[Weekly Compilation of Presidential Documents Volume 29, Number 7 (Monday, February 22, 1993)]
[Pages 212-215]
[Online from the Government Publishing Office, www.gpo.gov]
<R04>
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
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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 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
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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
reimbursement 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
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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 to 50 U.S.C. 1703(c).
William J. Clinton
The White House,
February 16, 1993.