NAIROBI, Jan 28 (AFP) - War clouds are gathering over Ethiopia and Eritrea as ominous signs point to the possible resumption of full-scale battles over their disputed border.

UN Secretary General Kofi Annan is "very, very concerned," UN special envoy Mohammed Sahnoun told a UN information service Wednesday from New York.

On January 12, the Eritrean government predicted that Ethiopia would launch attacks in three directions between mid-January and mid-February, with a foreign ministry communique citing "news leaked by various sources, including western intelligence sources."

The United States last Friday and Britain on Wednesday urged their nationals to avoid travel to the two Horn of Africa countries, and suggested that non-essential workers leave.

Ethiopian Foreign Minister Seyoum Mesfin declared on January 5 that the conflict had reached a "critical period," and on Wednesday Prime Minister Meles Zenawi told diplomats in Addis Ababa that "we would expect you to fully understand and defend our right to defend ourselves," state television reported.

A UN report quoted Meles as saying on January 13: "We feel we have come to the end of the road, and the configuration of forces for peace and war is shifting in favour of war." He also rejected any "new creative package."

France has deployed a frigate, the Cassard, in the Red Sea to monitor developments, according to military sources in Djibouti, where France maintains its biggest military base in Africa, with 3,200 men, and which borders both Eritrea and Ethiopia.

The heavily armed Cassard, which has a complement of 200 men, is also tasked with preventing any war spilling over into Djibouti, the sources said, adding that France had also sent more warplanes and helicopters to Djibouti.

Landlocked Ethiopia, deprived of Eritrea's Red Sea ports, now uses Djibouti for the bulk of its maritime trade. Eritrean President Issaias Afeworki accused Djibouti in November of siding with Ethiopia, leading President Hassan Gouled Aptidon to break relations with Asmara.

Both Ethiopia and Eritrea have well equipped and battle-hardened armies -- Eritrea fought a 30-year war against Ethiopia for its independence, gained de facto in 1991 -- and each has thousands of troops dug in along the rugged border, which is some 1,000 kilometers (600 miles) long.

Eritrea has recently bought new MiG 29 interceptors and Ethiopia has bought Sukhoi fighter-bombers -- both capable of flying from one capital to the other.

Reliable reports said that early battles in the conflict, which erupted in May last year, left several thousand dead. Hundreds of thousands of civilians living along the border have been displaced, and the two countries have expelled tens of thousands of each other's nationals.

Fighting at close quarters tapered off in June, when the two sides also agreed to a US-brokered pact to halt airstrikes.

But artillery shelling across the border is frequent, according to Seyoum, and Ethiopia this month and last has accused Eritrean troops of making raids across the border.

Early attempts by the United States and Rwanda to broker peace failed, but the Organisation of African Unity (OAU) came up with an 11-point peace plan in November which provides notably for the withdrawal of Eritrean forces from positions they occupied at the start of the conflict, the six-month deployment of a peacekeeping and observation force, and neutral delineation of the ill-defined frontier.

Ethiopia announced its acceptance of the plan, but an Eritrean diplomat told AFP Monday that Asmara was still seeking two essential clarifications -- whether the troop pull-back also applied to Ethiopia, and whether Addis Ababa would agree to recognise the border as defined in Italian colonial days.

Diplomatic efforts to resolve the dispute continue, based on the OAU plan.

Former US national security adviser Anthony Lake has been shuttling between Addis Ababa and Asmara, Sahnoun is expected back in the region soon, and two French envoys attempted mediation last week.

Kenyan President Daniel arap Moi arrived in Addis Ababa for mediation talks Thursday after visiting Asmara on Monday.

The European Union, Canada and Italy, the former colonial power, have all appealed recently for a diplomatic solution, and US President Bill Clinton called on Ethiopia and Eritrea last Friday to accept the OAU plan.

"The United States remains deeply concerned ... about the continuing military build-up," a White House statement said.