Impacts of the US Trade and Financial Sanctions on Iran

28 Pages Posted: 23 Mar 2005  

Akbar E. Torbat

California State University, Dominguez Hills - College of Business Administration and Public Policy

Abstract

This article presents a case study of the effectiveness of the US unilateral trade and financial sanctions on Iran. To assess the trade sanctions' effect, the US-Iran historical trade data are examined, and the economic cost of trade sanctions is measured by applying the concept of welfare loss. The financial sanctions' impacts are evaluated by assessing the extra charges Iran has paid on its foreign debt obligations and for financing its oil development projects. At the end, the efficacy of the US sanctions policy towards Iran is evaluated. It is found that the financial sanctions have had a more powerful impact than the trade sanctions. The analysis also shows that the unilateral import sanctions on the fungible crude oil have been ineffective. It is concluded that, overall, the sanctions' economic effect has been significant, while its political effect has been minimal. This article suggests that targeting the sanctions towards the ruling clergy can improve their effectiveness while lessening their side effects on the Iranian population. Precise smart sanctions to force the ruling clerics to step down will calm down Islamic fundamentalisms throughout the region and will contribute to peace and better relations with the West.

Suggested Citation

Torbat, Akbar E., Impacts of the US Trade and Financial Sanctions on Iran. The World Economy, Vol. 28, No. 3, pp. 407-434, March 2005. Available at SSRN: https://ssrn.com/abstract=685179

Akbar E. Torbat (Contact Author)

California State University, Dominguez Hills - College of Business Administration and Public Policy ( email )

1000 Victoria Street
Carson, CA 90747
United States

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