Abstract
This study is an empirical attempt to find out whether under sanctions Iran’s trade direction has shifted away from Europe (trade policy of de-Europeanization) towards Asia (trade policy of Asianization). The analysis is conducted using a panel-gravity trade model to analyze bilateral trade pattern between Iran and 50 countries from the EU and Asia during the period 2006–2013. To this end, the authors use an extended gravity model by adding new variables, including the index of Chinn–Ito (KAOPEN) as an indicator of financial openness, and the composite trade intensity (CTI) as an indicator of trade openness. Our findings reveal that the gravity equation fits the data reasonably well. The empirical evidence indicates a significant negative effect of sanctions on Iran–EU bilateral trade (by an average of 46.9%), while it has a positive impact on trade between Iran and the Asian countries (by an average of 85.2%). Overall, these findings confirm that the imposition of various sanctions related to Iran’s nuclear program has pushed the country’s foreign trade to reorient away from Europe towards Asia.
Highlights
Economic sanctions as a penalty levied on a country are one of the most debated topics in international trade
This study mainly tried to empirically find whether the imposition of sanctions against Iran has pushed this country toward Asianization and de-Europeanization
We investigated the impact of GDP, GDP per capita, trade openness, financial openness, Multilateral Resistance Term (MTR), distance and sanctions on Iran–EU members’ and Asian countries’ bilateral trade through the estimations of a gravity model from 2006 to 2013
Summary
Economic sanctions as a penalty levied on a country are one of the most debated topics in international trade. Deep reduction in trading volume with Europe due to the sanctions has prompted Iran to reorient her foreign trade away from Europe to new markets in order to prevent an economic collapse and ensure the viability of the import substitution policy. The changes of foreign trade flow of Iran have drawn some attention from researchers such as Rasoulinezhad (2016) [2], Fahimifard (2013) [3], Suvankulov and Guc (2012) [4], Soori and Tashkini (2012) [5], Taghavi and Hosein Tash (2011) [6], Esmaeli and Pourebrahim (2011) [7] and Kalbasi (2002) [8], we did not find any study that addressed the consequences of sanctions on Iran’s bilateral trade with the EU members and Asian countries through a gravity model. Research results are presented and the last section concludes with a discussion and directions for further research
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