Government needs to make it tougher for Tehran

Australia-Iran Sanctions

Australia has been a good friend and ally to the US, and to all free societies, in combating the threat posed by Iran.

Earlier this month, Foreign Minister Kevin Rudd announced new measures to inhibit Iran’s ability to move illicit funds. Australia has been a strong supporter of the international sanctions regime, which was put in place to stop Iran from building a nuclear bomb, oppressing its people, and proliferating terrorism.

There are, however, a number of additional measures Australia should take to curb the Iranian regime’s ability to abuse the international financial system.

In July last year, Australia imposed sanctions against Iran to reinforce UN Security Council Resolution 1929 and existing autonomous sanctions. These measures included financial sanctions against individuals, companies and financial institutions; travel restrictions on important members of the Iranian regime; and an arms and strategic goods embargo.

They targeted Iran’s financial and transport sectors, entities involved in Iran’s nuclear and missile programs, and those connected to Iran’s Islamic Revolutionary Guard Corps.

On March 29, draft regulations were proposed that prohibit transactions of $20,000 or more with parties in Iran. Under these regulations, businesses wanting to conduct transactions involving more than this amount would need to get approval from the Department of Foreign Affairs and Trade.

Australia is not alone in taking such a strong stand against the Iranian government. Countries that have taken similar action include the US, Canada and Japan, as well as the European Union. To date, the sanctions regime has focused on the refined petroleum, gas and banking sectors.

These types of restrictions have led to conditions that make it difficult, but not impossible, for Iran to move funds internationally using the banking sector. Eighteen of Iran’s 30 banks have been blacklisted by the Australian government for contributing to Iran’s nuclear and missile programs or helping Iran to violate its sanctions obligations.

Today, few financial institutions provide Iran with banking services. Banks, which have reportedly stopped supplying financial services to Iran, include Credit Suisse, Deutsche Bank, and UBS AG. This is a real achievement.

While Australian action has contributed to curbing Iran’s ability to import oil and gas, and France-based Total SA, Netherlands-based Royal Dutch Shell, Norway-based Statoil, and Italy-based Eni have finally turned their backs on Iran, some banks and oil companies are still doing business with the regime. A small number of banks provide Iran with correspondent banking services, and some of the biggest oil companies are still shipping it refined petroleum and gas.

The US Treasury Department has warned foreign banks and companies that do business with Iran that they could lose access to US markets if they deal with entities connected to terrorism or Iran’s nuclear industry. Similarly, no financial institution that does business with such Iranian entities should be allowed access to the Australian market.

Additionally, the government should consider passing laws along the lines of the Comprehensive Iran Sanctions Accountability and Divestment Act signed into law in the US in July 2010. CISADA forces companies and financial institutions to choose between the US market and the Iranian market. All US financial institutions must know with certainty that none of their business partners has a relationship with a designated Iranian bank.

Similarly, CISADA provides that any company traded on a US stock exchange can face stiff penalties if it helps Iran’s oil and gas sector in exploration or development, or as a technology provider.

The Australian government should put in place laws that ensure no company traded on the Australian Securities Exchange does business with designated Iranian entities or financial institutions. Australian banks should also be mandated to cut off correspondent banking relationships with any financial institution that provides designated Iranian entities with banking services.

The Australian government should also exert pressure on countries that have Australian and UN-designated Iranian banks operating in their jurisdictions. These include Armenia, France, Germany, Hong Kong, Italy, Malaysia, Qatar, Russia, South Korea, Turkey, Britain and the United Arab Emirates.

Pursuing a sanctions regime will raise the cost to the Iranian government of conducting illicit business. We have a collective moral obligation to curb its efforts.

As Australia and its allies press Iran to comply with UN Security Council resolutions, we must not overlook a critical task: constraining the regime’s ability to obtain money and operate within the international financial system worldwide. Any set of sanctions will fail unless we succeed in achieving that goal.