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Iranian national flags fly along a highway in Tehran, Iran, on Aug. 22, 2015.

Simon Dawson/Bloomberg

The federal government will not allow Iran to set up polling stations in Canada for its upcoming presidential election – a decision that comes as the countries quietly work to re-establish diplomatic relations.

Iran's permanent representative to the United Nations in New York sent a diplomatic note to Canadian officials around April 10 requesting that polling stations be established so that Iranians in Canada could vote in the May 19 election, according to the Iranian interests section at the Pakistani embassy in Washington. Members of the Iranian-Canadian community were also pressuring the government to allow them to cast their ballots in Canada. The request was denied by the Canadian government.

A source familiar with the matter said the request could not be accommodated because the Canadian government generally requires foreign countries to set up their polling stations at their diplomatic missions in Canada. Iran doesn't have a diplomatic presence in Canada, as the two countries severed relations in 2012, so there is no appropriate place to hold the elections under the current regulations. The source also said Iran's request came too late.

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The Iranian Canadian Congress (ICC) said Ottawa's decision is disappointing, but not something they suspect will damper the efforts to renew diplomatic relations between Canada and Iran.

"It is definitely something that is not positive that Canada may not be able to accommodate the voting, but I think we should look at Canada-Iran relations long term and hope that the countries re-establish diplomatic relations at the first opportunity," ICC president Bijan Ahmadi said.

The polling station issue also came up during a phone call between Foreign Affairs Minister Chrystia Freeland and her Iranian counterpart Javad Zarif on Monday, the source said. Speaking with Mr. Zarif for the first time, Ms. Freeland also raised Canadian consular cases of concern during the call; the source would not say which specific cases were discussed.

Three Canadian government officials are in Tehran this week advocating for those consular cases and improvement of Iran's human-rights record, according to the source. It's the latest in a string of meetings between Canadian and Iranian officials, who have been quietly working behind the scenes to re-establish diplomatic relations between the two countries.

Canadian and Iranian officials have also met numerous times on neutral territory to discuss re-engagement since the Liberal government took power in November, 2015.

A Canadian government source who asked not to be named because of the sensitivity of talks said Canadian and Iranian officials met in Switzerland in May, 2016, to discuss the re-engagement process. Another source familiar with the matter confirmed that officials have also met in New York on three occasions since Justin Trudeau's Liberals formed government – twice in 2016 and once in early 2017.

Senior Global Affairs officials leading the Iran file and a senior representative from the local Canadian mission attended the meetings in New York and Switzerland. A source said officials sought clear political direction from the government heading into the meetings with their Iranian counterparts.

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Former foreign affairs minister Stéphane Dion also met his Iranian counterpart, Mr.Zarif, last September on the sidelines of the United Nations General Assembly in New York, where they discussed the imprisonment of Canadian-Iranian professor Homa Hoodfar – who was released the following week – and paths to re-engagement. Prof. Hoodfar's case had the potential to scuttle re-engagement efforts.

Canada's plan to renew ties with Iran puts its approach at odds with that of its closest ally – the United States – and could become a point of friction with President Donald Trump, who continues to take a hard line against Iran.

"If Canada was to … go in the completely opposite direction by making diplomatic progress while [Mr. Trump is] trying to roll things back, I think he would take that personally," said James Devine, an Iran expert at Mount Allison University.

Last month, The Wall Street Journal reported that the President ordered aides to toughen a State Department letter declaring Iran had complied with a landmark nuclear deal.

The ICC's Mr. Ahmadi said Mr. Trump's position does not appear to have impacted Canada's plans to renew ties with Iran. However, there is concern that the unpredictability of U.S. foreign policy and the Iranian presidential election this month could delay the re-engagement process.

"We think that President Trump should not define our foreign policy approach. Prime Minister Trudeau made a promise to change our foreign-policy approach," Mr. Ahmadi said.

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The previous Conservative government expelled Iranian diplomats from Canada and closed the Canadian embassy in Tehran in September, 2012, over concerns about Iran's support for Syria, its refusal to comply with UN resolutions on its nuclear program and its deplorable human-rights record.

While some members of the Iranian-Canadian community were eager to see Iranian diplomats go, others remain frustrated by the consular nightmare spurred by the closing of the embassy. Experts say the move also diminished Canada's voice in Iran, complicating its ability to communicate with the regime on everything from human-rights concerns to the imprisonment of Canadian citizens.

The Liberal government has openly favoured dialogue over withdrawal, especially when it disagrees with governments such as Iran. It took its first step toward easing relations with Iran in February, 2016, by lifting sanctions on Iran's financial services, imports and exports. The move came after the United States and European Union lifted sanctions under the nuclear deal led by former U.S. president Barack Obama.

Canada's most recent ambassador to Iran, John Mundy, who was expelled from Iran in 2007, said that reciprocity is critical as the governments work to re-establish diplomatic ties. That's why the Iranians will likely take issue with a Harper-era law, known as the Justice for Victims of Terrorism Act, which allows victims of terrorism to sue state sponsors of terrorism. Last year, an Ontario Superior Court judge ordered that $13-million worth of Iran's non-diplomatic assets in Canada be handed over to victims of terrorist groups sponsored by the regime.

Thomas Juneau, a University of Ottawa expert on Iran who spent 11 years at the Department of National Defence, said the law puts the Liberal government in a difficult political position.

"Delisting Iran amounts to saying Iran is not a state sponsor of terrorism."

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There are logistical concerns on the Canadian side, as the government doesn't own any property in Iran. The Canadian embassy ended its lease agreement in Tehran months after it severed relations. The Iranian embassy in Ottawa, which has sat empty since diplomats were kicked out in 2012, is owned by the Iranians.

Canada and Iran could take a number of gradual steps toward the eventual reopening of embassies and exchange of ambassadors. Mr. Juneau said both governments could start by opening interests sections in each other's countries. For instance, the Pakistani embassy in Washington houses an Iranian interests section, where Iranians can obtain travel documents.

Mr. Mundy said the governments could also appoint a chargé d'affairs – a diplomat who oversees a mission in the absence of an ambassador.

In the past, Canadian businesses were eager to re-establish relations with Iran. But now that Canada, the United States and the EU have lifted sanctions and the playing field is more even for Canadian businesses operating in Iran, the Canadian Chamber of Commerce said interest in re-engagement has toned down.

The Iranian-Canadian community is not as united on the idea of re-engagement. On one side of the argument, the Iranian Canadian Congress has supported the renewal of relations, saying the diaspora has "suffered disproportionately" since 2012 because it has been unable to access consular services.

Iranians in Canada can go to the Iranian interests section in Washington for consular services, but Mr. Ahmadi said many are hesitant to cross the U.S. border as they are concerned they will be subjected to Mr. Trump's travel ban. The ban, which has been put on hold by a U.S. federal-court order, would block citizens of Iran, Somalia, Syria, Sudan, Libya and Yemen from applying for U.S. visas for 90 days. While Iranian-Canadian dual citizens are allowed to enter the United States, Iranian permanent residents in Canada would have to apply for a waiver to do so.

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There is another faction of the community that is strongly opposed to re-engagement.

Nazanin Afshin-Jam, a prominent Iranian-Canadian human-rights activist who is married to former Conservative cabinet minister Peter MacKay, has publicly denounced Iran's "egregious human-rights record" and called on the government to shut down the Iranian embassy in Ottawa in 2012, accusing the Iranians of using the office as a recruitment centre. She warned the government against letting Iranian diplomats back into Canada.

Mr. Trudeau wanted Canada to re-establish relations with Iran soon after forming the government, according to a source, but the process proved more complicated than anticipated. The source said the timeline for re-engagement can be measured in months, with the possibility of an agreement this year.

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