Reconfiguration of Iran’s trade following conflict
Wars have perpetually constituted one of the most significant causes of disruption within economic and commercial relations among nations. Nevertheless, when such conflicts transpire between major regional or global powers, their ramifications transcend the national level and affect the entirety of the international trade system.
Under ordinary circumstances, commerce among nations materializes upon a foundation of political stability, security of transport routes, access to international financial systems, and mutual trust; however, the eruption of war simultaneously destabilizes these components. Within such a milieu, transaction costs escalate, investment risk augments, and countries find themselves compelled to undertake an immediate reexamination of their respective trade policies.
Within this framework, the assault by the United States of America and the Zionist regime upon Iran on February 28, 2026, can be regarded as a clear example of war’s impact upon a nation’s trade architecture. This conflict, which arose following years of political tension, economic sanctions, and indirect hostilities, rapidly engendered extensive consequences for Iran’s economy and its commercial relationships with the world. Following the commencement of this confrontation, geopolitical hazards within the region intensified dramatically, and numerous pivotal trade routes, particularly within the energy sector and maritime transportation, encountered direct threats.
One of the foremost consequences of this war is a severe disruption to logistical infrastructures and supply chains. Insecurity along maritime routes, heightened transportation insurance costs, and restricted access to ports and commercial corridors have caused Iran’s imports and exports to face serious operational challenges. This situation will impose additional pressure upon the nation’s economy, especially concerning the procurement of essential commodities and raw materials for domestic industries.
Thus, the war between Iran and the United States in 2026 demonstrated how a military conflict can, within a short period of time, fundamentally transform a country’s trade structure.
According to an analysis published by the Iran Chamber of Commerce, this conflict shall not only diminish the volume of foreign trade and elevate its associated costs but shall also influence the long-term orientations of Iran’s trade policy. A movement toward self-sufficiency, the substitution of trade partners, and the utilization of alternative exchange methods represent among the efforts that shall become intensified as a result of this confrontation.
International commerce under warfare
Within the literature of international political economy, war is considered not merely an episodic disruption but rather a structural shock capable of redefining the logic governing the organization of global trade. Historical examinations demonstrate that major military conflicts, beyond causing interruptions in trade flows, have led to a fundamental rearrangement of the institutional, geographical, and sectoral architecture of the international exchange system.
From this perspective, war ought to be regarded not as a deviation from an equilibrium path but as an integral component of the internal dynamics of the international political-economic system, through which patterns of production, exchange networks, and the distribution of economic power are reconstructed. Within this analytical framework, the present conflict assumes particular significance for it permits the simultaneous examination of the interaction among natural resource dependence, geopolitical constraints, and institutional pressures.
The theoretical literature emphasizes the role of commerce in deterring conflict and considers increased economic interdependence as a factor that reduces the probability of confrontation. Nevertheless, this analytical framework confronts limitations when facing the complex realities of the contemporary global economy. Recent research indicates that the relationship between trade and military tension possesses a nonlinear character and is dependent upon the network structure of global commerce.
To state the matter with greater precision, whereas bilateral interdependence may elevate the costs of tension and exercise a deterrent function, the expansion of multilateral trade and the diversification of partners weaken this interdependence and, under certain circumstances, may even facilitate the occurrence of military tension. This observation indicates that the analysis of trade under current conditions necessitates moving beyond simplistic bilateral models and progressing toward a networked, multilayered comprehension of economic interactions.
From an analytical standpoint, the most significant consequence of war should be sought in the process of trade reconfiguration, not merely in the reduction of its aggregate volume. Empirical evidence drawn from recent global conflicts, particularly the Russia-Ukraine war, demonstrated that global trade responds to such shocks through mechanisms including substitution and route reconfiguration. This finding suggests that trade networks possess a degree of flexibility that enables adaptation to constraints, although such adaptation typically accompanies changes in cost and efficiency.
Consequently, war may be considered a factor that transforms not only the level but also the structure and quality of trade. The operation of this framework in the case of Iran indicates that the consequences of the present conflict should be analyzed at the intersection of three key factors: geopolitical position, a resource-based economic structure, and institutional constraints arising from sanctions.
The concentration of hydrocarbon resources, together with proximity to strategic chokepoints, such as the Strait of Hormuz, has rendered Iran a structural actor within the global energy market. However, these same characteristics elevate the degree of vulnerability to shocks of this nature.
In this context, one must note the fact that energy markets possess features that complicate their response to supply shocks. Low short-term supply elasticity and the vital role of energy as an intermediate good cause even limited disruptions to generate disproportionate consequences for price levels and economic stability.
On the other hand, a reduction in energy export volume does not necessarily entail a proportional decrease in revenues; rather, it may be partially compensated through price increases. Nevertheless, this situation accompanies heightened uncertainty and instability, which themselves emerge as deterrents to investment and economic planning.
One of the key dimensions in analyzing trade under wartime conditions is the role of trade costs and, especially, logistical costs. Increased security hazards, rising transportation insurance premiums, and disruptions to maritime routes effectively add to the economic distance between nations (when geographical distance remains constant). Within this framework, one may argue that war operates by redefining economic distance.
Furthermore, financial channels play a decisive role in transmitting the effects of war to international trade. Military tension, through its influence upon exchange rates, interest rates, and access to financial facilities, elevates transaction and commercial costs and restricts participation in global trade; for Iran, which have already confronted financial limitations, this situation may lead to a deepening of financial isolation. Although alternative mechanisms such as bilateral currency agreements or non-dollar payment systems may mitigate some of these restrictions, doubts persist regarding the efficiency and costs of these instruments.
Rather than causing a complete cessation of trade, wars redirect commerce toward alternative routes. However, this redirection seldom occurs without cost.
Increased transportation distances, diminished transparency, and alterations in the balance of power among trading parties all represent consequences of this process. War exerts multilayered effects not only upon the supply side but also upon the structure and dynamics of global demand.
Under such conditions, political preferences, geopolitical alignments, and considerations related to risk management increasingly participate in redefining demand patterns and thereby subject traditional trade routes to transformation.
On this basis, the present conflict may be analyzed within a broader and more systematic framework as an instance of the gradual transition from a relatively integrated trading system toward a fragmented, networked order predicated upon political and economic coalitions.
During this transition process, international trade neither disappears nor merely experiences a quantitative reduction; rather, it is reproduced and reorganized in novel forms, albeit with higher transaction costs and diminished efficiency.
These developments appear to confirm that international trade is inseparably shaped within the context of geopolitical transformations, and war may be regarded as one of the most significant forces reconstructing and directing its structure and function.
Iran’s trade during,
after war
Under conditions of military conflict and intensified geopolitical uncertainties, the foreign trade structure of nations undergoes fundamental disruption and necessitates rapid rearrangement at the levels of routes, partners, and financial mechanisms. The Iranian economy, as an economy possessing significant dependence upon the importation of essential commodities and production inputs, confronts multifaceted challenges in the foreign trade domain under such circumstances. An examination of Iran’s current trade situation reveals that approximately $15 billion of the nation’s annual imports (approximately 20.5% of total imports) is allocated to essential commodities, including production inputs for protein products (red meat, poultry, and eggs), rice, sugar, cooking oil, and legumes. This degree of dependence heightens the necessity of adopting alternative strategies to sustain procurement under wartime conditions.
Within this framework, one of the most important short-term measures constitutes the readjustment of import routes in accordance with war-induced logistical constraints. Specifically, in the domain of rice imports, which amount to approximately 1 million tons annually and are supplied predominantly from India and Pakistan, disruption to the country’s southern ports, especially key ports like Shahid Rajaei Port and Imam Khomeini Port, necessitates the utilization of alternative land-based and combined land-sea routes.
In this regard, imports from Pakistan via land borders may be used as an immediate and operational route, whereas imports from India may also be redesigned through transit across Pakistan or through the utilization of port capacities in the country’s southeast (Chabahar).
Similarly, concerning other essential commodities, such as red meat and legumes, the utilization of Central Asian countries’ capacities, including Uzbekistan and Kyrgyzstan, together with nations such as Turkey, may be proposed as an effective strategy under wartime conditions. This approach not only reduces dependence upon maritime routes but also enables geographical diversification of import origins.
In the domain of cooking oil imports, particularly sunflower oil, focusing upon northern countries’ capacities, especially Russia, and utilizing the country’s northern ports in the Caspian Sea assumes particular importance. These ports possess, from operational and hinterland perspectives, the potential capacity to receive several million tons of goods; however, effective exploitation of this capacity necessitates simultaneous reinforcement of maritime and rail transport infrastructure.
In this context, the development of the maritime transport fleet on the Caspian Sea and the activation and upgrading of associated rail corridors, especially the Incheh Borun and Sarakhs routes, must be placed high on the agenda of policymakers.
Beyond short-term measures, wartime conditions necessitate a fundamental reorientation of the country’s foreign trade geographical direction. Traditionally, a substantial portion of Iran’s trade was conducted via southern routes and, particularly, through intermediaries, such as the United Arab Emirates. However, recent geopolitical developments and that country’s stance in the present conflict underscore the necessity of transitioning from a southern, sea-based trade paradigm.
This shift in approach requires focusing upon the development of alternative corridors, including the International North-South Corridor and the reinforcement of transit routes through nations such as the Republic of Azerbaijan, Russia, Iraq, and Turkey.
Within this framework, the development of land-based trade prioritizing commodities such as foodstuffs, construction materials, and light industrial products can play an important role in sustaining trade flows. The reinforcement of border infrastructures, the facilitation of customs processes, and the reduction of non-tariff barriers along these routes constitute among the requirements for achieving this objective.
From an institutional and policy perspective, one of the key instruments for rearranging foreign trade is the utilization of bilateral and multilateral trade agreements. Under wartime and post-war conditions, these agreements can play a decisive role in altering the country’s trade map and creating incentives for economic actors.
In this regard, accelerating the implementation and updating of the preferential trade agreement with Turkey, with the active participation of the private sector, and moving toward the conclusion of a free trade agreement with that country assume great importance. Furthermore, the serious pursuit of concluding and implementing a free trade agreement with Pakistan may be proposed as one of the policy priorities in this domain.
In the financial and banking sphere, given the former role of the United Arab Emirates in facilitating Iran’s trade financial transfers, the new conditions necessitate the definition of alternative routes for conducting these operations. Within this framework, the utilization of capacities from aligned countries’ banks, especially Russia (including VTB Bank), may be considered as an operational route for executing financial transfers. Although the design and groundwork of this mechanism were completed in the Persian calendar year 1402 (2023–2024), its extensive use has not yet occurred, and it is necessary that, during the post-war period, the development and operationalization of this route be placed seriously upon the agenda.
At the executive level, the reform and facilitation of customs processes assume particular importance. In this regard, the Customs Administration of the Islamic Republic of Iran, within less than one week following the conflict’s commencement, announced a set of 11 measures aimed at accelerating and facilitating the clearance of imported goods. The continuation of these measures’ implementation until the war’s end, together with the reduction of the threshold for applying foreign exchange obligation restrictions, the utilization of percentage-based clearance mechanisms, and the possibility of 100% clearance of essential commodities, can play a decisive role in sustaining the flow of goods procurement under wartime conditions.
Achieving this objective requires complete coordination among the Central Bank of Iran, the Trade Promotion Organization, the Islamic Republic of Iran Customs Administration, and other relevant authorities until the conclusion of the wartime period. Moreover, the use of the green channel capacity and the definition of common customs standards with aligned countries can contribute to improving the efficiency of the country’s trade system. Moreover, targeted governmental support for the export sector, including the provision of transportation subsidies and export insurance under high-risk conditions, plays an important role in preserving and strengthening the country’s export capacity.
On the long-term horizon and during the post-war period, the reconstruction and reform of Iran’s foreign trade structure must be placed on the agenda. This necessitates targeted attraction of foreign investment and active participation in global value chains. Such an approach can contribute to enhancing the competitiveness of Iran’s economy and reducing its vulnerability to external shocks.
To deepen the analysis of Iran’s foreign trade situation during and after the war, an examination of the structure and composition of the country’s trade partners assumes particular importance. From this perspective, evaluating the position and role of countries that, for political reasons under wartime conditions, become excluded or restricted from Iran’s trade cycle can contribute to a more precise understanding of vulnerability dimensions and also to the identification of alternative capacities.
Within this framework, given the current circumstances of the war and the stances adopted by regional countries, it appears that the majority of member states of the Persian Gulf Cooperation Council, including Saudi Arabia, Qatar, Kuwait, Oman, the United Arab Emirates, and Bahrain, will gradually exit the list of Iran’s primary trade destinations and origins during the wartime period and even on the post-war horizon, or their role shall diminish significantly. This development underscores the necessity of a precise examination of each of these countries’ shares in Iran’s foreign trade structure.
The article first appeared in
Persian on IRNA.