South Caucasus

The Armenian government plans to increase military spending by about 20 per cent, equivalent to 110 billion drams (about $286 million). According to the proposed state budget for 2025, the Ministry of Defence will receive 664.6 billion drams (about $1.7 billion). Military expert Leonid Nersisyan, a researcher at the Armenian analytical centre APRI, describes this defence spending as unprecedented. However, he points out that despite the increased budget, Yerevan still lags far behind Baku in terms of military spending. Military spending remains lower than social spending in the state budget. Although the gap in military spending between Armenia and Azerbaijan is narrowing, with Armenia now trailing by a factor of two instead of five or six as it did in 2013, the difference remains significant.

The United States has announced a $20 million aid package to strengthen Armenia's cyber, border and energy security, USAID Administrator Samantha Power announced at a Democracy Delivers Initiative event in New York. The event, co-hosted by US Secretary of State Antony Blinken, was attended by Armenian Prime Minister Nikol Pashinyan.

The conflict between Armenia and Azerbaijan, two republics in the South Caucasus, has never been solely about their bilateral relations. Regional and distant powers have long sought to influence the conflict, pursuing their own strategic interests. This dynamic persisted even after the Second Karabakh War (27 September – 10 November 2020), which ended the core dispute between Armenia and Azerbaijan by bringing an end to the occupation of Azerbaijan’s Karabakh region. As the fourth anniversary of the war’s onset – also known as the 44-Day War – approaches, Baku and Yerevan continue to struggle with the peace process. Meanwhile, the most significant post-war initiative, the reopening of regional transportation and communication links, is facing increasing complications. Today, the often destructive involvement of external powers has become a major obstacle to the normalisation of Armenia-Azerbaijan relations and the implementation of regional transport projects.

Since the 2020 Nagorno-Karabakh War, negotiations between Armenia and Azerbaijan have gone through a series of ups and downs that often resemble a rollercoaster. Periods of heightened optimism have been followed by abrupt breaks in talks, as seen in late 2022 and 2023. After Armenia and Azerbaijan signed a joint statement in December 2023, early 2024 brought renewed hope to the process. In March-April 2024, Yerevan accepted Azerbaijani demands concerning four villages along the northern part of their shared border. Azerbaijan announced its intention to make the COP29 United Nations Climate Summit in Azerbaijan in November 2024 a “COP of peace,” fostering a growing belief that an agreement might be reached by that date. However, the new or reinforced sine qua non-preconditions by President Aliyev—such as amendments to the Armenian constitution and the dissolution of the Organization for Security and Cooperation in Europe (OSCE) Minsk Group established to seek a peaceful solution to the Nagorno-Karabakh conflict—have significantly dampened expectations that even a framework agreement outlining basic principles could be signed by the end of 2024.

In the lead-up to this year's NATO Summit in Washington D.C., it was uncertain whether Armenian Foreign Minister Ararat Mirzoyan and Azerbaijani Foreign Minister Jeyhun Bayramov would meet. However, a last-minute announcement confirmed that they would, albeit not in a bilateral format, but with U.S. Secretary of State Antony Blinken. Expectations were low, given disagreements over Azerbaijani demands for Armenia to change its constitution and the United States now apparently pushing its own vision for unblocking trade and communication in the region. Nonetheless, Blinken again emphasised that the two were close to reaching a deal. The foreign ministers issued identical scant three-paragraph statements which at least referred to a “historic agreement.”

On Thursday (20 June), EU Climate Commissioner Wopke Hoekstra visited Azerbaijan as part of the preparations for COP29, which will be hosted by Baku in November 2024. He held several high-level bilateral meetings with government officials in Baku: Minister of Ecology and Natural Resources Mukhtar Babayev, Minister of Energy Parviz Shahbazov and Minister of Foreign Affairs Jeyhun Bayramov. Commissioner Hoekstra also met with representatives of civil society.