Iran’s upcoming draft budget reveals that more than half of the revenue from oil and gas exports will go to the armed forces, according to a report by the Iran International network published on Thursday and reproduced by the Jerusalem Post.

The government is expected to receive about 24 billion euros from these exports, accounting for 37.5 percent of total revenue, the report said. Of that amount, about 12 billion euros, or 51 percent, will go to military spending, according to the report.

The Iranian armed forces, officially known as the Islamic Republic of Iran Armed Forces, include the Army, the Islamic Revolutionary Guard Corps (IRGC) and the Law Enforcement Forces (LEF). Meanwhile, 42.5 percent of the remaining funds will support the government’s operating expenses and 6.5 percent will go to “special projects,” the report said.

An important aspect of the budget is the increase in the official exchange rate of the euro, which rises from 310,000 riyals this year to 502,000 riyals next year, the report highlighted. This change is expected to significantly boost military funding from oil revenues, increasing the armed forces’ income to over 12 billion euros next year – up from 4.3 billion euros this year and 3 billion euros the year before.

In practice, the government will supply oil, priced in euros, to the armed forces, who can then sell it on international markets. With oil costing 57.5 euros per barrel, this is equivalent to a daily supply of 583,000 barrels for the military.

Oil tanker tracking data shows the IRGC is sending about 85,000 barrels of oil a day to Syria, according to the report. However, most of the oil available to the armed forces is expected to be sold to China, which receives 95% of Iran’s total oil exports, the report claimed. This year, the military has received over 200,000 barrels per day, with a significant portion going to Chinese markets and the rest to Syria.

Apart from oil revenue, the armed forces benefit from other financial sources within the wider national budget, the report highlighted. This year, their total budget is estimated at about $17 billion, including $4.5 billion worth of oil shipments.

Although next year’s draft budget released to the media does not provide details on other military funding, the trend of significant military funding continues, according to the report.

Iran’s dependence on oil and gas revenues

According to the report, Iran is projected to earn 64 billion euros from oil and gas exports next year. This includes 4.8 billion euros from natural gas exports, based on 16 billion cubic meters sold at 30 cents per cubic meter, and 59 billion euros from exports of oil and petroleum products.

Customs data showed that last year, the country’s total revenue from oil and petroleum exports was about $37 billion. In the first half of this year, it has already reached $24 billion, the report notes.

While the budget does not specify the volume of expected oil exports, it shows the government plans to increase daily crude oil production by 350,000 barrels, bringing the total to 3.75 million barrels per day next year, the report said. This increase is aimed exclusively at exports, as no new refineries are planned for the next few years.

The National Development Fund (NDF), which is supposed to receive 48% of oil export revenue, will see its share cut to 20%, with the government re-borrowing the remaining 28% – about 17.9 billion . euros, according to the report. This means that 65.5% of oil and gas revenues will go to the state budget, while 14.5% will go to the National Oil and Gas Companies and 20% to the NDF.

The government’s practice of borrowing from the NDF, totaling more than $100 billion, has created significant debt that it has been unable to repay, the report added. This continued borrowing threatens the long-term sustainability of the NDF’s assets, which were originally earmarked for private sector loans. According to recent statements by the director of the NDF, the fund’s foreign exchange reserves are almost depleted due to this situation.

In addition to oil exports, the government expects to earn 4.5 billion euros from the domestic sale of petroleum products and natural gas, the report concludes.