[Public Papers of the Presidents of the United States: George H. W. Bush (1992-1993, Book II)]
[December 23, 1992]
[Pages 2209-2213]
[From the U.S. Government Publishing Office www.gpo.gov]



Letter to Congressional Leaders Reporting on Sanctions Against the 
Federal Republic of Yugoslavia (Serbia and Montenegro)
December 23, 1992

Dear Mr. Speaker:  (Dear Mr. President:)
    On May 30, 1992, in Executive Order No. 12808, I declared a national 
emergency to deal with the threat to the national security, foreign 
policy, and economy of the United States arising from actions and 
policies of the Governments of Serbia and Montenegro, acting under the 
name of the Socialist Federal Republic of Yugoslavia or the Federal 
Republic of Yugoslavia, in their involvement in and support for groups 
attempting to seize territory in Croatia and Bosnia-Hercegovina by force 
and violence utilizing, in part, the forces of the so-called Yugoslav 
National Army (57 FR 23299). In that order, I ordered the immediate 
blocking of all property and interests in property of the Government of 
Serbia and the Government of Montenegro, and all property and interests 
in property in the name of the Government of the Socialist Federal 
Republic of Yugoslavia or the Government of the Federal Republic of 
Yugoslavia, then or thereafter located in the United States or within 
the possession or control of United States persons, including their 
overseas branches. Treasury agents immediately carried out these orders 
and blocked more than $450 million within the first 24 hours, closing 
down two Serbian-based banks that had been operating in New York City 
and sealing the offices of Yugoslav subsidiaries across the country.
    Subsequently, on June 5, 1992, to implement in the United States the 
prohibitions of United Nations Security Council Resolution No. 757 of 
May 30, 1992, I issued Executive Order No. 12810 adding trade and other 
economic sanctions against the Federal Republic of Yugoslavia (Serbia 
and Montenegro) (The ``FRY(S/M)'') to the sanctions imposed on May 30 
(57 FR 24347). Under this order, I prohibited the importation into the 
United States of any goods originating in, or services performed in, the 
FRY(S/M), exported from the FRY(S/M) after May 30, 1992, or any activity 
that promotes or is intended to promote such importation. The Executive 
order also prohibits the exportation to the FRY(S/M), or to any entity 
operated from the FRY(S/M), or owned or controlled by the Government of 
the FRY(S/M), directly or indirectly, of any goods, technology 
(including technical data or other information controlled for export 
pursuant to the Export Administration Regulations, 15 C.F.R. Parts 768 
et seq.), or services, either (1) from the United States, (2) requiring 
the issu- 
ance of a license by a Federal agency, 
or (3) involving the use of U.S.-registered vessels or aircraft, or any 
activity that promotes or is intended to promote

[[Page 2210]]

such exportation.
    Additional economic sanctions contained in Executive Order No. 12810 
prohibit (1) any dealing by a United States person related to property 
originating in the FRY(S/M) exported from the FRY(S/M) after May 30, 
1992, or property intended for exportation from the FRY(S/M) to any 
country, or exportation to the FRY(S/M) from any country, or any 
activity of any kind that promotes or is intended to promote such 
dealing; (2) any transaction by a United States person, or involving the 
use of U.S.-registered vessels or aircraft, relating to transportation 
to or from the FRY(S/M), the provision of transportation to or from the 
United States by any person in the FRY(S/M), or any vessel or aircraft 
registered in the FRY(S/M), or the sale in the United States by any 
person holding authority under the Federal Aviation Act of 1958, as 
amended (49 U.S.C. 1301 et seq.), of any transportation by air that 
includes any stop in the FRY(S/M); (3) the granting of permission to any 
aircraft to take off from, land in, or overfly the United States, if the 
aircraft, as part of the same flight, is destined to land in or has 
taken off from the territory of the FRY(S/M); (4) the performance by any 
United States person of any contract, including a financing contract, in 
support of an industrial, commercial, public utility, or governmental 
project in the FRY(S/M); (5) any commitment or transfer, direct or 
indirect, of funds or other financial or economic resources by any 
United States person to or for the benefit of the Government of the 
FRY(S/M) or any other person in the FRY(S/M)--effectively halting all 
transfers; (6) any transaction in the United States or by a United 
States person related to participation in sporting events in the United 
States by persons or groups representing the FRY(S/M); and (7) any 
transaction in the United States or by a United States person related to 
scientific and technical cooperation and cultural exchanges involving 
persons or groups officially sponsored by or representing the FRY(S/M), 
or related to visits to the United States by such persons or groups 
other than as authorized for the purpose of participation in the United 
Nations.
    1. The order exempts from trade restrictions (a) the transshipment 
through the FRY(S/M) of commodities and products originating outside the 
FRY(S/M) and temporarily present in the territory of the FRY(S/M) only 
for the purpose of such transshipment, and (b) activities related to the 
United Nations Protection Force (``UNPROFOR''), the Conference on 
Yugoslavia, or the European Community Monitor Mission.
    2. The declaration of the national emergency on May 30, 1992, was 
made pursuant to the authority vested in me as 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. I reported the emergency declaration 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)). The 
additional sanctions set forth in my order of June 5, 1992, were imposed 
pursuant to the authority vested in me by the Constitution and laws of 
the United States, including the statutes cited above, section 1114 of 
the Federal Aviation Act of 1958, as amended (49 U.S.C. App. 1514), and 
section 5 of the United Nations Participation Act of 1945, as amended 
(22 U.S.C. 287c), and implement in the United States provisions of 
United Nations Security Council Resolution No. 757. The present report 
is submitted pursuant to 50 U.S.C. 1641(c) and 1703(c), and discusses 
Administration actions and expenses directly related to the exercise of 
powers and authorities conferred by the national emergency with respect 
to the FRY(S/M) declared in Executive Order No. 12808, as implemented 
pursuant to that order and Executive Order No. 12810 (the ``Executive 
orders'').
    3. In its implementation of the sanctions program against the FRY(S/
M) pursuant to Executive Orders No. 12808 and No. 12810, Foreign Assets 
Control (``FAC'') has issued seven general licenses authorizing various 
transactions otherwise prohibited by the Executive orders and directing 
certain implementing measures. Copies of these general licenses 
are attached. General License No. 1

[[Page 2211]]

authorizes transactions incident to the receipt or transmission of mail 
and informational materials between the United States and the FRY(S/M). 
General License No. 2 authorizes transactions with respect to 
telecommunications transmissions involving the FRY(S/M), provided that 
any funds owed the Government of the FRY(S/M) are placed into a blocked 
interest-bearing account. General License No. 3 authorizes the 
importation and exportation of diplomatic pouches.
    General License No. 4 authorizes transfers of funds or other 
financial or economic resources for the benefit of individuals located 
in the FRY(S/M) in connection with the operation of accounts at U.S. 
financial institutions, provided that no transfers into the FRY(S/M) 
occur. This general license also requires that interest be paid on 
blocked FRY(S/M) Government funds and sets forth certain guidelines for 
the administration of blocked accounts. General License No. 5 authorizes 
the importation and exportation of the household and personal effects of 
persons arriving from or departing to the FRY(S/M), in conjunction with 
General License No. 6, which authorizes transactions related to 
nonbusiness travel by U.S. persons to, from, and within the FRY(S/M). 
Finally, General License No. 7 authorizes transactions involving 
secondary-market trading in debt obligations originally incurred by 
banks organized in the Republics of Slovenia, Croatia, Bosnia-
Hercegovina, and Macedonia, notwithstanding the joint and several 
liability on those debts undertaken by the National Bank of Yugoslavia 
and/or banks organized in Serbia or Montenegro.
    In addition to the seven general licenses, FAC issued General Notice 
No. 1 on July 6, 1992, entitled ``Notification of Status of Yugoslav 
Entities,'' followed by a list of ``Blocked Yugoslav Entities Currently 
Identified.'' 57 Fed. Reg. 32051 (July 20, 1992). A copy of the notice 
is attached. The list is composed of government, financial, and 
commercial entities organized in Serbia or Montenegro and a number of 
foreign subsidiaries of such entities. The list is illustrative of 
entities covered by FAC's presumption, stated in the notice, that all 
entities organized or located in Serbia or Montenegro, as well as their 
foreign branches and subsidiaries, are controlled by the Government of 
the FRY(S/M) and thus subject to the blocking provisions of the 
Executive orders. Accordingly, during the first 6 months of the 
sanctions program, 13 U.S. subsidiaries of entities organized in the 
FRY(S/M) were blocked as entities owned or controlled by the Government 
of the FRY(S/M). Similarly, six ships owned indirectly by Montenegrin 
shipping companies were blocked in U.S. ports as property in which the 
FRY(S/M) Government has an interest.
    FAC's presumption of FRY(S/M) Government control over subsidiaries 
of firms located or organized in Serbia or Montenegro was challenged in 
Federal district court by a blocked U.S. subsidiary of a Serbian firm 
(IPT Company, Inc. v. U.S. Department of the Treasury, et al., S.D.N.Y., 
No. 92 CIV 5542), and by a Maltese subsidiary of a Montenegrin ocean 
shipping company managing five of the six blocked ships (Milena Ship 
Management Co., Ltd. v. Newcomb et al., E.D. La, No. 92-2535). In both 
cases, FAC argued through the Department of Justice that its presumption 
is justified by the unique legal concept of ``social capital'' in the 
economic systems of both the prior Socialist Federal Republic of 
Yugoslavia and the current FRY(S/M), under which, by law, capital assets 
were, and generally continue to be, owned by the society but managed by 
the workers. Active state control of such enterprises is also often 
manifest by a crossover of political leaders between the enterprises and 
the government. Based upon the administrative record and FAC's denial of 
a license authorizing the blocked ships in the Milena case to conduct 
normal operations outside the FRY(S/M), the U.S. District Court for the 
Eastern District of Louisiana ruled in the government's favor and 
dismissed the suit on October 5, 1992. This decision was appealed by the 
plaintiffs to the U.S. Court of Appeals for the Fifth Circuit on October 
21, 1992. The suite brought by IPT Company, Inc. is still pending in the 
Southern District of New York.
    4. Over the past 6 months, the Departments of State and Treasury 
have worked closely with European Community (``EC'')

[[Page 2212]]

member states and other U.N. member nations to coordinate implementation 
of the sanctions against the FRY(S/M). This has included visits by 
assessment teams formed under the auspices of the United States, the EC, 
and the Conference for Security and Cooperation in Europe (the ``CSCE'') 
to states bordering on Serbia and Montenegro; deployment of CSCE 
sanctions assistance missions (``SAMS'') to Hungary, Romania, and 
Bulgaria to assist in monitoring land and Danube River traffic; 
bilateral contacts between the United States and other countries with 
the purpose of tightening restrictions on FRY(S/M) financial assets; and 
establishment of a mechanism to coordinate enforcement efforts and to 
exchange technical information.
    5. In these initial months of the sanctions program against the 
FRY(S/M), FAC has made extensive use of its authority to specifically 
license transactions with respect to the FRY(S/M) in an effort to 
positively influence both the political process within Serbia-Montenegro 
and negotiations between warring factions in the former Socialist 
Federal Republic of Yugoslavia. For example, specific licenses have been 
issued (a) permitting Milan Panic, a naturalized U.S. citizen of Serbian 
birth, to serve as Prime Minister of the FRY(S/M), (b) authorizing the 
International Republican Institute to provide support to the opposition 
political parties in the FRY(S/M), and (c) permitting the Free Trade 
Union Institute to attend meetings with the independent labor 
confederation, Nezavisnost, and the trials of union activists in the 
FRY(S/M).
    Since the issuance of Executive Order No. 12808, FAC has worked 
closely with the Board of Governors of the Federal Reserve Board, the 
Office of the Comptroller of the Currency, the New York State Banking 
Department, and the banking industry to assure compliance with the 
President's blocking order. On June 1, 1992, when FAC directed the 
closing of two Serbian banking institutions in New York, full-time bank 
examiners were posted in their offices to ensure that banking records 
were appropriately safeguarded. The examiners continue on-site 
compliance monitoring on a full-time basis.
    In all, FAC has issued 217 specific licenses regarding transactions 
pertaining to the FRY(S/M) or assets it owns or controls. Specific 
licenses have been issued for (1) payment to U.S. or third-country 
secured creditors, under certain narrowly defined circumstances, for 
pre-embargo import and export transactions; (2) for legal representation 
or advice to FRY(S/M) or FRY(S/M)-controlled clients; (3) for restricted 
and closely monitored operations by subsidiaries of FRY(S/M)-controlled 
firms located in the United States; (4) for limited FRY(S/M) diplomatic 
representation in Washington and New York; (5) for patent, trademark, 
and copyright protection and maintenance transactions in the FRY(S/M) 
not involving payment to the FRY(S/M) Government; (6) for certain 
communications, news media, and travel-related transactions; (7) for the 
payment of crews' wages and vessel maintenance of FRY(S/M)-controlled 
ships blocked in the United States; (8) for the export of certain non-
FRY(S/M) manufactured property owned and controlled by U.S. entities; 
and (9) to assist the United Nations in its UNPROFOR and relief 
operations. Pursuant to United Nations Security Council Resolution 757, 
specific licenses have also been issued to authorize exportation of 
food, medicine, and medical supplies intended for humanitarian purposes 
in the FRY(S/M).
    To ensure compliance with the terms of the licenses that have been 
issued, stringent reporting requirements have been imposed that are 
closely monitored. Licensed accounts are regularly audited by FAC 
compliance personnel and by cooperating auditors from other regulatory 
agencies.
    6. Since the issuance of Executive Order No. 12810, FAC has worked 
closely with the U.S. Customs Service to ensure both that prohibited 
imports and exports (including those in which the Government of the 
FRY(S/M) has an interest) are identified and interdicted, and that 
permitted imports and exports move to their intended destination without 
undue delay. Violations and suspected violations of the embargo are 
being investigated, and appropriate enforcement actions are being taken.
    7. The expenses incurred by the Federal Government in the 6-month 
period from May 30, 1992, through November 30, 1992,

[[Page 2213]]

that are directly attributable to the authorities conferred by the 
declaration of a national emergency with respect to the FRY(S/M) are 
estimated at $872,155, most of which represent 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, and the Office of the General Counsel), the Department of 
State, the National Security Council, and the Department of Commerce.
    8. The actions and policies of the Government of the FRY(S/M), in 
its involvement in and support for groups attempting to seize territory 
in Croatia and Bosnia-Hercegovina by force and violence, continue to 
pose an unusual and extraordinary threat to the national security, 
foreign policy, and economy of the United States. The United States 
remains committed to a multilateral resolution of this crisis through 
its actions implementing the resolutions of the United Nations Security 
Council with respect to the FRY(S/M). I shall continue to exercise the 
powers at my disposal to apply economic sanctions against the FRY(S/M) 
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).
    Sincerely,

                                                             George Bush

                    Note: Identical letters were sent to Thomas S. 
                        Foley, Speaker of the House of Representatives, 
                        and Dan Quayle, President of the Senate.