[Weekly Compilation of Presidential Documents Volume 34, Number 6 (Monday, February 9, 1998)]
[Pages 194-198]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Message to the Congress Reporting on Iraq

February 3, 1998

To the Congress of the United States:

    I hereby report to the Congress on the developments since my last 
report of July 31, 1997, concerning the national emergency with respect 
to Iraq that was declared in Executive Order 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 (IEEPA), 50 U.S.C. 1703(c).

[[Page 195]]

    Executive Order 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 United States 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. United States 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 12724, which was issued in order to align the sanctions 
imposed by the United States with United Nations Security Council 
Resolution (UNSCR) 661 of August 6, 1990.
    This report discusses only matters concerning the national emergency 
with respect to Iraq that was declared in Executive Order 12722 and 
matters relating to Executive Orders 12724 and 12817 (the ``Executive 
Orders''). The report covers events from August 2, 1997, through 
February 1, 1998.
    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 every 90 days for a total of 180 days under U.N. supervision in 
order to finance the purchase of food, medicine, and other humanitarian 
supplies. 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. On August 8, 1996, the UNSC committee 
established pursuant to UNSCR 661 (``the 661 Committee'') adopted 
procedures to be employed by the 661 Committee in implementation of 
UNSCR 986. On December 9, 1996, the President of the Security Council 
received the report prepared by the Secretary General as requested by 
paragraph 13 of UNSCR 986, making UNSCR 986 effective as of 12:01 a.m. 
December 10, 1996.
    On June 4, 1997, the U.N. Security Council adopted UNSCR 1111, 
renewing for another 180 days the authorization for Iraqi petroleum 
sales and purchases of humanitarian aid contained in UNSCR 986 of April 
14, 1995. The Resolution became effective on June 8, 1997. On September 
12, 1997, the Security Council, noting Iraq's decision not to export 
petroleum and petroleum products pursuant to UNSCR 1111 during the 
period June 8 to August 13, 1997, and deeply concerned about the 
resulting humanitarian consequences for the Iraqi people, adopted UNSCR 
1129. This resolution replaced the two 90-day quotas with one 120-day 
quota and one 60-day quota in order to enable Iraq to export its full $2 
billion quota of oil within the original 180 days of UNSCR 1111. On 
December 4, 1997, the U.N. Security Council adopted UNSCR 1143, renewing 
for another 180 days, beginning December 5, 1997, the authorization for 
Iraqi petroleum sales and humanitarian aid purchases contained in UNSCR 
986. As of January 2, 1998, however, Iraq still had not exported any 
petroleum under UNSCR 1143. During the reporting period, imports into 
the United States under this program totaled about 14.2 million barrels, 
bringing total imports since December 10, 1996, to approximately 23.7 
million barrels.
    2. There have been two amendments to the Iraqi Sanctions 
Regulations, 31 C.F.R. Part 575 (the ``ISR'' or the ``Regulations'') 
administered by the Office of Foreign Assets Control (OFAC) of the 
Department of the Treasury during the reporting period. The Regulations 
were amended on August 25, 1997. General reporting, recordkeeping, 
licensing, and other procedural regulations were moved from the 
Regulations to a separate part (31 C.F.R. Part 501) dealing solely with 
such procedural matters (62 Fed. Reg. 45098, August 25, 1997). A copy of 
the amendment is attached.

[[Page 196]]

    On December 30, 1997, the Regulations were amended to remove from 
appendices A and B to 31 C.F.R. chapter V the name of an individual who 
had been determined previously to act for or on behalf of, or to be 
owned or controlled by, the Government of Iraq (62 Fed. Reg. 67729, 
December 30, 1997). A copy of the amendment is attached.
    As previously reported, the Regulations were amended on December 10, 
1996, to provide a statement of licensing policy regarding specific 
licensing of United States persons seeking to purchase Iraqi-origin 
petroleum and petroleum products from Iraq (61 Fed. Reg. 65312, December 
11, 1996). Statements of licensing policy were also provided regarding 
sales of essential parts and equipment for the Kirkuk-Yumurtalik 
pipeline system, and sales of humanitarian goods to Iraq, pursuant to 
United Nations approval. A general license was also added to authorize 
dealings in Iraqi-origin petroleum and petroleum products that have been 
exported from Iraq with United Nations and United States Government 
approval.
    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 661 Committee and 
satisfaction of other conditions established by the United Nations, 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.
    On July 15, 1995, a jury in the Eastern District of New York 
returned a verdict of not guilty for two defendants charged with the 
attempted exportation and transshipment to Iraq of zirconium ingots in 
violation of IEEPA and the ISR. The two were charged in a Federal 
indictment on July 10, 1995, along with another defendant who entered a 
guilty plea on February 6, 1997.
    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.
    Since my last report, OFAC collected civil monetary penalties 
totaling more than $1.125 million for violations of IEEPA and the ISR 
relating to the sale and shipment of goods to the Government of Iraq and 
an entity in Iraq. Additional administrative proceedings have been 
initiated and others await commencement.
    4. The Office of Foreign Assets Control has issued hundreds of 
licensing determinations regarding transactions pertaining to Iraq or 
Iraqi assets since August 1990. Specific 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 
humanitarian relief purposes, sales of humanitarian supplies to Iraq 
under UNSCR 986 and 1111, diplomatic transactions, 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, 88 specific 
licenses have been issued, most with respect to sales of humanitarian 
goods.
    Since December 10, 1996, OFAC has issued specific licenses 
authorizing commercial sales of humanitarian goods funded by Iraqi oil 
sales pursuant to UNSCR 986 and 1111 valued at more than $239 million. 
Of that amount, approximately $222 million represents sales of basic 
foodstuffs, $7.9 million for medicines and medical supplies, $8.2 
million for water testing and treatment equipment, and nearly $700,000 
to fund a variety of United Nations activities in Iraq. International 
humanitarian relief in Iraq is coordinated under the direction of the 
United Nations Office of the Humanitarian Coordinator of Iraq. Assisting 
U.N. agencies include

[[Page 197]]

the World Food Program, the U.N. Population Fund, the U.N. Food and 
Agriculture Organization, the World Health Organization, and UNICEF. As 
of January 8, 1998, OFAC had authorized sales valued at more than $165.8 
million worth of humanitarian goods during the reporting period 
beginning August 2, 1997.
    5. The expenses incurred by the Federal Government in the 6-month 
period from August 2, 1997, through February 1, 1998, 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 $1.2 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 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 Bureau of Intelligence and Research, the 
U.S. Mission to the United Nations, and the Office of the Legal Adviser), 
and the Department of Transportation (particularly the U.S. Coast Guard).

    6. 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 relevant United Nations 
Security Council resolutions. Iraqi compliance with these resolutions is 
necessary before the United States will consider lifting economic 
sanctions. 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. Seven and a half 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 to provide immediate, unconditional, and 
unrestricted access to sites by these inspectors; 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 all forms of political 
expression, oppression of minorities, and denial of humanitarian 
assistance. The Government of Iraq has repeatedly said it will not 
comply with UNSCR 688 of April 5, 1991. The Iraqi military routinely 
harasses residents of the north, and has attempted to ``Arabize'' the 
Kurdish, Turkomen, 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 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

[[Page 198]]

deter it from threatening peace and stability in the region.
                                            William J. Clinton
The White House,
February 3, 1998.

Note: This message was released by the Office of the Press Secretary on 
February 4.