Armenia and Azerbaijan continue to sharply increase military spending despite a provisional peace agreement, underscoring persistent tensions and uncertainty over the region's political and economic future.
They may have agreed on a provisional peace agreement last August, but Armenia and Azerbaijan nevertheless each had some of the highest military spending as a share of GDP in the world in 2025, according to data compiled by the Stockholm International Peace Research Institute.
Azerbaijan ranked 6th 6.5 percent and Armenia 7th 6.1 percent in SIPRI's Top Ten countries in terms of highest military spending last year. The country with the highest spending on defense was, not surprisingly, Ukraine at 40 percent. Russia 7.5 percent ranked 4th behind Algeria and Israel. States in the Persian Gulf and Middle East rounded out the Top Ten list.
Azerbaijan, which completed its reconquest of the long-contested Nagorno-Karabakh territory in 2023, set a country record for military spending in 2025 with a defense budget reaching almost $5 billion. That marked a significant increase from 2024's defense budget of about $3.8 billion. Military spending this year is projected to be slightly higher than in 2025. Armenia also had record-high defense spending in 2025 totaling about $1.7 billion, an approximately 18 percent increase over the previous year's $1.4 billion budget.
The Armenian parliament voted to scale back the defense budget for 2026 to about $1.47 billion, with a large chunk of funding devoted to modernizing the army, based on lessons learned from its decisive defeat in the Second Karabakh War. Halting progress has been made on finalizing the peace deal both countries initialed in Washington last August.
Armenia will hold parliamentary elections in early June that will likely determine the future course of negotiations, not only concerning a peace treaty but also the development of TRIPP, or the Trump Route for International Peace and Prosperity, envisioned as a key node of the emerging Middle Corridor trade route. Armenian Prime Minister Nikol Pashinyan, an ardent proponent of the peace deal, is facing a challenging reelection battle. His electoral opponents are on record as opposing the peace deal. By Eurasianet
Azerbaijan Military Spending SIPRI Nagorno-Karabakh Defense Budgets South Caucasus Peace Deal TRIPP Corridor Elections
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