Institute for War and Peace Reporting | Giving Voice, Driving Change

Why Azerbaijan Won

Hi-tech weapon systems bought with oil revenue ultimately tipped the balance.
By Gubad Ibadoglu

Modern-day warfare is very expensive, as well as destructive. A state must have serious economic power and a healthy defence budget to ensure it has access to up-to-date military hardware and remote-controlled combat equipment.

Put simply, this is why Azerbaijan won the recent 45-day war in Nagorny Karabakh. An analysis of the number shows that – while in recent years Armenia spent more per capita on defence than Azerbaijan – diversification and oil revenue gave Baku the advantage.

First of all, Azerbaijan has been able to diversify its foreign arms purchases.

Israel was Azerbaijan's first largest military trading partner in arms imports in 2015-2019. Its share of Azerbaijan's arms imports during that period was 60 per cent, with Russia providing 31 per cent and Turkey 3.2 per cent. The remaining 5.8 per cent was divided between Ukraine, Belarus, Pakistan and China.

This allowed Azerbaijan to modernise its weapons fleet. The use of weapons such as Bayraktar TB2, a Turkish medium altitude long endurance unmanned aerial vehicle, and the Israeli Heron-TP drone played an important role in swinging the war in favour of Azerbaijan.

The Azerbaijani government prefers current political allies when choosing partners for military trade. Thus Russia was its main partner in 2010-2015 – with Azerbaijan purchases of military equipment accounting for five per cent of exports - Israel in 2015-2019, and Turkey in 2020.

Azerbaijani-Turkish military cooperation has long been close; trainings involving both armies of the two countries and involving all types of troops grows every year. There were seven such events in 2013, rising to 13 in 2019.

In the first nine months of 2020, Azerbaijan’s arms imports from Turkey's defence and aviation sector amounted to 123.26 million dollars. This made Azerbaijan the world’s fourth largest importer of weapons from Turkey. In September Azerbaijan topped the list, buying 77.167 million dollars worth of weapons.

In contrast, however, Armenia remained dependent on Russia as its main weapons supplier, with its agreement applying only to internationally regognised Armenian territory and not Karabakh.

Due to the secrecy surrounding military cooperation between the two countries, it is difficult to determine the scope and characteristics of this trade.

The only sources are the credit agreements between Armenia and Russia. Armenia’s expenditure programme for 2018-2020 envisaged a 60 million dollar annual increase in military expenditures spending, with the goal of increasing the share of military expenditures in GDP to 4 per cent by 2020.

In 2017, Armenia’s military expenditure amounted to 450 million dollars and a 3.6 per cent share of GDP. Part of its arsenal consisted of outdated, even Soviet-era weapons, with a heavy reliance on tanks and artillery.

Two weeks before the start of the latest Karabakh war, minister of defence David Tonoyan told reporters, “Armenia has twice received loans for the purchase of modern weapons and military equipment.

“Under the first agreement, 200 million dollars worth of weapons and equipment were delivered to the country. The process of signing another 100 million dollar loan agreement is underway.”

Azerbaijan’s military spending depends heavily on its oil revenues. When oil revenues peaked between 2010 to 2015, most of the money that the State Oil Fund of Azerbaijan Republic (SOFAZ) transferred to the budget was used to fund social and military projects.

Azerbaijan’s increase in military spending forced Armenia to follow suit. But while the oil-rich Azerbaijani economy did not suffer unduly, this became a significant financial burden for Armenia.

This in turn affected the mobilisation of the Armenian army, as young people of fighting age left the country in large numbers to seek work abroad.

Armenia spends proportionally more on the military, but this is to be expected given that that its GDP is four times less than that of Azerbaijan. Last year, Armenia’s military expenditure amounted to 673 million dollars while Azerbaijan's was 1,850 million. This meant that, per capita military expenditures in Azerbaijan last year amounted to 184 dollars, compared to 232 dollars in Armenia.

Ultimately, it was Azerbaijan’s superior military that won them the war and forced a deal on Armenia that saw them lose control over the cultural and historical capital of Shusha alongside several parts of Karabakh and surrounding territories that had been under Armenian control since 1994.

Armenia must withdraw from these territories, while Russian peacekeepers will monitor the ceasefire, mainly through the Lachin corridor, one of two main supply routes that connect Karabakh to Armenia.

According to the Global Firepower 2020 report ranking the world's strongest armies, Azerbaijan is 64 out of 138 countries. Armenia is ranked at 111th. Given these figures, and in the absence of a diplomatic or negotiated settlement, Baku always had the military advantage.

Gubad Ibadoglu is a senior policy analyst at the Baku-based Economic Research Center.

This publication was prepared under the "Giving Voice, Driving Change - from the Borderland to the Steppes Project" implemented with the financial support of the Foreign Ministry of Norway.