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Weapons of Mass Destruction (WMD)

Tracking Number:  152460

Title:  "Freeze of Iraq, Kuwait Assets Has Many Precedents." When President Bush issued executive orders blocking an estimated 20 to 30 billion dollars in Iraqi and Kuwaiti assets under US control, he was invoking a procedure employed by many throughout history. (900828)

Translated Title:  "Irak: Le Gel D'Avoirs a de Nombreux Precedents." (900828)
Date:  19900828


08/28/90 3Ec Bk FREEZE OF IRAQ, KUWAIT ASSETS HAS MANY PRECEDENTS (Backgrounder on freezing of foreign assets) (990) By Sam Burks USIA Staff Writer

Washington -- When President Bush issued executive orders August 2 blocking or "freezing" an estimated 20,000 to 30,000 million dollars in Iraqi and Kuwaiti assets under U.S. control, he was invoking a procedure employed by many nations throughout history.

The president's action, prompted by Iraq's unexpected invasion of Kuwait, has been matched by a growing number of other countries.

A freeze of foreign-owned assets can be applied selectively to a particular country, or to a group of countries, in time of war or in response to a national emergency situation, such as the 1979-81 Iranian hostage crisis.

The procedure can be used to serve three purposes:

-- to deny authorities in blocked countries access to assets that might be used against the United States;

-- to protect the true owners of the assets from illegal attempts to seize their property;

-- to create a pool of assets for possible use in settling U.S. claims against blocked countries, or for use as a bargaining chip in negotiating an eventual return to normal relations.

The president derives his authority to freeze foreign-owned assets from the Trading with the Enemy Act of 1917 and from the International Emergency Economic Powers Act of 1977. Each of these statutes provides criminal penalties of up to 10 years imprisonment and fines of up to 50,000 dollars for each violation of a freeze order.

According to the Department of the Treasury's Office of Foreign Assets Control, which administers the U.S. blocked assets program, economic sanctions can range from a simple freeze of some or all of a country's assets under U.S. jurisdiction to a complete embargo on any form of commercial or financial transaction.

An essential ingredient of an asset freeze is the immediate imposition of an across-the-board ban against asset

GE 2 ECO205 transfers. U.S. banks and financial institutions holding foreign-owned assets are prohibited from engaging in any transaction with respect to property in which the blocked country has an interest, direct or indirect, except as licensed by the Treasury Department.

Under U.S. law, title to blocked property remains with nationals of the country or countries whose assets are being frozen. But the exercise of powers and privileges normally associated with ownership is regulated by Treasury Department licenses. Licenses may be specific, applying to a particular transaction, or general, applying to a broad class of transactions. For example, licenses are frequently issued that permit the transfer of assets from one U.S. bank to another at the direction of the foreign owner, provided ownership of the assets does not change and they remain identified as blocked.

Following the Nazi invasion of Norway and Denmark in 1940, assets owned by those two countries were frozen by the United States to prevent them from being confiscated by the Germans. After the United States entered World War II, assets owned by Germany, Japan and Italy were blocked and eventually used in settling war claims against the axis powers. Similarly, assets of Latvia, Lithuania and Estonia located in the United States were blocked following their annexation by the Soviet Union. These assets remain frozen today, since the United States still views that annexation as illegal. Certain residual controls affecting German- owned property blocked in World War II also remain in effect regarding East Germany.

Asset blockings were initiated by the United States against North Korea and China in 1950, Cuba in 1963, Vietnam in 1964, Rhodesia in 1965, Kampuchea in 1975, Iran in 1979, Libya in 1986 and against the Noriega regime in Panama in 1988. Full or partial blockings against all these countries except China, Rhodesia and Panama are still in place today.

The largest single U.S. asset freeze prior to the Iraqi and Kuwaiti blockings was imposed against Iran November 14, 1979, following the illegal Iranian seizure of 52 U.S. hostages from the American Embassy in Teheran 10 days earlier. Over 12,000 million dollars of Iranian property was blocked, including bank deposits, securities, gold bullion, oil payments, military and non-military tangible property and various letters of credit. Of that total, about 5,000 million dollars was located in offshore branches of U.S. banks, mostly in Europe.

With the signing of the Algiers Accords in January 1981, nearly 8,000 million dollars of Iranian property was transferred to an escrow account at the Bank of England. Upon the freeing of the U.S. hostages, 2,800 million dollars of this amount was released to Iran, 3,700 million

GE 3 ECO205 was transferred to the Federal Reserve Bank of New York to pay Iranian syndicated loans in which U.S. banks were participating and 1,400 million dollars was retained in the Bank of England account to pay disputed bank claims.

An additional 2,000 million dollars of Iranian deposits in domestic U.S. banks was transferred to the New York Federal Reserve Bank in June 1981, 1,000 million of which was used to establish a security account in The Hague from which awards by the Iran-U.S. Claims Tribunal are paid. The remaining 1,000 million dollars was returned to Iran.

The Iranian property that remained blocked after these transfers consisted of disputed U.S. debt obligations; military properties which cannot be exported under U.S. law or against which U.S. claims have been made; and various standby letters of credit obligations. The disposition of these items has been and will continue to be determined through litigation before the Iran-U.S. Claims Tribunal.

The dollar value of blocked assets held in U.S. banks tends to fluctuate because of changes in the market value of the assets in the accounts. In general, however, their value tends to increase as a result of accruing interest and dividends, Treasury Department blocking actions affecting new property that enters the United States and other operations of law. NNNN

File Identification:  08/28/90, EC-205; 08/28/90, EP-210; 08/28/90, EU-211; 08/28/90, NE-216; 08/29/90, AR-305; 08/29/90, AS-314; 08/30/90, AE-408; 08/31/90, AF-503
Product Name:  Wireless File
Product Code:  WF
Languages:  Spanish; French
Keywords:  BUSH, GEORGE/Foreign Relations: Near East & South Asia; LEGAL SEIZURES/Policy; IRAQ-KUWAIT RELATIONS/Policy; INVASIONS/Policy; IRAQ-US RELATIONS/Policy
Thematic Codes:  1NE; 100
Target Areas:  EA; EU; NE; AR; AF
PDQ Text Link:  152460; 152528; 152692

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