The clashes came ahead of an expected announcement by Ethiopia that will set out its position on a peace plan Eritrea has already accepted.

"The Ethiopian defence forces launched an intensified counter-offensive at midnight in the vicinity of Tesseney," the Ethiopian Foreign Ministry said in a statement.

"The fighting, which lasted through the night, continues this morning," it added.

In Asmara, Eritrean presidential advisor Yemane Gebremeskel confirmed the fighting in the west and said there was also heavy shelling near Assab port on the eastern front of their 1,000 km (600 mile) border.

Ethiopian Foreign Minister Seyoum Mesfin is expected later on Wednesday to announce his government's formal position on the peace plan drawn up by the Organisation of African Unity (OAU).

Prime Minister Meles Zenawi's government said on Monday it accepted the U.N.-backed plan in principle, but said a formal position would be announced only after consultations by parliament and its cabinet.

The two Horn of Africa neighbours have accused each other of launching new attacks in a war that has killed tens of thousands of soldiers.

Eritrea, which has suffered battle-field reverses since the two-year-old war erupted again on May 12, has already accepted the plan despite deep reservations.

It is particularly unhappy about the establishment of a buffer zone, 25 km (15 miles) deep inside its territory along the common border from which its forces will be excluded.

Eritrean civilian administration, including police and local militia will be allowed to function in the zone.

It was also upset by Ethiopia's insistence that a ceasefire be agreed before discussion of contentious issues such as demarcation of the border, investigation of the cause of the war and its consequences.

The OAU proposals, a copy of which has been obtained by Reuters, say determination of the disputed border shall be "on the basis of pertinent colonial treaties and applicable international law", a position seen by some analysts as favourable to Ethiopia.

Where there is controversy, arbitration will be called in.

Ethiopia's army, which currently occupies large portions of undisputed Eritrean territory, is supposed to redeploy to positions it held before the war broke out in May 1998, two weeks after an agreement is signed.

It is to be replaced by a U.N. peacekeeping mission which will monitor key and sensitive areas in the zone and iron out any disputes through a Military Coordination Commission.

The United Nations says the war, between two poor countries, has displaced over 750,000 Eritreans and complicated efforts to help feed over nine million people in both countries who are threatened by hunger.

Military analysts say over 120,000 soldiers from both sides have been killed in the fighting.

The 6,000 animals stolen from Wajir District, Kenya, a week ago are still being held by Ethiopian Government forces some 15 kilometres from the Kenyan border.

But sources in Wajir indicated the Ethiopian forces were making arrangements to have the animals returned to their owners.

One source said the forces took the animals inadvertently, based on wrong information supplied by a Kenyan clan who allegedly betrayed the livestock owners by claiming the animals belonged to elements of the Oromo Liberation Front (OLF).

"In fact, these people (the Ethiopians) have even apologised to the victims of the raid and promised to hand over the animals to their owners in a few days' time."

The source, speaking by telephone on condition of anonymity, said: "Someone had misinformed them that the victims are members of the OLF holed up in Kenya."

According to the source, the animals were being held in the Kathathuma area, about 15 kilometres from the border.

Meanwhile, the owners of the 5,306 head of cattle and 950 camels stolen from the Tiniqu area, Bute Division, have been identified.

The animals had been stolen on June 8 during an incident in which three people were killed by an estimated 60 heavily armed raiders of the Tigray People's Revolutionary Liberation Forces (TPRLF).

Speaking to the Nation by telephone from Wajir, civic leaders Abdullai Amin Gabow and Ibrahim Waso gave the breakdown of the owners of the stolen cattle as follows: Takaw Mohamed 1,345, Ahmed Elmi 603, Mohamed Ibrahim 527, Yusuf Maalim Hussein 373, Adan Maalim Hussein 287, Ali Ahmed 214, Mohamed Adan Mata 204, Hassan Adano 184, Hassan Ahmed 130, Mohamed Sabe 110, Adan Gedow 102, and Abdi Kassim 102.

The owners of the stolen camels were identified as Ahmed Elmi (197), Hassan Ahmed (170), Ali Maalim (136), Adow Gedow (97), Ali Ahmed (96), Ali Gedow (84), Abdi Kassim (80), and Sugow Maalim (20).

The civic leaders, who included the chairman of the Wajir County Council, Mr Abdullai Amin Gabow, gave the names of the dead as Abdi I. Kassim, 50, Mohamed Adan Mata, 30, and Abdikadir Ibrahim Hinni, 20, the latter two being herdsmen.

The injured, who were initially admitted to the Bute Health Centre, were identified as Adow Gedow, Mohamed Osman and Adan Maalim Hussein.

In a statement on behalf of 28 councillors, the two took issue with the District Security Committee (DSC) for alleged lack of seriousness in pursuing the foreign raiders.

In Wajir town, there was tension as residents took to the streets for a second day to protest at the recent raid by the Ethiopian militiamen.

Addressing the demonstrators at his office, District Commissioner Fred Mutsami said the government had lodged a formal complaint with the Ethiopian Government.

The District Officer was unavailable for comment and was said to have travelled to an outpost area of Hadadi Ijole, where hundreds of families who have lost their animals are camped.