Azerbaijani military officer Ramil Safarov lays flowers at Martyrs' Alley national memorial in the capital Baku on August 31, 2012.
Armenia has expressed readiness for a war with its arch-foe, the Republic of Azerbaijan, after Baku pardoned and promoted an Azerbaijani officer who axed an Armenian soldier to death.
“We don't want a war, but if we have to, we will fight and win. We are not afraid of killers, even if they enjoy the protection of the head of state,” Armenian President Serzh Sarkisian said in a statement late on Sunday.
"They (Azerbaijanis) have been warned," he said, calling Azerbaijan a country where "illicit orders set free....[a person] who kills people only because they are Armenians".
Last week, Azerbaijan President Ilham Aliyev immediately pardoned military officer Ramil Safarov after he was extradited from Hungary, where he had been serving life in prison for hacking Armenian officer Gurgen Margarian to death at a military academy in Budapest in 2004.
The two servicemen were attending English-language courses organized by NATO at the time.
Safarov was given a hero's welcome, promoted to the rank of major, given a house and eight years' worth of back-pay after returning to Azerbaijan.
On August 31, Armenia broke off diplomatic ties with Hungary after Safarov was sent back to his homeland and, despite assurances, immediately pardoned and freed.
Sarkisian said Armenia was "halting diplomatic relations and all official ties with Hungary."
Protesters in the Armenian capital of Yerevan also threw tomatoes at the building housing Hungary's honorary consulate, and tore down the Hungarian flag.
US President Barack Obama has also expressed “concern” over the latest developments.
Researcher at the German Institute for International and Security Affairs (SWP) Uwe Halbach told Deutsche Welle that the recent rise in threats of war by both sides does not necessarily mean an actual military confrontation will take place.
However, Halbach says a confrontation is possible in an area between Karabakh and Azerbaijan’s border, as both sides have reportedly deployed snipers along their borders.
He added that the Nagorno-Karabakh conflict is one of the greatest challenges in the region.
Halbach has said that the international community must take action to prevent a war between the two.
An Azeri analyst says that Armenia and Azerbaijan have been experiencing a situation during the past two decades that can neither be classified as peace nor war. The source pointed out to Azerbaijan's growing military might as a result of its oil production.
The Azerbaijan government has even reportedly started advertising its military strength, claiming it is prepared to take back its seven occupied territories from Armenia.
Azerbaijan and Armenia are ex-Soviet neighbors that have been stranded in a long-standing conflict over the mountainous territory of Nagorno-Karabakh, where they fought a war in the 1990s.