In the capital Asmara the shops are well stocked, fuel is available in service stations and the prices of staple goods have not risen sharply.

A western diplomat said the national currency, the nafka, created in 1997, has remained relatively stable since the conflict broke out last May.

However the conflict with Ethiopia, from which Eritrea became independent in 1993 after a 30-year guerrilla war, has cost it heavily, both in military equipment and lost markets.

One of Addis Ababa's first steps when fighting broke out was to abandon the Eritrean ports of Assab and Massawa, landlocked Ethiopia's outlets for most of its trade, in favour of Djibouti.

The loss was immediate and deeply felt by Eritrea, whose trade with Ethiopia was largely in surplus, affecting both its ports and its transport companies.

The port of Assab is now virtually deserted, despite the development of a small amount of trade with Yemen, on the other side of the Red Sea. Eritrean fishermen sell their catches there in exchange for fruit.

A western diplomat said that last year Eritrea's economy grew by only half the forecast eight percent, while the budget has been knocked badly off course by the need to supply and equip its armed forces of more than 200,000 men and women.

Much of the workforce has been sent to the front, dealing a severe blow to many projects under way. Half the aid of the United Nations Development Programme (UNDP) has been switched to the Eritreans living in the border areas who have been displaced by the fighting, the UNDP's Asmara representative, Martyn Ngwenya, said.

Eritrea, which has a gross national product of around one billion dollars, has called on the patriotism of its expatriates, who number several hundred thousand in Saudi Arabia, the United States, Italy, Canada and Germany.

Between 150,000 and 180,000 Eritreans still live in Ethiopia, even though more than 50,000 have been expelled by the Addis Ababa authorities.

While inside the country taxes have been raised and voluntary contributions to the war effort have increased, a western analyst said that hard currency remissions from overseas were largely responsible for keeping the country going.

"Before, the expatriates sent two percent of their income home," he said. "Now it is ten percent."

An analyst said expatriate aid had been a major factor in thwarting Ethiopia's strategy of stifling the Eritrean economy.

The Organisation of African Unity has drawn up a peace plan, accepted in principle by both Ethiopia and Eritrea, that provides for a ceasefire, demilitarisation of the border, the deployment of peacekeepers and observers, and neutral demarcation of the ill-defined frontier.

Ethiopian government spokeswoman Selome Taddesse denied the claim, and said fighting was continuing on the western Badme front.

The Eritrean Foreign Ministry said in a statement that an Ethiopian MiG-23 fighter was shot down over the Badme front on Sunday, the third Ethiopian aircraft Eritrea says it has destroyed in the last week.

The others, according to the Eritreans, were another MiG-23 and a helicopter gunship.

Fighting in the 10-month-old border dispute shifted back to Badme last week from the central Tsorona front, where Eritrea claimed a string of battleground successes and said it killed more than 10,000 Ethiopian troops.

``The Ethiopian regime launched the attacks (at Badme) last Wednesday in an apparent attempt to over-extend the Eritrean Defence Forces, which routed a huge Ethiopian attack on the Tsorona front,'' the Eritrean statement said.

Ethiopia has flatly denied heavy losses at Tsorona, and has not yet commented on Eritrea's claims that it also inflicted heavy casualties at Badme.

Eritrea has made no comment on its own casualty numbers.

The Horn of Africa border war erupted last year with a month of fighting. After another eight months of rising tension and troop reinforcements along the border, the second round began in early February.

Late last month, Ethiopia succeeded in pushing Eritrean forces out of the Badme region which they had occupied in the first round of the war.

The United Nations and the Organisation of African Unity have led efforts to secure a ceasefire, but without success.

"Ethiopian defense forces and (Eritrean President) Issaias Afeworki's troops continued fighting Sunday in the vicinity of the Mereb River, near Shembeko" on the western front, said the ETV report late Sunday.

The Ethiopian television added that the Ethiopian and Eritrean forces had been battling for a week on the central front in the Zala Anbesa-Egala area, without giving any details.

According to Addis Ababa, the Eritrean army has occupied Ethiopian territory since last May, when their dispute over the ill-defined border between the two countries turned into open warfare.

A 69th session of the Organisation of African Unity (OAU) council of foreign ministers gets under way in Addis Ababa on Monday, with administrative and budgetary issues on the agenda.

However, the war between Eritrea and Ethiopia and is expected to dominate discussions, though the Asmara government would not be represented in the Ethiopian capital.

In a letter to all OAU member states made public Monday, Eritrea urged the pan-African body to ensure that its conflict with neighbouring Ethiopia was "discussed at a neutral venue" acceptable to both countries.

Eritrea said that it will not be represented at the meeting because it regards Ethiopia as a hostile country which has "unleashed a war of agression against it".

The OAU has already drawn up a Horn peace plan accepted in principle by both sides, but Asmara accuses Ethiopia of blocking the plan by imposing new preconditions.

Addis Ababa is demanding the return of all territories occupied since the conflict began in May 1998 as a condition for implementing the plan.

However, Asmara says a ceasefire should take effect since its troops have retreated from Badme and the surrounding district in line with the OAU plan, which has been contentious in the issue of troop withdrawals, but also provides for the deployment of peacekeepers and the neutral delineation of the border.

Intro: There is more fighting between Ethiopia and Eritrea. As VOA's Scott Stearns reports, African officials meet today (Monday) to discuss the border war.

Text: This round of fighting enters its second week with combat on the western Badame front. Ethiopia says fighting began past dawn and continued into the day in the Shambiko area on the Mereb river dividing Ethiopia and Eritrea.

Eritrea says it shot down an Ethiopian fighter jet Sunday after destroying two tanks Saturday and capturing an Ethiopian helicopter gunship Friday. Ethiopia dismisses those reports as "fabrications."

That follows a week of fighting on the central Tsorona front about 160 kilometers east of Badame. Eritrea says it killed more than 10-thousand Ethiopians during that battle, destroying 57 tanks in what it says was a devastating defeat for Ethiopia. Ethiopia denies the battlefield losses, saying fighting on the Tsorona front has been "scaled down."

African foreign ministers meet at the Organization of African Unity Monday to discuss the war. Both sides have accepted an OAU plan to arbitrate the dispute but each blames the other for blocking its start.

Eritrea will not be represented as the talks are at OAU headquarters in the Ethiopian capital, Addis Ababa. Eritrea is asking that all OAU discussions on the conflict now be moved to a neutral site.

In a letter to the ministerial session, Eritrea says it cannot argue its case in the capital of a country that has unleashed a war of aggression, redrawn international boundaries, and deported Eritrean civilians.

The foreign ministerial statement says Ethiopia has made new preconditions on the OAU plan in an effort to torpedo the peace process. Ethiopia's embassy in Kenya says there are no new preconditions, that Ethiopia is restating the letter and spirit of OAU proposals in defending its sovereign territory.

Eritrea says it is ready to pull-back its forces at the same time as Ethiopia in keeping with the OAU plan. Ethiopia says if Eritrea is serious about peace, it must first withdraw from territories administered by Ethiopia before fighting began last May.

The OAU plan calls on both sides to demilitarize the border ahead of an international monitoring force for disputed areas and a commission to decide the exact location of the border within six months.

Eritrea is questioning monday's fighting on the badame front near Shambiko saying that area is well within Eritrea and is not Contested territory. A foreign ministry statement asks if Ethiopia is not attempting to occupy more territory across the Border.

Ethiopia says it has no territorial ambitions in Eritrea, Asking how Eritrea can continue to deceive the international Community with what it calls obvious and blatant lies. (signed)

Date=3/22/99
Type=Correspondent Report
Number=2-247003
Title=U-N / Eritrea - Ethiopia (L - Only)
Byline=Max Ruston
Dateline=United Nations

Intro: Diplomats from the United Nations Security Council met with senior Ethiopian and Eritrean officials Monday, urging the two countries to end their border conflict. VOA's United Nations correspondent Max Ruston has the story.

Text: The council held separate, informal meetings with the foreign minister of Eritrea and the deputy foreign minister of Ethiopia. Namibia's UN ambassador, who organized the meetings, aays there were no surprises in the talks.

He says the meetings were called so the council could hear first-hand the views of the Ethiopian and Eritrean governments. He says the meetings also gave the council an opportunity to urge those countries to cease fighting immediately.

Diplomats involved in the meetings say the council was unified in urging the two countries to carry through with their promises to sign an Organization of African Unity peace plan. The two sides have expressed a willingness to sign the peace plan. But they have not stopped fighting. Diplomats say the council wants the two sides to stop fighting and sign the agreement soon, so formal measures can be taken to ease tension and find a long-term solution.

The meetings marked the first time Ethiopian and Eritrean officials have provided such briefings to the Security Council. (signed)

NEB/UN/MPR/LSF/WTW

22-Mar-99 5:26 PM EST (2226 UTC)
Source: Voice of America