Oil, gas and Iran economic analyst
Details of the Iranian government’s budget bill for next year show that more than half of the state’s total revenues from oil and gas exports will be allocated to the country's Armed Forces.
According to the budget bill, the Iranian government is projected to receive approximately 37.5% of the country’s total oil and gas export revenues, amounting to around €24 billion.
Of this amount, 51%—approximately €12 billion—will be allocated to military funding.
Officially known as the Islamic Republic of Iran Armed Forces, they consist of the Army, the Islamic Revolutionary Guard Corps (IRGC), and the Law Enforcement Forces (LEF).
From the remaining funds, 42.5% will go toward the government’s operating budget, and 6.5% will be earmarked for "special projects."
In the budget bill, the official exchange rate for the euro has increased from 310,000 rials this year to about 502,000 rials next year. Because of this change, the armed forces’ income from the government’s oil revenues will rise sharply. Next year, their income will exceed €12 billion, compared to €4.3 billion this year and €3 billion the previous year.
In practice, the government will provide the Armed Forces with oil valued in euros, which they can then sell to foreign buyers.
With the price of oil set at €57.5 per barrel in next year's budget, this allocation amounts to a daily delivery of 583,000 barrels to the military.
Tanker tracking data indicate that the IRGC exports around 85,000 barrels of oil per day to Syria. As a result, most of the oil allocated to the Armed Forces is expected to be directed to China – which accounts for 95% of the country’s total oil exports.
This year, the Armed Forces' share of oil exports exceeds 200,000 barrels per day, with less than half going to Syria and the remainder directed to Chinese markets.
In addition to other measures targeting the IRGC, the US has repeatedly imposed sanctions on networks affiliated with the state’s paramilitary forces for smuggling oil.
Some of these networks operate out of the UAE and East Asian countries, particularly China and Hong Kong.
In addition to the share from the government’s oil exports, the Armed Forces also receive financial resources from other lines within the total state budget.
This year, the total budget allocated to Iran's Armed Forces is estimated at around $17 billion, including $4.5 billion worth of oil cargoes.
The draft of next year's budget, made available to the media, does not mention other budget lines related to the Armed Forces.
Government's reliance on oil and gas revenues to finance budget
In total, based on figures from the budget bill, the government expects €64 billion in oil and gas export revenues for the country.
Of this amount, €4.8 billion is expected to come from gas exports (16 billion cubic meters at a price of 30 cents per cubic meter), and €59 billion from oil and petroleum product exports.
According to Iran's customs reports, the country’s total revenue from oil and petroleum product exports last year was approximately $37 billion, and in the first half of this year, it has already reached $24 billion.
The budget bill does not specify the expected oil export volume, but it indicates that the government plans to increase daily crude oil production by 350,000 barrels year-on-year, bringing it to 3.75 million barrels per day next year.
Since Iran will not be launching any new oil refineries in the next two years, the entire increase in oil production is intended for export.
The government has also stated in the budget bill that, although the National Development Fund’s share of oil export revenues is 48%, the actual share will be 20%, with the remaining 28% (€17.9 billion) loaned to the government.
As a result, next year, 65.5% of oil and gas export revenues will flow into the government budget, 14.5% will go to the National Oil and Gas Companies, and 20% will be allocated to the National Development Fund.
To cover the budget deficit, the government has borrowed over $100 billion from the National Development Fund and has been unable to repay it. This continued borrowing jeopardizes the future of the Fund’s assets, which were primarily intended for lending to the private sector.
Recently, the head of Iran's National Development Fund revealed that the foreign currency reserves of this financial institution have nearly been depleted, and the government is unable to repay its debts.
The government is also expected to earn €4.5 billion from the internal sale of petroleum products and gas.
