Iran denies collapse is close as US claims IRGC running out of money

Tehran, Iran – Iranian authorities have rejected claims that Iran is unable to support its regional allies, but acknowledged that the United States’ sanctions and the war have created financial challenges.

US Central Command chief Brad Cooper claimed last week that a combination of military attacks and a naval blockade of Iran’s southern ports “has dealt severe blows” to the country.

The admiral said the US had prevented at least $25bn in Iranian crude exports and helped freeze approximately $350m in cryptocurrency assets. This means the Iranian Revolutionary Guard Corps (IRGC) are now unable to pay their soldiers and Iran-linked regional groups suffering from financial shortfalls.

“The financial strain on Iran’s military has become so significant that there are reports of Iran-aligned militia groups across the region withholding payments to their soldiers in order to funnel money back to the IRGC, which also is not paying its troops,” Cooper said.

This is being portrayed as a victory for the US in its war with Iran, which so far has shown very few tangible victories for Washington.

Michael Knights, head of MENA research at US-based intelligence and geopolitical risk advisory firm Horizon Engage, said Hezbollah in Lebanon and the Houthis in Yemen have suffered financially during the past few years.

“The national economies feeding the Hezbollah and Houthi movements are badly broken, so they continue to receive stipends and in-kind funding – in fuel products – from Iran,” Knights told Al Jazeera.

Funding the axis

For decades, the IRGC Quds Force has supplied money, weapons, components, training and manufacturing expertise to regional allied groups. It has enabled partners at loggerheads with the US and Israel to assemble or produce a number of weapons locally, according to United Nations experts and US officials.

The axis groups also draw on businesses, including oil exports, as well as donations and local resources to fund their operations. Some Iraqi factions have been integrated into the official security forces and receive government funding through the Popular Mobilisation Forces.

Allied commercial networks in Iraq are selling Iranian commodities and distributing proceeds through intermediaries and exchange houses, the US Department of the Treasury has claimed.

This has put them in a better financial position than their “poorer cousins” in Hezbollah and the Houthis, Knights said, with some money allegedly flowing from Iraq towards Iran in recent years.

“Some Iraqi militiamen and government civil servants are indeed paid late at the same time that Iraqi militias send funding overseas to help Iran, the Houthis and Lebanese Hezbollah,” he told Al Jazeera.

The US Treasury alleged in September that Kataib Hezbollah, a prominent Tehran-backed Shia Muslim armed group in neighbouring Iraq, siphoned Iraqi resources to support Iran.

The Treasury also described substantial earlier transfers from the Quds Force to Hezbollah, depicting flows in both directions.

A report by the Reuters news agency earlier this month cited unnamed sources as saying Hezbollah received $200m from Iran in September. The US State Department rejected the report at the time, saying Hezbollah was “trying to save face with fake stories about cash influxes from Iran”.

Iran says no ‘collapse’ imminent

Iran’s economy has taken hit after hit in recent years due to war, domestic mismanagement and sanctions.

This has led to runaway inflation, low-paying jobs, a depreciating national currency and isolation from the global community for 90 million Iranians.

There appears to be little sign of the situation improving, with the World Bank reporting earlier this month a projected 7.7 percent contraction of the economy in the fiscal year 2026-27.

The authorities emphasise that does not affect their resolve. They have also challenged US Treasury assessments that economic pressure could result in losing control within months.

“Despite all these pressures, the Iranian economy has demonstrated very good resilience, and the claim that Iran’s economy is collapsing is nothing more than an illusion,” Central Bank chief Abdolnaser Hemmati said earlier this month.

Financial problems

President Masoud Pezeshkian acknowledged on Sunday that military attacks and the maritime blockade had created substantial problems for the country. But he said his government was relying on domestic capacities to withstand the pressure.

He claimed consumption management had now removed the need for petrol imports that would otherwise cost $12bn, if US pressure allowed imports at all. The president promised to return revenues from recently increased fuel prices to households by modestly increasing their electronic food vouchers.

Knights said the Iranian authorities were “stuck in an aggressive cycle of escalation with the US government no matter what state Iran’s economy is in”.

“Trump is betting that being poorer will make Iran’s regime more flexible, but that has never been a good bet,” he said.

Negar Mortazavi, a senior fellow at the Washington, DC-based Center for International Policy, said she expected Tehran to continue prioritising its regional allied groups despite the financial strains involved.

“Economic pressure is certainly constraining Iran’s military resources, but that does not mean it will fundamentally change the IRGC’s strategic calculations or force Tehran to surrender,” she told Al Jazeera.