Iran Faces Financial Strain, Allies May Be Funding IRGC

U.S. military officials have reported unusual financial transfers suggesting significant internal challenges for Iran's Islamic Revolutionary Guard Corps (IRGC). The financial system Iran has used for decades to support proxy groups in the Middle East may be undergoing substantial changes, with some Tehran allies reportedly redirecting funds to the IRGC. However, other information indicates a more complex situation where financial flows between Iran and its partners have not ceased.

U.S. Central Command chief Admiral Brad Cooper stated that Hezbollah, Hamas, and Shiite militias in Iraq are allegedly delaying payments to their fighters to finance the IRGC. Simultaneously, the IRGC itself is reportedly facing difficulties in paying its personnel. If confirmed, this would represent a significant shift from Tehran's historical role as the primary financial backer of these groups, providing funds for weapons, operational expenses, and fighter salaries.

Tehran's economic situation has worsened due to U.S. sanctions and military pressure, with the U.S. estimating that maritime blockades have cost Iran at least $25 billion in lost oil exports. Additionally, U.S. entities have blocked nearly $350 million in cryptocurrency assets, hindering Iran's ability to fund militias and rebuild its military industry. Financial problems are also affecting Iran internally, with reports of delayed salaries and social payments across various economic sectors, including within the IRGC.

However, the claim that allied groups are now funding the Iranian military lacks strong independent confirmation. The situation in Lebanon, where Reuters reported Hezbollah received approximately $200 million from Iran in September, appears to contradict a complete reversal of financial flows. Hezbollah reportedly continues to pay its fighters and support families of the deceased, though some medical and social programs have been cut. The group faces significant expenses supporting tens of thousands of displaced families while maintaining its armed structures, making large transfers back to Iran potentially weakening its domestic standing.

In Iraq, Iran-linked militias have access to state funding, and analysts suggest some groups may be using public funds and financial mechanisms to support Iran, potentially through banks, exchange bureaus, and entities posing as humanitarian organizations. While some Iraqi groups, like Iran's Nujaaba, have expressed intentions to support allied structures with their salaries, evidence of systematic large-scale transfers from the Iraqi state budget to the IRGC is scarce. Iraq's importance to Tehran may grow due to the financial capacity of its militias, with annual spending on the Popular Mobilization Forces estimated at over $3 billion and total expenditures exceeding $10 billion.

The situation with the Houthis in Yemen remains unclear due to insufficient reliable data on their funding levels, making it difficult to assess their potential role in supporting the IRGC. For Israel, these potential shifts have direct regional security implications. If Iran's structures are seeking external funding, financial intermediaries, banks, and companies facilitating these transfers become critical targets. Disrupting these channels could impede arms procurement, drone and missile production, and military infrastructure repair. However, Iran's financial weakening does not necessarily reduce the military threat, as U.S. commands link some aggressive actions in the Strait of Hormuz to economic pressure. A potential consequence is that as allied groups become more reliant on local budgets, businesses, and donations, their financial dependence on Tehran could decrease, potentially weakening Iran's control over their actions, even if they maintain political alignment.