Can We Trust How Iran Would Spend Funds From a Nuclear Deal?

The deadline in the Iran nuclear negotiations has just been extended. But if an agreement is ultimately reached, Tehran is expected to receive a substantial financial windfall. Critics have argued that an influx of funds will permit Iran to expand its destabilizing regional activities. The Obama administration has argued that Iran will use the funds primarily for domestic needs. Who is correct?

An estimated $100 billion to $140 billion in Iranian foreign exchange reserves are being held in escrow in banks overseas (primarily oil revenues that U.S. sanctions block from being repatriated to Iran). It is not clear how much of these funds would be made available to Iran under a nuclear agreement, or when. U.S. officials have reportedly indicated that Iran would receive $30 billion to $50 billion after completing initial steps to comply with an agreement (deactivating centrifuges in excess of those it is permitted to operate, reducing its stockpile of enriched uranium, and converting its heavy-water reactor). That work could take six months or more.

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In his most recent budget, Iranian President Hasan Rouhani proposed government expenditures of approximately $300 billion. While some domestic programs were increased—health-care spending rose 59%–so were security expenditures. Saeed Ghasseminejad and Emanuele Ottolenghi of the Foundation for Defense of Democracies noted that funding was up 48% for the Islamic Revolutionary Guard Corps and 40% for the Ministry of Intelligence and Security; overall defense spending, which amounts to 3% of Iran’s gross domestic product, rose 33%. These figures likely understate Iran’s security spending; as the Congressional Research Service recently noted, the Revolutionary Guard Corps spends “significant amounts of unbudgeted funds on arms, technology, support to pro-Iranian movements, and other functions.”

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