In talks on February 4 with Slovenian Foreign Minister Dmitrij Rupel, who was representing the current EU Presidency, Aliyev indicated Baku was contemplating waging war for control of the disputed territory, which together with a strip of adjacent Azerbaijani territory has been under Yerevan's control since a 1988-94 war between the two countries.
Benita Ferrero-Waldner, the EU's external relations commissioner, tells RFE/RL that Brussels firmly rejected Baku's "inflammatory" rhetoric. "I clearly said, not only to the authorities, but also at the press conference, that I think it is highly important that they avoid any inflammatory speech at the moment of presidential elections," she says.
Both countries are holding a presidential vote this year -- Armenia on February 19, and Azerbaijan in October. The Organization for Security and Cooperation in Europe (OSCE), which has spent more than 15 years mediating talks between the two sides, has indicated an election year is not likely to see major progress on the issue.
Baku, however, appears impatient. The Azerbaijani leadership, Rupel said, appears to feel that "time is not on Armenia's side." Nor is money. Azerbaijan's defense budget this year will exceed $1 billion; Armenia's is just one-third of that figure.
Azerbaijan has enjoyed spectacular economic growth over the past few years. The country's GDP grew by 25 percent in 2007, almost exclusively on the strength of oil and gas exports.
Azerbaijan's minister for economic development, Heydar Babayev, says he expects his government to generate upward of $150 billion in oil and gas revenues by 2015.
Armenia, meanwhile, has no lucrative natural resources. It is landlocked, blockaded by neighbors Turkey and Azerbaijan, and -- at Baku's behest -- bypassed by oil and gas pipelines, as well as rail and road projects, which originate in Azerbaijan.
'Winning The Peace'
But, as Rupel notes, Armenia has "alliances that speak for it." This is a reference to Russian backing. Throughout the Nagorno-Karabakh conflict, Russia is rumored to have given Armenia military equipment worth $1 billion. Russia provides for most of Armenia's energy needs and has bought up most of its energy infrastructure.
The Armenian government did not appeared cowed by Baku's fighting words. Foreign Minister Vartan Oskanian tells RFE/RL that Armenia is confident of its military capability. "No matter how strong the Azeris will be in the next 15 years, even with this kind of spending, even [if it] doubled every year, to catch up with Armenia's commitment to defend itself and Karabakh, that will require [as a] minimum 15-20 years," he says.
Oskanian says that Armenia would not be intimidated in any event. More importantly, he adds, he does not believe there can be a military solution to Nagorno-Karabakh. "We fought twice with the Azeris, we prevailed, but we never claimed that we won the war," he says. "Unless we win the peace, we will never claim that we won the war."
Oskanian acknowledges, however, that the chances of "winning the peace" are receding and that Azerbaijan's positions in the OSCE-mediated peace talks have hardened.
Rupel -- an old OSCE hand, having chaired the organization in 2005 -- also fears the Minsk Group, which oversees the mediation efforts, may face increasing obstinacy from Baku.
Nagorno-Karabakh is a key issue in both countries' election campaigns, and establishment candidates are expected to win in both countries, meaning novel approaches to the problem are not likely to be forthcoming.
Taking a longer-term view, Rupel says the conflict is rooted in the region's Soviet past, when Josef Stalin arranged their borders in a way apparently designed to exacerbate ethnic strife.
Rupel says both Armenia and Azerbaijan need a "generational change." "You know, a new generation, younger people, [would] deal with problems like Nagorno-Karabakh in an easier way," he says. "I think we have to rely on a new generation of politicians on both sides. There has been some generational change in Azerbaijan, as you know. We'll see how it happens here [in Armenia]. Certainly, it is not a pleasant situation."
And what of the EU's role? Rupel says the EU's Neighborhood Policy is "as balanced as possible" between the two countries. The EU, he says, is "very careful not to upset one side or the other," with even its economic assistance being as "similar" as possible.
But money appears to be no object in this standoff. The EU has not been directly involved in the peace talks, and there appears to be little wish on either side for it to engage. As an ally in a conflict, meanwhile, the EU remains of little use.