[Weekly Compilation of Presidential Documents Volume 33, Number 49 (Monday, December 8, 1997)]
[Pages 1979-1983]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Letter to Congressional Leaders Reporting on 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

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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 (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

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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). 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

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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 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

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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).
    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.