Relations between Ethiopia and Eritrea
  Eritrea, formerly a province of Ethiopia whose 30-year war for independence was a key factor in the broader rebellion that toppled Mengistu Haile Mariam. Eritrean rebels were instrumental in helping the Ethiopian People's Revolutionary Democratic Front overthrow a 17 year military regime in July 1991 (see Area Handbook Ethiopia ). Eritrea reached an amicable divorce with Ethiopia's new rulers and gained independence from Ethiopia in 1993.
Relations between the one-time allies soured when Eritrea introduced its own currency in November in an effort to reassert its independence, triggering a trade war.
  Ethiopia has 53 million people to Eritrea's 3 million, but the countries split the armaments that flowed into the region during the Cold War.

Border Dispute

  On May 6, Eritrean troops took over the border town of Badame, southwest of Asmara, after a skirmish between Ethiopian police units and armed men from Eritrea, according to Ethiopian officials.
   Ethiopia claims that Eritrea is illegally occupying the 160-square-mile Yirga triangle in northwestern Ethiopia, as well as other areas in the northeast. The two countries dispute at least six areas, Setit Mareb  Bada  Zoba Debubawi  Keyih  Bahri Badime(Yirga) areas , along their common border, which was drawn by Italy after it conquered Eritrea in 1885. The boundary was left vague when Eritrea became Africa's newest nation. Ethiopia says it has jurisdiction over those areas that used to be part of the Ethiopian province of Tigre. But Eritrea says those regions are within its own territory, citing turn-of-the century treaties between Italian colonizers of Eritrea and the Ethiopian emperor  (see Map of disputed areas: Ethiopia's claim on Eritrean land -Shaded Black Italian maps from the 1930s ) .
    On the surface, the conflict centers on a rocky 160-square-mile triangle of land which both countries claim. But the deeper cause of the conflict, diplomats and businessmen say, is economic.

          The ultimate fates of Ethiopia and Eritrea are inevitably intertwined. For economic reasons, Ethiopia needs to preserve its access to Eritrean ports, and Eritrea needs food from Ethiopia as well as the revenue and jobs that will be generated by acting as a transshipment point for Ethiopian goods.The Eritrean economy is dependent on Ethiopia for 67% of its exports and a large proportion of its imports, particularly food. The Eritrean government used to derive considerable income from Ethiopian trade passing through Massawa and Assab. Ethiopia has to worry about fuel with one refinery which it shares with Eritrea ( Assab refinery  in Assab &Aseb, Eritrea ).But, in January, Ethiopia stopped buying its gasoline from Assab, instead buying refined oil directly from producers. Further, Ethiopian traders were ordered by the government to trade with the port in nearby Djibouti, bypassing Eritrea.
Ashanti Exploration and Ezana Mining Development are prospecting for gold in the Tigre region ( Administrative map ).


Military balance
  Ethiopia's population of 60 million outnumbers Eritrea's by 15 to one. But Eritreans have been hardened by a 30 year war of liberation and have a formidable fighting record.
  Both countries retain large standing armies an the area is awash with tanks, artillery and aircraft provided by the former Soviet block and recently US. Ethiopia’s army outnumbers Eritrea’s 40,000-strong force by about 3-to-1.   The Eritreans spent $80 million on defence last year compared with Ethiopia's expenditure of $127 million.
   The Italians, Israelis and Americans have all helped with training. The Israelis and Americans have been helping both countries to rearm. If Ethiopia and Eritrea allow their border conflict to get any worse, they have the hardware to wage a very serious war and   hundreds of thousands of citizens capable of slotting into their regular armies (the border state of Tigray in Ethiopia, closest to the conflict, has thousands of veterans), drawing on their years of experience as guerrilla fighters against Mengistu's massive army.

  Outside interests
  Both Ethiopia and Eritrea have received considerable backing from Washington as part of its policy to pressure the Islamic government in Sudan. Eritrea officially supports Sudanese rebels.Senior U.S. officials are concern that a drawn-out conflict between Ethiopia and Eritrea will undermine the U.S.-financed informal alliance of countries headed by former rebels that is the cornerstone of the policy. These countries include Christian Ethiopia, Eritrea, Uganda and Rwanda.
  During its short history as an independent state, Eritrea has come close to war with Yemen over islands in the Red Sea and has squared up to tiny Djibouti over another dispute.
(see Sudan - Eritrea : Early warning note and International Boundary News Database  )