Ronald Reagan picture

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

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

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. 2349aa9. 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 7, 1988. That report covered events through April 30, 1988.

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. 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 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 licensingrelated 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.

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.

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 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 30, 1988, total payments to successful American claimants from the Security Account held by the NV Settlement Bank stood at approximately $1.073 billion.

To 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 21, 1988, 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.

In 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 30, 1988, Judge Moons had not yet named his selections, and the party-appointed arbitrators were also continuing their attempt to agree on replacements.

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 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.

4. 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 $250,000.

Since 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.

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 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.

On June 16, 1988, the Tribunal dismissed Iran's claim in Case No. B/l, 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 defect.

On 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 proceedings.

On 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.

6. 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. i 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. I to pay off each bank syndicate with a claim for January Interest against Bank Markazi.

7. 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.

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.



Note: Identical letters were sent to Jim Wright, Speaker of the House of Representatives, and George Bush, President of the Senate.

Ronald Reagan, Letter to the Speaker of the House of Representatives and the President of the Senate Reporting on the National Emergency With Respect to Iran Online by Gerhard Peters and John T. Woolley, The American Presidency Project

Filed Under



Simple Search of Our Archives