Thousands of foreign troops in Somalia could lead to "an all out war" between Somalia's transitional government and an Islamic group that controls much of the country, according to a confidential UN report.
The confidential report, dated October 26 and obtained by the agency, cites diplomatic sources in estimating that "between 6,000-8,000 Ethiopians and 2,000 fully equipped Eritrean troops are now inside Somalia supporting" the internationally recognised government and the Islamic movement.
"Both sides in the Somali conflict are reported to have major outside backers," the report said, saying Ethiopia, Uganda and Yemen supported the government and Iran, Libya, Saudi Arabia and Gulf states supported the Islamic movement.
The briefing paper was written to help senior UN officials map out a strategy on how to provide aid to one of the most impoverished countries in the world, which has not had an effective central government since 1991.
"In order for us to do this, a clear policy of engagement with the (Islamic movement) must be put in place," the report said.
"The fact is that there is new found stability in Mogadishu, extending to areas that they have begun to control, which has not been seen for many years."
One problem facing the United Nations is the listing of the Islamic movement's leader, Sheik Hassan Dahir Aweys, on a list of people with ties to terrorism.
UN policy severely restricts how much contact UN officials can have with people with alleged ties to terror organisations.
The report was written as both the transitional government and the Islamic movement appeared to be girding for battle.
Government forces, supported by Ethiopian military advisers, have been digging trenches near Baidoa, the only town the UN-backed government controls.
The Islamic movement has deployed forces at a strategic town between Baidoa, and Mogadishu, 250 kms to the southeast.
Ethiopian officials have insisted they have only a few hundred military advisers assisting the government, but international and local officials have put the number into the thousands.
Islamic leaders called for nationwide protests on Friday against Ethiopian troops in Somalia. Some Islamic leaders have called for a holy war against Ethiopia until it pulls its forces out of Somalia.
The Somali transitional government has repeatedly accused Eritrea of arming and supporting their rivals in the Islamic movement, something that both Eritrean and Islamic officials have repeatedly denied.
Ethiopia and Eritrea fought a two-year border war that remains unresolved and the top US diplomat to Africa, Jendayi Frazer, last week accused Eritrea of using Somalia to open a second front against Ethiopia.
In Washington on Thursday, US State Dept spokesman Sean McCormack called on Ethiopia and Eritrea not to further aggravate the tense situation in Somalia.
"This is a country that has been ravaged by violence and civil conflict for decades and it's a sad story, so we would hope that countries in the region would try to play a positive role ... to not take any steps that would aggravate what is already a very tough, sad situation," he said.
The UN refugee agency said on Friday that the flow of Somali refugees into neighboring Kenya had slowed down, but expressed concerns over reports Islamic leaders were preventing people from leaving Somalia.