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Trump effect, strained relations costing Canadians 'golden opportunity' in Iran's oilfields

While Europeans have seized lucrative investment opportunities in Iran, Canadians have lagged behind

Nahlah Ayed, Stephanie Jenzer, Richard Devey - CBC News

March 09, 2017

Reza Golhaki is the health, safety and environment supervisor at an oil-processing facility built with China’s help in Iran's oil-rich Khuzestan province. (Nahlah Ayed/CBC News)

On the lonely drive deep into Iran's southwest, the barren landscape gives away little, interrupted only by the occasional caravan of camels, or the glow of a distant flame.

Still, our escorts from the Ministry of Petroleum politely ask us to refrain from filming.

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This is Iran's coveted oil territory, and it is sensitive terrain.

Khuzestan province is up against the border with Iraq, once the front line in the calamitous war between the two countries in the 1980s.

It's also replete with untapped oil and home to Iran's biggest oilfield — and its boldest sales pitch.

A steady trickle of foreigners have been visiting, more than usual in this remote part of Iran.

Once inside the perimeter of a lustrous processing facility, we are allowed to do all the filming we want.

Barely a year old and built with China's help, the oil-processing facility has reached an output of 80,000 barrels per day and rising. (Nahlah Ayed/CBC News)

With China's help, a state-owned oil company constructed the facility while Iran was still under international sanctions. It is a model of international co-operation Iran is now looking to duplicate with Western outfits.

"This is our future," said Reza Golhaki, the health, safety and environment supervisor at the site, and our guide for the day.

"We'd be grateful working with the Canadians as well."

More than a year after sanctions against Iran were lifted in exchange for putting its nuclear program on ice, the country has opened up to Western investment.

Foreign companies have rushed in and signed billions of dollars worth of contracts since sanctions were lifted in Iran. (Nahlah Ayed/CBC News)

Tens of billions in contracts have been signed, says Cyrus Razzaghi, an Iranian-Canadian who runs ARA Enterprise, a Tehran-based business consulting firm. Companies like France's Airbus, even Boeing in the U.S., have closed deals, the latter to the tune of $16.6 billion US for new jets — the biggest contract with a Western firm since the 1979 revolution.

Oil giants are also on the verge.

After years of withering under quarantine, the largely state-owned industry needs outside investment. It also requires new oil-recovery technology. The kind Canadians have in spades.

But while Europeans rushed in for once-in-a-lifetime opportunities, Canadians have lagged behind. Holding them back, partly, are Ottawa's still-strained relations with Iran and the unexpected election of U.S. President Donald Trump.

Strained ties

The Iran Aseman Airlines flight from Tehran into Ahvaz embodies Iran's problems and its promise.

The plane is a worse-for-wear Boeing 727-200 — a model first manufactured by the U.S. company in the '60s. A relic of the pre-sanctions era.

Yet it is ferrying people from abroad with knowledge of the latest in oil-recovery technology right into the heart of Iran's oil country.

Aseman Airlines, Iran’s aging fleet of regional aircraft, presents an opportunity for outside manufacturers like Canada’s Bombardier to potentially enter the Iranian market. (Stephanie Jenzer/CBC News )

It was at the airport in Ahvaz, capital of Iran's oil-rich Khuzestan province, where we met Iranian-Canadian businessman Ehsan Ghayoominia. He had just finished showing a potential Canadian client around. Unsurprisingly, several of his clients are Albertans, still suffering the effects of the oil crash.

Ghayoominia remembers watching the nuclear talks closely. He says he considered the apparent determination of the negotiators, and the terrible prospects in Alberta where he worked, and came up with a plan: he would move to the country where he was born to a family steeped in the oil and gas business and start his own firm.

"I saw an opportunity," he said at his Tehran offices. He decided he would "bring Canadian companies to Iran and also bring new technologies to Iran."

"So that way we benefited both the countries."

The Trudeau government says its policy for re-engaging with Iran remains 'cautious and incremental.' (Jonathan Hayward/Canadian Press)

In light of the nuclear deal, the Canadian government lifted some of its sanctions to make it easier for Canadian companies to enter the Iranian market.

It also downgraded its warning against all travel to Iran.

Canadians have shown interest. Ghayoominia says he has several serious Canadian clients.

Even Canadian giant Bombardier is seeking to carve out a slice of the aviation market.

But the large number of Europeans coming to Iran — and the Peugeots and Citroens on the congested streets — is an indication of who is pulling ahead in this race.

A shot of Tehran on a smog-free winter day. Iran is in the market for everything from planes and trains, to fashion and cosmetics. (Stephanie Jenzer/CBC News)

"We took the delivery of the first [Airbus] aircraft after almost four decades. That's a good sign," said Razzaghi. "So I am very optimistic."

And yet Canadian companies have been cautious.

A major concern is that Canada has no diplomatic presence in the country. Canada, the U.S. and Saudi Arabia are the only G20 countries without embassies in Tehran.

'A lot of what I'm doing is what really the Canadian Embassy should be doing, answering their questions, their concerns.' Iranian-Canadian businessman Ehsan Ghayoominia

The rupture occurred in 2012 when Stephen Harper's government decided to shutter its embassy in Tehran and expel Iranian diplomats from Ottawa, citing security concerns and opposition to Iran's regional policies.

Ghayoominia says he's trying to bridge the gap for potential Canadian investors.

"A lot of what I'm doing is what really the Canadian Embassy should be doing, answering their questions, their concerns."

There are questions about the sturdiness of the nuclear deal, since both the U.S. and Iran have constituencies who would prefer to see it die.

Donald Trump's evolving hard line on Iran adds to the uncertainty.

U.S. President Donald Trump says the nuclear agreement that lifted tough sanctions against Iran is the 'worst deal ever made.' (Jonathan Ernst/Reuters)

The Trump effect

Trump is a merciless critic of the nuclear deal. He calls it the "worst deal ever made," a cash infusion for the terrorist groups Iran finances.

And when he was elected, Washington's stance on the deal it helped negotiate changed overnight.

Iran points out all the world's major powers signed on to the deal — putting aside longtime concerns about who owns what in Iran, and who exactly benefits from the lifting of sanctions on state-owned businesses.

Tehran warned that if Trump tears up the deal, it could quickly restart its nuclear program.

"We will deliver what we have committed to, that's for sure, and we expect the same thing from the other side," Ali Akbar Salehi, Iran's atomic energy chief and vice-president, told CBC News in an interview in January.

"I think both countries have to take this opportunity seriously to not destroy the trust which has been built up."

Ali Akbar Salehi, Iran's atomic energy chief and vice-president, says Iran could quickly restart its nuclear program if Trump kills the deal. (Stephanie Jenzer/CBC)

Tehran has pressed on, meanwhile, with its ambitious sales pitch. But for potential foreign investors, the Trump effect has caused a detectable chill.

"Now the attitude of foreign investors is like, 'Wait and see,'" said Razzaghi.

Cold feet

Things have only gone from bad to worse.

Trump included Iranians on his list of banned migrants. Then, just nine days into his presidency, Iran tested a new type of ballistic missile.

The Trump administration "put Iran on notice," then imposed new sanctions.

Potential investors with strong ties to the U.S. — like Canadian companies — became even more guarded. Some, like British Petroleum, got cold feet and walked away.

Cyrus Razzaghi moved from Vancouver to Tehran three years ago to run a trade consultancy. He sees Canada lagging behind European countries pursuing business opportunities in Iran. (Stephanie Jenzer/CBC News)

Bahram Rezaie, head of a private oil service company, says the Trump effect suspended his talks with two Canadian firms.

"Both of them suddenly decided not to continue the relationship although they claim they spent several hundred thousand dollars on lawyers," he said.

"One … was the same day Trump was elected."

It didn't help when even a former Norwegian prime minister was questioned upon arrival in Washington because of an Iranian visa stamp in his passport.

The Trump effect could also be influencing how quickly Ottawa re-engages with Iran — and its advice to Canadians seeking to do business there, according to sources familiar with those conversations. 

'Cautious and incremental'

The Trudeau government says nothing has changed.

A Global Affairs spokesperson said Ottawa's approach to re-engaging Iran has always been "cautious and incremental."

Potential investors are advised to approach the market "cautiously," and ensure they comply with "Canadian and ongoing UN sanctions" and U.S. trade law.

Despite the complexities, the deal-making continues. Including with Canadians.

It is, after all, the last major emerging market opportunity in the world, says Peter Sibold, CEO of Globex Business Centres Inc., a Canadian company that's about to open a serviced business centre in north Tehran for use by visiting investors.

"We've already pre-booked about half the work stations with European and Asian companies," he said.

"Iran is going to be a golden opportunity."

The historic markets of Tehran’s Grand Bazaar run along corridors that stretch several kilometres. (Stephanie Jenzer/CBC News)

Meanwhile, some 50 oil and gas fields were opened to bids from foreign companies. Memorandums of understanding and preliminary deals have been signed with France's Total and Russia's Gazprom.

There is no indication the Boeing deal, which will support tens of thousands of U.S. jobs, is being scuppered — suggesting perhaps some pragmatism on Trump's part.

But mostly, Canadians are missing out, says consultant Razzaghi.

"Canada can be a great partner," he said. "There are political issues that need to be addressed before that can happen … I think it's a matter of time."

More CBC News reports on Iran:

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