Decoding Iran's Military Spending: Shortcomings and New Findings

The military budget of the Islamic Republic has always been shrouded in ambiguity. This budget, apart from what is presented annually within the framework of the official state budget to the parliament, has hidden resources and dimensions that have occupied the minds of many military experts and defense economists. In this regard, the 'International Institute for Strategic Studies' in London, which annually publishes a comprehensive assessment of the military capabilities and defense spending of countries worldwide in a book called 'Military Balance', states in its latest report that a detailed examination of Iran's budget bill for 2018-2019 indicates a rising trend in military spending and fundamental changes in the allocation of financial resources to the military budget. The report points out that Iran's annual budget is just a snapshot of the country's official and visible expenses, noting that many organizations, especially the armed forces, have access to financial resources outside the budget circle, which they can use to increase their budgets. To this end, the Islamic Revolutionary Guard Corps (IRGC) is actively engaged in establishing private companies across the country to raise capital and accumulate financial resources. Additionally, the IRGC has leveraged its significant political influence to secure numerous contracts in various economic sectors, including construction, energy, road construction, food, and transportation. To arrive at the total military expenditure of Iran, it is not enough to consider the costs of the army, IRGC, and Basij; other items must also be taken into account, including the costs of the police force, welfare organizations and actions for military personnel, as well as the budget of numerous centers dedicated to ideological and political training, and organizations and universities engaged in defense research and providing services to military forces. Since transparency in operations paves the way for accountability, the process of preparing and presenting Iran's military budget has deliberately been kept ambiguous and unclear. The preparation of Iran's budget is more a result of bargaining and exchanges among factions and power groups than a response to the needs of ministries and organizations and their components. The influence and political power of groups and factions are the main factors in budget allocation to them. Despite these challenges and shortcomings, in-depth examinations of Iran's budget for 2018-2019 by the 'International Institute for Strategic Studies' have reached five key findings. 1) Official military and defense expenditures are significantly higher than the amounts generally demanded by lobbyists and hardliners in and outside the parliament. Media affiliated with the IRGC and high-ranking military and defense officials, such as Major General Mohammad Baqeri, Chief of Staff of the Armed Forces, and Aladdin Boroujerdi, former head of the National Security and Foreign Policy Commission of the Iranian Parliament, along with several hardliners and conservatives in parliament, have repeatedly urged the government to allocate five percent of the national budget to military affairs. In 2016, parliament complied with this request, resulting in total military spending for that year, considering all aspects, reaching 921 trillion rials (19.6 billion dollars). The Iranian government has set the budget for 2018-2019 at 12 thousand trillion rials (260 billion dollars), with 7.5 percent of this budget allocated to military expenses. 2) The depreciation of the rial against the dollar from April to October 2018 caused defense spending in dollar terms to decrease from 21.4 billion dollars to 19.6 billion dollars within six months. This phenomenon indicates that the extraordinary increase in the budget in rials, while significant, does not necessarily mean that the Islamic Republic prioritizes all defense matters. Nevertheless, Iran's military expenditures in 2018 increased by 53 percent in real terms compared to the five years prior. 3) The budget allocated in 2018-2019 to the Khatam al-Anbiya Headquarters (not to be confused with the Khatam al-Anbiya Construction Headquarters) indicates the importance and increasing influence of this organization, with command given to Major General Gholamali Rashid. This headquarters, which was responsible for coordinating between the army and the IRGC during the Iran-Iraq War, was overshadowed by the formation of the General Staff of the Armed Forces. However, in 2016, with the revival of the Khatam al-Anbiya Headquarters, it was announced that in the event of war, this headquarters would be responsible for designing, coordinating, and overseeing the operational activities of the armed forces, not the General Staff of the Armed Forces. Major General Rashid's deputy is Major General Hossein Hassani Saadi, who was previously the commander of the Army Ground Forces. According to some Iranian media, the Khatam al-Anbiya Headquarters is responsible for 'important and sensitive coordination in the Middle East.' Gholamali Rashid is a key commander of the IRGC who has close ties with Major General Qassem Soleimani, the commander of the IRGC Quds Force, which is responsible for conducting extraterritorial operations. 4) Examination of Iran's military budget for 2018-2019 shows that the budget for the police force has increased by 84 percent compared to the previous year, which is actually the highest increase since its budget was integrated into the overall military budget of the country. Accordingly, the police budget, which accounts for nearly 16 percent of Iran's military budget, exceeds that of the army, which holds 12.1 percent of the military budget. The significant increase in the police budget, responsible for internal security, is likely related to public protests and dissatisfaction with the government, the most significant of which occurred between December 28, 2017, and January 7, 2018. The budget for 2018-2019 also indicates that 33 percent of the country's military budget is allocated to the IRGC. The budget for educational, ideological, and political centers and facilities, which have separate codes, has not been included in the IRGC's budget determination. Thus, the IRGC's budget is approximately 303 trillion rials (equivalent to 6.4 billion dollars). 5) In the budget bill presented to parliament in 2017, the budget for the Quds Force was 10 trillion rials (213 million dollars). The same amount was allocated for missile programs. However, in the budget bill for 2018, there was no indication of a budget for these two items. This suggests that outside the official military budget of the country, there are other financial resources for military expenditures, especially for those programs and military organizations that hold special priority for the leader and other officials of the Islamic Republic. In conclusion, the report from the Strategic Studies Institute states that these preliminary findings indicate changes in the level and manner of financial resource allocation to Iran's military expenditures and how Iran pursues its security and defense programs.