Ethiopia: Breaking the silence on the Red Sea

Various interests are establishing trade as well as military outposts on the coastline across the Horn of Africa, and no one wants to be left out, but maintaining peace now is more paramount than ever.

Introduction

In a recently televised meeting with members of Ethiopia’s parliament, Prime Minister Abiy Ahmed emphasized, “the critical importance of the nation’s access to the sea”. This statement follows weeks, if not months of speculation and rumor that Addis Ababa was actively seeking port ownership by courting neighboring states of Eritrea, and the de facto state Somaliland.

Observers interpreted Prime Minister’s comments as provocation towards Eritrea, with whom he famously fostered a historic reconciliation, for which he was awarded the Nobel Peace Prize in 2019. The speech, or rather lecture delivered to members of parliament was largely interpreted as irredentist by surrounding countries. While ruling out the use of force or coercion in achieving this goal may provide some ease, his distaste for the status quo was visible. Abiy added by saying, “the current phase of being landlocked is not tenable for the long run — and could spark tensions and even conflict as the country continues to grow in population and economy”.

While Ethiopia has long sought reliable port access, or preferably ownership, the topic remained subdued for long periods. Several factors seemed to drive this issue to the forefront at this juncture.

In the absence of comprehensive financial relief, the country’s debt overhang, which has been rapidly accumulated since 2005, is straining its ability to pay port services provided by neighboring Djibouti, which according to Abdulber Shemsu, the Director General of the Ethiopian Maritime Authority, “handles most inbound and outbound trade from Ethiopia, raking in $1.6 billion in port fees annually”. This payment largely shouldered by importers and exporters is primarily made in dollars or euros. The state of Djibouti has pushed against claims that it charges excessive fees.

Red Star, a company engaged in importing and assembling tuk-tuk vehicles in Dire Dawa is just one of many businesses affected. Management laments work has slowed due to limited access to foreign currency. “We spend a lot of time procuring the necessary exchange needed for imports and also incur substantial expenses in import service fees”, said one executive. Many businesses also complain about storage fees and transit time capacity at the port of Djibouti. The Red Star manager further emphasized, “While the government has exempted import taxes on assembly part for vehicle and machinery, it’s still not enough”.

The government has long sought to prioritize key imports only, and maximize exports, drawing in foreign exchange, but Ethiopia continues to run a significant trade deficit. As of 2021 this imbalance was approximately negative $10 billion. Although declining recently, economists agree this number will not improve systemically without successful structural economic reforms to improve the quality and quantity of exportable commodities. In addition, challenges in governance, logistics, and infrastructure need improvement. The main exports include gold, coffee, live animals, and oilseeds. Conversely, Ethiopia heavily relies on imports for fuel, fertilizer, pharmaceuticals, and textile apparel.

The country’s negative trade was sustainable when readily accessible, low-interest multilateral debt financing was relatively easier to get. The situation now is different. Not only have interest rates risen substantially, but global crises, domestic instability, and structural adjustment demands have restricted credit from the likes of the IMF. Cutting costs has thus become a necessity This period of austerity includes costs associated with services at the port of Djibouti.

The port of Assab and turmoil in Ethiopia

Addis Ababa has been trying to diversify the country’s access to ports for at least a decade. In doing so it hoped to cut costs, but it also wanted ownership. Underutilized ports of Assab in Eritrea and Berbera in Somaliland both have obvious appeal. Cooperation on the Port of Assab had a promising start in 2018, when roadwork connecting the port to Ethiopia began. At that time, influential constituencies within Ethiopia, such as the Tigray People’s Liberation Front(TPLF) remained deeply suspicious of closer ties between Asmara and Addis Ababa.

This, in no small part contributed to the TPLF’s calculation in igniting what became commonly referred to as the “Tigray War” on November 4, 2020. Notably, the United States shared similar and growing uneasiness towards Ethiopia-Eritrea detente, which it believed was aimed at cornering the TPLF. The U.S appeared to be seeking the Tigray rebels as counterweight against Asmara’s influence, long viewed as a regional spoiler by Washington.

However, cooperation on the port of Assab was in no way directly impacted by the conflict. Geographically located farther away from the conflict zone, it remains to this day a stable corridor. Yet, unbeknownst to many, attempts to restore Assab, spearheaded by the UAE began to face difficulty as far back as late 2018. While the specific details of the 2018 peace agreement remained undisclosed, it was widely acknowledged that Ethiopia would reestablish free access to Eritrea’s ports in return for relinquishing the contested regions it had held since the conclusion of the 1998 border conflict.

UAE’s involvement in the port of Assab preceded the 2018 Ethiopia-Eritrea peace deal, mediated by Saudi Arabia and the UAE. Assab served as a military base for the UAE’s support of Yemen’s Hadi Government in its fight against Houthi rebels.

The Ethiopia- Eritrea agreement solidified Abu Dhabi’s and Riyadh’s role in Horn politics, especially considering earlier setbacks in Djibouti and Somalia. The general consensus at the time was Assab would be upgraded with investment from the Gulf and would mainly serve the Ethiopian market.

The subsequent military defeat of the TPLF was welcome news to both Ethiopian and Eritrean leaders, but the involvement of the United States in the African Union led Cessation of Hostilities Agreement (CoHA) that ultimately ended the fighting in November 2022 remained a point of contention. Asmara believed an opportunity for the complete and unconditional surrender of the TPLF leadership was missed. Washington had used its leverage on Ethiopia, to force a soft surrender of the Tigray rebels, as opposed to a complete wipeout. Prime Minister Abiy was likely enticed further by presumed economic and political support from the U.S, which of course holds tremendous sway over the IMF and World Bank.

Eritrea had been involved in the “Tigray War” on the side of Ethiopia’s federal government, but was not party to the peace agreement, and continued to be targeted by Western news media and civil society, alleging it committed atrocities during the war. Faced with increased pressure, Asmara sought to pivot towards Russia and China. In May of 2023, President Isaias Afeworki made a high-level state visit to both China and Russia in quick succession. Meanwhile, in Ethiopia an uneasy peace deal still holds. However, the Amhara Fano militia and the federal government, which were formerly allied have recently clashed. The fighting in Amhara has since overshadowed the conflict in Tigray.

An agreement on the port of Assab now seems complicated, primarily by Ethiopia’s ongoing political turmoil and the geopolitical circumstances, in which the United States has tried to leverage its influence on Ethiopia to bear upon Eritrea, particularly as it pertains to their continued convergence. Both Eritrean and Ethiopian authorities remained tightlipped about their growing divergence on the CoHA and its implementation process, but relations between the two has cooled visibly.

Regardless, it would be too hasty to assume relations are irreparable. Rather than conflating trade and economic issues with regional political and security matters, the two countries may begin compartmentalizing their relations into spheres of commonality and divergence. The latest conversation about the Red Sea has damaged relations, at least in the short term.

While delving into the precise nature of their disagreement would be speculative, it is crucial to acknowledge the possible adverse consequences of escalating tensions, affecting the vital interests of both nations. No one will benefit from a return to the fraught relations which prevailed for two decades before 2018. A recommitment for cooperation cannot be ruled out either. For now, Ethiopia is likely to explore other routes to secure access to maritime trade it controls, while keeping public conversation about the Red Sea alive.

The Somaliland Option

At the moment Somaliland seems to be the path of least resistance. It is geographically accessible to Ethiopia’s mainland, but more importantly, this de facto autonomous region, which declared “the restoration of its independence from Somalia” in May 1991 could be amenable to Ethiopia in return for security assistance and recognition of its vaunted statehood. So far Somaliland has only received recognition by Taiwan, itself a semi-autonomous region of The People’s Republic of China. It maintains diplomatic missions in seven countries, most notably Ethiopia.

Somaliland has been relatively successful and most importantly peaceful. It has managed all its affairs independently since about 1993 and has become self-reliant in many ways. It holds elections, and by regional standards, its telecom and banking sectors are notable. It has attracted some investment from the Middle East and cooperation with Ethiopia could increase economic benefits. Yet it remains prone to the highly fragmented and clannish nature of Somali politics. Most recently, the northernmost sub-region of Somaliland, referred to Awdal, home to the historically strategic seashore of Zeila has sought autonomy, citing neglect by Hargeisa, the capital of Somaliland. Zeila would require significant investment to make it a viable port.

In 2017, an agreement known as the concession agreement was inked by DP World of the UAE, Ethiopia, and the government of Somaliland, aimed at the revitalization and modernization of the Berbera port. This 30-year concession encompassed the development of a commercial port, a free trade zone, a corridor connecting Berbera to Ethiopia’s borders, and the construction of an airport.

As part of this concession, Somaliland’s government was entitled to maintain a 30% stake in the port, while Ethiopia was allocated 19%, and DP World held the majority share at 51%. However, in June 2022, Somaliland declared that ‘Ethiopia had not fulfilled the conditions to obtain its 19% share in the Berbera port due to non-compliance on Ethiopia’s part’. The UAE proceeded to invest the remaining sum to upgrade the port. The port remains a viable, efficient, and competitive option for trade in the region, especially for Ethiopian transit cargo.

Exported goods at Berbera, in Somaliland and Bossaso, in Puntland are largely coming from Ethiopia. These include livestock, camel, coffee, and khat, a stimulant herb widely consumed. “A significant portion of these goods are exported as contraband ”, according to assistant professor Salah Hussien at Jijiga University, located in Ethiopia’s Somali region. Arab traders located in Bossaso, Berbera and Zeila facilitate transactions. Hussein adds, ‘by owning its own port, Ethiopia may be more successful in controlling illicit trade, but establishing rules governing this centuries old and largely informal trade is difficult, especially when you don’t have leverage over the ports’. The Portuguese tried it in the 16^th century and so did the Ottoman Turks in the following centuries’.

Somaliland serves as a secure alternative to Djibouti, Somalia, and Kenya’s Lamu Port. The UAE is keen to support Ethiopia and keep costs lower than what it currently pays in Djibouti due to their strategic partnership. In remarks made to FDI Intelligence, Ahmed Musa, research fellow at the LSE said, “If Ethiopia is not onboard, it raises a big question on the feasibility of the Berbera port and corridor project”. However, Prime Minister Abiy’s recent speech signaled greater ambition, not just for access, but for control. His government has been building a naval force since at least July 2018, when the BBC reported, “Why landlocked Ethiopia wants to launch a navy”. Hundreds of sailors underwent training in the UAE as well as in France. Where will this force be deployed?

So far the UAE has managed to outbid competition for ports in Somaliland, but rival bids from Turkey and Qatar is aways a possibility. China Merchant Port Holdings, which is involved in the development of the US$3.5B Djibouti International Free Trade Zone could come in as well.

China expanded its military presence in Djibouti, which also hosts French, Japanese, Italian as well the American naval base of Camp Lemonnier. Overcrowding of military bases has become an issue. The Pentagon has raised concerns about “strategic competition and potential risk of confrontation with China in Djibouti” and is exploring the viability of Somaliland as an alternative relocation point. Somaliland has offered to host a U.S base with naval and airport facilities in exchange for recognition of its independence, a move that has displeased the Republic of Somalia.

In an apparent signal to Washington, Somaliland has tried to position itself as a potential counterforce to rising Chinese influence in Africa. This is evident in its July 2020 agreement to establish representation offices with Taiwan, a move that has drawn the ire of Beijing, seeking to isolate Taiwan. Ethiopia would have to consider ways of balancing its engagements in light of this.

According to a recent report by Bloomberg, Abiy’s comments were also rebuffed by The Republic of Somalia, where authorities believe Ethiopia is trying to illegally grab its coastal territory. However, Mogadishu has limited leverage on decisions made by Somaliland. Mogadishu itself is reliant on security provided by the African Union Transition Mission in Somalia (ATMIS, formerly AMISOM), in which Ethiopia has played a key role for years. A drawdown of this internationally backed force is currently underway. President Hassan Sheikh Mohamud’s government seeks regional cooperation to contain increasing attacks by Al Shabab terrorists.

In June 2023, ATMIS commenced a reduction of its troop presence in Somalia, withdrawing 2000 out of 22,000 troops. In September, a further 3,000 troops were removed. More reductions are scheduled, with the goal of a complete withdrawal by December 2024. In addition to this multilateral effort, The Republic of Somalia has received direct security assistance from Kenya, Eritrea, and Ethiopia. The latter has been the most extensive, spanning almost two decades, and its complete departure might leave a security gap Mogadishu will struggle to fill. Nonetheless, helping Somalia become more secure and stable remains in the in the interest of all of its neighbors.

Related Red Sea Developments

The Red Sea has quickly evolved into a focal point of fresh geopolitical interest, with a surge in interactions between Gulf nations and the Horn of Africa reshaping the dynamics of politics, economics, and security along one of the world’s busiest maritime routes. Allies and adversaries have come together in this increasingly crowded region, as the Red Sea and its surrounding areas gain heightened strategic significance. Within this evolving frontier, there are both opportunities and challenges, and much like any emerging scenario, the governing principles are yet to be established.

According to a report by Brookings, “No clear regional hegemon exists in the Red Sea, and the competition among aspirants is characterized by projections of influence across ever-greater swathes of land and sea”. In January 2020, the Red Sea Council, organized and hosted by Saudi Arabia was aimed at organizing consensus among the littoral states of Egypt, Jordan, Eritrea, Yemen, Sudan, Djibouti and Somalia. A report by Radio France International (RFI) says ‘the notable meeting did not recognize key players, such as Israel and the self-declared independent country of Somaliland’, which as mentioned, has been directly engaged in livestock and other commodity trading, primarily originating from Ethiopia and transported to Saudi Arabia through the Berbera port.

Ethiopia was also left out of the Red Sea Council. Although landlocked, leaving out the largest population center and fastest growing economy in the region was not ideal. Despite a slowdown, Ethiopia still stands out as one of Africa’s rapidly expanding economies, with its global trade amounting to $19.2 billion in 2022. This figure represents a 4.3% increase compared to the preceding year, as per data collected by Bloomberg. An IMF report projects its GDP to grow at 6.2% in 2023.

Speaking on Ethiopia’s exclusion, Ahmed Soliman, Africa Programme research fellow at Chatham House in 2020 said, “You don’t want to limit participation to littoral states only–There is a need to look at more inclusive engagement and membership around that”. Camille Lons, research associate at the International Institute for Strategic Studies (IISS) Middle East based in Bahrain views Ethiopia’s exclusion as having more to do with lobbying by Egypt rather than its landlocked status. In her statement to RFI, she says, “For Saudi Arabia, there is a similar dilemma over the inclusion of Ethiopia in the Council–Keeping it outside makes little sense, but Saudi Arabia is trying to spare Egypt”. Disagreement over the Grand Ethiopia Renaissance Dam, aimed at harnessing water from the Nile River for electric power generation has fueled Egyptian-Ethiopian tensions for decades.

In July on 2020, a report confirmed members of Somaliland’s Cabinet of Ministers, along with the Chief Intelligence Officer, made a trip to Egypt. The objective was for Egypt to set up a military base and apply pressure on Ethiopia in light of the ongoing Nile River dispute. This coincided with ongoing conflict in northern Ethiopia. The Ethiopian government objected to the move. Foreign Ministry spokesman Dana Mufti stated “This is a red line for us”, adding that ‘Ethiopia wants friendly relations with Somaliland, despite its non-state status’. Although the plan never came into being, word of Egypt’s move prompted Addis Ababa to refocus on the security risk posed from not having enough leverage on coastal territories in a rapidly changing region.

Ranking as the world’s largest landlocked country in terms of population, Ethiopia remained muted on its ambitions, particularly considering its own internal unrest, but quietly proceeded to organize a naval branch of its military, a move some have argued is akin to putting the wagon before the horse. Prime Minister Abiy in his speech said, “talking about the Red Sea in parliament was taboo until now”, before proceeding to explain how “the nation’s fate has long been intertwined with the waters of the Nile River and the Red Sea”. The speech was intended to provoke a somewhat uncomfortable conversation. Some argued it was to distract from Ethiopia’s internal feud. It would be immature to believe this is enough to unite a divided society, however.

Conclusion

Ultimately all nations of the Horn of Africa share the common goal of peace and development. Given the interlinked mesh of interests and advantages, the obvious and best outcome ought to be a balanced win-win solution focused on integrating their economies, but this is easier said than done, especially given the layers of conflict and competition influencing decisions. Encouraging the smooth and uninterrupted flow of goods and services across borders and beyond is a common good that aligns with regional goals as well as continental goals of Agenda 2063.

The politics of maritime trade can be thorny. History shows the goal of owning a port or coastal territory is largely about controlling the chokepoint in trade routes, which then allows one the power to extract levies and political leverage. All states and empires have an inherent desire to do this. This risk is heightened in a global system undergoing transformation, as is currently the case. Numerous interests are establishing trade as well as military outposts on the coastline across the Horn of Africa, and no one wants to be left out, but maintaining peace now is more paramount than ever. In this sense, Prime Minister Abiy is correct in stating, “the longer we ignore the port issue, the more intractable it becomes”. It remains troubling however, that no effective regional mechanism exists to guide a more open conversation for cooperation.