September 22, 1981

To the Congress of the United States:

Pursuant to Section 204(c) of the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. Section 1703(c), I hereby report to the Congress with respect to developments since my report of February 24, 1981, concerning the declaration of national emergency with respect to Iran in Executive Order No. 12170 of November 14, 1979. This declaration and previous actions under it were described in earlier reports submitted to the Congress.

1. Pursuant to my decision, reflected in Executive Order No. 12294 of February 24, 1981, that the January 19, 1981 agreements with Iran should be implemented, the Department of the Treasury, acting under my delegation of authority to the Secretary of Treasury, issued a series of regulations to implement Executive Orders Nos. 12276 - 12285, signed by President Carter on January 19, 1981, and my Order of February 24. Among other things, these regulations revoked certain trade and financial sanctions against Iran, provided for the transfer of blocked Iranian assets to Iran and to a security account for U.S. claimants against Iran, and suspended certain claims of U.S. nationals against Iran pending review by the Iran-U.S. Claims Tribunal. With the exception of regulations issued July 6 and August 17, which are attached herewith, regulations issued since February 24, 1981 have been provided to Congress in accordance with the National Emergencies Act, 50 U.S.C. Section 1641(b).

2. On July 2, 1981 the Supreme Court in the case of Dames & Moore v. Regan, 49 U.S.L.W. 4969 (U.S. July 2, 1981) (No. 80 - 2078), upheld the President's authority to nullify attachments and other judicial orders with respect to assets of Iran, to order the transfer of those assets pursuant to the agreements with Iran, and to suspend certain claims of U.S. nationals against Iran and Iranian entities.

3. Following the Supreme Court decision and pursuant to certain of the Executive Orders mentioned above, financial assets exceeding two billion dollars held by persons within the United States were transferred to the Federal Reserve Bank of New York in mid-July. The agreements provided that a total of one billion dollars of the assets formerly held by domestic banks was to be transferred to an interest-bearing security account in a foreign bank to be used for payment of Claims Tribunal awards to U.S. nationals against Iran. The remainder of the assets was to be transferred through a foreign bank to Iran.

The technical arrangements for the establishment of the security account were concluded on August 17 by the Central Bank of Algeria, Bank Markazi Iran, the Federal Reserve Bank of New York, and the N.V. Settlement Bank of the Netherlands, a subsidiary of the Netherlands Central Bank. In connection with the arrangements, the U.S. agreed to provide special liquidity support of up to $500 million to the Netherlands Central Bank if lawsuits or other proceedings involving the security account impair the bank's ability to defend the guilder.

On August 18, the funds were transferred by the Federal Reserve Bank of New York to the Settlement Bank. Because of the delay in concluding arrangements for the security account, this transfer was delayed one month from the original transfer date of July 19 contemplated under the agreements.

4. Certain questions concerning the security account which were not resolved in our negotiations with Iran will be referred to the Claims Tribunal, which is expected to decide the issues shortly. These questions concern (1) the disposition of the interest accruing in the funds in the security account; (2) indemnification of the Settlement Bank of the Netherlands and the Netherlands Central Bank, as manager of the funds deposited with the Settlement Bank, against any claims relating to the security account; (3) payment of the administrative fees of the Settlement Bank; and (4) payment of settlements with U.S. claimants worked out directly between the U.S. claimants and Iran.

As now constituted, the Claims Tribunal consists of three Iranian, three U.S., and three neutral arbitrators (two from Sweden and one from France). The Tribunal has held preliminary organizational meetings and is expected to receive claims during the three-month period beginning October 20.

5. Other financial questions remain unresolved. U.S. banks and Bank Markazi Iran are continuing to negotiate concerning the repayment of non-syndicated loans and disputed interest from the $1.418 billion escrow account which is held by the Bank of England. To date, no payments have been made out of this account.

6. Pursuant to the January 19 agreements, the transfer of certain nonfinancial Iranian property, such as tangible merchandise, is to be made in accordance with directions from Iran. In many cases, there are questions concerning the exact nature of Iran's interest in these properties. Under my delegation of authority, the Treasury Department is reviewing those cases brought to its attention in which the entitlement of Iran is challenged or in which Iran has not paid claims or charges against the properties. In exercise of its discretion, Treasury has the power to license various transfers involving these properties.

7. Although the hostages have been released and certain assets returned to Iran, several financial and diplomatic aspects of the crisis with Iran have not yet been resolved and continue to present an unusual and extraordinary threat to the national security and foreign policy of the United States. I shall continue to exercise the powers at my disposal to deal appropriately with these problems and will continue to report periodically to Congress on significant developments.

Ronald Reagan
The White House,
September 22, 1981.