Document Type : ORIGINAL ARTICLE
Authors
1 PhD student in Economic, Aras international campus, University of Tabriz, Tabriz, Iran
2 Professor, Faculty of Economic and Management, University of Tabriz, Tabriz, Iran
3 Associate Professor, Department of Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran,
Abstract
This empirical study investigates the interplay between geopolitical distance (IPD) and economic sanctions on Iran's bilateral trade with 15 major partners over 2015-2023. It estimates IPD's overall effect, its intensification after the 2022 Ukraine war, isolates sanction impacts, and assesses Iran's trade orientation toward the Eastern bloc. Results confirm IPD significantly reduces trade, with a coefficient of -0.210 (10% level), translating to a 19% average decrease per unit increase. The post-2022 period shows exacerbated negative effects via an interaction coefficient of -0.110 (1% level), indicating a 10.4% amplification of IPD's adverse impact. While the direct sanction effect is unidentified due to collinearity with year-fixed effects (+0.214), its interaction with IPD is significantly negative (-0.168 at 5%), demonstrating that sanctions critically amplify geopolitical trade barriers. Block heterogeneity analysis reveals IPD's negative impact is substantially weaker in the Eastern bloc (-0.108) than in the Western bloc (-0.208), statistically confirming Iran's structural pivot toward Eastern markets. Crucially, excluding China and Russia reduces the IPD coefficient to an insignificant -0.010, suggesting observed geopolitical friction concentrates on these two principal Eastern partners. Overall, empirical evidence establishes IPD as a significant, persistent, and growing impediment to Iran's trade. Its influence markedly intensified after the Ukraine conflict, with sanctions acting as a multiplier. Nevertheless, Iran's distinct trade resilience with the Eastern bloc, particularly China and Russia, underscores a strategic reorientation partially mitigating these constraints, highlighting asymmetric effects of global political fractures on trade flows.
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