Letter to Congressional Leaders Reporting on the National Emergency With Respect to Iran

Dear Mr. Speaker: (Dear Mr. President:)

I hereby report to the Congress on developments since the last report of May 14, 1990, 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 is submitted 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 covers events through September 30, 1990, including those that occurred since the last report under Executive Order No. 12170 dated May 14, 1990. That report covered events through March 31, 1990.

1. Since the last report, there have been no amendments to the Iranian Transactions Regulations, 31 C.F.R. Part 560 (the "ITRs"), administered by the Office of Foreign Assets Control ("FAC"). The Iranian Assets Control Regulations, 31 C.F.R. Part 535 (the "IACRs"), were amended on October 5, 1990, 55 FR 40830, to implement the Settlement Agreement in Claims of less than $250,000.00, Case No. 86 and Case No. B38, dated May 13, 1990, in which the Governments of the United States and Iran settled certain U.S. private claims of less than $250,000.00, and all outstanding and potential U.S. government claims arising in relation to case number 86 or B38.

The major focus of licensing activity under the ITRs remains 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. Since March 31, 1990, FAC has made 87 licensing determinations under the ITRs.

During the reporting period, the Customs Service has effected numerous seizures of Iranian-origin merchandise, primarily carpets, caviar, pistachios, jewelry, and gold and sterling silver artifacts, for violations of the ITRs. FAC and Customs Service investigations of these violations have resulted in forfeiture actions and impositions of civil monetary penalties amounting to $141,413.00. Numerous additional forfeiture and civil penalties actions are under review.

The United States v. Hamed Mohseni, a case brought in the Eastern District of Wisconsin, the defendant was indicted on June 12, 1990, for willful falsification of documents in an attempt to illegally enter Iranian carpets into U.S. trade by misdescribing their origin as Pakistani. Mohseni pled guilty to this charge on August 12, 1990. On October 22, 1990, Mohseni was sentenced to 2 years' probation, 1 month's incarceration, and a criminal fine of $1,050.00. Additionally, the Court ordered the forfeiture of four Iranian carpets having a wholesale value of $40,000.00.

In a related case in the Eastern District of Wisconsin, United States v. Geoffrey A. Orley, the defendant, an attorney and licensed securities broker, entered into a plea agreement on May 23, 1990, admitting to filing false documents to further an Iranian carpet smuggling scheme. Orley was convicted on September 17, 1990. A sentencing date has not been set. As part of their plea agreements, Geoffrey Orley and Hamed Mohseni have agreed to cooperate with the U.S. Government and to testify in pending criminal proceedings against two additional defendants. Multi-count indictments are anticipated in the latter cases.

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 the last report, the Tribunal has rendered 13 awards, for a total of 489 awards. Of that total, 344 have been awards in favor of American claimants: 213 of these were awards on agreed terms, authorizing and approving payment of settlements negotiated by the parties, and 131 were decisions adjudicated on the merits. The Tribunal has dismissed a total of 32 other claims on the merits and 70 for jurisdictional reasons. Of the 43 remaining awards, two were withdrawn and 41 were in favor of Iranian claimants. As of September 30, 1990, awards to successful American claimants from the Security Account held by the NV Settlement Bank stood at $2,004,184,294.21.

As of September 30, 1990, the Security Account has fallen below the required balance of $500 million 34 times. Iran has replenished the account 34 times, 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 twice when it was not required by the Accords, for a total of 36 replenishments. Additionally, the account was replenished on September 21 in the amount of $200 million pursuant to a settlement agreement with the United States Government. A further replenishment of $228,804.05 on September 24 was related to the transfer of the unutilized balance of a letter of credit. As of September 30, 1990, the total amount in the Security Account was $271,986,604.21, and the total amount in the interest account was $5,247,131.38. The aggregate amount that has been transferred from the interest account to the Security Account is $832,872,986.47.

3. The Tribunal continues to make progress in the arbitration of claims of U.S. nationals for $250,000.00 or more. Over 80 percent of the nonbank claims have now been disposed of through adjudication, settlement, or voluntary withdrawal, leaving 133 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. In the largest settlement to date, Amoco settled its two pending cases against the National Iranian Oil Co. for a payment of $600 million. Since the last report, 12 large claims have been decided.

4. On May 13, 1990, the United States and Iran signed an agreement settling the claims of U.S. nationals against Iran of less than $250,000.00 and certain U.S. claims against Iran for outstanding loans made by the Agency for International Development. On June 22, 1990, the Iran-U.S. Claims Tribunal issued Award No. 483 recording and giving effect to the settlement agreement. This award terminated the small claims pending before the Tribunal. Under the IACRs, the award constitutes the Tribunal's final disposition of small claims. The award provided for the payment of $105 million to the United States out of the Security Account. Of that amount, $50 million will be available for the settlement of the small claims through a program established at the Foreign Claims Settlement Commission at the Department of Justice. On June 28, 1990, the Department of State formally transferred the small claims program to the Foreign Claims Settlement Commission, as envisioned by the settlement agreement and the Iran Claims Settlement Act.

Originally, 2,795 small claims were filed with the Tribunal. The small claims settlement agreement covers 2,361 claims that were pending at the Tribunal on the date of the signing of the agreement, 10 claims that were dismissed by the Tribunal for lack of jurisdiction, 326 claims that were filed with the Tribunal but subsequently voluntarily withdrawn, and 415 claims that were submitted to the State Department but not timely filed with the Tribunal. All other claims filed with the Tribunal but not covered by the agreement had already been resolved through awards or settlements between the parties.

5. 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 the last report, the Department has filed pleadings in eight government-to-government claims. Two such claims have been settled. Regarding Case No. B/1, in return for Iran's agreement not to seek return of the full balance of its Foreign Military Sales Trust Fund from the United States in advance of adjudication of its claims on the merits, the United States transferred $200 million from the Trust Fund to the Security Account, where it will be available for payment of Tribunal awards to successful U.S. claimants.

6. Since the last report, eight bank syndicates have completed negotiations with Bank Markazi Jomhouri Islami Iran ("Bank Markazi," Iran's central bank) and have been paid a total of $4,393,148.93 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"). In addition, under the April 13, 1988, agreement between the FRBNY and Bank Markazi, the FRBNY returned $4,693,421.29 of Iranian funds to Bank Markazi.

7. 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 to implement properly 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.

Sincerely,

George Bush