The Financial, Economic and Political Risk of Trader Partners on the Import of Virtual Water of Oilseeds to Iran

Introduction The growing virtual water trade globally reflects economic principles associated with international trade, particularly the Heckscher-Ohlin theory. Each nation tends to export products that utilize relatively abundant and inexpensive production factors while importing those that necessitate scarce and costly resources. The strategic use of virtual water in the management of water resources is a critical issue, mainly, considering that a significant portion of Iran experiences arid and semi-arid conditions, leading to severe and increasing water shortages. Among the agricultural products that Iran requires are oilseeds, such as soybean and sunflower, which the country produces and imports in substantial quantities annually.   Materials and Methods The present study aims to assess the trend of importing virtual water from oilseeds through trade partners and determine the effects of economic and environmental factors influencing their import during 2005-2020, utilizing the generalized gravity model. Economic and trade variables such as the ratio of Iran's GDP to other countries, import tariff ratio, real exchange rate growth, country risk index, distance between countries, and sanctions are considered. Environmental variables such as area under cultivation, access to water, and lack of access to water per capita are also included. The variables related to access and lack of access to water consist of four environmental factors: total water withdrawal, total renewable water, agricultural water withdrawal, and total freshwater volume.   Results and Discussion The virtual water trading model is considered a scientific model and a practical solution to address the water shortage crisis in countries, especially Iran. In this research, through gravity models, the determinants affecting the volume of oilseed imports to Iran were identified. The variables of the ratio of Iran's GDP to the trading partner country and the access to water of the trading partner country were effective in both estimations, while the variable of the import tariff ratio was not effective in any of them. The risk variables of the countries have also been effective in importing virtual water. The variables of access to water and lack of access to water are environmental variables that influence the model, similar to economic variables. Therefore, the import of oilseeds is affected by economic variables; however, since the importation of oilseeds is supported to meet the country's needs and government currency has been utilized during the studied period, the variable of real exchange rate growth has less effect on imports. On the other hand, the variables of access and lack of access to water, which consist of four environmental factors (total water withdrawal, total renewable water, agricultural water withdrawal, and total freshwater volume), play an important role in the import of virtual water through oilseeds to Iran. The following suggestions can be made: Considering the significance of the variable distance between countries in the estimation, instead of meeting the demand for oilseeds from producers located at a large geographical distance, it is suggested to exchange these products with neighboring countries and regional markets if they are capable of producing these products. In other words, the Iranian government should accept the risk of importing oilseeds from neighboring and regional markets that are closer, rather than necessarily from the production hub. This may reduce the cost of importing this product by choosing these countries. Additionally, based on the role of the risk index, it is expected that countries with lower risk will be chosen as trading partners. Although the area under cultivation may be associated with a reduction in virtual water imports, considering the state of Iran's water resources and the need to import these two types of oilseeds, increasing the area under cultivation may not be feasible. Importing virtual water can play an important role in the sustainability of water resources while simultaneously meeting domestic needs. Based on the significance of access to and lack of access to water in the estimated relationships for soybean and sunflower production, certain countries have a relative advantage in cultivating these crops. Therefore, to enhance the management and sustainability of water resources, it is recommended to import from countries with greater water availability and higher production capacity. As a result, importing more virtual water supports the conservation of local water resources while ensuring the cultivation of these crops.