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Iran - Military Spending

Brian Hook, State Department special envoy for Iran, said 10 May 2019 that the U.S. had "sanctioned almost 1,000 Iranian individuals and organizations ... As a consequence of all of these sanctions the oil sanctions, banking, all of this this year alone Iran had to cut its defense spending, its military spending by 28 percent." He said "Last year they cut it by 10 percent. Their military spending achieved record highs because they took the sanctions relief and they spent it like they always do, on their military and on terrorism around the Middle East. So we're in a much better position now and I think we have increased Iran's diplomatic isolation."

The Stockholm International Peace Research Institute (SIPRI) reported 29 April 2019 that Iran's military spending in 2018 was more than $13 billion. SIPRI monitors developments in military expenditure worldwide and maintains the most comprehensive, consistent and extensive data source available on military expenditure. The report said Iran ranked 18th in the world last year in terms of military expenditures.

SIPRI observed that during 2018, Iran's military expenditure had declined by about 9.5 percent in comparison to the 2017. SIPRI assessed that the decline in Iran's military expenditure during 2018 was due to a variety of reasons including economic problems, a reduction in the country's Gross Domestic Product, and unusually high inflation. Irans economy faced a crisis in 2018, with its currency declining four-fold against major currencies and its oil exports, which generate most of its income, reaching one million barrels a day from a high of 2.5 million. New U.S. sanctions played a major role in the sudden deterioration of Irans economy. However, in spite of a decline in Iran's oil revenues as a result of U.S. sanctions, last year, Iran withdrew sums from its foreign currency reserves to spend on its regional military ambitions. In a bigger picture, Iran has spent a total of close to $140 billion on its military ambitions during the past 10 years, the report said.

Funds gained as a result of the nuclear agreement were used to fuel wars in the region and increase military and security spending. Rouhani's Defense Minister, Revolutionary Guards Brigadier General Hossein Dehghan, in his remarks, described Rouhani's tenure as "the most glorious period in development of missile and defense programs of the country in terms of both quantity and quality." He added that until March 2017 "credit guarantees for defense grew by up to 2.5 fold compared with the previous government" and "it will increase up to four fold by March 2018 relative to the previous government."

By 2016 Iran's military capabilities were "very weak." Iran, in total weapons procurement spent $550 million in 2015. Saudi Arabia's defense imports, they were $7 billion in 2015. The UAE imported $4 billion. Oman imported $1 billion, which is twice as much as the Iranian total. A "refresh" of the country's military could cost an estimated $40 billion. Iranian politicians and military officials are putting forth similar figures.

Under the Islamic Republic, the armed forces budget was prepared by the Ministry of Defense and Armed Forces Logistics in consultation with the Supreme Defense Council (SDC). The president, who also is a member of the SDC, submits the completed package to the Majlis for debate, approval, and appropriation. The ability of the Islamic Republic to commit resources to military modernization and enhancement is contingent on the success of the overall Iranian economy. The intrinsic problems of Irans economy, however, are extremely difficult to rectify and were not ameliorated in the early 2000s by increased income from Irans most valuable export, oil (see The Economy after the Islamic Revolution, 1979, ch. 3). Irans defense budget for 2006 was estimated at US$6.6 billion, up significantly from the 2004 level of US$5.6 billion.

During the reign of the last shah, high military expenditures caused severe popular discontent. Income from the oil boom of 197374 was disproportionately invested in military procurement at the expense of industry, agriculture, and education. Particularly in the rural areas, the civilian population disapproved of the privileged status granted to the military establishment. Despite constructive civilian activities by the armed forces (especially in education), Iranian society in general never shared the shah's commitment to a buildup that drained the treasury.

The Revolution failed to change this pattern, except for cancellation of arms procurement commitments in the first year of the new regime. At that time, the government abandoned many military projects because they involved contracts with U.S. corporations and because the Khomeini regime identified the governments first priority as satisfying the needs of the masses.

This trend was rapidly reversed, however, with the revolutionary government's first war budget in 1981. By 1987 all defense expenditures for the year, including those of the IRGC and Basij and payments to the families of war casualties, totaled as much as US$100 billion. Expenditures dropped sharply to US$6.8 billion the year after the cease-fire. However, beginning in 1989 Iran again increased procurement of arms, largely from the former Soviet Union, as well as domestic production of strategic missiles.

As a result of its vulnerability to air attack due to the significant deficiencies in its strategic air defense system, Iran is building up its strategic missile forces as a cost effective way of countering the stronger air forces of its neighbors and compensating for its weakness in this area. Iran's strategic weapons development program is its top military priority; by all indications, the portion of the budget devoted to this program remains substantial despite the fact that severe financial pressures have forced major cuts elsewhere. Iran's effort will continue to be focused on building the infrastructure needed to produce nuclear weapons, the production of biological weapons and the acquisition or production of missiles and strike aircraft to deliver them.

Increases in defense spending in the 1990s stemmed from internal evalutaions of the Pasdaran and regular Iranian armed forces during the Iran-Iraq war in 1988-89. After the conflict the National Security Council and the Iranian High Command called for a number of improvements. Recommendations focused on four areas: modernization and rationalization of the command structures of the republic's armed forces (including the Pasdaran), the creation of a single chain of command, rearmament, and the development of the country's defence industries. The outgoing prime minister (Moussavi) summarized the government's thinking on this in September 1988 when he said, "the fundamental duty was to strengthen the defence forces."

Within the context of new external pressures in the Persian Gulf region, this policy reflects a realignment of priorities from addressing fundamental economic ills to responding to security pressures related to the Persian Gulf region. Beginning in 2003, the presence of U.S. forces both to the west in Iraq and to the east in Afghanistan magnified the importance of military funding decisions. Because of changes in how military spending is categorized, statistics for the early 2000s are speculative. For instance, it is likely that any significant expenditures on Irans nuclear arms program would have been concealed under energy production expenses.

The strengthening was combined with a push toward military self-sufficiency, which saw the Iranians look for foreign technical assistance in developing a variety of capabilities, both operational and in production of equipment. Iran countined its trend of espousing strong independant rhetoric, however, marking even the license production of foreign equipment as great leaps forward for Iranian military industries. Reports of Iranian advances in indigenous capability between 2000 and 2008 were continually debated as being possibly the product of foreign technical assistance from Iran's allies, such as Russia, Ukraine, China and North Korea.

On 02 February 2012 Islamic Republics President Mahmoud Ahmadinejad stated that Irans budget for the new fiscal year starting on March 20 should be cut by 5.6 percent and defense spending more than doubled. Ahmadinejad presented a government-proposed draft budget, worth 5.1 quadrillion rials (about $416 billion), to parliament on Wednesday. Last years budget was worth 5.4 quadrillion rials. Defense spending will be increased 127 percent and more money will be allocated for scientific research and healthcare. The budget is based on an average oil price of $85 per barrel; the U.S. dollars average value is projected at 11,500 rials.




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