The SIPRI 2025 data shows that both Armenia and Azerbaijan allocate exceptionally high shares of their economies to defense, placing them among the most security-driven states globally. Azerbaijan ranks 6th in the world, with military expenditure at 6.5% of GDP, while Armenia ranks 7th, at 6.1%. Both countries are among the ten highest globally in military burden.

Despite this similarity in relative spending, their defense postures diverge fundamentally. Azerbaijan not only sustains a high level of military expenditure, but also recorded one of the largest increases in military burden globally in 2025, reflecting the continued prioritization and expansion of its defense sector. This aligns with a broader strategy aimed at strengthening military capabilities and consolidating regional military superiority. Armenia, by contrast, is undertaking targeted defense reforms aimed at strengthening deterrence against potential aggression.

Azerbaijan’s larger economic base means that comparable percentages translate into significantly higher absolute military expenditure. This enables sustained investments in offensive capabilities, force projection and technological modernization, reinforcing its capacity to rely on coercive approaches.

Armenia’s spending, in contrast, is directed toward rebuilding defensive capacity and developing deterrence after the 2020 war and subsequent security shocks. The objective is not symmetrical competition, but to raise the costs of potential aggression and reduce vulnerability in an asymmetric environment.

The result is not military balance, but an asymmetric structure shaped by coercion and deterrence. Azerbaijan’s military expansion supports a strategy of pressure and leverage, while Armenia’s defense spending constitutes a response aimed at preventing further escalation. In this context, high levels of military expenditure on both sides reflect diverging defense postures within an unequal balance of power rather than a symmetrical arms race.

Despite the peace deal reached on 8 August in Washington under the mediation of Donald Trump, these trends indicate that Azerbaijan continues to rely on military advantage as a source of leverage in the negotiating process. The peace agreement remains unsigned, and the delimitation and demarcation of borders has not progressed since the initial approximately 12 km section agreed in 2024. Azerbaijan articulates narratives of military threats from Russia and Iran, while more recently there has been a degree of reconciliation and rapprochement with Russia and supportive statements regarding Iran, introducing inconsistency into its threat framing.