Ethiopia supports new African Union (AU) chairman Muammar Gaddafi's efforts to mediate between it and border rival Eritrea and is open to peace talks, Prime Minister Meles Zenawi said.

Relations between the feuding Horn of Africa neighbours have been at an impasse since they fought a 1998-2000 border war in which at least 70,000 people were killed.

A peace agreement signed in Algiers in 2000 said both sides would have to abide by an independent ruling over the 1,000-km (620-mile) frontier, but it has never been implemented since Ethiopia initially rejected it. Both nations keep troops near the border, and tensions are high.

"We very much welcome (Gaddafi's) offer to help us resolve our problem," Meles told reporters late on Friday. "The only way for us to do that is for us to get together and iron out our issues."

Gaddafi, who was last week elected AU chairman in a closed-door decision diplomats say was opposed by some African leaders, made a three-day trip to Eritrea after the summit, hoping to help resolve the border crisis.

But Meles doubted whether Gaddafi could succeed in unravelling the long-running issue, which is a source of tensions across the region.

"I am sure he will devote a lot of energy," he said, adding that he had voted for the Libyan leader to become AU chairman. "But I believe (Eritrean President Isaias Afwerki) is unlikely to change his colours."