\\J S. Hrg. 103-«93 IRAQ CLAIMS L^EGI^SL^AT^ION^^^^ Y 4. F 76/2; S. HRG. 103-893 Iraq Clains Legislation^ S.Hrg. 103... HEARING BEFORE THE SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, TRADE, OCEANS AND ENVIRONMENT OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS SECOND SESSION SEPTEMBER 21, 1994 Printed for the use of the Committee on Foreign Relations API? f f figs U.S. GOVERNMENT PIUNTING OFFICE 8a-180CC WASHINGTON : 1995 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington.DC 20402 ISBN 0-16-046736-5 n \J —^=^S. H=rg. 10^3-893 I IRAQ CLAIMS LEGISLATION Y 4.F 76/2: S, HRG. 103-893 Iraq Clains Legislation^ S.Hrg. 103... HEARING BEFORE THE SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, TRADE, OCEANS AND ENVIRONMENT OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS SECOND SESSION SEPTEMBER 21, 1994 Printed for the use of the Committee on Foreign Relations ^P»? f f figs U.S. GOVERNMENT PRINTING OFFICE 8»-180CC WASHINGTON : 1995 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-046736-5 COMMITTEE ON FOREIGN RELATIONS CLAIBORNE PELL, Rhode Island, Chairman JOSEPH R. BIDEN, Jr., Delaware JESSE HELMS, North Carohna PAUL S. SARBANES, Maryland RICHARD G. LUGAR, Indiana CHRISTOPHER J. DODD, Connecticut NANCY L. KASSEBAUM, Kansas JOHN F. KERRY, Massachusetts LARRY PRESSLER, South Dakota PAUL SIMON, Illinois FRANK H. MURKOWSKI, Alaska DANIEL P. MOYNIHAN, New York HANK BROWN, Colorado CHARLES S. ROBB, Virginia JAMES M. JEFFORDS, Vermont HARRIS WOFFORD, Pennsylvania PAUL COVERDELL, GeoT^ia RUSSELL D. FEINGOLD, Wisconsin JUDD GREGG, New Hampshire HARLAN MATHEWS. Tennessee GeryLD B. Christianson, StaffDirector James W. Nance, Minority StaffDirector Subcommittee on International Economic Policy, Trade, Oceans and Environment PAUL S. SARBANES, Maryland, Chairman JOSEPH R. BIDEN Jr., Delaware NANCY L. KASSEBAUM, Kansas CHRISTOPHER J. DODD, Connecticut JESSE HELMS, North Carolina JOHN F. KERRY, Massachusetts FRANK H. MURKOWSKI, Alaska HARRIS WOFFORD, Pennsylvania HANK BROWN, Colorado RUSSELL D. FEINGOLD, Wisconsin JAMES M. JEFFORDS, Vermont (II) m CONTENTS Page Block, L. Thomas, seniorvice president. Chemical BankingCorp 37 FVepared statement 39 Matheson, MichaelJ., Principal Deputy LegalAdviser, DepartmentofState ... 5 Preparedstatement 8 Newconib, R. Richard, Director, Office ofForeign Assets Control, Department ofthe Treasury 9 Preparedstatement 11 Parrish, Thomas C, vice president, Monk-Austin International, Inc 42 Prepared statement 46 Violante,Joseph A., legislative counsel. DisabledAmericanVeterans 40 F'repared statement 41 Appendix Summary ofLicenses Grantedto Debit Blocked Iraqi Account(asofDecember 1, 1994) 61 SenatorHelms LettertoSecretaryBentsen — 61 Secretary Bentsen's response toSenatorHelms—first response 63 Secretary Bentsen's response to SenatorHelms second response 68 Responses to Questions Asked ofMr. Newcomb at the Hearingon September 21 75 Greneral License No. 7 77 General License No. 7, as amended 78 Additional QuestionsSubmittedbySenatorHelms atthe Hearing 79 Question SubmittedbySenatorFeingold atthe Hearing 81 Additional Documents Submitted by Thomas C. Parrish of Monk-Austin International Inc 81 PreparedStatementofArabAmerican Bank 82 an) IRAQ CLAIMS LEGISLATION WEDNESDAY, SEPTEMBER 21, 1994 U.S. Senate, Subcommittee on International Economic Policy, Trade, Oceans and Environment OF THE Committee on Foreign Relations, Washington, DC. The committee met, pursuant to notice, at 10:35 a.m., in room SD-419, Dirksen Senate Office Building, Hon. Paul S. Sarbanes (chairman ofthe subcommittee) presiding. Present: Senators Sarbanes, Helms, and Robb. Senator Sarbanes. The committee will come to order. I apologize to the witnesses for the delay in starting the hearin^^, but there are a number of committee meetings taking place this morning. I had to be at another one and was not able to depart from there. The Subcommittee on Economic International Economic Policy, Trade, and the Environment meets this morning to hear testimony on the Iraq claims legislation, currently pending before the Foreign Relations Committee. The legislation, H.R. 3221 and S. 1401, was introduced at the re- quest of the administration to provide a procedure for liquidating Iraq's frozen assets in the United States and allocating those assets amongst the claimants. The situation to which this is addressed, as I understand it, is as follows: Even before invading Kuwait on August 2, 1990, the Iraqi Government was in debt to numerous American companies and to the U.S. Grovernment for various loans, credits, and commer- cial transactions. Iraq also had not compensated the United States for personal in- juries or property damage arising from the attack against the U.S.S. Stark, although it nad paid the families of military person- nel killed in that action. From the day of Iraq's invasions through the end of the inter- national campaign to reverse this action, there was a large human cost in deaths and injuries and continuing illnesses, as well as a large economic cost from property seized, damaged, or destroyed. The U.N. found Iraq "liable under international law for any di- rect loss, damage or injury to foreign governments, nationals and corporations, as a result ofIraq's unlawful invasion and occupation ofKuwait." When Iraq invaded Kuwait, one of the first steps that was taken was the blocking by Executive order of all Iraqi property and ac- counts in the United States. (1) The value of those assets that were blocked has been estimated at about $1.2 billion, mostly in proceeds from Iraqi oil on the high seas at the time ofthe invasion. However, the amount of U.S. claims against Iraq far exceeds the amount ofassets currently frozen in the United States. Even before Operation Desert Storm began on January 16, 1991, there were, I am told, about $5 billion in U.S. claims known to the Treasury De- partment. Obviously in these circumstances, it is imperative that a fair and workable system be devised for adjudicating claims and compensat- ing claimants. Now, there is a system in place for doing this multilaterally through the U.N. Claims Commission. However, the mandate of that Con.,"fission is limited in scope. For instance, pre-invasion claims fall outside the jurisdiction of the Claims Commission, as do claims of members of the military forces who served in the Persian Gulf, other than prisoners of war. We are examining today what system to establisn domestically to compensate Americans for claims that are not covered by the U.N. Commission. We will hear this morning from two panels. The first, speaking for the administration, includes Michael Matheson, the Principal Deputy Legal Adviser at the Department of State, and Richard Newcomb, the Director of the Office of Foreign Assets Control at the Department ofTreasury. Following this panel, we will hear from three private sector wit- nesses: Thomas Block, senior vice president of Chemical Bank, tes- tifying on behalf ofthe Bankers' Association for Foreign Trade; Jo- seph Violante, legislative counsel for the Disabled American Veter- ans; and Thomas Parrish, vice president of Monk-Austin Inter- national, Inc., ofFarmville, NC. Gentlemen, we will hear from you in just a moment, but I yield now to Senator Helms for any opening comments he may wish to make. Senator Helms. Mr. Chairman, I appreciate your scheduling this hearing this morning. The committee, as the distinguished chairman has said, is con- sidering legislation that will allocate and distribute a finite amount ofIraqi assets that were frozen when Saddam Hussein invaded Ku- wait on August 2, 1990. And as much as we are properly interested in the overall U.S. policy to collect every debt that Iraq owes to every American, in- curred either before or after the invasion of Kuwait, that really is not what this legislation is all about. The committee, represented by Senator Sarbanes and me on this occasion, is meeting to try to gain an understanding as to why the Clinton administration has moved forward on a policy that, by its own admission, will not provide 100-percent reimbursements to the U.S. Grovernment, the U.S. businesses, and to the U.S. veterans of the Persian Gulfwar. And to put it bluntly, why the administration is unfairly compet- ing against the veterans of America who served in the Gulf War and against U.S. businesses, especially when the U.S. Government, unlike the veterans and the business people, has the capability to collect 100 percent on Iraqi debts in a variety of ways from now until eternity. We are talking about an arbitrary, bureaucratic deci- sion, which I believe is patently unfair on its face. This issue is not an easy one. Instead, it is one in which you could be easily encumbered in a lot of superfluous issues. I hope we can avoid tnat. We must avoid that. Instead, it is imperative that we focus on the issues that matter, namely the plight of U.S. citizens, who maintain claims against a relatively small amount of Iraqi money, frozen by the U.S. Govern- ment in response to Iraq's invasion ofKuwait. Now, the complexities ofletters ofcredit transactions or what the U.N. is or is not doing with Iraqi funds are issues that should not be the focal point ofour discussions. I submit, Mr. Chairman, that ofprimary interest is the fact that there is just a little more than $1 billion to repay more than $3 billion in pre-invasion claims. Somebody is going to lose out under the present circumstances. The House-passed bill gives the U.S. Grovernment first priority in recovering a portion of its money. It gives the Gulf war veterans next That is as strange lineup to me. Andpritohriirtdy.and last are the U.S. businesses and individuals scrap- ing for whatever may be left over. And that is plain not fair, be- cause the U.S. Government can collect its money 100 percent by keeping on, keeping on. It is the responsibility of this committee, I think, to determine a better way and a fairer way to handle this situation. There are some who have said those of us who question the terms ofthis legislation are somehow opposed to the establishment ofa mechanism to adjudicate U.S. claims against Iraq on a fair and orderly basis. They even go so far to say that we are out to protect a certain group ofcompanies, which is absurd. What we oppose is the U.S. Government's bureaucratic decision to force U.S. veterans of the Gulf war and U.S. businesses and the U.S. Government itself to settle for less than 100-percent reim- bursement from the pool of Iraqi funds frozen in the United States. Saddam Hussein owes us 100 cents on the dollar, not less, and we should not play into his hands by any legislation that will pro- vide otherwise. And I am going to do the best I can to help come up with legisla- tion to prevent U.S. veterans and U.S. business people and the U.S. taxpayers from being shortchanged. If President Clinton wants to get tough with a demonstrable reprobate, Saddam Hus- sein is his man. Mr. Chairman, more than 3 weeks ago, I sent a letter to the De- partment of the Treasury, a letter containing a number of ques- tions, all of which, in my considered opinion, are reasonable and fair questions designed to bring to light a number ofthe issues sur- rounding this complicated situation. The Department was to have delivered the answers on Monday of last week, September 12. The deadline came and went. No re- sponses. Then the Department was to have delivered them this past Fri- day, September 16. We finally received the package of information late yesterday afternoon, Tuesday, September 20. Over that period, my staffhad a series of conversations with the staff of the Department, inquiring about the status of the ques- tions, and the Director of the Office of Foreign Assets Control as- sured us that the answers to the questions were delayed because the Treasury Department was slaving to answer every last ques- tion. Baloney. I see very clearly now that they were buying time, pushing up right to the limit, so that a postponement of the hearing would be out ofthe question. In the end, the Treasury Department offered only that informa- tion that was readily available in the public records from the House debates on this issue. That is all they sent. And those re- sponses were totally unacceptable. As long as I serve in this Senate and on this committee, no bureaucrat is going to get by with that. I ask your consent, Mr. Chairman, that tne questions and the Department of the Treasury's responses be printed in the record. And I want a printed record of this hearing to illustrate the point that I am trying to make right now. Senator Sarbanes. Without objection, so ordered. Senator Helms. I thank you, sir. I sent a series of 25 separate questions. The Treasury returned a 6V4-page letter that answered what the Department felt was in its interest to address and omitted questions it deigned to be against administration position. That is an old dodge around this place, and you are not going to by with it. Ifyou get by the committee, you are going to catch feetll on the Senate floor. I guarantee it. Ajid take that back to Lloyd Bentsen who is one of the best friends I have had in this Senate. Not only were these responses submitted later than requested, but they appeared to be an insolent disregard ofSenate inquiry. I was predisposed to be cooperative with the administration on this matter, and I think the exchange of the correspondence be- tween Lloyd Bentsen and me will demonstrate that. I know that he answered the letter in which he indicated co- operation. I do not know who answered the questions. He did not. This casual treatment ofthis inquiry and disregard for legitimate Senate inquiry may have changed my predisposition to cooperation. The Secretary ofthe Treasury, as I have indicated, was a respected Member of the Senate, and I do not think he would have put up with this, ifhe were in the Senate and had made the same inquiry of the Department that I did. I doubt very much that he is aware of this. I hope that somebody will go back and make him aware of it. — Finally,—Mr. Chairman and I apologize for running long on this statement ^although we received responses to the questions just yesterday, we are nonetheless proceeding with this hearing today without any reasonable opportunity to review the responses of the Treasury Department, imacceptable as many of the responses are, based on even a casual glance at them. And that is all the time we have had to do it. In light of this, Mr. Chairman, I request that no Iraqi claims-re- lated legislation be included on the agenda for the committee's business sessions until all of these questions have been answered.