Escalating violence, a spiralling arms race and a slowdown in peace talks have increased the risk of war between South Caucasus enemies Armenia and Azerbaijan, a leading think tank said on Tuesday.
The International Crisis Group (ICG) said in a report that skirmishes between Armenia and Azerbaijan could easily spiral out of control, causing "devastating regional consequences".
"Escalating frontline clashes, a spiralling arms race, vitriolic rhetoric and a virtual breakdown in peace talks increase the chance Armenia and Azerbaijan will go back to war over Nagorno-Karabakh," it said.
The unresolved conflict, which has killed 3,000 people since 1994, mainly soldiers, is a constant threat to stability in the South Caucasus, a region bordering Russia, Iran and Turkey, and criss-crossed by pipelines carrying oil and gas to Europe.
ICG said 25 people were killed in 2010 despite an uneasy truce between the two countries, which lie at the heart of key natural gas and oil routes. Three soldiers were killed in 2011.
The two countries fought a war over Nagorno-Karabakh which broke away from Muslim Azerbaijan with the help of Christian Armenia during the collapse of the Soviet Union.
A 1994 ceasefire ended the war, and mediators from Russia, the United States and France have led negotiations between the two ex-Soviet countries.
However, little progress has been made and Azeri President Ilham Aliyev, who has ramped up his country's military power with recent arms deals, has said Azerbaijan is willing to go to war with Armenia to reclaim Nagorno Karabakh.
"Lack of progress in the peace talks is increasing the likelihood of an accidental war at any time or an all-out offensive within the next few years", said Sabine Freizer, the ICG Europe Programme Director.
Azerbaijan, which hosts oil majors including BP, ExxonMobil and Chevron, is given to sabre rattling over the emotionally charged issue.
Armenia has not recognised Nagorno-Karabakh as independent, but has threatened recognition in the event of war. The enclave runs its own affairs with economic and military support from Armenia.
Tension has increased since Armenia and its traditional foe Turkey, which has close ties to Azerbaijan, reached an historic rapprochement in 2009. The accord crumbled last year when Armenia suspended ratification after Turkish demands that it first reach terms over Nagorno-Karabakh, a condition set by Turkey to appease Azerbaijan.