Azerbaijan Slashes Defense Budget as Oil Revenue Plummets

In documents released late last week, it was revealed that energy-rich Azerbaijan is being forced to cut its defense budget by 27 percent to just over USD 1 billion as the state’s coffers dry up with the sharp drop in oil prices, its main source of revenue, and following the freefall of the national currency, the Manat.

The move is a sharp about-face, as boosting the country’s defense capabilities has been a cornerstone of Azeri President Ilham Aliyev’s national agenda for several years.

Aliyev launched a major overhaul of Azerbaijan’s once beleaguered military over a decade ago, at a time when oil prices were hitting all-time highs.

The massive amounts of revenue that flowed into the energy-rich South Caucasus country at the height of the early 2010s commodities boom allowed Baku to stockpile vast quantities of highly sophisticated Russian-made equipment.

The sales shocked and angered archenemy Armenia, traditionally one of Moscow’s staunchest allies on the international stage.

Azerbaijan’s military spending increased 20-fold from 2004-2014 and eventually passed Armenia’s entire state budget.

The arms purchases and massive spending on defense issues further alarmed Yerevan as Azerbaijan's massive arms budget has been the cornerstone of Aliyev’s efforts to re-take the breakaway region of Nagorno Karabakh – an ethnic Armenian exclave that has been under Yerevan-backed separatists since 1994.

But with oil prices hovering at around USD 45 per barrel, down from an average of USD 105 in 2014, the Azeri government now has no choice but to curtail its defense spending.

Nicholas Waller