WASHINGTON – President Bill Clinton and Azerbaijani President Haydar Aliyev last week discussed the prospects for peace between Azerbaijan and Armenia over the disputed region of Nagorno-Karabakh and the development of a multi-billion dollar oil pipeline from Baku to Turkey.

Oil-rich Azerbaijan has made some progress in resolving its long-standing conflict with Armenia over Nagorno-Karabakh, a region located within Azerbaijan but populated mainly by ethnic Armenians.

Armenian forces occupy large chunks of Azerbaijan's territory after seizing it during a war that erupted in the final years of Soviet rule. About 35,000 people were killed before a cease-fire in 1994. Aliyev has had several recent meetings with Armenian President Robert Kocharian to discuss the matter.

Clinton and Aliyev had what the White House described as a productive, cordial meeting of 45 minutes in the Oval Office.

"I believe that these discussions were very helpful and very useful for the political peaceful settlement of the conflict between Armenia and Azerbaijan, and this meeting will give additional impetus to a final settlement," Aliyev told reporters after the meeting.

Asked what concessions Armenians and Azerbaijanis should make to reach a final settlement, such as a swap of land, Aliyev demurred.

"It is quite natural that both sides have to make compromises now that negotiations are under way in order to define all the concessions. Since the negotiations have not come to an end, I would not like to go into details about it," he said.

Clinton and Aliyev also talked about development of the so-called Baku-Ceyhan oil pipeline, a multi-billion dollar oil pipeline from Baku, Azerbaijan to the Turkish port of Ceyhan.

In a ceremony attended by Clinton, Turkey, Azerbaijan and Georgia signed agreements in Istanbul in November setting out the legal framework for the project.

Construction of the one million barrel per day pipeline is set to start in the third quarter of 2001, with completion planned for late 2004.

Western oil companies have signed contracts worth more than $50 billion in potential investments to develop the oil production of Aliyev's ex-Soviet Caspian Sea state.

"President Aliyev reiterated his strong commitment to the building of the Baku-Ceyhan oil pipeline and outlined the current state of talks aimed at finalizing and then implementing the framework agreement that was signed at Istanbul in November," said Jim Fallin, a spokesman for the White House National Security Council.

He said Aliyev also underscored his commitment to a trans-Caspian gas pipeline that would enable Azerbaijan to export its vast natural gas reserves.