Investigating the Effect of Military Expenditure and Economic Growth on Energy Consumption in Iran by Providing Solutions to Enhance Energy Security

Energy security can be defined as the ability of an economy to ensure the sustainable supply of energy over time, and at a price level that does not adversely affect the economic performance of that economy. The specific objectives in maintaining energy security are threefold; reducing vulnerability to external threats or pressures, preventing a supply crisis, and minimizing the economic and military impacts of an energy crisis in the event of such a crisis. The security energy supply consists of the constant availability of energy under different circumstances, in sufficient quantities, and at a reasonable price. On the other hand, the security of demand for energy is maintained when on the other side of the market there is a constant and regular demand for energy at competitive prices that at least compensate for the minimum production and transaction costs. Thereby, the maintenance of energy security for Iran as a major producer depends on securing both sides of the market; i.e. demand and supply. Explicitly, energy security for Iran is contingent on the existence of a continuous market with low fluctuations and a reasonable future growth rate. Significantly for the purpose of this paper, military spending could directly or indirectly affect the GDP and energy consumption either positively or negatively. Thus, military spending is a crucial factor in determining energy security through its impact on energy consumption. By this light, the modus operandi of this paper utilizes Panel Data between 1965 and 2018, to examine the impact of military expenditure and economic growth on energy consumption of Iran, Turkey, Egypt, and Saudi Arabia. Using the ARDL model, this study examines the effect of economic growth and military expenditure on energy consumption in Iran. The results indicate that the short run effects of the aforementioned variables on energy consumption is positive, and further, finds no long-term relationship between the two. Furthermore, applying Granger’s causality test showed the GDP_ serving to represents economic growth_ as the determinant of energy consumption in Iran. Finally, the paper concludes by proposing solutions to enhance energy security.