By Professor Matthew Tasooji, CSUSM, (An FISN Research Project)
Note: FISN research reports and papers may be used freely with proper referencing and credit to the authors and the Free Iran Scholars Network.
Over the past three decades, Iran is estimated to have spent approximately two trillion US dollars on military programs, weapons development, and projects related to weapons of mass destruction. This staggering figure represents not just a vast financial outlay, but a profound misallocation of national resources. It diverted wealth from critical priorities such as infrastructure, education, healthcare, and environmental sustainability, and instead entrenched the regime’s control through militarization and external aggression.
Spending in Context — The GDP Comparison
According to data from the World Bank and Trading Economics, Iran’s average annual gross domestic product (GDP) from 1995 to 2024 is approximately 326.5 billion dollars. Over thirty years, this totals about 9.8 trillion dollars. The military expenditure of 2 trillion dollars over the same period amounts to more than 20 percent of the country’s total economic output [1][2].
According to SIPRI and other defense databases, Iran’s official military spending rose sharply in recent years, climbing from 5.7 billion dollars in 2021 to over 10 billion dollars by 2023 [3]. This increase does not account for the significant off-budget and untracked expenditures controlled by the Islamic Revolutionary Guard Corps (IRGC), which operates an opaque military-industrial empire inside and outside of Iran [4].
The Personal Cost — Impact on Iranian Families
With approximately 25 million households in Iran, the 2 trillion dollars in military spending translates to about 80,000 dollars per family. In a country where the annual per capita income is roughly 4,500 dollars, this figure equates to 18 years of income for each Iranian citizen [1]. It is wealth that could have transformed lives, lifted families out of poverty, or launched entire communities into modernity. Instead, it went into missile silos, proxy militias, and nuclear centrifuges.
The Four Chronic Crises Iran Failed to Address
Despite this massive outlay of resources, Iran continues to suffer from four interconnected and worsening crises:
- Water Scarcity: Iran is one of the most water-stressed countries in the world. Over 90 percent of its population lives in areas facing serious water stress. Between 2002 and 2017, more than 30,000 villages experienced population collapse due to water shortages [5]. Rivers have dried, groundwater tables have plummeted, and critical reservoirs like Lar Dam near Tehran are nearing depletion [6].
- Energy Shortages: Iran has a nominal energy production capacity of 92 gigawatts, but actual available power is significantly lower due to aging infrastructure. In 2024, electricity shortages peaked at 14 gigawatts during summer [7]. Winter gas shortages have become a regular feature, with industrial and residential users facing fuel cuts. Iran loses an estimated 4 to 5 billion dollars per year to inefficiencies and leakage in its energy grid [8].
- Inflation and Currency Collapse: Annual inflation in Iran has remained above 40 percent in recent years. The Iranian rial is one of the weakest currencies in the world [9]. Ordinary goods, housing, and food have become unaffordable for large sections of the population. Over 50 percent of Iranians now live below the poverty line, and many face food insecurity and malnutrition [10].
- Unemployment and Brain Drain: Youth unemployment in Iran consistently ranges from 25 to 50 percent. A vast segment of Iran’s educated population is either unemployed, underemployed, or has emigrated. Iran is one of the leading countries in terms of skilled emigration [11]. Entire sectors such as information technology, advanced manufacturing, and healthcare remain underfunded and poorly integrated into the global economy.
What Could Have Been Done Instead
Redirecting even 10 percent of the military spending—200 billion dollars—would have had transformative national consequences.
- Power Infrastructure: According to the International Energy Agency, diesel-based power plants cost around 1 billion dollars per gigawatt of capacity. With an investment of 25 to 100 billion dollars, Iran could have added between 25 to 100 gigawatts of new electricity capacity [12].
- Industrial Job Creation: Based on 2020 data from the Iranian Ministry of Industry, 2.1 billion dollars in foreign direct investment in industrial zones created nearly 20,000 direct jobs [13]. Scaling this model, 1 billion dollars could produce approximately 30,000 jobs when indirect employment is considered. A 100 billion dollar investment in domestic industry could generate 3 million long-term jobs.
- Water Restoration: The government’s own research suggests that a 30 to 50 billion dollar investment could reverse groundwater depletion, upgrade irrigation systems, and revitalize farming communities, potentially saving millions from rural displacement and food insecurity [5].
- Healthcare and Education: With about 10 billion dollars per year, Iran could have launched a ten-year plan to modernize its healthcare system, expand coverage to remote regions, and overhaul its education infrastructure, including universities, vocational training, and digital access [14].
The Militarized Economy and Regime Priorities
The Islamic Revolutionary Guard Corps has grown into a massive military-industrial complex controlling hundreds of companies across oil, construction, banking, and media [4]. It operates outside of regular government scrutiny and siphons national wealth through direct budget allocations, smuggling networks, and ownership of strategic assets.
Much of Iran’s military expenditure funds regional destabilization: Hezbollah in Lebanon, Shiite militias in Iraq, Assad’s forces in Syria, and the Houthis in Yemen. These activities have provoked sanctions, diplomatic isolation, and retaliatory strikes, further worsening Iran’s economic outlook [15].
Recent Events That Reinforce the Cost
In June 2025, a series of Israeli airstrikes destroyed key oil and energy infrastructure across Iran. These strikes crippled already fragile fuel supplies, leading to massive queues, power blackouts, internet outages, and a new wave of inflation [16].
In early 2025, the United States reimposed stringent sanctions on Iran’s oil exports under renewed enforcement of “maximum pressure” policies. This deprived the government of billions in revenue and accelerated food and medicine shortages [17].
Comparative View: The Regional Picture
Iran’s military spending is not unusually high in absolute terms compared to Saudi Arabia or Israel, but the context is crucial. With a much smaller GDP and a struggling economy, Iran’s defense burden weighs far more heavily on its population. Furthermore, while other regional states use military expenditure to develop domestic defense industries or build global partnerships, Iran’s focus has been almost entirely destructive [3][18].
The Real Cost: Human Development Denied
This is not merely a story of numbers. The real cost is in lives not lived to their potential: children who go uneducated, patients without medicine, families displaced by drought, and youths without jobs or hope. The 2 trillion dollars spent on militarism could have made Iran a leader in science, health, education, and clean energy. Instead, it is trapped in crisis, isolation, and repression.
Conclusion: A Different Iran is Possible
Iran’s two trillion dollar military investment between 1995 and 2024 is a monument to lost opportunity. It represents a deliberate choice to sacrifice progress, prosperity, and human dignity at the altar of regime survival and ideological ambition.
Yet this path is not inevitable. Even now, a strategic reallocation of national resources can rescue the country from decline. A fraction of the military budget could be used to end blackouts, create jobs, replenish water supplies, and rebuild Iran’s health and education systems.
For that to happen, however, the Iranian people must reclaim their voice, and the international community must stand with them. The future belongs not to those who build bombs but to those who build societies.
References
- World Bank, Iran Country Data. www.worldbank.org
- Trading Economics, Iran Economic Indicators. www.tradingeconomics.com
- Stockholm International Peace Research Institute (SIPRI), Military Expenditure Database. www.sipri.org
- Bourse and Bazaar Foundation, “The IRGC’s Economic Empire in Iran.” www.bourseandbazaar.org
- Water Scarcity in Iran – Wikipedia. https://en.wikipedia.org/wiki/Water_scarcity_in_Iran
- NCRI, “Water Crisis in Iran Sparks Concern over Future Stability.” www.ncr-iran.org
- Iranian Energy Crisis – Wikipedia. https://en.wikipedia.org/wiki/Iranian_energy_crisis
- International Energy Agency (IEA), “Electricity System Losses.” www.iea.org
- World Bank, Iran Inflation Rate. www.worldbank.org
- Iran Open Data Project, “Household Poverty and Inflation Trends.” www.iranopendata.org
- Iranian Brain Drain Report – Migration Policy Institute. www.migrationpolicy.org
- IEA Power Sector Cost Analysis. www.iea.org
- Iranian Ministry of Industry, “Annual FDI and Employment Report, 2020.”
- Iran Ministry of Health Budget Proposals, 2021–2024.
- U.S. State Department, “Sanctions on Iranian Proxy Networks,” 2024.
- Washington Post, “Iranians Rattled by Israeli Strikes as Fuel Runs Dry.” June 2025. www.washingtonpost.com
- Reuters, “Iran’s Economy Struggles Under Maximum Pressure Sanctions.” March 2025. www.reuters.com
- SIPRI Fact Sheet: Global Military Spending 2024. www.sipri.org