Public Papers of the Presidents of the United States: William J. Clinton (1997, Book II) - Letter to Congressional Leaders Reporting on the National Emergency With Respect to the Federal Republic of Yugoslavia (Serbia and Montenegro)

[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

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(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).

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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).

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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.