Question

In: Economics

Discuss the trade and financial sanctions on Iran.

Discuss the trade and financial sanctions on Iran.

Solutions

Expert Solution

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. In 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 fundamentalists throughout the region and will contribute to peace and better relations with the West.

Trade policies:

The United States was one of Iran's major trade partners ?before the Iranian revolution in 1979 Iran's main imports are machinery, cereals, iron and steel, and chemicals Main import partners are the United Arab Emirates, China, South Korea, Turkey, and Germany The empirical results showed that an increase in GDP implies an increased trade flow between Iran and the trade partners in both the EU and Asia

Some business observations of doing business with Iran:

It is difficult for German companies to do business in Iran business ties between Iran and Germany are important to Iran's development Iran is known for their robust generosity and cordial welcoming. Companies looking to enter markets throughout Iran will have to accept regional customs and traditions to achieve success


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