Investigating the Impact of Economic Sanctions on the Iran-Afghanistan Trade (2004-2018)

Iran and Afghanistan share deep historical, cultural and civilizational ties. Iran is one of Afghanistan’s largest trading partners. However, economic sanctions have disrupted bilateral trade between these two neighboring countries through various channels. This paper presents an empirical analysis of the impact of economic sanctions on trade between Iran and Afghanistan in the period 2004- 2018 by applying the Gravity Model, while the estimation is performed using fully modified least-squares technique. Findings of the research indicate that the imposition of any strong economic sanctions, in the long run, not only during the sanctions period but also in the post-sanctions period, has increased trade between Iran and Afghanistan. On the other hand, weak sanctions during the sanctions period have reduced trade; nevertheless, weak sanctions in the post- sanctions period have increased bilateral trade. Development of trade cooperation between the two countries, facilitation of trade affairs and expansion of joint regional and international cooperation should be on the agenda of economic policymakers in Iran and Afghanistan.