Iran's military budget is growing: What does that mean for the Middle East? - analysis

Iran says it is planning to raise its military budget by 200%, essentially tripling its defense spending.

This should raise eyebrows in the region and could lead to an arms race. Reports say that Iran’s government spokesperson, Fatemeh Mohajerani, declared on Tuesday the goal of this major raise in the budget.

“A considerable raise that amounts to 200% has been witnessed in the country’s defense budget,” Mohajerani said. It was a short statement, and it leads to a considerable deal of speculation about what Iran’s government actually intends to do.

The report of the increased military expenditure plans was picked up by Reuters and has been reported by DW, Al-Arabiya, and many other media organizations. It’s worth looking more closely at what the Iranian government said and what this might mean for Iran and the region.

Tasnim News in Iran noted that the government spokesperson had slammed Israel in the comments in which the budget discussion came up. Mohajerani also discussed threats to Iran from what Iran labels “terrorists” in the Balochistan Province.

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“The terrorist group in the southeast of the country killed 10 of our border guards during a planned action, at the same time as the Zionist regime attacked,” she said.

The Iranian spokesperson said that Iran’s budget is also focused on education and on developing various economic initiatives, such as tax-free zones. 

“The Ministry of Interior is organizing in this regard and the departure of unauthorized citizens, as well as the construction of a wall on the border,” Mohajerani said. Iran also sees its involvement in BRICS, alongside economies such as Russia and China, as an alliance that will increase Iran’s power and help its economy.

When the issue of the defense budget came up, the spokesperson said, “We considered a 200% increase in the defense base in the next year’s budget.” The wording of the statement leaves it open to change. 

Mohajerani quickly moved on from discussing the defense budget to discussing Israel’s threats to Iran. “The Iranian people are not war-seekers and are peace-seekers. Iran is looking for peace, and our busy foreign minister is looking to explain our positions correctly and minimize threats and tensions,” she said.

Iran has increased its defense budget in the past but not by nearly as much. In 2022, “Iran increased its military spending by 11%, making it the 14th largest military spender last year. It was the first time in two decades that Iran ranked among the top 15 military spenders,” Radio Free Europe reported.

This amounted to $24.6 billion in spending. “The budget allocated for the country’s Revolutionary Guard, or IRGC, grew by 14% compared to 2020 and now accounts for 34% of Iran’s total military spending,” Iran International noted. The 2022 reports were based on data from the Stockholm International Peace Research Institute (SIPRI).

Despite the changes in the budget, the World Bank estimates Iranian defense spending at around 2% of its overall GDP. Although there has been a slight increase, it still remains relatively small.

Since the 2022 report, it appears the budget fluctuated. The budget for 2023 was lower than that of 2021. “Iran was the fourth largest military spender in the Middle East in 2023 with $10.3b. According to available data, the share of military spending allocated to the IRGC grew from 27% to 37% between 2019 and 2023,” SIPRI concluded.

“In 2024, Iran’s defense budget is set to reach $16.7b. – a 20% increase from the previous year and comprising 25% of the national budget, according to recently published data by [the] Iran Open Data Center. This substantial rise in military expenditure comes at a time when Iran’s economy is struggling with soaring inflation and declining purchasing power,” a report at Global Voices said.

The Emirates Policy Center published an article in 2023 noting that “even with Iran’s economy hitting rock bottom, its military sector still got a significant slice of the pie (21%) in the Iranian New Year budget, showing the regime’s commitment to its military and armament agenda.”

While there is no doubt that Iran’s military spending has increased and that Iran seeks to position itself as a world power based on that, it is not clear if Iran can actually increase its spending by 200%.

However, if the spending fluctuates by billions of dollars a year, the ability to increase by such a large percentage is easier. For instance, if there is a 50% decline in spending from $20b. to $10b., then a 200% increase brings it to $30b. This means the numbers could be deceptive.

What comes after this spending?

What matters more are the results of this spending. Iran will want to increase the range, accuracy, and overall number of its ballistic missiles. It will want to invest in military aspects of its space and nuclear programs. It will also invest heavily in drones. It may seek to modernize not only its air defenses but also its navy and air force, which have lagged behind for many years.

Iran’s backing for proxies in Lebanon, Iraq, Yemen, and Gaza also requires outlays of hundreds of millions of dollars, or perhaps billions, depending on how much Iran seeks to invest in all these places.

The Iranian increase in defense spending comes amid reconciliation with Saudi Arabia and the Gulf. It also comes as Iran moves to work more closely with Egypt and Turkey. Will those countries view the spending as a threat, or will they assume it’s only a threat to Israel? There are many factors in play and Iran’s reference to spending increases will raise eyebrows across the region.