H.Doc.105-200 EMIGRATION LAWS AND POLICIES OF ALBANIA, KAZAKHSTAN, KYRGYZSTAN, ...

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105th Congress, 2d Session  - - - - - - - - - - House Document 105-199


 
ACTIONS AND EXPENSES RELATING TO NATIONAL EMERGENCY WITH BOSNIAN SERBS

                               __________

                             COMMUNICATION

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 A REPORT ON 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 COVERING THE PERIOD FROM MAY 30 
        THROUGH NOVEMBER 29, 1997, PURSUANT TO 50 U.S.C. 1641(c)


<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>


February 3, 1998.--Referred to the Committee on International Relations 
                       and ordered to be printed


                                           The White House,
                                      Washington, December 3, 1997.
Hon. Newt Gingrich,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: 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 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 
Monetnegro'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 
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 Untied 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 worked closely with European Union member 
states and other U.N. member nations to implement the 
provisions of UNSCR 1022. In the Untied 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 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 

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