Letter to the Speaker of
the House of Representatives and the President of the Senate Reporting on the
National Emergency With Respect to Iran
November 15, 1988
Mr. Speaker: (Dear Mr. President:)
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 October 1, 1988, including those that
occurred since my last report under Executive Order No. 12170 dated June
That report covered events through April
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. 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'').
to Executive Order No. 12613, 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'') on November 13, 1987. Since issuance
of the ITRs, FAC has answered over 435
licensing-related requests made pursuant to the ITRs.
Currently, the major focus of licensing activity for FAC relates to the
importation of certain non-fungible Iranian-origin goods, principally carpets,
which were located outside Iran before the embargo was
imposed, and where no payment or benefit accrued to Iran after the effective
date of the embargo.
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.
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 30 awards, for a total of 390 awards.
Of that total, 284 have been awards in favor of American claimants: 170 of
these were awards on agreed terms, authorizing and approving payment of settlements
negotiated by the parties, and 114 were decisions adjudicated on the merits.
The Tribunal has dismissed a total of 25 other claims on the merits and 54 for
jurisdictional reasons. Of the 27 remaining awards, two represent withdrawals
and 25 were in favor of Iranian claimants. As of September
total payments to successful American claimants from the Security Account held
by the NV Settlement Bank stood at approximately $1.073 billion.
date, the Security Account has fallen below the required balance of $500
million 20 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 21
replenishments. The most recent replenishment occurred on September
in the amount of $250,000, bringing the total in the Security Account to $500,222,351.
The aggregate amount that has been transferred from the interest account to the
Security Account is approximately $573 million.
June 1988, two arbitrators submitted letters of resignation: Professor
Karl-Heinz Bockstiegel, the President of the Tribunal
and Chairman of Chamber One; and Professor Michel Andre Virally, Chairman of
Chamber Three. Professor Bockstiegel's resignation
will take effect not later than December 15, 1988; Professor Virally
intends to resign as of December 31, 1988. Since the arbitrators
appointed by Iran and the United States had not yet agreed on replacements by
September 8, 1988, on that date the United States requested that the former
Netherlands Supreme Court Chief Judge Charles M.J.A. Moons, the appointing authority
for the Tribunal, designate the two replacements. As of September
Judge Moons had not yet named his selections, and the party-appointed
arbitrators were also continuing their attempt to agree on replacements.
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 66 percent of the nonbank claims have
now been disposed of through adjudication, settlement, or voluntary withdrawal,
leaving 178 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, eight large claims have been decided. One U.S. company
received an award for $18 million.
The Tribunal continues to process claims of U.S. nationals against Iran of less than $250,000
each. As of September 30, 1988, a total of 280 small
claims have been resolved, 70 of them since my last report, as a result of
decisions on the merits, awards on agreed terms, or Tribunal orders. Two
contested claims have been decided since my previous report, raising the total
number of contested claims decided to 23, 14 of which favored the American claimant.
These decisions will help in establishing guidelines for the adjudication or
settlement of similar small claims. To date, American claimants have also
received 46 awards on agreed terms reflecting settlements of claims under
my last report, the three Tribunal Chambers have selected 82 small claims for
active arbitration, bringing the total number of small claims currently under
active Tribunal consideration to 214. The Tribunal's small claims docket will
be maintained at approximately 225 active cases. This represents a
significantly increased commitment of Tribunal resources to small claims.
In coordination with concerned Government agencies, the Department of State
continues to present United States 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 nine government-to-government claims,
while three claims have been settled; of these, one settlement resulted in a
payment of $18.85 million to the Commodity Credit Corporation of the U.S.
Department of Agriculture.
June 16, 1988, the Tribunal dismissed
Iran's claim in Case No. B/1, Claim 5 for damages for allegedly defective helicopters sold
by the United States to Iran under
the Foreign Military Sales Program. The Tribunal found that the United States could not be found
liable for breach of warranty or any other contractual obligation or latent
August 31, 1988, the Tribunal issued a partial
award in Case No. B/1, Claim 4. The Tribunal held that
the United States has no obligation under
the Algiers Accords to return to Iran certain Iranian-titled
military equipment, as the Algiers Accords make the return to Iranian property
subject to U.S. law, and return of the
property at issue was barred by the Arms Export Control Act. The Tribunal found
that Iran is entitled to the
monetary value of the equipment, which is to be determined in subsequent
August 5, 1988, Iran filed a new
interpretive dispute, Case No. A/24, asking the Tribunal to hold that it is
inconsistent with the Accords for U.S. courts to consider an expropriation
claim against Iran when, Iran alleges, the Tribunal had previously considered
the same claim and concluded that the expropriation had not occurred within the
Tribunal's jurisdictional deadline, January 19, 1981.
Since my last report, two bank syndicates have completed negotiations with Bank
Markazi Jomhouri Islami Iran (``Bank Markazi,''
Iran's central bank) and have been paid a total of $812,649 for interest
accruing for the period January 1 - 18, 1981 (``January Interest''). These
payments were made from Dollar Account No. 1 at the Federal Reserve Bank of New York (``FRBNY''). Moreover,
under the April 13, 1988, agreement between the
FRBNY and Bank Markazi, the FRBNY transferred
$311,895 to Bank Markazi. That transfer represents
the excess of amounts reserved in Dollar Account No. 1 to pay off each bank
syndicate with a claim for January Interest against Bank Markazi.
Since my last report, there have been no amendments to the Iranian Assets
Control Regulations, 31 C.F.R. Part 535, administered by FAC. There have been
no amendments to the Iranian Transactions Regulation, 31 C.F.R. Part 560, since
their publication on November 17, 1987.
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
Note: Identical letters
were sent to Jim Wright, Speaker of the House of Representatives, and George
Bush, President of the Senate.