In a statement issued late Wednesday, the Ethiopian government said it will pursue the fighting because it believed Eritrean President Isaias Afwerki was bent on doing the same.

"The Ethiopian government does not believe that (Eritrea) will accept and implement proposals aimed at a peaceful solution to the conflict," the statement said.

"Since it understands that the Isaias regime will not refrain from continuing the war, the Ethiopian government will not lessen its vigilance. In this regard, the heroic defense forces must continue their unyieldng efforts to ensure that the sovereignty of our country is respected."

There was no immediate reaction from Eritrea to the Ethiopian statement.

Both Horn of Africa Nations have accepted an Organization of African Unity framework for peacefully resolving the conflict, but could not agree on its interpretation.

The OAU tried to resolve the impasse by drawing up a list of modalities to clarify some of the sticking points. Both countries announced acceptance of the modalities, but accused each other of issuing demands not agreed upon within these frameworks. This has left the negotiations back at square one, according to the governments.

The two countries have traded blame almost daily on the failure to reach agreement on implementing the OAU peace plan.

Still, international mediators appeared encouraged by recent positive responses by both countries to the OAU peace plan.

"Members of the council expressed their hope that this proves to be an important step towards the resolution of this devastating conflict," Malaysia's U.N. Ambassador Hasmy Agam, the current council president, said Wednesday.

Council members urged both governments to sign the proposal on modalities to implement an agreement as well as the broader OAU agreement to end the conflict, he said.

In a press statement, council members commended the OAU for its efforts to secure the agreement. They singled out outgoing chairman President Blaise Campaore of Burkina Faso, the current chairman President Abdelaziz Bouteflika of Algeria, and OAU Secretary-General Salim Salim.

The details worked out at the OAU heads of state and government summit in Algiers early this month differed little from another peace proposal last November.

The original 11-point OAU plan calls for Eritrea to withdraw from the contested Badme region, the westernmost front along their 1,000 kilometer (620 mile) border. Eritrea captured Badme at the start of the war in May 1998. Ethiopia has since recaptured it.

The agreement calls for both sides to then immediately cease hostilities, and for international observers to deploy in the contested areas until a new border is decided and marked.

The plan calls for the two countries to withdraw their troops from each other's territory occupied after May 6, 1998, when the fighting broke out.

The United States, meanwhile, on Wednesday dispatched mediator Anthony Lake, former U.S. national security adviser, to the region for the first time in months, in apparent hope that a breakthrough could now be achieved.

Ethiopian Army is carving out a buffer zone to prevent incursions from Somalia. Mogadishu, Somalia -- When the Ethiopian Army invaded neighboring Somalia and laid siege to the central city of Baidoa last month, the degree of indifference with which the news was met offered perhaps the starkest measure of Somalia's misery to date.

Except for the griping of a Somali warlord, whose town it was that the Ethiopians were attacking, the war for Baidoa might have gone entirely unnoticed - drowned out by Nelson Mandela's retirement in South Africa, by news of an imminent peace deal in Sierra Leone, and progress in talks to end the conflict in the Democratic Republic of Congo (formerly Zaire).

Yet the presence of Ethiopian troops on Somali soil spells trouble not only for Somalia but also for the wider Horn of Africa region. Ethiopia and Eritrea, which have at times been close friends since Eritrea broke away in 1991, have been at war over their ill-defined border for more than a year. The conflict has claimed an estimated 50,000 lives.

Now these two countries are fighting their war on Somali territory. The fact that they are doing so by proxy, arming rival factions and setting them against one another, is lending new vigor to old conflicts.

"In January there were signs of positive developments. There were attempts to form semistable governments in Somalia," notes a Western diplomat. "When the Eritreans began showing up, they were not enough to do anything to Ethiopia, but they upset the balance in Somalia."

When the war between Ethiopia and Eritrea first started in June last year, analysts predicted that Eritrea, the smaller and economically weaker of the two countries, would attempt to destabilize Ethiopia by seeking out its dissident forces and spurring them into action. The prediction proved accurate; fighters from the Oromo Liberation Front (OLF) began showing up in Eritrea for training after years of inactivity.

The OLF, a guerrilla movement from Ethiopia's largest tribe, parted company with the Ethiopian government in the early 1990s - after accusing Prime Minister Meles Zenawi and his Tigrean People's Liberation Front of monopolizing power. The Tigreans make up roughly 5 percent of Ethiopia's population yet have maintained control of most key state institutions since the overthrow of Mengistu Haile Mariam's Marxist dictatorship in 1991.

Once the partnership between Eritrea and the OLF was formed, Somalia became a natural launching pad for operations against Ethiopia. "The border between Ethiopia and Somalia is one of the longest in Africa. I imagine [Eritrea's president] Isaias [Aferwerki] thought that was a good starting point," says a regional analyst in Nairobi.

It's unclear why Somali warlord Hussein Aidid, a former US marine who controls the southern sector of Mogadishu and who used to control Baidoa, agreed to help Eritrea. Observers speculate that Mr. Aidid - impoverished by years of economic stagnation and the prolonged closure of Mogadishu's main port and airport - was promised arms and money, which he needed to fight other faction leaders.

"The man is in desperate need of assistance," rival warlord Osman Ali Ato says of Aidid. "He thought he could do a deal with Eritrea."

Ethiopia, however, wasn't going to stand by. Anticipating border attacks, the Ethiopian Army set out to create a buffer zone on Somali territory, taking control of the town of Luuq and creating a security zone across the Gedo region. Then Ethiopia attacked Aidid's forces in Baidoa with help from the Rahanwein Resistance Army (RRA), a local faction trying to rid the area of Aidid's gunmen since 1996.

The battle for Baidoa was fiercer than anyone had imagined. A combined force of 3,000 well-trained and well-armed Ethiopian and RRA fighters backed by heavy artillery and air support attacked the town after nightfall on June 6, taking on Aidid's militia and its new allies from the OLF.

"It was unbelievable," says a Somali who fled the fighting and did not wish to be named, "Aidid lost everything: He lost hundreds of men and between 40 to 50 technicals," pickup trucks with artillery pieces mounted on them.

The Ethiopian government immediately denies ever having set foot in Baidoa. But sources in the region say the Ethiopian Army has effectively carved out a security zone in Somalia with an estimated 3,000 troops. "The Ethiopians not only occupy Baidoa, but all of Gedo region. The only city that is not occupied is Bardera," says Prof. Issa Mohammed Siad, a spokesman for Aidid.

Tens of thousands of residents are returning to Baidoa, hoping to rebuild the shattered city. And some diplomats suggest that Aidid's losses, could increase the chance for peace. The weakened warlord may be forced to give up ambitions of ruling the country single-handed.

Earlier, Ambassador Mohammed Sahnoun, the Secretary-General's Special Envoy in Africa briefed the Council about recent developments for a negotiated settlement to the conflict.

After the briefing, Council Members issued a press statement urging the two governments to formally sign the modalities to fully implement a framework agreement proposed by the Organization of African Unity (OAU). They expressed the hope that this action might be an important step towards resolving the devastating conflict.

Clinton, speaking at a news conference, said the ongoing fighting had been a disappointment to him.

"I did everything I could to head off (the war) between Ethiopia and Eritrea," he said, characterizing the fighting as a dispute over a divorce settlement.

"I don't mean to trivialize it in that characterization (and) we are still actively involved in trying to stop that."

Earlier, the State Department said Secretary of State Madeleine Albright had asked former National Security Adviser Anthony Lake to go to the two countries in the hopes of tying them to an Organization of African Unitypeace plan which Washington supports.

Lake was to leave Washington for East Africa later Wednesday and is expected to meet with OAU Secretary General Salim Ahmed Salim as well as Ethiopian Prime Minister Meles Zenawi and Eritrean President Issaias Afeworki, spokesman James Rubin said.

He "will discuss modalities put forward by the Organization of African Unity during the recent OAU summit in Algiers for implementing the framework agreement to bring peace to the region," he added.

"We hope this OAU initiative will prove to be an important step towards a resolution of this conflict."

Lake has traveled several times to the region in an effort to ease tensions between Ethiopia and Eritrea which have spilled out into open warfare along the border.

Both countries agreed to the principles of an OAU peace plan earlier this month which provide for Eritrea redeploying its troops from positions occupied after May 6, 1998, while Ethiopia would do the same for territory taken from February 6 this year.