Eritrean President Isaias Afwerki said the international community would regret moves to impose sanctions on the country, a government website said.
The UN Security Council is reviewing draft plans for punitive measures against the Red Sea state, which could include an arms embargo, travel bans and asset freezes for members of Eritrea’s government and military.
The Asmara authorities are accused of backing an insurgency in Somalia by funnelling funds and weapons to rebels battling that country’s UN-backed transitional government.
"The distorted and baseless anti-Eritrea accusations and intended measures in connection with the Somali issue would be a resort the authors and implementers stand to regret," state-run website shabait.com quoted the president as saying.
"There is no reason at all for Eritrea to send arms to Somalia where there exists huge arsenal of armaments for a long time and is still the centre of arms sales."
The president was critical of recent attempts to impose peace in the anarchic country.
"The course being pursued by the international community in general and the forces directly involved in the Somali issue in particular has failed to bear any fruitful outcome," he said.
The draft proposes a ban on all sales to Asmara of "weapons and ammunition, military vehicles and equipment, paramilitary equipment, and spare parts".
It would also impose a travel ban and freeze the assets of political and military leaders and other Eritrean individuals and firms suspected of backing the hardline Islamist rebels.
Some analysts fear sanctions would punish a population already hit by drought and the global economic crisis, and that it may prove a rallying cry for the government.
But one Western diplomat defended the proposed measures. "They strike the right note between being too egregious to enforce upon a poor country, and being too soft to put any pressure on the government," the diplomat said.
"We shouldn’t underestimate the travel bans and asset freezes, this economy relies on the financial and moral support of the diaspora, which requires local officials drumming up support in other countries and carrying money back in."
Fighting in Somalia has killed nearly 19 000 civilians since the start of 2007 and driven 1.5 million from their homes.
Pic: President Isaias Afwerki of Eritrea