Australia to Recognize Jerusalem as Israel’s Capital, Report Says

(Bloomberg) -- Australia will formally recognize West Jerusalem as the capital of Israel, following the lead of key ally the U.S.

Prime Minister Scott Morrison made the announcement in an address to the Sydney Institute in a move he said was aimed at advancing the stalled Middle East peace process.

“The rancid stalemate has to be broken,” Morrison said in a Q&A session after his speech.

Australia to Recognize Jerusalem as Israel’s Capital, Report Says

As part of the acknowledgment, Australia will establish a defense and trade office in West Jerusalem, although moving the nation’s embassy to the city from Tel Aviv will be delayed until the status of the city is determined under a peace settlement.

“We have decided to start the work now” to identify a suitable site for an Australian embassy in West Jerusalem, Morrison said.

Morrison warned against what he called “ritualistic denunciations of Israel,” stating “those who see foreign relations through a narrow transactional lens sell Australia short.” Australia had “earned the right” to participate in discussions about the need for a two-state solution in the Middle East.

Morrison also revealed the outcome of a review on Australia’s policy position on the Iran nuclear deal, retaining support but flagging the possibility of “autonomous sanctions” over Iran’s sponsorship of terrorism in the Middle East.

Mixed Reception

When Morrison said in October that he was considering an embassy switch, the announcement was welcomed by Israeli Prime Minister Benjamin Netanyahu but lambasted by Muslim-majority nations in Southeast Asia. Indonesia put an imminent free-trade deal with Australia on ice, while Malaysia Prime Minister Mahathir Mohamad said it could add to the causes of terrorism.

World leaders from the Vatican to Tehran denounced President Donald Trump’s decision to relocate the U.S. embassy from Tel Aviv. The contentious inauguration in May, timed to coincide with the 70th anniversary of Israel’s independence, escalated clashes between Israeli troops and Palestinians in the Gaza Strip.

It’s not clear whether Morrison intends to announce funding for the embassy switch before Australian elections expected in May. The main opposition Labor Party, which polls show is on track to win power, doesn’t support the move as it says Jerusalem’s status should be determined as part of an overall two-state solution.

Australia and Indonesia in August concluded talks that began in 2010 on a free-trade deal.

Australian Trade Minister Simon Birmingham last month signaled Canberra wasn’t likely to succumb to pressure from Indonesia, which suggested it wouldn’t sign a negotiated free-trade deal as long as Australia was considering moving its Israeli embassy to Jerusalem.

In 2017, two-way trade of goods between the nations totaled A$11.2 billion ($8 billion), making Indonesia Australia’s 14th-largest trading partner.

©2018 Bloomberg L.P.