Iran’s Military Budget Soars 35% to $23B in 2025

Iran’s military budget for the Persian year 1404 (2025) has surged to an estimated $23.1 billion, marking a 35% increase from the previous year, according to a new analysis by Iran Open Data (IOD). This growth, the largest in recent years, comes amid deepening U.S. sanctions and growing regional tensions.

Why it matters:
Despite sanctions and economic pressures, Iran continues to ramp up its defense spending—largely using off-budget oil revenues and foreign exchange allocations that lack transparency. These opaque mechanisms make it difficult for international observers to assess the true scale of Iran’s military capabilities.

By the numbers:
- $12.36 billion is allocated through Iran’s official military budget lines.
- An additional €11 billion (≈$10.74 billion) is funneled through oil quotas and special project credits.
- Based on official exchange rates (1 euro = 60,228 IRR; 1 USD = 52,300 IRR), the total military budget exceeds $23 billion.
- This figure is over double what the Stockholm International Peace Research Institute (SIPRI) reported for 2024.

Disputed Figures

The wide gap in reported figures stems from divergent accounting methods.

The Stockholm International Peace Research Institute (SIPRI), a leading global authority on military expenditure and arms trade, estimated Iran’s 2024 defense budget at $7.9 billion, a 10% decrease from the previous year. The drop, according to SIPRI, was driven by high inflation, declining oil revenues, and intensified U.S. sanctions, which have constrained Iran’s economy and defense procurement capabilities.

SIPRI relies primarily on official budgetary data and standardized exchange rates. However, its estimates often exclude off-budget streams—such as oil-barter arrangements, non-cash allocations, and foreign currency reserves—which are commonly used in Iran’s budgeting process but not publicly detailed.

IOD, in contrast, includes these opaque revenue sources in its analysis. It estimates Iran’s actual 2024 military budget at nearly $17 billion, nearly double SIPRI’s figure. 

This would place Iran 22nd globally in military expenditure, not 34th as SIPRI reported. The discrepancy underscores the challenges of assessing military spending in opaque, sanctioned economies, where significant funding flows outside traditional budget lines.

Regional Rivalry

Iran’s defense budget still trails those of key regional rivals, but the gap is narrowing:
- Saudi Arabia spent $75 billion in 2024, maintaining one of the world’s largest military budgets.
- Israel allocated $46.5 billion, a 65% increase year-over-year—its steepest rise since 1967—driven by military operations in Gaza and ongoing confrontations with Hezbollah in Lebanon.

What’s Next
Iran’s military remains heavily funded by crude oil exports, much of which bypasses conventional oversight through quota-based allocations rather than cash payments. IOD estimates currently nearly 47% of Iran’s defense budget comes from special crude oil quotas.