"Ethiopia opposes any provocative measure that leads to war and confrontation for it strongly believes that a border dispute can be settled only through diplomatic dialogue and peaceful means," said a foreign ministry statement.

Tensions are growing between the two countries which have remained at odds since a 1998-2000 bloody border conflict killed some 70,000 people, many in First World War-type trench warfare.

Eritrea's claims last Saturday followed another accusation late last month that Ethiopia would attack "in the first week of November" with the "blessing of the US adminstration".

"The belligerent government of Eritrea is now presenting a fictitous accusation against Ethiopia saying that Ethiopia is preparing itself to wage war on Eritrea," the statement said.

"This in fact, could not be something that is hidden from the international community, that Eritrea has deliberately devised this tactic to divert attention and conceal its internal and external crisis," it added.

Eritrea's powerful head of internal security survived an assassination bid last month and Washington has turned up the heat on the Red Sea state for alleged support to Islamists in the region.

Ethiopia and Eritrea have been flexing muscles and exchanging bitter rhetoric ahead of the expected closure of a UN-appointed border panel later this month.

The disputed frontiers will then be fixed on maps, with the panel complaining that uncompromising stances from both sides have prevented it from physically demarcating the border on the ground.

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