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Crossroads of The Caucasus
Crossroads of The Caucasus
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Azerbaijan's long-running conflict with Armenia, combined with its geostrategic importance
in the Caucasus and as a gateway to Central Asia, have fuelled a significant investment in
military capabilities and defence-industrial growth in recent years. Charles Forrester
reports
Azerbaijan stands at an important crossroads in the Caucasus, linking Central Asia, Turkey, and
Eastern Europe. A key oil producer in its own right, the country has significant financial clout for
investment in defence. The long-running conflict with Armenia over the enclave of NagornoKarabakh has been a key factor in the country's defence investment, with the Azerbaijani
government seeking to allocate more funding to defence than Armenia's entire national budget.
Azerbaijani T-72 Aslan tanks in the country's Agdam area, near Nagorno-Karabakh, in 2014.
Azerbaijan is involved in an ongoing conflict with Armenia over the Nagorno-Karabakh enclave in
the west of the country. (PA)
1568073
Violence between Armenia and Azerbaijan flared up in April over the Nagorno-Karabakh enclave,
with a four-day engagement ultimately leading to a continuation of the decades-long stalemate
between the two countries.
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Strategic threats
Azerbaijan's defence and security needs are complex, with the country also in a precarious
position regarding suppliers.
The country's main strategic threat is the conflict over Nagorno-Karabakh, which has been running
since the early 1990s. The enclave and some surrounding Azerbaijani territory, located in the west
of the country, have been occupied by Armenia since a war that ended with a 1994 ceasefire.
Peace negotiations led by the Organisation for Security and Cooperation in Europe (OSCE) have
made little progress.
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Ceasefire violations, most commonly sniper attacks, occur daily along the line of contact (LoC).
Both sides have claimed a substantial increase in violations in recent years and since 2014 there
has been an increase in the use of mortars and artillery. By late 2015 Azerbaijan had reportedly
moved tanks into the area of operations and begun employing 122 mm artillery.
Azerbaijan is faced with a number of security challenges, including energy and littoral security, as
well as the ongoing conflict over the Nagorno-Karabakh enclave. (IHS)
1651023
The short conflict in early 2016 is understood to have inflicted heavy casualties on the Azerbaijani
side, with estimates ranging from less than fifty to several hundred. The Azerbaijanis also
deployed new combat capabilities, such as thermobaric rocket artillery and loitering munitions,
during this period.
Azerbaijan is located on the Caspian Sea and is a key producer of oil for European markets. In
addition the country is a major transit point for oil and gas pipelines from Central Asia, allowing
producers to bypass Russia and providing access to Western energy markets. With the main
energy links being located to the west of the country, Azerbaijan is reliant on the maintenance of a
secure corridor to Georgia - then through to Turkey - for the flow of hydrocarbons.
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Defence expenditure
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40% of total defence expenditure - was removed from the budget, ostensibly creating a 42.4%
real-term cut to defence spending.
Upon the release of the supplemental budget later in 2016 it emerged that defence allocation had
been increased to AZN2.2 billion, suggesting that defence special projects funding has indeed
been discontinued and replaced by an augmented core defence budget.
This now means that Azerbaijan's defence expenditure appears to have fallen to around 3.4% of
GDP from its previous level of 5% and is likely to remain at this level over the short to medium
term.
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Industrial capabilities
Azerbaijan's defence-industrial capabilities remain limited, although expansion has been apparent
in recent years through the establishment of joint ventures between foreign suppliers of military
materiel and the Ministry of Defence Industry of Azerbaijan Republic (MODIAR).
Considered a relative backwater under Soviet rule (excluding the oil sector, which received heavy,
if narrow, investment), limited defence-industrial capabilities were developed in the region.
Accordingly, Azerbaijan did not benefit in the aftermath of the Soviet Union's disintegration in
inheriting a developed and fully functioning defence-industrial complex, unlike other former Soviet
republics. While Azerbaijan is now seeking to rectify this situation the country is practically only in
the first stages of creating its defence industry and its capabilities remain limited.
At present Azerbaijan's defence industry remains predominantly state-owned, with MODIAR
controlling the 19 production plants and research institutes that comprise Azerbaijan's indigenous
capability as well as having stakes in the industrial joint ventures undertaken with foreign
companies.
MODIAR, created in 2005, amalgamated the MoD's State Department for Special Industry and
Conversion and the Military Science Centre into the new body with sole responsibility and
leadership for driving defence-industrial development. Alongside the unification of authority for
defence industry leadership, MODIAR also received the transferred ownership of all arms
production companies in Azerbaijan.
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Azerbaijan has developed a wide range of small arms, shown here at the IDEF exhibition in
Turkey in 2015. (Remigiusz Wilk)
1565544
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Azerbaijani industry has developed a multiple rocket launcher for use on a Ford F450 pick-up
truck. (Ministry of Defence Industry of Azerbaijan Republic)
1527244
A 107 mm rocket launcher system that can be vehicle mounted or operated as a standalone
weapon has been developed by Azerbaijani manufacturers and is designed for use in
mountainous terrain. It can be configured with one, two, or three barrels and has been shown
mounted on a Ford F450 XLT 4x4 truck chassis.
Vehicles
The other key area of Azerbaijan's defence-industrial development in the land domain is the
armoured vehicles sector.
A scout vehicle based on the Soviet-era BRDM-2 design is under development and will be
equipped with a 23 mm cannon, coaxial twin 7.62 mm MGs, an AG-17 grenade launcher, and
smoke grenade launchers. The vehicle is intended to be used against fixed-and rotary-wing
aircraft, as well as ground targets.
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Air
Azerbaijan has very little indigenous defence-industry capability in the air domain. The country is
almost exclusively reliant upon foreign suppliers for defence aviation manufacturing and
maintenance, repair and overhaul (MRO) services. The exceptions to this include the Azad joint
venture with Israel to manufacture unmanned aerial vehicles (UAVs) in-country under licence.
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International partnerships
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Key to the development of Azerbaijan's defence industry has been the formation of international
partnerships. While countries such as Russia and Ukraine have been notable as Azerbaijan's
largest defence technology suppliers, there have been relatively few industry partnerships
between Azerbaijan and these countries until recently.
Other countries have looked to a more participatory approach as they seek to access Baku's
spending. Firms from countries such as Israel, Turkey, and South Africa have enjoyed significant
successes in the Azerbaijani defence market in recent years.
Azerbaijan has been assembling Matador mine-protected vehicles, developed by South Africa's
Paramount Group. (Office of President of Azerbaijan)
1424299
Azerbaijan's defence-industrial growth can also be attributed to a requirement for technology
transfer and workshare participation in its international procurements. While not an official offset
policy, it has allowed the country to develop a number of areas of specialisation and foster skills
development in areas such as aeronautics and heavy industrial manufacturing.
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