    [Public Papers of the Presidents of the United States: William J. Clinton (1997, Book II)]
    [December 3, 1997]
    [Pages 1714-1718]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Letter to Congressional Leaders Reporting on the National Emergency With
    Respect to the Federal Republic of Yugoslavia (Serbia and Montenegro)
    December 3, 1997

    Dear Mr. Speaker:  (Dear Mr. President:)
        On May 30, 1992, by Executive Order 12808, President Bush declared a
    national emergency to deal with the unusual and extraordinary threat to
    the national security, foreign policy, and economy of the United States
    constituted by the actions and policies of the Governments of Serbia and
    Montenegro, blocking all property and interests in property of those
    Governments. President Bush took additional measures to prohibit trade
    and other transactions with the Federal Republic of Yugoslavia (Serbia
    and Montenegro) by Executive Orders 12810 and 12831, issued on June 5,
    1992, and January 15, 1993, respectively.
        On April 25, 1993, I issued Executive Order 12846, blocking the
    property and interests in property of all commercial, industrial, or
    public utility undertakings or entities organized or located in the
    Federal Republic of Yugoslavia (Serbia and Montenegro) (the ``FRY
    (S&M)''), and prohibiting trade-related transactions by United States
    persons involving those areas of the Republic of Bosnia and Herzegovina
    controlled by the Bosnian Serb forces and the United Nations Protected
    Areas in the Republic of Croatia. On October 25, 1994, because of the
    actions and policies of the Bosnian Serbs, I expanded the scope of the
    national emergency by issuance of Executive Order 12934 to block the
    property of the Bosnian Serb forces and the authorities in the territory
    that they controlled within the Republic of Bosnia and Herzegovina, as
    well as the property of any entity organized or located in, or
    controlled by any person in, or resident in, those areas.
        On November 22, 1995, the United Nations Security Council passed
    Resolution 1022

    [[Page 1715]]

    (UNSCR or ``Resolution 1022''), immediately and indefinitely suspending
    economic sanctions against the FRY (S&M). Sanctions were subsequently
    lifted by the United Nations Security Council pursuant to Resolution
    1074 on October 1, 1996. Resolution 1022, however, continues to provide
    for the release of funds and assets previously blocked pursuant to
    sanctions against the FRY (S&M), provided that such funds and assets
    that are subject to claims and encumbrances, or that are the property of
    persons deemed insolvent, remain blocked until ``released in accordance
    with applicable law.'' This provision was implemented in the United
    States on December 27, 1995, by Presidential Determination No. 96-7. The
    Determination, in conformity with Resolution 1022, directed the
    Secretary of the Treasury, inter alia, to suspend the application of
    sanctions imposed on the FRY (S&M) pursuant to the above-referenced
    Executive orders and to continue to block property previously blocked
    until provision is made to address claims or encumbrances, including the
    claims of the other successor states of the former Yugoslavia. This
    sanctions relief was an essential factor motivating Serbia and
    Montenegro's acceptance of the General Framework Agreement for Peace in
    Bosnia and Herzegovina initialed by the parties in Dayton on November
    21, 1995 (the ``Peace Agreement'') and signed in Paris on December 14,
    1995. The sanctions imposed on the FRY (S&M) and on the United Nations
    Protected Areas in the Republic of Croatia were accordingly suspended
    prospectively, effective January 16, 1996. Sanctions imposed on the
    Bosnian Serb forces and authorities and on the territory that they
    controlled within the Republic of Bosnia and Herzegovina were
    subsequently suspended prospectively, effective May 10, 1996, in
    conformity with UNSCR 1022. On October 1, 1996, the United Nations
    passed UNSCR 1074, terminating U.N. sanctions against the FRY (S&M) and
    the Bosnian Serbs in light of the elections that took place in Bosnia
    and Herzegovina on September 14, 1996. UNSCR 1074, however, reaffirms
    the provisions of UNSCR 1022 with respect to the release of blocked
    assets, as set forth above.
        The present report is submitted pursuant to 50 U.S.C. 1641(c) and
    1703(c) and covers the period from May 30 through November 29, 1997. 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 12808 as expanded with respect to
    the Bosnian Serbs in Executive Order 12934, and against the FRY (S&M)
    contained in Executive Orders 12810, 12831, and 12846.
        1. 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).
        2. The Office of Foreign Assets Control (OFAC), acting under
    authority delegated by the Secretary of the Treasury, implemented the
    sanctions imposed under the foregoing statutes in the Federal Republic
    of Yugoslavia (Serbia and Montenegro) and Bosnian Serb-Controlled Areas
    of the Republic of Bosnia and Herzegovina Sanctions Regulations, 31
    C.F.R. Part 585 (the ``Regulations''). To implement Presidential
    Determination No. 96-7, the Regulations were amended to authorize
    prospectively all transactions with respect to the FRY (S&M) otherwise
    prohibited (61 FR 1282, January 19, 1996). Property and interests in
    property of the FRY (S&M) previously blocked within the jurisdiction of
    the United States remain blocked, in conformity with the Peace Agreement
    and UNSCR 1022, until provision is made to address claims or
    encumbrances, including the claims of the other successor states of the
    former Yugoslavia.
        On May 10, 1996, OFAC amended the Regulations to authorize
    prospectively all transactions with respect to the Bosnian Serbs
    otherwise prohibited, except with respect to property previously blocked
    (61 FR 24696, May 16, 1996).

    [[Page 1716]]

    On December 4, 1996, OFAC amended Appendices A and B to 31 C.F.R.
    chapter V, containing the names of entities and individuals in
    alphabetical order and by location that are subject to the various
    economic sanctions programs administered by OFAC, to remove the entries
    for individuals and entities that were determined to be acting for or on
    behalf of the Government of the Federal Republic of Yugoslavia (Serbia
    and Montenegro). These assets were blocked on the basis of these
    persons' activities in support of the FRY (S&M)--activities no longer
    prohibited--not because the Government of the FRY (S&M) or entities
    located in or controlled from the FRY (S&M) had any interest in those
    assets (61 FR 64289, December 4, 1996).
        On April 18, 1997, the Regulations were amended by adding new
    section 585.528, authorizing all transactions after 30 days with respect
    to the following vessels that remained blocked pursuant to the
    Regulations, effective at 10:00 a.m. local time in the location of the
    vessel on May 19, 1997: the M/V MOSLAVINA, M/V ZETA, M/V LOVCEN, M/V
    DURMITOR and M/V BAR (a/k/a M/V INVIKEN) (62 FR 19672, April 23, 1997).
    During the 30-day period, United States persons were authorized to
    negotiate settlements of their outstanding claims with respect to the
    vessels with the vessels' owners or agents and were generally licensed
    to seek and obtain judicial warrants of maritime arrest. If claims
    remained unresolved 10 days prior to the vessels' unblocking (May 8,
    1997), service of the warrants could be effected at that time through
    the U.S. Marshal's Office in the district where the vessel was located
    to ensure that U.S. creditors of a vessel had the opportunity to assert
    their claims. Appendix C to 31 CFR, chapter V, containing the names of
    vessels blocked pursuant to the various economic sanctions programs
    administered by OFAC (61 FR 32936, June 26, 1996), was also amended to
    remove these vessels from the list effective May 19, 1997.
        There has been one amendment to the Regulations since my report of
    May 30, 1997. The Federal Republic of Yugoslavia (Serbia and Montenegro)
    and Bosnian Serb-Controlled Areas of the Republic of Bosnia and
    Herzegovina Sanctions Regulations, 31 C.F.R. Part 585, were amended on
    August 25, 1997. General reporting, recordkeeping, licensing, and other
    procedural regulations were moved from the Regulations to a separate
    part (31 CFR Part 501) dealing solely with such procedural matters. (62
    FR 45098, August 25, 1997). No substantive changes to the Regulations
    were made. A copy of the amendment is attached to this report.
        3. Over the past year and a half, the Departments of State and the
    Treasury have worked closely with European Union member states and other
    U.N. member nations to implement the provisions of UNSCR 1022. In the
    United States, retention of blocking authority pursuant to the extension
    of a national emergency provides a framework for administration of an
    orderly claims settlement. This accords with past policy and practice
    with respect to the suspension of sanctions regimes.
        4. During this reporting period, OFAC issued six specific licenses
    regarding transactions pertaining to the FRY (S&M) or property in which
    it has an interest. Specific licenses were issued (1) to authorize the
    unblocking of certain funds and other administrative transactions
    involving assets previously blocked; (2) to authorize the transfer of
    presanctions ownership interests in certain blocked property from one
    U.S. person to another; and (3) to authorize litigation against the
    Government of the FRY (S&M) by a United States person for recovery of
    presanctions obligations.
        During the past 6 months, OFAC has continued to oversee the
    maintenance of blocked FRY (S&M) accounts; and records with respect to:
    (1) liquidated tangible assets and personalty of the 15 blocked U.S.
    subsidiaries of entities organized in the FRY (S&M); (2) the blocked
    personalty, files, and records of the two Serbian banking institutions
    in New York previously placed in secure storage; (3) remaining blocked
    FRY (S&M) tangible property, including real estate; and (4) the five
    Yugoslav-owned vessels recently unblocked in the United States.
        On September 29, 1997, the United States filed Statements of
    Interest in cases being litigated in the Southern District of New York:
    Beogradska Banka A.D. Belgrade v. Interenergo, Inc., 97 Civ. 2065 (JGK)
    and Jugobanka A.D. Belgrade v. U.C.F. International Trading, Inc. et
    al., 97 Civ. 3912, 3913 and 6748 (LAK). These cases involve actions by
    blocked New York Serbian bank agencies and their parent offices in
    Belgrade, Serbia, to collect on defaulted loans made prior to the
    imposition of economic sanctions and dispensed, in one case, to the U.S.
    subsidiary of a Bosnian firm and, in the other cases, to various foreign
    subsidiaries

    [[Page 1717]]

    of a Slovenian firm. Because these loan receivables are a form of
    property that was blocked prior to December 27, 1995, any funds
    collected as a consequence of these actions would remain blocked and
    subject to United States jurisdiction. Defendants asserted that the
    loans had been made from the currency reserves of the central bank of
    the former Yugoslavia to which all successor states had contributed, and
    that the loan funds represent assets of the former Yugoslavia and are
    therefore subject to claims by all five successor states. The Department
    of State, in consultation with the Department of the Treasury, concluded
    that the collection of blocked receivables through the actions by the
    bank and the placement of those collected funds into a blocked account
    did not prejudice the claims of successor states nor compromise
    outstanding claims on the part of any creditor of the bank, since any
    monies collected would remain in a blocked status and available to
    satisfy obligations to United States and foreign creditors and other
    claimants--including possible distribution to successor states under a
    settlement arising from the negotiations on the division of assets and
    liabilities of the former Yugoslavia.
        5. Despite the prospective authorization of transactions with the
    FRY (S&M), OFAC has continued to work closely with the U.S. Customs
    Service and other cooperating agencies to investigate alleged violations
    that occurred while sanctions were in force. On February 13, 1997, a
    Federal grand jury in the Southern District of Florida, Miami, returned
    a 13-count indictment against one U.S. citizen and two nationals of the
    FRY (S&M). The indictment charges that the subjects participated and
    conspired to purchase three Cessna propeller aircraft, a Cessna jet
    aircraft, and various aircraft parts in the United States and to export
    them to the FRY (S&M) in violation of U.S. sanctions and the
    Regulations. Timely interdiction action prevented the aircraft from
    being exported from the United States. A trial date has not yet been
    scheduled but is anticipated in late October.
        Since my last report, OFAC has collected four civil monetary
    penalties totaling nearly $176,000 for violations of the sanctions.
    These violations involved prohibited exports of goods and services,
    contract dealings, and payments either to the Government of the FRY
    (S&M), persons in the FRY (S&M), or to blocked entities owned or
    controlled by the FRY (S&M). The violators include two U.S. companies,
    one law firm, and a U.S. financial institution.
        6. The expenses incurred by the Federal Government in the 6-month
    period from May 30 through November 29, 1997, that are directly
    attributable to the declaration of a national emergency with respect to
    the FRY (S&M) and the Bosnian Serb forces and authorities are estimated
    at approximately $400,000, most of which represents wage and salary
    costs for Federal personnel. Personnel costs were largely centered in
    the Department of the Treasury (particularly in OFAC and its Chief
    Counsel's Office, and the U.S. Customs Service), the Department of
    State, the National Security Council, and the Department of Commerce.
        7. In the last 2 years, substantial progress has been achieved to
    bring about a settlement of the conflict in the former Yugoslavia
    acceptable to the parties. UNSCR 1074 terminates sanctions in view of
    the first free and fair elections to occur in the Republic of Bosnia and
    Herzegovina, as provided for in the Peace Agreement. In reaffirming
    Resolution 1022, however, UNSCR 1074 contemplates the continued blocking
    of assets potentially subject to conflicting claims and encumbrances
    until provision is made to address them under applicable law, including
    claims of the other successor states of the former Yugoslavia.
        The resolution of the crisis and conflict in the former Yugoslavia
    that has resulted from the actions and policies of the Government of the
    Federal Republic of Yugoslavia (Serbia and Montenegro), and of the
    Bosnian Serb forces and the authorities in the territory that they
    controlled, will not be complete until such time as the Peace Agreement
    is implemented and the terms of UNSCR 1022 have been met. Therefore, I
    have continued for another year the national emergency declared on May
    30, 1992, as expanded in scope on October 25, 1994, and will continue to
    enforce the measures adopted pursuant thereto.
        I shall continue to exercise the powers at my disposal with respect
    to the measures against the Government of the Federal Republic of
    Yugoslavia (Serbia and Montenegro), 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).

    [[Page 1718]]

            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. This
    letter was released by the Office of the Press Secretary on December 4.