Iran’s Plan for a Post-War Military Revamp: Financing Gaps, Similar Mistakes, and Sanctions Risks
Iran’s parliament is moving forward with a Plan to Strengthen the Armed Forces, presenting it as a path to rebuild after the 12-day war. At first glance, the initiative looks ambitious with new funding lines, promises of procurement, and a bid to plug the glaring holes in Iran’s conventional military capabilities. But beneath the surface, the plan is riddled with problems: insufficient financing, uncertain execution, and the looming risk of a reinstated arms embargo if snapback sanctions return.
Where the Plan Stands
The bill has cleared the Majles (Iran’s parliament) National Security and Foreign Policy Commission. Approval in commission is only the beginning of the Iranian legislative process. The bill still requires approval in the plenary before being sent to the Guardian Council then to the President and relevant government organs for implementation
This bill is being portrayed as a necessary and comprehensive effort to rebuild Iran’s military capabilities. Hard-liners, in particular, have been calling for more military spending and for greater preparedness for the next war with Israel.
So far, Tehran has announced around $6 billion in initiatives. Yet roughly $1 billion of that figure simply covers arrears from 2024–25 allocations the military never received. The genuinely new commitments amount to about $5 billion. In theory, the Supreme National Security Council could call for additional funding as stipulated in the bill.
That being said, Iran’s official defense budget figures often conceal significant additional spending hidden in off-budget sources, such as allocations from oil revenues, frozen assets, or the Supreme National Security Council’s special decrees. These shadow funds create opacity, allowing Tehran to sustain military projects and procurement beyond the headline numbers reported in the state budget.
Despite the amped up rhetoric about a comprehensive rebuild, the budget is actually relatively modest. For perspective, Iran’s 2024 defense spending was estimated by SIPRI at around $7.9 billion. In 2023, it was estimated to be around $10.3 billion. SIPRI tends to have lower estimates than IISS and DIA. Numbers aside, the contents of the bill and the current discussions in Iran about military reconstitution lack the necessary strategic reorientation that the 12-day war should have triggered.
How the Money Is Structured
The allocations lean heavily on loans and oil-linked transfers rather than sustainable budget increases. Among the key provisions:
$2.2B from the Central Bank (via frozen assets or other foreign currency abroad) as zero-interest loans for urgent defense projects
$2.2B for the Ministry of Defense to purchase major foreign arms, coordinated with the General Staff
$1.5B transferred from the Ministry of Oil directly to the General Staff
$50-70M annually (about 30% of air transit revenues) earmarked for strengthening air defense systems
The Planning and Budget Organization is also required to allocate an annual share through savings or oil revenues, leaving the door open to additional funds. This structure reflects both the chronic fiscal pressures of the Iranian state and the political difficulty of openly increasing the defense line in the national budget at a time of widespread economic hardship.
For one, the reliance on frozen assets or foreign currency deposits abroad as zero-interest loans underscores the lack of liquid reserves within Iran. While it provides short-term liquidity, it is essentially a one-off mechanism that depends on the release or conversion of politically contingent funds. If sanctions tighten further or asset recovery stalls, this allocation will remain notional rather than executable. Similarly, oil revenues (long used as a funding stream for Iran’s defense spending) are sensitive to fluctuations in global oil prices and export volumes, both of which are constrained under sanctions and will be more so if a crisis emerges from snapback.
Business as Usual
During the 12-day war, Iran’s most glaring weakness was the fragility of its air defense network, which proved unable to stop deep Israeli strikes on critical infrastructure. Command-and-control and intelligence systems were quickly degraded, leaving Tehran with little capacity to coordinate defenses or sustain high-tempo operations. Although Iran’s missile forces launched salvos, their rate of fire declined sharply as bases, stockpiles, and logistics came under attack. More broadly, the 12-day war exposed the failure of forward defense and credible retaliation.
Yet, despite this experience, the priorities embedded in the current bill (and discussions within Iran) remain largely unchanged from pre-war patterns. Budgetary allocations are still funneled through the same mechanisms of oil revenue transfers, frozen asset releases, and ad hoc loan facilities, while procurement planning is reactive and narrowly scoped.
In effect, the legislation funds repairs and incremental acquisitions rather than forcing a doctrinal rethink. There is no indication of a decisive shift toward addressing the structural deficits in air defenses, command-and-control integration, radar coverage, or resilient basing that the conflict so clearly highlighted. Nor are there new efforts to expand indigenous R&D pipelines or overhaul defense-industrial bottlenecks.
The earmark of 30% of airspace overflight fees toward air defense looks almost symbolic when set against the vulnerability of Iran’s radar and interceptor network revealed during the war. Even at the upper end, this would barely cover a handful of modern interceptors or radar upgrades.
The only real difference is the relative emphasis on foreign procurement of major systems compared to the longstanding narrative of self-sufficiency and reliance on domestic industry. Even that pivot is less a transformation than a reluctant adjustment, reflecting recognition that key conventional platforms cannot be sourced indigenously at scale or within a relevant timeline.
The Shadow of Snapback
A potential vulnerability in Iran’s reconstitution plan lies in the reinstatement of snapback sanctions, which would restore the restrictive regime that prevailed prior to the JCPOA. The earlier embargoes under UNSCR 1747 (2007) and UNSCR 1929 (2010) not only prohibited the import of virtually all major conventional systems but also banned the associated infrastructure of spare parts, training, financial resources, and maintenance services.
UNSCR 1747 (2007) called on states to exercise restraint in transfers to Iran of any systems covered by the UN Register of Conventional Arms: battle tanks, armored combat vehicles, large-caliber artillery, combat aircraft, attack helicopters, warships, missiles, and missile systems.
UNSCR 1929 (2010) strengthened this by prohibiting the direct or indirect supply of those same categories to Iran, and extended the prohibition to spare parts, related materiel, technical training, financial resources, maintenance, and associated services.
In practice, this regime constrained Iran’s ability to modernize its forces and forced reliance on smuggling networks, limited barter arrangements, and incremental domestic substitution. Although earlier embargoes did not explicitly list air defense systems among the prohibited categories, in practice suppliers treated them as covered under the broader restrictions (Russia and the S-300). As a result, Iran faced the same difficulties acquiring advanced air defenses as it did with offensive conventional platforms.
The current plan’s $2.2 billion earmark for foreign procurement is therefore somewhat of an unknown. While Russia and China oppose snapback, it is not guaranteed that either would step in to provide Iran with advanced systems under an embargo.
Russia, though politically aligned with Tehran, faces real constraints: its own defense industry is overburdened by the war in Ukraine, it has little capacity to extend weapons on credit, and Iran’s past experience with Russian arms deals has been characterized by repeated delays and under-delivery. China, by contrast, has the industrial capacity to supply the systems Iran most needs, but Beijing has historically been cautious about crossing U.N. sanctions lines when its broader economic interests are at stake; willingness, not capability, is the key constraint.
In this environment, North Korea is a plausible candidate for cooperation, particularly in areas such as underground construction, missile basing, and survivability measures, where Pyongyang has deep technical experience. At the same time, Iranian military discourse has increasingly referenced Pakistan as a potential defense partner.
Where is Iran headed?
The current discussions in Tehran, and the text of the bill itself, suggest that Iran is poised to continue pre-war patterns of defense planning rather than embarking on a smarter path characterized by introspection and adaptation. It remains unclear whether Iranian decision-makers have drawn the right lessons from that conflict, or whether the experience has been reframed domestically in ways that obscure its operational failures. Moreover, the reliance on oil revenues, frozen assets, and politically expedient loans underscores how deeply the military’s future is tied to Iran’s worsening economic situation.
If another confrontation with Israel erupts, these structural weaknesses could leave Iran in an even more precarious position than during the 12-day war, with fewer options for credible retaliation. This uncertainty is compounded by the lack of progress with the E3 on extending snapback sanctions and the parallel discourse in Tehran about a potential withdrawal from the NPT. Taken together, these dynamics point to a defense posture that is reactive and brittle — one that is sustained by rhetoric of resilience but vulnerable to both external pressure and internal crises.