Iran will skimp to finance higher military spending

Significance

This was an immediate response to the US killing of Quds Force chief Qassem Soleimani, preceding today’s launch of ballistic missiles at Iraqi bases hosting US troops. Increased security fears are also feeding into the debate over the draft budget for the fiscal year that starts on March 21.

Impacts

• If Iran’s re-nuclearisation provokes “snapback” UN sanctions, the economic situation will deteriorate still further.
• Pressure on household finances could increase support for populist conservative candidates in the 2020 legislative elections.
• Some parts of the establishment, including IRGC entities, will profit from sanctions, for example through smuggling.