The border dispute with Ethiopia, estimated to have generated well over 100,000 casualties between the two sides, lingered until 2002. The border dispute started with the invasion and occupation of territory within northeastern Ethiopia by Eritrean soldiers in the first week of May 1998. International intervention in a search for peace had generally failed as each country accused the other of demanding impossible conditions for the implementation of framework agreements, while saying they accepted them. Though the war formally ended with a Cessation of Hostilities agreement in June 2000, followed by the Algiers Agreement signed in December of the same year, governments on both sides refused to demobilize their troops, apparently waiting for the other to move first.
A major tenet of the Algiers Agreement allowed that the International Boundary Commission (headquartered in The Hague, Netherlands) would "delimit and demarcate the colonial treaty border based on pertinent colonial treaties (1900, 1902, and 1908) and applicable international law." Their ruling was issued 13 April 2002. The ruling gave to Ethiopia the disputed border villages and towns that it had claimed. The ruling was hailed as a final legal settlement, and an important milestone in the peace process. In the meantime, the UN Security Council has continued to urge both sides to refrain from any military actions, and to help implement the decision. In March 2002, the UN country delegations for Ethiopia and Eritrea met for the first time in Addis Ababa to consider future humanitarian and development assistance that would support peace and reconciliation. The UN is now providing support for demining the war zone around the demarcated border.
The destruction and dislocation of three decades of war have meant that Eritrea's foreign policy in the early years of the twenty-first century, will continue to focus primarily on securing foreign development assistance and addressing the difficult problems of repatriating 750,000 refugees. About 500,000 are in Sudan and the rest are in the Middle East, Persian Gulf, Europe, and North America. Of these refugees, the government has given priority to repatriating those in Sudan. Many refugees, including those in North America and Europe, have prospered in business, academia, and politics and now constitute an important body of wealth and opinion. Expatriate Eritreans form a large source of the private funds invested in the country's recovery and are a source of support for gaining bilateral aid from foreign governments and international agencies such as the World Bank, which has already allocated US $270 million as part of an emergency reconstruction package. In August of 2002, after a severe drought, Eritrea called on these international aid funds for relief in the form of food donations.
Eritrea is a member in good standing of the Organization of African Unity (OAU) and of Common Market for Eastern and Southern Africa (COMESA). It has had close relations with the United States, Italy, and a number of other European nations, including the United Kingdom, Germany, Norway, and Denmark, which have become important aid donors. These relations have been strained, however, as a result of the recent government arrest of political dissidents shutting down the independent press. In March 2002, the European Parliament issued a resolution accusing Eritrea of human rights violations.