    [Public Papers of the Presidents of the United States: William J. Clinton (1996, Book II)]
    [August 14, 1996]
    [Pages 1295-1298]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Letter to Congressional Leaders Reporting on the National Emergency With
    Respect to Iraq
    August 14, 1996

    Dear Mr. Speaker: (Dear Mr. President:)
        I hereby report to the Congress on the developments since my last
    report of February 9, 1996, 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, 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

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    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 are 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.
        Executive Order No. 12817 was issued on October 21, 1992, to
    implement in the United States measures adopted in United Nations
    Security Council Resolution (``UNSCR'') 778 of October 2, 1992. UNSCR
    778 requires U.N. Member States to transfer to a U.N. escrow account any
    funds (up to $200 million apiece) representing Iraqi oil sale proceeds
    paid by purchasers after the imposition of U.N. sanctions on Iraq, to
    finance Iraq's obligations for U.N. activities with respect to Iraq,
    such as expenses to verify Iraqi weapons destruction, and to provide
    humanitarian assistance in Iraq on a nonpartisan basis. A portion of the
    escrowed funds also funds the activities of the U.N. Compensation
    Commission in Geneva, which handles claims from victims of the Iraqi
    invasion and occupation of Kuwait. Member States also may make voluntary
    contributions to the account. The funds placed in the escrow account are
    to be returned, with interest, to the Member States that transferred
    them to the United Nations, as funds are received from future sales of
    Iraqi oil authorized by the U.N. Security Council. No Member State is
    required to fund more than half of the total transfers or contributions
    to the escrow account.
        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 No. 12724 and 12817 (the
    ``Executive Orders''). The report covers events from February 2, 1996,
    through August 1, 1996.
        1. In April 1995, the U.N. Security Council adopted UNSCR 986
    authorizing Iraq to export up to $1 billion in petroleum and petroleum
    products per quarter for 6 months under U.N. supervision in order to
    finance the purchase of food, medicine, and other humanitarian supplies.
    This arrangement may be renewed by the Security Council for additional
    6-month periods. UNSCR 986 includes arrangements to ensure equitable
    distribution of humanitarian goods purchased with UNSCR 986 oil revenues
    to all the people of Iraq. The resolution also provides for the payment
    of compensation to victims of Iraqi aggression and for the funding of
    other U.N. activities with respect to Iraq. On May 20, 1996, a
    memorandum of understanding was concluded between the Secretariat of the
    United Nations and the Government of Iraq agreeing on terms for
    implementing UNSCR 986. Further implementation procedures are being
    considered by the Iraq Sanctions Committee which is composed of members
    of the Security Council.
        2. During the reporting period, there was one amendment to the Iraqi
    Sanctions Regulations (the ``ISR''). On July 10, 1996, the Department of
    the Treasury's Office of Foreign Assets Control (``OFAC'') amended the
    ISR 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 and services, with performance conditioned
    upon approval by the Office of Foreign Assets Control within the
    framework of United Nations Security Council Resolution 986 (1995). (61
    Fed. Reg. 36627, July 12, 1996.) A copy of the amended Regulations is
    attached.
        All executory contracts must contain terms requiring that all
    proceeds of oil purchases from the Government of Iraq, including the
    State Oil marketing organization, must be placed in the U.N. escrow
    account at Banque Nationale de Paris, New York (the ``986 Escrow
    Account''), and all Iraqi payments for authorized sales of pipeline
    parts and equipment, humanitarian goods, and incidental transaction
    costs borne by Iraq will, upon approval by the UNSC committee
    established pursuant to UNSCR 661 (``the 661 Committee''), be paid or
    payable out of the 986 Escrow Account.
        3. Investigations of possible violations of the Iraqi sanctions
    continue to be pursued and appropriate enforcement actions taken.
    Several cases from prior reporting periods are continu-

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    ing and recent additional allegations have been referred by OFAC to the
    U.S. Customs Service for investigation. Several OFAC civil penalty
    proceedings are pending.
        Investigation also continues into the roles played by various
    individuals and firms outside Iraq in the Iraqi government procurement
    network. These investigations may lead to additions to OFAC's listing of
    individuals and organizations determined to be Specially Designated
    Nationals (``SDNs'') of the Government of Iraq.
        4. Pursuant to Executive Order No. 12817 implementing UNSCR 778, on
    October 28, 1992, OFAC directed the Federal Reserve Bank of New York 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. Cumulative transfers from the blocked Federal
    Reserve Bank of New York account since issuance of Executive Order No.
    12817 amounted to $200 million as of December 21, 1995, fully satisfying
    the United States' commitment to match the payments of other Member
    States from blocked Iraqi oil payments, and its obligation pursuant to
    UNSCR 778.
        5. The Office of Foreign Assets Control has issued a total of 630
    specific licenses regarding transactions pertaining to Iraq or Iraqi
    assets since August 1990. Licenses have been issued for transactions
    such as the filing of legal actions against Iraqi governmental entities,
    legal representation of Iraq, and the exportation to Iraq of donated
    medicine, medical supplies, and food intended for humanitarian relief
    purposes, the execution of powers of attorney relating to the
    administration of personal assets and decedents' estates in Iraq and the
    protection of preexistent intellectual property rights in Iraq. Since my
    last report, 12 specific licenses have been issued.
        6. The expenses incurred by the Federal Government in the 6-month
    period from February 2, 1996, through August 1, 1996, that are directly
    attributable to the exercise of powers and authorities conferred by the
    declaration of a national emergency with respect to Iraq are reported to
    be about $1 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 the office of Foreign Assets
    Control, the U.S. Customs Service, the Office of the Under Secretary for
    Enforcement, and the Office of the General Counsel), the Department of
    State (particularly the Bureau of Economic and Business Affairs, the
    Bureau of Near Eastern Affairs, the Bureau of International Organization
    Affairs, the Bureau of Political-Military Affairs, the U.S. Mission to
    the United Nations, and the Office of the Legal Advisor), and the
    Department of Transportation (particularly the U.S. Coast Guard).
        7. The United States imposed economic sanctions on Iraq in response
    to Iraq's illegal invasion and 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. Security Council resolutions on Iraq call for the
    elimination of Iraqi weapons of mass destruction, Iraqi recognition of
    Kuwait and 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
    capabilities, the return of Kuwaiti assets stolen during Iraq's illegal
    occupation of Kuwait, renunciation of terrorism, an end to internal
    Iraqi repression of its own civilian population, and the facilitation of
    access of international relief organizations to all those in need in all
    parts of Iraq. Six years after the invasion, a pattern of defiance
    persists: a refusal to account for missing Kuwaiti detainees; failure to
    return Kuwaiti property worth millions of dollars, including military
    equipment that was used by Iraq in its movement of troops to the Kuwaiti
    border in October 1994; sponsorship of assassinations in Lebanon and in
    northern Iraq; incomplete declarations to weapons inspectors and refusal
    of unimpeded access; and ongoing widespread human rights violations. As
    a result, the U.N. sanctions remain in place; the United States will
    continue to enforce those sanctions under domestic authority.
        The Baghdad government continues to violate basic human rights of
    its own citizens through systematic repression of minorities and denial
    of humanitarian assistance. The Government of Iraq has repeatedly said
    it will not be bound by UNSC Resolution 688. For nearly 5 years, Baghdad
    has maintained a blockade of food, medicine, and other humanitarian
    supplies against northern Iraq. The Iraqi military routinely harasses
    residents of the north, and has attempted to ``Arabize'' the Kurdish,
    Turcomen,

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    and Assyrian areas in the north. Iraq has not relented in its artillery
    attacks against civilian population centers in the south, or in its
    burning and draining operations in the southern marshes, which have
    forced thousands to flee to neighboring States.
        The policies and actions of the Saddam Hussein regime continue 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 U.N. resolutions affirm that the Security Council must be
    assured of Iraq's peaceful intentions in judging its compliance with
    sanctions. Because of Iraq's failure to comply fully with these
    resolutions, the United States will continue to apply economic sanctions
    to deter it from threatening peace and stability in the region.
            Sincerely,

                                                          William J. Clinton

    Note: Identical letters were sent to Newt Gingrich, Speaker of the House
    of Representatives, and Albert Gore, Jr., President of the Senate.