Ammon News - TBILSI (Reuters) - European institutions criticized Azeri President Ilham Aliyev on Thursday for signing legislation making defamation over the Internet a criminal offence punishable by imprisonment as the country prepares for an autumn presidential election.

The European Union, Council of Europe and the Organization for Security and Cooperation in Europe (OSCE) accused the oil-producing ex-Soviet state and its leader of tightening curbs on free expression before the October vote.

Parliament in May passed amendments imposing fines of up to 1,000 manats ($1,250) and prison terms of up to three years for defamation committed online. Aliyev signed the legislation this week despite calls by European groups to reject it.

"Wary of the chilling effect that these provisions are bound to have on those wishing to use the Internet to raise legitimate critical voices ... (we) expressed concern that the new changes will further erode the already limited space for free expression in the country," Council of Europe Human Rights Commissioner Nils Muiznieks and OSCE media freedom representative Dunja Mijatovic said in a joint statement.

"The EU is concerned at such further curbs on freedom of expression in Azerbaijan," said EU foreign policy chief Catherine Ashton and Stefan Fule, EU commissioner for Enlargement and European Neighborhood Policy.

Aliyev, who succeeded his father in 2003, is expected to win a new term despite opposition from some Azeris tired of his rule over the mostly Muslim nation of 9 million on the Caspian Sea.

Inspired in part by the Arab Spring uprisings in the Middle East and North Africa, some opponents have used social media to organize street protests, many of which were swiftly dispersed.

Sandwiched between Russia, Iran and Turkey, Azerbaijan is an energy supplier to Europe and a transit route for U.S. troops in Afghanistan - a role that rights groups say has cushioned the country from Western criticism of its democracy record.