(Refiles to fix typo in fourth paragraph.)

By Tom Miles

GENEVA, June 21 (Reuters) - Ethiopia is contemplating full-scale war against Eritrea, an Eritrean official told the U.N. Human Rights Council on Tuesday, as he defended his country against allegations of crimes against humanity.

Eritrean and Ethiopian troops clashed along their border on June 12. Each has accused the other of starting the hostilities .

Last week, Eritrea's Foreign Ministry blamed the United States for playing a role, referring to "Washington's instigation" of the attack by Ethiopian forces. Eritrea also said at least 200 Ethiopian troops were killed.

"As we speak, Ethiopia is making preparations for a bigger military offensive and contemplating a full-scale war," Yemane Ghebreab, an Eritrean presidential advisor, told the U.N. council on Tuesday.

"Ethiopia reckons that the gross accusations against Eritrea afford it with the perfect pretext, and that it may be now or never. It reckons that those who are only too eager to blame Eritrea will as usual look the other way and fail to act as Ethiopia commits what are truly crimes against humanity against its people and unleashes another war."

Ethiopia said both sides suffered casualties in the recent fighting but said it would not discuss specifics about casualties on either side. It has also said does not expect the situation to escalate.

"We are capable of waging a full-scale war against Eritrea, but simply we don't choose to. That is why we have withdrawn our forces once our objectives were achieved," Ethiopian government spokesman Getachew Reda told a new briefing on June 14.

U.N. human rights investigators have accused Eritrea's leaders of crimes against humanity, including torture, rape and murder, over the past 25 years and called for the case to be referred to the International Criminal Court.

They have also accused Eritrea of enslaving 300,000 to 400,000 of its own people and operating a shoot-to-kill policy on its borders to stop people from fleeing abroad.

Eritrea has rejected all the allegations, and Yemane said 200,000 people had signed a petition supporting the government. Thousands more were protesting on a square outside the U.N.

Representatives of Somalia, Djibouti and Kenya told the Council that they favoured setting up a new U.N. mechanism to protect and promote human rights in Eritrea.

"There is an urgent need to ensure accountability," said Ethiopian Ambassador Negash Kebret Botora, calling the U.N. report conclusive, robust and extensive. (Reporting by Tom Miles, additional reporting by Edmund Blair in Nairobi; Editing by Larry King)