International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Challenges and Opportunities of Oil Sanctions for Iranian Economy
Mohammad Mohammadikhabbazan, Hossein Sadeghi, Bahram Sahabi

In this paper, the consequences of oil sanctions on Iran’s economy were investigated and the pros and cons potentially arising due to such sanctions were highlighted. In this regard, a computable general equilibrium (CGE) model and a social accounting matrix (SAM) were employed to simulate some scenarios. We utilized data and calibrations from a recent paper by the authors Farzanegan, Mohammadikhabbazan, and Sadeghi (2015), which investigates the effects of oil sanctions on Iranian macro indicators and households’ welfare by cutting fixed amount of oil export. We introduced a new parameter, “sanction,” by which received price of oil export and thus its exportation decrease, incorporating the circumvention of sanctions into our model. While our findings on macro indicators and households’ welfare indicated drop in almost all areas, generally similar to those of Farzanegan et al. (2015), surprisingly, a decline was observed in CPI. Net indirect tax also interestingly increased in less stringent oil sanction scenarios, attained a pick, and fell in stricter scenarios thereafter. Moreover, induced by oil sanctions, reallocation of factors and resources resulted in the rise in most of disaggregated activity production levels and decrease in majority of disaggregated activity prices.

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