In this Dec. 22, 2014 file photo, an Iranian oil worker rides his bicycle at the Tehran's oil refinery south of the capital Tehran, Iran.Vahid Salemi/The Associated Press
The lifting of Canadian sanctions against Iran could create significant opportunities for Canadian businesses, but these will not occur overnight and firms courageous enough to go there will face a controlled and sometimes corrupt economy.
With a population of close to 80 million, and massive needs for infrastructure improvements, Iran could eventually provide a large potential market for Canadian exporters, said Jayson Myers, president of Canadian Manufacturers & Exporters. Canadian producers of oil and gas field equipment, engineering firms and agricultural equipment makers could all find new markets there, he said, as could makers of medical devices and clean technology.
Canadian companies could also participate in the global supply chain serving Iran, he added, perhaps selling to U.S. firms that are making products for the Iranian market.
However, this potential is unlikely to materialize quickly, or easily, others warn.
While some sanctions may be lifted soon, others will likely continue to apply over the long term, said trade lawyer Larry Herman of Herman & Associates. He noted that there are multiple layers of sanctions in place, including ones related to Iran's nuclear program, and others that have been imposed because of the country's ongoing support of international terrorism. Not all are likely to be removed at once, so companies will have to be careful to ensure they don't unwittingly run afoul of those that remain.
University of Ottawa professor Thomas Juneau also noted that sanctions can be reapplied, if Iran violates its nuclear deal, potentially trapping companies that have started to do business there.
While there are lots of stories of companies in the United Syayes and Europe going to Iran to check things out, Prof. Juneau said, most of these are still essentially "fact-finding trips, not deal-making trips" because of the uncertainty. Vehicle-maker Daimler Trucks and airplane-maker Airbus signalled Monday they will sell their products in Iran when sanctions are lifted.
Prof. Juneau said that beyond the sanctions, doing business in Iran will remain complex and difficult. "The climate for foreign business in Iran is hostile," he said, because of corruption and aggressive nationalist laws against foreign investment. Domestic economic reforms aimed at fixing this situation have stalled, he added.
"The idea that the doors to the Iranian economy will swing wide open does not conform to reality," Prof. Juneau said. There are potential opportunities in the financial-services sector, tourism and many other sectors because of the diversified economy, but these remain opportunities "in theory" rather than reality, he said.
While Canada does have particular expertise in oil and gas infrastructure that could be very useful in Iran's decrepit resource sector, there will also be intense competition from European and U.S. companies that had considerable experience operating there before the sanctions were put in place.
Indeed, Canada's trade with Iran has traditionally been fairly limited, with most of our exports consisting of grains. Some trade was maintained during the sanction period, thanks to food exemptions for humanitarian purposes. Canadian exports to Iran hit about $680-million in 2008 – still mostly grain sales – but trailed off after sanctions were tightened, bottoming out at $14-million in 2013.
Even if normal trade resumes – still a "hypothetical scenario," according to Export Development Canada deputy chief economist Stuart Bergman – it will take time to re-establish relations and business-to-business connections. And initially, the resumed trade is likely to remain primarily in the food sector, he said.
Ian Lee, a professor at Carleton University's Sprott School of Business who taught MBA programs in Iran, said the Canadian companies that might have the most success in tackling the new market are those that have experience working in other countries with state-controlled economies, such as Russia, China or Cuba.
"Any company that has only dealt with the Canadian or American economy will find it a tremendous culture shock," he said, because of the lack of transparency and the uneven and corrupt public administration.
Still, he said, Iran has a functioning stock market and a critical mass of business people who are relatively sophisticated, so it is "not a Third World country where there are no institutions in place."
Iran will be challenging and risky for Canadian companies, but if they "go in with their eyes open" there will be significant opportunities, he said.