Proposal for a COUNCIL REGULATION (EC) concerning the interruption of economic and financial relations between the European Community and Iraq
Date: 1996-07-26
Institutions: European Commission
Subjects: Iraq, UN resolution, international sanctions, petroleum, petroleum product, trading operation

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  26.07.1996 
COM(96) 416  final 

Proposal  for  a 

COUNCIL REGULATION  (EC) 

concerning the interruption of economic and financial  relations between the 
European Community and Iraq 

Draft 

DECISION  OF THE REPRESENTATIVES  OF THE GOVERNMENTS  OF THE 

MEMBER STATES OF THE EUROPEAN COAL AND  STEEL  COMMUNITY. 

MEETING WITHIN THE COUNCIL 

repealing Decision 90/414/ECSC preventing trade as regards Iraq and Kuwait 

(presented by the  Commission) 

Explanatory  Memorandum 

By adopting on  14 April  1995  resolution 986 (1995) the Security Council of the United 
Nations opened the way for the export of oil by Iraq, in order to enable that country to 
meet the humanitarian needs of its population, and in particular to pay for the import of 
medicine, health supplies, foodstuffs  and materials and supplies for essential  civilian 
needs. 

Having refused  initially to negotiate with the United Nations on the implementation of 
the resolution, Iraq finally  agreed to such negotiations at the beginning of  1996. As a 
result operative paragraphs  1  and 2 of said resolution  will now enter into force, 
permitting the export of Iraqi oil valued at one billion US dollars every 90 days under the 
conditions set out in the Resolution, the ensuing Memorandum of Understanding between 
Iraq and the Secretary-General  of the United Nations and the rules of procedures and 
guidelines adopted by the Committee established by Resolution 661 (1990), hereafter 
called the Iraq Sanctions Committee. 

The existing Community  legislation with regard to the embargo to Iraq has to be adapted 
to, the provisions of Resolution  986 (1995) in order to make it possible for  the imports 
from  and the exports to Iraq to take place effectively  as far as the Community is 
concerned. The European Commission has therefore made the  proposal  accompanying 
this  memorandum. The proposal does not limit itself to amend the existing Council 
Regulations, but creates a comprehensive text regarding the embargo regime, including 
the new exemptions provided for by Resolution 986 (1995) and reflecting  the experiences 
gained during the application of the embargo.  Such a  text increases the transparancy of 
the Community legislation and will facilitate considerably its application, by inter alia 
economic operators within the Community. 

Articles 228A and 73G of the EC Treaty form the legal basis, enabling the legislation to 
cover more aspects of the embargo than Article  113 which served as the legal basis for 
the existing embargo regime. The present proposal does not affect  Regulation (EEC) No 
3541/92, dealing with the prohibition to satisfy  Iraqi claims with regard to contracts and 
transactions the performance  of which was affected  by United Nations Security Council 
Resolution 661 (1990) and related resolutions. This last Regulation should continue to 
stand on its own, because, inter alia, it will remain permanently in force, even after a 
complete lifting  of the embargo. On the other hand, in the light of  Opinion  1/94 of the 
European Court of Justice, the present proposal covers the products falling under the 
Treaty of the European Coal and Steel Community (ECSC), and if adopted by the 
Council of the European Union, Decision 90/414/ECSC should then be repealed by the 
Member States. A separate proposal to this effect  will also be submitted by the European 
Commission. 

Resolution 986 (1995) provides for a strict control of Iraqi oil exports  by the Iraq 
Sanctions Committee. Discussions are still taking place within the Committee on the 
modalities of these control mechanisms. The role, if any, of the competent authorities 
within the European Community in this respect is  not yet clear. The same is true for the 
mechanisms with regard to the control of exports to Iraq of goods and services to be paid 
out of the so-called escrow account, which will be fed by the revenues of oil exports  from 

Z 

Iraq. The  information  available in this regard indicates that strict procedures will be 
applied by the Iraq Sanctions Committee or the Secretary-General  of the United Nations 
in order to guarantee that the full  amount due for the Iraqi oil will be paid into the escrow 
account and that the goods to be paid for from  this account will effectively  arrive in Iraq 
and be distributed  in accordance with the provisions of Resolution 986 ( 1995). 

The Secretary-General  of the United Nations has not yet chosen the bank which will hold 
the escrow-account, and the present proposal has, therefore, to be amended in due time in 
this respect. 

Furthermore, the foreseeable  increase in commercial traffic  with Iraq will also increase 
the possibilities of circumvention of the embargo. Additional control mechanisms might, 
therefore,  appear to be necessary to cope with this increased risk of violations of the 
sanctions regime. Other sanctions regimes have shown that the prevention of such 
violations can not (always) be fully  guaranteed by border measures of the Member States 
of the European Community. A heavier burden in this respect will be put on the 
shoulders of the neighbouring states of Iraq and of multilateral task forces  such as the 
Maritime Interception Force. Nevertheless, those parties will need the cooperation  of the 
European Community to enable them to play an effective  role in the prevention  and/or 
detection of breaches of the sanctions regime. Previous experience with regard to such 
prevention and dectection has demonstrated that the Commission can play a useful  role in 
this regard, while fully  respecting the role of the Member States in the enforcement of 
Community Regulations. The present proposal provides for a close and  effective 
cooperation between the European Commission and all other competent  authorities 
within the Community. 

Whatever additional tasks might have to be performed  by the competent  authorities 
within the Community, and which might have to be included in the Regulation to be 
adopted, the Commission considers that the situation with regard to the implementation 
of Resolution 986 (1995) has developed to such an extent that the present proposal for 
the relevant Community  legislation will cover most of the necessary adaptations to the 
existing legislation  and should, therefore, be made already at this moment. Such a timing 
is, furthermore, justified  by the precarious situation of a large part of the population of 
Iraq, the alleviation of which is exactly the purpose of Resolution 986 (1995). 

With regard to the separate Articles of the Regulation the following can be said: 

Article  1  sums up the prohibitions which up to now are embodied in Council Regulations 
2340/90 and 3155/90, as amended. 

Article 2 contains the exemptions from the embargo and the conditions attached thereto, 
such as an export authorisation by the competent authorities of the Member States in the 
case of medicines. Paragraph  1(b) provides for the possibility to import Iraqi petroleum 
and petroleum products into the Community. Paragraph 2 introduces the notion of 
approval by the Iraq Sanctions Committee for export of certain goods which will be paid 
for out of the escrow account. Paragraph 5 demands such an approval for the opening of 
letters of credit related to the exports of certain parts and equipment, mentioned in 
paragraph 2.d.. Paragraphs 3,4 and 6 contain exemptions that already exist under the 
present embargo regime. 

Article 3 provides for the provision of conclusive evidence to the Commission of 
confirmation  of notifications, approvals etc. by the Iraq Sanctions Committee. Through 

1 

this procedure competent authorities of the Member States, as well as those of third 
States or organisations entrusted with the control of the sanctions and other directly 
interested parties will be afforded  a  single address for relevant information  that would 
otherwise only be available in a fragmented  form. 

Article 4 reflects  paragraph  14 of Resolution 986 (1995), dealing with immunity  for 
petroleum and petroleum products still under Iraqi title. An extension of this immunity to 
payments for these goods is justified  by the fact that a lack of such protection would 
seriously hamper the realization of the objectives of Resolution 986 (1995). 

Article 5 ensures that, also in accordance with paragraph  14 of Resolution 986 (1995), 
the payments from  the escrow account are not diverted to purposes other than those 
indicated in Resolution 986. Where these purposes are expressly stated, such as in 
paragraph  8 of Resolution 986 (1995), they shall be published immediately  by the 
Commission  in the C series of the Official  Journal in accordance with Article 7 of the 
present proposal. When additional destinations will be agreed upon by the Sanctions 
Committee, in accordance with paragraph 8(f) of the said Resolution, they will also be 
published. 

Article 6 responds to paragraphs 5 of Resolution 661 (1990) and 25 of Resolution 687 
(1991), and is similar in its formulation  to provisions in other Council  Regulations 
implementing Security Council decisions concerning economic sanctions. 

In order to facilitate  in particular the operations of the economic operators within the 
Community which have an interest in the implementation  of Resolution 986 (1995), the 
Commission  is instructed by Article 7 to publish all relevant procedures to be established 
by the Iraq Sanctions Committee regarding the embargo of Iraq and other relevant 
information  such as the Iraq Sanctions Committee's definition  of foodstuffs.  This 
information  will  then be available in eleven languages of the Community, and thus 
contribute to creating a level playing field for the interested economic operators. The 
reponsibility for the content of the procedures, guidelines or interpretations established by 
the Iraq Sanctions Committee rests with the Committee. A list of the competent 
authorities within the Community  dealing with the different  aspects of the embargo of 
Iraq should also form part of this publication. 

By Article 8 a system of mutual information  between the Commission and the Member 
States will be established in order to obtain maximum transparancy of the 
implementation of the Community law, as well as to further the uniform  application 
thereof. Sanctions to be imposed where the provisions of the proposed Regulation are 
violated have to be introduced by the Member States. 

Having integrated the provisions of Council Regulations (EEC) Nrs 2 340/90 and 
3155/90, as amended, in the present proposed Regulation, both former  Regulations can 
be repealed (Article 9). 

Article  10 contains the usual limitations by territory and nationality of the applicability of 
the Regulation. 

Article  11  establishes the date of entry into force of the Regulation  and, therefore, does 
not reflect  the fact that the Security Council decided in paragraph 3 of the Resolution that 
the exceptions to the embargo created by Resolution 986 (1995) only remain in force  for 
an initial period of  180 days. The Commission considers that a limitation to 180 days of 

M 

the proposed Regulation  would create many inconveniences, such as when  transactions 
legally concluded during the first  180 days still  have to be completed after this period. If 
the Security Council  would decide not to prolong the period of  180 days, or even  to 
shorten this period, the Commission  will ensure that proposals for the corresponding 
legislation  will  be made. 

Finally, Article 73G of  the EC Treaty would enable the integration  in the present proposal 
of the financial  sanctions decided upon by the Security Council  which are up till  now 
implemented by national  legislation of the Member States. At this stage and for reasons 
of urgency, the proposal does not include the appropriate provisions to this effect,  but the 
Commission,  in the event, may introduce such provisions through a new proposal. 

S 

Proposal  for a 

COUNCIL REGULATION  (EC) 

concerning the interruption of economic and financial  relations between the 
European Community and Iraq 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty  establishing the European Community, and in particular 
Articles 228a and 73g thereof, 

Having regard to the Common Position of ....  1996 defined  by the Council on the basis of 
article J.2 of the Treaty on European Union, with regard to the implementation of 
resolutions 660, 661, 666, 670 (1990), 687 (1991) and 986 (1995) of the United Nations 
Security Council, 

Having regard to the proposal of the Commission, 

Whereas the United Nations Security Council, acting under Chapter VII of the Charter of 
the United Nations, decided in its resolutions 660, 661, 666, 670  (1990) and 687 (1991) 
that all States should take the necessary measures with regard to the interruption of  their 
economic and financial  relations with Iraq as provided for in these resolutions, 

Whereas, furthermore,  the United Nations Security Council, acting under Chapter VII of 
the Charter of the United Nations, decided in its resolution 986 (1995), to allow, as a 
temporary  measure and under strict conditions,  the import of petroleum and petroleum 
products originating in Iraq in order to create the funds necessary for the payment for the 
import of certain goods into Iraq and certain commercial activities related thereto, in 
particular foodstuffs  and medical products, and decided to allow the export to Iraq of 
certain goods and the use of certain financial  instruments to facilitate  such export, and 
determined certain condtions attached to aforementioned  transactions and activities; 

Whereas, in order to enable the  Community to continue to implement effectively  the 
embargo of Iraq, while at the same time enabling its economic operators to fully  use the 
derogations to the economic embargo concerning Iraq, appropriate mechanisms should be 
established for the handling of notifications  to and applications for approval of 
transactions and contracts with Iraq by the Committee established by Resolution 661 
(1992) of the Security Council, as well as of the authorizations given by this Committee; 

Whereas, for reasons of transparency and in the light of the developments since the 
intoduction of the embargo, the Community legislation, implementing the 
abovementioned United Nations Security Council Resolutions should be incorporated in 
a comprehensive Community instrument, including inter alia the products falling under 
the Treaty establishing the European Coal and Steel Community (ECSC), and therefore, 
Council Regulations (EEC) 2340/90 >) and 3155/90 2) preventing trade by the 
Community with Iraq should be repealed, 

l) OJ no L 213, 9.8.1990, pl„  as last amended by Council Regulation (EEC) No 1194/91 (OJ No L  115, 
8.5.1991, p. 37) 
2)OJnoL304,  1.11.1190, p.l, 

€ 

Whereas, to this effect,  the Member States of the European Coal  and Steel  Community 
have repealed Decision 90/414/ ECSC as of the date entry into force of this Regulation,3) 

HAS ADOPTED THIS  REGULATION: 

The following  shall be prohibited: 

Article 1 

1. The introduction  into or the transit through  the territory of the Community  of all 
commodities and products originating  in, coming from, or having transited through Iraq; 

2. The export to, or the transit through, Iraq of all commodities  and products originating 
in, coming from, or in transit through the Community; 

3. The provision of  services with the object or effect  of promoting the economy  of Iraq, 
and in particular 
(i) for the purposes of any economic  activity carried out in or from Iraq; or 
(ii) to any natural person in Iraq, any legal  person so constituted or incorporated under 
Iraqi law or any organization  exercising  an economic  activity (whether in Iraq or not) 
controlled by persons resident  in Iraq or by organizations constituted or incorporated 
under the law of Iraq; 

4. The permission to any aircraft to take off  from, land in, or overfly,  the territory of the 
Community  if it is destined to land in, or has taken off  from, the territory of Iraq; 

5. Any  activity or transaction the object of effect  of which is, directly  or indirectly, to 
promote the transactions or activities mentioned under this article 

The prohibitions of Article  1 shall not apply to: 

Article 2 

1. The introduction into the territory of the Community  of 

a. commodities  or products originating in, coming from or having transited Iraq 

before 7 August  1990; 

b. petroleum and petroleum products originating in Iraq, whose export by Iraq has 

been approved by the Committee established under Security  Council 
Resolution 661  (1990)  and for which  payment of the full  amount of each 
purchase has been made into the Iraq account with 

Bank  ....; 

3  ) OJ no L 213,9.8.1990, p.3, as last amended by Decision 91/265/ECSC (OJ no L  127, 23.5.1991, p.27) 

1 

2. The export from  or the transit through the Community to Iraq of 

a. products intended strictly for medical purposes, after  authorisation by the 

competent authority of the Member State; 

b. foodstuffs,  after  notification  to the said Committee; 
c. materials and supplies for essential needs, the export of which to Iraq has been 

approved by said Committee; 

d. parts and equipment which are essential for the safe operation  of the Kirkuk-
Yumurtalik pipeline system in Iraq, the export of which to Iraq has been 
approved by said Committee; 

e. any other product for the export of which said Committee has given its 

approval; 

With regard to products mentioned under a. and b. of this paragraph  the authorisation, 
respectively notification  requirements will be deemed fulfilled  when the said Comittee 
has approved the payment for these goods from the Iraqi account with .... Bank. 

3.  The provision of postal or telecommunications services, medical services necessary 
for the operation of existing hospitals, or services resulting from contracts or amendments 
to contracts concluded before the entry into force of the interdiction contained in 
Regulation  (EEC) No 2340/90, where their execution began before that date; 

4. Flights approved by the said Committee or destined for activities of the United Nations 
in Iraq; 

5. The issuance or confirmation  of letters of credit to the benefit of a party in Iraq within 
the framework  of the export of goods mentioned under paragraph 2 d. of this Article, 
after  approval of each such issuance or confirmation  by the said Committee; 

6. Any activity or transaction the object of effect  of which is, directly or indirectly, to 
promote the transactions or activities mentioned under paragraphs  l.a., 2.a., b. and c, 3. 
and 4 above. 

7. Essential transactions directly relating to the export by Iraq of petroleum and 
petroleum products  permitted under paragraph  1 ,b. above and other activities directly 
related to these exports and to those permitted under paragraph  2.d. and e. 

Article 3 

Conclusive evidence of each notification  of the export of foodstuffs,  approval by the said 
Committee of a contract, transaction, export, letter of credit or of a  payment into the 
Iraqi Account of... Bank ... shall be provided to the European Commission. 

Article 4 

Petroleum or petroleum products exported by Iraq with approval of the said Committee, 
and still being under Iraqi title, or any payment related to these exports, shall be immune 
from  legal proceedings and not be subject to any form of attachment, garnishment or 
execution. 

g 

Article 5 

Any direct or indirect payment from the  Iraq account with ... Bank ... shall only be 
destined for the  purposes indicated in paragraph  8 of Resolution 986 (1995), as 
published  in the Official  Journal of the European Communities, and shall not be diverted 
to any other purpose. 

Article 6 

Articles  1  to 6 shall apply notwithstanding any rights or obligations conferred  or imposed 
by any international agreement or any contract entered into or any licence granted  before 
the entry into force of this Regulation. 

Article 7 

The Commission  shall publish  in the Official  Journal of the European Communities the 
relevant information  regarding applicable procedures for notifying  to or obtaining  the 
necessary approval by the said Committee of transactions or activities referred  to in 
Article 2, and in particular those for obtaining  payment from  the Iraqi Account with .... 
Bank 
this Regulation. 

, as well as other relevant information  in connection with the implementation of 

Article 8 

1. The Commission and the Member States shall take the necessary measures to ensure 
the implementation of this Regulation, 

2. They shall inform each other of the measures taken and of other relevant information  at 
their disposal  in connection  with this Regulation. 

3. Each Member States shall determine the sanctions to be imposed where the provisions 
of this Regulation are  infringed. 

Council Regulations (EEC) Nos 2340/90 and 3155/90 are hereby repealed. 

Article 9 

Article 10 

This Regulation  shall apply within the territory of the European Community  including its 
air space and on any aircraft  or any vessel under the jurisdiction of a Member State and to 
any person elsewhere who is a national of a Member State and any body which is 
incorporated or constituted under the law of a Member State. 

3 

Article 11 

This Regulation shall enter into force on the day of its publication in the Official Journal 
of the European Communities. 

This Regulation shall be binding in its entirety and directly applicable in all Member 
States. 

Done at, 

For the Council 

The President 

"lo 

DECISION  OF THE REPRESENTATIVES  OF THE GOVERNMENTS  OF THE 

MEMBER STATES OF THE EUROPEAN COAL AND STEEL COMMUNITY. 

MEETING WITHIN THE COUNCIL 

repealing Decision 90/414/ECSC preventing trade as regards Iraq and Kuwait 

(96/..../ECSC) 

THE REPRESENTATIVES  OF THE GOVERNMENTS OF THE MEMBER STATES 
OF THE EUROPEAN COAL AND STEEL COMMUNITY, MEETING WITHIN THE 
COUNCIL, 

Whereas the Council of the European Union, in view of the Resolutions of the United 
Nations Security Council regarding the interruption of economic and financial  relations 
with Iraq, has adopted Regulation (EC) No 
/96, ') concerning the interruption of 
economic and financial  relations between the European Community  and Iraq, which 
covers also the goods and products falling under the Treaty establishing the European 
Coal and Steel  Community; 

Whereas for these reason there is no longer a need for the continuation of Decision 
90/414/ECSC 2) and, therefore, this decision should be repealed; 

In agreement with the Commission, 

HAVE DECIDED AS FOLLOWS: 

Decision 90/414/ECSC is hereby repealed. 

Article 1 

Article 2 

This Decision shall enter into force on the day of its publication in the Official Journal of 
the European Communities. 

Done at Brussels, 

The President 

c/iraq/ecscoilf 

')OJnoL....,  ......1996, p 
2 ) OJ no L 213, 9.8.90, p.3 as last amended by Decision 91/265/ECSC (OJ no L  127, 23.5.91, p.27) 

ISSN 0254-1475 

COM(96) 416  final 

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