Lifting Economic Sanctions on Iran: Global Effects and Strategic Responses

35 Pages Posted: 20 Apr 2016

See all articles by Elena Ianchovichina

Elena Ianchovichina

World Bank

Shantayanan Devarajan

World Bank Middle East and North Africa Region

Csilla Lakatos

Purdue University - Department of Agricultural Economics

Date Written: February 1, 2016

Abstract

This paper uses a global general equilibrium simulation model to quantify the effects of lifting economic sanctions on Iran with and without strategic responses. Iran benefits the most, with average per capita welfare gains ranging from close to 3 percent, in the case when Iran's crude oil exports to the European Union recover to half their pre-embargo level, to 6.5 percent, in the best case of complete recovery of oil exports to the European Union, successful domestic reforms that enable a strong supply response, and increased market access for Iranian exports in developed markets. Iran could achieve benefits close to the upper range if Gulf Cooperation Council oil exporters limit their crude oil exports to support the oil price. If they do nothing, however, the price of oil will decline by 13 percent in the case of complete recovery of oil exports to the European Union, leaving net oil importers better off and net oil exporters worse off.

Keywords: Fiscal & Monetary Policy, Industrial Economics, Economic Theory & Research, Economic Growth, International Trade and Trade Rules, Energy and Mining, Energy Demand, Consumption, Energy and Environment

Suggested Citation

Ianchovichina, Elena and Devarajan, Shantayanan and Lakatos, Csilla, Lifting Economic Sanctions on Iran: Global Effects and Strategic Responses (February 1, 2016). World Bank Policy Research Working Paper No. 7549. Available at SSRN: https://ssrn.com/abstract=2726341

Elena Ianchovichina (Contact Author)

World Bank ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-8910 (Phone)
202-522-1159 (Fax)

Shantayanan Devarajan

World Bank Middle East and North Africa Region ( email )

1818 H Street, NW
Washington, DC 20433
United States

Csilla Lakatos

Purdue University - Department of Agricultural Economics

403 West State Street
West Lafayette, IN 47907-2056
United States

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