U.S. considers putting Eritrea on terrorism list

By Arshad Mohammed

WASHINGTON (Reuters) - The United States said on Friday it was considering putting Eritrea on its list of state sponsors of terrorism for allegedly funneling weapons to insurgents fighting the Ethiopian-backed government in Somalia.

Putting Eritrea on the list would impose sanctions on the Horn of Africa nation, including a ban on arms-related sales, prohibitions on some U.S. aid and U.S. opposition to International Monetary Fund and World Bank loans to Eritrea.

The fragile interim Somali government, backed by troops from Eritrea's archrival Ethiopia, is fighting an Islamist insurgency in a conflict that has killed hundreds of people since December.

A U.N. monitoring group last month said large quantities of arms, including surface-to-air missiles, were flowing from Eritrea to Somalia. Eritrea has denied sending the weapons.

Diplomats say Eritrea and Ethiopia have been waging a proxy war in Somalia since last year, when Asmara backed a hard-line Islamist movement against the country's government.

U.S. Assistant Secretary of State Jendayi Frazer said Eritrea could avoid being designated a state sponsor of terrorism if it stopped its alleged activities in Somalia.

"We are not looking to go down this route but if they continue their behavior and we put together the file that's necessary, I think it would be fairly convincing," she told reporters.

Frazer said the United States had intelligence that backed up the U.N. report.