Production has started at Azad Systems, a joint venture between the defence ministry of Azerbaijan and Israeli unmanned aircraft systems manufacturer Aeronautics.
According to the Azeri press, the facility in Baku will assemble and manufacture the Israeli company's Aerostar and Orbiter unmanned air vehicles.
Sources in Israel indicate that the close co-operation between Aeronautics and Rafael may result in the production or assembly of some Rafael systems in the new facility.
Aeronautics is the third-largest Israeli UAV manufacturer, after Israel Aerospace Industries and Elbit Systems.
Aeronautics has formed a similar joint venture in Spain and the facility there will start operations by mid-2011.
In recent years, Israel has become a major arms supplier to Azerbaijan. The deals so far include artillery systems, communications equipment and UAVs of the same types that will be now assembled locally.