Figures released by Iran’s government for the fiscal year 2019-2020 reveal significant budget cuts in military spending. US sanctions have forced Iran to reduce parts of its defense budget.
Unveiled on December 8, the budget shows an overestimation of revenues according to the Majlis Research Center. The figure is projected at 4,845 trillion rials or $37 billion (per open market exchange rate of $1 = 13,000 rials).
Tehran will be forced to re-balance its budget before Parliament finalizes it. This will result in some $5.5 billion being cut from the projected revenues. The revised military budget for Iran will also be negotiated in Parliament. In recent weeks, Iran’s joint armed forces commanders have held closed-door meetings in Parliament to urge it to approve higher military allocations.
However, figures released show a significant reduction in Iran’s defense budget. The Defense Ministry’s allocation dropped from 26,000 billion tomans last year to 9,800 billion tomans in 2019-2020. The Minister of Defense Amir Hatami has pressured Parliament for a larger budgetary allocation. Iran’s Supreme Leader Ayatollah Ali Khamenei supports Hatami’s demand.
Following the US targeted killing of the Qods Force Commander, Qasim Soleimani, article 3 of a new parliamentary bill approved an additional allocation of 200 million euros from Iran’s National Development Fund to strengthen the elite force. The Islamic Revolutionary Guard Corps (IRGC) Chief Hossein Salami expressed gratitude for the ratification of the so-called “Hard Revenge” bill.
The IRGC and the paramilitary Basij Forces budgetary allocations slightly increased as well. The IRGC will receive 18,315 billion tomans in the new fiscal year compared to 15,000 billion tomans the previous year. The Basij Forces will get 1,746 billion tomans compared to 923 billion tomans in 2018-2019. In return, the IRGC and Basij have vowed to rebuild Iran’s infrastructure damaged by recent floods and earthquakes.
Brigadier General Salami says Iran is in an economic war, referring to US sanctions, and must build a military front to eradicate poverty. He insists the IRGC will use budgetary allocations to generate employment. Unemployment and underemployment in Iran have led to frequent and deadly protests in recent years. This may explain the higher budgetary allocation this year to the Iranian Disciplinary and Security Forces, responsible for maintaining internal security, of 17,444 billion tomans compared to 11,521 billion tomans last year.
The army will be hit the hardest by the latest budgetary cuts. The army keeps the borders safe and develops Iran’s defense industry. At times, it is pressured by the IRGC to reallocate resources to supporting trans-border military operations, but it does so reluctantly.
The army is also reluctant to fight a war during sanctions. The Defense Ministry supervises army budgetary allocations and says Iran will not start a war with any country. The supreme leader says Iran will try to avoid war. To avert war and deter enemies from attacking Iran, Commander of the Iranian Army Major General Abdolrahim Mousavi insists Iran is well equipped to defend itself. Iran’s Aerospace Force Commander Amir Ali Hajizadeh says the army’s defense systems are indigenous, which means less spending on foreign supplies. Chief of Staff of the Iranian Armed Forces Mohammad Bagheri says Iran is able to meet all its defense needs despite budget constraints.
After talks with Parliament conclude, the army could receive a slightly higher allocation this year of 11,978 billion tomans compared to 10.24 billion tomans last year. The budgetary figures do not indicate a reduction in defense administrative expenditures which are used to pay military personnel.
Admiral Habibolah Sayyari, head of the army’s deputy coordinating staff told Parliament that Iran’s army personnel are underpaid while taking on roles to rebuild flood and earthquake hit areas near the borders. Some army personnel work several jobs to make ends meet.
Retired army officers are likely to be hit the hardest by the budgetary cuts. According to Abulfazl Hossein Beighi, a member of the Iranian Parliament’s Security Commission, the army retirement fund faces a deficit of 3,000 billion tomans.
Parliament has taken steps to increase the salaries of the armed forces, but that may not be enough. Under Iran’s laws, army personnel must receive salaries that are 20 percent higher than employees in other government sectors. Members of the armed forces currently receive salaries that are 15 percent less than other government employees.
Since May 2019, it was expected that Iran would cut its military budget because of US sanctions, so the government’s decision to tighten military budgetary allocations has not come as a surprise.But the latest budgetary trends reveal some of Iran’s military plans and challenges for the year ahead. Clearly, Tehran has no intention to alter its trans-border operations carried out by the IRGC. It will also aim to address poverty and protests by dividing tasks and resources among the IRGC, Basij and Disciplinary forces.
After recently ending its commitments to the nuclear deal, it is possible for Iran to allocate fresh funds to developing its nuclear industry. Tehran has not stated where the funds may come from, but the National Development Fund may be used for this purpose. The new Qods Force Commander, Brigadier Ismaeel Gha’ani has announced jihadist plans to mobilize Iran’s nuclear industry to liberate the first and second Qiblas of the Muslim world, referring to Makkah and Jerusalem.
Iran is prepared to return to the nuclear deal if all parties commit to upholding it, so its provocative military statements could all be bluffs. What is unsettling to Iran is that its own internal estimates suggest that if US sanctions continue, it will need to reduce military spending by approximately 77 percent in the long haul. In that event, it is unclear how Iran’s defense doctrine will evolve.
Sanctions may weaken Iran’s military capabilities. Since 2019, sanctions have been enforced on Iranian companies and banks that transferred hundreds of millions of dollars to the IRGC and the Defense Ministry via countries like Turkey and the United Arab Emirates. The United States has also designated the IRGC as a terrorist organization, and it may proceed to designate Iran’s Defense Ministry as a terrorist body, following the Iranian Parliament’s decision this week to name the entire US Defense Department as a terrorist body following Soleimani’s death.
It remains to be seen how sanctions will alter Iran’s cross-border military expeditions especially as it prepares revenge attacks for Soleimani’s killing. Iran’s Supreme National Security Council Secretary Ali Shamkhani has unveiled tentative plans to hit 13 targets abroad, possibly including US military bases in the Gulf region. He says Iran will hit US targets and military personnel, and will aim to destroy American bases if the US retains forces in them.