Mitigating the Oil Curse in the Presence of Economic Sanctions: A Constructive Engagement Approach: Evidence from Petrostate

Ertimi, Basem; Sarmidi, Tamat; Cahyadin, Malik; Egziama, Abderazag Elamn

doi:2026.41.1.157

The Journal of Economic Integration 2026 March;41(1) :157-194.
DOI: https://doi.org/10.11130/jei.2025019

Mitigating the Oil Curse in the Presence of Economic Sanctions: A Constructive Engagement Approach: Evidence from Petrostate

Basem Ertimi¹, Tamat Sarmidi², Malik Cahyadin³, Abderazag Elamn Egziama¹

¹Assistant Professor, Department of Economics, Faculty of Economics, zawia university, Zawia, Libya
²Professor, Universiti Kebangsaan Malaysia
³Lecturer, Department of Economics, Faculty of Economics and Business; and PSP-KUMKM, Universitas Sebelas Maret, Indonesia

Corresponding Author: Basem Ertimi ,Email: B.ertimi@zu.edu.ly

ABSTRACT

The oil-fuelled prosperity of petrostate countries has made their foreign relations involve many economic sanctions. As a foreign relations issue, a high-profile case sanctioned to those countries should therefore be brought into question. The obvious opportunity for those countries that the international community may have missed is shifting policies towards a more constructive direction. The foreign policies' prevailing view holds that "constructive engagement" with repressive regimes will induce sensitive human rights issues. As it stands, much of the historical account of foreign policy is focused predominantly on countries under economic sanctions. However, little academic literature investigate how to mitigate the negative effect of it. This study utilises panel data of 21 petrostate countries over the period 1995-2018 and 7 countries that have been under sanctions. It undertakes an empirical analysis of the mitigating effects of the constructive engagement on economic sanctions that address these methodological issues by using One Step-GMM. The paper has shown a positive role played by the constructive engagement in mitigating the negative effect of economic sanction on economic growth. This article charts the adoption of constructive engagement policy in mitigating the negative impact of economic sanctions. This research found out that such foreign policy has contributed greatly to mitigating the oil curse.

JEL Classification

G21: Banks; Depository Institutions; Micro Finance Institutions; Mortgages
G28: Government Policy and Regulation
G34: Mergers; Acquisitions; Restructuring; Corporate Governance
E44: Financial Markets and the Macroeconomy

Keywords: Constructive Engagement | Economic Integration | Economic Sanctions | International Relations | Oil Curse