Canadian firms look to Iran to offset losses amid planned sanctions lift

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Corporate Canada is poised to capitalize on Ottawa's planned lifting of sanctions against Iran, with oil and gas companies and aerospace firms in particular looking to the Middle East nation to help offset the deep challenges hitting their industries.

Though most Canadian corporations remain hesitant to talk publicly about Iranian opportunities as long as sanctions remain legally in place, lawyers specializing in international trade and investment say their phone lines have been busy with business people seeking advice about the country.

"Interest is very high," said John Boscariol, a trade specialist with McCarthy Tétrault in Toronto, whose clients include companies involved in oil field services and extraction technology.

"When you think of it, aerospace and oil and gas especially are suffering in this country. And we're talking about an emerging market of 80 million people in the Middle East that are highly educated, young, highly motivated. This is going to be a huge light, I'd say, on a desolate landscape in the international economy."

Petroleum Services Association of Canada president Mark Salkeld said his members are showing increasing interest in Iran and that the association "has met with a couple of delegations from Iran in preparation for this outcome." He declined to say which companies are involved.

Foreign Affairs Minister Stéphane Dion said earlier this week that Canada will act "in a speedy fashion" to remove economic sanctions against Iran and normalize relations. But he gave few details of the steps to be taken beyond a plan to reinstate permission to sell civilian aircraft into the country. A number of Canadian allies such as the European Union and Australia have already moved to lift sanctions against the Islamic republic to varying degrees.

Jaylor Fabricating Inc., a Garafraxa, Ont.-based manufacturer of feed mixers for dairy and beef farmers, is among the companies anxious to get back into Iran after exiting the country under measures enacted by the previous Conservative government in 2012.

The company was the No. 1 seller of vertical feed mixers in Iran before it was forced to abandon the business, founder and chief executive Jake Tamminga said. He said Jaylor invested a significant sum to adapt its equipment for the Iranian market before sanctions were introduced.

"We lost it all. We spent a lot of money there."

In addition to ending the trade embargo on goods sold to Iran, Mr. Tamminga urged Ottawa to roll back the banking restrictions it put in place related to the country. The restrictions means companies selling into Iran can't get paid through Canadian financial institutions. They also face other limits to their accounts in Canada.

"We are impatiently waiting for the government to remove those constraints from the banks so we can actually do business over there," Mr. Tamminga said. He said he worries that U.S. and European competitors have a significant head start in Iran because they've already taken formal steps toward normalizing relations.

To what extent that delay has already hurt Canadian companies is difficult to say.

In the aerospace industry, Iran Air said on Thursday it struck a deal to buy 118 airliners from France's Airbus including 12 wide-body A380s, the world's biggest passenger jets, and 45 narrow-body planes. Experts said they believed it was the largest single airplane order by Iran since the 1979 revolution.

Montreal-based Bombardier Inc., struggling to win new aircraft orders under a $9-billion (U.S.) debt, is also eyeing a piece of the country's new-found appetite for airplane fleet renewal. It had been unable to market its aircraft in Iran because of sanctions until earlier this month but has since held exploratory talks with potential customers "in the region" as some U.S. rules on passenger aircraft vis-à-vis Iran were relaxed, spokeswoman Marianella de la Barrera said.

Iran's state-run Mehr News Agency has said the country's carriers could buy at least 581 planes of various sizes over the next decade.

Bombardier isn't the only company enthused about Iran and its $400-billion economy.

"Iran has said they would be buying commercial aircraft from different manufacturers," said Pascale Alpha, of aircraft-simulation company CAE Inc. "That means they will need to train those pilots, so we see opportunities when the sanctions will be lifted."

Other companies who used to do business in the country say there are better opportunities elsewhere.

"Been there, done that," said Jerry Bartelse, president of milk-based animal feed producer Grober Group in Cambridge, Ont., which built a plant in Iran's Isfahan province in the late 1980s before the business soured. "There's no direct need to look at that part of the world" given growth we've experienced in Canada and the United States, Mr. Bartelse said, adding it was always more complicated to do business in the region than in North America or Europe.

Engineering and construction firm SNC-Lavalin Group Inc. has worked in Iran in the past on humanitarian projects funded by international financial institutions, said spokesman Louis-Antoine Paquin. He would not say whether SNC would seek to do business there again, explaining that for reasons of competitiveness the company does not publicly divulge its interest in specific markets.