With the world's attention distracted by the latest WikiLeaks revelations, Ethiopia's prime minister Meles Zenawi did not need a whistleblower to cause his country diplomatic embarrassment: he proved more than capable of doing that all by himself.

Zenawi accused Egypt of backing anti-government rebels in his country and warned that Egypt would be defeated if it tried to invade Ethiopia. "Nobody who has tried that has lived to tell the story," he boasted, rather inaccurately. But why would Zenawi, a presumably seasoned politician who has led his country for almost two decades, make such wild allegations without supplying a shred of evidence to back them up, and why now?

Sceptics may conclude that fomenting a manufactured foreign crisis is a classic tactic to divert attention away from the questionable elections earlier this year, which helped Zenawi retain his grip on power and gave his party all but two seats in the parliament. And Zenawi, despite defeating Ethiopia's "red terror" when he himself was a rebel leader, has largely worn out his welcome with millions of Ethiopians, particularly those living in the cities, as I witnessed first hand while travelling in the country at the time of the 2005 elections.

Zenawi's political offensive seems to have caught Egypt unawares, with the ageing and increasingly frail-looking President Hosni Mubarak appearing miffed by Ethiopia's posturing when asked about it by al-Jazeera last week. Nevertheless, like its counterpart in Addis Ababa, the Cairo regime could find a foreign distraction convenient, embroiled as it also is in allegations of vote-rigging and intimidation during last month's parliamentary elections.

But are there any reasonable grounds for Zenawi's allegations? Whether or not Egypt is actually backing rebels in Ethiopia, many Ethiopians may be inclined to believe the claim, simply because Egypt has previous form when it comes to meddling in Ethiopia's affairs.

After Egypt conquered Sudan in the 19th-century, it launched a further campaign to invade Ethiopia, which ended in failure in 1875. In the aftermath of the second world war, Egypt made a cheeky claim for Eritrea at the Paris peace conference, which undoubtedly incensed the Ethiopians. In more recent times, Egypt and other Arab countries provided support to the Eritrean independence movement, in a kind of proxy Arab-Israeli war. However, for all his other failings, President Mubarak has taken a far more nuanced and conciliatory approach than his predecessors towards relations with Ethiopia.

But why this animosity between two countries who – beyond sporadic trading missions that stretch back to ancient times, and the religious link between the Egyptian and Ethiopian Coptic churches – have actually had limited contact and interest in each other's affairs over the centuries?

Well, one issue above all else has been clouding the waters: the Nile. It is only fairly recently that the discovery was made that some 85% of the Nile's waters originate in the Ethiopian highlands. Five years ago, when I sat in a boat on Lake Tana, the source of the Blue Nile, it was somewhat overwhelming to reflect that here I was many thousands of miles away, floating on Egypt's life-support system.

Herodcreating sotus once said that Egypt was the gift of the Nile but, in a way, the river is also its modern curse. If it weren't for the "eternal river", which courses through the country like a life-supporting vein pumping billions of gallons of vitality into a narrow strip of lush green, Egypt, one of the driest places on earth, would be little more than a barren desert dotted by occasional oases.

Given Egypt's almost complete dependence on water from outside its own borders, the Nile is viewed as a major "national security" issue – and one whose importance is growing. To secure its supply, Egypt signed an agreement with Anglo-Egyptian Sudan in 1929 which gave Egypt 48bn cubic metres of the Nile's total flow of an average 88bn cubic metres. Following independence, Sudan upped its share to 18.5bn cubic metres and Egypt got 55.5bn.

When the other Nile basin countries were not in a position to make use of the river's resources, this staggering inequality was not a major issue. However, in recent years they have pursued a drive for more equitable redistribution of the Nile's resources through the Nile Basin Initiative.

Ethiopia understandably wishes to exploit the rains that fall on its territory to develop its agricultural sector, to stave off starvation, to generate electricity and to stimulate development. Towards that end, it has constructed a number of dams in recent years, including a mega dam.

Despite Egypt's expressed commitment to sharing the river, the country can barely make ends meet with its current mega quota of Nile water. And, with a burgeoning population and an even drier climate thanks to global warming, Egypt will need even more water in the future. That is why it has been blocking moves to change quotas.

Frustrated at Egyptian-Sudanese obstructionism, a number of upstream countries, including Ethiopia, signed a deal in May to re-assign Nile quotas, which was roundly condemned by Egypt and Sudan. So, could this impasse eventually lead to a water war on the Nile? The idea is not far-fetched, as a number of conflicts already partly revolve around water, including Darfur and the Israeli-Palestinian conflict.

In 1999, the UN, predicting that water would be the main cause of conflict in Africa over the following 25 years, identified the Nile basin as a major flashpoint.

Averting this looming catastrophe involves careful diplomacy, the development of appropriate alternative sources of water (including desalination) and, perhaps above all, urgent population control.