Ethiopia has begun diverting the Blue Nile to build a giant hydroelectric dam, cutting the flow of water to Egypt, Sudan and other downstream states and raising tensions in a long-running dispute with Cairo.

With Egypt in turmoil and financial straits in the lingering aftermath of the 2011 pro-democracy ouster of longtime President Hosni Mubarak, and Sudan gripped by political upheaval following the secession of oil-rich South Sudan in 2012, the long-running Nile issue could turn nasty.

Ethiopia insisted that the flow levels of the world's longest river wouldn't be affected by the 6,000-megawatt, $4.7 billion Grand Renaissance Dam.

But Cairo and Khartoum say that once the massive project, one of several dams Addis Ababa is building, is completed, supposedly by 2015, their share of the Nile water will be reduced by 18 billion cubic meters a year.

The Ethiopian dam is to have a reservoir of 63 billion cubic meters of water, one of the largest in Africa. Filling that would immediately cut the water flow to Sudan and Egypt.

How bad that will be depends on the rate at which the Ethiopians decide to fill the reservoir.

The Blue Nile, which rises in Ethiopia's highlands, joins the White Nile, which flows through Sudan, at Khartoum, and flows northward through Egypt to the Mediterranean Sea.

The diversion of the Blue Nile began Tuesday, one day after an African Union summit during which Egyptian President Mohammed Morsi met with Ethiopian Prime Minister Hailemariam Desalegn on the Nile issue.

Morsi, who's grappling with major political and economic crises, publicly played down Egypt's concerns about the Grand Renaissance Dam while Egypt's ambassador to Ethiopia even insisted the Arab state would ultimately benefit from the project.

"Perhaps most alarming to Egypt was not the announcement itself but rather how quickly Ethiopia announced the diversion after the meeting," the U.S. global security consultancy Stratfor observed.

The move by Addis Ababa appeared to underline Desalegn's determination to press ahead with his government's ambitious program of major hydroelectric dams on the Blue Nile despite the growing concerns of Cairo and Khartoum, which would be particularly hard hit by a reduced water flow from the Nile.

It's widely accepted that Sudan and Egypt face severe problems because the water provided by the Nile is already being stretched to the limit.

Under a 1959 agreement brokered by Britain, the former colonial ruler, Egypt was awarded a quota of 55 billion cubic meters per year, with Sudan getting 18.5 billion cubic meters a year.

That's the lion's share of the Nile flow, which totals about 85 billion cubic meters annually.

Upstream states, led by Ethiopia, claim the 1959 agreement is a relic of the colonial era that doesn't reflect the growing needs of the African riparian states that need more water for industrial and agricultural development to meet the demands of burgeoning populations.

Seven upstream states -- Uganda, Ethiopia, Kenya, Tanzania, Rwanda, Burundi and the Democratic Republic of Congo -- signed an agreement to pressure Sudan and Egypt to ditch the 1959 pact.

South Sudan joined them when it became a state in July 2011.

Egypt, with a population of 82 million, already uses its entire quota and by 2050 its requirement is expected to increase another 21 billion cubic meters a year.

Egypt "uses roughly 47 billion cubic meters of water for irrigation and agriculture," Stratfor noted.

"Less water for crops means less food for consumption, and the country's financial woes -- which include becoming a net importer of staple commodities like oil -- have left Cairo struggling to afford higher volumes of food, particularly wheat."

Given Cairo's inflexibility on this issue, there's been talk that the Nile dispute could lead to actual conflict. In the current highly charged climate in Egypt, Morsi acceding on the Nile issue would likely be political suicide.

International bodies have warned for years that shrinking water resources could trigger wars in the Middle East, Africa and Asia, though none has broken out.

But Stratfor noted: "A history of tensions between Egypt and Ethiopia make a diplomatic solution unlikely.

"While the probability is low for outright military action between the two, Cairo could coordinate with Khartoum to pressure Addis Ababa to changes its plans."