By Marcus George and Randall Palmer
DUBAI/OTTAWA, Sept 10 - Canada's surprise decision to sever relations with Iran may well have been triggered by Ottawa's fear of retaliation for stepping up its denunciations of Tehran and a parallel move to list Iran as a state sponsor of terrorism.
The break in relations, announced on Friday, has led to speculation that it was a prelude to Israeli or U.S. military action against Iran's nuclear facilities. Canada has categorically denied having any information about planned attacks.
"Canada wants to be able to continue to speak up on the Iranian regime's behavior, and we didn't want our guys in there as hostage," said Andrew MacDougall, chief spokesman for Prime Minister Stephen Harper, explaining the decision to close the Tehran embassy and order Iranian diplomats out of Canada.
The Canadian announcement offered a long list of reasons for cutting ties: Iran's nuclear program, hostility toward Israel, Tehran's military assistance to Syria, and what Ottawa said was Iran's support for terrorist groups.
But none of those reasons had surfaced overnight, leaving people asking, why now?
Indeed, the decision appeared to catch Canada's Western allies off-guard.
"It was news to us," one Western diplomat based in Tehran told Reuters by telephone hours after the announcement. "There seemed to be nothing specific that made them pull the plug."
Still, the announcement came on the same day that Canada designated Iran as a state sponsor of terrorism. A new Canadian law required the government to come up with a list of state terrorism sponsors by September 13, and many feared such a declaration could have sparked reprisals in Tehran if Canadian diplomats had stayed.
Canadian officials were mindful of the storming of the British Embassy in Tehran last November after a tightening of banking sanctions. The incident led London to close the embassy.
"With the British gone, who will be on the frontline of Iran's animosity?" reflected the Western diplomat. "There's France and Canada, and it's got a lot of people thinking."
A Canadian official who asked not to be identified said the timing of the announcement hinged partly on getting the last Canadian diplomat out of Iran.
"We had gotten to the point where all our diplomats had left safely ... and we were able to announce it," he said.
Israeli Prime Minister Benjamin Netanyahu was quick to welcome Canada's tough stance, but the announcement has come in for criticism by some in Canada.
John Mundy, whom Tehran expelled as Canadian ambassador in 2007 and who has since retired, says Ottawa's reasons are not convincing and called on the government to say if it had received specific threats.
"When the going gets rough you really need your diplomats," he wrote in Monday's Globe and Mail newspaper. "Canada's tradition is to be one of the last countries to leave in a crisis, not the first."
MacDougall, the prime minister's spokesman, dismissed the remarks as ill-informed: "This is a former ambassador who, quite frankly, isn't aware of the specifics or anything of this."
He added: "The prime minister's not willing to have civil servants who don't get paid to go to war for their country to be pawns in any dispute. The prime minister and minister of foreign affairs didn't feel that they could guarantee the safety of our diplomat personnel there, and so got them out."
On Saturday Iranian officials lashed out at Canada, describing the embassy closure as a hostile and anti-Iranian act that was taken under Israeli and British influence.
Already on a downward slump, the value of the Iranian currency, the rial, has fallen by more than 10 percent since Friday.
While there has been muted reaction among people in Iran, many Iranians in Canada sense ominous news to come.
"Many Iranians here interpret it as a green light to Israel for military action. They aren't happy with it," said blogger Mahmoud Azimaee, based in Toronto, home to around half of Canada's Iranian community of an estimated 120,000 people.
"What has to be avoided are bombers and Israeli missiles flying over Iran, because that will be a 10-year setback for any democratic movement. Cutting ties with the regime does not help that," said Arash Abadpour, a 33-year-old IT engineer.
Canada is also home to some of the most vocal critics of the Iranian government over its human rights abuses and they strongly support the Harper government's actions.
They have highlighted the cases of Saeed Malekpour and Hamid Ghassemi-Shall, both Iranians with Canadian citizenship, who have been sentenced to death and languish in prison in Iran.
Also behind bars is Hossein Derakhshan, an Iranian Canadian blogger, who was sentenced to 19 years in prison on charges of cooperating with hostile countries and spreading propaganda.
Activists have long alleged that the Iranian embassy in Ottawa has carried out secretive activities to monitor dissenting voices and intimidate them into keeping quiet.
"Many Iranians here are apprehensive to speak publicly against human rights violations because they fear the regime is keeping tabs on them," Toronto-based activist Maryam Nayeb Yazdi told Reuters by email.
(Additional reporting by David Ljunggren; Editing by Frank McGurty)