An Estimation of The Impact of Economic Sanctions and Oil Price Shocks on Iran-Russian Trade: Evidence from a Gravity- VEC Approach

Abstract This article is an empirical attempt to explore the relationship between sanctions (financial and non-financial), oil price shocks and Iran-Russian bilateral trade flows over the period 1991–2014. In contrast to earlier studies in which a gravity model has been estimated through a panel data approach, in this paper the authors apply a gravity model for only two countries and do the estimations using the vector error correction approach. The overall estimation results indicate that financial sanctions, non-financial sanctions and oil price shocks negatively impact the Iran-Russian trade. Furthermore, financial sanctions had the greatest negative impact on Iran-Russian trade rather than non-financial sanctions and sharp oil price shocks.