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The Impact of Trade Sanctions on Iran's Foreign Trade in the Medium and Long Term

Student: Damir Musin

Supervisor: Tatyana Anatolyevna Kolobashkina

Faculty: Faculty of World Economy and International Affairs

Educational Programme: World Economy (Bachelor)

Year of Graduation: 2021

The paper analyzes the economic sanctions applied by the US and EU countries in order to exert political pressure on Iran. Based on the study of the history of the development of the Iranian economy in the context of the sanctions, it is shown that in the conditions when the initiator of the sanctions is one country, the sanctions practically do not restrict trade in any way. Through diversification of trading partners, triangular trade schemes and special payment systems, Iran continues to trade with all countries except the United States, regardless of sanctions. At the same time, Iran's trade turnover decreases with a decrease in oil prices, but does not decrease with the introduction of a new series of sanctions restrictions. Iran's role in world trade is also not dependent on sanctions - Iran specializes in supplying oil to the world market, and over the past twentieth years, the direction of oil exports has changed from Europe to China and Asian countries. The potential trade turnover between the United States and Iran, not carried out due to the sanctions, is estimated using a gravity model. Calculations show that the Iranian economy is losing no more than 1% of GDP from the sanctions at the present time. At the same time, as a result of the application of sanctions in the early 50s of the last century, the Iranian economy lost more than 10% of GDP. The hypothesis that the country's economy is able to adapt to existence under the conditions of sanctions is empirically confirmed, as a result of which the average damage from sanctions per year decreases as the duration of the sanctions increases. Based on the analysis, two scenarios for the development of Iranian-American relations seem likely - either the sanctions will move to a qualitatively new level in order to continue pressure on Iran (for example, sanctions against the country as a whole will be replaced by sanctions against the country's top political leadership), or they will be terminated, since the absence of a significant impact of sanctions on the Iranian economy is obvious, including for the country - the initiator.

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