    [Public Papers of the Presidents of the United States: William J. Clinton (1995, Book II)]
    [July 18, 1995]
    [Pages 1101-1105]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Message to the Congress Reporting on Sanctions Against the Federal
    Republic of Yugoslavia (Serbia and Montenegro)
    July 18, 1995

    To the Congress of the United States:
        On May 30, 1992, in Executive Order No. 12808, the President
    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 the Republic of
    Bosnia and Herzegovina by force and violence utilizing, in part, the
    forces of the so-called Yugoslav National Army (57 FR 23299, June 2,
    1992). I expanded the national emergency in Executive Order No. 12934 of
    October 25, 1994, to address the actions and policies of the Bosnian
    Serb forces and the authorities in the territory of the Republic of
    Bosnia and Herzegovina that they control. The present report is
    submitted pursuant to 50 U.S.C. 1641(c) and 1703(c). 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 No. 12808 and Executive Order No. 12934 and
    to expanded sanctions against the Federal Republic of Yugoslavia (Serbia
    and Montenegro) (the ``FRY (S/M)'') and the Bosnian Serbs contained in
    Executive Order No. 12810 of June 5, 1992 (57 FR 24347, June 9, 1992),
    Executive Order No. 12831 of January 15, 1993 (58 FR 5253, Jan. 21,
    1993), Executive Order No. 12846 of April 25, 1993 (58 FR 25771, April
    27, 1993), and Executive Order No. 12934 of October 25, 1994 (59 FR
    54117, October 27, 1994).
        1. Executive Order No. 12808 blocked all property and interests in
    property of the Governments of Serbia and Montenegro, or held in the
    name of the former 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 U.S. persons, including their overseas branches.
        Subsequently, Executive Order No. 12810 expanded U.S. actions to
    implement in the United States the United Nations sanctions against the
    FRY (S/M) adopted in United Nations Security Council (``UNSC'')
    Resolution 757 of May 30, 1992. In addition to reaffirming the blocking
    of FRY (S/M) Government property, this order prohibited transactions
    with respect to the FRY (S/M) involving imports, exports, dealing in
    FRY-origin property, air and sea transportation, contract performance,
    funds transfers, activity promoting importation or exportation or
    dealings in property, and official sports, scientific, technical, or
    other cultural representation of, or sponsorship by, the FRY (S/M) in
    the United States.
        Executive Order No. 12810 exempted from trade restrictions (1)
    transshipments through the FRY (S/M), and (2) activities related to the
    United Nations Protection Force (``UNPROFOR''), the Conference on
    Yugoslavia, or the European Community Monitor Mission.
        On January 15, 1993, President Bush issued Executive Order No. 12831
    to implement new sanctions contained in U.N. Security Council Resolution
    787 of November 16, 1992. The order revoked the exemption for
    transshipments through the FRY (S/M) contained in Executive Order No.
    12810, prohibited transactions within the United States or by a U.S.
    person relating to FRY (S/M) vessels and vessels in which a majority or
    controlling interest is held by a person or entity in, or operating
    from, the FRY (S/M), and stated that all such vessels shall be
    considered as vessels of the FRY (S/M), regardless of the flag under
    which they sail.

    [[Page 1102]]

        On April 25, 1993, I issued Executive Order No. 12846 to implement
    in the United States the sanctions adopted in UNSC Resolution 820 of
    April 17, 1993. That resolution called on the Bosnian Serbs to accept
    the Vance-Owen peace plan for the Republic of Bosnia and Herzegovina
    and, if they failed to do so by April 26, called on member states to
    take additional measures to tighten the embargo against the FRY (S/M)
    and Serbian controlled areas of the Republic of Bosnia and Herzegovina
    and the United Nations Protected Areas in Croatia. Effective April 26,
    1993, the order blocked all property and interests in property of
    commercial, industrial, or public utility undertakings or entities
    organized or located in the FRY (S/M), including property and interests
    in property of entities (wherever organized or located) owned or
    controlled by such undertakings or entities, that are or thereafter come
    within the possession or control of U.S. persons.
        On October 25, 1994, in view of UNSC Resolution 942 of September 23,
    1994, I issued Executive Order No. 12934 in order to take additional
    steps with respect to the crisis in the former Yugoslavia. (59 FR 54117,
    October 27, 1994.) Executive Order No. 12934 expands the scope of the
    national emergency declared in Executive Order No. 12808 to address the
    unusual and extraordinary threat to the national security, foreign
    policy, and economy of the United States posed by the actions and
    policies of the Bosnian Serb forces and the authorities in the territory
    in the Republic of Bosnia and Herzegovina that they control, including
    their refusal to accept the proposed territorial settlement of the
    conflict in the Republic of Bosnia and Herzegovina.
        The Executive order blocks all property and interests in property
    that are in the United States, that hereafter come within the United
    States, or that are or hereafter come within the possession or control
    of United States persons (including their overseas branches) of: (1) the
    Bosnian Serb military and paramilitary forces and the authorities in
    areas of the Republic of Bosnia and Herzegovina under the control of
    those forces; (2) any entity, including any commercial, industrial, or
    public utility undertaking, organized or located in those areas of the
    Republic of Bosnia and Herzegovina under the control of Bosnian Serb
    forces; (3) any entity, wherever organized or located, which is owned or
    controlled directly or indirectly by any person in, or resident in,
    those areas of the Republic of Bosnia and Herzegovina under the control
    of Bosnian Serb forces; and (4) any person acting for or on behalf of
    any person within the scope of the above definitions.
        The Executive order also prohibits the provision or exportation of
    services to those areas of the Republic of Bosnia and Herzegovina under
    the control of Bosnian Serb forces, or to any person for the purpose of
    any business carried on in those areas, either from the United States or
    by a U.S. person. The order also prohibits the entry of any U.S.-flagged
    vessel, other than a U.S. naval vessel, into the riverine ports of those
    areas of the Republic of Bosnia and Herzegovina under the control of
    Bosnia Serb forces. Finally, any transaction by any U.S. person that
    evades or avoids, or has the purpose of evading or avoiding, or attempts
    to violate any of the prohibitions set forth in the order is prohibited.
    Executive Order No. 12934 became effective at 11:59 p.m., e.d.t., on
    October 25, 1994.
        2. 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).
        3. There have been no amendments to the Federal Republic of
    Yugoslavia (Serbia and Montenegro) Sanctions Regulations (the
    ``Regulations''), 31 C.F.R. Part 585, since the last report. The
    Treasury Department had previously published 853 names in the Federal
    Register on November 17, 1994 (59 FR 59460), as part of a comprehensive
    listing of all blocked persons and specially designated nationals
    (``SDNs'') of the FRY (S/M). This list identified individuals

    [[Page 1103]]

    and entities determined by the Department of the Treasury to be owned or
    controlled by or acting for or on behalf of the Government of the FRY
    (S/M), persons in the FRY (S/M), or entities located or organized in or
    controlled from the FRY (S/M). All prohibitions in the Regulations
    pertaining to the Government of the FRY (S/M) apply to the entities and
    individuals identified. U.S. persons, on notice of the status of such
    blocked persons and specially designated nationals, are prohibited from
    entering into transactions with them, or transactions in which they have
    an interest, unless otherwise exempted or authorized pursuant to the
    Regulations.
        On February 22, 1995, pursuant to Executive Order 12934 and the
    Regulations, Treasury identified 85 individuals as leaders of the
    Bosnian Serb forces or civilian authorities in the territories in the
    Republic of Bosnia and Herzegovina that they control. Also on February
    22, Treasury designated 19 individuals and 23 companies as SDNs of the
    FRY (S/M). These designations include FRY (S/M)-connected companies
    around the world that are being directed from Cyprus, two Cypriot-owned
    firms that have had a central role in helping establish and sustain
    sanctions-evading FRY (S/M) front companies in Cyprus, and the head of
    the FRY (S/M)'s Central Bank who is also the architect of the FRY (S/M)
    economic program.
        Additionally, on March 13, 1995, Treasury named 32 firms and eight
    individuals that are part of the Karic Brothers' family network of
    companies as SDNs of the FRY (S/M). Their enterprises span the globe and
    are especially active in former East Bloc countries. These additions and
    amendments, published in the Federal Register on April 18, 1995 (60 FR
    19448), bring the current total of Blocked Entities and SDNs of the FRY
    (S/M) to 938 and the total number of individuals identified as leaders
    of the Bosnian Serb military or paramilitary forces or civilian
    authorities in the territories in the Republic of Bosnia and Herzegovina
    that they control to 85. A copy of the notice is attached.
        Treasury's blocking authority as applied to FRY (S/M) subsidiaries
    and vessels in the United States has been challenged in court. In Milena
    Ship Management Company, Ltd. v. Newcomb, 804 F.Supp. 846, 855, and 859
    (E.D.L.A. 1992) aff'd, 995 F.2d 620 (5th Cir. 1993), cert. denied, 114
    S.Ct. 877 (1994), involving five ships owned or controlled by FRY (S/M)
    entities blocked in various U.S. ports, theblocking authority as applied
    to these vessels was upheld. In IPT Company, Inc. v. United States
    Department of the Treasury, No. 92 CIV 5542 (S.D.N.Y. 1994), the
    district court also upheld the blocking authority as applied to the
    property of a Yugoslav subsidiary located in the United States. The
    latter case is currently on appeal to the Second Circuit.
        4. Over the past 6 months, the Departments of State and Treasury
    have worked closely with European Union (the ``EU'') member states and
    other U.N. member nations to coordinate implementation of the U.N.
    sanctions against the FRY (S/M). This has included visits by assessment
    teams formed under the auspices of the United States, the EU, and the
    Organization for Security and Cooperation in Europe (the ``OSCE'') to
    states bordering on Serbia and Montenegro; continued deployment of OSCE
    sanctions assistance missions (``SAMs'') to Albania, Bulgaria, Croatia,
    the former Yugoslav Republic of Macedonia, Hungary, Romania, and Ukraine
    to assist in monitoring land and Danube River traffic; support for the
    International Conference on the Former Yugoslavia (``ICFY'') monitoring
    missions along the Serbia-Montenegro-Bosnia border; bilateral contacts
    between the United States and other countries for the purpose of
    tightening financial and trade restrictions on the FRY (S/M); and
    ongoing multilateral meetings by financial sanctions enforcement
    authorities from various countries to coordinate enforcement efforts and
    to exchange technical information.
        5. In accordance with licensing policy and the Regulations, FAC has
    exercised its authority to license certain specific transactions with
    respect to the FRY (S/M) that are consistent with U.S. foreign policy
    and the Security Council sanctions. During the reporting period, FAC has
    issued 109 specific licenses regarding transactions pertaining to the
    FRY (S/M) or assets it owns or controls, bringing the total as of April
    25, 1995, to 930. Specific licenses have been issued (1) for 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 the Government of the FRY (S/M) or FRY
    (S/M)-located or controlled entities; (3) for the liquidation or
    protection of tangible assets of subsidiaries of FRY (S/M)-located or
    controlled firms located in the U.S.; (4) for limited transactions
    related to FRY (S/M) diplomatic representation in Washington and New
    York; (5)

    [[Page 1104]]

    for patent, trademark and copyright protection 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, vessel maintenance, and emergency supplies for
    FRY (S/M) controlled ships blocked in the United States; (8) for the
    removal from the FRY (S/M), or protection within the FRY (S/M), of
    certain property owned and controlled by U.S. entities; (9) to assist
    the United Nations in its relief operations and the activities of the
    U.N. Protection Force; and (10) for payment from funds outside the
    United States where a third country has licensed the transaction in
    accordance with U.N. sanctions. Pursuant to U.S. regulations
    implementing UNSC Resolutions, specific licenses have also been issued
    to authorize exportation of food, medicine, and supplies intended for
    humanitarian purposes in the FRY (S/M).
        During the past 6 months, FAC has continued to oversee the
    liquidation of tangible assets of the 15 U.S. subsidiaries of entities
    organized in the FRY (S/M). Subsequent to the issuance of Executive
    Order No. 12846, all operating licenses issued for these U.S.-located
    Serbian or Montenegrin subsidiaries or joint ventures were revoked, and
    the net proceeds of the liquidation of their assets placed in blocked
    accounts.
        In order to reduce the drain on blocked assets caused by continuing
    to rent commercial space, FAC arranged to have the blocked personalty,
    files, and records of the two Serbian banking institutions in New York
    moved to secure storage. The personalty is being liquidated, with the
    net proceeds placed in blocked accounts.
        Following the sale of the M/V Kapetan Martinovic in January 1995,
    five Yugoslav-owned vessels remain blocked in the United States.
    Approval of the UNSC's Serbian sanctions Committee was sought and
    obtained for the sale of the M/V Kapetan Martinovic (and the M/V Bor,
    which was sold in June 1994) based on U.S. assurances that the sale
    would comply with four basic conditions, which assure that both U.S. and
    U.N. sanctions objectives with respect to the FRY (S/M) are met: (1) the
    sale will be for fair market value; (2) the sale will result in a
    complete divestiture of any interest of the FRY (S/M) (or of commercial
    interests located in or controlled from the FRY (S/M)) in the vessel;
    (3) the sale would result in no economic benefit to the FRY (S/M) (or
    commercial interests located in or controlled from the FRY (S/M)); and
    (4) the net proceeds of the sale (the gross proceeds less the costs of
    sale normally paid by the seller) will be placed in a blocked account in
    the United States. Negotiations for the sale of the M/V Bar, now blocked
    in New Orleans, are underway and are likely to be concluded prior to my
    next report.
        Other than the M/V Bar, the four remaining Yugoslav-owned vessels
    are beneficially owned by Jugooceanija Plovidba of Kotor, Montenegro,
    and managed by Milena Ship Management Co. Ltd. in Malta. These vessels
    have many unpaid U.S. creditors for services and supplies furnished
    during the time they have been blocked in the United States; moreover,
    the owner appears to have insufficient resources to provide for the
    future upkeep and maintenance needs of these vessels and their crews.
    The United States is notifying the UNSC's Serbian Sanctions Committee of
    the United States's intention to license some or all of these remaining
    four vessels upon the owner's request.
        With the FAC-licensed sales of the M/V Kapetan Martinovic and the M/
    V Bor, those vessels were removed from the list of blocked FRY entities
    and merchant vessels maintained by FAC. The new owners of several
    formerly Yugoslav-owned vessels, which have been sold in other
    countries, have petitioned FAC to remove those vessels from the list.
    FAC, in coordination with the Department of State, is currently
    reviewing the sale terms and conditions for those vessels to ascertain
    whether they comply with U.N. sanctions objectives and UNSC's Serbian
    Sanctions Committee practice.
        During the past 6 months, U.S. financial institutions have continued
    to block funds transfers in which there is an interest of the Government
    of the FRY (S/M) or an entity or undertaking located in or controlled
    from the FRY (S/M), and to stop prohibited transfers to persons in the
    FRY (S/M). Such interdicted transfers have accounted for $125.6 million
    since the issuance of Executive Order No. 12808, including some $9.3
    million during the past 6 months.
        To ensure compliance with the terms of the licenses that have been
    issued under the program, stringent reporting requirements are imposed.
    More than 279 submissions have been reviewed by FAC since the last
    report, and more than 125 compliance cases are currently open.
        6. Since the issuance of Executive Order No. 12810, FAC has worked
    closely with the U.S.

    [[Page 1105]]

    Customs Service to ensure both that prohibited imports and exports
    (including those in which the Government of the FRY (S/M) or Bosnian
    Serb authorities have 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. There are currently 37 cases under active investigation. Since
    the last report, FAC has collected nine civil penalties totaling nearly
    $20,000. Of these, five were paid by U.S. financial institutions for
    violative funds transfers involving the Government of the FRY (S/M),
    persons in the FRY (S/M), or entities located or organized in or
    controlled from the FRY (S/M). Three U.S. companies and one air carrier
    have also paid penalties related to exports or unlicensed payments to
    the Government of the FRY (S/M) or persons in the FRY (S/M) or other
    violations of the Regulations.
        7. The expenses incurred by the Federal Government in the 6-month
    period from November 30, 1994, through May 29, 1995, that are directly
    attributable to the authorities conferred by the declaration of a
    national emergency with respect to the FRY (S/M) and the Bosnian Serb
    forces and authorities are estimated at about $3.5 million, 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 and its Chief Counsel's Office, and the U.S.
    Customs Service), the Department of State, the National Security
    Council, the U.S. Coast Guard, 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 and hold
    territory in the Republics of Croatia and Bosnia and Herzegovina by
    force and violence, and the actions and policies of the Bosnian Serb
    forces and the authorities in the areas of Bosnia and Herzegovina under
    their control, 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 the
    conflict through implementation of the United Nations Security Council
    resolutions.
        I shall continue to exercise the powers at my disposal to apply
    economic sanctions against the FRY (S/M) 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 18, 1995.