Russia mediates Armenia, Azerbaijan Nagorno-Karabakh talks.hurriyet2008-detailbox-newslink { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:none; color:#000000;}.hurriyet2008-detailbox-newslink:hover { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:underline; color:#990000;}The leaders of Armenia and Azerbaijan began talks Sunday in the Kremlin as Russia casts itself as peacemaker in the volatile Caucasus after its August war with Georgia. (UPDATED)

Azerbaijani President Ilham Aliyev and his Armenian counterpart Serzh Sargsyan meet in a bid to secure a breakthrough in their frozen war over the disputed province of Nagorny-Karabakh, a Kremlin spokesman said, the AFP reported.

The conflict between Azerbaijan and Armenia began in 1988 on Armenian territorial claims over Azerbaijan.

Since 1992, Armenian Armed Forces have occupied 20 percent of Azerbaijan including the Nagorno-Karabakh region and its seven surrounding districts, displacing 10 percent of the Azeri population in the series of bloody clashes both between and within the two neighboring countries.

In 1994, Azerbaijan and Armenia signed a ceasefire agreement at which time the active hostilities ended. The Co-Chairs of the OSCE Minsk Group are currently holding peaceful negotiations.

Nearly 30,000 were killed in the 1990s war over the enclave and soldiers on both sides continue to exchange sporadic fire, claiming lives.

Russian President Dmitry Medvedev, who in August oversaw Russia's war with Georgia -- which borders both Armenia and Azerbaijan -- was to broker the peace talks, the Kremlin said.

Medvedev in October launched a fresh push to end the long-simmering conflict during a visit to Armenia.

At the meeting Sargsyan said he was ready for talks with Azerbaijan on the basis of principles worked out at negotiations in Madrid last year under a plan that would give Nagorno-Karabakh the right to self-determination, AFP reported.

The Kremlin would act as guarantor of a new accord, an administration official was quoted as saying on Saturday.

Analysts say Moscow is keen to maintain influence in Armenia, its main ally in the Caucasus, after the conflict between Russia and U.S.-allied Georgia in August raised tensions throughout the region.

The August war, which began when Georgia attacked its own breakaway enclave of South Ossetia, raised fears of similar violence in Nagorno-Karabakh.

"Russia would be prepared to support a resolution to problem that suits both sides and act as guarantor if a compromise deal is reached," the unnamed Kremlin official said, state news agency RIA Novosti reported.