Improper Blocking of U.S. Funds by Office of Foreign Assets Control

Before October 1973, the Department of Defense (DOD) supplied petroleum, oil, and lubricants to the Republic of Vietnam directly by open market purchases from major international suppliers out of appropriated funds under Defense Supply Agency contracts. When the Arab oil-producing countries embargoed the United States and other Western nations, a DOD plan for circumventing the embargo was established in conjunction with the three major Vietnam suppliers. Since Vietnam was not an embargoed country, the oil was to be purchased by means of an elaborate subterfuge whereby purchases were ostensibly made in the name of the Vietnam armed forces but were underwritten by U.S. Government funds in the form of prepayments to the oil companies. The Treasury checks were made payable to and endorsed by a Vietnamese bank, but the American bank from which it came never actually credited the money to the Vietnamese bank's account. Thus, the money was never paid to any public or private Vietnamese party. Although the prepayments were made to the oil companies for delivery of the oil, Vietnam fell when only a small percentage of the oil had actually been delivered. DOD requested that the three oil companies return the prepayments and two of the companies did. However the third refused to return $6,054,759.06, stating that it was not required to do so because Treasury had blocked the assets of Vietnam and the prepayments in question were interpreted as being included in the blocking.