Chapter 3
Key issues
Introduction
3.1
A number of concerns were raised during the inquiry regarding the Foreign
Minister's decision to partially suspend sanctions against Iran. Criticisms
were made regarding the adequacy and clarity of the explanatory statements that
gave effect to the partial suspension, together with the scarcity of
information on the reasoning behind the removal of some entities from the
sanctions list and the retention of others.
3.2
The lack of public consultation prior to the suspension of sanctions was
a significant concern, as was the positive political message the partial
lifting would send to the Iranian authorities. Many argued that the partial
suspension could be perceived as an expression of support for Iran's approach
to human rights, its foreign policy and behaviour on the international stage,
which many submitters widely condemned.
3.3
The proposed re-opening of a trade office in Tehran received a mixed
response. While some supported the re-opening as a means of providing support and
guidance to Australian business entering Iranian markets and encouraging change
within Iranian society, others argued it would legitimise a regime that is the
antithesis of Australia's open and pluralist society and liberal democratic
values.
3.4
This chapter examines each of these concerns in greater detail under the
following seven headings:
-
explanatory statements;
-
removal of entities and financial ties;
-
lack of public consultation;
-
significance of the partial suspension;
-
human rights in Iran;
-
Iran in international affairs; and
-
an Australian trade office in Iran.
Explanatory statements
3.5
Criticisms were made of the explanatory statements that gave effect to
the partial suspension and repeal of sanctions. The Department of Foreign
Affairs and Trade (DFAT) advised that the explanatory statements 'comply with
the requirements of both the Legislation Act 2003 and the General Requirements
for Preparing Explanatory Statements as required by the Senate Regulations and
Ordinances Committee'.[1]
3.6
The Export Council of Australia (ECA) was of the view that the
explanatory statements adequately informed relevant parties of business
dealings that remain restricted or prohibited between Australia and Iran. While
the ECA stated that the statements 'are concise and present information on the
regime in a clear and accessible manner, including relevant implementing
legislation',[2]
at the hearing the ECA Director, Mr Andrew Hudson, did not fully endorse the
information on the DFAT website, especially information to assist SME exporters.[3]
3.7
However, the ECA argued that a lack of clarity and specificity with regard
to the sanctions is one of the biggest barriers nationally and internationally
to increased engagement with Iran following the Joint Comprehensive Plan of
Action (JCPOA).[4] It was suggested there was scope to enhance
the information available on DFAT's website to clearly state which trade
remains restricted or prohibited:
... one recommendation to improve the available information on
the Iran sanctions regime would be to create a summary of some sort that
succinctly outlines trade which is still restricted or prohibited with Iran,
rather than requiring users to scroll through the entire regime webpage to get
a full picture of the situation. Considering relatively few sectors and
activities remain restricted or prohibited, this may go some way toward
providing a clearer picture of the sanction regime's current status.[5]
3.8
The ECA also recommended that a summary of the US and other
international sanctions regimes on Iran be included.[6]
3.9
The Hon Michael Danby MP, Member for Melbourne Ports and Shadow
Parliamentary Secretary to the Leader of the Opposition, described the
explanatory statements as 'highly inadequate' for failing to provide
information on the reasons supporting the decision to lift some sanctions but
not others, and a comparison of Australia's sanctions regimes with other
nations:
... the Australian Government has provided no detailed
explanation as to why particular sanctions relief was given in relation to
particular activities, persons and entities, the extent to which Australia
differs from the U.S. and other relevant countries' approaches to sanctions
relief, and the reasons for those differences.
On such an important matter and in relation to such a
dangerous and untrustworthy regime, there should be detailed explanations of
the matters referred to above. Not all such detail needs to be included in the
explanatory statements, but it should be easily accessible elsewhere with
appropriate references to it.[7]
3.10
The Executive Council of Australian Jewry noted that while the Iran page
on the DFAT website provides relevant background and details of the UN Security
Council and autonomous sanctions which currently apply under Australian law: 'There
is no statement of the underlying rationale for removing or continuing each of
the autonomous sanctions'.[8]
3.11
Moreover, the submission argued that when read together the Explanatory
Statements, DFAT's website and the Foreign Minister's media release do not
provide an easily comprehensible summary of the new sanctions regime, or how
the remaining sanctions are targeted against Iran's human rights record, in
particular Iran's promotion of racism and support for terrorism:
...the Explanatory Statements, the Iran page of the DFAT
website and the Foreign Minister's media release do not, in our view, provide a
simple, readily-comprehensible summary of which sanctions (both UN-mandated and
autonomous) that were formerly applied by Australia against Iran have been
removed, which of them remain in force, and the underlying rationale in each
case for removing or continuing the sanctions. A summary table collating this
information would be helpful, and could be provided on the Iran page of the
DFAT website.
It is also unclear from the Explanatory Statements how the
remaining autonomous sanctions are effectively targeted against Iran's human
rights abuses, its promotion of racism, its support for terrorism and its
destabilising foreign policy. Given that the stated purpose of removing certain
sanctions is as a reward for Iran's compliance with its obligations under the
JCPOA, it would have been desirable to have provided some explanation of how
the remaining sanctions will be directed at other unlawful behaviours of the
Iranian regime which fall outside the scope of the JCPOA. This information also
could be provided on the Iran page of the DFAT website.[9]
Snapback of sanctions
3.12
The Executive Council of Australian Jewry was also critical of the
Explanatory Statements for not providing an explanation of how the Australian
government intends to reimpose autonomous sanctions against Iran in the event
of a significant breach or non-performance by Iran of its JCPOA commitments.[10]
3.13
Mr Danby speculated on the circumstances which could lead to a 'snapback'
of sanctions:
It is difficult to see beyond what the Iranians are already
doing that could lead to snapback of sanctions. They are conducting ballistic
missile tests. The one on 18 April this year had the potential to carry a
nuclear warhead. It is difficult to be more specific or threatening than that,
if you ask me. They have written on the side of a missile tested in February of
this year that a member state of the United Nations should be wiped out. I
wonder what more they ought to do?[11]
3.14
The Australian Strategic Policy Institute (ASPI) submission emphasised
the importance of the Australian Government developing a clear 'snapback' plan
for the rapid reimposition of sanctions in the event of non-compliance:
Government should have the necessary regulations drafted to
allow a swift re-imposition of sanctions should other countries adopt this
course of action. It would be important for Australia not to lag the
international community in this effort, nor to find that loopholes in
regulations are unable to prevent exports that might in some way assist an Iranian
nuclear or missile program should any come to the attention of Western
Governments.[12]
3.15
When questioned on the mechanisms for reimposing sanctions on Iran, Ms
Justine Braithwaite, Assistant Secretary, Sanctions, Treaties and Transnational
Crime Legal Branch, DFAT, replied that there were clear provisions in the JCPOA
and UN Security Council Resolution 2231 around the circumstances under which
sanctions could be reimposed.[13]
However, the situation in regard to the reimposition of Australian autonomous
sanctions was less clear:
On the threshold for reinstituting Australian autonomous
sanctions, I would be hesitant to speculate on the set of circumstances that
might lead to that ... what I can say is that the decision to reinstitute
sanctions will be one for the government of the day at a time when there is an
activity of concern that would require some form of response. I should also
note that sanctions are only one of the available tools in our foreign policy
toolbox to respond to situations or developments of concern.[14]
Removal of entities and financial ties
3.16
Concern was also expressed regarding how the decision to remove certain
entities from the sanctions list was made. DFAT explained that Australia's
approach to sanctions against Iran has 'closely followed' that of the European
Union. DFAT added:
The revocations of the lists of designated persons and
entities were in line with the actions of likeminded states party to the JCPOA,
which was endorsed by UN Security Council Resolution 2231...the Australian Government
will continue to closely monitor developments in Iran and it is open to the
Government to impose new sanctions on individuals, entities or classes of
activities if the Government considers it appropriate to do so.[15]
3.17
The Executive Council of Australian Jewry criticised the dearth of
information provided by DFAT regarding the decision to remove certain entities
but not others from the sanctions list:
There is no readily available list of persons and entities
against whom autonomous sanctions by Australia have ceased to apply. Nor is
there any explanation as to why autonomous sanctions by Australia have ceased
to apply to each of those persons and entities, but continue to apply to persons
and entities who continue to be named in the Australian List.[16]
3.18
Mr Peter Wertheim, Executive Director, stated that he 'would simply like
the government to share its thinking with the public about why particular
individuals have been removed from that list and why particular individuals
have been kept on it'.[17]
Mr Wertheim outlined the potential benefits of a more open approach:
It would simply serve to better inform the public, and I
think also the business community in particular, about the dangers that are
faced in dealing with the particular individuals who remain on the list and why
the government feels that there is no continuing danger in relation to those
who have been removed from the list.[18]
3.19
Mr Danby was also critical of the process, saying that while 'some very
brief and general information' was contained in the Autonomous Sanctions
(Designated Persons and Entities and Declared Persons – Iran) List 2012, the
Australian Government should provide information and an explanation as to how the
government determined who should be removed from, and who should be retained on,
the list.[19]
3.20
Mr Danby contended that to enable proper consideration of the partial
suspension of sanctions, the Australian Government should provide the following
information:
-
a detailed explanation of the reasons for particular sanctions
relief;
-
a detailed explanation of the criteria used by the Government to
determine particular sanctions relief and the reasons for such criteria;
-
detailed information about the checks and other investigations
made to determine that persons or entities removed from the sanctions regime
are not linked to persons or entities that are, or should be, subject to the
sanctions regime e.g. the Army of the Guardians of the Islamic Revolution (IRGC);
-
to what extent, and why, do Australia's sanctions relating to
Iran differ from those of the U.S. and other relevant countries?[20]
3.21
Former Australian diplomat and senior editor of the Australian, Ms
Rebecca Weisser, submitted that it is vital that sanctions continue to apply to
the IRGC because it is directly involved in training and supplying Hezbollah
and Hamas, which are fully proscribed terrorist organisations in Australia.[21]
3.22
Drawing on the work Dr Emanuele Ottolenghi, an international authority
who recently described the IRGC as an 'economic conglomerate',[22]
Ms Weisser argued that because IRGC is the single most powerful institution in
Iran, the Australian Government must work with key intelligence partners to
identify all of the IRGC's economic activities to ensure they remain fully
sanctioned:
Unless the Australian government urgently devotes the
necessary resources to do this, it is almost certain, given the reach of the
IRGC throughout the Iranian economy, that Australian businesses will
inadvertently contribute to providing the IRGC with the means to continue its
terrorist agenda and threaten the security not just of the Middle East and in
other parts of the world, but in Australia's own region.[23]
3.23
Ms Weisser emphasised that unless this close examination of the IRGC's
ties occurs, 'the lifting of sanctions will almost certainly contribute to the
enrichment of the IRGC and increase its ability to fund terror'.[24]
Approach to sanctions
3.24
As noted earlier, Australia's approach to sanctions against Iran is closely
aligned with that of the European Union. Mr Danby queried why Australia was
following the European approach to sanctions, rather than aligning with the
United States given that 225 entities and individuals remain under sanctions in
the United States compared with 91 entities and individuals on the Australian
sanctions list:
Given the fact that the United States has 225 entities and
individuals listed...under sanctions, there are only 91 who are listed by the
Australian government after the current lifting of sanctions. There is an
obvious danger that Australian companies trading with Iranian individuals or
entities, such as the Iranian Revolutionary Guards, will still be trading with
companies that are barred or sanctioned by the United States.[25]
3.25
In a supplementary submission, Mr Danby cited a speech by senior US
Treasury Official, Adam J. Szubin, outlining how US sanctions with respect to
Iran pursued a significantly tougher approach than that of Australia:
Mr Szubin comments that, 'more than 225 Iran-linked persons
will remain designated and subject to our sanctions'. That figure is more than
double the number of persons and entities listed by Australia for sanction, as
set out in the Autonomous Sanctions (Designated Persons and Entities and
Declared Persons – Iran) List 2012 (as amended). The numbers in that list are
23 individuals and 68 entities, making a total of 91 altogether. Given the
differences, the Australian Government should explain why Australia's list
carries a significantly lesser number of persons and entities than that of the
U.S.[26]
3.26
Mr Danby was of the view that 'Australia should reorientate its policy
on Iran sanctions by aligning them in word and deed with the United States'.[27]
3.27
When questioned on this matter, Ms Braithwaite advised that alignment
with the European Union occurred because the European sanctions system is the
most comparable, and applied in a similar way, to Australia.[28]
Ms Braithwaite explained that the United States' approach to sanctions is
fundamentally different to that taken by Australia:
The US system uses sanctions that are far more broadly
defined in terms of a tool of national security. The US applies not just
nuclear related sanctions; it also applies sanctions in a whole range of other
areas that we do not have—for example, on the grounds of organised crime,
counter-narcotics and in response to cyberattacks. Those are just some of the
additional areas where the US applies additional sanctions. That could explain
the differentiation in numbers.[29]
3.28
By contrast, Australia's autonomous sanctions are only linked to two
criteria:
-
the Foreign Minister must be satisfied that the person is
engaging in an activity connected with Weapons of Mass Destruction programs or
their delivery systems; or
-
the Foreign Minister must be satisfied that a person or an entity
is assisting someone to violate relevant UN Security Council resolutions.[30]
3.29
The ASPI submission observed that the views on JCPOA held by candidates
in the United States Presidential Election differ to those held by the Obama
Administration, meaning there is likely to be a change in the United States'
approach to Iran after the forthcoming election. As such, the Institute
suggested that it would be prudent to take a cautious approach to any change in
Australia's policy:
The most sensible course of action for Australia is not to
get too far ahead of possible American changes of policy after the Presidential
election. A significant reversal of American policy in response to concerns
about Iranian nuclear developments would presumably force a reconsideration of
Australian policy. Following Hillary Clinton's advice to 'distrust and verify'
Australia should remove sanctions slowly and only after evidence of a positive
Iranian intent to abide by the JCPOA.[31]
Lack of public consultation
3.30
In its submission to the inquiry, DFAT advised that no public consultation
was undertaken in relation to the instruments that put into effect the partial
suspension of sanctions because 'all instruments used to give effect to the
decision reduce legal obligations on Australians in regard to Iran'.[32]
DFAT described this reduction as of 'minor regulatory impact', and noted that
the lack of consultation was in accordance with the process followed when
autonomous sanctions were partially removed against Fiji in 2014 and Myanmar in
2015.[33]
3.31
However, a number of submitters were of the view that the government
should have undertaken public consultation prior to the partial suspension of
sanctions to ensure that the wider implications of the suspension were taken
into account. For example, the Executive Council of Australian Jewry stated:
... the mere fact that the relevant instrument removed, rather
than added, the names of persons and entities who are subject to Australia's
sanctions regime is not, in our view, a sufficient reason not to have had a
prior public consultation about the changes. The removal of the names of persons
and entities from the sanctioned list might adversely affect third parties,
that is, persons or groups in the wider Australian community, and Australia's
national interests more broadly.[34]
3.32
The Council was of the view that the lack of consultation meant that
individuals and organisations were unable to ventilate their concerns over the
partial suspension of sanctions:
... many other groups in Australia have expressed their
concerns publicly over Iran's appalling human rights and foreign policy record.
These groups include the Australian Bahai community, the trade union movement,
the National Council of Churches of Australia, the Australian Partnership of
Religious Organisations, human rights organisations such as Amnesty International,
women's rights advocates and children's rights advocates.
A process of public consultation should have been undertaken
so as to give these groups, and any other groups or individuals in Australia
who have an interest in these matters, an opportunity to ventilate their
concerns and have them addressed by the government.[35]
3.33
Mr Wertheim suggested that a public consultation could have occurred
under the auspices of the Senate's Foreign Affairs, Defence and Trade Committee
following the conclusion of the JCPOA but before the partial lifting of
sanctions came into effect. Such a public consultation process would not have
disadvantaged Australian businesses, but would have highlighted important considerations
beyond Iran's nuclear program and possible new business opportunities.[36]
3.34
Mr Wertheim speculated that one of the reasons for the lack of public
consultation may have been the Government's desire to repatriate Iranian
refugees:
I think it was no secret—because the foreign minister did
actually say so—that the government's principal concern at the time, or perhaps
I should say one of its principal concerns, was the repatriation of some 8,000
or 9,000 former Iranian nationals who had sought asylum in Australia and had
been found not to be refugees. The government, I think it is fair to say, was
anxious to reach an understanding with the Iranian government about the
repatriation of those people to Iran.[37]
3.35
Mr Danby was adamant that consultation should have taken place to
explain the reasons for the partial suspension:
The sanctions were in place because Iran was considered a
danger to world peace and security and had engaged in unacceptable behaviour.
Little to no explanation has been given as to why particular sanctions and
listings of persons and entities have been suspended ... Without public
consultation and scrutiny and a proper explanation, Australians have not had
the opportunity of assessing the appropriateness of sanctions relief and what
steps have been taken to ensure that relieved individuals and entities are not
associated with wrongful activity or sanctioned organisations.[38]
3.36
Mr Danby believed that the partial suspension should have been debated
in the Parliament to allow for a fulsome consideration of relevant issues and
implications.[39]
3.37
In response to DFAT's statement that the lack of consultation was in
accordance with the process followed when autonomous sanctions were removed
against Myanmar and Fiji, Mr Danby contended that 'those countries had nothing
like the global impact and egregious record of Iran, and posed nothing like the
threat to peace and security that Iran does'.[40]
3.38
Mr Wertheim similarly considered that there was 'no comparison' between
Myanmar and Fiji on the one hand, and Iran on the other, observing that while
Myanmar and Fiji may have been internally problematic they did not pose an
external threat of the magnitude of Iran.[41]
3.39
DFAT indicated that the comparison with Myanmar, Fiji and Iran was not
made to compare the nations themselves, but merely to highlight recent
instances of sanctions being lifted or eased without DFAT undertaking public
consultation.[42]
Ms Braithwaite assured the committee that '[i]f we were imposing sanctions on
new individuals or creating new sanction regimes altogether, then in that
circumstance the department would go out to public consultation'.[43]
Significance of the partial suspension
3.40
The majority of submitters expressed deep concern over the significance
of the partial suspension of sanctions against Iran, arguing it
could be interpreted as a message of support for Iran's approach to domestic
and international affairs.
3.41
The Jewish Community Council of Victoria was highly critical of Iran's
behaviour, arguing that Iran had done nothing to warrant sanctions being lifted:
... the Australian Government should cut all and any economic
ties with the Iranian regime until it implements true democracy, ceases the
brutal and inhumane treatment of its people which is the antitheses to
Australian expectations, and demonstrates a real commitment to peaceful
coexistence with its neighbours, around the region and around the world.[44]
3.42
Mr Wertheim stated: 'The easing of sanctions by Australia in such
circumstances sends a signal to the Iranian regime that it can persist in this
behaviour with impunity'.[45]
3.43
Concerns were also raised by the Australian Bahá'í
Community, who argued that the partial suspension of sanctions may signal to
Iran that it would not be held to account for its poor human rights record:
To decrease the international pressure on the Iranian
government over the human rights situation in its country at this time, when
there has been no documented improvement in conditions on the ground, may well
give credence to the false view, often put forward by Iranian representatives,
that past expressions of concern have been politically motivated. It would give
a signal to Iran that it will no longer be held accountable for its treatment
of its citizens and thus has a free hand to continue, and possibly increase,
its human rights abuses.[46]
3.44
Mr Joshua Koonin, Member of executive, B'nai B'rith Australia/New
Zealand, outlined the circumstances in which he considered it appropriate that sanctions
could be relaxed without there being a perception of the current Iranian regime
being supported:
... there would have to be a significant pattern of behaviour
shown by the Iranian regime in terms of promotion of human rights at home. I
think that issues such as the decriminalisation of homosexuality would be
important, as would the end of persecution of minorities—particularly the Baha'i,
the Kurds, the Jewish community and various Christian communities who are
persecuted—and I think that Iran would also need to change its behaviour in the
international arena.[47]
3.45
The submission from B'nai B'rith Australia/New Zealand drew particular
attention to Iran's treatment of Israel as a cause for concern, arguing that
there should be no relaxation in sanctions until Iran demonstrated a commitment
to democratic values or until there was a significant change in Iran's attitude
towards Israel:
Further, in the light of the avowed intention of Iran's
leaders to destroy another sovereign state – Israel – any relaxation of the
sanctions regime would signal Australia's sanctioning of Iran's current
policies and practices.
In this context, we note that a relaxation of global
sanctions in all likelihood would lead to increased Iranian revenue flowing to
its recognised proxy terror organisations such as the military wings of
Hezbollah and Hamas, both of which support the Iranian aim of destroying
Israel.[48]
3.46
In order to address perceptions that the lifting of sanctions may
condone the behaviour of Iran, Mr Wertheim suggested the Australian Government
should have issued a statement that:
-
affirmed the values that Australia subscribes to and seeks to
promote both domestically and internationally;
-
affirmed that Australia has not fundamentally altered its view of
the Iranian regime;
-
noted that Iran 'remains implacably committed to the propagation
around the world of its theocratic totalitarian ideology and form of
government, and remains equally implacably opposed to democratic and secular forms
of government everywhere';
-
noted that Iran lacks respect for the UN charter system, violates
international laws, and complies with it 'only grudgingly and to the extent
that it feels compelled to do so';
-
noted the regime continues to use brutal repression domestically,
and military force, terrorism and espionage externally; and
-
concluded that friendly relations, such as those which ordinarily
prevail between nations, cannot be sustained with Iran under its present form
of government.[49]
3.47
Mrs Venus Khalessi, Director of Public Information, Australian
Bahá'í Community, asserted that given Iran's continued poor human
rights record, the Australian Government must take every opportunity to
maintain scrutiny of human rights abuses in Iran, both in its bilateral
relationship with Iran and in multilateral fora.[50]
Human rights in Iran
3.48
As noted in the previous section, of serious concern to submitters was
the poor human rights situation in Iran. For example, the submission from
Amnesty International highlighted significant misgivings regarding the human
rights record of Iran, including:
-
use of the death penalty, including for minors;
-
the use of torture, and cruel, inhuman and degrading punishment;
-
unfair trials;
-
lack of freedom of expression, association and assembly; and
-
extensive discrimination against woman, and ethnic and religious
minorities.[51]
3.49
The Jewish Community Council of Victoria also drew attention to the high
number of public executions, persecution of people of 'diverse sexual
orientation and gender identity', anti-Semitism and religious intolerance. The
Council concluded that these transgressions 'suggest a regime that should not
be trusted, tolerated or partnered with'.[52]
3.50
The Executive Council of Australian Jewry considered that 'Iran's
policies and practices are diametrically opposed to the values of democracy,
human rights and the rule of law, which Australia as a nation subscribes to and
seeks to promote'.[53]
3.51
Whilst acknowledging Iran's poor record in the human rights sphere, the ECA
offered the pragmatic view that closer economic engagement might serve to
improve the human rights situation:
Australia has been able to separate trade and politics with
Iran in the past ... There is an argument to be made that economic engagement
rather than sanctions is the best way to encourage Iran toward a less
confrontational and more open path over the medium and longer terms.[54]
3.52
Ms Michelle Bolger drew upon her personal experience as a traveller to
Iran to argue the sanctions only served to punish the wider population:
... it is difficult to understand why we have participated in
the en masse punishment of innocent people and seriously undermined their
capacity to meet their basic economic and social needs ... I am confident that I
speak for the majority of Australians in stating that they would be as
distressed as I was to witness and understand the severe effects of the
sanctions on the Iranian people, particularly given the lack of proven efficacy
that sanctions have when punishing non-target groups and the seeming lack of a
severe enough security concern to justify the harshest sanctions ever imposed
on a nation.[55]
3.53
However, other submitters were not convinced that the partial suspension
of sanctions would improve the human rights situation, arguing instead that
sanctions were a proven mechanism to force regime's to change their behaviour.
For example, Mr Koonin cited the example of sanctions against South Africa as
an instance where sanctions had brought about positive change:
... in previous historic instances, such as the apartheid
regime in South Africa, sanctions were extremely effective in bringing about
democratic change and in forcing a regime to meet international norms. I
believe that there is no reason to set a different course with regard to Iran.[56]
3.54
Mr Wertheim concurred, noting that while trade, education and cultural
exchanges can soften the hard edges of dictatorial regimes, when it comes to
dealing with Iran such soft measures have been limited in their effectiveness: 'Unfortunately,
the only things that seem to have worked have been sanctions and, occasionally,
the threat of force.'[57]
3.55
In response to concerns about the appearance of a lack of action over
human rights violations, Mr Greg Ralph, Acting First Assistant Secretary,
Middle East and Africa Division, DFAT said: '... there was a question this
morning that we might be pulling our punches on some of these things, because
we have other interests with Iran. We do have other interests with Iran,
certainly on the security front, but we do not pull our punches on human rights'.[58]
Iran in international affairs
3.56
A number of submitters were deeply concerned about the potential impact
of the partial suspension of sanctions against Iran on international affairs,
arguing that Iran had not demonstrated the behaviour expected of a valued
member of the international community.
3.57
The Executive Council of Australian Jewry considered that the impact of lifting
sanctions is likely to '...give a major boost to Iran's international standing
and its ability to infiltrate other countries'.[59]
The Council considered this to be an undesirable and potentially dangerous
development, taking into consideration that Iran:
-
is widely regarded as the world's foremost state sponsor of
terrorism;
-
continues to carry out public executions at the rate of two to
three people each day;
-
continues to promote Holocaust denial;
-
continues to persecute, harass and intimidate trade union
activists and to deny basic labour rights to workers;
-
is involved in cyber-attacks against Western targets; and
-
continues to arbitrarily arrest and imprison political activists,
ethnic minorities, religious minorities, gays and artists.[60]
3.58
Mr Danby also commented on the potential implications of the partial
suspension of sanctions for Iran's conduct in international affairs, suggesting
that a number of broader issues required careful consideration:
-
lack of evidence that Iran has 'significantly changed its ways',
including the recent ballistic missile tests;
-
impact of the partial suspension on Australia's relations with
other nations;
-
assessments of security concerns for Australian businesses
operating in Iran;
-
risks to Australian banks and financial institutions from
associations with Iranian banks and financial institutions;
-
potential for goods or services supplied to Iran to be used for terrorist
or military activities; and
-
assessments made regarding the removal of persons and entities
from the Designated Persons and Entities List, as well as the decisions to lift
certain sanctions but not others.[61]
3.59
The submission by Ms Weisser raised concerns about the effect that lifting
of sanctions would have on Iran's capacity to sponsor international terrorist activity.
Estimating that Iran could access approximately US$150 billion in sanctions
relief following implementation of the JCPOA, Ms Weisser argued that these substantial
additional funds will allow Iran to 'turbo-charge its terrorist activities', support
its allies in advancing the goal of achieving regional hegemony, and increase the
threat of a nuclear-armed Iran.[62]
3.60
Ms Weisser highlighted a number of weaknesses with the JCPOA which could
impact global and therefore Australian security. These include that it:
-
expires after ten years;
-
does not allow for 'anytime, anywhere' inspections;
-
does not impose penalties for anything other than 'gross
infringements';
-
ends the arms embargo in five years and the ballistic missile
embargo in ten years; and
-
does not address Iran's support for terrorism, nor its destabilisation
of the Middle East region including threats to Israel.[63]
3.61
Further, Ms Weisser drew attention to two recent incidents involving Iran
which further show the limitations of the JCPOA:
-
on October 10 2015, Iran fired two ballistic missiles which
resulted in US sanctions against businesses and individuals involved in procurement
of materials for Iran's ballistic missile program; and
-
on 9 March 2016, Iran test fired two ballistic missiles which had
the phrase 'Israel must be wiped out' written in Hebrew.[64]
3.62
Mr Danby questioned if the Australian Government was reconsidering the
partial suspension of sanctions, or if additional sanctions should be imposed
against Iran, in light of this continued activity in ballistic missile
development and testing.[65]
Financial Action Task Force
3.63
In order to avoid Australian funds being used to support terrorist
activities, the role of the Financial Action Task Force (FATF) as the global
standard-setting body for anti-money-laundering and combatting the financing of
terrorism organisations was briefly discussed. Mr Danby noted that in February
2016 the FATF had declared that it 'remains particularly and exceptionally
concerned about Iran's failure to address the risk of terrorist financing and
the serious threat this poses to the integrity of the international financial
system.'[66]
3.64
Mr Danby suggested that Australia should be an active member at a
forthcoming FATF conference, and seek to apply specific cautions to Iranian
involvement in Australia or Australian involvement in Iran with financial
institutions that the FATF identifies as problematic.[67]
Mr Danby justified his reasoning for this stance:
I would not like Australia to be involved—I am sure none of
us would—in entities which might be involved in the financing of terrorism even
though they are the business that, for example, you were doing some metallurgy
within Isfahan or somewhere.[68]
3.65
Ms Braithwaite advised that there are 'very robust requirements' under
the FATF regime around the need for financial institutions to conduct enhanced
customer due diligence. Ms Braithwaite explained that responsibility for
undertaking due diligence had shifted from DFAT to the financial institutions
themselves:
Previously, DFAT was in a situation where it needed to assess
all financial transfers to and from Iran over $20,000. That financial
transaction limit has now been repealed. Instead, it has been replaced by this
FATF requirement for financial institutions to conduct due diligence to
specifically address the issue of counterterrorist financing and money
laundering. Due diligence includes obviously updating and clarifying identity
and beneficial ownership information, obtaining further information on the
source of the customer's beneficial owner's funds, clarifying the nature of the
customer's business, analysing past and future transactions and seeking senior
management approval to process transactions or to continue the business
relationship. Those are the types of questions that financial institutions are
now obliged to seek information on before supporting those dealings.[69]
3.66
Mr Ralph was encouraged by the fact that Iran itself had shown an
interest in engaging with the FATF to improve the transparency of its banking
sector. The matter was discussed during the recent visit by the Iranian Foreign
Minister Zarif to Australia:
He [Dr Zarif] made the point himself that the Iranian banking
sector has been cut off from the outside world from nearly two decades and is a
long way behind where it needs to be in terms of openness and transparency. I
think it is reassuring that at least elements of the Iranian government are
aware of that, and we will do what we can to assist their re-engagement with
the FATF process. Anything we can do to push them further down that path can
only be to the good in ensuring that no moneys flow from any business engagement
that Australia might have to support for other groups in the region which we
would not want to see supported.[70]
An Australian trade office in Iran
3.67
As noted in chapter 2, the Australian Government will re-open a trade
office in Tehran in the second half of 2016. DFAT advised that Australia had
previously maintained an office within the Australian Embassy in Tehran from
1968 to 2010.[71]
3.68
Given the considerable significance of Iran as a regional economy, the
re-opened trade office '...will allow the Australian Government to more
effectively assist Australian businesses to capitalise on commercial
opportunities emerging in Iran following sanctions removal'.[72]
DFAT observed that there are particular opportunities in the areas of mining,
oil and gas, water resource management, healthcare, and education and skills
training.[73]
3.69
Mr Ralph advised that preparations for re-opening the office were
proceeding, and that the office would be a valuable resource for Australian companies
looking to move into Iranian markets:
The reopening of the office, as much as anything else, is to
have a resource there to assist those companies that are coming in. As I said,
we have had a lot of interest. We, and our colleagues in Austrade—there are 30
or 40 Australian companies who are kind of queueing at the door. Some have
already reopened offices in Tehran and others have expressed interest in doing
so. So we actually need a resource at the embassy dedicated to making those
contacts.[74]
3.70
The ECA expressed strong support for the re-opening of the trade office,
noting that it would '... go some way toward restoring our once strong trading
relationship with Iran'.[75]
The Council considered that having a physical presence in Iran would both
assist Australian businesses to make initial connections in the market, and
signal to the Australian business community that the Government takes market
potential in Iran seriously, and is willing to provide assistance to business
interested in engaging there.[76]
3.71
The ECA identified a number of areas where there is significant
potential for trade growth, including:
-
agricultural commodities;
-
livestock exports;
-
mining and related knowledge;
-
manufacturing;
-
education; and
-
health, medical and aged care services.[77]
3.72
In order to take advantage of new opportunities the ECA suggested that DFAT
develop a specific Iran page that comprehensively outlines trade with Iran,
including online tutorials and presentations, and information on the Australian
and international sanctions regime.[78]
3.73
Mr Andrew Hudson, Director of ECA, further suggested that small and
medium enterprise exporters would benefit from the establishment of a
specialist Iran office in one of the capital cities in Australia which could
act as a central point of expertise on doing business in Iran.[79]
3.74
Ms Braithwaite advised that DFAT was currently revising its website, as
well as the online sanctions system to make information more readily accessible.[80]
Ms Braithwaite also expressed a desire to include information regarding
obligations under the sanctions laws of other countries.[81]
3.75
However, a number of submitters were critical of the decision to re-open
a trade office. For example, Mr Danby described the decision as 'highly
premature'.[82]
3.76
Ms Weisser was stridently opposed to the re-establishment of a trade
office in Iran:
In view of the scarcity of resources in the budget of the
Department of Foreign Affairs and Trade, it seems to me unconscionable that
Australian taxpayers should be expected to foot the bill for actively promoting
commerce with a state that ruthlessly launches terror attacks on civilian
targets.
Until Iran ceases to sponsor terrorism, it seems to me that
it would be much better to devote resources to determining the involvement of the
IRGC in the Iranian economy and that the government should maintain the highest
vigilance in ensuring that Australian companies do not, either advertently or
inadvertently, contribute to the funding of Iranian terror.[83]
3.77
Similarly, the Executive Council of Australian Jewry and the Jewish
Community Council of Victoria were adamant that the trade office should not be
re-opened as it would have the effect of normalising relations with Iran.[84]
Doing business in Iran
3.78
A number of submitters commented on the risks and complexities of doing
business in Iran and recommended that the Australian Government proceed with
caution. Mr Wertheim drew attention to a 2008 statement from the former Deputy
Prime Minister, the Hon Warren Truss MP, who described Iran as a 'difficult
market':
He was alluding, I think, to several things. One was the fact
that most of the trade that we had with Iran prior to the imposition of
sanctions was trade which Australia itself financed. In other words, we
provided the money to the Iranians to buy our product. That was done through
the Export Finance and Insurance Corporation and also through export market
development grants. So the arrangement was that we would depend, then, on the
Iranian government repaying that debt. My understanding is they did fully repay
that debt. However, the commercial reality of that arrangement was that the
Australian taxpayer was essentially bearing the commercial risk of that debt
for the benefit of private exporters, and it seems to me that there is something
fundamentally askew with that kind of rationale... The other thing was that, as
you said, it is a notoriously difficult market to deal with, because there is
no real rule of law in Iran. There is no transparency. There is nothing that
would in any way approximate our standards of transparency and accountability
in commercial dealings. So it was indeed, as he said, a difficult market, and I
think it remains so.[85]
3.79
Mr Hudson agreed that Iran would be a challenging operating environment,
but considered that Australian businesses should strive to be early entrants
into the market to make the most of the opportunities.[86]
Mr Hudson emphasised the critical importance of due diligence, observing that
Iran was not unique in this regard:
The starting point is extreme caution. It is part of the due
diligence or the homework we talk about. Iran is not necessarily unique in this
respect. There are many governments around the world where you might find that
the military who previously ran the country have now changed into business
suits and still have those significant connections ... increasingly exporters,
whether of goods or financials, will have this on their agenda. It is part of
their anticorruption and bribery training, part of their concern about the
regimes that take place.[87]
3.80
Ms Weisser warned that entrants into the Iranian markets should 'use
extreme caution' due to the uncertainty of the environment.[88]
3.81
In order to ensure that Australian companies do not inadvertently
contribute to the exclusion of minorities from Iranian society, Mrs Khalessi recommended
that 'systematic measures be put in place to ensure that those Australian
corporations seeking to do business in Iran are made fully aware of the
environment in which they propose to operate'.[89]
3.82
Mr Danby said that the United Kingdom had taken a cautious approach in
its explanatory guide for businesses looking to operate in Iran, highlighting
the following potential challenges:
-
risk of bribery and corruption, with Iran scoring highly on the
Corruption Perception Index;
-
influence, direct or indirect control by the Iranian security
services of many Iranian companies;
-
inflation, price control and subsidies reduce the potential for
private sector growth;
-
Iran ranks low on the World Bank Ease of Doing Business report
ranking 118th in 2015-16 report;
-
lack of investment in infrastructure;
-
risk of bureaucratic delays; and
-
some sanctions on Iran remain in place.[90]
3.83
Mr Danby considered that 'the Australian government should be more
explicit in issuing similar cautions'.[91]
3.84
The ASPI submission also advised that the Australian Government should take
a cautious approach in facilitating Australian trade and investment with Iran,
given the risks associated with moving too quickly. This support for a cautious
approach was based on four factors:
-
Australia's ability to lift a sanction regime can be done far
more quickly than the detailed intelligence analysis can be done to establish
evidence of covert proliferation;
-
because of the classified nature of this analysis, it can be
problematic to share the results of these assessments with firms seeking to
expand business opportunities in Iran;
-
Australia's ability to 'snap-back' with fresh sanctions will, by
definition, lag behind covert proliferation activities. Once sanctions are
lifted it may not be possible to bring an effective sanctions regime back into
existence; and
-
the range of current American and Australian sanctions form a
very complex body of regulations and laws. These are difficult to interpret
with a view to providing the private sector with actionable and accurate advice
on trade and investment.[92]
3.85
Mr Danby was also concerned about dual use goods. He asked:
What consideration has been given to the possibility
of dual-use goods (goods that can be used for both non-military and military
purposes) finding their way to Iran; identifying the persons and entities
providing such dual-use goods; and Australian laws and Ministerial
determinations that have been, and can be, relied on, to prevent the export or
sale of such dual-use goods to Iran?[93]
3.86
He also noted that:
...sanctions have been removed from "Goods
mentioned in the Australia Group Common Control Lists"...The Australia
Group, which provides such lists, notes on its website that it "seeks to
ensure that exports do not contribute to the development of chemical or
biological weapons". It refers to the following lists that it provides –
(i) Chemical Weapons Precursors, (ii) Dual-use chemical manufacturing
facilities and equipment and related technology and software, (iii) Dual-use
biological equipment and related technology and software, (iv) Human and Animal
Pathogens and Toxins, and (v) Plant pathogens.[94]
3.87
Further he drew specific attention to the fact that 'Australia has
lifted sanctions in relation to the provision of a service that "assists
with, or is provided in relation to", "a military activity" for
Iran', and asked 'why should Australia and Australians be permitted to play a
role in enhancing Iran's military capability?'[95]
3.88
ASPI called for the exercise of caution over the export of goods that
could have both civilian and military uses:
Mining equipment, technology and services, for example are
just as important to the construction of underground nuclear facilities as they
are to natural resource extraction. As has been observed with Iranian covert
programs in the past, Tehran can take measures to hide the intended purpose of
dual-use goods, or indeed simply divert useful acquisitions to more covert
purposes. The Australian Government should take particular care over export
approvals that may have dual use applications.[96]
3.89
ASPI warned that the Government's advice to Australian businesses may
not remain valid or accurate for long given the rapidly changing strategic
landscape of the Middle East.[97]
Taking into consideration the various factors at play, the Institute concluded
that the most prudent approach to doing business with Iran would be to 'proceed
slowly and carefully with expanding business connections ... There is no benefit
and, indeed, substantial risk for the Australian Government and business
community to get too far ahead of the international community in lifting
sanctions'.[98]
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