[Weekly Compilation of Presidential Documents Volume 32, Number 33 (Monday, August 19, 1996)]
[Pages 1450-1453]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Letter to Congressional Leaders on 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 
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.

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    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 continuing 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 hu- 

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manitarian 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, 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.

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