The military threat to the leftist Ethiopian government is growing in both northern Eritrean province and in the Ogaden region in the south, according to reports from Ethiopia and neighboring countries.

Official sources in Addis Ababa, the Ethiopian capital admitted the first time yesterday that a major battle is taking place around Dire Dawa, a key southeastern railway town.

The sources gave no details beyond saying that prisoners had been taken and heavy casualties sustained in fighting with Somali-backed insurgents who are operating with increasing freedom throughout the Ogaden region. Dire Dawa, with a population of about 66,500, is the third largest city in the country and a major railway center.

Further reports from the Sudanese capital Khartoum testified to the widening two-front war in Ethiopia.

Secessionists in Eritrea are now said to be tightening their grip on the provincial capital Asmara by shelling the Red Sea port of Massawa, the only supply point with a land route now open to beleagured highland city.

On Rome, a spokesman for the Eritrean People's Liberation Front said Monday that its troops were attacking both Massawa and Asmara, the Associated Press reported. He said the troops had reached Sembel Prison inside Asmara and freed more than a thousand political prisoners, who were transferred to rebel bases outside the city.

AP quoted diplomatic sources in Addis Ababa as saying the fighting in the Ogaden apparently erupted Thursday and continued for two or three days. It was reportedly far greater in intensity than previous skirmishes in the area, the sources said.

[The Smomali-backed guerrillas claim to control 60 per cent of the Ogaden region, a bleak and hot semi-desert that covers almost a third of Ethiopia's territory. Sixty per cent of the nation's exports and imports travel the rail line that goes through Dire Dawa.]

In addition to these problems, gasoline supplies were reported to be running low in the capital. Civilian air traffic has been disrupted since the military commandered Boeing 707s and 727s of the national airline to fly militia and regular troops north and south to join the fighting.

Observers now believe that the Ethiopian military leader, Mengistu Haile Mariam, is fast approaching the crisis point in his bid to contain insurgencies in the crumbling empire that he inherited from fellow army commanders who overthrew Emperor Haile Selassie in September 1974.

Diplomats here report that in order to survive, the Ethiopian government must fight off the threat to Asmara and quickly reopen the strategic railway from the capital through Dire Dawa to the newly independent port state of Djibouti.

The escalating wars in norhtern and southeastern Ethiopia evidently have been planned and coordinated to deny Mengistu the one thing he desperately needs, time to absorb the imports of Soviet military equipment and the advisers that will accompany such shipments.

New shortages in Addis, Ababa are said to have been caused by the increased military demand for petroleum and the two-week period that it now takes for heavily guarded convoys to reach the capital from its only remaining outlet to the sea. Red Sea of Assab.