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(Reuters) - Ilham Aliev, widely seen as Azerbaijan's president-in-waiting, has ruled out any compromise with Armenia in their bitter conflict over Nagorno-Karabakh.

In a tough-talking interview in the Friday edition of Russia's Izvestia daily, the son of ailing president Heydar Aliev said the only acceptable solution to the protracted dispute was "the total liberation of the territory which Armenian forces had occupied". And he excluded any resumption of normal trade with Azerbaijan's neighbor, saying: "Until our territories are liberated we will not have any cooperation with Armenia."

The Armenian-populated territory at the heart of Azerbaijan has been at the center of a dispute between the two former Soviet republics since ethnic conflict erupted there in 1988 in the dying days of the Soviet Union. Azeri forces were driven out and ethnic Armenians have since established self-government in the region.

Ilham, 41, emerged this month as Azerbaijan's likely next president when his 80-year-old father, dominant political figure in the oil-rich Caspian state for three decades, was flown to the United States for treatment for heart and kidney problems. From his sick bed in a Turkish military hospital earlier, Aliev nominated Ilham as prime minister -- a move endorsed by parliament and effectively making him automatic successor as interim head of state in the event of his father's death.

Muslim Azerbaijan and Christian Armenia remain technically at war, though a precarious truce has been in place for some years. With compromise a politically risky venture for both sides, the Karabakh dispute has stubbornly defied a peaceful solution despite periodic negotiations, mediated by Russia, the United States and France.

Ilham's tough talk on the highly-emotional issue clearly had built-in voter-appeal ahead of the October elections. He said Azerbaijan still hoped for a peaceful settlement to the former Soviet Union's long-running ethnic conflict. But he added: "If Armenia thinks it can...force us to make one-sided concessions that damage our interests or territorial integrity then it is making a mistake."

Ilham said Armenia had ultimately been the loser from the conflict since its economy had been ravaged by the effect of Azerbaijan trade sanctions and was hugely dependent on foreign support from the Armenian Diaspora.
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