[Public Papers of the Presidents of the United States: George H. W. Bush (1992-1993, Book II)]
[August 3, 1992]
[Pages 1299-1301]
[From the U.S. Government Publishing Office www.gpo.gov]



Message to the Congress Reporting on the National Emergency With Respect 
to Iraq
August 3, 1992

To the Congress of the United States:
    I hereby report to the Congress on the developments since my last 
report of February 11, 1992, concerning the national emergency with 
respect to Iraq that was declared in Executive Order No. 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 (``IEEPA''), 50 U.S.C. 
1703(c).
    Executive Order No. 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 U.S. person. In that 
order, I 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. I prohibited 
travel-related transactions and transportation transactions to or from 
Iraq and the performance of any contract in support of any 
industrial, commercial, or governmental project in Iraq. U.S. persons

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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 No. 12724 which I issued in order to align the sanctions 
imposed by the United States with United Nations Security Council 
Resolution 661 of August 6, 1990.
    This report discusses only matters concerning the national emergency 
with respect to Iraq that was declared in Executive Order No. 12722 and 
matters relating to Executive Order No. 12724 (``the Executive 
orders''). The report covers events from February 2, 1992, through 
August 1, 1992.
    1. The economic sanctions imposed on Iraq by the Executive orders 
are administered by the Treasury Department's Office of Foreign Assets 
Control (``FAC'') under the Iraqi Sanctions Regulations, 31 CFR Part 575 
(``ISR''). There have been no amendments of those regulations since my 
last report.
    2. Investigations of possible violations of the Iraqi sanctions 
continue to be pursued and appropriate enforcement actions taken. These 
are intended to deter future activities in violation of the sanctions. 
Additional civil penalty notices were prepared during the reporting 
period for violations of the IEEPA and ISR with respect to transactions 
involving Iraq. Penalties were collected, principally from financial 
institutions which engaged in unauthorized, albeit apparently 
inadvertent, transactions with respect to Iraq.
    3. Investigation also continues into the roles played by various 
individuals and firms outside of Iraq in Saddam Hussein's procurement 
network. These investigations may lead to additions to the FAC listing 
of individuals and organizations determined to be Specially Designated 
Nationals (``SDN's'') of the Government of Iraq. In practice, an Iraqi 
SDN is a representative, agent, intermediary, or front (whether open or 
covert) of the Iraqi government that is located outside of Iraq. Iraqi 
SDN's are Saddam Hussein's principal instruments for doing business in 
third countries, and doing business with them is the same as doing 
business directly with the Government of Iraq.
    The impact of being named an Iraqi SDN is considerable: all assets 
within U.S. jurisdiction of parties found to be Iraqi SDN's are blocked; 
all economic transactions with SDN's by U.S. persons are prohibited; and 
the SDN individual or organization is exposed as an agent of the Iraqi 
regime.
    4. Since my last report, one case filed against the Government of 
Iraq has gone to judgment. Centrifugal Casting Machine Co., Inc. v. 
American Bank and Trust Co., Banca Nazionale del Lavoro, Republic of 
Iraq, Machinery Trading Co., Baghdad, Iraq, Central Bank of Iraq, and 
Bank of Rafidain, No. 91-5150 (10th Cir., decided June 11, 1992), arose 
out of a contract for the sale of goods by plaintiff to the State 
Machinery Co., an Iraqi governmental entity. In connection with the 
contract, the Iraqi defendants opened an irrevocable letter of credit in 
favor of Centrifugal, from which Centrifugal drew a 10 percent advance 
payment. Repayment of the advance payment in case of nonperformance by 
Centrifugal was guaranteed by a standby letter of credit. Performance 
did not occur due to the imposition of economic sanctions against Iraq 
in August 1990, and the United States claimed that an amount equal to 
the advance payment was blocked property. The district court ruled that 
the standby letter of credit had expired, that no U.S. party was liable 
to an Iraqi entity under the standby letter of credit, and that the 
advance payment funds were therefore not blocked property and could be 
distributed to U.S. persons. The court of appeals affirmed the ruling of 
the district court that there was no blocked Iraqi property interest in 
the advance payment funds, based on applicable principles of letter of 
credit law.
    5. FAC has issued 288 specific licenses regarding transactions 
pertaining to Iraq or Iraqi assets. Since my last report, 71 specific 
licenses have been issued. Most of these licenses were issued for 
conducting procedural transactions such as filing of legal actions, and 
for legal representation; other licenses were issued pursuant to United 
Nations Security Council Resolutions 661, 666, and 687, to authorize the 
exportation to Iraq of donated medicine, medical supplies,

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and food intended for humanitarian relief purposes. All of these 
licenses concern minor transactions of no economic benefit to the 
Government of Iraq.
    To ensure compliance with the terms of the licenses which have been 
issued, stringent reporting requirements have been imposed that are 
closely monitored. Licensed accounts are regularly audited by FAC 
compliance personnel and deputized auditors from other regulatory 
agencies. FAC compliance personnel continue to work closely with both 
State and Federal bank regulatory and law enforcement agencies in 
conducting special audits of Iraqi accounts subject to the ISR.
    6. The expenses incurred by the Federal Government in the 6-month 
period from February 2, 1992, through August 1, 1992, that are directly 
attributable to the exercise of powers and authorities conferred by the 
declaration of a national emergency with respect to Iraq are estimated 
at $2,476,000, most of which represents wage and salary costs for 
Federal personnel. Personnel costs were largely centered in the 
Department of the Treasury (particularly in FAC, the U.S. Customs 
Service, the Office of the Assistant Secretary for Enforcement, the 
Office of the Assistant Secretary for International Affairs, and the 
Office of the General Counsel), the Department of State (particularly 
the Bureau of Economic and Business Affairs and the Office of the Legal 
Adviser), the Department of Transportation (particularly the U.S. Coast 
Guard), and the Department of Commerce (particularly in the Bureau of 
Export Administration and the Office of the General Counsel).
    7. The United States imposed economic sanctions on Iraq in response 
to Iraq's invasion and illegal 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 calling for the elimination of Iraqi weapons of mass 
destruction, the demarcation of the Iraq-Kuwait border, the release of 
Kuwaiti and other prisoners, compensation for victims of Iraqi 
aggression, and the return of Kuwaiti assets stolen during its illegal 
occupation of Kuwait. The U.N. sanctions remain in place; the United 
States will continue to enforce those sanctions.
    The Saddam Hussein regime continues to violate basic human rights by 
repressing the Iraqi civilian population and depriving it of 
humanitarian assistance. The United Nations Security Council passed 
resolutions that permit Iraq to sell $1.6 billion of oil under U.N. 
auspices to fund the provision of food, medicine, and other humanitarian 
supplies to the people of Iraq. Under the U.N. resolutions, the 
equitable distribution within Iraq of this assistance would be 
supervised and monitored by the United Nations and other international 
organizations. The Iraqi regime continues to refuse to accept these 
resolutions, and has thereby chosen to perpetuate the suffering of its 
civilian population.
    The regime of Saddam Hussein continues 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 United 
States will therefore continue to apply economic sanctions to deter Iraq 
from threatening peace and stability in the region, and I will continue 
to report periodically to the Congress on significant developments, 
pursuant to 50 U.S.C. 1703(c).

                                                             George Bush

The White House,
August 3, 1992.