The High Price of Safety: The Economic and Strategic Implications of the Iran-Israel Conflict
Mathing out the Iranian Attack
As the dust settles from this weekend’s flurry of activity around Iran’s long range attack on Israel, we’re starting to get better fidelity on what actually happened.
At the same time, it’s a bit hard to parse through the various commentary.
Some commentators highlight the incredible success rate of the defense, which blocked 99% of all of the Iranian systems from reaching Israel. Undoubtedly, Israel’s Iron Dome and the coalition effort to defend were incredible.
Some commentators discuss that Iran didn’t truly intend to strike Israel, and so they telegraphed their moves in a way that would allow Israel to defend itself while still allowing Iran to claim retribution for the April 1 attack against its mission in Damascus.
As my friend Noah Sheinbaum of Defense Tech Jobs rightly pointed out earlier this morning, of the numerous claims being made about the attack, more than one can be right at any time.
So, how do we evaluate winners and losers?
First, I think both Israel and Iran succeeded in their principal strategic aims for the event.
Israel demonstrated that its Iron Dome system remains incredibly robust and capable. Further, it scored significantly in bringing in foreign partners to help its defense. And, finally, following growing opposition to Israel’s heavy handed counterterror operations in Gaza, Iran’s attack helps shift the narrative in media and public discourse.
For its part, Iran reminded the world that it has systems capable of reaching out regionally and that it has the ability to plan, coordinate, and synchronize complex operations. Iran demonstrated that with sufficient will, it can overwhelm Israel’s air defenses. The attack also likely strengthened Iran’s relationship with the Axis of Autocracy. China claimed the attack was a spillover from Israel’s Gaza operations. Russia blamed UNSC inaction for Iran’s attack. Finally, while Iranian one way attack drone (specifically the Shahed-136) were already well known prior to the attack, I suspect that they’ve gained a new level of notoriety, which could lead to future increased sales of the platform.
While both countries can claim some degree of success, I suspect that for both, these are largely Pyrrhic victories.
First, Israel will respond in some way to Iran. We don’t know exactly how, but a response will come. Secondly, it’s possible that Iran had hoped that by attacking Israel, other Islamic states in the region might support them. Apparently, they forgot the lessons of 1991, when Saddam Hussein sought to fracture the coalition seeking to liberate Kuwait by launching Scud missiles at Israel. Instead, numerous regional states including the Kingdoms of Jordan and Saudi Arabia supported Israel in its defense.
Now, what I really want to dig into is the cost of defending Israel (why it was Pyrrhic) and its implications for future warfare.
Alright, let’s start by examining the numbers.
Iran
According to the Haaretz, Iran sent 185 drones, 36 cruise missiles, and 110 surface-to-surface (ballistic) missiles.
Let’s assume that all 185 drones were Shahed-136s. A Shahed-136 likely costs around $30,000 to manufacture (and maybe much less), when done at scale. (Leaked documents suggest that Iran sells the system at a 10x markup, at least to Russia).
While Iran has several types of cruise missiles, Iran most likely used its Paveh cruise missile for the attack. While, the cost of a Paveh isn’t entirely known, we can estimate it using known costs of other cruise missiles. For example, a US-made Tomahawk Block V costs around $2M.
Next up, are the ballistic missiles. It seems that Iran launched at least two types of medium range ballistic missile (MRBM), the Emad and the Khorramshahr-4. Now the Emad is a variant of the Shahab-3 MRBM, which costs roughly $3M. So absent additional cost information, we’ll allow the price of the Shahab-3 to stand in for the Emad. Similarly, as there’s little data on the Khorramshahr-4 (Iran’s newest ballistic missile), we’ll use a stand-in for cost estimation. This time, we’ll use the approximate cost of a North Korean Hwasong-10 missions, on which the Khorramshahr appears to be based. The Hwasong-10 costs approximately $8M. Note, that there is some disagreement on what types of missiles Iran launched, with many others suggesting that the Khorramshahr wasn’t used, which would dramatically drop the overall cost of Iran’s attack. Nevertheless, we’ll use these to help us approximate the cost of the attack. Let’s also assume a 3:1 use of Emads to Khorramshahr, as the Islamic Republic would likely use up its older systems first to maintain its current / best technology.
Taken together, that suggests a total cost to Iran of somewhere around $545M, at the high end.
Israel
Israel’s Iron Dome integrated air defense system is world-class, but it comes at a premium. Each Arrow-3 missile that it shoots costs around $3M. All told, most estimates of what Israel spent range from a bottom of $550M upwards towards $1.3Bn. I suspect it’s somewhere close to the $1Bn.
But that’s just Israel.
That doesn’t include the 2x squadrons of F-15Es (494th and 335th) that the US provided to shoot down 80 of the drones and 6 of the missiles.
An F-15EX costs around $29,000 in operating costs per hour of flight.
Let’s assume each squadron has 12 F-15Es (different squadrons have different numbers of aircraft, but this is a good planning number). Let’s also assume that only 75% of the aircraft were flying at any time.
Now let’s also assume that the aircraft were only airborne for about 6 hours (unlikely, they were likely in the air earlier knowing that the attack was coming). Over 6 hours, the two squadrons would have cost $3.1M in operating costs.
These two squadrons shot down the drones. Let’s assume that the aircraft predominantly used Advanced Medium-Range Air-to-Air Missiles (AMRAAM) to increase its standoff from the drones and to destroy them as far away from Israel as possible. An AMRAAM carries a cost of $1.09M. Shooting down 80 drones cost $87.2M.
Two Mediterranean Sea based destroyers shot down six ballistic missiles, using the new Standard Missile - 3 (SM-3). The SM-3 Block IIA costs an exorbitant $27.9M. Assuming, that each Iranian missile shot down by the US destroyers only required one SM-3, then we’re still at a price of $167.5M.
Additionally, a US Patriot missile system shot down at least one ballistic missile over Iraq. A single Patriot missiles shot costs about $4M.
So, altogether, the US price tag is somewhere around $262M—not including the costs of repositioning forces to the Middle East over the past two weeks, the costs of in-flight refueling, the costs of maintaining the various systems, and the cost of manpower (including sustainment).
We could continue with exploration of the costs incurred by other the British, French, Jordanian, Saudi forces, ad nauseam.
Suffice to say that the defense cost considerably more than the offense, likely by an order of magnitude.
Yes, the coalition stopped 99% of the drones and missiles.
What if one of the few missiles that snuck through the Iron Dome had been equipped with a nuclear warhead. Would we still feel as smug about this “turkey shoot?”
While 185 drones represents to my knowledge the single greatest drone attack ever (nearly tripling a November 2023 Russian attack against Ukraine), Iran could have launched many many more. They also could have employed better operational security, making our ability to target them more difficult. Firing $1.09M AMRAAMs at $30K drones will get expensive VERY quickly.
And at the end of it all, Iran can still claim that they successfully pierced the Iron Dome, landing at least a few missiles inside of Israel and potentially rendering at least one airfield ineffective. I would expect that a larger attack would see the successful defense rate drop precipitously.
In other words, large swarms of inexpensive systems aren’t going away.
So, if both sides are claiming a victory, who are the losers of this attack?
You could argue that the US is a loser. We’ve been trying for a generation to extricate ourselves from the Middle East. Every time we think we’re able to, we get sucked back in. The requirement for the exquisite, high-tech systems that we used to defend Israel (rightfully so, I may add) pull away from resources that we need for other theaters and to deter other adversaries in the Axis of Autocracy.
The other big loser is Ukraine. Ukraine has suffered the indignity of watching the US, UK, and other Allies and partners come to the aid of another country without it necessarily provoking a broader war. I’m old enough to remember the indignity that the Rwandan people felt in 1994 while crying for intervention in its brutal civil war. Only a rogue Canadian general helped them. Rwandans pointed to Bosnia to demonstrate that intervention was possible. Now, Ukraine continues to fight its war against a much more existential threat than what Iran poses to Israel. And they continue to do it alone.
In conclusion, we need to continue to invest in both low-cost attritable systems and the exquisite, highly technical systems as well.
Larger, more sophisticated swarms of low-cost systems are coming.
Using exquisite systems to defend against the attritable will be very costly.
No matter what, we must
Keep building,
Andrew