Ethiopia dismissed Egyptian talk of military action against a giant dam it is building on the Nile as "psychological warfare", and said on Tuesday it would defend itself and carry on with the work regardless.

 

Responding to a speech on Monday by President Mohamed Mursi, in which he said Egypt did not want "war" but would keep "all options open" to avoid losing any water, Ethiopia's Foreign Ministry spokesman said: "This sort of bragging won't divert our attention."

 

One bone of contention is a technical analysis of the impact of the $4.7-billion dam being built by an Italian firm on the Blue Nile near the border with Sudan, which supports the plan.

 

Ethiopia says a joint report, still kept under wraps by both governments, supports its assurances it will do "no appreciable harm" to Sudan and Egypt downstream. It has no plan to use water for irrigation and says that once the reservoir is filled, all the river's water will be free to flow through its turbines.

 

Mursi, however, said Egypt had carried out studies that showed "negative consequences". Less water would flow while the reservoir is filling. Once full, more water may evaporate.

 

Despite its lack of means, Ethiopia insists it can fund the project itself without help from international lenders wary of the diplomatic dispute. It has been aided by a $1-billion loan from China to build power transmission lines.

 

It says the project, on which work to divert the river temporarily began in May, is 21 percent complete. With a target generating capacity of 6,000 megawatts, it is part of a plan to make Ethiopia the biggest electricity exporter in Africa.