Cheap Drones, Expensive Missiles and The Missile Accounting Fallacy
The fourth Gulf War (the ongoing US-Iran conflict, 2025-) has primarily been fought so far with drones, missile defence and unrivalled US air power.
Wars in the gulf region have a habit of happening every 10 years or so, starting with the Iran-Iraq War in the 1980s, Operation Desert Storm in 1991, the invasion of Iraq in 2003 (and ensuing conflict) and this present iteration.
The conflict has brought the world's attention to this new kind of remote, arms length conflict. Circulating on social media and in some serious journalistic circles there is a view that Iran is getting the better of the US due to basic accounting.
The argument goes like this: according to the New Scientist, an Iranian drone costs approximately $50,000, yet it is being shot down by a Patriot missile that Time Magazine reports costs $4,000,000 each. So the Americans are going to go bankrupt firing all these missiles.
I call this the Missile Accounting Fallacy.
Explaining the Missile Accounting Fallacy
The argument comparing like for like costs of drones versus missile defense is a seductive argument. At first glance it makes sense.
Cheap drones being shot down by missiles that cost 10, 20 or 30 times as much looks like a strategic mismatch that economics and accounting will eventually play out in Iran's favour.
So the fallacy that many people seem to be falling for is comparing the costs of the war against each other. Balancing the payments between the two powers and projecting the costs forward to victory.
Why is Missile Accounting a Fallacy?
Comparing the costs of these two systems against each other is a fallacy because:
- War and politics is not an exercise in financial accounting, it is an exercise in who controls the narrative, the institutions of state and popular opinion, economics and ultimately the ground.
- Both sides' victory will not be based on the costs of the material used to fight the conflict.
- Both sides' defeat will not stem from the accounting cost of fighting the war.
- Neither side starts with comparable balance sheets to judge costs.
- Both sides do not have bank accounts labeled 2026 Fourth Gulf War fund.
Strong missile defense is a display of political power as is firing cheap drones.
For both the US and Iran, this is a war, a conflict about regime survival versus a president's geopolitical legacy.
Politics and Drones and Missile Defense
Iran: Drones equal Regime Survival
For Iran, being able to fire missiles and drones at its neighbors is a demonstration that the regime is still in power. Whether many of those missiles hit the target is immaterial.
As long as the missiles and drones keep coming, they can hold onto power and help shape the internal narrative for the populace.
Over the long run, the regime arguably can only survive if it can keep sending missiles and drones threatening the Strait of Hormuz and at gulf state oil infrastructure at levels that disrupt supplies. The regime will be calculating that if they close the straits for long enough the economic costs of the war will force the US to end operations. Although we can only guess as to the Iranian regime's true intentions.
Gulf States: Economic and Brand Preservation
Each drone that flies towards the Gulf States is a threat to their carefully cultivated national reputations and economic foundation. Although it should be noted that Qatar, Kuwait and Saudi Arabia each have their own agendas and preferred outcomes.
Every drone flying towards Qatar, Kuwait or Saudi Arabia is a potential disruption in crude oil supplies.
Spending huge amounts of money on missile defense is a no-brainer, it's economic survival. It's protecting assets.
Although expensive, missile defense is more akin to an insurance policy. An insurance policy that protects valuable assets and carefully cultivated national reputations.
Israel: Weakening Threats
For Israel this war gives the chance to hobble the only truly hostile challenger in the region and eliminate the threat from proxies nearby.
For a national state that feels the weight of the Shoah around every corner, this is an aim worth almost any cost.
USA: Geopolitical Prizes, Oil Prices and Presidential Legacy
For the US the war is expensive, however, America spends a lot of money on its military even during calm periods.
The current expense is, potentially, less an expense to account for than the price of a regime change of a large petro-state.
A regime change, which if it works, potentially protects the Petro-Dollar system keeping lending cheap.
If successful, it denies a rival power of one in eight barrels of oil currently needed for China's economy, which hampers their ability to challenge America.
Additionally, if successful, it denies another rival, Russia, of a key supplier of arms and ends the direct land trade route between India and Russia.
Removing a hostile Iran also potentially frees up US forces to redeploy to the Asia Pacific region.
Completing this regime change is a gigantic geopolitical prize that will potentially pay economic dividends for decades.
And for President Trump, winning this fourth Gulf War will cement his legacy.
Final Thought
Using Accounting as a means of assessing the ongoing conflict is a fallacy. Profit and Loss charts and Balance sheets do not judge the end of a war. The internal politics of protagonists does.
In this fourth Gulf War, the missiles and drones will dictate whether the American political system or the Iranian gives up first.
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