A hike in oil revenues in 2010-2015 in Azerbaijan coincided with a rapid increase in the country’s spending on its defense sector. However, with no transparency on defense contracts, it is difficult to track the use of military funding. The lack of accountability of military expenditures has also increased the risk of corruption in spending.
About the Author: Gubad Ibadoghlu, Senior Policy Analyst for social and economic studies at Azerbaijan’s Economic Research Center, a Baku-based NGO that promotes economic development and good governance.
Azerbaijan’s military spending depends heavily on the country’s oil revenues. When oil revenues peaked in 2010-2015, the largest amount of money that the State Oil Fund transferred to the state budget was used to fund social and military projects.
Between 2011-2015, the costs of maintaining the military equaled US $16.064 million – 56.5% of the overall financial resources spent on military between 1995-2018. The graph below demonstrates the dependence of the military budget on oil revenues transfers to the state budget between 2008-2019.
They reveal that Russia, Israel, Turkey, Ukraine, Belarus, Pakistan, the South African Republic, and China play a significant role in providing arms and military technology to Azerbaijan. Thus, the Azerbaijani government, which spends oil revenues for weapons acquisition, gives preference to political allies while choosing its partners for military trade.
Military Cooperation with Russia
Russia is the main trade partner of Azerbaijan in arms trade. According to Azerbaijani and international media cited below, Azerbaijan purchased billions of dollars worth of arms and military ammunition from Russia.
According to the Stockholm International Peace Research Institute (SIPRI), military equipment purchased by Azerbaijan using the state budget between 2011-2015 comprised 5% of Russia’s export.
In his September 2018 interview with the Russian Ria-Novosti channel, Azerbaijani President Ilham Aliyev stated that the equipment and arms purchased by Azerbaijan from Russia reached 5 billion USD and that Russia would continue to provide Azerbaijan with ammunition and military equipment.
According to local Azerbaijani media, ammunition purchases from Russia coincided with the hike of oil revenues between 2010-2015.
The Russian newspaper Kommersant confirmed that military cooperation between Azerbaijan and Russia is ongoing.
In November 2019, Azerbaijani media reported that another agreement worth 5 billion USD is expected to define Russian-Azerbaijan military cooperation.
Without official records of Azerbaijan’s military trade with Russia, it is difficult to determine the specifics of this trade, as it is carried out without sufficient transparency.
Trades with Israel and Belarus
Israel is the second largest military trade partner for Azerbaijan. Referencing Israeli newspaper Haaretz, Azerbaijani media reported that Israel sold 5 billion USD worth of arms and military equipment to the Azerbaijani government.
In 2005, Azerbaijan began purchasing ammunition and military technology from Belarus including various optical devices from Belarusian BELOMO optics company. This cooperation is ongoing.
In 2005, Azerbaijan began purchasing ammunition and military technology from Belarus including various optical devices from Belarusian BELOMO optics company.  This cooperation is ongoing.
In conclusion, like with other state budget expenditures, the country’s defense sector needs clear and accessible transparency mechanisms, especially when it comes to contracts.