Azeri Finance Minister Samir Sharifov said the plans would increase the defense budget by 89.7 percent, explaining that roughly half of the amount would be spent directly on the purchase of state of the art military hardware while the rest would involve funding of special projects. He didn't elaborate.

"Defense spending in 2011 will account for 19.7 percent compared with 10.7 percent in 2010, so the share of defense spending in the budget will almost double," he told lawmakers considering next year's draft budget.

His remarks came as Azerbaijan continues to be embroiled in a conflict with Armenia over the rebel region of Nagorno-Karabakh and energy exports. A former Soviet republic, Azerbaijan had already nearly doubled defense spending in the previous two years to sustain its fight in the long-simmering conflict over Nagorno-Karabakh, which the country's President Ilham Aliyev has vowed to win back.

Ethnic Armenian separatists backed by Yerevan seized control of the region during a war in the 1990s. An estimated 30,000 were left dead and 1 million displaced after a ceasefire in 1994. A peace accord though has never been signed and the region remains outside Azerbaijani control.

Last month, the Azeri government approved a 2011 budget forecasting a growth of 3.8 percent, the country's slowest economic growth in a decade. The slump stems in the drop in oil prices.

It remains unclear what hardware the Azeris are eyeing and from which countries.

Ending an official visit to Azerbaijan, Iranian Defense Minister Ahmad Vahidi said Tehran was willing to help Azerbaijan bolster its military capabilities.

He didn't elaborate but said the two countries were planning military war games in the Caspian Sea. By some accounts, Iran is bolstering its military ties with Caspian states in a bid to fortress its frontier from a potential attack.

Analysts have indicated Tehran's interest in using the Gabala radar station which Azerbaijan already leases to Russia.

"Iran is concerned that U.S. soldiers could come to the region and create a threat to Iran," military expert Uzeyir Cafarov was quoted telling Radio Free Europe. "Azerbaijan however, has its own interests and the final decision will become known early next year."

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