In Addis Ababa, an Ethiopian statement acknowledged the loss of the Mi-24 helicopter with all its crew, but said that all other aircraft had returned safely to base.

Cathy Jenkins reports from Asmara

The Eritrean Ministry of Foreign Affairs said Ethiopian forces had launched an artillery offensive on the Assab front in the early morning. The line is 70km west of Assab port.

The Eritrean authorities say that their air defence unit shot down the Ethiopian helicopter gunship as it came in to attack the front line.

The news was greeted in the Eritrean capital, Asmara, by motorists honking their horns and pedestrians whooping with delight.

Lull in fighting over

The Assab front is heavily defended by the Eritreans. They believe that Ethiopia, which is landlocked, wants to take the port of Assab in order to have access to the Red Sea.

Simmering border tensions first erupted last weekend, after an eight-month unofficial ceasefire.

Ethiopia broke an air moratorium on Tuesday, bombing the disputed area of Badme. Heavy fighting ensued on both sides in a number of the disputed border zones lasting for three to four days.

But there had been a lull of several days before this latest incident.

Casualty figures denied

Ethiopian POWs held by guards

In recent days Eritrea has denied Ethiopian reports that as many as 7,000 Eritrean troops have been killed or wounded since fighting flared a week ago.

An Eritrean presidential spokesman, quoted on state radio, described statements by the Ethiopian Government on Friday as a pack of lies.

Again, there is no independent confirmation of the figures or earlier claims by Eritrea to have killed at least 1,500 Ethiopian soldiers and wounded a further 3,000.

Arms embargo

The Security Council has called for an international arms embargo on both sides. The first round of fighting last May and June claimed at least a thousand lives.

Both sides have used the past eight months since the beginning of the crisis to reinforce their military hardware, and both are prepared, if necessary, for a longer war.

Ethiopian Foreign Minister Seyoum Mesfin has said his country had no option but to continue fighting Eritrean forces until they left the disputed border area.

The Eritrean Government has denied responsibility for the border war with Ethiopia and said it has a "legitimate right to defend itself" in the face of Ethiopian attacks.