Azerbaijan shot down an Armenian helicopter that it said violated its airspace in an attack that may trigger fresh confrontations between the two countries.

The Mi-24 helicopter was “trying to attack” Azeri positions near a cease-fire line when it was hit, the Defense Ministry in Baku said on its website. Armenia’s Defense Ministry claimed the aircraft was unarmed and called its downing an “unprecedented provocation.”

“This is the worst military incident in more than 20 years since the cease-fire,” Thomas de Waal, senior associate at the Carnegie Endowment for International Peace, said by e-mail from Washington.

Armenia and Azerbaijan fought a war as the Soviet Union collapsed that claimed about 30,000 lives and displaced 1.2 million people. The latest rupture of the 1994 cease-fire marks a potentially dangerous turn in the Caucasus flashpoint located between Turkey, Iran and Russia, which has a mutual defense pact with Armenia.

Armenians seized Nagorno-Karabakh and seven surrounding regions from Azerbaijan in the early 1990s. Efforts by the Minsk Group of U.S., Russian and French mediators from the Organization for Security and Cooperation in Europe have failed to achieve a peace agreement and end sporadic confrontations, which in August resulted in the death of 20 troops.

First Downing

The incident was the first time an aircraft was shot down in the conflict zone around Nagorno-Karabakh since the cease-fire, according to both sides.

“At 1:45 today, a Mi-25 helicopter of Armenian armed forces tried to attack our positions,” the Azeri ministry said. “Our troops shot the enemy helicopter down.”

The Minsk Group mediators said they were “deeply worried” by the incident and appealed to all sides to avoid escalating tensions. “The region cannot afford another round of violence like we witnessed this summer,” Russian Ambassador Igor Popov, U.S. Ambassador James Warlick and French Ambassador Pierre Andrieu said in an e-mailed OSCE statement.

Companies led by London-based BP Plc (BP/) have invested more than $40 billion in Azerbaijan’s oil and gas fields. Azerbaijan can pump as much as 1.2 million barrels a day of oil to Turkey through the Baku-Tbilisi-Ceyhan pipeline, which allows supplies to bypass Russia, and at its closest point lies about 50 kilometers (30 miles) from Nagorno-Karabakh.

Military Spending

Azerbaijan has used oil revenue to raise military spending 30-fold in the past decade and threatened to use force to regain control of the territory should mediation fail. It says Nagorno-Karabakh must remain part of Azerbaijan to maintain the principle of territorial integrity, while Armenia says the region has a right to self-determination.

“Azeri accusations claiming that Armenian helicopters have carried out attacks on their positions and got a proper response are mindless,” said Artsrun Hovhannisyan, a ministry spokesman in Yerevan. “An investigation of the helicopter’s debris will confirm that the helicopter was not militarily equipped.”

Three crew died, Radio Liberty reported on its website, citing Davit Babayan, spokesman for Nagorno-Karabakh President Bako Sahakyan. Hovhannisyan said Azerbaijan was blocking attempts to reach the helicopter. “This unprecedented provocation will be very painful for Azerbaijan,” he said.

The Azeri ministry named the soldier it said had shot down the aircraft as Ilkin Muradov, and said he had been decorated for “distinction in military service.” The helicopter had crashed 500 meters from the Azeri front line, it said.

War Games

The latest spark comes as Armenia and troops from the self-declared state of Nagorno-Karabakh stage military drills in the area. Almost 50,000 troops are currently engaged in military exercises that began on Nov. 6, their defense ministries said.

Armenia has 17,000 troops in the exercise, the Defense Ministry in Yerevan said on its website, while the Nagorno-Karabakh Defense Ministry said on its website that it had 30,000 soldiers involved. The “Unity 2014” drills involve 850 armored vehicles, 2,100 artillery pieces and 450 air defense units, the ministries said.

Azeri President Ilham Aliev and Armenian President Serzh Sargsyan have met twice in the past three months, in Sochi in August and in Paris in October, in an attempt to overcome their differences.