Four years after declaring that its annual military expenditure has surpassed Armenia’s entire state budget worth about $3 billion, Azerbaijan reportedly plans to spend only $1.2 billion on defense and security in 2016.
The collapse of international oil prices and the resulting sharp depreciation of the Azerbaijani national currency, the manat, may have put an end to a decade-long massive military buildup which Baku hoped will help it win back Nagorno-Karabakh and other Armenian-controlled territories.
The oil-rich country’s government is to cut its total expenditure by as much as 23 percent, to 16.3 billion manats in accordance with its budget for 2016 passed by the Azerbaijani parliamentary in October. Last week’s further devaluation of the manat slashed the budget’s dollar-denominated value from $15.5 billion to $10.5 billion.
As recently as a year ago, the Azerbaijani Finance Minister Samir Sharifov claimed that despite falling crude prices Azerbaijan’s defense spending will grow by more than a quarter in 2015 to 3.8 billion manats, then the equivalent of $4.8 billion. He emphasized the fact that Armenia’s total budget spending is projected at only $3.2 billion.
“Azerbaijan’s armed forces need better equipment as Armenia continues its occupation policy in defiance of international law,” the Bloomberg news agency quoted Sharifov as saying.
Shortly afterwards, the Azerbaijani news agency APA reported that the 2015 budget commits the Azerbaijani government to spending only 3.3 billion manats on “military institutions.” Those included not only the armed forces but also interior troops, the National Security Ministry and other security services.
APA and other state-controlled Azerbaijani media only added to the confusion when they said this fall, citing government data, that Azerbaijan’s defense budget will grow from 1.78 billion manats in 2015 to 1.84 billion manats in 2016. In contrast to previous years, they presented no breakdowns of this spending target. Accordingly, there was no word on allocations to “special defense projects,” an apparent official euphemism for the arms procurements from foreign states.
Azerbaijan’s defense budget was worth only $175 million at the start of President Ilham Aliyev’s rule in 2004. It skyrocketed in the following years as the country reaped the benefits of its contracts signed with a BP-led oil consortium in the late 1990s. In 2011, Aliyev declared that Azerbaijani military spending has reached $3.1 billion, surpassing Armenia’s entire state budget worth $2.8 billion at the time. He has since repeatedly portrayed that as further proof of a “widening gap” between Azerbaijan and Armenia which will eventually allow his nation to regain control over Karabakh.
The actual level of that spending has been a matter of contention, however, and not just because Baku’s official defense budget figures have included funds allocated to not only the Azerbaijani army but also law-enforcement bodies.
Writing for the London-based Economist Intelligence Unit (EIU) last January, Emil Sanamyan, a Washington-based analyst, questioned the Aliyev administration’s claims that it spent $20 billion on defense from 2010 through 2015. Sanamyan argued that Azerbaijan reportedly purchased a combined $7 billion worth of weapons from its key suppliers -- Russia, Israel, Turkey and Belarus -- during that period. The Azertbaijani army is unlikely to have absorbed the remaining $13 billion, he said, pointing to its virtually unchanged size and the absence of sharp pay rises for Azerbaijani military personnel.
“Judging by itemized spending since 2011, Azerbaijan may have overstated its actual military spending by more than $1 billion annually so that this spending would appear larger than Armenia's budget,” said Sanamyan. He suggested that this was done for bullying the Armenians into offering more concessions to Baku on Karabakh.
At any rate, the collapse of the oil prices and the manat’s value against the U.S. dollar makes it extremely difficult for Baku to carry on with its military spending spree. The crisis has already translated into some embarrassing economic statistics for Aliyev: at less than $300 a month, the official average wage in Azerbaijan is now considerably lower than that in resource-poor Armenia. Azerbaijan has earned over $116 billion in oil revenues since 2001.
Armenia, whose 2016 defense budget is projected at 208 billion drams ($433 million), has sought to offset the Azerbaijani military buildup with close military ties with Russia, which have enabled it to receive large quantities of Russian-made weapons at discount prices or even for free.