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The Ethiopian Government says it has arrested more than 1,000 Eritreans living in the country, on suspicion of spying.
A government spokesman said that those held would be deported, although they would be allowed to appoint agents to manage their businesses and property.
Correspondents say many of them are well-known businessmen who run transport companies and retail shops.
Those held are said to be members of the ruling party in Eritrea, the People's Front for Democracy and Justice - the successor to the rebel movement which fought Ethiopia for more than 30 years for independence.
Ethiopian Tigray radio reported on Saturday: "The expulsions of Eritreans from Ethiopia were instituted after investigations confirmed that the expelled people were registered agents of the sha'biyyah [Eritrean Government]."
It said the Eritreans were used "to raise funds for the war effort, spying and spreading propaganda".
The arrests are the latest move in the worsening relations between the two countries following border fighting between them in May.
Previous expulsions
In June, a group of more than 700 Eritreans who were expelled from Ethiopia returned to a huge welcome in the Eritrean capital Asmara.
The government in Addis Ababa said the deportees were a security risk, but those returning to the capital said they took no part in politics.
Earlier this month, Eritrea's President Afewerke said he had assured an Organisation of African Unity delegation - composed of the ambassadors to the OAU from Burkina Faso, Djibouti and Zimbabwe - that Eritrea remained committed to the search for peace.
He called for a clear demarcation of the border between the two countries as a means of avoiding future conflict.
But Ethiopia's Prime Minister, Meles Zenawi, did not hold out hope of an early end to the conflict.
He said the fault lay with Eritrea, which he alleged refuses to withdraw from Ethiopian territory.
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