US President Donald Trump was deterred from launching a broader attack on Iran by concerns over the cost of defending against the retaliation that would follow.
At the heart of the problem is a stark cost imbalance. Iran can launch a relatively inexpensive drone costing tens of thousands of dollars or fire a missile, while the United States may have to counter it with a Patriot or THAAD interceptor or a naval missile priced in the millions. Even a technically successful defense can therefore prove economically disadvantageous.
More important than the book value of the missiles is their opportunity cost – the value of what must be sacrificed when they are used. An interceptor fired in the Middle East today is no longer available in a potential conflict over Taiwan or to support European allies.
The strategic value of those remaining therefore rises sharply as stockpiles shrink. From an economic perspective, each additional interceptor becomes more valuable than the one used before it.
The Supply-Chain Constraint
The United States is not primarily facing a shortage of money, but an inflexible supply chain. Congress can approve tens of billions of dollars relatively quickly, but production of sophisticated missiles cannot be expanded within a matter of months.
Specialized production lines, rocket engines, electronics, explosives and skilled workers are all in short supply. In the near term, greater demand is therefore more likely to drive up prices than to increase the number of missiles delivered.
The US arms market is dominated by a single government customer and a small group of major suppliers. The Pentagon is the principal buyer, while individual weapons systems are often produced by only one or two companies.
Manufacturers have consequently avoided maintaining costly spare capacity because they lacked any guarantee of sustained orders. Current multi-year contracts will increase output, but only after a delay of several years.
Ammunition has therefore taken on the character of strategic capital. Trump must consider not only the immediate cost of attacking Iran, but also the price of leaving the country less able to respond elsewhere.
The United States can afford a broader war financially. What it cannot quickly buy is time, production capacity or deeper stockpiles.
Originally published on the author's personal website lukaskovanda.cz.