Issues of the Iranian Defence Industry and Strategic Choices: Resistance without an Axis?

The Islamic Republic of Iran has faced significant international isolation since its establishment in 1979, particularly due to the sanctions and embargoes imposed by Western powers. From early on, Tehran relied on establishing a chain of regional allies, the “Axis of Resistance,” and on the production of low-cost weaponry to counter its adversaries, starting with Israel. However, the weakening of several members of this Axis (Hamas, Hezbollah), or even their disappearance (the Bashar Al-Assad regime in Syria) have significantly weakened Iran’s position in the Middle East. What is the current state of the Iranian defense industry and what challenges does it face?

Between regional isolation and strategic dependence on Russia

Analyzing the current situation from the Iranian perspective reveals three major observations. First, Iran finds itself in a regional environment it perceives as hostile. The direct confrontation with Israel, which occurred between April and October last year, had a considerable impact on the Iranian regime. Since September, the United States has strengthened its military presence in the region, with nearly 40,000 troops deployed. Secondly, Iran is going through a period of fragility. The country is facing a significant loss of influence within its “Axis of Resistance” since the fall of the Bashar Al-Assad regime. Syria, a key link in the strategic corridor allowing the Quds Force to supply weapons to Hezbollah, has seen the official withdrawal of Iranian forces. Russian armed forces have also evacuated about 4,000 pro-Iranian fighters, marking a significant setback to Iran’s regional security strategy. Although Tehran claims to maintain “direct contacts” with the Hayat Tahrir al-Sham group in Syria through its new Foreign Minister for Syria, Mohammed-Reza Raouf-Sheibani, Saudi Arabia and Turkey are among the first foreign destinations of the new leader Ahmed Al-Sharaa, formerly known as Al-Joulani. Finally, some Iranian military capabilities are damaged, obsolete, or aging. Anti-aircraft defense systems, such as the Russian S-300s, have been partially destroyed in Israeli strikes. Concurrently, economic sanctions have hampered the modernization of infrastructure and military equipment in Iran, leading to the obsolescence of some equipment.

Thus, the signing of the strategic agreement with Russia on January 17, 2025, comes at an opportune moment for Iran. Although it is not surprising, it underscores the significant rapprochement between Moscow and Tehran, accelerated by the outbreak of war in Ukraine. A genuine flight to security for Iran, the weakening of the Axis of Resistance reinforces Tehran’s dependence on Moscow. Nevertheless, despite the signing of the agreement, the perception of Russia in Iran remains largely negative among the public. In 2021, about 66% of the population rejected the strategic partnership project between the two powers. Politically, the Russo-Iranian relationship divides Iranian elites. On one side, the Revolutionary Guards and ultra-conservatives support an enhanced rapprochement with Moscow and Beijing to counter the West. On the other, reformist figures believe that Iran could be instrumentalized by Russia in its confrontation with the United States. This agreement, which lasts for twenty years, establishes strategic cooperation in various sectors: cultural, economic, medical, industrial, commercial, but especially military, including clauses on intelligence sharing, cybersecurity cooperation, and the organization of joint military exercises to respond to “common threats.” For Russia, this is the longest agreement ever signed. However, the same is not true for Iran, which had signed a twenty-five-year trade agreement with China in 2021. Beyond its content, the timing of this agreement highlights Iran’s growing dependence on Russia and the asymmetric relationship between the two powers. Iran is still awaiting the delivery of Sukhoi-35 fighter jets and Russian S-400 anti-missile defense systems, which Russia has promised it.

Between low-cost, adaptation, and optimization: the evolution of Iranian defense

The Iranian regime therefore cannot rely solely on Russian arms exports and has, over the years, developed a unique defense industry. Three key words characterize it: low-cost solutions, resource optimization, and adaptation to the geopolitical context.

The low-cost solutions of the Iranian regime are particularly visible through its drone program. Indeed, Iran does not have a modern traditional air force: its F-4, F-5, and F-14 aircraft are at the end of their life. The country has therefore developed a drone program that is today among the oldest and most advanced in the region. This program, coupled with the ballistic missile program, constitutes the cornerstone of the Iranian military strategy, exporting Shahed-136 and Mohajer-6 drones to several countries, including Ethiopia, Sudan, and Russia. The Shahed-136, probably the most well-known model today, has played a key role in the war in Ukraine since 2022, leading to the creation of an Iranian drone production factory in Tatarstan, Russia. Although less technologically advanced than Turkish (Kargu-2) and U.S. (Switchblade-200) drones, the Shahed-136 nonetheless has the advantage of evading traditional air defense systems by flying at very low altitudes and moderate speeds. Its low cost (approximately $20,000 per unit) allows for mass production, inspired by the Chinese model of low-cost production, thereby increasing Iranian projection capability.

Concurrently, the Iranian regime has made resource optimization a central element of its military strategy. The Revolutionary Guards have thus converted civilian ships into military platforms to increase their projection capability. In 2023, the container ship Shahid Madhavi was transformed into a helicopter carrier. More recently, in February 2025, the container ship Perarin was refitted as a drone carrier, thus reinforcing the Iranian maritime presence in the Persian Gulf and the Red Sea. For its drones, Iran uses moped engines or Chinese MD550 engines inspired by German Limbach L550E engines. In order to further modernize its arsenal, the Iranian government plans to increase its defense budget by 200% starting in March 2025. According to SIPRI, Iran was already the fourth-largest military spender in the Middle East in 2023, with $10.3 billion. According to SIPRI data, the share of military spending allocated to the Revolutionary Guards increased from 27% to 37% between 2019 and 2023.

Beyond resource optimization, Iran also exploits the geopolitical context to send strategic messages. Two days before the U.S. elections, the regime unveiled its brand new submarine base located 500 meters deep. A week after the elections, Iran unveiled its new ballistic missile, Etemad. In response to the escalation of tensions with Israel in 2024, Iran also intensified its efforts to protect its military infrastructure, developing the Zoubin defense system, designed to counter low-flying drones. Through these actions, Iran seeks to show Western powers that it retains its deterrent force and remains a military power capable of resistance.

Arms supply: reverse engineering and military diplomacy

If Iran remains militarily weakened, the country nonetheless retains certain strategic reserves. Before the strengthening of sanctions, Iran could legally acquire certain military equipment, primarily from China, which was a major supplier of arms to Tehran in the 1990s and early 2000s. Although a strategic ally, China nonetheless remains reluctant to sell fighter jets to Iran, and for several reasons: today, Beijing prefers payments in currency rather than in energy resources, while Iran offers oil or gas in exchange for military equipment. Moreover, China seeks to avoid provoking the United States, particularly in the context of growing trade tensions between the two powers. In 2022, Beijing sold 25 fighter jets to Pakistan but has not granted the same treatment to Iran, which has been making the same request for several years now.

Since 1979, Iran uses networks of intermediaries or relies on allied countries to bypass international restrictions and acquire military equipment under the guise of civilian commercial agreements. Indeed, Tehran circumvents restrictions imposed by international arms traffic regulation, notably the International Traffic in Arms Regulations (ITAR). A notable example of this practice is the use of Shahed-136 drones by Russia in Ukraine, which incorporate Western components, mainly from the United States, Japan, Canada, and Switzerland. To do this, the regime has developed multiple techniques (front companies, darkweb, smuggling, cryptocurrencies, etc.). Before the fall of Bashar Al-Assad, Syria was a strategic partner essential to Iran, playing a crucial role as a hub for transferring armaments. Once these equipments are in hand, Iran has capitalized on its expertise in reverse engineering to analyze, reproduce, and adapt these systems to its needs. Thus, local versions of missiles have been developed, such as the Nasr-1 (inspired by the Chinese C-704 missile) and the Kosar-1 (based on the Chinese C-701). By modifying Chinese-origin technologies, Iran manages to produce arms internally, allowing it to rid itself of dependence on arms imports while circumventing embargoes that hinder the acquisition of strategic technologies. Iran has also developed long-range cruise missiles from Soviet missiles, developing the Soumar in 2013 and its successor, the Hoveyzeh, in 2014. These missiles were used against Israel in 2024, illustrating the culmination of the Iranian strategy of reverse engineering.