Karine, who runs a cafe in Stepanakert, capital of Nagorno Karabakh, said she was worried about the news from Baku.

"Is it true that Aliev is dying?" she asked with a nervous laugh. "We've just done up the cafe and we don't want another war."

As Azerbaijan prepares for a presidential election in October and an expected change of regime due to the ill health of President Heidar Aliev, the region is bracing itself for new tensions in the unresolved Armenian-Azerbaijani dispute over Nagorno Karabakh. President Aliev flew to the United States on August 6 for more medical treatment.

Since the two sides signed a ceasefire in May 1994, the Armenians have had control of the territory of Karabakh and its surrounding regions. Armenian and Azerbaijani armed forces have faced each other across a "line of contact". Unlike in the nearby disputes over Abkhazia or South Ossetia, there is no outside peacekeeping force monitoring the Karabakh ceasefire, which means that it is basically self-regulating.

That means that the level of tension across the ceasefire line acts as a kind of weathervane for the state of the peace process and also a kind of early warning system for the possibility of another war. The nightmare scenario for the Karabakh conflict is that, at a time of political instability in both Azerbaijan and Armenia, a small flare-up on the ceasefire line could escalate into a serious bout of new fighting.

And the last two months have seen some of the worst violence for many years.

The most serious reports of ceasefire violations have come from the village of Garakhanbeili in the Fizuli region of southern Azerbaijan. But there have also been reports of incidents across the Armenia-Nakhichevan border and the northern frontier between Armenia and Azerbaijan.

Estimates of the number of casualties vary. The Armenians admits to the death of only one of its soldiers and the wounding of two others in July. The Azerbaijanis give much more dramatic figures, saying 11 of their soldiers have been lost in the last two months, with more than 30 killed in the year so far and 18 counted as missing.

An official close to the talks, speaking on condition of anonymity, said that if current trends continue, the losses across the front line for 2003 could be three times worse than last year, when around 20 soldiers were killed. That would make it the worst year of violence since 1996.

The Armenians blame the recent upsurge in shooting incidents on political instability in Azerbaijan.

"We've been saying that we have absolutely no interest in triggering everything," Armenia's Minister of Foreign Affairs Vartan Oskanian told IWPR. "We're satisfied with the status quo. The whole thing is being instigated by the Azerbaijani side and they are getting an adequate reaction from the Armenian side."

Ashot Gulian, who is the foreign minister of the unrecognized republic of Nagorno Karabakh, alleged that the Azerbaijanis have been moving their border posts much closer to the Armenians.

"They moved their posts to within 35 meter of our positions," Gulian said in an interview. "When they started digging trenches by night, our men resisted that because having the enemy 35 meters away is just the same as having a bullet in the head."

Gulian claimed that several of the incidents reported by the Azerbaijanis had been made up for political reasons and nothing had actually happened. "This tense situation is of no benefit either to us or to Azerbaijan," he said.

For its part, the Azerbaijanis blame the Armenians for the rise in tension. Foreign minister Vilaya Guliev has called on the United Nations to hold Armenia to account for ceasefire violations.

Ramiz Melikov, press secretary with Azerbaijan's Ministry of Defense, warned that "war is always a possibility and we don't rule it out for a minute. Azerbaijani soldiers are fed up with sitting in trenches, refugees are fed up with sitting in tents, the people are asking for lands to be liberated".

However, the Azerbaijani press has paid relatively little attention to the ceasefire violations, concentrating instead on the long-running domestic political crisis in Azerbaijan.

The problems on the ceasefire line have done more damage to international efforts to keep the peace process for Karabakh alive. The three international co-chairs of the Organization for Security and Cooperation in Europe's Minsk Group, which is the main mediating body for the conflict, are expressing concern over what is going on.

"We are disturbed by all the incidents on the line of contact," the American co-chair of the Minsk Group, Rudolf Perina, told IWPR by telephone from Washington. The other two co-chairs are from France and Russia.

Perina also expressed the hope that the recent surge in incidents has passed and the situation is showing signs of improvement.

The co-chairs have not been able to make a single trip to the region this year - although they have met the Armenian and Azerbaijani presidents elsewhere.

"We know there is a lot of frustration in the region with the peace process this year," Perin said. "The co-chairs themselves have also been frustrated. We have tried several times to visit the region this year and each time it was inconvenient to one side or the other for us to do so. And, as you know, we like to visit both sides when we travel to the region."

Ultimately, however, the mediators are playing a secondary role and it is the politicians on the ground who will decide what happens with Karabakh.

"The ceasefire is holding because of political will," said Ambassador Andrzej Kasprzyk, who is the personal representative of the chairman-in-office of the OSCE with responsibility for the Karabakh conflict - in other words the international official who most closely monitors the situation on the ground. "My office is supporting the ceasefire and serves as an early warning system to the presidents. But if there is no political will, there is not much we can do."

(Thomas de Waal is IWPR's Caucasus Editor. Shahin Rzayev, IWPR's Azerbaijan coordinator in Baku, contributed to this article.)