And secondly, they lack financial prudence. Iran simply cannot pay back these loans, as many international observers have pointed out. The most disturbing aspect of this relationship between Australia and Iran is that it potentially allows the cash-strapped Iranian economy to sustain high expenditure on programs for weapons of mass destruction, ballistic missiles, and diversion of funds to terrorist groups. Given the principled stand Australia has adopted in support of the Chemical Weapons Convention and the Nuclear Non-Proliferation Treaty, the contradiction in its policy towards Iran embarrasses Australia in its relations with other countries, particularly the United States, which disturbingly has raised serious concerns over Australian concessionary credit arrangements. The United States has tried to lead its allies away from this path.
Most Western governments rate Iran in their highest risk, least creditworthy category.
Iran borrowed much more than it could handle, and when oil prices dropped in the early 1990s, Iran stopped making payments. By 1993, it was deep in a debt crisis. Iran has, in a very short time, shifted from a capital-importing country to one experiencing a very substantial net outflow. Keeping Iran in a net capital outflow position is of enormous benefit to the West, as it reduces Tehran's ability to finance policies inimical to our vital interests. The economic crisis has already forced the regime to delay portions of its military modernisation effort, postponing several major arms agreements.