The latest round of UN-led shuttle diplomacy failed to persuade Asmara to accept Ethiopian demands that peace talks be contingent on an Eritrean withdrawal from territory occupied since the first outbreak of fighting.
Ethiopia's push into Eritrea came days after Ethiopian Prime Minister Meles Zenawi said the war needed to end "now and quickly".
Ethiopia, like Eritrea, is facing a major humanitarian crisis; it wants to shift its attention to this, away from a costly and futile war.
Peace, however, requires a negotiated settlement, which Ethiopia believes that Eritrea is not prepared to accept.
The latest round of UN-led shuttle diplomacy failed to persuade Asmara to accept Ethiopian demands that peace talks be contingent on an Eritrean withdrawal from territory occupied since the first outbreak of fighting.
Hence Ethiopia has rejected the UN Security Council demand for an immediate halt to the war.
The UN's arms embargo is virtually meaningless since both have spent so extensively on arms in the last two years.
Ethiopia remains particularly irritated by the UN's refusal to name Eritrea as the aggressor, and by its failure to impose sanctions against Eritrea in May 1998 when Eritrean troops crossed the border into Ethiopian administered territory.
Supply lines cut
In the first four days of fighting, Ethiopian troops broke through Eritrean lines to cross the Mereb River and cut the Barentu to Mandefera road, the main supply line for Eritrean troops on the western front of the fighting.
Ethiopian forces now appear to be turning east, with the apparent intention of trying to take Eritrean troops on the Zalambessa front, where Eritrea still holds Ethiopian territory, from the rear.
This suggests Ethiopian war aims remain confined to pushing Eritrea out of all the areas seized in May 1998, thus forcing Eritrea to the conference table on Ethiopia's terms.
More recently, the Ethiopian Air Force has carried out bombing raids close to Massawa, Eritrea's main port and naval base.
Here the apparent aim is to continue to damage Eritrea's military capability.
Bombing Massawa would also inhibit ship movements in the port, damaging Eritrea's international trade.
Further ambitions
There have been constant claims from Eritrea that Ethiopia would like to reconquer Eritrea or take the port of Assab. Both assertions seem wide of the mark.
The present Ethiopian Government both accepted and supported Eritrean independence in 1993, and since the fighting started Ethiopia has made no effort to capture Assab though it could have done so relatively easily in May or June 1998, or after the Eritrean defeats in March and June last year.
Certainly, Ethiopia and Eritrea do have at least one other shared long-term aim: The removal of each other's leader. Eritrea appears to have expected the collapse of the Ethiopian government as a direct response of the original fighting in May 1998.
Its support last year for opposition groups involved in armed struggle in southern Ethiopia, including the Oromo Liberation Front and the Ogaden National Liberation Front, was part of the same strategy.
Distrust of Afwerki
Ethiopia has made it clear it distrusts President Isaias Afwerki personally, and that it would prefer to see a less aggressive Eritrean leader. It certainly hopes that it can break the strength of the Eritrean army, and an admission, once the war ends, of the serious Eritrean casualty figures, will put pressure on the Eritrean regime.
Ethiopia has given support to the opposition Alliance of Eritrean National Forces (AENF), now based in Ethiopia. It anticipates that this will be able to mobilise former Eritrean Liberation Front supporters, and Muslim critics of the present government.
It is, however, under no illusions about the AENF's strength, nor its effectiveness.
It knows any change of government in Eritrea will have to come from within the ruling and single party, the People's Front for Democracy and Justice, and, given President Isaias's personal grip on the party and the government, this is highly unlikely.
At one level differences remain minimal, revolving around issues of trust, of which there is no little or none. At another level, it is a question of nationalism, of which there is all too much.
President Isaias said in July 1998 that this was not a matter of boundaries but of national pride and territorial integrity - it is hardly surprising the two sides have been unable to agree on a peace process.