Iran rejects collapse warnings as US says IRGC faces cash shortage
Iranian officials have pushed back against assertions that Tehran can no longer back its regional allies, while conceding that U.S. sanctions and the ongoing war have created serious financial strains.
Brad Cooper, the head of U.S. Central Command, said last week that a series of military strikes and a naval blockade of Iran’s southern ports have dealt “severe blows” to the country. He claimed the United States has blocked at least $25 billion in Iranian crude exports and helped freeze roughly $350 million in cryptocurrency assets. According to Cooper, these actions have left the Islamic Revolutionary Guard Corps (IRGC) unable to pay its soldiers, and have forced Iran‑linked militias across the region to grapple with funding 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 told reporters. He framed the situation as a U.S. victory in its broader confrontation with Iran.
Michael Knights, head of MENA research at the intelligence and risk advisory firm Horizon Engage, noted that Hezbollah in Lebanon and the Houthis in Yemen have felt the pressure of reduced finances in recent 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 said to Al Jazeera.
For decades, the IRGC’s Quds Force has provided money, weapons, components, training and manufacturing expertise to allied groups, enabling them to produce weapons locally, according to United Nations experts and U.S. officials. These “axis” groups also draw on oil exports, donations and local resources to fund their operations. Some Iraqi factions have been incorporated into official security structures and receive state funding through the Popular Mobilisation Forces.
The U.S. Treasury has accused commercial networks in Iraq of selling Iranian commodities and moving the proceeds through intermediaries and exchange houses, giving those groups a stronger financial footing than their “poorer cousins” in Hezbollah and the Houthis. Knights added that money has reportedly flowed from Iraq to Iran in recent years.
In September, the Treasury alleged that Kataib Hezbollah, a Tehran‑backed Shia militia in Iraq, siphoned Iraqi resources to support Iran. The agency also described earlier transfers from the Quds Force to Hezbollah, indicating bidirectional flows. A Reuters report earlier this month cited unnamed sources saying Hezbollah received $200 million from Iran in September; the State Department dismissed the claim as a fabricated story aimed at saving face.
Iran’s economy has been battered by war, domestic mismanagement and sanctions, leading to soaring inflation, low wages, a weakening currency and growing isolation for the country’s 90 million residents. The World Bank recently projected a 7.7 percent contraction for the fiscal year 2026‑27.
Despite the downturn, officials say the pressure has not shaken Tehran’s resolve. Central Bank governor Abdolnaser Hemmati told reporters that the economy has shown “very good resilience” and that claims of an imminent collapse are “nothing more than an illusion.”
President Masoud Pezeshkian acknowledged on Sunday that the recent military strikes and maritime blockade have created “substantial problems” for Iran, but said the government is relying on domestic capacity to absorb the shock. He claimed that tighter consumption management has eliminated the need for petrol imports that would have cost about $12 billion, even if U.S. pressure allowed such imports. Pezeshkian promised to channel the extra revenue from higher fuel prices back to households by modestly increasing electronic food vouchers.