Studying the Feasibility of Iran Economic Integration with BSEC Using Gravity Model

Extended abstract
1- INTRODUCTION
Economic and political convergence within a region offers numerous advantages to the constituent countries of that region. Given Iran's imperative need to bolster its trade relationships with other nations as a strategy to mitigate the economic sanctions it faces, this study places paramount significance on exploring the feasibility of enhancing Iran's economic convergence with the Black Sea Economic Cooperation Organization (BSEC). Situated at the crossroads of Asia and Europe, and historically associated with the Silk Road, this organization was established in 1992. The primary aim of BSEC is to foster cooperation among its 13 founding member countries, namely Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, North Macedonia, Russia, Romania, Serbia, Turkey, and Ukraine. The overarching goal is to promote peace, stability, and prosperity within the Black Sea region. To date, the Islamic Republic of Iran has engaged with the aforementioned organization in the capacity of a Sectoral Dialogue Partner (SDP). Collaboration between Iran and BSEC has encompassed a wide spectrum of domains, including but not limited to transportation, agriculture and related industries, banking and finance, combatting organized crime, culture, customs affairs, education, emergency aid, energy, environmental protection, statistical data and information exchange, healthcare and the pharmaceutical industry, information and communication technologies, organizational rejuvenation and good governance, science and technology, small and medium industries, tourism, trade, and economic development. Furthermore, several specialized working groups have been established to facilitate and oversee these collaborative efforts.
2- THEORETICAL FRAMEWORK
The theoretical framework underpinning research concerning economic convergence finds its roots in the theory of customs unions. Esteemed economists such as Viner (1950) and Meade (1955) have made significant contributions to the development of this theoretical domain. Advocates of the theory of economic convergence contend that it offers a pathway for less developed nations to harness the benefits of larger markets and to attain economies of scale, thereby mitigating the constraints imposed by the limited size of their domestic economies. Furthermore, proponents of the economic convergence theory posit that, through this approach, smaller nations can bolster their standing within the global economy and enhance their appeal for attracting foreign and international capital investments.
3- METHODOLOGY
To fulfill the objectives of this research, data spanning the period from 2010 to 2021 was gathered from authoritative sources including the World Bank, the International Monetary Fund, and the International Trade Center. Subsequently, the collected data underwent analysis utilizing the gravity model, with the STATA software serving as the analytical tool. Notably, in the 1960s, seminal work conducted by Tinbergen and Poyhonen marked the early application of the gravity model for the examination of international trade flows. Since that time, the gravity model has evolved into a widely adopted tool in the realm of international economic studies. Numerous researchers have employed this model to explore trade dynamics between nations. It is worth
 
emphasizing that the utility of the gravity model extends beyond the analysis of trade patterns; it is also instrumental in the examination of regionalism. In essence, this model functions as a versatile tool, capable of simulating potential trade relationships within any form of integration program involving groups of nations.
4- RESULTS & DISCUSSION
The results of the analysis have revealed that certain categories of goods, identified by their two-digit customs tariff codes, hold particular promise for the development of trade relations between Iran and the countries in question. These preferred groupings are as follows: "27: Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes," "72: Iron and steel," "39: Plastics and articles thereof," "29: Organic chemicals," "08: Edible fruit and nuts; peel of citrus fruit or melons," "74: Copper and articles thereof," "76: Aluminum and articles thereof," and "84: Machinery, mechanical appliances, nuclear reactors; parts thereof," in respective order. Moreover, the findings highlight that economic integration between Iran and the BSEC countries exerts a positive influence on the overall trade volume originating from Iran and destined for BSEC nations. Specifically, it is observed that a one-unit increase in economic integration between Iran and the BSEC countries leads to a corresponding 0.24 unit increase in the total trade volume between Iran and the countries within the BSEC framework. Consequently, it is deduced that fostering economic integration between Iran and the BSEC countries is a viable prospect, one that is poised to yield an upsurge in the volume of trade between Iran and the aforementioned countries.
5- CONCLUSIONS & SUGGESTIONS
Based on the research findings, it is recommended that policymakers take proactive measures to enhance economic convergence between Iran and the Black Sea Economic Cooperation Organization (BSEC) as a strategy to mitigate the impacts of economic sanctions. This recommendation is underscored by the strategic importance of the Black Sea region, given its unique position at the crossroads of Asia and Europe, historically associated with the Silk Road. However, it is essential to acknowledge that the Black Sea basin is one of the most heterogeneous and intricate regions globally. This geographic area encompasses countries that exhibit substantial political, economic, military, cultural, and religious diversity. Consequently, any collaborative endeavors between Iran and the member nations of the Black Sea Economic Cooperation (BSEC) should be structured and adapted to account for these multifaceted and dynamic conditions and components.