The Conditional Curse, a Missing Dimension of the Oil Curse — Economic Sanctions Channel in a Petrostate Economy: A Curse or a Blessing

Abstract

This paper seeks to expand the concept of a contractual natural resource curse and suggests another channel that may not be addressed as one of the resource curse channels in petrostate countries since there remains little understanding of the Resource Curse Hypothesis (RCH), by which economic sanctions bring a new manifestation and shape the prospect of international economic relations. A sample of 21 petrostate economies is investigated over 1995–2018. The empirical results show a symptom of the oil curse from a new transmission channel under the international relations arena. This result supports our argument that the interactive relationship between sanctions and oil dependence affects sanctioned countries’ economic growth. Transmission channels determine whether natural resources are either a curse or a blessing. Our study found evidence supporting the concept of the oil resource curse taking place through economic sanctions. Hence, the presence of such a negative link casts new light on the debate concerning the influence of natural resource/oil resource curse on the international relations–growth nexus. Policy research needs to be conducted in understanding and mitigating the resource curse.