Both Azerbaijan and Armenia could not hide their disappointment following the failure of a presidential summit in France in February to achieve a breakthrough in Nagorno-Karabakh peace talks. With discussions stalled and cease-fire violations by both sides increasingly frequent, Azerbaijan has stepped up threats to use military force to regain the territory.

Following his February 10-11 summit with Armenian President Robert Kocharian, Azerbaijani chief executive Ilham Aliyev resorted to bellicose rhetoric, telling local journalists that "[i]t is time that Azerbaijan re-considers the negotiation course and views other options." He also paid a visit to the cease-fire line in the Ter-Ter region, wearing a military uniform while touring the trenches. The uniform was taken as a sign of support for Azerbaijanis' increasingly widespread pro-military sentiments.

President Kocharian responded in kind, declaring that "if the peace process does not produce any results, Armenia will recognize the independence of Nagorno-Karabakh," various media outlets reported. Armenian Foreign Minister Vartan Oskanian, meanwhile, stated that Azerbaijan's threats will not change Armenia's position on Karabakh. "Azerbaijan will not dare to start a war," Oskanian told Armenia's Shant TV recently. "Azerbaijan is not ready for a war."

Even so, it appears that Azerbaijan is embarking on a military build-up. On March 16, Aliyev called for Azerbaijan's military budget within the next few years to equal "the total budget of Armenia," the Russian news agency ITAR-TASS reported.

Some Azerbaijani media outlets, however, argue that both sides are posturing to gain an advantage at the negotiation table. "Armenia and Azerbaijan's military officials continue to shoot militaristic threats into the air," commented Baku's pro-opposition Russian-language daily Zerkalo on March 11. For all the militant rhetoric, Baku's desire to negotiate does not appear at an end. At a conference of the Azerbaijani Diaspora in Baku on March 16, Aliyev affirmed that Azerbaijan would continue with Karabakh peace talks "as long as we feel that there is a chance for a political settlement . . . But if we see that the process turns into a simulation, we shall quit [them]," ITAR-TASS reported. Aliyev went on to add that granting Nagorno-Karabakh autonomous status within the confines of Azerbaijan is "possible," but stressed that "we shall never agree to the loss of our territories."

International mediators appear to be increasingly concerned that time is running out for a peaceful settlement of the 18-year-conflict. On March 7, the Russian, French and American co-chairs of the Organization for Security and Cooperation in Europe's Minsk Group, which facilitates Karabakh negotiations, reassembled in Washington to assess the peace process. The group has urged the Azerbaijani and Armenian leaders to not give up on negotiations. The Minsk Group meeting coincided with a summit between US Secretary of State Condoleezza Rice and Russian Foreign Minister Sergei Lavrov in Washington that also reportedly included discussion of a resolution for the Nagorno-Karabakh conflict.

Local observers believe Washington is employing a carrots-and-stick strategy to keep Azerbaijan at the negotiating table. The stick, they say, comes in the form of the US State Department's annual report on human rights, a document that harshly criticized Azerbaijan's observance of voting rights in the 2005 parliamentary elections, as well as law enforcement officers' use of torture and arbitrary arrest.

Rumors are also swirling in Baku that President Aliyev could be invited to Washington to meet with US President George W. Bush in late spring, provided a breakthrough in Karabakh talks occurs by then. "It is not excluded that the United States may use an invitation to Washington as an incentive to get certain concessions from Ilham Aliyev," commented Tabib Huseynov, an independent expert on Nagorno-Karabakh conflict. The US government has not given any indication that such a visit is under consideration, however.

The present aim of US diplomacy seems to be keeping the channels of communication open. Speaking at a March 14 press conference in Baku, US Assistant Secretary of State for European and Eurasian Affairs Daniel Fried acknowledged that Washington was "disappointed with the results of the Rambouillet [France] talks," but added that "the negotiation process is going on and we hope that the conflict will be solved in 2006." Steven Mann, the US co-chair of the Minsk Group, who arrived in Baku a day earlier, stated that "the spring of 2006 is an important period for the Nagorno-Karabakh talks."

US officials have clearly intimated that Azerbaijan's economic interests would be best served by a negotiated Karabakh settlement. "The sides who want war should first ask what would Azerbaijan's strategic borders be if war starts?" ANS TV reported Mann as saying. "What will be the situation in the energy sphere and the investment flow? I know the Azerbaijani people very well and don't believe that the Azerbaijani people would want war again."

Fried held talks in Yerevan on March 15-16 and was scheduled to travel to Ankara, Turkey, on March 16 for further discussions on the Karabakh peace process.