Sydney jihadi Khaled Sharrouf is wanted by the AFP.

From 9News

One of the Sydney terror suspects pictured in gruesome photos from Iraq’s battlefields has issued a statement claiming he would have carried out an attack on Australian soil, had he not left for the Middle East last year.

Khaled Sharrouf, who is wanted by federal police, said in a statement to Fairfax Media that he also demanded the release of 12 Muslim prisoners, including five men found guilty of planning a terrorism attack in Sydney.

"Tell them that if they don’t leave my sister’s alone and release my brother’s (sic) … they will be attacked and tell them dont worry about thinking who or from where cause they will never know," the 31-year-old said.

Mr Sharrouf said he was inspired to join al-Qaeda-linked fighters in Syria and then Iraq because of constant harassment by police and intelligence authorities.

He also accused Australian authorities of hypocrisy for allowing Jews to fight for the Israeli Defence Force while banning Muslims from fighting in the Syrian or Iraqi conflicts.

"We r not mad men or dysfunctional as they portray us to be [sic]. By Allah, we are the sane. Anyone who sees what is happening to the muslims around the world … and sits back and does nothing, he is insane," he said.

Police are skeptical of Mr Sharrouf’s threats, Fairfax reports, but fear his extremist rhetoric may influence followers on social media.

University of Western Sydney terrorism expert Adam Dolnik said he was "taunting the authorities from a safe distance."

"There seems to be no expectation of ever returning to Australia, let alone to carry out an attack here," he was quoted as saying.

Police issued an arrest warrant for Sharrouf and Sydney man Mohamed Elomar, after they posted images from Iraq on Twitter showing them posing with bloodied bodies including the decapitated heads of executed fighters.