A member of the Armenian military guarding his country on the border of Azerbaijan.

An upswing in hostility between Azerbaijan and Armenia may endanger may soon endanger oil investments in the countries.

The situation is at its worst since the 1990s when the two countries were at war. The conflict was ended with a cease fire, but now, after 21 years it seems that confrontation is building again.

The reason for the new conflict is the elections in Nagorno-Karabakh, a region that the Armenians took over during the war but is still officially considered a part of Azerbaijan. The majority of the people living there are Armenians, but the elections scheduled for May 3 are viewed as an illegal act.

This territory was a center of dispute for years, but this vote just stirred tension and escalation of these events is awaited.

Investments made in this region amount to billions from some of the world’s biggest companies. Besides the Russian Southern Fringe the biggest loss could be felt by BP Plc who spent significant amounts of money on oil and gas production in Azerbaijan and a pipeline linking it to southern Italy. BP’s Baku-Tbilisi-Ceyhan pipeline is less than 100 miles away from the cease fire.

Azerbaijan is the worlds third largest producer of crude gas and oil and it is a member of The Caspian Sea group that signed an agreement with Europe to supply gas through 2500 mile long pipeline. Also, Azerbaijan is supported by the US and Israeli army as an alliance signatory and is one of the biggest spenders in the arms market. Just this year 27 percent of their budget has been spent on a rearming program, cashing out a total of 3.6 billion US dollars to its European partners, which is equal to Armenia’s annual expenditures.

Talks between the two sides were mediated by France, Russia and America, but still they show no signs of improvement or any kind of agreement. The cease fire area is heavily armed and both sides are waiting on action in their trenches.

The last incident occurred in August when 19 troops were killed and the battle raged over a week. After that Azerbaijan’s army started using 120mm mortar rounds, the first time since the end of the conflict in 1993.

Experts say that even though Azerbaijan is doing some serious preparations of its military force it’s unlikely that they will rush into war immediately. The first European Games were scheduled for this June and Baku is hosting them. Any attempt of Azerbaijan’s army to reclaim territory or start a fight will be restricted until the games are over.