Nagorno-Karabakh says its two largest cities under fierce attack

At least 1,000 people - and possibly many more - have died in nearly six weeks of fighting

TBILISI (Reuters) - Three residents of Nagorno-Karabakh s largest city were killed during overnight shelling by Azeri forces, the enclave s ethnic Armenian-controlled Emergency and Rescue Service said on Friday, as the battle for control of its major settlements intensified.

Azerbaijan denied the reports of shelling in Stepanakert. Two independent observers said fighting appeared to be moving deeper into the enclave, with Azeri troops stepping up attacks on its biggest two cities.

At least 1,000 people - and possibly many more - have died in nearly six weeks of fighting in and around Nagorno-Karabakh, a mountainous enclave internationally recognised as part of Azerbaijan but populated and controlled by ethnic Armenians.

The conflict has underlined the influence of Turkey, an ally of Azerbaijan, in a former Soviet region long dominated by Moscow, which has a defence pact with Armenia. It also threatens the security of Azeri oil and gas pipelines.

The Nagorno-Karabakh Emergency and Rescue Service said residential buildings and public infrastructure in Stepanakert had been targeted. It said that the three people killed had been inside the same house.

Reuters was unable independently to verify these reports. Three sources working in Stepanakert said that the city - known in Azerbaijan as Khankendi - had come under heavy shelling late on Thursday.

Shushi, 15 km (9 miles) to the south and the enclave s second-largest city, had also come under bombardment overnight and several houses were on fire, the Emergency and Rescue Service said. The city is of strategic importance to both sides.

Azerbaijan s defence ministry said allegations that it had shelled civilian areas were "misinformation".

It has previously accused Armenian-controlled forces of shelling cities under its control, including Terter and Barda, as well as Ganja, the second-largest city in Azerbaijan. Dozens were killed in those attacks.

Thomas de Waal, analyst at the Carnegie Endowment for International Peace and author of a book on the 1990s Nagorno-Karabakh war, said the conflict appeared to be moving toward a potentially bloody battle for Shushi, known to Azeris as Shusha.

"Shusha has great importance for Azerbaijanis, as a cultural and historical centre and the town where they had a majority population before the war," de Waal told Reuters.

"That is almost certainly why their military operation was diverted from Lachin towards the city," he said. "It has great importance for Armenians too: it sits above Stepanakert and is the site of Karabakh s cathedral."

BROKEN CEASEFIRES

Three ceasefires have failed to halt the bloodiest fighting in the South Caucasus for more than 25 years. Both sides accused each other of launching attacks within hours of an agreement on Oct. 30 to avoid deliberately targeting civilians.

The Nagorno-Karabakh defence ministry said combat operations continued overnight along all major sections of the front line. It said that "multiple attempts" to attack Shushi were repelled.

Olesya Vartanyan, Crisis Group s Tbilisi-based senior analyst for the South Caucasus, told Reuters that fighting near Shushi had "been intensifying during the last week, with more face-to-face clashes closer to the town".

"The side that controls Shushi automatically gains control over Stepanakert," she said. "Even if Baku decides to stop the war after taking Shushi, this will still significantly decrease the chance of ethnic Armenians returning to their homes in Stepanakert."

The Nagorno-Karabakh defence ministry says 1,177 of its troops have been killed. Azerbaijan does not disclose its military casualties, while Russia has estimated 5,000 deaths on both sides. Around 30,000 people were killed in the 1991-94 war.