Minister sees Iran thaw as opportunity for Canadian aerospace industry

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Federal Economic Development Minister Navdeep Bains says he hopes Iran's growing appetite to purchase hundreds of civilian aircraft on the world market translates into an opportunity for Canadian aerospace, but the Trudeau government hasn't said when or how Ottawa might roll back economic sanctions on Tehran to make this possible.

Foreign Minister Stéphane Dion would only say the government does not want to leave Canadian companies at a disadvantage, but he's not yet revealing how broadly Canada will act to repeal barriers to trade with Iran, a country of 80 million.

The U.S. and the European Union have just lifted many sanctions against doing business with Iran after United Nations inspectors verified Tehran is complying with an accord to curb parts of its nuclear program. The Trudeau government is now confronted with the risk that Canadian companies will be left behind in the rush to sell to Iran.

One of the clearest opportunities presenting itself could benefit Montreal-based aircraft maker Bombardier. The company is now struggling with insufficient orders for its new C Series jets and has asked the federal government for financial assistance above the $1.3-billion offered by the province of Quebec.

Iran's state-run Mehr news agency has announced the country is raising the number of civilian aircraft it wants to acquire to at least 581 planes over the next decade – up from 400. This is a market opportunity for competitors such as Canada's Bombardier, Europe's Airbus, U.S.-based Boeing and Brazil's Embraer.

Canada still has comprehensive sanctions in place against Iran – measures enacted by the former Harper government that block trade in everything from oil-field services to telecommunications to aircraft – and, until Ottawa acts, Canadian firms are stuck on the sidelines.

Mr. Bains, whose files include the aerospace industry, signalled the Liberals are prepared to clear the way for Canadian companies.

"I will work with [the Department of] Global Affairs to … take a responsible and timely decision in order to make sure that we have those opportunities for our companies to compete and succeed abroad."

Asked if the Iranian demand for jets represents an opportunity for Canada, the industry minister replied: "I hope so."

He didn't name Bombardier, but cited Canada's "very strong aerospace sector," saying, "We have very strong brands here in Canada that have done well in the past."

Asked about the Iranian market, Mr. Bains said the Liberals realize Canadian businesses need more market opportunities abroad.

"In order to grow the economy, we really need to tap into foreign markets. We need to provide growth opportunities for our companies to succeed globally, to be part of global value chains."

Milos Barutciski, a trade-law expert with Bennett Jones in Toronto, says "the case is overwhelmingly compelling" for Ottawa to lift sanctions against Iran, he said, particularly when Canada's economic outlook is weakening.

"If I'm the government, I'm thinking I've got an oil and gas services sector in Western Canada that is reeling and I've got Bombardier where the government is under intense pressure to help – there's no better help than a bunch of new orders," Mr. Barutciski said.

"I'm astounded they've waited this long."

He said he expects Canada will roll back portions of the comprehensive economic sanctions on Iran and replace them with targeted sanctions in changes that bring Canada's measures into line with what the European Union still has in place.

"They might do a partial rollback, but it won't be tinkering around the edges just to allow a couple of deals through like aircraft. My guess is they will want to align themselves … with the rest of the international community, which means the European Union will be the bottom line."

Shortly after the U.S. lifted a series of sanctions on Iran – including one that prohibited the sale of civilian aircraft to Tehran – it added new targeted sanctions that penalized Iranian citizens and companies linked to tests of ballistic missiles last fall that were capable of carrying nuclear warheads.

It's possible Canada could enact similar new measures, Mr. Barutciski said.

Before successive waves of Canadian sanctions took effect, Iran was one of Canada's most important trading partners in the Middle East.

On Monday at a cabinet retreat in New Brunswick, Prime Minister Justin Trudeau signalled Canada is preparing changes to the Canada-Iran relationship.

He lauded news this past weekend that International Atomic Energy Agency inspectors had verified Iran has taken all measures required to curb its nuclear weapons program under an accord reached last summer with six countries including the United States.

"We are, first of all, pleased with the results that quiet diplomacy and international negotiation have led to," he said. "Iran's significant move towards respecting international expectations [is] a very positive sign."

Mr. Trudeau's government is making plans to expand diplomatic relations with Iran – a major reversal of Canada's policy toward Tehran. In 2012, the former Harper government suspended diplomatic relations with Iran and closed Canada's embassy there. The Liberal leader said before the October election that he would like to reopen Canada's embassy in Tehran. Asked Monday when this might happen, Mr. Trudeau said the Department of "Global Affairs is engaged with the issue and I look forward to discussing it at a future cabinet meeting."

The opposition Conservatives have warned against reopening trade and diplomatic relations with Iran, saying Canada should wait to see if Tehran continues to stick to the terms of the 2015 deal to curb its nuclear weapons program.

"The reality of dealing with a country that is currently listed in Canada as a state sponsor of terror, and which creates and foments terrorism across the Middle East … is that it simply is not trustworthy," the Tories said in a statement.

With a report from Bloomberg News