The Ethiopian government says it has formally notified Eritrea that it considers it to be in material breach of the Algiers Agreement.
The treaty ended a two-year war between the two countries in 2000.
A foreign ministry statement said it had told Eritrea that Ethiopia could invoke this as grounds for terminating or suspending the agreement.
It said the letter was sent on Tuesday, with a copy going to the United Nations Security Council.
Disputed border
The statement said that the letter was intended as a formal legal measure to give Eritrea notice that unless she returned to compliance Ethiopia would be forced to consider its options.
The letter stresses that those would be peaceful and legal options under international law.
TENSE BORDER
These could include terminating or suspending, in whole or part, the operation of the Algiers Agreement.
The Eritrean actions, which Ethiopia says amounts to a material breach of the treaty, include occupying what should be a demilitarised zone with its troops and restricting the movements of UN peacekeepers in the border area.
Foreign ministry sources stress that this is merely a formal notification, and the desired outcome would be for Eritrea to return to compliance so that no further action would follow.
But if Ethiopia did follow through on its threat to pull out of the treaty, it might imply, for instance, that it would no longer feel bound to comply with the ruling of the border commission set up under the Algiers Agreement, the ruling which awarded the disputed area of Badme to Eritrea.
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