ADDIS ABABA (Reuters) - The African Union on Tuesday supported a mediation agreement between Eritrea and Djibouti, whose border standoff could destabilise the Horn of Africa region.
Djibouti's government said that further to the deal, Eritrea had withdrawn its troops from two areas they had occupied.
The Red Sea nations, who share a coastline on a crucial shipping lane linking Asia to Europe, clashed over their border several times in 2008 and routinely exchange accusations.
Jean Ping, chair of the AU Commission, said the countries had signed a deal that would see Qatar's Emir Sheikh Hamad bin Khalifa al-Thani mediate between them.
"(Jean Ping) expresses the hope that this...endeavour would have a positive impact on the overall situation in the Horn of Africa...including the resolution of other bilateral disputes in the region," an AU statement said.
"(Ping) is confident that the proposal to be made will indeed pave the way for a full normalisation of relations between Djibouti and Eritrea," said the statement, which singled out the Somali peace effort as getting a boost from the move.
Djibouti said Eritrean troops had withdrawn from two areas.
"Mahamoud Ali Youssouf...confirmed the withdrawal of the Eritrean troops from Doumeira and the island of Doumeira," the foreign ministry said a statement, quoting its minister.
"We are convinced that mediation is the best option to resolve this border problem."
The United Nations last year imposed sanctions on Eritrea for refusing to pursue a peaceful solution to its border dispute with Djibouti, and for allegedly backing rebel groups in Somalia where at least 21,000 have died in fighting since early 2007.
Eritrea denies all charges relating to the sanctions and sees Somalia as afflicted by Western interference. But analysts say the mediation deal is a sign the U.N. measures are working.
Western security agencies fear Somalia could become a base for international attacks. Huge swathes of the war-ravaged nation are under the control of al Qaeda-linked Islamist rebels.
Djibouti, which is sandwiched between Eritrea and Somalia, backed the U.N. sanctions and accuses Eritrea of occupying some of its territory. The tiny state hosts France's largest military base in Africa and also a major U.S. base.
The country's port is used by foreign navies patrolling the coast of Somalia to fight pirates who cost foreign firms millions of dollars in ransoms and insurance hikes.
The former French colony of just 800,000 people is also the main route to the sea for Ethiopia, a regional ally of Washington. Eritrea -- which used to be part of Ethiopia -- fought a border war with that country from 1998 to 2000.
In 2006, Ethiopia sent troops into Somalia to oust an Islamist group that had taken control of most of the capital in a move that was seen as backed by Washington. The move sparked an insurgency that still rages despite Ethiopia's withdrawal.
Gas-rich Qatar has boosted its status as a peace broker in recent years, interceding in conflicts from Lebanon to Yemen and, most recently, Sudan.