Can Canadian Companies Do Business with Iran?

This is a simple question, but there is not a simple “Yes” or “No” answer to it, at least not yet (up to the date of this post).

Up until the 5th of February 2016 the answer to the above question was “No”. Regardless of  whether you wanted to export oilfields equipment, provide services, consulting, receiving your invoices, etc. the answer was “No”.

So why Canadian companies are still in a limbo zone despite of the 5th of Feb. announcement?

Regulations of Special Economic Measures for Iran was amended on 5th of Feb. by the Government of Canada. As per the new regulation “Canada has therefore amended its broad-reaching autonomous sanctions against Iran to allow for a controlled economic re-engagement, including lifting the broad ban on financial services, imports and exports. Canada has also updated its regulations under the United Nations Act in order to conform with the changes to the United Nations sanctions regime mandated by the UN Security Council” (more in here).

In simple words, today, Canadian companies can do business with Iran for oilfields and other goods and services except for sensitive goods and materials i.e. military, nuclear related tech, etc. (more in here). In other words, while Canadian businesses are free to send goods and provide services to Iran, the execution components of it including banking, insurance, debt market, freight forwarding and most of the governmental bodies such as EDC are not at the execution stage to support your engagement with Iranian market.

So can our company bid for tenders and send goods to Iran?

It depends on your readiness and risk profile. If you ask your corporate lawyer or your compliance officer if you could sign an agreement/contract with Iran s/he would say “yes, but better wait a few weeks“.The amendment of the government of Canada on Iran economic regulation has not come down to the execution level yet. The EDC’s page on Iran is still closed. Calgary Economic Development is still in planning phase and the Trade Commissioner Service in Alberta is busy with translating the amendment into practical means.

On the other hand, as suggested by the amendment “A Notice to Exporters has been issued indicating that while all applications for export permits will be considered on a case-by-case basis, … (more)” Canadian companies could submit their application to export to Iran (which you couldn’t do prior to 5th of Feb.), and if your goods/services are not listed in the forbidden items your application will be approved. That’s why there is a component of risk and readiness involved in your decision making.

How long can it take for the amendment to hit the execution level?

Our best estimate is 4-10 weeks from 5th of Feb. 2016.

What can we do now? Can we sign any contract with Iranian companies?

Iranian oil and gas is a complicated market. You should avoid rushing in engaging into Iranian oilfields market. You need to do your homework in parallel while the execution arms here in Alberta/Canada are setting the ground ready for re-establishment of business with Iran.

Depending on whether this is goods or services that you wish to export to Iran we would advise different paths. The  following common areas need to be looked at:

  • Study of Iranian oilfields market (i.e. market size, technologies, niches, competitors, political and business risks, operational risks, import/export,…)
  • Business context and engagement options(i.e. NIOC subsidiaries, IPC tender round and its timing, IOCs engagement scenarios, possible engagement strategies, tax and levies, legal establishment, free and economic zones,…)
  • Local partner and local content(i.e. top 5 local players, technical/commercial/legal due diligence of your local partner, expectations of your local partner and structure of partnership options…)

 

Contact us today if you are not sure about your entry strategy to Iranian market. We can help you with running a market research, developing an entry strategy, establishing your local branch, connecting you to the short-listed local partners and land you safely in Iranian oilfields sector.

 

More information:

eMail: iran@naft.ca

Phone:
Calgary: +1 (403) 400-4665
Tehran: +98 912 3234 051

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Syd Nejad is an expert in commercial and operations of upstream projects. He has served the industry in a variety of roles including strategy and corporate planning, acquisition and divestiture, portfolio optimization, asset management, production/field operations; and reserves, reservoir/exploitation engineering.

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