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The Ins and Outs of Iranian Industrial Resilience under Sanctions
Author(s) -
Batmanghelidj Esfandyar
Publication year - 2021
Publication title -
the muslim world
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.106
H-Index - 23
eISSN - 1478-1913
pISSN - 0027-4909
DOI - 10.1111/muwo.12374
Subject(s) - sanctions , index (typography) , international trade , european union , industrial production , china , economic sanctions , business , resilience (materials science) , production (economics) , order (exchange) , international economics , economy , economics , political science , finance , physics , law , thermodynamics , macroeconomics , world wide web , computer science , keynesian economics
This paper draws on export data from four of Iran’s key trade partners—the European Union, China, the United Arab Emirates (UAE), and Turkey—to examine the robust and positive correlations between the export of parts and machinery to Iran and Iran’s industrial output, as measured by production index data published by the Central Bank of Iran for industrial enterprises with over 100 employees. The period of analysis is 2000 to 2017. It may seem intuitive that the output of Iranian manufacturers depends on the ability of companies to source intermediate goods such as parts and machinery. However, the imposition of sanctions on Iran is shown to have temporarily decoupled the relationship between European industrial exports to Iran and the Iranian industrial production index—the index remained stable even as European exports fell. An analysis of trade data for the other three trade partners included in this study quantitatively substantiates reports noting that in order to sustain the industrial production index, Iran engaged in processes that can be collectively described as “import reflection.” This entails substituting European intermediate inputs with Chinese inputs while also circumventing sanctions pressures on trade by sourcing European inputs via re‐export from the UAE and Turkey. These processes were fundamental to Iran’s economic resilience in the face of multilateral sanctions and have played a central role in Iran’s defense of its industrialized economy and particularly its non‐oil exports as the administration of US President Donald Trump pursues a new unilateral campaign of “maximum pressure” sanctions.