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MUNICH, Germany (Reuters) - Azerbaijan and Armenia hold talks on Sunday on the Nagorno-Karabakh conflict, with Azeri ally Turkey pressing for progress before it seals an historic rapprochement with neighbouring Armenia.
Oil-producing Azerbaijan has raised the stakes, warning the meeting of presidents in Munich will be "decisive" and that its troops are ready to take back the mountain territory by force unless there is a breakthrough soon in negotiations.
Backed by Christian Armenia, ethnic Armenians in Nagorno-Karabakh threw off rule by Muslim Azerbaijan in fighting that erupted as the Soviet Union headed towards its 1991 collapse. Some 30,000 people died before a cease-fire in 1994.
The territory of 100,000 people wants recognition as an independent state, but 15 years of mediation have failed to produce a peace deal. Sporadic exchanges of fire continue to threaten war in a key oil and gas transit region to the West.
The Caucasus conflict has been thrust back into the diplomatic spotlight this year by a deal between Turkey and Armenia to overcome a century of hostility stemming from the World War One mass killing of Armenians by Ottoman Turks.
Ankara and Yerevan have signed accords to establish diplomatic ties and open their border, which Turkey closed in 1993 in solidarity with Azerbaijan during the war.
The deal carries huge significance for Turkey's diplomatic clout in the strategic Caucasus region, for its bid to join the European Union, and for landlocked Armenia's crisis-hit economy.
But Ankara, stung by an Azeri backlash to the thaw and bogged down in protracted negotiations over Azeri gas supplies, says it wants to see progress on Nagorno-Karabakh before it ratifies the deal. Armenia rejects the link.
Talks between Armenia's Serzh Sarksyan and Azerbaijan's Ilham Aliyev are due to begin at midday (1100 a.m. British time) at the residence of the French Consul General in Munich. It will be the sixth such encounter this year.
"If that meeting ends without result, then our hopes in negotiations will be exhausted and then we are left with no other option," Aliyev said in comments broadcast on Saturday. "We have the full right to liberate our land by military means."
Azerbaijan, courted by Europe to supply the planned Nabucco gas pipeline, often threatens force to take back the region, but analysts say tensions are rising over the Turkey-Armenia deal.
U.S., Russian and French mediators say they are making progress in talks, but Western diplomats say neither side appears ready to commit to painful concessions.
The principles of a deal would see ethnic Armenian forces give back most of seven Azeri districts surrounding Nagorno-Karabakh that they captured during the war. The rebel territory would be granted greater international legitimacy before a popular vote in the future to decide its final status.
(Writing by Matt Robinson; Editing by Dominic Evans)

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