Balancing Food Security and Water Scarcity: Economic and Environmental Implications of Alternative Wheat Policies in Iran

Water scarcity and food security are critical policy dilemmas for Iran, where wheat production is the largest user of agricultural water and is considered vital for food independence. This study examines the economic and environmental trade-offs between wheat self-sufficiency and virtual water imports, two competing policy approaches that have not been comprehensively compared in the literature. We consider pure self-sufficiency, pure virtual water dependence, hybrids of these approaches, and responses to global supply shocks using a dynamic computable general equilibrium model. Our results highlight that virtual water imports can save 5.7% of the agricultural water use and even raise GDP by 4.0%, but with risks of deteriorating trade deficits and higher income inequality in the long run. While increasing food self-sufficiency provides more food security, it also creates a trade surplus of $2,370 million but raises water use by 4.9% and GHG emissions by 4.2%. Of particular importance, our new hybrid policy—namely, 75% domestic production and 25% strategic imports—resulted in 5.3% GDP growth with a 2.6% decrease in water use. The crisis simulation reveals that only strategic reserves through expansion and diversification can effectively buffer the shock of up to a 50% reduction in global exports. These results provide an evidence-based framework for the design of resilient food security strategies in water-scarce regions, while there is an imperative for balanced policy approaches and regional cooperation.