HARVARD POLITICAL REVIEW
29 October 2018
by KESHAV RASTOGI
Port of Djibouti, 2005
With over 100 million people, Ethiopia is easily the most populous landlocked country on earth. When Eritrea seceded in 1993, Ethiopia lost access to its coastline, impeding its economic growth and limiting the nation’s ambitions of becoming a regional hegemon. No coastline meant no direct access to ports, hindering Ethiopia’s efforts to achieve middle-income status via export-oriented industrialization. Furthermore, strained relations between Addis Ababa and Asmara have forced Ethiopia to rely on neighboring Djibouti for most of its trade. In fact, 95% of Ethiopia’s imports and exports pass through this country of less than one million. Ethiopians are increasingly recognizing the danger of dependence on their small neighbor, especially after Djibouti temporarily refused to release cargo bound for Ethiopia because of delays in payment transfers in 2013.
However, under Abiy Ahmed, Ethiopia’s Prime Minister since April 2018, there have been signs that Ethiopia’s peculiar relationship with Djibouti is set to change. Abiy signed a peace agreement with his Eritrean counterpart on July 17, bringing a formal end to the 1998-2000 Eritrean-Ethiopian War and potentially opening Eritrea’s ports on the Red Sea to Ethiopian exports. By also pursuing deals with ports in Sudan and Somaliland, Ethiopia is making it clear that the first priority in its quest to become a regional power is establishing direct control over its access to the Red Sea and Gulf of Aden.
Practicality Behind Sentimentality
Ethiopia’s recent normalization of relations with Eritrea was an emotional affair. The conflict stemmed from a border dispute that led to the deaths of over 80,000 people and the displacement of more than 350,000. For years, Addis Ababa refused to accept an international commission’s ruling on the border demarcation and cut off all economic and diplomatic ties with Eritrea.
In June, Abiy’s decision to suddenly comply with the ruling set off a flurry of moves. Eritrean President Isaias Afwerki visited Addis Ababa, and the two leaders agreed to re-establish embassies, resume flights between the two states, and reopen Eritrean ports to Ethiopian trade. Furthermore, thousands of families separated since the 1998-2000 war can now take advantage of re-established transportation and telecommunication links between the two countries.
Among many other benefits, this dramatic detente will allow Addis Ababa to regain access to critical ports on the Red Sea. Before the bilateral relationship deteriorated in 1997, the Assab port in Eritrea handled the majority of Ethiopian exports and imports, while the Port of Djibouti only played a minor role. After more than two decades, Abiy has indicated a keen interest in reconnecting Ethiopia with Assab, a port in Eritrea’s south, and Massawa, a port in the north. There is more at stake for Ethiopia than just diplomatic niceties in this recent rapprochement — its shipping routes hang in the balance as well.
Leveraging its Options: Strategic Port Diversification
Eritrea, however, is not the only country that has recently attracted Ethiopia’s attention in its campaign to diversify its ports. In the last decade, Addis Ababa has cultivated an interest in developing and acquiring stakes in other ports along the East African coast. Ethiopia’s strategy is gradually paying off. In 2012, Kenya and Ethiopia agreed to jointly develop a 32-berth port at Lamu, a quiet town nestled on an island right off the coast of Kenya. However, the $3.1 billion project is only 42% complete, as both countries have struggled to find sources of financing. In March of this year, Ethiopia also bought a 19% share in a deal negotiated by Dubai Ports World, a global Emirati port management company, to develop the port of Berbera in Somaliland. That Ethiopia went ahead with this deal when no country in the international community recognizes Somaliland as an independent state attests to Addis Ababa’s confidence in its foreign policy strategy.
Once Berbera and Lamu are completed, Djibouti will no longer be the only port open to Ethiopian exports on the 6,000 km of coastline between Port Sudan and the Port of Mombasa in Kenya. Past posing a significant threat to Djibouti’s control over Ethiopian trade flows, Addis Ababa’s acquisition of a stake in Berbera was a victory in its push to secure capital from the Arab Gulf states to build and maintain ports in the region.
Ethiopia has continued its campaign to diversify its access to ports since Abiy took office. In May, Abiy and Sudanese President Omar al-Bashir agreed to jointly develop and administer Port Sudan in order to increase Ethiopian cargo traffic through the facility. In the near future, Ethiopia envisions shipping around 30% of its imports and exports through Berbera and 10% via Port Sudan. After Djibouti ended a contract with Dubai Ports World to manage its main port, it courted Ethiopia, among others, for additional investment. In May, during his first foreign trip as head of state, Abiy entered an agreement to acquire an undisclosed stake in the Port of Djibouti, which will give his country more control over its current trade flow.
Less Djibouti, More Booty
Addis Ababa is rapidly signing these deals to prevent Djibouti from utilizing its monopoly to Ethiopia’s disadvantage. Some Ethiopians fear that, given the prevalence of international military bases in Djibouti, geopolitically motivated foreign meddling and international conflict could devastate their economy. Overall, Ethiopia’s push to foster port competition will likely bring more stability to its economy. It will also potentially lower shipping costs for Ethiopian cargo, since Ethiopian firms and the government pay between $1.5 billion and $2 billion in port fees to Djibouti annually.
Ethiopia’s lack of port diversification came to a head over Djibouti’s actions in 2013 but now has less to do with tiny Djibouti and more to do with a broader foreign policy strategy to drive forward greater economic integration in a region fraught with political tensions. As Ethiopia has learned from its relationship with Djibouti, it is avoiding putting all its eggs in one basket.