Bilateral ties were restricted, such as preventing direct air links between the two countries or the opening of Iranian consulates and cultural centres in Canada (other than the embassy in Ottawa).

[13][14][15] Relations between Canada and Iran drastically deteriorated in June 2003 when Zahra Kazemi, an Iranian-Canadian freelance photographer from Montreal, was arrested while taking pictures outside a prison in Tehran during a student protest.

[citation needed] In another incident, a prominent Canadian-Iranian blogger, Hossein Derakhshan, was detained by police in Tehran in 2008 over remarks he made about the Shiite faith, according to the Iranian Judiciary.

[19] On May 17, 2005, Canada tightened its controlled engagement policy by limiting talks with Iran to four subjects: In October 2005, Iranian president Mahmoud Ahmadinejad gave a speech at a conference entitled "The World Without Zionism".

[21] On December 26, 2006, the United Nations Security Council unanimously adopted Resolution 1737, demanding that Iran suspend its uranium enrichment program or face economic sanctions.

The sanctions include a ban on any trade that could contribute to Iran's activities in enrichment, reprocessing heavy water, or the development of nuclear weapons delivery systems.

In June, Iranian Foreign Minister Manouchehr Mottaki told the Islamic Republic News Agency that Canada was "hiding some spies at their embassy in Tehran and allowing them to escape".

On November 30, 2006, the conservative-dominated parliament in Iran accused the Canadian embassy of being a "den of spies" for the United States and launched a query to investigate.

[22] In 2007, moves to warm relations between the two countries occurred with the Supreme Court in Iran calling for another review of the death of Zahra Kazemi, and an attempt to again exchange ambassadors.

Statistics Canada's data for 2012 reveals exports to Iran were worth around C$95 million, mostly consisting of cereals, oil seeds, and fruit, as well as chemical products, and machinery.

Baird won an extended standing ovation for reiterating the government's view that Iran's pursuit of a nuclear weapon is the most dangerous threat to global security.

The agreement lasted until 2005, when Ayatollah Khamenei became convinced that Europe was negotiating in bad faith and only acting for the United States, who remained unambiguously hostile.

[28] On September 7, 2012 (during APEC Russia 2012 summit), Canadian Minister of Foreign Affairs John Baird announced that Canada was breaking diplomatic relations with Iran.

"[35] Canada's foreign affairs ministry offered the following explanation: The Iranian regime is providing increasing military assistance to the Assad regime; it refuses to comply with UN resolutions pertaining to its nuclear program; it routinely threatens the existence of the State of Israel and engages in racist anti-Semitic rhetoric and incitement to genocide; it is among the world's worst violators of human rights; and it shelters and materially supports terrorist groups, requiring the Government of Canada to formally list Iran as a state sponsor of terrorism under the Justice for Victims of Terrorism Act.

"[29] Ramin Mehmanparast, spokesman of the Iranian Ministry of Foreign Affairs described this development as "the hostile" action of the "racist government in Canada", which is following "the pursuit of Zionist and British dictated policies.

[42][43] Israeli Prime Minister Benjamin Netanyahu praised Canada for the decision, calling it a "moral, courageous step" which sends a message to the international community that it can not allow "the dark regime in Iran to get nuclear weapons."

Netanyahu called on other members of the international community to follow Canada's lead and "set moral and practical red lines" to Iran.

[47][48] Justin Trudeau said within the first month of the October 2015 election which brought him to power that he had plans to restore relations between the two nations, in the wake of the Iranian nuclear deal, which the outgoing Harper government had strongly opposed.

In 2013 alone, the Canadian government (under Stephen Harper) has imposed a complete trade embargo on Iran and economic sanctions and travel restrictions against 78 individuals and 508 companies and organizations.

In his March 2016 speech at the University of Ottawa, Dion said that breaking off diplomatic ties with Iran "had no positive consequences for anyone"—not for Canadians, not for Iranians, not for Israelis and not for global security.

[55] According to the UN's top tribunal, Iran took Canada to the International Court of Justice for "allowing victims of alleged terror attacks to claim damages from Tehran".