[Congressional Record Volume 144, Number 96 (Friday, July 17, 1998)]
[Senate]
[Pages S8478-S8480]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    REPORT OF THE EXECUTIVE ORDER BLOCKING GOVERNMENT PROPERTY AND 
   PROHIBITING TRANSACTIONS WITH THE FEDERAL REPUBLIC OF YUGOSLAVIA 
      (SERBIA AND MONTENEGRO)--MESSAGES FROM THE PRESIDENT--PM 144

  The PRESIDING OFFICER laid before the Senate the following message 
from the President of the United States, together with an accompanying 
report; which was referred to the Committee on Banking, Housing, and 
Urban Affairs.

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 on 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 initiated 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 emergency in 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.

[[Page S8479]]

  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 from 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 vessel was 
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 FYR (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 involve 
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 
on December 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

[[Page S8480]]

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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