Last week Eritrea failed to re-take Badme, the disputed triangle of desert in the Horn of Africa which all the fighting has supposedly been about since Eritrea seized it in May last year. Ethiopia drove the Eritreans out in February, and Eritrea's first attempt to re-take it failed in late March; its second could not penetrate Ethiopian defences.
When the Eritreans took Badme, they dug trenches and bunkers and sowed Egyptian-made anti-personnel and anti-tank mines. Ethiopian attacks, by tank and artillery-supported infantry, follow extensive barrages, supported by air strikes. When Ethiopian forces broke through at Badme on 26 February, they rolled back the Eritrean line, capturing thousands, and advancing 20 miles into Eritrea; over-confident Eritrean commanders had only a single defence line, and no reserves. They learnt quickly. At Tserona, on the central front, two weeks later, Ethiopia failed to break a triple defensive line. Losses were high.
Each side is mobilising armies of more than 250,000 men they can ill afford - Eritrea has called up all its 150,000 national service conscripts and shortened their training; industrial and agricultural production is hampered by lack of labour and transport; and the government has been demanding larger "donations" from Eritreans abroad, and issuing treasury bonds and increasing taxes.
Both countries have spent hundreds of millions on arms, paying cash in advance, from China, Bulgaria, Romania and Russia which has supplied modern fighter aircraft to both sides (MiG29s to Eritrea; Sukhoi 27s to Ethiopia). Eritrea's most recent acquisition may include surface-to-air missiles, possibly from Libya, if its claims to have shot down four of Ethiopia's older MiG23s during the last week are true; it lost four or five of its six MiG29s to Ethiopian planes in earlier battles.
Eritrea appealed for food aid in April; Ethiopia issued an appeal in May. Eritrea claims more than 250,000 people have been displaced by the fighting and 52,000 more deported from Ethiopia. Ethiopia has more than 300,000 displaced, and claims a further 40,000 have been forced to leave Eritrea. The effects will be long-lasting; aid is drying up, the US has threatened to veto debt rescheduling, and foreign investors, already in short supply, will become even rarer.
But the war is spreading. Eritrea is backing Ethiopian opposition groups, particularly the Oromo Liberation Front (OLF), in southern Ethiopia, along the Kenyan border. Kenya has a brigade in the area.
Eritrean arms are being channelled through Hussein Aideed, a warlord in the Somalia capital, Mogadishu. Two planeloads of arms arrived in February, one shipload reached the port of Marka south-west of Mogadishu in March, and another in May with several hundred Oromo fighters fresh from training, military advisers and land-mine experts.
Ethiopia has 3,000 troops in Somalia's north-western Gedo region, setting up a buffer zone several hundred miles long to prevent infiltration. It promptly increased backing to Hussein Aideed's opponents. The Rahenweyne Resistance Army (RRA), with Ethiopian assistance and armour, drove Hussein Aideed's forces out of Baidoa on June 6.
The RRA, which denies having Ethiopian support, now talks of advancing on Hussein Aideed's airfield at Balidogle, and the Oromo training camps at Qorioli and Marka. A few days later, Hussein Aideed, who was in Libya when the attack came, captured the port of Kismayo in southern Somalia.
In turn, Ethiopia is backing the Alliance of Eritrean National Forces, set up in March in Khartoum and active in western Eritrea. In Djibouti, now Ethiopia's only supply route, Eritrea is supporting a small armed opposition movement, aiming to disrupt the flow of military, and non-military imports.
The rainy season and an Organisation of African Unity (OAU) summit are coming up next month, and both sides are manoeuvring for position. President Isaias Aferwerki of Eritrea and Prime Minister Meles Zenawi of Ethiopia clearly want to see the other removed from office. On 24 May, Liberation Day, President Isaias Afewerki referred to the "narrow and vindictive political will", and the "evil appetite of greed and jealousy" of Ethiopia's leadership. Ethiopia has thrown doubts on President Isaias's sanity.
The war has removed the central element in US regional strategy, ruining its political vision for containing Sudanese "Islamism". Distracted by Kosovo, the US has given the Horn little attention, allowing Eritrea to drop its Israeli links and forge an alliance with Libya, even applying to join the Arab League. The French presence in Djibouti would then be the sole non-Arab element in the Red Sea, one of Israel's perennial nightmares.
A negotiated settlement will require international pressure which has yet to be applied.