was sold by that Government in May, 1993 for almost 
     $350 million, but that only $40 million of that sum was 
     returned to the U.N. escrow account. I would like to know if 
     this information is accurate and what is United States policy 
     on the appropriate disposition of these funds.
       In order to understand the full scope of activities related 
     to the U.N. escrow account, I would appreciate answers to the 
     following questions:
       1. Since the inception of the Multinational Interception 
     Force (M.I.F.), what is the total amount and estimated value 
     of intercepted Iraqi oil that has been turned over to each of 
     the Gulf States?
       2. To your knowledge, how much of this oil has been sold by 
     the Gulf States, by country, since the inception of the 
     M.I.F.?
       3. To your knowledge, how much of the proceeds from the 
     sale of oil has been transferred to the U.N. escrow account, 
     by country, since the inception of the M.I.F.?
       4. Have you demarched Gulf States which have not 
     transferred all proceeds to the U.N. escrow account? If so, 
     what has been the response?
       The integrity of the sanctions regime depends on 
     cooperation between the M.I.F. and the Gulf States in 
     transferring intercepted oil proceeds to the U.N. escrow 
     account. If these funds are not in fact being transferred to 
     the escrow account, it undermines the entire integrity of the 
     sanctions regime, and calls into question the utility of the 
     complex and costly M.I.F. effort.
       I appreciate your consideration of these matters and look 
     forward to your reply.
       With best regards,
           Sincerely yours,
                                                   Lee H. Hamilton
     Ranking Democratic Member.
                                                                    ____



                                     U.S. Department of State,

                                   Washington, DC, March 28, 1996.
     Hon. Lee H. Hamilton,
     House of Representatives,
     Washington, DC.
       Dear Mr. Hamilton: I am writing in response to your letter 
     regarding the disposition of Iraqi oil intercepted by ships 
     of the Multinational Interception Force (MIF).
       The MIF has been a highly successful operation by any 
     standard. Iraq first attempted to export large amounts of oil 
     from its Gulf ports in the fall of 1994 (after these ports 
     were restored to working condition). The MIF intercepted the 
     first and only two tankers which attempted to smuggle Iraqi 
     oil from these ports. Since the interceptions and the 
     penalties imposed on the vessels by the nations to which the 
     vessels were diverted (Kuwait and the U.A.E.), Iraqi efforts 
     to smuggle large cargoes of oil from the southern ports 
     ceased. The MIF is not only responsible for stopping Iraqi 
     exports. It also has successfully prevented the import into 
     Iraq of non-humanitarian goods which smugglers attempted to 
     bring to Iraq disguised as permitted humanitarian cargoes.
       Vessels carrying Iraqi oil have been diverted to ports in 
     the United Arab Emirates, Kuwait, and Saudi Arabia. 
     Altogether, these smugglers carried approximately 30,000 tons 
     of petroleum products with a value in excess of $6 million.
       The U.A.E. sold approximately 20,000 tons of seized oil and 
     deposited the proceeds in an escrow account in the U.A.E. 
     while awaiting final instructions on disposition from the UN 
     Iraq Sanctions Committee. Kuwait has sold approximately 5300 
     hundred tons of Iraqi oil and deposited the proceeds 
     ($615,000) in the UN escrow account. Kuwait continues to hold 
     the proceeds from a larger cargo seized from the tanker ``al 
     Mahrousa.'' The Kuwaiti government is still awaiting payment 
     from the ship's owner, of expenses relating to the diversion. 
     Saudi Arabia has sold approximately 4,000 tons of seized oil 
     and is preparing to transfer the proceeds to the UN escrow 
     account. (States are permitted to deduct expenses related to 
     the disposal of the seized oil from the proceeds of their 
     sale.)
       In your letter, you question why the UN Compensation 
     Commission is coordinating receipt of only thirty percent of 
     these proceeds rather than the entire amount. Under U.N. 
     resolutions, all of the proceeds from sale of these oil 
     cargoes (less expenses) are to be deposited to a U.N. escrow 
     account, with the U.N. Compensation Commission entitled to 
     thirty percent of this sum. The remainder goes to fund U.N. 
     operations regarding Iraq (the northern Iraq relief program, 
     the U.N. Special Commission, etc.).
       At the time sanctions were imposed against Iraq, there was 
     a substantial amount of Iraqi oil in the Iraq-Saudi Arabia 
     oil pipeline and in storage at the pipeline's outlet at the 
     Saudi port of al-Mu'ajjiz. Saudi Arabia subsequently sold 
     this oil. According to Saudi Arabia's interpretation of its 
     obligations under the UN resolutions, it deposited $40 
     million from the sale into the UN escrow account. While we 
     have requested the Saudi government to reopen its accounting 
     of this sale with a view to increasing the contribution to 
     UNSCOM, the Saudi position remains that the $40 million 
     deposit fully satisfied the requirements of the UN 
     resolutions. We will continue to press the Saudis on this 
     important matter.
       Please feel free to write us in the future if we may be of 
     further assistance.
           Sincerely,

                                               Barbara Larkin,

                                       Acting Assistant Secretary,
     Legislative Affairs.

                          ____________________