By Jack Kimball

ASMARA, Sept 15 (Reuters) - Eritrean President Isaias Afwerki has backed a new Somali opposition alliance, saying arch-foe Ethiopia's fight against insurgents in Mogadishu was doomed to fail, state media reported on Saturday.

The formation of the group, including top Islamist leaders, in Asmara this week has generated yet more friction between Ethiopia and Eritrea after their border war of 1998-2000.

"The Eritrean people's support to the Somali people is consistent and historical, as well as a legal and moral obligation," Isaias was quoted as saying.

"The Somali people's opposition to the invader ... is a legitimate right of self-defence."

Ethiopia sent troops into Somalia last year to help the interim government chase out the Islamic Courts movement that had ruled Mogadishu and most of the south for six months.

Islamist leaders and fighters scattered into hiding in Somalia or abroad, but some regrouped to spearhead the present insurgency against the Ethiopian troops and government.

Asmara is widely suspected of supporting the Islamists, with a U.N. monitoring group saying earlier this year that "huge quantities of arms" had reached the insurgents via Eritrea.

Eritrea says Ethiopia, the main ally of the United States in the turbulent Horn of Africa region, is deliberately destabilising Somalia to keep control over it.

"The conspiracies being weaved by external forces to incite conflict among the Somali people are doomed to end up in fiasco," Isaias added, according to Eritrea Profile newspaper.

Western analysts say Ethiopia and Eritrea, still bitter over the border conflict in which 70,000 people were killed, are now fighting a proxy war in Somalia.

The United States says it is considering placing Eritrea on its list of state sponsors of terrorism for allegedly arming the insurgents. Eritrea denies this and says Washington is stirring up the Horn of Africa for its own ends.

The nine-day meeting of Somali opposition figures in Asmara ended on Friday with the election of moderate Islamist leader Sheikh Sharif Ahmed as head of the new "Alliance For The Re-Liberation Of Somalia".

Somalia has had no central government since warlords overthrew dictator Mohamed Siad Barre in 1991.

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