An Analysis of Iran’s Trade Regime, and its Economic Ties to Key Global Players

As Iran continues to move forward with its nuclear program, and as attempts at diplomacy have given way to more aggressive rhetoric, the specter of economic sanctions has once again stepped out on to the international theatre’s main stage. Unlike previous sanctions, though, the current US proposal being circulated among UN Security Council members would reportedly call for an outright ban on specific transactions between UN countries and the Islamic Republic, in an attempt to more precisely target the banking, insurance and shipping sectors under the control of the Islamic Revolutionary Guard Corps (IRCG).

The debate rages on, however, over how effective a new slate of sanctions would be in halting or even deterring Iran’s uranium enrichment efforts. While most Western powers have come out in favor of the proposed sanctions, support from Russia and China remains critical. Not coincidentally, both hesitant, veto-wielding countries also have significant economic interests within Iran’s borders.

The debate may be shrouded in political discourse, but it’s unquestionably driven by economics. And while experts and policy-makers may continue to disagree over the capacity of sanctions to bring about real political change, the only way to undertake a cost-benefit analysis of prospective economic sanctions is from the bottom, with a more detailed excavation of the Iranian trade climate and the trade relations governing it. islamske revolusjon

Iran’s Trade Landscape

With a full 10% of the world’s known oil reserves within its vast borders, Iran’s economy revolves, not surprisingly, around energy. In 2007, the Iranian state pulled in $57 billion in oil export revenue, comprising about half of all governmental revenue. Oil currently comprises about 80% of all Iranian exports.

Under the administration of President Mahmoud Ahmadinejad, though, the country’s domestic economy has staggered under the weight of enormous government subsidies, rising unemployment, and double-digit inflation levels. Without proper infrastructure to refine its massive supply of crude oil, the country has been forced to import gasoline. According to a recent Reuters report, Iran imported 23% more gasoline in February of 2010 than it did during the same month last year.

While many agree that sanctions targeting the IRCG would exert some deleterious effect upon the Iranian economy, others believe that sanctions could actually benefit specific partners. Dr. Arang Keshavarzian, associate professor at the Department of Middle Eastern and Islamic Studies at New York University, claims that “the tightening of sanctions will benefit three groups-traders based in free trade zones in the Gulf (especially in Dubai), business interests in countries able to resist or skirt sanctions 9especially in East and Southeast Asia), and large parastatal organizations in Iran.”

Since 1996, when the US government unilaterally passed the Iran and Libya Sanctions Act (ISLA), Iran has greatly expanded its trade relations with specific partners. Although the EU and the People’s Republic of China lead the list of Iran’s top trade partners, recent years have seen a surge in Iranian trade with other developing countries, such as Syria, Venezuela, Cuba, and India.


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