(Updates with analyst, government comment)

By Jack Kimball

ASMARA, May 9 (Reuters) - Eritrea defended on Wednesday its right to send troops into the disputed border region with Horn of Africa arch-foe Ethiopia.

The United Nations called on both countries on Tuesday to withdraw their troops from the border where it said Addis Ababa and Asmara had moved more than 5,000 soldiers in recent months.

"It's not a violation, because at the end of the day, we have freedom of movement in our territory," presidential adviser Yemane Ghebremeskel told Reuters.

"What the Security Council is saying now has nothing to do with the agreement. Why are we being asked about a few clauses in the agreement when the main clause has been violated?"

A peace deal ended the 1998-2000 border war that killed some 70,000 people, but the process soon ground to a halt when Ethiopia rejected a 2002 decision by an independent boundary commission awarding a flashpoint town to Eritrea.

Ethiopian police said on Wednesday that about 4,000 Eritreans -- including soldiers, policemen, government workers, students and a journalist -- had entered the country over the last eight months, fleeing repression at home.

Analysts say relations between the neighbours have deteriorated over Somalia where Ethiopian-backed Somali government troops ousted Islamists, seen to be supported by Eritrea, in a war.

Last month, U.N. Secretary-General Ban Ki-moon said the border impasse was a "serious" source of instability.

But Eritrea blamed the Security Council for the region's instability.

"It should definitely be held accountable for the dangerous situation prevailing in the Horn of Africa," said a statement in the government-owned English newspaper.

Despite analysts' fears of renewed conflict, the United Nations has gradually scaled down a peacekeeping mission monitoring Eritrea's 1,000 km (620 mile) border with Ethiopia.

"CROCODILE TEARS"

Yemane accused the United Nations of being disingenuous with its claim of being "deeply concerned" with the peace process.

"That's just shedding crocodile tears, they have the power to enforce the border ruling," he said. "But since the U.S. favours Ethiopia, they are not going to do anything."

But analysts say a thaw in relations between Asmara, long suspicious of the international community, and some Western nations may portend a diplomatic solution to the border issue.

"There's going to be a big push now, because ... there is recognition that there's a region-wide problem brewing. Heads will be put together and there will be some kind of will to soften tempers in region," said a British-based analyst, who declined to be named.

"There may be moments when conflagration will be possible. By the EU opening the door to Eritrea, there seems to be more of a diplomatic balance than there was," the analyst said. (Additional reporting by Tsegaye Tadesse in Addis Ababa)

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