Dangerous Relations: Teheran’s problematic partnerships and what can be done

Aug 3, 2007 | AIJAC staff

Update from AIJAC

August 3, 2007
Number 08/07 #02

This Update explores aspects of Iran’s terrorist and other troublesome external links, and some policy proposals to consider in order to curtail these.

First up, Matthew Levitt and Jake Lipton, terrorism experts at the Washington Institute for Near East policy, look in detail at the Iran-Hezbollah alliance 13 years after Hezbollah’s most notorious terror attack abroad, the AMIA bombing in Buenos Aires, Argentina. In particular, they highlight the role played by financial links in facilitating Hezbollah’s activities, and ways to target these links as a way to help neutralise Hezbollah. For their full discussion, CLICK HERE.

Next up, another Washington Institute terrorism expert, Michael Jacobson, looks at the broader issue of cutting off illicit or nuclear or terror-related financial transactions by Teheran. Jacobson, a former government expert on terrorist finance, says US government efforts are already hampering Iran’s ability to make such transactions through international financial institutions, but the key to greater effectiveness is gaining endorsement from “a multilateral body or international organization” for special scrutiny of Teheran’s efforts. He identifies a body which can and should fulfil this role, called the FATF. To read his full policy proposal, CLICK HERE.

Finally, author and terror analyst Daveed Gartenstein-Ross offers up a more general summary of Iran’s problematic activities across the Middle East and beyond, and predicts a ramping up of these efforts in coming weeks and months. He points to intelligence indicating Iran is considering a big push to try to drive the US out of Iraq now that the debate over the “surge” is at a height, and to a variety of areas in which Iran can try to increase the pressure, beyond what it is already doing in Iraq. For the basis for his prediction of increased Iranian efforts, CLICK HERE.

Dangerous Partners: Targeting the Iran-Hizballah Alliance

Matthew Levitt and Jake Lipton

PolicyWatch #1266
Analysis of Near East policy from the scholars and associates of The Washington Institute   
July 30, 2007           
July 18 marked the thirteenth anniversary of Argentina’s deadliest terrorist attack: a 1994 car bombing carried out by Hizballah at Iran’s behest. The attack targeted the Asociación Mutual Israelita Argentina (AMIA), a Jewish community organization, killing 85 and wounding more than 200. Last week also saw the release of a new National Intelligence Estimate (NIE) warning of an increased likelihood that Hizballah could attack U.S. soil if it, or Iran, feels directly threatened by the United States. Washington continues to take action against the organization, but given Hizballah’s impressive fundraising capabilities and Iranian support — both highlighted recently by Argentinean officials involved in the long-running AMIA case — the task is challenging.
Operations in Argentina, Connections to Iran
In late 2006, an Argentinean special prosecutor released a detailed report on the AMIA bombing, issuing arrest warrants for high-level Iranian officials and Hizballah members involved in the attack. According to a U.S. State Department assessment, “members of the Iranian government’s highest echelons planned out how the attack would occur and entrusted its execution to the Lebanese terrorist organization [Hizballah].”
Indeed, the bombing was an archetypal example of Iran’s direct sponsorship of Hizballah. The Argentinean investigation concluded that Tehran transferred at least $152,812 to accounts controlled by Mohsen Rabbani, a Shiite cleric who at the time held diplomatic immunity as a cultural attaché at the Iranian embassy in Buenos Aires. Rabbani was responsible for coordinating logistical details and procuring materials (e.g., vehicles and explosives) for the attack. Arrest warrants were issued for nine others, including former Iranian president Ali Akbar Rafsanjani and Hizballah operations chief Imad Mughniyeh. Rafsanjani was charged with “heading the intelligence office whose main function was to devise a preliminary plan to attack Argentina,” Mughniyeh with “overseeing the complex operations of Hizballah overseas, and was a specialist in recruiting soldiers for foreign operations, reporting to no one else but Iran.”
 The findings from Argentina suggest that Iran has long used Hizballah as a militant extension of its foreign policy. Similar to the U.S. NIE warning about potential Hizballah attacks in the United States, a June 2006 report issued by British authorities warned “of an increased threat to the U.K. from Iranian state-sponsored terrorism should the diplomatic situation deteriorate.” All of these reports make clear that Hizballah would conduct an attack abroad if asked to do so by Iran. As Hizballah secretary-general Hassan Nasrallah once remarked, “If [Iranian Supreme Leader Ayatollah Ali] Khamenei would tell me to divorce my wife, I would do it.” Accordingly, actions targeting financial, operational, or logistical links between Hizballah and Iran are critical to undermining the organization’s ability to conduct operations of its own or Iranian design.
New Designation
 Last week, the U.S. Treasury Department designated a parastatal Iranian organization as a key link between Tehran and Hizballah. The latest in a series of ongoing measures intended to prevent Hizballah from raising funds either abroad or in the United States, the designation targeted the Iran-based Martyrs Foundation (Bonyad-e shahid) for “provid[ing] financial support to the families of killed or imprisoned Hizballah and PIJ [Palestinian Islamic Jihad] members, including suicide bombers in the Palestinian territories,” and for being “directly involved in Hizballah operations against Israel during the July–August 2006 conflict.” Two individuals intimately involved in the foundation’s operations — Qasem Aliq and Ahmad al-Shami, who concurrently serves as director of the previously designated Hizballah construction arm Jihad al-Bina — were also designated.
The United States is not the first nation to highlight the relationship between the Martyrs Foundation and Hizballah. In 2001, Paraguayan police searched the home of Hizballah operative Sobhi Mahmoud Fayad in Ciudad del Este, a town in the Tri-Border Area between Brazil, Argentina, and Paraguay. There, they found Martyrs Foundation receipts for donations by Fayad totaling more than $3.5 million. Authorities believe he had sent more than $50 million to Hizballah since 1995. According to press reports, Iran has traditionally funded Palestinian dissident groups in the Lebanese refugee camps, including Munir al-Maqdah, through the foundation’s Palestinian branch.
In the United States, a Martyrs Foundation satellite office in Dearborn, Michigan — the Goodwill Charitable Organization (GCO) — was also designated for instructing “Hizballah members in the United States to send their contributions to GCO and to contact the GCO for the purpose of contributing to the Martyrs Foundation.” The same day GCO was designated and raided, federal agents raided the offices of another Hizballah-linked organization, the al-Mabarrat Charity Association. Although it was not designated, the charity has long been under a heavy cloud of suspicion.
In 2003, for example, then–Lebanese finance minister and current prime minister Fouad Siniora was barred from entering the United States because of a donation he made to al-Mabarrat in 2000. The charity, headed by former Hizballah spiritual leader Muhammad Hussein Fadlallah, raised $954,027 in 2005. Just last week, Fadlallah — who is on the Treasury Department’s list of specially designated terrorists and maintains close ties with Hizballah — asserted in a Washington Post online forum that “jihad is confronting violence by means of violence and force by force, which makes it of a defensive nature at times and a preventive one at others.”
Difficult Challenge
Targeting Hizballah’s finances is difficult for two key reasons: the organization receives significant support from Iran, and it raises considerable funds autonomously. Regarding the former, Western diplomats and Lebanese analysts have estimated that Hizballah receives close to $200 million a year from Iran. Tehran provides additional funding when needed, such as contributing to the estimated $300 million spent by Hizballah as a result of its summer 2006 war with Israel. Beyond this tangible support, Iran also provides Hizballah with training and help in logistical operations. Indeed, many of Hizballah’s global activities — financial, logistical, and operational — are, at some level, overseen by Iranian officials.
In addition to Iranian funding, Hizballah has become an adaptive financial adversary, often forcing investigators to engage in cat-and-mouse games. For example, according to the recent Treasury Department designation of loan agency al-Qard al-Hassan (AQAH), “[A]s of February 2007, bank accounts of [previously designated] Bayt al-Mal and Yousser Company were changed and re-registered in the name of senior employees of AQAH. Further, after the majority of Bayt al-Mal’s offices were destroyed during the summer 2006 conflict, Hizballah transferred a portion of its financial activity to AQAH, giving Hizballah access to the international banking system.” Bayt al-Mal and Yousser had been designated in September 2006 for “function[ing] as Hizballah’s unofficial treasury, holding and investing its assets and serving as intermediaries between the terrorist group and mainstream banks.”
The latest NIE highlights the significance of Iran’s support for Hizballah. Undoubtedly, the 1994 AMIA bombings could not have occurred without Iranian authorization and support; reports have detailed Tehran’s leading role from the planning through the execution of the attack. This level of assistance continues unabated today. Targeting the financial links between Iran and Hizballah — as the Treasury Department did last week — is critical to undermining the organization’s capability to conduct operations at home and abroad.
Matthew Levitt is director of The Washington Institute’s Stein Program on Terrorism, Intelligence, and Policy and former deputy assistant secretary for intelligence and analysis at the Treasury Department. Jake Lipton is a research assistant at the Institute.


What to Do about Teheran’s Money-Laundering

Michael Jacobson

Jerusalem Post, July 30, 2007                                                                                                                                                                     
As the US presses for a stronger UN Security Council resolution on Iran, the Treasury Department continues its international outreach to highlight Iran’s illicit financial activity. While the Treasury-led campaign has achieved considerable success, this initiative would be far more effective if the US was not the only voice decrying the risk that Iran’s deceptive 

Over the past year and a half, senior Treasury officials have traveled the world, briefing their finance ministry counterparts and the private sector on the range of Iran’s deceptive financial activity. This includes: Iran’s use of front companies; frequent requests by Iranian state-owned banks to remove their names from financial transactions; and the involvement of these same banks in Iran’s nuclear and missile programs and terrorist financing.
In light of this, the Treasury Department has argued that doing business with Iran is a risky endeavor, and could ultimately cause great reputational harm to those associated with the regime.
 Major international financial institutions have been responsive to the Treasury pitch. According to Treasury, global institutions — including Switzerland’s UBS and Credit Suisse and the UK’s HSBC — have either terminated or dramatically reduced business with Iran. Both the potential reputational risk and the prospect of being shut out of the US market were likely factors in their decisions.
Unfortunately, Treasury has not achieved success across the board. Recent reports indicate that smaller banks are beginning to step in as the larger ones withdraw, and a number of financial institutions have only stopped engaging in dollar transactions with Iran. Additionally, many other types of companies are still eager to do business with Iran, despite the US warnings.
One reason why Treasury has not produced more wide-scale results is that the US has been alone in emphasizing this important message about the risks to the international financial system. Although the US warnings carry enormous weight, there are many companies and financial institutions which do not do business in the US, and are less concerned about invoking America’s wrath.
 To have a broader impact, the US must encourage a multilateral body or international organization to step into this void to reinforce the American message. One organization that would be well positioned to do so would be the Paris-based Financial Action Task Force, a relatively obscure, but potentially powerful international body, which seeks to set global standards on combating money laundering and terrorism financing. Launched by the G7 in 1989, FATF includes 31 member countries, including the US and the European Commission.
FATF should be pressed — through the UK, its sitting president — to blacklist Iran. This is a practice FATF has used regularly and effectively in the past. For example, until fairly recently, FATF maintained a list of Non-Cooperative Countries or Territories (NCCT).
The purpose of the NCCT list was to identify those countries that have not adopted adequate measures to combat money laundering and terrorist financing, in order to “reduce the vulnerability of the financial system.”
Iran certainly qualifies for a spot on a FATF list. The Iranian banking system has no meaningful anti-money laundering controls. Iran’s efforts to address terrorist financing are non-existent — hardly surprising in a country that US government officials have described as the “central banker of terror,” and where support for terrorist groups is official government policy.
In fact, Iranian state-owned financial institutions have played a role in furthering the government’s illicit activity. For example, Bank Saderat has been involved in transferring funds to terrorist groups and Bank Sepah has provided financial services to support Iran’s ballistic missile program.
Being placed on the FATF blacklist would be a serious blow to the regime. FATF blacklisting generally has two effects. First, it puts pressure on countries to improve their anti-money laundering and counterterrorism financing regimes. Second, it alerts the private sector of the business risks associated with that particular jurisdiction.
While Iran would be unlikely to make the necessary systemic changes, a listing could help put additional economic pressure on Teheran by making the private sector more reluctant to do business with Iran. Financial institutions — which are extremely concerned about their reputations — would be particularly leary of doing business as usual with Iran under these conditions. In fact, financial institutions are specifically instructed by FATF to give “special attention to business relations and transactions” with entities from listed jurisdictions.
Were Iran listed by FATF, past history suggests that many governments would follow suit, placing Iran on their own domestic blacklists. This could have a significant impact, particularly if Iran’s main business partners in Europe or Asia were to act. While some companies and financial institutions may not heed US or FATF cautions, they would be far more reluctant to ignore the proclamations of their supervisory regulatory agencies.
Treasury has been beating the drum about Iran’s illicit financial activity for some time now. While Treasury should continue to emphasize this message, it should also focus on getting others to publicly join this fight.
Iran’s abuse of the financial system to further the regime’s dangerous goals should be of great concern not only to the US, but to all of those with responsibility for protecting the security and integrity of the global financial system.
The writer is a senior fellow in the Stein program in terrorism, intelligence and policy at The Washington Institute for Near East Policy and a former senior advisor in Treasury’s Office of Terrorism and Financial Intelligence.


Hot in Tehran

By Daveed Gartenstein-Ross

National Review Online, July 27, 2007

On the same day that Tony Blair debuted in Portugal as Middle East envoy for the Quartet, a group attempting to advance peace efforts in the Middle East, another kind of meeting convened in Syria. Iranian president Mahmoud Ahmadinejad met in Damascus on July 19 with leaders from Syria, Hizballah, and Hamas to chart a different course for the Middle East. Asked in a joint press conference with Syrian president Bashar al-Assad if he expected another “hot summer,” Ahmadinejad said, “We hope that the hot weather of this summer would coincide with similar victories for the region’s peoples and with consequent defeat for the region’s enemies.”

Indeed, although a number of conflicts could erupt in a variety of Middle Eastern countries this summer, Iran is the common denominator among them. Iran’s leaders understand that they have a real chance to drive the United States out of Iraq and substantially weaken the U.S.’s position in the region.

Iran’s most obvious maneuverings have been in Iraq, where it has long aided insurgent factions. During a recent trip to Baghdad, where I was embedded as a reporter, I found that virtually every American soldier feared the explosively formed projectile (EFP). This kind of bomb has been described as uniquely dangerous because “when it detonates, the concave end blows outward and melts into a bullet-shaped fragment that slices through armor and flesh.” Captain Greg Hirschey of the Army’s 717th Explosive Ordnance Disposal Company told Wired of an incident where an EFP went through a Humvee, taking off both of the driver’s legs and also an arm. Lieutenant Patrick Henson of the 2nd Battalion, 32nd Field Artillery told me that he saw video in which an EFP went straight through a heavily armored Humvee and left an impact on the curb on the other side of the road. (Several Army sources corroborated his account.) Iran has been providing Shia insurgents with these deadly weapons. In 2005, Time reported that Iranian operative Abu Mustafa al-Sheibani, who headed an insurgent network created by the Iranian Revolutionary Guard Corps, introduced EFPs to Iraq. In February of this year, the American military stated that EFPs had killed “170 American and coalition troops in Iraq,” and the numbers have continued to rise since then.

Iran has also trained Shia insurgent factions. Recently, U.S. military spokesman Brig. Gen. Kevin J. Bergner said that Shia insurgents have been “taken to Iran in groups of 20 to 60 for training in three camps ‘not too far from Tehran.’” According to Brig. Gen. Bergner, when they returned to Iraq, the trainees “formed units called ‘special groups’ to carry out attacks, bombings and kidnappings.”

It seems that Iran has even provided active direction to Shia militias. Brig. Gen. Bergner stated in a press conference that U.S. forces recovered a 22-page planning and lessons learned document relating to the January 20 attack in Karbala, in which 12 men disguised as U.S. soldiers mounted an attack that killed five. He noted that the document shows that Iran’s elite Qods force “had developed detailed information regarding our soldiers’ activities, shift changes and fences, and this information was shared with the attackers.” Iran also likely provided the attackers with “American-looking uniforms, vehicles and identification cards” that helped them penetrate their target and “achieve surprise.”

Although it is a Shia theocracy, Iran has not limited itself to support of Shia insurgents. In January, the New York Sun reported that Iranian documents captured by American forces showed that Iran also supported Sunni insurgents. U.S. Army Maj. Gen. William Caldwell, the military’s chief spokesman in Iraq, has also stated this publicly in press conferences. In addition to trying to drive the U.S. out of Iraq, Iran’s support for Sunni insurgents seems to be a form of hedging its bets by providing something of value to all insurgent factions.

Analysts believe that the fact that the administration has staked so much politically on how much progress is made by September provides Iran with an incentive to ramp up violence in Iraq during August.

Nor is the chaos in which Iran has involved itself limited to Iraq. The country that was central to the long, hot summer of 2006 — Lebanon — sits directly to the west of Iran’s strategic partner Syria. With elections just around the corner, chaos could again break out in Lebanon this summer.

The political situation in Lebanon has been precarious since Syrian withdrawal in 2005. One of the most destabilizing forces has been Hezbollah, which is strongly aligned with Iran: the first generation of Hezbollah’s leadership pledged their loyalty to Iranian revolutionary leader Ayatollah Khomeini in Lebanon’s Bekaa Valley in 1982, and since then Iran has been a primary source of financial support and training for Hizballah’s fighters.

Hezbollah’s war against Israel last summer was dramatically destabilizing. There has also been a rash of political assassinations inside Lebanon. While suspicion for these incidents focuses on Syrian intelligence, high-ranking sources in American intelligence believe that Hezbollah facilitated the assassinations by aiding the assassins’ entry into Lebanon, helping to put them in a position where they could carry out the attacks, and facilitating their exit. (Hezbollah, it should be noted, receives sponsorship from Syria as well as Iran.) Hezbollah also played a small but not insignificant role in the recent month-long struggle between Lebanon’s military and the militant Fatah Islam group, which had been holed up in a refugee camp outside Tripoli. During this conflict, Hezbollah made noise about siding with the Sunni militant group against Fouad Siniora’s government.

Hezbollah also periodically leads street protests with the explicit purpose of toppling Lebanon’s government. This is a powerful symbol of the Siniora government’s impotence, as the street protests have been able to paralyze the capital city of Beirut. Lebanon’s military is not up to the task of clearing Hezbollah out.

Iran’s reach extends also to the Palestinian territories, which have been wracked by violence between Hamas and Fatah. Iran contributed to the violence that flared up in the Gaza Strip in June: Iran, Syria, and a number of private Saudi donors emboldened Hamas by proclaiming their unconditional support. This helped to give Hamas the confidence it needed to take over the Gaza Strip, where it seized Fatah’s compound and forced Palestinian president Mahmoud Abbas to declare a state of emergency. As Egyptian foreign minister Ahmed Abul Gheit stated, “Iran’s policies encouraged Hamas to do what it has done in Gaza.” Indeed, as Hamas’s number one single donor, Iran has a great deal of leverage over the group.

Chaos in the Palestinian territories always presents a risk of escalation. Israel often faces violent provocations from those areas. If last summer’s battle against Hezbollah demonstrates one thing, it is that Israel is hesitant to back down from a fight. Israel already fought something of a two-front war against Iranian clients last summer, as it fought Hezbollah in Lebanon and Hamas in the Gaza Strip. Both Hezbollah and Hamas are stronger now than they were last summer.

There are other areas where Iranian actions are of great concern. Al Qaeda leaders who are under “house arrest” in Iran, such as Saif al-Adl and Saad bin Laden, have reportedly been able to communicate with the outside world. In his book At the Center of the Storm, former CIA chief George Tenet reveals that while al-Adl was in Iran, senior al Qaeda leaders in Saudi Arabia were able to seek his advice as they negotiated the purchase of Russian nuclear devices. Al-Adl replied that no price was too high, but cautioned “that al Qaeda had been stung by scams in the past and that Pakistani specialists should be brought to Saudi Arabia to inspect the merchandise prior to purchase.”

Meanwhile, Iranian presence is visibly increasing in South America’s tri-border region. Hezbollah also has a presence in Venezuela, where it maintains a base in Margarita Island. The increasingly cozy relationship between Ahmadinejad and Venezuelan president Hugo Chavez — and in particular, their announced “axis of unity” — makes it likely that Hezbollah’s presence will continue to grow there. Hezbollah also has a presence in the United States, with past involvement in drug trafficking, counterfeiting, and sending money and equipment back to the Middle East. Although there are no known instances of Hezbollah cells in the U.S. going beyond logistical support for the terrorist group and becoming “operational,” this is not outside the range of possibility. Several Hezbollah cells have cased potential targets, and operatives who have had military training could be turned operational without great difficulty. The most recent National Intelligence Estimate certainly considers this a risk, noting that Hezbollah “may be more likely to consider attacking the Homeland over the next three years if it perceives the United States as posing a direct threat to the group or Iran.”

Against this backdrop, Iran continues to pursue its nuclear capabilities. Although estimates within the intelligence community concerning how far along Iran’s nuclear development has come vary widely, the bottom line is that Iran does not appear to be backing down in its pursuit of nuclear weapons.

In its actions, Iran is pursuing multiple goals. Since the 1979 revolution, it has tried to position itself as a regional hegemon, and the past five years have made these designs more likely. Nuclear development fits neatly with Iran’s hegemonic ambitions, and seems tied to the regional chaos that it has stirred up. As Ahmed Al-Jarallah, editor-in-chief of Kuwait’s Arab Times, wrote in a recent editorial, “[w]henever the US forces Iran into a corner over its nuclear programme, Tehran works hard to shift this battle to Arab countries.” Indeed, last summer the conflict between Israel and Hezbollah was precipitated the same day that Iran was supposed to report to the International Atomic Energy Agency about its nuclear program: Hizballah’s incursion into Israel came on July 12, the date of the IAEA deadline.

According to a senior American military intelligence source, Iranian factions are debating whether they would like chaos to embroil multiple areas in August and September in a bid to force the United States out of Iraq. Some factions disagree, arguing that it would be foolish to fight a war on so many fronts, and that they should conserve their resources for the U.S.’s withdrawal from Iraq.

Expect Iran to turn up the heat in Iraq in August. But don’t be surprised if Tehran’s “global warming” agenda reaches far beyond that.

— Daveed Gartenstein-Ross is the vice president of research at the Foundation for Defense of Democracies, and the author of My Year Inside Radical Islam.



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