Eritrea says its war with Ethiopia is far from over because Ethiopia has not complied with the peace plan put forward by the Organisation of African Unity.
But diplomats in Asmara believe Eritrea may have little choice but to accept Ethiopia's conditions for settling the dispute if it is to avoid many more years of war.
A young business student said she believed that for a state like Eritrea, land was worth more than anything.
But diplomats and independent observers in the capital are saying that Eritrea might not have a choice.
One observer said it would be better for Eritrea to accept sooner rather than later the fact that Ethiopia has got the territories it wants.
The alternative, the observer said, might be years more of war.
The diplomats seem to be suggesting that the best Eritrea can hope for, if it does want to avoid continued bloodshed, is a face-saving formula.This could guarantee that Ethiopian troops withdraw from undisputed Eritrean territory as quickly as possible in return for a peace settlement which satisfies Ethiopian demands about the border.
Ethiopia said it will remain inside Eritrea until its security can be guaranteed.
The continued occupation by Ethiopian troops of several Eritrean towns is a humiliation for the Eritreans.
As the country has spent 30 years fighting for independence, it is possible yet that Eritrea may choose to fight to try to push the Ethiopians back.
Contrary to Ethiopian assertions that the Eritrean army has been routed, the Eritreans say their forces are far from crushed.
And for Eritrea's President Isaias Afwerki, who has led his tiny nation through the brutal two-year war, it will be crucial not to be seen to have failed.