Egypt's president has warned Ethiopia that “all options are open" in dealing with its construction of a Nile dam that threatens to leave Egypt with a dangerous water shortage.

Speaking in a live televised speech before hundreds of supporters on Monday, Mohammed Morsi said Egypt was not calling for war, but it is willing to confront any threats to its water security.

"If it loses one drop, our blood is the alternative," he said to a raucous crowd of largely Islamist supporters that erupted into a standing ovation.

Ethiopia's $4.2 billion hydroelectric dam, which would be Africa's largest, challenges a colonial-era agreement that had given Egypt and Sudan the lion's share of rights to Nile water.

Egyptian lifeline

Experts estimate that Egypt could lose as much as 20 percent of its Nile water in the three to five years needed for Ethiopia to fill a massive reservoir.

Morsi’s speech reflected the importance of the Nile River to Egypt. It provides almost all of the fresh water to a country that is otherwise largely parched desert.

As much as 85 percent of the Nile's water comes from Ethiopia.

"We are not calling for war, but we will not allow, at all, threats against our water security," Morsi said before adding, "all options are open."

"The great Nile is that which all our lives are connected to. The lives of the Egyptians are connected around it ... as one great people," Morsi told the crowd.

Shifting his tone later in the speech, Morsi said that Egypt considered Ethiopia a "friend" and noted he had visited the country twice since taking office.

He said his administration was in continuous dialogue with Ethiopia and Sudan to discuss water rights.

Source: Agencies