The enduring conflict between Armenia and Azerbaijan casts a long shadow over the South Caucasus, a region crucial for global energy routes and geopolitical stability. The article examines how Armenia, a small nation under persistent threat, is recalibrating its defense strategies amidst escalating regional tensions and Azerbaijan’s aggressive military build-up. It reveals the broader implications of this rivalry for democratic alliances, military modernization, and peace in a fractious area bridging Europe and Asia.

Background

(Since 2020, this region has been a cauldron of volatility, with Armenia suffering repeated blows from Azerbaijan’s unrelenting aggression.)Starting from 2020, countries were involved in several large-scale escalations, which included the 2020 Second Nagorno-Karabakh War, the complete takeover of Nagorno-Karabakh in 2023 by Azerbaijan, and the direct Azerbaijani occupation of Armenia's proper territory in 2021 and 2022. Despite the fact that Baku gained everything it wished before the 2020 war and Yerevan is ready to sign a peace agreement, it continues persistent military pressure to get even more concessions from Armenia. The key issue is the so-called Zangezur Corridor: a route connecting Azerbaijan's mainland with the Nachichevan exclave via Armenian territory, beyond the control of the Republic of Armenia.

Armenia’s increasing defense expenditures reflect a calculated response to enduring threats and regional instability. Yerevan’s focus has shifted toward safeguarding its sovereignty and territorial integrity.  Amidst these challenges, Armenia’s defense strategy seeks to establish a credible deterrent rooted in alliances with democratic nations and investments in modernized military infrastructure.  At the same time, Azerbaijan continues its militarization and modernizes its armed forces,  bolstered by significant weapons procurement from Israel, Turkey, and countries in Eastern Europe. The article adeptly traces the escalation in defense budgets of Armenia and Azerbaijan over the past five years.

Military Spending

Azerbaijan’s spending trajectory is striking, climbing from USD 2.2 billion in 2020 to a projected USD 5 billion in 2025. This 127% increase highlights Baku’s commitment to maintaining military superiority. (USD 2.6 billion in 2021, USD 2.7 billion in 2022, USD 3.1 billion in 2023, and USD 3.8 billion in 2024)

Armenia’s defense spending reflects a determined, constrained response to persistent military threats. Its planned 252% budget increase from 2021 to 2025 (USD 1.7 billion) indicates a significant shift in priorities.  Yet, Armenia’s total defense allocation remains a fraction of Azerbaijan’s. Yerevan allocated  USD 745 million in 2020 (including expenses related to the  Second Karabakh War), USD 673 million in 2021, US D820 million in 2022, US D1.3 billion in 2023, and USD 1.4 billion in 2024.

Armenia’s defense budget focuses on its armed forces, while Azerbaijan’s includes additional allocations for various institutions. Of Azerbaijan’s USD 5 billion defense budget for 2025, USD 1.57 billion is designated for the armed forces, USD 275 million for national security, USD 318 million for border service, and USD 2.7 billion for “other defense and national security-related activities.” Much of this latter category funds arms procurement, raising Azerbaijan’s core defense budget to approximately $4.3 billion. Notably, some of these expenditures, such as naval costs, are unrelated to the conflict with Armenia. Initially, Azerbaijan planned minimal growth in its 2025 defense budget due to a stagnating economy. However, Armenia’s 20% increase in its defense budget for 2025 prompted Baku to allocate an additional USD 1 billion from its State Oil Fund to maintain its military advantage. For example, Azerbaijan’s planned procurement spending for 2025 surpasses the total value of Armenia’s defense acquisitions, estimated at around USD 2 billion since late 2022. These developments highlight Azerbaijan’s determination to intensify its militarization and sustain its strategic advantage over Armenia, despite Armenia's constructive efforts to establish peace, as evidenced by its willingness to make concessions and its officials’ repeated public statements to foster reconciliation.

Procurement and Alliances

Beyond budget figures, it is critical to examine developments in military procurement, alliances, and cooperation within the armed forces of both countries.

Since the 2020 war, Azerbaijan has pursued extensive arms procurement from Israel, Turkey, Pakistan, Serbia, and Slovakia. Publicly known acquisitions include 48 155-mm Nora B-52NG self-propelled guns (SPG) from Serbia for USD339 million, 70 155-mm Dita SPGs from Slovakia, Pakistani JF-17 jet fighters for USD1.6 billion, Turkish Akinci heavy combat drones, and Barak MX air defense systems from Israel for USD1.2 billion. Additionally, Azerbaijan has discreetly acquired other military equipment from Israel, modernized its aviation capabilities with Italian C-27J Spartan military transport aircraft, and upgraded its Su-25 attack aircraft in Turkey to enable the use of guided bombs and missiles.

Turkey continues to conduct military drills with Azerbaijan, train its forces, and support its stance regarding Armenia. It ties progress in the Yerevan-Ankara normalization process to peace negotiations between Baku and Yerevan. Azerbaijan also held joint drills with Iran, another Armenian neighbor country.  

Armenia, seeking to rebuild its military capacity after the 2020 defeat, initially turned to its treaty ally, Russia. However, most weapons procured under August 2021 contracts were never delivered.  Following Azerbaijani incursions into Armenian territory in 2021 and 2022, Yerevan distanced itself from the Collective Security Treaty Organization (CSTO) and Russia, shifting its focus to India and France while expanding its security cooperation with the United States and the European Union. Armenia is now undertaking the most significant procurement effort in its history, estimated at USD 2 billion. Recent contracts with India include acquisitions of 155-mm ATAGS towed guns, 72 155-mm MARG self-propelled guns (SPG), Pinaka multiple launch rocket systems (MLRS), Akash surface-to-air missiles (SAM), Zen anti-drone systems, Konkurs-M anti-tank missiles, small arms, and ammunition. In 2024, Armenian and Indian defense officials signed a training and institutional collaboration cooperation agreement.

Armenia has procured three GM-200 radars, 50 Bastion armored vehicles, 36 155-mm Cesar SPGs, small arms, and other equipment from France. France and the United States also support Armenia’s defense reforms. Meanwhile, Yerevan has invested significant resources in building heavy fortifications along its borders—a strategy unlikely to reflect offensive intentions given Armenia’s limited resources.

Conclusion

Azerbaijan, following its 2020 victory and the ethnic cleansing of Nagorno-Karabakh in 2023, continues its militarization efforts to maintain a decisive military advantage over Armenia. Despite significantly higher defense spending, Baku frequently accuses Armenia of militarization and revanchism, using these claims to justify future military actions, even as the underlying disputes that once fueled the conflict have largely been resolved.

Armenia’s viable path to stability lies in rebuilding its armed forces to a level sufficient to deter large-scale aggression from hostile neighbors and to safeguard its sovereignty. A durable resolution to their conflicts can only be rooted in mutual interests, dialogue, and a shared commitment to rebuilding trust and fostering cooperation.

Leonid Nersisyan is a defense analyst and research fellow at APRI Armenia. He is co-author of the books Waiting for the Storm: The South Caucasus and Storm in the Caucasus.

These views are his own.