The Sanctions and Geographical Shift in Trading Partners: Evidence from Iran and Russia through a Gravity Model

Abstract

T

his paper is an attempt investigating the relationship between sanctions implications and geographical shift in trading partners. To this end, we analyze separately foreign trade patterns of two countries namely Iran and Russia - which are under imposed sanctions experience - with two United Nations Regional Groups (The Asia-Pacific and the Western European groups) using a gravity model. The gravity models are estimated over two different time periods: (i) 2006-2015 for Iran and (ii) 2008-2016 for Russia. The main results provide evidence supporting the Asianization and de-Europeanization of Iran and Russia under sanctions which proves the hypothesis of a geographical shift in trading partners under imposing sanctions. However, sanctions have stronger impacts on modifications of Iran's foreign trade rather than Russian shift in trading partners.