Even before Trump dumped nuclear pact, Canada's relations with Iran were in limbo

Canadian officials say the United States' decision to withdraw from the Iran nuclear deal may have little diplomatic or economic effect on Canada, because Ottawa and Canadian banks and businesses have kept their distance from Iran despite the end of sanctions in 2016.

Canadian officials say mistreatment of detainees has frozen talks on reopening embassy

This undated photo provided by the family of the late Iranian-Canadian professor Kavous Seyed-Emami, shows him, right, and his wife, Maryam Mombeini, in an unidentified place in Iran. Mombeini - the widow of Seyed-Emami, who died in custody in Tehran in disputed circumstances - has been prevented from leaving Iran. (Family of Kavous Seyed-Emami/The Associated Press)

The Canadian government says it expects few immediate consequences for Canada from the Trump administration's withdrawal from the Joint Comprehensive Plan of Action, better known as the Iran nuclear deal.

There will be few diplomatic consequences for Canada because, although the Trudeau government campaigned on a promise to restore diplomatic relations with Iran (suspended by the Harper government in 2012), talks are currently frozen pending the release of dual Iranian-Canadian citizen Maryam Mombeini.

And, says a Global Affairs official, there will be few economic consequences because — despite the official lifting of Canada's own sanctions on Iran in 2016 — few Canadian companies have ventured into the country to do business.

On Thursday, Foreign Minister Chrystia Freeland spoke about the issue in Washington, where she's attending NAFTA negotiations.

"We regret the U.S. decision on the [Joint Comprehensive Plan of Action.]," she said. "We believe the JCPOA is an important and useful agreement."

"I do also want to take this opportunity to say that for Canada, the key issue at the moment is the dreadful treatment of Maryam Mombeini, who has not only had to live through the terrible death of her husband, she's also unable to come home to Canada. She is a Canadian citizen, and her two sons are Canadian citizens and are in Canada.

"This is a key issue for me personally and for the government of Canada."

Foreign Affairs Minister Chrystia Freeland on Canada's relationship with Iran and former prime minister Stephen Harper's decision to speak out in support of U.S. President Donald Trump's decision to abandon the Iran nuclear deal. 1:27

Arrested for filming wildlife

Mombeini is the widow of Iranian-Canadian professor Kavous Seyed-Emami, who died in Iran's notorious Evin Prison last February after being arrested on spying charges.

He died in the same prison where Iranian-Canadian Zahra Kazemi was raped and killed by her Iranian interrogators in 2003.

His family members say Seyed-Emami was charged with espionage because he had set up wildlife cameras to record the movements of the Asiatic cheetah. The academic was a naturalist and director of the Persian Heritage Wildlife Foundation, which he helped to found.

Iranian officials claimed Seyed-Emami committed suicide in prison — a claim the family has rejected. His widow and sons were subjected to a pressure campaign by Iranian officials to stop questioning the official version of his death.

In March, Seyed-Emami's wife and two adult sons attempted to leave Iran and return to Canada, but Maryam Mombeini was prevented from boarding her flight. She hasn't been allowed to leave the country since. Canadian officials have received assistance in the case from Italy, which maintains a diplomatic presence in the Islamic Republic.

Canada appeared to be on track to reopen its Tehran mission until late last year. Two exploratory missions had visited Iran in May and October of last year.

But an official with Global Affairs, speaking on background, told CBC that all talks with Iran are now on hold until Maryam Mombeini is permitted to return home. Canada also has rejected Iran's account of the death of her husband and has demanded an explanation.

Sanctions won't bite deep here

U.S. President Donald Trump isn't merely prohibiting U.S. companies from doing business with Iran (effectively cancelling a multi-billion-dollar deal for Boeing). His administration is also applying secondary sanctions on other countries' companies if they trade with Iran.

So a Canadian company that imports Iranian goods could find itself barred from doing business in the U.S. as a result.

The threat of those secondary sanctions poses a major dilemma for some European countries and businesses. Airbus, for example, stands to lose billions of dollars in jet sales to Iran.

But Canadian government officials say few businesses here will be forced to make such difficult choices because they've mostly stayed away from Iran, despite the removal of most sanctions in 2016.

The natural conservatism of Canadian banks is one reason for that. As long as doubts lingered about the survival of the JCPOA deal — doubts fuelled by Trump's constant threats to end it — Canadian banks were mostly unwilling to handle transactions involving Iran.

They were also swayed by the fact that Canada maintained a strict export control list for Iran, even after lifting sanctions.

"Canada will continue to maintain tight controls on exports to Iran of goods and technologies which are considered sensitive from a national and international security perspective," Global Affairs Canada warned in a 'Notice to Exporters' published as it lifted most sanctions. Exporters can apply for permits to sell a wide range of products — from lasers to high-speed cameras to various types of software — but applications "will normally be denied," the notice states.

One Iranian-born Canadian, Ghobad Ghasempour, faces serious charges in the U.S. for violating similar American export controls.

Canada has also maintained a 'designated persons and entities' list under the Special Economic Measures Act, and it remains illegal for Canadians to do business with a large number of Iranian individuals and organizations, ranging from a medical university to a paint company.

Fear of falling afoul of those complicated regulations appears to have stymied the growth of Iran-Canada trade — never that large to begin with.

Global Affairs Canada also has published a post-sanctions Guide for Canadian Businesses Considering Iran. But the guide hardly inspires confidence. ("Iran is a difficult market and is still subject to a range of sanctions from Canada and other countries as well as the United Nations Security Council … Companies should be particularly cautious and seek their own independent legal counsel with regard to getting paid.")

Bombardier deal in doubt

One exception to that cautious Canadian approach has been Bombardier's regional jet division. A new Iranian airline based out of the country's Qeshm island free-trade zone announced a deal to buy ten CRJ-900 NextGen regional jets from Bombardier earlier this year.

Bombardier does far more business in the U.S. than in Iran and would be unlikely to risk its U.S. sales by proceeding with a deal that would attract American sanctions.

Also, any aircraft that contains more than 10 per cent U.S.-made components by value needs a waiver from the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) in order to be sold in Iran. The United States now seems certain to oppose such a sale.

Goldy Hyder, CEO of Hill+Knowlton Strategies Canada, told CBC News the sanctions may end up helping America's rivals.

"When there's a vacuum, it tends to get filled," said Hyder. "Ironically, the actions here could benefit Russia and China.

"Russians can sell planes now, and they've got the capacity to build those planes without 10 per cent U.S. parts or input. You've got China probably eyeing the Total property and the oil growth that's available in Iran, a very oil-rich country."

France's Total oil was poised to invest over $6 billion (Cdn) in Iran's South Pars oilfield, in a joint venture with the National Iranian Oil Company and the China National Petroleum Corporation (CNPC). If Total has to pull out because of sanctions, the Chinese company is widely expected to step up and take a majority share.

Some financial analysts say Canada's oil sector could benefit from rising crude prices following the return of sanctions. But Hyder warns that such an increase could be a double-edged sword, pushing up the Canadian dollar and interest rates as well.

About the Author

Evan Dyer

Senior Reporter

Evan Dyer has been a journalist with CBC for 18 years, after an early career as a freelancer in Argentina. He works in the Parliamentary Bureau and can be reached at evan.dyer@cbc.ca.

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