Industry Spotlight: Defense Industry
/By Tony Liu, Research Associate
Introduction:
The Iranian defense industry is quite unique, having been shaped by a history of ostracization from the international community, wide-ranging sanctions on the import and export of weapons, and a strategic need to counter military behemoths such as the United States, Israel, and the Arab states. These factors have led to the formation of a defense industry in Iran that is stunningly obsolete in many respects, but is still able to execute many of Iran’s strategic objectives. Still, despite the government’s boastful rhetoric towards its military capabilities, many of the actual details surrounding the modernity and effectiveness of Iranian armaments remain unclear.
This AIC Industry Spotlight therefore seeks to examine the importance of the defense industry to the Iranian economy and provide details on Iranian arms manufacturing, weapons capability, and the future potential of Iranian arms imports and exports in light of sanctions relief.
Origins:
Prior to the 1979 revolution and subsequent Iran-Iraq War, the function of the Iranian defense industry was very different than it is today. Under the rule of Mohammed Reza Pahlavi, the Iranian armed forces relied heavily on foreign imports to meet their armament needs. Between 1970 and 1978, Iran imported $20 billion worth of arms, ammunition, and additional military hardware from the United States. These purchases included the sale of F-4, F-5, and F-14 fighter jets, AH-1 attack helicopters, and various other weapons platforms that Iran still operates today. In addition to direct purchases, Iran also acquired the licensing rights to produce various western arms such as the Heckler & Koch G-3 assault rifle and MP5 submachine gun (Germany), Rheinmetall MG3 (Germany), and British Aerospace Rapier surface-to-air missile system (United Kingdom); many of which are still produced in Iran today. A joint-venture was also established in 1970 between Northrop and Iran to form Iran Aircraft Industries with the eventual hopes of developing a self-sufficient Iranian aerospace industry.
This trend of cooperation with the West came to an abrupt end, however, with the 1979 revolution. The United States was swift in instituting an arms embargo on the new Islamic regime. All military support to Iran was immediately halted, and in 1992, the Iran-Iraq Arms Nonproliferation Act was passed to officially sanction any weapons sales to the country. Further sanctions were eventually added and strengthened following the continued development of Iran’s nuclear program, including ones added by the 2006 Iran, North Korea and Syria Nonproliferation Act, which aimed to ban Iran’s import of advanced conventional weapons such as radar-evading aircraft and cruise missiles. In 2017, US president Donald Trump renewed sanctions on Iran with the Countering America’s Adversaries Through Sanctions Act.
The United Nations also implemented its own arms embargo on Iran in 2006, with the UN Security Council unanimously adopting Resolution 1737, which aimed to block Iranian nuclear weapons development. Many of the items used in nuclear weapons development, however, are also used in the creation of conventional weapons, meaning the embargo hit all aspects of Iranian arms imports. In 2007, the UN Security Council took a step further and adopted Resolution 1747, which fully banned all states from purchasing Iranian arms exports. Resolution 1929 was later adopted in 2010, which imposed additional limitations on Iran, banning any country from themselves supplying major foreign military arms to the country. This embargo included a ban on the Iranian importation of battle tanks, armored combat vehicles, large caliber artillery, combat aircraft, attack helicopters, warships, and certain missiles and missile launchers. Resolution 1929 also blocked the provision of spare parts and technical assistance related to the weapons banned by the resolution. The ban notably, however, did not include certain weapons such as larger surface-to-air missile platforms and most small arms.
The final Iranian arms resolution undertaken by the UN Security Council was Resolution 2231, which was adopted in support of the 2015 Joint Comprehensive Plan of Action (JCPOA). The resolution determined that arms transfers to Iran could be approved on a case-by-case basis by the UN Security Council if Iran came into compliance with the terms of the JCPOA. More importantly, though, Resolution 2231 stipulated that the overall UN arms embargo placed on Iran would be lifted five years after Iran’s adoption of the JCPOA (October 18, 2020). This date has now passed, and despite fierce protest from the Trump Administration, the UN arms embargo on Iran was formally lifted at the end of 2020.
Strategic Objectives:
Under the United States’ and United Nations’ arms embargoes, Iran has been forced to become a self-sufficient arms producer. It has been able to do this by demonstrating an impressive ability to reverse-engineer weapons purchased from the West, Russia, and China before the 1979 revolution. To this day, Iran still maintains many legacy weapons purchased from foreign suppliers during the Pahlavi era and continues to upgrade and support them to ensure their continued functioning.
Iran has also taken many steps towards developing its own indigenous weapons; strides in this regard have, however, been highly asymmetric. While Iran has made significant gains in its ballistic missile, unmanned aerial vehicle (UAV), and naval capabilities, it still has yet to demonstrate a meaningful capability to produce truly original modern ground vehicles, combat aircraft, and attack helicopters. The lack of access to advanced weapons technologies has no doubt significantly hampered the development of conventional Iranian weapons. Despite this disadvantage, though, the asymmetric development of the Iranian defense industry has still been carefully aligned with the strategic aims of the Iranian government. Iran’s military strategy is structured as a direct response to traditional tenets of United States military planning. This strategic aim has led to extensive Iranian military focus on five primary pillars: fixed and mobile air defense, artillery and ballistic missiles, electronic and cyber warfare, limited airpower, and naval combat. It is by and large in these areas that the Iranian defense industry has seen the most significant and impressive technological advancements, and the creation of these weapons remains the primary focus of Iran’s arms manufacturing.
Industry Overview:
The defense industry of Iran is organized under significant state control and is broadly overseen by the Ministry of Defense and Armed Forces Logistics (MODAFL). Under the control of MODAFL are a number of major industrial organizations responsible for the research and development, production, and acquisition of specific weapons categories. MODAFL also supervises several research and education institutions, such as Malek-Ashtar University of Technology (MUT), which aim to prepare a stable pool of scientific and engineering talent on which the Iranian defense industry can reliably draw. In total, MODAFL and its sub-organizations collaborate with over 3150 firms and 92 universities to form the basis of the Iranian defense industry.
As of 2020, Iran spent at least $15.825 billion on defense expenditures, which amounted to 11.709% of total government spending. Some experts, however, believe that the true extent of Iran’s military spending is significantly higher than this reported figure, as much of the funding appropriated by Iran’s Islamic Revolutionary Guards Corps (IRGC) is unknown even to those in Iran’s executive and legislative branches. Additionally, in the period from 2017-2021, Iran launched a major modernization program aimed specifically at the development and production of missile, air defense, naval, UAV, and electronic warfare systems—further growing Iran’s domestic defense industry and decreasing dependence on foreign imports despite the end of the United Nations arms embargo on Iran in 2020.
Industry Capabilities:
Ground Arms Sector
Iran’s defense industry has seen a general reduction in ground arms investment since the end of the Iran-Iraq War. This is in large part due to the reduced role of land combat in Iran’s military strategy in recent decades, with most land engagements being seen in small-scale counterinsurgency campaigns against militarily inferior adversaries. As such, while Iran’s government claims it is capable of producing fully indigenous ground vehicles that are on-par with or superior to Western vehicle models, in reality, most of the ‘original’ ground vehicles produced by the Iranian defense industry are aging Western, Russian, or Chinese models obtained before the downfall of the Shah that have since been modified and upgraded so that they may be claimed as domestically created. The original models of many of the ground vehicles still produced in Iran today were, in fact, retired and discontinued decades ago in the countries where they were first developed. The only advanced and modern ground vehicle that Iran can claim to have indigenously produced is the Karrar main battle tank, which was unveiled in 2016, and is asserted by the Iranian government to be a superior platform, in some respects, to Russia’s modern T-90 tank. This claim, though, is faced with extreme skepticism from international weapons experts, as Iran has neither the financial nor technological means to develop such an advanced vehicle. Further, it appears that the Karrar platform is itself based on the old Russian T-72 tank model, which is no longer produced in either Russia or Ukraine. Iran’s current inability to develop truly original and modern ground vehicles, however, does not extend to its ability to produce basic ground forces equipment, such as small arms and ammunition, artillery, and anti-tank guided missiles (ATGMs). In respect to these weapons, Iran is capable of producing over 50 types of ammunition and shells, and supplies the majority of its own small arms weapons either through indigenous development or reverse-engineering.
Naval Sector
The asymmetric development of Iran’s defense industry is perhaps best embodied by its naval production sector. Iran has broadly avoided the creation of a true blue-water navy in favor of a littoral fleet that is capable of denying its adversaries access to the territorial waters around Iran, particularly the Strait of Hormuz. This has led to significant Iranian investment into the creation of small fast-attack craft, anti-ship missiles, naval mines, drones, and non-nuclear submarines. In recent years, however, Iran’s navy has seen some shift toward vessels indicative of blue-water ambitions. In 2021, the Islamic Republic of Iran Navy unveiled its largest ever warship, the Makran, which is a former oil tanker converted into a forward base ship—a vessel capable of carrying Iranian forces far from Iran’s territorial waters. Nevertheless, the vast majority of Iran’s naval industry focus remains on producing craft and weapons capable of defending Iranian coastal waters.
In this regard, Iran’s development of its naval weapons industry has been very successful. Iran is capable of producing a number of increasingly potent indigenous fast-attack craft. In 2021 alone, Iran added 110 new speedboats to its naval force. Iran is also one of the few nations in the Middle East capable of indigenously producing submarines. Iran has continued to upgrade the 3 Russian Kilo submarines and 14-20 North Korean Yono mini submarines it maintains as a part of its naval force. Iran is also capable of domestically producing, albeit with North Korean assistance, the new Fateh class of submarine, which was first commissioned in 2019.
It is more challenging to assess the growth of Iran’s naval mine and anti-ship missile capabilities. Experts, however, believe that the Iranian defense industry’s ability to produce these weapons has improved in recent years. In particular, many point to Iran's Zafar, Nasr, Noor, and Ghader anti-ship missiles as evidence of Iran’s naval weapon development, with some anti-ship missiles even being capable of launch from submarines.
Aircraft Sector
Iran’s defense industry is incapable of independently producing fixed-wing combat aircraft, despite the Iranian government’s attestations to the contrary. Iran has, however, demonstrated an impressive ability to maintain and upgrade old legacy aircraft purchased from the United States and Russia under the Pahlavi regime, such as the F-4, F-5, F-14, Su-24, and MiG-29. Many of these aircraft have since been retired in their origin nations, for example, the most advanced fighter sold to Iran by the United States, the F-14 Tomcat, was retired by the United States military in 2007. In Iran, though, these aging aircraft still constitute the bulk of the Iranian air force, with most ‘original’ aircraft unveiled by the Iranian government simply being rehashes or upgrades to existing legacy craft. Experts estimate that Iran is capable of domestically producing between 15% to 70% of the spare parts necessary to maintain its aging fleet, with additional spare parts taken from cannibalized planes and purchased from the black market also contributing to the longevity of Iranian aircraft. Despite this impressive effort to maintain the nation’s elderly military airfleet, Iran has still borne the inevitable consequences of flying obsolete and poorly upgraded aircraft. In 2022, an Iranian F-5 fighter originally purchased from the United States crashed in the city of Tabriz after suffering a technical problem, leading to the death of both pilots and one civilian.
In terms of military helicopters, the Iranian defense industry is somewhat more capable in indigenously producing reverse-engineered platforms and spare parts. Iran still maintains and operates many foreign military helicopters, such as the Bell AH-1, Bell 206, and Russian Mi-17, through domestically manufactured, cannibalized, and black market spare parts. Iran has also been able to produce some indigenous helicopters based upon reverse-engineered U.S. designs, such as Shahed 285, which is derived from the Bell 206. Similar to its treatment of fixed-wing aircraft, Iran’s defense industry has demonstrated an ability to modernize aging foreign-made helicopters, such as the AH-1, which are then commonly claimed by the Iranian government as wholly original rotary aircraft.
Ballistic Missile Sector
Iran's advanced ballistic missile research and production capability is the crown jewel of its modern defense industry. Ballistic missile development remains the centerpiece of Iran’s military deterrence strategy, and thus is also the primary focus of the Iranian government’s investment in its defense industrial base. This focus in investment has paid significant dividends, with Iran’s ballistic missile program being now capable of producing increasingly indigenized and potent missile technologies. With assistance and imports from Russia, China, and in particular, North Korea, Iran has been able to domestically develop and manufacture missiles capable of striking increasingly distant targets with greater payload and precision.
The older Shahab class of missiles were originally based on missiles designed by the Soviet Union (Shahab-1 and Shahab-2) and North Korea (Shahab-3). As the Shahab class of missiles has aged, Iran has taken strides in upgrading its existing weapons arsenal, modifying and upgrading the Shahab-3 into the more reliable and simplified Ghadr-1, and with the Ghadr-1 itself being eventually improved into the Emad in 2015. Further, Iran has unveiled the new Sejil-2, which appears to be an uniquely Iranian designed missile, and is capable of being mostly indigenously produced by Iran’s defense industry. In addition, there are numerous other domestically developed ballistic missile variants and classes that Iran is able to produce, for example, the smaller and more precise Fateh-110. All indications point towards the Iranian defense industry’s continued development of a significant ballistic missile program, with new missiles such as the Sejil-3 already believed to be in development. Some uncertainty remains, however, regarding the effective precision of Iranian ballistic missiles, since many older Iranian missiles still lack fully functioning GPS guidance systems, greatly reducing their ability to reliably hit long-range targets. These issues, though, are being gradually addressed in newer missile designs, and so long as Iran’s national military strategy continues to rely heavily on ballistic missile use, it is likely these issues will continue to be addressed in the future.
Unmanned Aerial Vehicle Sector
Iran’s defense industry places heavy emphasis on the development and creation of unmanned aerial vehicles (UAVs) for surveillance and lethal operations. Through a combination of indigenous research, violations of international arms embargoes, and the reverse-engineering of foreign UAVs that Iran has been able to acquire, Iran’s defense industry has developed a wide array of drones for military use. It is speculated that Iran now fields a dozen different UAV models, with multiple variants of each model also existing. Some of these models include the infamous Abadil, Fotros, and Karrar drones—all of which are relatively cheap craft capable of carrying out surveillance operations, launching munitions to strike adversarial targets, or even conducting suicide attacks using the drone itself as a destructive payload. While Iran’s UAV program is at the core of its national security strategy, most Iranian UAV models do not stand up in sophistication or effectiveness to Western drone models. Iranian drones, however, are well-suited to the strategic needs of the Iranian government and similarly cash-strapped governments with alike strategic challenges, and as such, their value to certain states should not be understated.
Arms Exports and Future Prospects:
With the lifting of the United Nations arms embargo in October of 2020, Iran is once again able to purchase and sell weapons on the global arms market. Despite this, however, Iran hasn’t seen a significant increase in its arms imports or exports in the period since the end of the embargo. From 2017-2021, Iran received only $13 million in arms imports, all of which came from Russia. This number is dwarfed by the value of military imports by Iran’s regional rivals, such as Saudi Arabia, which was the second largest importer of weapons in the world through the same period ($149.46 million imported from 2017-2021). The absence of an Iranian shopping spree following the end of the United Nations arms embargo is at least partially attributable to poor present economic circumstances in Iran caused by strong U.S. sanctions, the COVID-19 pandemic, and other variables. Another contributing factor is Iran’s desire to maintain independence from the global arms market for its armament needs. Still, Iran has purchased a limited number of foreign arms in a likely effort to reverse-engineer those weapons to try and patch the existing deficiencies in its own defense industrial base. While imports may remain low in the near term, Iran’s leaders are expressly committed to a high level of weapons exports. This goal, however, is still partially restricted by separate arms embargoes that were not lifted by the end of the United Nations’ arms embargo. The nation is still blocked from exporting weapons to Lebanon, Yemen, and Syria. Iran also faces more systematic issues in expanding the scope of its weapons exports, as many of the countries looking to purchase the cheap weapons systems offered by Iran are also able to find similar products from Russian and Chinese manufacturers. Regardless, there still exists a demand for Iranian armaments, particularly in countries cut off from major weapons markets. Iran’s defense industry boasts a very impressive array of effective and cheap weapons, especially in the field of anti-tank missiles, anti-ship missiles, and UAVs. It was even reported in 2019 that Russian military officials were interested in purchasing Iranian drones, though no deal has yet materialized. As such, it is likely that Iran will be able to find a market for its weapons in countries such as Venezuela, Syria, Mauritania, Yemen, Lebanon, and Iraq (despite what arms embargoes remain in many of these countries). Since 2000, Iran has exported over $429 million worth of arms to foreign allies such as Syria, Iraq, Sudan, and Venezuela. Iran is also known to export weapons to non-state actors, such as the Lebanese Hezbollah and Yemeni Houthis, who have in the past received missiles and suicide drones, along with other armaments, from Iranian weapons manufacturers.
Conclusion:
The unique history of Iran’s development into a indigenous armaments producer has shaped a defense industry in Iran that is vastly asymmetric in its capabilities. While Iran’s defense industrial base is unable to domestically produce truly modern ground vehicles and aircraft—two core pillars of most contemporary militaries—it has demonstrated an impressive ability to reverse-engineer, upgrade, and maintain the aging weapons systems it has. Further, Iran’s focus on certain technologies, in particular ballistic missiles and unmanned aerial vehicles, has yielded a wide array of uniquely Iranian armaments that Iran is capable of domestically manufacturing. Despite these strides, decades of various international arms embargoes have left much of Iran’s military arsenal highly obsolete, and many of the weapons it has indigenously developed are still inferior to the Western, Russian, and Chinese armaments fielded by most of its regional and global adversaries. The recent expiration of the United Nations arms embargo, coupled with a possible lifting of sanctions on Iran following the reestablishment of the Joint Comprehensive Plan of Action, have the potential to change this reality in the long-term.
