Azerbaijan has recently moved to strike a peace deal with Armenia after violently recapturing the disputed territory of Nagorno-Karabakh in 2023. But continued fighting between the two countries might be more likely than peace, and other transnational threats continue to lurk beneath the surface. For one, Azerbaijan’s President Ilham Aliyev retains visions of territorial expansion through a creeping invasion of Armenia’s southern border. And the tentacles of Azerbaijan’s business dealings should raise alarms throughout the international financial system.
Despite efforts by the Azerbaijani government to portray itself as a respectable member of the international community by hosting the COP29 climate change conference in November 2024 and other international events, the regime in Baku remains highly militarized and does not play by the rules. Since 2020, Azerbaijan’s military has occupied an estimated 83 square miles of Armenian land, resulting in the death of hundreds of soldiers and the displacement of more than 7,600 civilians from Armenian provinces. This does not include the forcible displacement of nearly all of Nagorno-Karabakh’s ethnic Armenian population – more than 100,000 people – just two years ago.
Azerbaijan wants some of the land to build a railroad to its exclave Nakhichevan, in a project that Aliyev has dubbed the “Zangezur corridor.” Armenia opposes Azerbaijan’s plan, saying it would breach Armenia’s sovereignty. This has not been part of the negotiations over a peace agreement, though both sides have agreed to address it separately after a deal is struck.
Meanwhile, Aliyev has laid claim to huge swaths of southern Armenia, calling it “Western Azerbaijan” and claiming that there is a longstanding Azerbaijani community there in need of “liberation.” The tactics are reminiscent of the claims made by Russia over eastern Ukraine prior to its 2022 invasion and over Crimea before capturing the peninsula in 2014. In January this year, on the same day as the outline of a potential peace deal was announced between Armenia and Azerbaijan, Aliyev ramped up his rhetoric, calling Armenia “in effect, a fascist state,” and adding, “It will be either destroyed by the leadership of Armenia or we will destroy it.” In this context, leaders in Yerevan understandably have sounded the alarm repeatedly about Azerbaijan’s military escalation, warning that a new conflict in the Caucasus is looming.
Posing a Threat Beyond Armenia
Azerbaijan also poses a significant threat far beyond Armenia through its reported schemes for money laundering and bribery in Western capitals. Chief among these is the nation’s “caviar diplomacy,” through which senior Azerbaijani officials were found to have paid bribes to European members of the Parliamentary Assembly of the Council of Europe (PACE) to vote in Azerbaijan’s favor. Further light was cast on the scheme by the Azerbaijani Laundromat, a leak of banking transactions that revealed how large and suspicious payments had gone to several PACE members, some of whom were later expelled. Nor has the United States been immune. Last year, the Department of Justice charged Congressman Henry Cuellar with bribery over allegations that he lobbied for Azerbaijan in exchange for $360,000 from SOCAR, Azerbaijan’s state-owned oil company. The case continues to wind its way through the judicial process.
While all this has been going on, reporting by the organization I co-founded, The Sentry, uncovered how Aliyev’s two daughters have amassed an unprecedented $13 billion empire, even as Azerbaijanis suffer under a repressive regime. Indeed, while the Aliyev daughters launched luxury magazines, invested in Dubai real estate, and travelled the world — all with the support of an army of international enablers — reports continue to surface about the continued repression of the Azerbaijani people. Since 2023, Azerbaijan has imprisoned more than 30 journalists and media workers. These include Voice of America contributor Ulviyya Ali, who was arrested on May 7 and beaten by police.
Responding to these threats requires action from both the Trump administration and the international financial sector.
During his campaign for the 2024 election, President Donald Trump condemned the persecution and forcible displacement of Armenian Christians in Nagorno-Karabakh, the breakaway Armenian state in western Azerbaijan: “When I am President, I will protect persecuted Christians, I will work to stop the violence and ethnic cleansing, and we will restore PEACE between Armenia and Azerbaijan.” Similarly, when he was a U.S. senator, now-Secretary of State Marco Rubio co-sponsored legislation that condemned Azerbaijan’s actions and ongoing human rights violations in Nagorno-Karabakh and called on Washington to consider sanctions against Azerbaijani leaders.
Safeguards for Peace
Of course, the United States should support the finalization of the peace agreement between Azerbaijan and Armenia. But officials in Washington need to make clear that tools of financial pressure such as sanctions are on the table, should there be violations of any peace agreement or a return to violence.
If Azerbaijan moves against Armenian territory, the U.S. Department of the Treasury should be prepared to impose steadily escalating targeted sanctions against the networks of key Azerbaijani officials, companies, and enablers that profit from the current system, particularly the Aliyev sisters’ network of facilitators and their corporate holdings. To enhance impact, these sanctions could be coupled with focused law enforcement action to target illicit transactions.
The adage that “money talks” very much fits this context. Azerbaijani officials and their facilitators may try to shake off reputational slights, but they remain entirely susceptible to their wealth being targeted.
While the United States and its allies possess the tools to make a significant impact on the Azerbaijani regime, this impact can be intensified by engaging the private sector. Global financial institutions should conduct enhanced due diligence to uncover and prevent illicit finance linked to Azerbaijan, particularly when providing correspondent services to banks known to have relationships with the Aliyev network. Professionals such as attorneys, accountants, and company formation agents should be on high alert for clients who are part of or linked to the Aliyev kleptocracy.
Public and private action by the Trump administration and global banks could help prevent a resumption of war in the Caucasus and reduce the illicit financial flows emanating from Baku into the international financial system. This kind of targeted effort can put pressure on Azerbaijan, creating leverage for the pursuit of peace and finally turning off the flow of illicit money that has enriched the Aliyev empire for far too long.
