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South Caucasus: Armed Forces and Economy

“Fund Your Army, otherwise you will have to fund others’ army”.

The stronger the economy, the more funds are directed to strengthening the defense industry. America is the best sample. The country with the strongest economy spends 720 billion USD on defense, triple the consolidated military expenditures of China and Russia.

What is the situation in this respect in the South Caucasus? What resources do the economies of Georgia, Armenia and Azerbaijan have, so citizens of these countries feel safe more or less?

In the Global Firepower Index 2018 rating, an index which estimates the military might of 136 countries, Georgia ranks 82nd. The report’s authors have compared quantity of troops and military hardware, as well as various economic parameters such as external debts, currency and gold reserves.

According to the Global Firepower Index, Georgia’s defense budget is 380 million USD, against 14.1 billion USD in external debts. Purchasing power parity is 39.3 billion USD. As for gold and currency reserves, their volume is at around 3 billion USD.

The report also indicates that there are about 2 million able-bodied citizens in Georgia. The country owns 2 basic seaports and 22 working airports. The total length of road exceeds 20,000 kilometers, while the total length of railroad is about 1,600 kilometers. The report also notes that Georgia produces 400 barrels of oil a day. Confirmed oil reserves constitute  35 million barrels, while the daily consumption of oil takes up 17,000 barrels.

As for Azerbaijan and Armenia, these countries have the following indicators, according to the Global Firepower Index 2018:

Armenia   

  1. Defense budget  – 512 million USD
  2. External debts – 9.170 billion USD
  3. Purchasing power parity – 27.210 billion USD
  4. Currency and gold reserves – 2.242 billion USD
  5. Working airdromes – 11
  6. Total length of roads – 7.705 kilometers
  7. Railroad length – 869 kilometers
  8. Daily oil production – 0
  9. Confirmed oil reserves – 0

Azerbaijan

  1. Defense budget – 1.600 billion USD
  2. External debt – 16.620 million USD
  3. Purchasing power parity – 166.800 billion USD
  4. Currency and gold reserves – 8.886 billion USD
  5. Working airdromes – 37
  6. Total length of roads – 52 942 km
  7. Length of railroad – 2 918 km
  8. Daily oil production  – 93 000
  9. Confirmed oil reserves – 7,000,000,000

Other economic parameters also enable a  certain analysis and a conclusion. According to the statistics committee of Armenia, in 2017, Armenia exported 2,242.9 million USD in products, while imports constituted 4,182.6 million USD. The negative trade balance is recorded at 1,900.4 million USD.

Georgia’s negative trade balance is higher. According to the 2018 indicators, Georgia’s negative trade balance made up 5,56.0 million USD.

An absolutely different situation is recorded in Azerbaijan. Unlike Georgia and Armenia, Azerbaijan has a positive trade balance, and exports exceeds imports by 5.5 billion USD. In 2017, Azerbaijan sold 14 million USD in products, and its imports are marked at 8.5 billion USD.

Based on all of the aforementioned statistics. it is not surprising that in the Global Firepower Index, Azerbaijan ranks 53rd, Georgia 82nd and Armenia 84th.

What should we expect in the future, and will the current parity change?

According to the IMF forecast, Georgia’s economic growth in 2019 will be 4.8% and this growth pace will be 52nd result worldwide. According to the IMF, Armenia will record 3% upturn and Azerbaijan will record 3.5% growth. Thus, we should not expect the near future to bring any impressive changes in the economic and military potential of these countries.