Sanctions against Iran: An assessment of their global impact through the lens of international methanol prices

Iran’s energy and petrochemical exports have recently been restricted by a series of international sanctions. This paper focuses on one of the country’s exports, namely methanol – a petrochemical increasingly used for fuel blending and traded at various locations worldwide – and empirically explores the relationships among the North American, European, and Asian markets to investigate the incidence of these sanctions. The analyses are conducted under a parity bounds framework based on Negassa and Myers (2007). The model was applied to the main methanol importing markets to estimate the effects of the sanctions on the degree of spatial integration. The findings document the occurrence of a complete reconfiguration of the spatial extent of the methanol markets. Under the sanctions, an increased degree of market integration was observed across the Atlantic, while fragmentation rose between Europe, South East Asia, and the two giant economies of China and India which both experienced lower prices.