[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.