''They are immediately concerned that Iran's pursuit of nuclear capabilities would lead to a conventional war - or even nuclear exchange - in the Middle East involving the United States that would draw Australia into a conflict.'' Australian concerns about a possible Israeli military strike against Iran are also recorded in another US embassy cable, sent to Washington in December 2008, reporting on discussions between Peter Varghese, then chief of Australia's peak intelligence agency, the Office of National Assessments (ONA), and the then head of the US State Department's Bureau of Intelligence and Research (INR), assistant secretary of state Randall Fort. The embassy's report of the meeting says that ''ONA seniors and analysts were particularly interested in A/S Fort and INR's assessments on Israeli 'red lines' on Iran's nuclear program and the likelihood of an Israeli strike against Iranian nuclear facilities''. An earlier cable, sent in July 2008, records that former prime minister Kevin Rudd was ''deeply worried'' that Iranian President Mahmoud Ahmadinejad's intransigence concerning Tehran's nuclear program meant that the window for a diplomatic solution was closing and that ''Israel may feel forced to use 'non-diplomatic' means''. Last week Mr Rudd called on Israel to sign the nuclear non-proliferation treaty as part of a broader effort to establish the Middle East as a nuclear-weapon-free zone.

The US embassy's March 2009 report told Washington that the Australian government was ''more broadly concerned about the potential for renewed nuclear proliferation in the Middle East, driving south-east Asian states to abandon the [nuclear non-proliferation treaty] and pursue their own nuclear capabilities, which could introduce a direct threat to the Australian homeland''. Australian intelligence views on Iran were solicited by US officials in response to a request from Washington to ascertain reactions to the possibility that the US might seek to discuss regional security issues with Tehran. The US embassy cables confirm the presence in Canberra of representatives of all US national intelligence agencies: the CIA, the National Security Agency, the National Reconnaissance Office, the National Geospatial Agency, the Defence Intelligence Agency and the FBI. US intelligence liaison officers engaged all their Australian counterpart agencies on the Iran question including ONA, the office of the National Security Adviser, the Department of Foreign Affairs and Trade, the Australian Secret Intelligence Service, the Defence Intelligence Organisation, the Defence Signals Directorate, the Defence Imagery and Geospatial Organisation, the Defence Science and Technology Organisation, and the Australian Security Intelligence Organisation. In its July 2009 report to Washington, the embassy noted that the Australian intelligence community had ''increased its collection and analytic efforts on Iran over the past decade, demonstrating Australia's strategic commitment to engage substantively as a significant US partner on Iran''.

US diplomats expressed ''high confidence'' that the Australian government would have no objections to US efforts to engage Iran, noting that while Australian troops remain stationed in Afghanistan ''the Australians will look to increased US engagement with Iran to improve upon creating a realistic framework for an accelerated reduction and eventual cessation of Iranian support to the Taliban, al-Qaeda and related groups, and Hezbollah. Simultaneously, Australia will look for increased US-Iranian engagement to lead to a more stable governance environment for Afghanistan, Pakistan, Iraq, and the Levant.'' The US embassy's cable on the December 2008 intelligence exchange in Iran reported ONA director-general Varghese's view that possible conflict between Israel and Iran ''clearly represented the greatest challenge to [Middle East] stability''. ONA analysts said the Iranian government appeared determined to acquire nuclear weapons, though this was probably driven by the desire to deter Israel and the US rather than an intention to strike against other Middle East states. ''ONA viewed Tehran's nuclear program within the paradigm of 'the laws of deterrence,' noting that Iran's ability to produce a weapon may be 'enough' to meet its security objectives,'' the US embassy reported. ''Nevertheless, Australian intelligence viewed Tehran's pursuit of full self-sufficiency in the nuclear fuel cycle, long-standing covert weapons program, and continued work on delivery systems as strong indicators that Tehran's preferred end state included a nuclear arsenal.''

ONA analysts told their US counterparts they were not alone in this assessment, asserting that ''while China and Russia remain opposed to it, they view Iran's acquisition of nuclear weapons as inevitable''. However, ONA urged a balanced view of Tehran as a sophisticated diplomatic player rather than a ''rogue state'' liable to behave impulsively or irrationally. Mr Varghese said ONA was telling the Australian government: ''It's a mistake to think of Iran as a 'rogue state'.'' Loading The embassy cable reported: ''ONA analysts assessed that Tehran 'knows' about its lack of certain capabilities, but plays 'beyond its hand' very skilfully … ONA judged that Iran's activities in Iraq - both overt and covert - represented an extreme manifestation of Iranian strategic calculus, designed to 'outflank' the US in the region.''

However the Australian intelligence analysts ''asserted that … the most effective means by which Tehran could ensure its national security would be a strategic relationship with the US via some 'grand bargain'.''