Russia condemned on Monday the pardon given to an Azerbaijani army officer who was sentenced to life in prison for murdering an Armenian soldier in Hungary in 2004.

In a press release, Russia's Foreign Ministry said the decision by Azerbaijani President Ilham Aliyev to pardon Ramil Safarov, who returned to Baku on August 31 following his transfer from Hungary, "undermines efforts... to reduce tensions in the region."

Ramil Safarov had been serving a life sentence for hacking Gurgen Margaryan to death with an ax during a NATO training event in Budapest in 2004.

Safarov attacked Margaryan as the Armenian slept, striking him an alleged 16 times.

Armenia and Azerbaijan have been at odds since fighting a bitter war over the mainly Armenian Nagorno-Karabakh enclave in the early 1990s. A ceasefire was signed in 1994, but relations continue to be strained.

Hungary said it had agreed to return Safarov to Azerbaijan after receiving assurances that his sentence would be enforced.

But Armenian President Serzh Sargsyan has said Hungary made a "gross mistake" in sending Safarov back to Baku, where he was greeted as a national hero, and announced that Yerevan was severing its diplomatic ties with Budapest.

"With their joint actions, Azerbaijan and Hungary opened the door to the recurrence of such crimes," Sargsyan said in comments carried by his press office.

"I cannot put up with this. The republic of Armenia cannot put up with this," he added.