Message to the Congress Reporting on the National Emergency With Respect to Iran

To the Congress of the United States:

I hereby report to the Congress on developments since the last report of November 15, 1988, 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 March 28, 1989, including those that occurred since the last report under Executive Order No. 12170 dated November 15, 1988. That report covered events through October 1, 1988.

1. Since the last report, there have been no amendments to the Iranian Assets Control Regulations, 31 C.F.R. Part 535 (the "IACRs"), or the Iranian Transactions Regulations, 31 C.F.R. Part 560 (the "ITRs"), administered by the Office of Foreign Assets Control ("FAC"). 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 October 1, 1988, FAC has made 583 licensing determinations under the ITRs.

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 has been issued in the case of United States v. Benham Tahriri, which is now pending in the United States District Court for the District of Vermont.

2. The Iran-United States Claims Tribunal (the "Tribunal"), established at The Hague pursuant to the Claims Settlement Agreement of January 19, 1981 (the "Algiers Accords"), continues to make progress in arbitrating the claims before it. Since the last report, the Tribunal has rendered 22 awards, for a total of 418 awards. Of that total, 308 have been awards in favor of American claimants: 193 of these were awards on agreed terms, authorizing and approving payment of settlements negotiated by the parties, and 115 were decisions adjudicated on the merits. The Tribunal has dismissed a total of 25 other claims on the merits and 56 for jurisdictional reasons. Of the 29 remaining awards, two represent withdrawals and 27 were in favor of Iranian claimants. As of March 28, 1989, awards to successful American claimants from the Security Account held by the NV Settlement Bank stood at $1,136,444,726.00.

As of March 28, 1989, the Security Account has fallen below the required balance of $500 million 25 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 26 replenishments. The most recent replenishment as of March 28, 1989, occurred on March 22, 1989, in the amount of $100,000, bringing the total in the Security Account to $500,011,034.15. The aggregate amount that has been transferred from the interest account to the Security Account is $624,698,999.39. The amount in the interest account as of March 28, 1989, was $128,220,636.82.

Iranian and U.S. arbitrators agreed on two neutral arbitrators to replace Professor Karl-Heinz Bockstiegel and Professor Michel Andre Virally, who had submitted letters of resignation. On December 16, 1988, Professor Bengt Broms of Finland replaced Professor Bockstiegel as Chairman of Chamber One, and on January 1, 1989, Professor Gaetano Arangio-Ruiz of Italy replaced Professor Virally as Chairman of Chamber Three. Professor Bockstiegel had also served as President of the Tribunal. After Iran and the United States were unable to agree on a new President of the Tribunal, former Netherlands Supreme Court Chief Judge Charles M.J.A. Moons, the appointing authority for the Tribunal, appointed Professor Robert Briner to the position on February 2, 1989. Professor Briner, who has been a member of the Tribunal since 1985, will continue to serve as Chairman of Chamber Two.

3. The Tribunal continues to make progress in the arbitration of claims of U.S. nationals for $250,000 or more. Over 68 percent of the nonbank claims have now been disposed of through adjudication, settlement, or voluntary withdrawal, leaving 169 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, nine large claims have been decided. One U.S. company received an award on agreed terms of $10,800,000.

4. The Tribunal continues to process claims of U.S. nationals against Iran of less than $250,000 each. As of March 28, 1989, a total of 362 small claims have been resolved, 82 of them since the last report, as a result of decisions on the merits, awards on agreed terms, or Tribunal orders. One contested claim has been decided since the last report, raising the total number of contested claims decided to 24, 15 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 56 awards on agreed terms reflecting settlements of claims under $250,000.

The Tribunal's current small claims docket includes approximately 185 active cases. It is anticipated that the Tribunal will issue new scheduling orders later this spring to bring its active docket to approximately 225 active cases.

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, and presented one claim at a hearing before the Tribunal. In addition, two claims have been settled.

6. Since the last report, nine bank syndicates have completed negotiations with Bank Markazi Jomhouri Islami Iran ("Bank Markazi," Iran's central bank) and have been paid a total of $11,235,741.87 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 returned $7,295,823.58 of Iranian funds 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.

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 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.

George Bush

The White House,

May 23, 1989.