Military expenditures under the shah were high and unpopular. Even after the 1974 rise in the price of petroleum, a disproportionately high percentage of the government's annual budget was devoted to military expenditures. Iran's military establishment occupied a special place, and the civilian population, particularly in the rural areas, disapproved of its privileged status. Despite the nation-building activities in which the armed forces were engaged (especially in the area of education), Iranian society in general never fully shared the shah's commitment to a buildup that drained the treasury of scarce resources.

Since 1980 the armed forces' budget has been prepared by the Ministry of Defense (formerly the Ministry of War under the shah) in consultation with the SDC. The latter is also consulted by the Ministry of the Pasdaran in preparing its budget. In turn, the prime minister, who is also a member of the SDC, submits the completed package to the Majlis for debate, approval, and appropriation.

In the absence of official data, the precise levels of military expenditures are difficult to determine. Figures collected and analyzed by the Stockholm International Peace Research Institute for the 1976-83 period indicate a reduction in defense expenditures from the equivalent of US$14.6 billion in 1976 to US$5.2 billion in 1983. Not surprisingly, the sharpest decline occurred in 1979, when the revolutionary regime either canceled or postponed contracted purchases. The most notable cancellations were the navy's six Spruance-class destroyers and three Tang-class submarines. The air force also canceled big-ticket items, including 160 F-16 fighters and 7 Boeing E3A-AWACS aircraft. Admittedly, some cancellations were caused by economic difficulties during the shah's last years in power. With a reduction in Iran's oil revenues during the 1977-78 period, the shah reluctantly agreed to scale down ambitious construction projects, such as the naval facility at Chah Bahar (now Bandar Beheshti) on the Arabian Sea and the military industrial complex at Esfahan.

Nevertheless, the revolutionary government abandoned many military projects, not only because most were contracted with American corporations such as Northrop and Boeing, but also because the new regime's priorities were different. The Khomeini government claimed to represent the oppressed masses and promised to provide for their needs. To this end the government chose to reallocate massive defense expenditures in other directions.

This trend was rapidly reversed, however, with the revolutionary government's first war budget in 1981. Because published figures are lacking, reliable estimates of Iran's defense expenditures are difficult to make. For example, according to the International Institute for Strategic Studies, defense expenditures in FY 1981-82 may have been somewhere between US$4.4 and US$13.3 billion if so, the latter figure would represent 41.6 percent of Iran's total budget. By 1987 all defense expenditures, including those of the Pasdaran and Basij and payments to the families of war martyrs, may have totaled Uceb US$100 billion.

Iran's prerevolutionary defense budgets were high by the standards of developing countries, and large expenditures for its armed forces continued through the early 1980s. Despite the outbreak of the war, Iran's gross national product (GNP--see Glossary) climbed from an estimated US$107 billion in 1979 to US$158 billion in 1984. Military expenditures climbed similarly from an estimated US$8.8 billion in 1979 to US$11.3 billion in 1984. The United States Arms Control and Disarmament Agency's statistics indicated that military expenditures as a percentage of GNP increased from 6.6 percent to 7.2 percent between 1980 and 1984. More significantly, according to some estimates, military expenditures represented 19.7 percent of central government expenditures in 1980 and 29.9 percent in 1984. By all accounts, the impact of these large military expenditures on Iranian society has been considerable.

The World Bank (see Glossary) estimated that with almost one-third of the annual budget allocated to the war effort, other sectors of the economy, including education, health, and housing, experienced sharp declines. Iran's revolutionary government, however, rechanneled some of its military disbursements to the nonmilitary population. For example, veterans, disabled veterans, and widows continued to receive financial support from the government. In rural areas, ad hoc procurement mechanisms were rapidly put in place to feed and clothe the swelling volunteer ranks. These activities created employment opportunities that channeled government monies to the civilian population.

Ingenious as these steps were, the burden of defense expenditures left some of Tehran's revolutionary promises unfulfilled. Khomeini had criticized the shah's regime for squandering Iran's assets by pouring a large percentage of oil revenues into the military and denying basic services to the majority of the population, but in some cases Khomeini was obliged to do the same thing. It was true that after 1980, economic conditions improved proportionately faster for the lower classes than for any other group (see War Costs , ch. 3). Still, the revolutionary regime was exacting great sacrifices from those who could least afford it.

Data as of December 1987