How political conflicts threaten energy security and economic growth in Asia: A study on the sanctions imposed on Iran

Abstract

Given their high dependence on energy imports, Asian countries’ energy security is challenged by international political conflicts that interfere with the global energy supply. This study examines the impacts of the sanctions imposed on Iran on the energy security and economic growth of oil-importing Asian countries. A global computable equilibrium model is applied, and three illustrative scenarios are developed to simulate a full embargo on Iran's oil exports, the utilization of spare oil production capacity of other Persian Gulf countries, and a reduction of their oil exports. The impacts of a full embargo are not disastrous if oil exports from other Persian Gulf petrostates are secured. The utilization of spare oil production capacity could largely buffer the impacts on Asian countries’ oil prices than oil supply. Under a pessimistic scenario, the oil supply of Asian countries would be disastrously disturbed. Moreover, political conflicts would force Asian countries to struggle for oil import sources, straining their relations and causing intense international competition.