    [Public Papers of the Presidents of the United States: William J. Clinton (1993, Book I)]
    [February 16, 1993]
    [Pages 110-113]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Message to the Congress Reporting on the National Emergency With Respect
    to Iraq
    February 16, 1993

    To the Congress of the United States:
        I hereby report to the Congress on the developments since the last
    report of August 3, 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 sections 401(c) of the
    National Emergencies Act (``NEA''), 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. That order
    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. The order prohibited
    travel-related 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 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 was 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 Orders Nos. 12724 and 12817 (the
    ``Executive Orders''). The report covers events from August 2, 1992,
    through February 1, 1993.
        1. On October 21, 1992, President Bush issued Executive Order No.
    12817, implementing in the United States measures adopted in United
    Nations Security Council Resolution (``UNSCR'') No. 778 of October 2,
    1992. UNSCR No. 778 requires U.N. member states temporarily to transfer
    to a U.N. escrow account up to $200 million apiece in Iraqi oil proceeds
    paid by the purchaser after the imposition of

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    U.N. sanctions on Iraq. These funds finance Iraq's obligations for U.N.
    activities with respect to Iraq, including expenses to verify Iraqi
    weapons destruction and to provide humanitarian assistance in Iraq on a
    nonpartisan basis. A portion of the escrowed funds will also fund the
    activities of the U.N. Compensation Commission in Geneva, which will
    handle claims from victims of the Iraqi invasion of Kuwait. The funds
    placed in the escrow account are to be returned, with interest, to the
    member states that transferred them to the U.N., as funds are received
    from future sales of Iraqi oil authorized by the United Nations Security
    Council. No member state is required to fund more than half of the total
    contributions to the escrow account.
        Executive Order No. 12817 authorized the Secretary of the Treasury
    (the ``Secretary'') to identify the proceeds of the sale of Iraqi
    petroleum or petroleum products paid for by or on behalf of the
    purchaser on or after August 6, 1990, and directed United States
    financial institutions holding such funds to transfer them to the
    Federal Reserve Bank of New York (``FRBNY'') in the manner required by
    the Secretary. Executive Order No. 12817 further directs the FRBNY to
    receive, hold, and transfer funds in which the Government of Iraq has an
    interest at the direction of the Secretary to fulfill U.S. rights and
    obligations pursuant to UNSCR No. 778.
        2. The economic sanctions imposed on Iraq by the Executive orders
    are administered by the Treasury Department's Office of Foreign Assets
    Control (``FAC'') pursuant to the Iraqi Sanctions Regulations, 31 CFR
    Part 575 (``ISR''). The ISR were amended on September 1, 1992, to revoke
    section 575.603, which had required U.S. financial institutions to file
    monthly reports regarding certain bank accounts in which the Government
    of Iraq has an interest. While this information was needed during the
    early implementation of the regulations and for a period thereafter, it
    is no longer required on a monthly basis and can be obtained by FAC on a
    case-by-case basis as required. The amendment is in harmony with
    President Bush's Regulatory Initiative.
        3. 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.
        4. Investigation also continues into the roles played by various
    individuals and firms outside 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 (``SDNs'') of the Government of Iraq.
        5. Pursuant to Executive Order No. 12817 implementing UNSCR No. 778,
    on October 26, 1992, FAC directed the FRBNY to establish a blocked
    account for receipt of certain post-August 6, 1990, Iraqi oil sales
    proceeds, and to hold, invest, and transfer these funds as required by
    the order. On the same date, FAC directed the eight United States
    financial institutions holding the affected oil proceeds, on an
    allocated, pro rata basis, to transfer a total of $200 million of these
    blocked Iraqi assets to the FRBNY account. On December 15, 1992,
    following the payment of $20 million by the Government of Kuwait and $30
    million by the Government of Saudi Arabia to a special United Nations-
    controlled account, entitled UNSCR No. 778 Escrow Account, the FRBNY was
    directed to transfer a corresponding amount of $50 million from the
    blocked account it holds to the United Nations-controlled account.
    Future transfers from the blocked FRBNY account will be made on a
    matching basis up to the $200 million for which the United States is
    potentially obligated pursuant to UNSCR No. 778.
        6. Since the last report, one case filed against the Government of
    Iraq has gone to judgment. Consarc Corporation v. Iraqi Ministry of
    Industry and Minerals et al., No. 90-2269 (D.D.C., filed December 29,
    1992), arose out of a contract for the sale of furnaces by plaintiff to
    the Iraqi Ministry of Industry and Minerals (``MIM''), an Iraqi
    governmental entity. In connection with the contract, the Iraqi
    defendants opened an irrevocable letter of credit with an Iraqi bank in
    favor of Consarc, which was advised by Pittsburgh National Bank
    (``PNB''), with the Bank of New York (``BoNY'') entering into a
    confirmed reimbursement agreement with the advising bank. Funds were set
    aside at BoNY, in an account of the Iraqi bank, for reimbursement of
    BoNY if PNB made a payment to Consarc on the letter of credit and sought
    reim-

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    bursement from BoNY. Consarc received a down payment from the Iraqi MIM
    and manufactured the furnaces. No goods were shipped prior to imposition
    of sanctions on August 2, 1990, and the United States claimed that the
    funds on deposit in the Iraqi bank account at BoNY were blocked, as well
    as the furnaces manufactured for the Iraqi Government or the proceeds of
    the sale of the furnaces to third parties. The district court ruled that
    the furnaces or their sales proceeds were properly blocked pursuant to
    the declaration of the national emergency and blocking of Iraqi
    Government property interests, but that, due to fraud on MIM's part in
    concluding the sales contract, the funds on deposit in an Iraqi bank
    account at BoNY were not the property of the Government of Iraq, and
    ordered FAC to unblock these funds. FAC has noted its appeal of this
    ruling.
        7. FAC has issued a total of 337 specific licenses regarding
    transactions pertaining to Iraq or Iraqi assets since August 1990. Since
    the last report, 49 specific licenses have been issued. Licenses were
    issued for transactions such as the filing of legal actions involving
    Iraqi interests, for legal representation of Iraq, and the exportation
    to Iraq of donated medicine, medical supplies, and food intended for
    humanitarian relief purposes.
        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.
        8. The expenses incurred by the Federal Government in the 6-month
    period from August 2, 1992, through February 1, 1993, 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 about $2 million, 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, the Bureau of Near East and
    South Asian Affairs, the Bureau of International Organizations, 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).
        9. 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, including those calling for the elimination of
    Iraqi weapons of mass destruction, the inviolability of the Iraq-Kuwait
    boundary, the release of Kuwaiti and other third country nationals,
    compensation for victims of Iraqi aggression, long-term monitoring of
    weapons of mass destruction (WMD) capabilities, 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 continued 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. The Iraqi regime
    continued 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. Because of
    Iraq's failure to comply fully with United Nations Security Council
    resolutions, 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

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    to 50 U.S.C. 1703(c).

                                                          William J. Clinton

    The White House,
    February 16, 1993.