Armenia has strongly criticised Baku’s decision to pardon Azeri soldier Ramil Safarov for killing an Armenian soldier in Hungary in 2004.

President Serzh Sarkisian said that Armenia was ready for war if the situation escalated, reported the AFP.

"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 on Sunday.

"They (Azerbaijanis) have been warned," he said, calling Azerbaijan a country where "illicit orders set free and publicly glorify every bastard who kills people only because they are Armenians"

Azeri President Ilham Aliyev pardoned Safarov after he was extradited from Hungary last week, promoted him to the rank of Major, provided him with a flat and paid him for the eight years he spent in prison.

Safarov hacked Armenian officer Gurgen Margarian to death while attending a NATO-organised English course at a military academy in Budapest.

Safarov claimed that Margarian had insulted his country and that he was traumatised as he lost relatives during the war between the two countries.

Russia has criticised Hungary’s extradition and expressed ‘deep concern’ over the pardon granted to Safarov.

"We believe that these actions of the Azerbaijanis, as well as the Hungarian authorities, go against the efforts agreed at an international level primarily through the OSCE Minsk Group aimed at reducing tension in the region," Russian foreign ministry spokesman Alexander Lukashevich said in a statement.

The European Union called for restraint and said it will continue to follow the situation closely.

"In the interest of regional stability and on-going efforts towards reconciliation," the EU said they "reiterate their call on Azerbaijan and Armenia to exercise restraint, on the ground as well as in public statements, in order to prevent an escalation of the situation."