Australia must not be duped into softening its stance on Iran

China and North Korea topped the list of mutual security concerns last week when Malcolm Turnbull met US President Donald Trump in Washington.

The meetings were widely viewed as positive and productive.

But while Asian security policies appear to be aligned, the question of Iran lingers.

Before the Trump presidency, Canberra’s Iran policy was in line with the Obama administration’s rosy outlook on the 2015 Iran nuclear deal, the Joint Comprehensive Plan of Action.

The Trump administration is significantly less sanguine about the deal, which soon will relax restrictions on arms purchases, missile testing and, with the looming expiration of key restrictions, eventually Iran’s nuclear ambitions as well.

Whatever the Prime Minister or Foreign Minister Julie Bishop think of Trump’s unconventional presidency, they will soon realise that Trump’s perspective on Iran is more in line with decades of conventional US foreign policy than the last three years under Obama, which were an anomaly.

Trump is trying to address the fatal flaws of the nuclear deal and deter Iran’s aggression across the Middle East. This includes Iran’s support for terrorist proxies Hezbollah and Hamas, as well as Shi’ite militias in Syria and Iraq, not to mention the Houthis in Yemen and the murderous dictator Bashar al-Assad in Syria.

The Obama policy was to avert America’s gaze. Trump, by contrast, is in the early stages of devising a policy to ensure that this aggression does not go unchecked.

The White House also is retooling US policy to address the regime’s brutal repression of dissent at home.

Of course, Australia will be tempted by all of the business deals that Iran is dangling.

It is dollar signs that European and Asian nations see when they relax their restrictions on the Islamic Republic. In fact, this was the underlying strategy of the JCPOA — normalisation through commerce.

But the Turnbull government must understand that this commerce comes at great risk.

Iran is not normalising. It has not addressed the rampant money-laundering issues that pervade all sectors of its economy.

This is compounded by systemic financial corruption throughout Iran’s government bodies.

In fact, corruption and illicit finance are intrinsic to Iran’s economy. Iran’s poor rankings on a wide range of corruption and compliance indexes underscore this point. The Islamic Republic’s legal system contains significant carve-outs for governmental discretion, under the dubious pretext of “national security”.

Huge sums of money flow to the business empires of Iran’s Islamic Revolutionary Guard Corps, and the Supreme Leader. His conglomerate of companies and foundations, built through the expropriation of Iranian private property, is valued at more than $200 billion.

The IRGC, which controls as much as one-third of Iran’s economy, provides billions of dollars to its extraterritorial fighting squad, known as the Quds Force.

The Quds Force also produces hundreds of millions of dollars in counterfeit money using European technology to fund its illicit activities.

The US has long proscribed the group as a terrorist organisation for its support for a wide range of bad actors across the Middle East.

Part of the problem is that Iran’s deceptive terrorism financing laws don’t apply to the terrorist organisations it bankrolls, such as Hezbollah and Hamas.

In fact, Tehran carves out exemptions for them under the pretence that they attempt “to end foreign occupation, colonialism and racism”.

This is unacceptable to international anti-money laundering and illicit finance watchdogs such as the Financial Action Task Force, which just last week kept Iran on its blacklist.

While FATF suspended its countermeasures to afford Iran the opportunity to address the problem, it calls on financial institutions to apply “enhanced due diligence” with Iranian counterparts and cautions that doing business with Iran carries serious risk of exposure to terror finance.

If that doesn’t convince Australian companies from investing in Iran, perhaps the new Trump Iran policy will. By May 12, if there is no agreement between the US and the Europeans to plug the holes in the JCPOA, Trump has threatened to “tear up” the deal.

Whether the nuclear agreement is fixed or nixed, US policy will remain focused on deterring companies that contravene existing US sanctions designed to prevent Iran from funding terrorist organisations, developing its missile program, repressing its citizens and wreaking havoc in the Middle East.

In the meantime, Iran also remains designated under section 311 of the USA Patriot Act as a jurisdiction of money-laundering concern. Former US acting undersecretary for terrorism and financial intelligence Adam Szubin stated that if foreign firms ran afoul of US sanctions regulations, they would be “risking the most draconian sanctions in our toolkit, and that governs not just US persons but actors all around the world”.

Australia remains a vital US ally. Trump and Turnbull have affirmed this. And new Asia policies will underscore it, too. The challenges of North Korea and China loom large. But much work needs to be done on the Iran front. As Washington works to isolate the Iranian regime for a wide range of malign behaviour, Canberra should follow suit.

Jonathan Schanzer, a former terrorism-finance analyst for the US Department of the Treasury, is senior vice president at Foundation for Defense of Democracies. Follow Jonathan on Twitter @JSchanzer.

Mark Dubowitz is the chief executive officer of the Foundation for Defense of Democracies. Follow Mark on Twitter @mdubowitz.

Follow the Foundation for Defense of Democracies on Twitter @FDD. FDD is a Washington-based nonpartisan research institute focusing on national security and foreign policy.