Message to the Congress Reporting on the National Emergency With Respect to Iran
June 7, 1988
To the Congress of the United States:
This report with respect to Iran is made pursuant to section 204(c) of the International Emergency Economic Powers Act, 50 U.S.C. 1703(c), and section 505(c) of the International Security and Development Cooperation Act of 1985, 22 U.S.C. 2349aa - 9. This report discusses only matters concerning the national emergency with respect to Iran that was declared in Executive Order No. 12170 of November 14, 1979, and matters relating to Executive Order No. 12613 of October 29, 1987. This report covers events through April 30, 1988, including those that occurred since my last report under Executive Order No. 12170 dated November 20, 1987. That report covered events through October 15, 1987.
1. On October 29, 1987, after prior consultation with the Congress, I issued Executive Order No. 12613 invoking, inter alia, the authority of the International Security and Development Cooperation Act of 1985 to prohibit the importation of goods and services from Iran. As reported to the Congress on that date, this action was taken in response to the actions and policies of the Government of Iran in support of terrorism and acts of aggression against U.S. forces, U.S.-flag vessels, and other merchant vessels of nonbelligerent nations engaged in lawful and peaceful commerce in international waters of the Persian Gulf and territorial waters of nonbelligerent nations of that region. The Executive Order and my report noted that the import prohibition was in response to actions of the Government of Iran taken after the conclusion of the Claims Settlement Agreement of January 19, 1981 (the ``Algiers Accords'').
Pursuant to Executive Order No. 12613 (the "Embargo Order''), the Secretary of the Treasury, in consultation with the Secretary of State, issued the Iranian Transactions Regulations, 31 C.F.R. Part 560 (the "ITRs''), administered by the Office of Foreign Assets Control ("FAC''). A copy of these regulations is attached.
The ITRs provide, by general license, an exception to the import embargo for goods in transit at the October 29, 1987, effective date of the Embargo Order. Additionally, the ITRs provide for importation pursuant to specific FAC license for several categories of goods of Iranian origin, including those (a) imported prior to January 1, 1988, pursuant to a contract predating the Embargo Order, (b) located outside Iran as of the effective date of the Embargo Order and for which no benefit or payment would accrue to Iran after the effective date relating to the sale or importation, or (c) received by U.S. claimants pursuant to an award of, or in settlement of claims brought before, the Iran-United States Claims Tribunal (see paragraph 2 of this report).
In the period ended April 30, 1988, FAC issued 74 specific licenses for imports of goods under preexisting contracts and 94 specific licenses for goods located outside Iran on the effective date of the Embargo Order. We believe that nearly all goods eligible for importation pursuant to the ``in transit'' exception were admitted within this reporting period.
Numerous Customs Service detentions and seizures of Iranian-origin goods (including carpets, caviar, dates, pistachios, and gold) have taken place, and a number of FAC and Customs investigations into potential violations of the ITRs are pending. Several of the seizures have led to forfeiture actions and imposition of civil monetary penalties. An indictment relating to the importation of 1.7 tons of Iranian caviar was returned on April 21, 1988, in Miami, Florida.
2. The Iran-United States Claims Tribunal (the "Tribunal''), established at The Hague pursuant to the Algiers Accords, continues to make progress in arbitrating the claims before it. Since my last report, the Tribunal has rendered 42 awards, for a total of 360 awards. Of that total, 259 have been awards in favor of American claimants: 154 of these were awards on agreed terms, authorizing and approving payment of settlements negotiated by the parties, and 105 were decisions adjudicated on the merits. The Tribunal has dismissed a total of 25 other claims on the merits and 52 for jurisdictional reasons. Of the 24 remaining awards, two represent withdrawals and 22 were in favor of Iranian claimants. As of April 30, 1988, total payments to successful American claimants from the Security Account held by the NV Settlement Bank stood at approximately $1.051 billion.
To date, the Security Account has fallen below the required balance of $500 million 11 times. Each time, Iran has replenished the account, as required by the Algiers Accords, by transferring funds from the separate account held by the NV Settlement Bank in which interest on the Security Account is deposited. Iran has also replenished the account once when it was not required by the Accords, for a total of 12 replenishments. The most recent replenishment occurred on April 20, 1988, in the amount of $500,000, bringing the total in the Security Account to $500,367,792. The aggregate amount that has been transferred from the interest account to the Security Account is approximately $549.5 million.
In July 1987, the Government of Iran appointed Mr. Seyed Khalil Khalilian to replace Dr. Hamid Bahrami-Ahmadi as the Iranian arbitrator to Chamber Two.
3. As stated in my last report, the Tribunal continues to make progress in the arbitration of claims of U.S. nationals for $250,000 or more. Over 64 percent of the nonbank claims have now been disposed of through adjudication, settlement, or voluntary withdrawal, leaving 184 such claims on the docket. The largest of the large claims, the progress of which has been slowed by their complexity, are finally being decided, sometimes with sizable damage awards to the U.S. claimant. Since the last report, 21 large claims have been decided. One U.S. company received an award for $54.4 million.
4. The Tribunal continues to process claims of U.S. nationals against Iran of less than $250,000 each. As of April 30, 1988, a total of 210 small claims have been resolved, 71 of them since my last report, as a result of decisions on the merits, awards on agreed terms, or Tribunal orders. Eight contested claims have been decided since my previous report, raising the total number of contested claims decided to 21, 12 of which favored the American claimant. These decisions will help in establishing guidelines for the adjudication or settlement of similar claims. To date, American claimants have also received 25 awards on agreed terms reflecting settlements of claims under $250,000.
Since my last report, the three Tribunal Chambers have selected 53 small claims for active arbitration, bringing the total number of small claims currently under active Tribunal consideration to 185. The Tribunal has held hearings in six of these claims since my last report. The Tribunal has recently decided three significant "wrongful expulsion'' test cases. The general thrust of the holdings in this area is that claimants may recover for losses associated with expulsion from Iran only when officials of the Islamic Revolutionary Government perpetrated specific acts directed at the claimant and the claimant clearly left Iran as a result of those acts.
5. In coordination with concerned government agencies, the Department of State continues to present U.S. Government claims against Iran, as well as responses by the United States Government to claims brought against it by Iran. Since my last report, the Department has filed pleadings in 12 government-to-government claims based on contracts for the provision of goods and services.
In five related government-to-government claims, the Tribunal awarded damages to Iran Air for aircraft services and supplies it found to be owed by U.S. agencies. With these decisions, the Tribunal to date has made five awards in favor of the United States and nine in favor of Iran. The Tribunal has dismissed 12 claims that had been filed by the United States and three claims that had been filed by Iran. In addition, Iran has withdrawn 13 of its government-to-government claims, while the United States has withdrawn five. No government-to-government claims have been finally settled since my last report, so 26 remain pending.
The Tribunal has not issued any opinions in claims concerning the interpretation or performance of various provisions of the Algiers Accords since my last report. One interpretive dispute brought by Iran was withdrawn by Iran and terminated. Iran recently filed an interpretive dispute in which it challenges a claimant's right to attach Iranian assets abroad in advance of an award by the Tribunal. The Department of State has filed two pleadings in interpretive disputes since my last report.
6. Since my last report, three bank syndicates have completed negotiations with Bank Markazi Jomhouri Islami Iran ("Bank Markazi,'' Iran's central bank) and have been paid a total of $691,912.40 for interest accruing for the period January 1 - 18, 1981 ("January Interest''). These payments were made from Dollar Account No. 2 at the Bank of England.
As indicated in my report of June 16, 1987, on May 4, 1987, the Tribunal directed that about $454 million in Iranian funds held at the Federal Reserve Bank of New York ("FRBNY'') be transferred to the Bank of England for credit to the account of Bank Markazi. These funds were transferred on May 13, 1987, with my approval. The Tribunal's May 4, 1987, order also directed that the United States and Iran pursue the settlement of remaining claims pending against the FRBNY account from which the money was transferred, and an amount was reserved for those claims. On April 13, 1988, FRBNY, acting on behalf of the United States Government, and Bank Markazi, acting on behalf of the Government of Iran, agreed on the disposition of the remaining Iranian funds held at FRBNY. As a result, on April 15, 1988, $37.9 million not needed to cover any of the claims pending against the account at FRBNY were returned, as required under the Tribunal's order. Further, a procedure was established for the disposition of the remaining claims -- which are claims of bank syndicates of which a U.S. bank is a member -- against the remainder of these funds (approximately $31.6 million).
7. Since my last report, there has been one amendment to the Iranian Assets Control Regulations, 31 C.F.R. Part 535 (the "Regulations''), administered by the Office of Foreign Assets Control. On January 26, 1988, FAC established administrative procedures for the imposition of civil monetary penalties for violation of the Regulations, as provided in section 206 of the International Emergency Economic Powers Act, 50 U.S.C. 1705. 53 Fed. Reg. 7355 (March 8, 1988). A copy of these amendments to the Regulations is attached. The new prepenalty and penalty procedures do not alter substantive obligations imposed by the Regulations.
There have been no amendments to the Iranian Transactions Regulations since their publication on November 17, 1987.
8. The situation reviewed above continues to implicate important diplomatic, financial, and legal interests of the United States and its nationals and presents an unusual challenge to the national security and foreign policy of the United States. The Iranian Assets Control Regulations issued pursuant to Executive Order No. 12170 continue to play an important role in structuring our relationship with Iran and in enabling the United States properly to implement the Algiers Accords. Similarly, the Iranian Transactions Regulations issued pursuant to Executive Order No. 12613 continue to advance important objectives in combatting international terrorism. I shall continue to exercise the powers at my disposal to deal with these problems and will continue to report periodically to the Congress on significant developments.
The White House,
June 7, 1988.