[Federal Register Volume 61, Number 135 (Friday, July 12, 1996)]
[Rules and Regulations]
[Pages 36627-36629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17951]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Part 575


Iraqi Sanctions Regulations; Executory Contracts with the 
Government of Iraq

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Final rule; amendment.

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SUMMARY: This final rule amends the Iraqi Sanctions Regulations to 
provide a general license authorizing U.S. persons to enter into 
executory contracts with the Government of Iraq for the purchase of 
Iraqi-origin petroleum and petroleum products, the sale of essential 
parts and equipment for the Kirkuk-Yumurtalik pipeline system, and the 
sale of humanitarian goods, with performance conditioned upon approval 
by the Office of Foreign Assets Control within the framework of United 
Nations Security Council Resolution 986 (1995).

EFFECTIVE DATE: July 10, 1996.

FOR FURTHER INFORMATION CONTACT: Steven I. Pinter, Chief, Licensing 
Division, Tel.: 202/622-2480, or William B. Hoffman, Chief Counsel, 
Tel.: 202/622-2410, Office of Foreign Assets Control, Department of the 
Treasury, Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

    This document is available as an electronic file on The Federal 
Bulletin Board the day of publication in the Federal Register. By 
modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for 
disk or paper copies. This file is available for downloading without 
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(*.PDF) formats. For Internet access, the address for use with the 
World Wide Web (Home Page), Telnet, or FTP protocol is: 
fedbbs.access.gpo.gov. The document is also accessible for downloading 
in ASCII format without charge from Treasury's Electronic Library 
(``TEL'') in the ``Business, Trade and Labor Mall'' of the FedWorld 
bulletin board. By modem, dial 703/321-3339, and select the appropriate 
self-expanding file in TEL. For Internet access, use one of the 
following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide 
Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov 
(192.239.92.205). Additional information concerning the programs of the 
Office of Foreign Assets Control is available for downloading from 
Office's Internet Home Page: http://www.ustreas.gov/treasury/services/
fac/fac.html, or in fax form through the Office's 24-hour fax-on-demand 
service: call 202/622-0077 using a fax machine, fax modem, or touch 
tone telephone.

Background

    On April 14, 1995, the United Nations Security Council (the 
``UNSC'') adopted Resolution 986, which creates a framework, subject to 
agreement of the Government of Iraq, that would permit the Government 
of Iraq to sell $2 billion worth of petroleum and petroleum products 
over a 6-month period, with all proceeds placed in a UN escrow account 
for designated uses. On May 20, 1996, a Memorandum of Understanding 
Between the Secretariat of the United Nations and the Government of 
Iraq on the Implementation of Security Council Resolution 986 (1995) 
(the ``Memorandum of Understanding'') was signed by representatives of 
the Government of Iraq and the United Nations (the ``UN''). The 
Memorandum of Understanding contains agreements preparatory to 
implementation of Resolution 986. A portion of the proceeds in the 
escrow account will be

[[Page 36628]]

available for Iraq's purchase of medicine, health supplies, foodstuffs, 
and materials and supplies for essential civilian needs, to be 
specified in a list prepared by Iraq and submitted to and approved by 
the UN Secretary-General. At the UN level, this program will be 
administered by the UNSC Committee established pursuant to UNSC 
Resolution 661 (the ``661 Committee''), which will establish guidelines 
concerning procedures for permitted Iraqi purchases and sales. Within 
the United States, the Treasury Department's Office of Foreign Assets 
Control (``OFAC''), in consultation with the Department of State, will 
implement UNSC Resolution 986. No direct financial transactions with 
the Government of Iraq are permitted.
    This final rule amends the Iraqi Sanctions Regulations, 31 CFR part 
575 (the ``Regulations''), to provide a general license in new 
Sec. 575.522, authorizing U.S. persons to enter into executory 
contracts with the Government of Iraq for the purchases of Iraqi-origin 
petroleum and petroleum products, and the sales of humanitarian goods 
and pipeline parts and equipment permitted pursuant to UNSC Resolution 
986, provided that no contract with the Government of Iraq can be 
performed except as further authorized by OFAC. New Secs. 575.323, 
575.324, 575.325, and 575.326, provide definitions for the terms ``661 
Committee,'' ``UNSC Resolution 986,'' ``986 Escrow Account,'' and 
``executory contract.''
    All executory contracts must contain terms requiring that all 
proceeds of oil purchases from the Government of Iraq, including SOMO, 
must be placed in the UN escrow account at Banque Nationale de Paris, 
New York (the ``986 Escrow Account''), and all Iraqi payment for sales 
of authorized pipeline parts and equipment, humanitarian goods, and 
incidental transaction costs borne by Iraq will, upon 661 Committee 
approval, be paid or payable out of the 986 Escrow Account.
    The Office of Foreign Assets Control will provide further guidance 
on licensing policy for purchases of Iraqi-origin petroleum and 
petroleum products, and sales to Iraq of pipeline parts and equipment 
essential to the safe operation of the Kirkuk-Yumurtalik pipeline and 
of humanitarian goods, once the 661 Committee has provided guidance on 
its requirements for contract approval.
    Because the Regulations involve a foreign affairs function, 
Executive Order 12886 and the provisions of the Administrative 
Procedure Act, 5 U.S.C. 553, requiring notice of proposed rulemaking, 
opportunity for public participation, and delay in effective date, are 
inapplicable. Because no notice of proposed rulemaking is required for 
this rule, the Regulatory Flexibility Act, 5 U.S.C. 601-612, does not 
apply.
    There is no collection of information contained herein.
List of Subjects in 31 CFR Part 575
    Administrative practice and procedure, Banks, banking, Blocking of 
assets, Exports, Foreign trade, Humanitarian aid, Imports, Iraq, Oil 
imports, Penalties, Petroleum, Petroleum products, Reporting and 
recordkeeping requirements, Specially designated nationals, Travel 
restrictions.

    For the reasons set forth in the preamble, 31 CFR part 575 is 
amended as follows:
PART 575--IRAQI SANCTIONS REGULATIONS
    1. The authority citation for part 575 continues to read as 
follows:
    Authority: 50 U.S.C. 1701-1706; 50 U.S.C. 1601-1651; 22 U.S.C. 
287c; Pub. L. 101-513, 104 Stat. 2047-55 (50 U.S.C. 1701 Note); 3 
U.S.C. 301; E.O. 12722, 55 FR 31803, 3 CFR, 1990 Comp., p. 294; E.O. 
12724, 55 FR 33089, 3 CFR, 1992 Comp., p. 317.
Subpart C--General Definitions
    2. Section 575.323 is added to subpart C to read as follows:
Sec. 575.323  661 Committee.
    The term 661 Committee means the Security Council Committee 
established by UNSC Resolution 661, and persons acting for or on behalf 
of the Committee under its specific delegation of authority for the 
relevant matter or category of activity, including the overseers 
appointed by the UN Secretary-General to examine and approve agreements 
for purchases of petroleum and petroleum products from the Government 
of Iraq pursuant to UNSC Resolution 986 (1995).

    3. Section 575.324 is added to subpart C to read as follows:
Sec. 575.324  UNSC Resolution 986.
    The term UNSC Resolution 986 means United Nations Security Council 
Resolution 986, adopted April 14, 1995.

    4. Section 575.325 is added to subpart C to read as follows:
Sec. 575.325  986 Escrow Account.
    The term 986 Escrow Account means the escrow account established by 
the Secretary-General of the United Nations pursuant to paragraph 7 of 
UNSC Resolution 986.

    5. Section 575.326 is added to subpart C to read as follows:
Sec. 575.326  Executory contract.
    The term executory contract means a contract which cannot be 
performed according to its terms until a stated condition has been 
fulfilled, such as a contract which requires the approval of a 
regulatory body before the contracting parties may begin performance.
Subpart E--Licenses, Authorizations, and Statements of Licensing 
Policy
    6. Section 575.522 is added to subpart E to read as follows:
Sec. 575.522  Executory contracts with the Government of Iraq for trade 
in petroleum, pipeline parts and equipment, and humanitarian goods 
authorized.
    (a) United States persons are authorized to enter into executory 
contracts with the Government of Iraq for the following transactions, 
the performance of which (including any preparatory activities, 
payments or deposits related to such executory contracts) is contingent 
upon the prior authorization of the Office of Foreign Assets Control in 
or pursuant to this part:
    (1) The purchase and exportation from Iraq of Iraqi-origin 
petroleum and petroleum products;
    (2) The trading, importation, exportation, or other dealings in or 
related to Iraqi-origin petroleum and petroleum products outside Iraq;
    (3) The sale and exportation to Iraq of parts and equipment that 
are essential for the safe operation of the Kirkuk-Yumurtalik pipeline 
system in Iraq; and
    (4) The sale and exportation to Iraq of medicines, health supplies, 
foodstuffs, and materials and supplies for essential civilian needs.
    (b) The authorization contained in paragraph (a) of this section 
applies only to executory contracts meeting both of the following 
conditions:
    (1) The executory contracts, including all related financing, 
insurance, transportation, delivery, and other incidental contracts, 
are consistent with all requirements of UNSC Resolution 986, other 
applicable Security Council resolutions, the May 20, 1996 Memorandum of 
Understanding Between the Secretariat of the United Nations and the 
Government of Iraq on the Implementation of Security Council Resolution 
986 (1995), and applicable guidance issued by the 661 Committee; and
    (2) The executory contracts make any performance involving the 
exportation, reexportation, transfer or supply of any goods, technology 
or services that are subject to license application requirements of 
another Federal agency contingent upon the prior authorization of that 
agency. See Sec. 575.101(b).
    (c) Nothing in this section authorizes any transaction related to a 
United States person's travel to Iraq or activity

[[Page 36629]]

within Iraq, or any debit to an account blocked pursuant to this part.
    (d) Note: U.S. passports must be validated by the U.S. Department 
of State for travel to Iraq.
    (e) Attention is drawn to the recordkeeping and retention 
requirements of Sec. 575.601.

    Dated: July 9, 1996.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.
    Approved: July 9, 1996.
James E. Johnson,
Assistant Secretary (Enforcement).
[FR Doc. 96-17951 Filed 7-10-96; 2:05 pm]
BILLING CODE 4810-25-F