In the fragile aftermath of a landmark peace agreement, Armenia is signalling a potential reduction in future defence spending, while Azerbaijan pledges to continue its military buildup, creating a complex picture of post-conflict priorities in the South Caucasus. The moves come just weeks after a historic US-brokered summit in Washington that aimed to formally end decades of hostilities between the two nations.
According to a report by OC Media on 22 August, Armenian Prime Minister Nikol Pashinyan stated it was "logical" that the country’s 2026 state budget may see no significant increase in defence spending, or potentially none at all, in light of what he termed an "established" peace with Baku. His remarks followed comments from Finance Minister Vahe Hovhannisyan, who cited a positive assessment from Fitch Ratings on the peace prospects. The credit agency noted that a peace deal could "ease budget pressures from defence spending," a sentiment Hovhannisyan confirmed the government planned to implement, marking a sharp reversal from a planned 20% military budget increase for 2025.
Across the border, Azerbaijani President Ilham Aliyev also declared that the initialling of the peace treaty "actually puts an end to the Armenia–Azerbaijan conflict" and that the "reconciliation process has almost been completed." However, in a subsequent address, Aliyev struck a more hawkish tone, asserting that Azerbaijan "must be ready for war at any moment." He confirmed his country was building up its military capacity, increasing its special forces by "thousands" and acquiring modern unmanned aerial vehicles. While concluding that Azerbaijan does not intend "to wage war with anyone," he warned, "If we face a threat, then everyone will still see our iron fist." There has been no indication that Azerbaijan plans to cut its $5.5 billion military budget.
These divergent military postures follow the historic summit in Washington on August 8, where Pashinyan and Aliyev initialled a peace framework and agreed to establish the "Trump Road for International Peace and Prosperity" (TRIPP), a new transit corridor. The significant US diplomatic involvement has prompted swift reactions from traditional regional powers Russia and Iran, which have long cautioned against Western mediation.
In the days following the agreement, Yerevan has hosted high-level delegations from both Moscow and Tehran. Russian Deputy Prime Minister Aleksei Overchuk met with Pashinyan on August 21 to discuss bilateral economic issues and the "unblocking of regional communications." The meeting, coming so soon after the Washington deal, is widely seen as an effort by Moscow to reassert its influence. Similarly, Iranian President Masoud Pezeshkian visited Yerevan just prior, underscoring the delicate geopolitical balancing act Armenia must now perform as it navigates a new era of peace shaped by competing global and regional interests.
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