Heat oil in a large skillet or pot. Add onion, and fry until translucent; add minced garlic, and fry for a few seconds. Add chili pepper and red bell pepper and fry until semi-soft.
Put the tomatoes in a food processor, grind them and add them to the pan with the vegetables. Add tomato paste, spices, and sugar and mix well.
Add water as needed until you get the desired consistency; Mix, taste, and adjust seasoning if necessary.
Bring to a boil, lower the heat and cook for about ten minutes, occasionally checking the water level; Add more water if necessary, and mix.
Take the meatballs out of the oven, let them cool for about five minutes, and add them to the sauce with a spatula or tongs (don't use a fork); Cook on low heat, covered for about 10 minutes—no need to flip them.