The 31-year-old Russian international will be out of contract at the end of the season, and having fallen out of favour in north London, is set to leave England this summer.
Gunners boss Arsene Wenger has no intention of offering Arshavin a new deal to remain at the Emirates Stadium, having made just 11 first-team appearances in 2012/13, and failing to start a single Premier League game.
Khazar are believed to be one of four clubs in Azerbaijan's Premier League with the necessary funds to tempt the Arsenal reject, with a four-way scrap set to ensue at the end of the campaign.
"At the moment there are only four teams in Azerbaijan who could be ready to pay for such a player as Andrey," Aliyev told izvestia.ru. "Apart from Khazar it's Quabala, Neftci and Baki.
"We have a new coach: the popular John Toshack. At the moment he has to check the squad and decide in which positions he should strengthen the team."
The former Wales boss arrived in Azerbaijan earlier this month, tasked with helping Khazar stave off the threat of relegation, and helped them to an 8th place finish in the table.