Kremlin pays $193,000 per Shahed-136 Drone
Iran. Oh. My!
A hacker group known as the Prana Network infiltrated the servers of the Iranian Revolutionary Guard Corps and obtained approximately 10 gigabytes of data. Subsequently, the group disclosed the pricing information of Iranian drones sold to Russia.
In a late December update, Ukrainian officials said Russia had launched about “7,400 missiles and 3,700 Shahed attack drones at targets in Ukraine”. The Shahed kamikaze drones supplied by Iran is one of the most important weapons in the Kremlin’s arsenal.
The Institute of Study of War reported on this development in its assessment today. The numbers were breathtaking. I am still struggling to come to terms with it:
- The leaked documents suggest that Russia pays $193,000 per Shahed-136 drone in batches of 6,000 drones, which would total about $1.1 billion for all 6,000 Shahed-136 drones.
- Russia reportedly pays $1.4 million per unit for one type of Shahed-238 drone and plans to purchase 677 of these upgraded Shahed drones per year, which would total about $947 million.
- Another type of Shahed-238 reportedly cost about $900,000 per drone, and Russia reportedly plans to purchase 2,310 per year for just under $2.1 billion.
- The documents claimed that the reconnaissance and attack Shahed-107 drones cost $460,000 each and that Russia plans to purchase 2,310, which would total about $1.5 billion.
I so badly wanted to dismiss this information as incorrect. But then, I also remembered the huge oil discounts China extracted from Russia, buying $4 to $10 below benchmark crude oil prices. If China imports ten million barrels of oil per day, get half of that from Russia, that would mean and average discount of $35 million per day. $1 billion thank you to Putin every month.
So, what are the chances that Iran wouldn’t attempt to exploit Russia’s situation, capitalizing on the opportunity to make money? Iran is well aware of Russia’s struggles in its defense industrial base. With decades of experience navigating sanctions, Iran has developed robust systems to manufacture weapons. Coupled with their technological expertise, Iran is in a prime position to take advantage of Russia’s need for weapons, particularly when other sources are limited.
Which country in the world would sell drones to Russia? No one. Iran was the only supplier.
So, why not?
It is entirely possible, as price often correlates with demand and availability. Initially, we assumed that Iranian-made Shahed-136s cost between €20,000 to €50,000. However, the hacker’s report suggests that Russia may be paying three to four times the original price.
Three to four times the list price can indeed occur during periods of high demand, especially in markets where supply is limited or when there’s a sudden surge in demand for a particular product or service. In this case, both conditions were true.
High demand.
Extremely limited supply. (Only one supplier)
It is indeed a seller’s market, and Iran has capitalized on the situation to its fullest extent. If Russia continues to pay the reported prices, there is reason to be concerned about the implications. As economic conditions deteriorate, Russia may find itself compelled to sell some of its technology to sustain its purchases of Iranian drones.
Putin’s so called allies are exploiting the situation
Iran, China, and India — all three nations — are taking advantage of the turmoil created by Russia’s invasion of Ukraine. China and India continue to leverage Russia to lower the costs of their oil imports. Reports suggest that China has maximized this situation to bolster its oil reserves.
Over the first five months of the year China has added about 730,00 bpd to storages, roughly in line with the 740,000 bpd added over 2022 as a whole — Reuters in June 2023
India had been purchasing Russian oil at a discounted price, but it encountered payment issues recently. “Almost five million barrels of Russia’s Sokol grade crude failed to reach Indian refiners” in December 2023. Reports suggest that payment problems stemming from the G7 oil price cap resulted in delivery disruptions. It remains unclear whether the issue has been resolved or if China intervened to assist the Kremlin in maintaining its oil supply.
Regardless of the outcome, both India and China will exploit the situation to their advantage. India will likely avoid completely aligning Russia with the Chinese government, aiming to maintain a balance between the West and Russia. Meanwhile, China will continue supporting Putin, as having a large democratic neighbor next door is not in their interest.
But it’s the burgeoning relationship between Iran and Russia that should cause significant concern worldwide. This partnership isn’t founded on principles but rather an opportunistic alliance aimed at undermining the democratic coalition.
No other country besides Israel needs to remain as vigilant regarding this development. It is in Israel’s utmost interest to ensure Ukraine’s victory in the war. Anything to the contrary could result in prolonged and exponentially escalating trouble for them.
