Tonnes of army equipment and 40 ex-German army lorries have been impounded at Antwerp docks. A Customs spokesman said that the equipment included replacement engines for former Soviet tanks, infra-red sights, periscopes and thermal imaging equipment. "This is an exceptional catch. We don't seize 91 container loads of military equipment every day," he said.

Fierce fighting broke out in Eritrea on Saturday when Ethiopia invaded the Badme area after a recurring border dispute. Fighting continued yesterday when Russian-made Ethiopian aircraft attacked villages in Western Eritrea.

The military equipment had been bought in Germany, brought together in Holland and moved by rail to Antwerp for loading on to a ship. Customs officials became suspicious of the cargo, which was listed as building equipment and water pumps. A strict new Belgian law prevents military equipment being exported without an arms export licence.

The British company organising the shipment is the south London-based JMT Charlesworth Ltd, trading as Global Services. John Charlesworth, the owner, speaking from Antwerp yesterday denied that it was military equipment. "It was an order for a Eritrean road construction company called Ghedem," he said.

Mr Charlesworth said that he had struck the deal after being given a Department of Trade and Industry grant to explore export opportunities in Eritrea. Mr Charlesworth said that he had not known there were infra-red sights, periscopes or thermal imaging included in the shipment. The 80 engines are of the type used for Russian made T-54 and T-55 tanks, although he said they were for use in Russian-made bulldozers. He has mounted a legal challenge against the Belgian government over the seizure but the authorities brought in a military intelligence official who confirmed that the shipment was military equipment. An independent expert is due to report shortly.

As a result of the shipment being held up in Antwerp since October, the Eritrean company has pulled out of the deal, Mr Charlesworth said. He denied he dealt in military equipment.

There is no arms embargo in Britain on supplying weapons to Eritrea or Ethiopia, Oxfam said yesterday: "The key issue is arms broking, which was really at the centre of the Sandline affair. It is not illegal if the arms do not touch UK soil."

To many outsiders, the immediate object of the conflict appears obscure -- a barren triangle of border land that both sides claim as its territory.

Two desperately poor states struggling to rebuild their economies risk throwing it all away for a scrap of land.

But the Badme triangle is the battleground for deep political, economic and ethnic rivalry between the two states arising from their interwoven history.

At root this is a tussle over sovereignty.

``This is a war of the cousins,'' said Moustapha Hassouna, a writer on conflicts in the Horn of Africa. ``It is the type of conflict that will defy mediation.''

Before May last year, Eritrea's President Isayas Afewerki and Ethiopian Prime Minister Meles Zenawi personified the most stable partnership in the Horn of Africa, a region blighted by conflicts in Somalia and south Sudan.

The two brothers-in-arms, as leaders of rebel movements in Eritrea and Ethiopia's northern province of Tigre, defeated Marxist dictator Mengistu Haile Mariam in May 1991.

Despite some rivalry between the two groups and a falling out in the mid-1980s, they had fought together to defeat their foe.

When Eritrea gained independence in 1993 with Ethiopia's blessing, both states took pains to present a common front on regional and economic questions.

Though Eritrea embraced reform of its agricultural economy more readily than Ethiopia, both states established strong systems of state control with limited media freedom.

Under the surface, however, there were divisions.

In November 1997 Eritrea introduced its own currency, the nakfa. Ethiopia responded by declaring that foreign trade should be conducted in hard currency.

The dispute brought into the open an imbalance in the economies of the two countries. Ethiopia's population at 57 million vastly outnumbers Eritrea's, but landlocked Ethiopia was largely reliant on Eritrean ports at Massawa and Assab.

Ethiopians argue that Eritrea started the war because its economy had been ruined by a decline in trade with its southern neighbour. Eritreans say Ethiopia resented ceding its coastline to the new nation and was looking for an excuse to regain access to the sea.

Pride is also at stake. Both countries have unusually powerful national traditions.

Thirty years of a war for independence from Ethiopia forged Eritrea into a nation with an exceptionally strong identity, while Ethiopians glory in a history dating back 2,000 years.

Eritrea occupied the sparsely populated Badme triangle last May, sparking a ground and air war on three fronts and a bitter struggle between two nations.

An eight-month lull only deepened animosity.

Both sides engaged in a war of words, reportedly expelled citizens resident in each other's country and massively reinforced their 1,000-km (600-mile) border.

Now the substantial firepower of the two nations, both of which have long military traditions, has been unleashed.

Who started the fighting last Saturday remains unclear, but diplomats say Ethiopia's military objective is to regain disputed territory at Badme and Zalambessa occupied by Eritrea last year.

``We have a situation where the perceived offended country, Ethiopia, is determined to get back land that has been taken by Eritrea,'' a diplomat in the Ethiopian capital told Reuters.

African wars are legion but direct conflicts between nation states are rare.

The demands came in a resolution adopted at a formal council meeting after members were briefed privately by U.N. special envoy Mohamed Sahnoun, just back from the region.

Troubleshooter Sahnoun, supported by a Jan. 29 council resolution, visited Ethiopia and Eritrea in a bid to head off a resumption of fighting that broke out last May between the once-friendly neighbours over a rocky 150-square mile (390 sq km) patch of land called Badme.

But the conflict, which subsided last June, erupted again during the past week, dashing efforts by the Organisation of African Unity, Sahnoun and American envoy Anthony Lake.

The council, in its resolution, condemned ``the recourse to the use of force by Ethiopia and Eritrea'' and demanded ``an immediate halt to the hostilities, in particular the use of air strikes.''

Both sides, which have accused the other of attacking first, have resorted to bombing raids despite a U.S.-brokered moratorium last June on air strikes.

The resolution also ``strongly urges all states to end immediately all sales of arms and munitions'' to both countries.

This falls short of a binding arms embargo like those imposed in other African conflicts, although the council might impose one later, diplomats said.

While the resolution called the situation ``a threat to peace and security,'' it did not invoke the mandatory provisions of Chapter VII of the U.N. Charter usually justified by such language. That would have taken longer to negotiate and delayed swift council action.

Secretary-General Kofi Annan and Sahnoun both attended the council meeting at which the resolution was adopted. The only speakers were Ethiopian U.N. ambassador Duri Mohammed and his Eritrean counterpart, Haile Menkerios.

Mohammed strongly objected that the arms ban also applied to his country and drew a parallel with the way it was treated in 1936 when the League of Nations ``imposed an arms embargo on both Fascist Italy and Ethiopia.''

The aggressor was self-sufficient in weapons while Ethiopia was ``a poor country trying to defend its sovereignty,'' he said.

``History is repeating itself.''

Menkerios of Eritrea said it was ``tragic and regrettable'' that the Security Council failed to condemn Ethiopia for ``its irresponsible resort to force to solve what is indeed a border conflict.''

``To allow the Ethiopian regime to continue to wage war in violation of another country's sovereignty with impunity would only encourage Ethiopia ... to continue on its war path, with very grave consequences,'' he said.

Sahnoun told a news conference before the meeting that both countries had acquired fighter planes and bombers and said the world might ``soon be witnessing the first high-tech war in Africa.'' He declined to say who he thought might be supplying the sophisticated arms.

The council demanded that both warring neighbours ``resume diplomatic efforts to find a peaceful resolution to the conflict.''

Ethiopia and Eritrea were also called on to ensure the safety of civilians and to respect human rights and international humanitarian law.

Sahnoun, an Algerian who lived in Ethiopia for nearly 10 years as deputy secretary-general of the OAU, called the war ``nonsensical and unacceptable.''

He said the council's call for an immediate halt to hostilities should be followed by action by the OAU.

Ethiopia and Eritrea worked together to oust Ethiopian dictator Mengistu Haile Mariam in 1991 after a long civil war.

Eritrean presidential adviser Yermane Gebremeskel said there had been only sporadic shelling on the two main fronts of the border war on Wednesday.

``The Ethiopians have not been attacking and, apart from the odd shelling, there has not been fighting on any of the fronts. They have not attacked our positions and we still have no intention of attacking theirs,'' Gebremeskel told Reuters.

A Reuters correspondent on the military front near the key Eritrean border town of Tsorona said the intense fighting of recent days had eased with only light shelling at mid-morning.

``We can see the front from across the ridge. It's quiet over there. We can't hear anything,'' he said.

U.S. President Bill Clinton and the U.N. Security Council on Tuesday both called for an immediate halt to the fighting between the two Horn of Africa nations, and expressed dismay over the human cost of the war.

Eritrea says it has been defending itself from Ethiopia's attacks since fighting erupted on Saturday and that any ceasefire deal would depend on Ethiopia.

``A ceasefire can take place as soon as Ethiopia stops attacking us as we are merely defending ourselves,'' Gebremeskel said.

But Ethiopia accuses Eritrea of starting the fighting and said its forces had come under another attack on Wednesday.

Ethiopia said it could only stop fighting if Eritrea withdrew from contested border territories as set out in a peace plan drawn up by the Organisation of African Unity (OAU).

``If Eritrea accepts the OAU proposals then a ceasefire comes immediately,'' Ethiopian government spokeswoman Selome Taddesse told Reuters.

``The (ceasefire) call is better directed to the Eritreans -- but if we are attacked on our territory, then there is nothing left for us,'' she said. ``What do they expect us to do?''

Ethiopia has accepted the OAU plan but Eritrea turned it down, saying it wanted clarification on two key points.

Fighting broke out in the disputed Badme region on Saturday after an eight-month lull, with each side accusing the other of firing first. Since then, both claim to have the upper hand.

In his call for a ceasefire on Tuesday, Clinton also appealed to both sides to respect the U.S.-backed moratorium on air strikes which was agreed last June after six weeks of fighting in the first round of the border war.

Ethiopia is using fighter planes and helicopter gunships and five civilians were killed in one of its bombing raids on a small Eritrean village near the border on Tuesday.

But Ethiopian officials accuse Eritrea of breaking the air moratorium first by bombing its northern town of Adigrat last Friday, and say it has also shelled civilian targets.

Eritrea's ambassador to Ethiopia left Addis Ababa on Wednesday after being declared persona non grata, and took a parting shot at the government before flying out of the city.

The Security Council, in a unanimous resolution issued after a briefing from U.N. special envoy Mohamed Sahnoun following his return from the Horn of Africa region, also urged all countries to halt weapons sales to Ethiopia and Eritrea.

Fighting eased in the border conflict on Wednesday but Ethiopian Foreign Minister Seyoum Mesfin said there was ``no question'' of a ceasefire unless Eritrea pulled back from the disputed Badme region.

``Ethiopia has no option but to fight the aggressor army, to root it out of our own territory, and Ethiopia has full confidence that it has the capacity and capability to achieve this objective,'' he said.

Eritrea occupied Badme and other pockets of land along the border in the first round of the bloody war in May last year. Fighting died down in June but reignited on Saturday.

Eritrea, which was the Red Sea region of Ethiopia before it won independence in 1993, says it has simply defended its positions from Ethiopian attack in the new round of fighting and that any truce depends entirely on Addis Ababa.

Troubleshooter Sahnoun visited Ethiopia and Eritrea in a bid to head off a resumption of fighting that broke out over a rocky 150-square mile (390 sq km) patch of land called Badme.

The Council's resolution condemned ``the recourse to the use of force by Ethiopia and Eritrea'' and demanded ``an immediate halt to the hostilities, in particular the use of air strikes.''

It also ``strongly urges all states to end immediately all sales of arms and munitions'' to both countries.''

This fell short of a binding arms embargo like those imposed in other African conflicts, although the Council might impose one later, according to diplomats.

U.S. President Bill Clinton has also called for an immediate end to the fighting between the two Horn of Africa nations.

Eritrean presidential adviser Yermane Gebremeskel told Reuters there was only sporadic shelling between the two sides on Wednesday. A Reuters correspondent on the military front near the key Eritrean border town of Tsorona said the intense fighting of recent days had indeed eased.

Diplomatic efforts to resolve the dispute foundered after Eritrea refused to accept a peace plan drawn up by the Organisation of African Unity, which called on it to withdraw from Badme before negotiations on sovereignty begin.

Eritrea says it wants clarification on two points in the plan, which has been accepted by Ethiopia. Mesfin on Wednesday urged the international community to put pressure on Eritrea to accept the OAU's proposals.

The OAU plan is also backed by the United Nations and the United States.

In his call for a ceasefire on Tuesday, Clinton also appealed to both sides to respect the U.S.-backed moratorium on air strikes which was agreed last June.

Ethiopia is using fighter planes and helicopter gunships and five civilians were killed in one of its bombing raids on a small Eritrean village near the border on Tuesday.

But Ethiopian officials accuse Eritrea of breaking the air moratorium first by bombing its northern town of Adigrat last Friday, and say it has also shelled civilian targets.