Chapter 3Strengthening the sanctions regime
3.1Even if applied consistently and in alignment with like-minded global partners, sanctions have unintended impacts on innocent third parties, including civilians, businesses and states. Imposing and maintaining sanctions therefore involves balancing both intended and unintended outcomes.
3.2Doing so requires an adequate degree of accuracy in the appraisal of effectiveness, which is empirically difficult to achieve.
Measuring effectiveness
3.3Measuring the effectiveness of sanctions is complex, as the impact of each measure evolves within its specific political and economic context. Furthermore, while sanctions measures have direct effects on the target country, they also have indirect effects on other countries and global economic markets. This can in theory obscure or overshadow their effect on the target country or individuals.
3.4Furthermore, individual sanctions are intended to achieve a range of intertwined short, medium and long-term policy goals. As submitted by DFAT:
There is no single or straightforward approach to evaluating sanctions’ effectiveness. Measuring their qualitative and quantitative impact will depend on the objectives for their imposition and the intended impact on the target.
3.5This means that effectiveness is measured differently between sanctions measures and regimes, depending on their respective objectives and intended effects. However, as a broad rule of thumb it is fair to say that the greater the existing links between a targeted individual or targeted sector of a country’s economy, the greater the impact sanctions have the potential to have. For this reason, effectiveness might be optimised by gearing sanctions policy towards ‘targeting those who rely on the Australian economy’.
3.6While measuring effectiveness is a complex, multifaceted process with recognised methodological challenges, effectiveness is demonstrated in practice. Submitters cited examples of how sanctions can bring about change and influence foreign government action. Walk Free and International Justice Mission Australia, for example, described two instructive case studies, the first of which relates to human trafficking:
In December 2022, the US government issued sanctions in relation to human trafficking abuses, targeting two individuals, Zhuo Xinrong and Li Zhenyu, and their network of entities and vessels involved in forced labour on a China registered distant-water fishing fleet. These were the first US sanctions targeting an entity listed on the NASDAQ stock exchange. In June 2023, an investigation by The Australian uncovered Zhuo Xinrong’s association with the Australia China Economic, Trade and Cultural Exchange Association, which prompted his resignation, demonstrating the impact of sanctions beyond the US.
3.7The second example concerned money laundering, illustrating how sanctions have the potential to spur behaviour modification:
In December 2019, the US government imposed sanctions on Aivars Lembergs, a Latvian politician, for money laundering, expropriation, bribery, and abuse of office. Four entities that Lembergs owned or controlled were also designated, including the Ventspils Freeport Authority, which operated a major international port. Following the designation, the Latvian government passed legislation removing Lembergs from control of the Ventspils Freeport Authority, and Lembergs resigned from the entity, where he had previously served as board chair.
3.8DFAT informed the committee that work is currently underway to develop best-practice methodologies to measure the effectiveness of sanctions, and provided two strong case studies. The first of these relates to cyber security:
In 2024, Australia imposed its first-ever sanctions for significant cyber incidents under the cyber sanctions framework introduced in 2021. This was the culmination of an 18-month joint investigation between the Australian Signals Directorate and the Australian Federal Police, together with DFAT and other Commonwealth agencies, as well as international partners, including the United States (US), United Kingdom (UK) and European Union (EU).
3.9Targeted financial sanctions and travel bans were imposed on two Russian citizens, each responsible for separate, significant cyber incidents. The objective was to hold the individuals accountable for their crimes, to disrupt their ability to engage in repeat acts of cybercrime and to deter others. DFAT submitted that the measures were successful:
Australia’s sanctions and the public attribution that resulted helped to break their ransomware business model by exposing the activities and identities of the criminals behind these actions.
3.10The second example DFAT provided to illustrate how effective sanctions can be relates to the ongoing efforts towards imposing costs on Russia for its military invasion of Ukraine in 2022:
Australia has implemented a broad range of sanctions covering trade, commercial activities, targeted financial sanctions and travel bans… Collectively, Australia’s sanctions response to Russia’s invasion of Ukraine is our largest ever, with Russia-Ukraine listings comprising two-thirds of all sanctions imposed under the Autonomous Sanctions Regulations 2011.
3.11Others called for an assessment of effectiveness using wider parameters. A joint submission from Geoffrey Robertson AO KC, founder of Europe’s largest human rights practice, and the Australian Centre for International Justice, argued that a true measure of effectiveness must include looking at the integrity of the sanctions process as well as its outcomes:
To accurately assess effectiveness, one must consider more than the mere objectives the regime seeks to achieve. A true assessment also asks whether the infrastructure in place affords adequate safeguards and due process to targeted individuals. To overlook such considerations would fail to present an honest account of the impact of sanctions. Effectiveness, in this sense, is not just about hypothetical outcomes but about the integrity and fairness of the process itself.
Evasion of sanctions
3.12Several witnesses and submitters discussed how the development of sanctions regimes is accompanied by increasingly sophisticated methods of sanctions evasion.
3.13Representatives from the Myanmar Campaign Network, for example, highlighted the general reluctance to sanction central banks as a factor which might have the unintended consequence of aiding evasion and as a result stymieing the effectiveness of sanctions:
Sanction evasion is happening. They are scrambling for hard currencies. The sanctions are to do with hard currencies, which I'll talk about next. They can go to China, India and other suppliers. We have two prominent suppliers being sanctioned, but there are other suppliers that they can't just—not suppliers; distributors in the country which have access to hard currency to buy fuel overseas. So you're just in a kind of whack-a-mole. You just switch. But what you cannot switch here is the junta's access to hard currency. Oil money they can have, but the oil has to come from offshore. Sanctioning the Myanmar central bank, which is the conduit to get this hard currency, will be very effective. But all governments are very reluctant to sanction central banks.
3.14This reluctance is due to the fear that sanctioning central banks will, in most countries, impact ordinary citizens who are not the intended target of sanctions. The Myanmar Campaign Network explained that this was not the case in Myanmar, and that sanctions against central banks should be imposed:
[I]n Myanmar, the case is different. Ordinary citizens don't have access to hard currency. Whatever hard currency they have in these state banks, the regime has got control of it—30 per cent, 40 per cent, 45 per cent—and they've taken it and converted into whatever they want to use. Banks and hard currency are not part of the everyday lives of Myanmar people, trust me. Sanctioning the central bank will be highly effective, and Australia should make up for being behind in sanctioning and sanction the central bank. That will really tackle the core of the problem. The only advantage the regime has right now is air power. Air power means their financial ability to buy jet fighters and all that from Russia and also jet fuels. There are about 60 attacks a week or something happening. It is horrific. The only advantage it has is air power. We can stop that by financial sanctions, and the one to sanction is the central bank, which we haven't.
3.15The committee also received evidence suggesting that listed individuals and entities linked to Iran’s Islamic Revolutionary Guard Corps (IRGC), an organisation involved in multiple, serious human rights violations and linked to international terrorist activity, might have developed methods to circumvent sanctions undetected. AUSIRAN listed a number of these, citing sources:
(1)Use of Front Companies and Complex Networks: The IRGC often employ a network of front companies and complex corporate structures to disguise the origins and destinations of its goods and funds. These front companies operate globally, including in countries like China, Hong Kong, and Venezuela, to facilitate trade that would otherwise be restricted due to sanctions (Reuters, 2023).
(2)Smuggling and Illicit Trade: Smuggling has been a significant method to bypass sanctions. Goods, particularly oil, are often shipped through unofficial channels, sometimes involving complex maritime manoeuvres such as ship-to-ship transfers and falsifying cargo documentation. These tactics help the IRGC continue its oil exports despite international restrictions (Hoover Institution, 2023).
(3)Barter and Non-Dollar Transactions: To mitigate the impact of financial sanctions, the IRGC has engaged in barter trade and transactions in currencies other than the US dollar. This includes trading oil for goods and services directly, thus avoiding the international financial systems monitored by the US and its allies (GOV.UK, 2023).
(4)Cryptocurrency: There have been increasing reports of turning to cryptocurrencies to conduct transactions that are difficult to trace. Cryptocurrencies provide a way to move money across borders with relative anonymity, bypassing traditional banking channels affected by sanctions (Reuters, 2023).
3.16Other submitters, such as Dr Graham Marning, suggested that evasion of some sanctions is actively enabled by the Australian Government. He cited Australia’s purchasing of fuel refined from Russian oil in other countries as being either a failure to understand how global supply chains enable sanctions evasion, or a deliberate act of self-interest in ‘wanting full and unrestricted liquid energy supply’. As put by Dr Marning:
We have created a loophole that is legal, but, is not measured or defined, and is not being acted upon by our Parliament. We have failed to introduce a review mechanism of this loophole at the time of granting it. If we have reviewed it, we are comfortable with its implications for Ukraine. If that is the case, it is a national disgrace.
3.17This issue is discussed further below.
Trade in sanctioned goods
3.18Oil and coal are a prime example of how legislative gaps and the complexities of global trade combine to lessen the effects of sanctions settings.
3.19The Australian Government has banned the import and export of certain goods from and to Russia, including oil, to exert financial pressure on the Russian Government by depriving it of a valuable trade opportunity. However, a loophole remains which allows the import of products made from crude Russian oil refined in third-party countries. This has enabled Russia to continue to take considerable revenue from its oil.
3.20AFUO submitted that refined petroleum was Australia’s most imported product in 2022, with 80 per cent of Australia’s required refined petroleum products coming from overseas, primarily from South Korea, Singapore, Malaysia and Taiwan—countries which purchase crude oil used for refining from various suppliers, including indirectly from Russia:
We are of the understanding that these countries purchase and refine crude oil from various global suppliers, including indirectly from Russia through intermediaries like India and China, which have emerged as major buyers of Russian oil in the time since the start of the full-scale invasion. The outcome is that Australian consumers are providing financial support to Russia’s war machine when they are filling up their vehicles. That this situation is allowed to continue with India, our partner in the Quadrilateral Security Dialogue, is particularly upsetting.
3.21UCNSW cited a 2024 report from the Finnish Centre for Research on Energy and Clean Air (CREA), which confirms that:
Australia is among countries continuing to import oil products refined in third-party countries from Russian crude. In the first six months of 2024, Australian reportedly imported more than 1.4 million tonnes of refined oil products from at least four refineries sourcing Russian crude—Jamnagar, New Mangalore and Vadinar refineries in India, and Qingdao Huangdao refinery in China.
3.22One of these refineries, Jamnagar in India, is reportedly owned by a company which in May 2024 signed a deal with Russia’s Rosneft—controlled by the Russian government—to purchase a minimum of 3 million barrels of oil per month. This, UCNSW stated, means that Australian companies buying products made with refined Russian petroleum are helping Russia’s oil revenue to flow unimpeded despite the sanctions which Australia has imposed.
3.23Furthermore, in an answer to a question put on notice by the committee, UCNSW pointed out that Australia is also a member of the ‘Price Cap Coalition’, together with the G7 and European Union. Two of the coalition’s key objectives are:
(5)constraining Russian revenues which could otherwise be used to fund Russia’s war of aggression against Ukraine; while
(6)maintaining global oil flows and protecting energy security.
3.24Despite these objectives and their alignment with sanctions imposed against Russia, imports of products made with refined Russian oil are not only continuing, but increasing:
[A]ccording to CREA, EUR8.5bn of Price Cap Coalition countries’ imports of oil products between December 2022 and December 2023, were made from Russian crude—the largest quantities by far being from India’s Jamnagar and Vadinar refineries. In 2023, there was a 44% year-on-year increase in sanctioning countries imports of oil products, by volume, produced from Russian crude.
3.25Submitters discussing this issue were unanimous in their calls for Australia to ensure that Russia cannot profit from the importation of products made from its crude oil. AFUO, for example, called on the Australian Government to take the lead in making sure that the effectiveness of sanctions targeting Russia’s oil trade is not undermined by legislative gaps around the import of sanctioned goods which result in Russian oil continuing to make its way into Australia as a refined product:
To not close this loophole independently in our own legislation and sanctions regime (and by working in concert with our partners who face a similar issue) is funding Russia’s war to the tune of tens of billions of dollars per year and is having demonstrably grave impacts on the weight of industrial might Ukraine must withstand.
3.26The committee also explored how some Australian companies exploit loopholes in sanctions laws which allow them to produce import-sanctioned goods outside Australia and sell them to overseas customers. Dr Moiseienko described how one such example saw an Australian-headquartered company take its case to the Federal Court:
[A]n Australian-headquartered company, Tigers Realm Coal, which extracts coal in Russia, wanted to continue those operations and sought an indication from the Australian Sanctions Office as to whether doing so would be lawful. The Australian Sanctions Office said no, and the company sought to obtain a declaration in the Federal Court that, in fact, they would be compliant with Australian sanctions if they continued to extract coal in Russia and didn't import it into Australia but sold it to other customers around the world.
3.27Although the Federal Court ruled that continuing to operate in this manner would not be legal under Australian sanctions laws, Dr Moiseienko stated that the reason for the ruling appeared to be technical and could imply that a legal loophole remains in place:
It all came down to the fact that Australian sanctions laws prohibit not only importing import-sanctioned goods into Australia but also transporting them to anywhere in the world. So it seems the implication is that, if you, let's say, extract Russian coal and you don't import it into Australia and you don't transport it to anywhere in the world but you just simply sell it to customers elsewhere—somewhere that's not Australia—that potentially could be compliant with Australian sanctions. It seems to be the implication of the judgement.
3.28This suggests that more should be done to avoid undermining the effectiveness of the Australian sanctions regime. As Dr Moiseienko observed, constraining Russia or Iran’s ability to trade their resources requires a tightening of the legislation:
[I]f we are trying to constrain the access of, let's say, the Russian regime or the Iranian regime to resources and we're trying to make it more difficult for them to trade in certain commodities, then it would be nonsensical to allow Australian companies to operate in those countries, extract those commodities and sell them to somewhere, provided that it's just not Australia and they don't transport those goods. That would not, I think, be compatible with the objective of those regulations, hence the point that I was making in the submission, which, although technical, has come up in legislation, so I think there is some importance to it.
3.29Dr Moiseienko suggested how the Act could be amended to close these loopholes by sanctioning the sale, rather than just the import, of such goods.
3.30DFAT representatives acknowledged the complexity involved in ensuring that sanctions laws evolve and reiterated that issues around sanctions evasion and compliance with existing sanctions are under ongoing review:
This is part of the big challenge that we face. How do we keep our sanctions regime live and up-to-date? We had a legislative review, which may well come up in questioning, that is intended to enable us to update our sanctions regimes but, of course, they are constantly under review. We will constantly tweak to add more provisions to make sure they are robust, defensible and the like. Enforcement and compliance, which was mentioned by ABF as well, is a critical piece of the sanctions workload and that has gotten more difficult.
3.31The committee also approached the Department of Home Affairs on the topic of sanctions evasion, for example about leakage within the Australian sanctions framework which might enable companies to import Russian goods. Departmental representatives indicated that the department has ‘no immediate concerns’, but acknowledged that some leakage does occur:
It would be fair to say that there are no immediate concerns that are raised specific to the point that you've just raised in this inquiry. Naturally, from a border perspective we acknowledge the fact that leakage does occur when we have 95 million cargo consignments that move across the border. We target our efforts based on information and intelligence to ensure we are targeting the goods of suspect concern as best we possibly can, acknowledging the fact that leakage does occur. Our role at the border is to ensure that leakage is minimised to the highest level possible.
3.32The department did not provide further details on active investigations relating to sanctioned trade, other than to state that six referrals from the Australian Sanctions Office (ASO) and five active investigations are currently underway. Two of these active investigations relate to ‘goods suspected of being exported to Russia’.
Committee view
3.33The committee recognises that measuring the effectiveness of sanctions is complex due to the number and nature of objectives involved, the timing and duration of listings and the specific economic and political context in which they occur. On top of this, as can be seen specifically with sanctions relating to Russia, targets may adapt by seeking trade with alternative markets or selling their products through countries which may not be as committed to enforcing economic pressure imposed by the international community. It is also worth noting that measuring effectiveness is difficult to do with precision, because other forms of pressure, such as diplomatic or internal political pressure within targeted countries, often occur concurrently. This means that attributing desired outcomes to sanctions policy risks both over- and underestimating their effectiveness.
3.34The committee notes that DFAT is working with international partners on developing best-practice methodologies which will be used to optimise and measure the effectiveness of sanctions. Given the rapidly evolving nature of multiple crises which threaten global security, this work must be expedited. The committee therefore urges DFAT to progress this critical work as a priority and provide Australian stakeholders and non-governmental organisations an opportunity for consultation to inform this process.
3.35This is the second inquiry the committee has recently conducted involving sanctions relating to Russian oil, and both have led to the inescapable conclusion that the existing sanctions regime has had limited impact on Russia’s oil-related revenue. While sanctions prevent the import of Russian oil into Australia, legislative loopholes allow Russia to pivot towards revenue from third-party countries which continue to import its oil and then profit by exporting petroleum-derived products to Australia. The committee also notes with some disappointment that loopholes which allow the continued importation of goods made with Russian oil refined in third countries are not a new concern, and that the government has failed to act in spite of Recommendation 8 of the committee’s September 2024 inquiry into Australia’s support for Ukraine.
3.36The committee is strongly of the view that a stronger focus on sanctions enforcement is required so that products made with oil sourced from countries which Australia has imposed sanctions on, such as Russia and Iran, are not imported into the country. The committee agrees that this is an important facet of optimising the effectiveness of sanctions and avoiding the inadvertent provision of unintended financial support to sanctioned regimes.
3.37The committee recommends that the Australian Government work with its global partners to increase focus on sanctions enforcement and close loopholes which allow Iran and Russia to evade the financial impact of Australian sanctions.
3.38The committee recommends that the Australian Government continue to impose sanctions on Iranian officials involved in serious violations or serious abuses of human rights, including wrongful detention.
3.39The committee recommends that the Australian Government prioritise, in consultation with international partners and non-governmental Australian stakeholders, the development of methodologies to target and measure the effectiveness of Australia’s sanctions regime.
Repurposing of frozen assets
3.40Asset freezing extends to financial and physical assets, such as bank accounts, property and luxury goods. It prohibits sanctioned individuals or entities from accessing their assets.
3.41Freezing financially valuable assets belonging to individuals or governments is a powerful tool for addressing and deterring undesirable behaviour and illicit activities such as human rights abuses, corruption and financing terrorism. However, it presents legal and political issues which Australia and its global partners have grappled with in recent years.
3.42Russia’s invasion of Ukraine and the subsequent freezing of hundreds of billions of dollars across Western countries have prompted considerable discussion of how best to transfer assets owned by states engaged in wars of aggression to their victims. Leading legal experts have confirmed that such transfers are indeed lawful.
3.43The committee identified this as a priority concern during an inquiry into Australian support for Ukraine conducted in 2024. Recommendation 7 of the committee’s September 2024 report urged immediate action:
ThecommitteerecommendsthattheAustralianGovernmentidentifyasa matterofpriorityallRussianassetsinAustraliathataresubjectto sanctions, and assess what legislative changes are required to enable the transfer of these assets or associated income to Ukraine.
3.44To date, the US, UK and Canada have led the way in supporting the victims of military aggression through the use of assets frozen through the imposition of sanctions. At the time of writing, the US has given Ukraine US$20 billion funded by the profits of seized Russian assets. In October 2024, the EU Parliament similarly approved a €35 billion loan to Ukraine backed by future revenue from frozen Russian assets, while as recently as December 2024 Ukrainian President Volodymyr Zelensky flagged Japan’s intention to transfer $3 billion from frozen Russian assets to Ukraine.
3.45The committee spoke with several witnesses about the point at which consideration should be given to moving from simply freezing, to seizing of these assets, as well as the barriers to such a move.
3.46Asset seizure is a considerable step beyond asset freezing, as it involves permanently taking ownership of assets belonging to another country, rather than temporarily freezing access as allowed under international law. Seizing and repurposing of assets therefore requires supporting legislation in order for it to be done under a legal process.
3.47Witnesses and submitters who considered the issue of transferal of frozen assets identified several impediments, notably in the case of sanctions relating to Russian and Iranian individuals and entities.
3.48The Australian Centre for International Justice (ACIJ), for example, noted that Australia does not currently have legal avenues in place specifically allowing authorities to seize and repurpose frozen assets belonging to sanctioned individuals or entities. While certain mechanisms for the confiscation of assets exist under the Proceeds of Crime Act 2002, ACIJ was of the view that the legislation could be improved:
In our view, a clear amendment to the POCA or separate regulations made under the Autonomous Sanctions Act 2011 (Cth) addressing the procedures for confiscation and repurposing with specific respect to sanctions would be appropriate. These amendments could propose that assets would vest in a trust, with decisions on distribution to be made subject to applications to an independent committee or following consultation with affected communities.
3.49ACIJ acknowledged that practicalities around such a measure would require further consideration.
3.50Dr Moiseienko identified the ‘freeze and seize’ debate as part of the broader question of sanctions enforcement, urging greater focus on the ability to adequately identify the assets to be seized:
[W]hen we talk about individuals or companies with significant amounts of assets, if they know that they're likely to be sanctioned because they're involved in misconduct, then they're unlikely to hold those assets directly—they will use proxy owners, nominees and so on—and there's a genuine question around the capacity and the processes in place to identify those indirect holdings.
3.51The challenge inherent in identifying and locating assets of sanctioned individuals and entities is of paramount importance and has been highlighted by issues around Russia-related sanctions.
3.52Other stakeholders also discussed the difficulty involved in identifying assets linked to sanctioned individuals and entities. AUSIRAN, a not-for-profit organisation advocating for the Iranian diaspora in Australia, made several recommendations aimed at improving Australia’s mechanisms for asset freezing and confiscation, including:
Establishment of specialised recovery units working towards identifying, freezing and confiscating assets belonging to sanctioned entities.
Developing a database for the prompt reporting of information on sanctioned assets to help track and manage such assets across jurisdictions.
Engaging with like-minded international partners to facilitate cross-border asset recovery.
Setting up a central agency for the coordination of sanctions enforcement, which would function similarly to the US Office of Foreign Assets Control (OFAC) in managing sanctions regulation and enforcement.
3.53AUSIRAN noted that AUSTRAC had recently established a team tasked with monitoring and triaging financial reporting relating to Russian sanctions, suggesting that the same approach should be applied against Islamic Revolutionary Guard Corps (IRGC) financial networks.
3.54Emphasising that the disposition and use of frozen assets is a policy question for the Australian Government, the ABA urged transparency to ensure that stakeholders are adequately informed of their obligations and any legal implications if frozen assets are confiscated. The ABA also suggested that the government consider giving financial institutions legal protection from litigation by individuals or entities whose assets are confiscated.
3.55The committee discussed the actual assessment of Russian entities and assets in Australia with government agencies, citing discrepancies in the numbers of sanctioned assets identified in Australia reported by the AFP. DFAT representatives highlighted that sanctions law places the onus on asset holders to report sanctioned assets to the government and indicated that the perceived discrepancies are not reflective of a lack of identification:
Australian sanctions law imposes strict prohibitions on dealing with designated persons or entities and their assets. Asset holders are required by law to provide the AFP with specific information about controlled assets. That's part of the legislation. DFAT works closely with AUSTRAC actually in relation to tracking financial transactions. There are frozen Russian financial assets in Australia. These may not have been reported to the AFP, which may explain the discrepancy, but we certainly are aware of frozen Russian financial assets in Australia.
3.56The AFP explained that discrepancies in the numbers of assets cited were due to the actual assessment evolving over time:
The figures in question relate to certain points in time for the number of instances reported to the Australian Federal Police (AFP) of potential Australian-based assets that could be the subject of the sanctions regime. The first figure of 21 notifications being as at May 2023, which increased to 23 notifications as at October 2023. During the course of the AFP’s investigations into these notifications, the AFP did not identify any Australian-based assets.
3.57When asked how many referrals of possible breaches or identifications of possible breaches agencies had discovered since 2022, the AFP said:
The Australian Federal Police has received five (5) reports of crime from the Department of Foreign Affairs and Trade regarding breaches or possible breaches of the Autonomous Sanctions Act 2011 law since 2022.
Of the four current active investigations, all of these investigations commenced following reports of crime received by the Australian Federal Police from the Australian Sanctions Office.
3.58DFAT also disputed media reports suggesting that Australia holds $9 billion in frozen Russian assets, placing the figure closer to ‘well less than $100 million’ in both private and sovereign assets.
Committee view
3.59The committee has already expressed its unreserved support for Ukraine in the face of the existential threat the country faces. While the seizure and transfer of frozen Russian assets is undoubtedly complex and may even require legislative change, the committee is of the opinion that such a transfer would give existing sanctions teeth and be of tangible benefit to the Ukrainian community.
3.60Furthermore, the government has already had considerable time to act on this issue. The committee again notes Recommendation 7 of the committee’s September 2024 report on Australia’s support for Ukraine, which clearly identified the transfer of Russian assets in Australia as a priority issue and called on the government to act.
3.61The inability to identify and locate assets belonging to individuals or entities linked to human rights abuses severely compromises the effectiveness sanctions can have. This being the case, the committee recalls evidence regarding the evasion of sanctions discussed earlier in this chapter and cannot help but ask whether the reluctance to transfer frozen Russian assets to Ukraine is at least partly due to a failure to accurately identify the assets in question or the extent of ongoing, undetected trade in sanctioned goods. The committee is therefore concerned by the very limited evidence which exists to suggest that assets held in Australia by individuals associated with the IRGC or the Russian Government have been adequately identified for sanctions to be applied and enforced.
3.62The committee recommends that the Australian Government consider how to identify and locate all Russian and Iranian Islamic Revolutionary Guard Corps-associated assets in Australia which are currently subject to sanctions.
3.63The committee recommends that the Australian Government identify all Russian assets in Australia that are subject to sanctions, and consider what legislative and other changes are required to enable the transfer of these assets.
Conclusion
3.64The committee recognises that measuring the impact and effectiveness of sanctions is not a straightforward endeavour. There are many variables and potential parameters involved, and the committee looks forward to seeing the outcome of the work DFAT said is underway to develop best-practice methodologies for measuring effectiveness.
3.65Notwithstanding the complexity involved in all aspects of a successful sanctions policy, there are clearly aspects of the current regime which could operate better than they do now. Chief among these is the inconsistency in where and when the Australian Government decides to apply sanctions, driven at least partly by the lack of objective and transparent criteria for when sanctions will be imposed. This results in the public perception that Australia is unwilling to apply sanctions objectively in circumstances where diplomatic considerations outweigh ethical ones, such as the case of CCP officials responsible for human rights abuses in Xinjiang.
3.66The impact of this underutilisation of the existing sanctions framework and inconsistency in the application of sanctions is exacerbated by the fact that Australia consistently lags behind its global partners in applying thematic sanctions. The committee considers alignment with like-minded nations to be an important way for Australia to increase the effectiveness of its sanctions regime. Australia should always prioritise its own interests and make its own judgements about when sanctions should be applied, but where Australia’s position clearly aligns with that of our allies, delays only serve to give targets time to move assets.
3.67It is also the case that sanctions policy needs to be nimble and evolve as circumstances do. Targeted individuals, states and entities will continue to look for ways to evade sanctions, as can be seen with the continuing—arguably flourishing—trade of Russian oil and the multitude of creative ways Iranian IRGC-affiliated individuals are finding to work around sanctions. As a result, Australia and its global partners have the unenviable task of ensuring that sanctions policy outpaces evasion. We must not be complacent in this. The committee is particularly concerned by the fact that Australian money continues to flow unabated, in its billions, to the Russian Government and its war efforts through the continuing import of goods made with refined Russian petroleum.
3.68The committee urges the government to take decisive steps to address the issues identified in this report without further delay, and to offer clear avenues for stakeholders who engaged with this inquiry to provide input into the ongoing development of Australia’s sanctions policy.
Senator Dave Sharma
Chair