The Red Sea nation of 5 million people is currently engaged in verbal fisticuffs with the UN, the US government, and its giant neighbour, Ethiopia (population 77 million). As they say in boxing, it is ducking and weaving like a good 'un.

The problem with this latest David and Goliath act by Eritrea's mercurial president, Isaias Afwerki, is that even the smallest miscalculation could bring disaster.

An estimated 225,000 troops are now within glaring distance of each other along the disputed Eritrea-Ethiopia border. UN demarcation efforts have collapsed, bilateral dialogue is non-existent, and independent observers are warning of a Christmas war.

"The risk of renewed fighting is at its greatest since the signing of the peace accord in December, 2000," the Economist Intelligence Unit warned last week, referring back to the 1998-2000 conflict that cost 70,000 lives.

"The military build-up has reached alarming proportions ... The international community must act urgently to prevent turmoil in the entire Horn of Africa," the International Crisis Group said.

Eritrean diaspora groups are working themselves into a frenzy over perceived "international conspiracies" against their homeland. Public meetings in the US, Australia and Germany heard calls for solidarity and cash. Eritrean exiles in New York, Boston and Philadelphia each reportedly pledged $500 to the cause.

Signalling the region-wide nature of the crisis, a conference in London this month brought together opposition youth organisations from Somalia and Eritrea and from Ethiopia's Oromo and Ogaden communities. They condemned what they said were "war crimes committed by the Ethiopian regime" and claimed international donor money was being used by the government of Meles Zenawi to dominate Somalia and Eritrea.

Broad western acquiescence - and direct US support - for Ethiopia's military intervention in Somalia one year ago to topple an Islamist-led administration (that Washington linked to al-Qaida) has heightened Eritrean paranoia - and hastened its hunt for friends. Not coincidentally perhaps, Afwerki hosted security talks recently with Sudan, Libya and Chad, an unlovely alliance with a distinct anti-western flavour.

Sources say Egypt and other Arab countries are quietly stoking anti-Ethiopian sentiment. "Once again, the regime (Ethiopia) and its masters (the US) are preparing to launch a suicidal war," the Eritrean ministry of information's website, declared this month. "The next aggression the enemy tries will not only be dealt a crushing defeat but will also be an end to their very existence."

So far at least, Ethiopian officials have responded to the hostile rhetoric - and what they see as numerous, gratuitous Eritrean provocations - with notable restraint.

They argue that the Somalia intervention was forced upon Addis Ababa by destabilising anarchy next door that threatened to spill over into Ethiopia and Kenya - and may yet still do so. They say Eritrea is currently harbouring, arming and aiding Islamist insurgents in both Somalia and the Ogaden, a view shared in western capitals. For its part, the US is considering whether to designate Eritrea a state sponsor of terrorism.

Concerning the border, Ethiopia says it wants more talks, particularly over the symbolic Ethiopian town of Badme that the boundary commission inexplicably awarded to Eritrea. Like the UN security council, it also wants Eritrean troops to stop harassing UN peacekeepers and vacate the temporary security zone, thereby lessening the chance of an armed clash. It is meanwhile downplaying talk of war.

"We will never, ever go to war with Eritrea unless there is a full-scale invasion," Meles vowed recently. "I do not think that the Eritrean government would launch an invasion. It would be suicidal for them." All the same, there are worries that Eritrea's military may use Ethiopia's distracting involvement in Somalia to spring a nasty surprise.

Strange to say, Ethiopia's attempts to be reasonable are being undermined by its most powerful ally. Heavily lobbied by diaspora exiles, the US Congress recently endorsed a bill, opposed by the Bush administration, linking further US aid to Ethiopia to improved human and civil rights.

Ethiopian officials admit the country's record is not perfect. But they say critics have vastly exaggerated the problems in the eastern Somali state and elsewhere - and are distracting attention from the real challenges of security, expanded foreign investment, commodity trade and human development.

"Sadly, Congress is poised to fuel the march to war," Vicki Huddleston, a former US diplomat in Addis, wrote. "By singling out Ethiopia for public embarrassment, the bill puts Congress unwittingly on the side of jihadists and insurgents."

All is not yet lost. A senior UN official, Lynn Pascoe, is due in the region for consultations. And the security council is seeking a special representative to tackle the border dispute. As was said of the last Ethiopia-Eritrea punch-up, this silly, pointless scrap is akin to two bald men fighting over a comb. But it remains explosively dangerous for all that.

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