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107th Congress, 1st Session - - - - - - - - - - - - - House Document 107-44


 
                   REPORT ON THE NATIONAL EMERGENCY


                         WITH RESPECT TO IRAQ

                               __________

                                MESSAGE

                                  FROM

                   THE PRESIDENT OF THE UNITED STATES

                              TRANSMITTING

  A 6-MONTH PERIODIC REPORT ON THE NATIONAL EMERGENCY WITH RESPECT TO 
IRAQ THAT WAS DECLARED IN EXECUTIVE ORDER NO. 12722 OF AUGUST 2, 1990, 
                     PURSUANT TO 50 U.S.C. 1703(c)

<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>


  February 12, 2001.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed
To the Congress of the United States:
    As required by 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), I transmit 
herewith a 6-month periodic report on the national emergency 
with respect to Iraq that was declared in Executive Order 12722 
of August 2, 1990.

                                                    George W. Bush.
    The White House, February 8, 2001.
President's Periodic Report on the National Emergency With Respect to Iraq

    I hereby report to the Congress on the developments since 
the last report of July 28, 2000, 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, 50 U.S.C. 1703(c) (``IEEPA'').
    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 
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. 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. Subsequently, Executive Order 12817 was issued 
to implement provisions of UNSCR 778, authorizing the Secretary 
of the Treasury 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 directing U.S. 
financial institutions holding such funds to transfer them to 
the Federal Reserve Bank of New York (``FRBNY'').
    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, 2000 through February 1, 2001.
    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 United Nations 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 U.N. Security Council (the 
``Security Council'') committee established pursuant to UNSCR 
661 (``the 661 Committee'') adopted procedures it would employ 
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 Security Council adopted UNSCR 1111, 
renewing for another 180 days the authorization of 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 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.
    On February 20, 1998, the Security Council adopted UNSCR 
1153, authorizing the sale of Iraqi petroleum and petroleum 
products and the purchase of humanitarian aid for a 180-day 
period beginning with the date of notification by the President 
of the Security Council to the members thereof of receipt of 
the report requested in UNSCR 1153. UNSCR 1153 authorized the 
sale of $5.256 billion of Iraqi petroleum and petroleum 
products. On March 25, 1998, the Security Council, noting the 
shortfall in revenue from Iraq's sale of petroleum and 
petroleum productsduring the first 90-day period of 
implementation of UNSCR 1143, due to the delayed resumption in sales 
and a serious decrease in prices, and concerned about the resulting 
humanitarian consequences for the Iraqi people, adopted UNSCR 1158. 
This Resolution reaffirmed the authorization for Iraqi petroleum sales 
and purchases of humanitarian aid contained in UNSCR 1143 for the 
remainder of the second 90-day period and set the authorized value 
during that timeframe to $1.4 billion pending implementation of UNSCR 
1153. The 180-day period authorized in UNSCR 1153 began on May 30, 
1998. On June 19, 1998, the Security Council adopted Resolution 1175, 
authorizing the expenditure of up to $300 million on Iraqi oil 
infrastructure repairs in order to help Iraq reach the higher export 
ceiling permitted under UNSCR 1153. UNSCR 1175 also reaffirmed the 
Security Council's endorsement of the Secretary General's 
recommendation that the ``oil-for-food'' distribution plan be ongoing 
and project-based. Subsequently, the Security Council extended the oil-
for-food program for 180-day periods twice more, on November 24, 1998 
and on May 21, 1999.
    Resolution 1266, adopted by the Security Council on October 
4, 1999, authorized Iraq to export petroleum and petroleum 
products in excess of $5.2 billion per 180-day phase under the 
``oil-for-food'' program in order to make up for revenue 
shortfalls from previous phases of the program. Resolutions 
1275 and 1280 extended the sixth phase of the program for a 
total of three weeks. On December 10, the Security Council 
extended the ``oil-for-food'' program for a seventh 180-day 
phase. On December 17, 1999, the Security Council adopted 
resolution 1284, which permits Iraq to export petroleum 
products as required to meet humanitarian needs. On June 8, 
2000, the Security Council adopted resolution 1302 which 
extended the ``oil-for-food'' program for an eighth 180-day 
phase. On December 5, 2000, the Security Council adopted 
resolution 1330, extending the ``oil for food'' program for 
another 180-day phase beginning December 6, 2000. During the 
period covered by this report, imports into the United States 
under the program totaled about 50.2 million barrels. During 
the prior period, U.S. imports included an additional 2 million 
barrels not previously reported, bringing total imports since 
December 10, 1996, to approximately 461 million barrels.
    2. There have been no amendments to the Iraqi Sanctions 
Regulations, 31 C.F.R. Part 575 (the ``Regulations''), 
administered by the Office of Foreign Assets Control (``OFAC'') 
of the Department of the Treasury, during the current reporting 
period. As noted in the report of July 28, 2000, theRegulations 
were amended effective November 10, 1998, to authorize U.S. persons to 
enter into executory contracts for the sale of oilfield parts and 
equipment to the Government of Iraq in conformity with UNSCR 1153 and 
UNSCR 1175 (63 Fed. Reg. 62942, November 10, 1998).
    As previously reported, the Regulations were amended on 
December 10, 1996 to provide a statement of licensing policy 
regarding specific licensing of U.S. persons seeking to 
purchase Iraqi-origin petroleum and petroleum products (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 
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, 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. In November 2000, OFAC 
granted a license, amended in December 2000, to Banque 
Nationale de Paris to establish a sub-account of the escrow 
account for the issuance, confirmation, or advisement of 
letters of credit in Euros. The use of Euros in addition to 
dollars in no way changes the control exercised by the United 
Nations over Iraqi's oil-for-food revenues.
    3. Since the last report, OFAC has collected two civil 
monetary penalties totaling more than $12,500 for violations of 
the sanctions. One U.S. financial institution and one 
individual paid the penalties for violations involving a 
payment to Iraq and an attempted export of goods to Iraq. An 
additional twenty-one cases are undergoing agency penalty 
action or debt collection action for violation of the 
Regulations.
    4. Three foreign businessmen were arrested in San Diego on 
March 21, 2000, by the U.S. Customs Service and subsequently 
were charged with conspiracy to violate the embargo against 
Iraq by purchasing oil from Iraq. They allegedly entered 
theUnited States to complete the purchase of 160,000 metric tons of oil 
from Iraq in violation of IEEPA and the Regulations.
    Separately, OFAC continues to investigate 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.
    5. As of December 8, 2000, 24 transactions totaling 
approximately $2.5 million had been blocked during the 
reporting period. One hundred fifteen transactions, not 
involving blockable interests, were rejected by U.S. banks 
causing a disruption of more than $4.65 million in business for 
Iraq.
    6. OPAC has issued numerous 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, the 
exportation to Iraq of donated medicine, medical supplies, and 
food intended for humanitarian relief purposes, sales of 
humanitarian supplies and oilfield parts and equipments to Iraq 
under UNSCRs 986, 1111, 1143, 1153, 1210, 1242, 1284, 1302, and 
1330, 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 the last report, 
104 specific licenses have been issued, most with respect to 
sales of humanitarian goods and oilfield parts and equipment.
    7. Since December 10, 1996, OFAC has issued specific 
licenses authorizing participation by U.S. persons in 
commercial sales of humanitarian goods to Iraq funded by Iraqi 
oil sales, and imports of Iraqi petroleum products, pursuant to 
UNSCRs 986, 1111, 1143, 1153,1210, 1242, 1284, 1302, and 1330, 
valued at more than $587 million. Of that amount, approximately 
$453 million represents sales of basic foodstuffs, $46 million 
for medicines and medical supplies, $76 million for water 
testing and treatment equipment, and nearly $12 million 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 in 
Iraq. Assisting U.N. agencies include the World Food Program, 
the U.N. Population Fund, the U.N. Food and Agriculture 
Organization, and World Health Organization, and UNICEF. As 
ofDecember 15, 2000, OFAC had authorized sales valued at nearly $77 
million of humanitarian goods during the current reporting period. In 
addition, in conformity with UNSCR 1153 and UNSCR 1175, OFAC has issued 
165 licenses since November 10, 1998, authorizing U.S. persons to enter 
into executory contracts for the sale of oilfield parts and equipment 
to the Government of Iraq. The oil infrastructure merchandise covered 
by such contracts is valued at approximately $67.7 million.
    Earlier, in October 1992, OFAC had issued directive 
licenses to eight commercial banks ordering the transfer of a 
total of $200 million blocked Iraqi oil funds to the FRBNY for 
further transfer to and use by the United Nations in Iraq. This 
action was taken pursuant to UNSCR 778 and Executive Order 
12817. Under UNSCR 986, and its successors, the funds were to 
have been repaid from the proceeds of the oil-for-food program. 
In late 1998, OFAC was informed that money was flowing back 
into the FRBNY from the United Nations to effect this 
repayment. At the request of the Department of State, OFAC 
licensed the distribution of Iraqi funds repaid by the United 
Nations, and held at the FRBNY, to the eight commercial banks. 
The licenses were issued April 14, 1999, jointly to the FRBNY 
and the eight commercial banks. A total amount of 
$37,694,734.46 was transferred, representing $36,474,145.00 in 
principal (amounts received from the United Nations) and 
$1,220,589.46 in interest (earned at the FRBNY). As of December 
15, 2000, an additional total of $17,319,828 has been received 
at the FRBNY.
    8. The expenses incurred by the Federal Government in the 
six-month period from August 2, 2000 through February 1, 2001, 
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 
$895,000, most of which represent 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 

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