Ethiopia's Ambitious Leader Reaches for the Stars
September 18, 2018
§ - Addis Ababa will drum up foreign investment by trying to privatize key state-owned industries, but it will continue to grapple with the economic slowdown caused by its foreign exchange shortage.
§ - Peace between Ethiopia and its once bitter enemy Eritrea will be a windfall eventually for both sides in terms of regional stability, trade and foreign investment.
§ - Chinese interest in large-scale projects in Ethiopia is waning, but the United Arab Emirates appears intent on deepening its investments there.
Ethiopian Prime Minister Abiy Ahmed governs like a man running short on time. After less than six months in office, the youthful leader has presided over impressive internal ethnic and political reconciliation, has established peace with Eritrea and has begun ambitious economic privatization efforts. The changes have come so quickly that many question whether they are sustainable. And while there are many limitations to just how much Abiy can accomplish, it's very possible that he will establish a new level of stability and economic opportunity in the East African country of 100 million people.
What Abiy Has Accomplished
The wave of support for Abiy emerged from massive protests against the government in 2016. At that time, an angry and increasingly educated youth population, shut out from the top-heavy economy, began expressing its discontent across the country — from the large and marginalized region of Oromia across the highland core to Amhara. The growing destabilization heaped pressure on Addis Ababa's governing elites. Led by hard-liners within the Tigray People's Liberation Front, a critical source of power in Ethiopia's ruling coalition, Addis Ababa turned to repression, cracking down on all kinds of dissent. Nevertheless, the protests persisted well into 2017, forcing the Ethiopian People's Revolutionary Democratic Front (EPRDF), the ruling coalition, to begin internal deliberations about how it needed to adjust its strategy.
Once they realized that repressing the protests could not save the system, the elites banked on reconciling with the uncontrollable regions, and that's when the 42-year-old former military officer Abiy stepped up. Hailing from the restive Oromo region, Abiy boasted a diverse ethnic background, and he was equal parts a product of the system and a clear reformer of it, enabling him to win support from key power bases across ethnic lines in the ruling coalition.
Ethno-Linguistic Regional States, Population Density and new railway.
Since taking office in April, Abiy has overseen a "purge" of hard-liners who had failed to create a more stable security environment and had lost internal party credibility in the process. These efforts increased after a likely attempt on Abiy's life in June. The government has removed several key figures, including top chiefs of the military and intelligence service. Abiy and his allies have coupled this purge with overtures to parts of the opposition — those agitating for reform inside and outside of Ethiopia. They have also released political prisoners and loosened media restrictions, among other things. Exiles have flocked back to the country. At the same time, the internal security environment has improved; attacks on foreign businesses and other targets have slowed while public trust in Abiy's government has grown. However, additional progress is likely to stall as local groups — as well as some returning hard-line activists — agitate against their ideological opponents. This disrupting influence will hamper Abiy's ability to consolidate power at lower levels, opening up room for some groups and biased police to fuel ethnic flare-ups.
Thawing a Long-Running Feud
After making such swift and dramatic progress domestically, Abiy and his allies then turned to Ethiopia's external challenges, with the country's enmity toward Eritrea being key among them. The two sides fought a border war during 1998-2000 after the former province had broken away from Ethiopia in a decadeslong insurgency. That break left Addis Ababa without sea access and the markets beyond. Relations between the two have been acrimonious since the war, and Eritrea has rejected previous overtures from Ethiopia.
But Abiy and his allies have quickly changed the relationship. For over 20 years, security decisions on Eritrea had been handled by hard-liners within the powerful Tigray People's Liberation Front, who had major personal conflicts with the leadership in Asmara, Eritrea's capital. The new president sidelined these elites, showing reclusive Eritrean President Isaias Afwerki that he intended to be a serious partner for peace. (This is convenient for Ethiopia's allies, including the United Arab Emirates, Saudi Arabia and the United States, which have been pushing Addis Ababa to agree to a postwar ruling over disputed territory.)
Revitalizing the Economy
Abiy has also pushed hard for greater privatization of the economy, which is still weighted heavily toward public spending as a result of the country's recent communist past. Hailing from Oromia and being relatively young, Abiy understands that a key protest grievance has been the economy's exclusion of increasingly educated young Ethiopians. For many years its impressive growth has been mainly driven by government-sponsored projects, while entrenched, predatory elites and a notoriously risk-averse bureaucracy suppressed entrepreneurism.
However, the country's deep foreign currency shortage caused by large-scale government projects has forced those elites to rethink their approach, allowing Abiy to push for the partial privatization of huge state-owned companies such as Ethiopian Airlines (the key generator of foreign currency), Ethio Telecom (the local cash cow) and Ethiopian Shipping and Logistics. Full privatization has been promised for other state-owned enterprises, including industrial parks, hotels and railway projects. That the country represents a growing market of 100 million citizens has not been lost on potential investors and allies, such as the United Arab Emirates. After the emir visited Addis Ababa in June, the Emirates decided to deposit $1 billion in the Ethiopian central bank to help ease the country's foreign exchange shortage.
ETHIOPIA'S FOREIGN EXCHANGE RESERVES BY QUARTER
The recent docking of an Ethiopian commercial ship at the Eritrean port of Massawa — the first in over 20 years — is a clear sign that the rapprochement is real and not just political rhetoric. And repaired ties between Eritrea and Ethiopia will likely be an economic boon for both countries. Ethiopia will now have another country to import and export goods through; it now relies on Djibouti for 95 percent for this exchange. And cargo transport times for goods coming from Ethiopia's north will be shorter, helping reduce costs and probably providing a boost for residents in the north looking to import and export products that were not economical via the Djibouti route.
For Asmara, the benefits are also clear. Eritrea has been under crippling international sanctions for over a decade due to alleged support for militants in neighboring Somalia, and renewed peace has opened the door to future normalization. Ethiopia and others in the region have supported removing U.N. sanctions on Eritrea, opening Asmara up to more large investments from Gulf Cooperation Council states and others. And this input could provide a new flow of foreign currency for the cash-strapped country. However, Asmara will likely need to show greater signs of reform before the United States and others agree to remove sanctions.
ETHIOPIA'S TOP EXPORT PARTNERS
The State of Investments
There are still constraints on Ethiopia, such as the foreign exchange crunch that continues to slow the economy. During a July trip to the United States, Abiy tried to tap into Ethiopia's 3 million-strong global diaspora, asking them to send remittances home through official channels while setting up a new sovereign wealth fund to which the diaspora could donate. At the same time, the black market reduced its exchange rates, creating incentive for the diaspora to send more money back via banks and helping increase foreign currency flows to Addis Ababa. The measures have had an impact, but the crunch will likely persist for years and reduce Addis Ababa's appetite for new large projects — especially since evidence suggests that Chinese investment interest is waning due to mounting concerns about debt and slower-than-expected returns on massive projects such as the $4 billion Addis Ababa-Djibouti railway, completed in 2017.
Other countries, however, are not shying away. The United Arab Emirates has reportedly been a key force in Ethiopia's rapprochement with Eritrea, no doubt as part of Abu Dhabi's strategy to further diversify its oil-based economy. Once Ethiopia and Eritrea are on good terms again, the Emirates could efficiently link its long-term investments in ports in Eritrea (and also Somaliland) to its current and likely expanded investments in Ethiopia. That Ethiopia's investment board opened the logistics sector to minority joint venture foreign investment on Sept. 7 is likely no coincidence. Recent trips by emirati officials to an industrial park in Jimma, in the Oromia region, suggest that Abu Dhabi could acquire such an investment — and also the logistics network necessary to export the manufactured goods through Eritrea and other coastal neighbors.
The Horn of Africa is changing rapidly, and Abiy appears to be leading the way. His ambitious moves to transform Ethiopia for the future will remain a key story in the months ahead.
A River Runs Through an African Rivalry
JANUARY 3, 2017
The competition to secure water from the Nile River will create problems for Egypt and Ethiopia, much as it has for centuries.
The countries will, however, probably find some common ground despite the ongoing construction of the divisive Grand Ethiopian Renaissance Dam.
Distrust still defines relations between Cairo and Addis Ababa, and Egyptian-Ethiopian competition over water resources will not end.
Egypt and Ethiopia have been at odds for much of their modern history, perhaps nowhere more so than in their attempts to secure water of the Nile River basin. This particular struggle has been on full display in recent negotiations over the Grand Ethiopian Renaissance Dam, which is situated on the Blue Nile. The history of competition over the critical waterway provides the context for regional dynamics that will endure long into the future.
Treaties lie at the center of controversy between Egypt and Ethiopia over the Nile River, primarily because most of these agreements never included Ethiopia as a signatory. The treaties were tools British colonial officials used in the 19th and 20th centuries to manage relations between their Egyptian and Sudanese holdings. Ethiopia, which was not a colony, at times negotiated with the British government but never had the same say in regulating the use of the Nile. Understandably, Addis Ababa has often rejected the legal framework established in this period for managing the river. One of Ethiopia's main concerns is the fact that it, as an upstream country, is not protected in the same way as downstream countries such as Egypt.
From Ethiopia's perspective, all countries in the basin depend on the water resource. Addis Ababa argues that it should have been invited to take part in initial agreements that set water use terms. Because it was sidelined from the process that laid down the management of the river, Ethiopia has instead pursued self-development projects such as the Grand Ethiopian Renaissance Dam. These kinds of projects are a problem for Egypt: the Nile is the desert country's primary source of fresh water and of irrigation for agriculture. For that reason alone, Egypt has and will continue to dominate in use of Nile River water. Without it, Egypt could not survive.
The most recent major agreement on managing the Nile was reached in 1959, marking the start of the modern history of Nile River relations. It was signed soon after the independence of Sudan in 1956 and Gamal Abdel Nasser's 1956 rise to power in Egypt. It dictated the amount of water that could be used by each country and established a number of joint projects to limit loss of water from evaporation in certain sections of the Nile. But once again, the agreement did not include Ethiopia.
Of course, Nasser was not oblivious to Ethiopia's concerns — or to its importance to Egyptian water security. Even before Nasser, Egypt had attempted to gain more control over the Blue Nile, one of the Nile's major tributaries. During the 19th century, Egypt tried to invade Ethiopia to gain control over this portion of the basin. But Ethiopian armies deflected the invasion in the coastal areas of modern day northern Eritrea. Even after the failed invasions, Egypt maintained forces in the port city of Massawa (now part of Eritrea) to maintain military options against Ethiopia. By the time Nasser came to power as Egypt's president in 1956, Egypt's military no longer held these areas because the United Kingdom had given up control of the territory. And, in 1952, Eritrea had entered into a federacy with Ethiopia.
Rather than try to force Ethiopia's hand militarily, Nasser attempted to work with Addis Ababa diplomatically. Moreover, Nasser had a direct connection with Ethiopia's rulers. During his career as a military officer, he had been stationed in Sudan and had interacted closely with Ethiopian officials. Nasser failed, however, to convince the Ethiopian emperor to visit Egypt. Despite the interest Ethiopia may have had in collaborating with Egypt on Nile River issues, the style of Arab nationalism Nasser propagated in his country and the region drove a deep wedge between the two countries. Ethiopia considered the ideology a threat to monarchies such as its own. Furthermore, Ethiopians were Africans, not Arabs, so Addis Ababa was suspicious of any potential ulterior motives that may have been guiding Nasser's attempts to initiate dialogue.
The Ebb of Conflict
In addition, both countries were implicated in Cold War politics. While Nasser's Egypt was supported by the Soviet Union, Ethiopia was supported by the United States. For Ethiopia, this allegiance presented an existential threat. Communism, of course, staunchly opposes the concept of a monarchy, and Ethiopian rulers rejected communism and all of its agents. Eventually, communism did indeed bring down Ethiopia's monarchy when the Coordinating Committee of the Armed Forces, Police, and Territorial Army (a Marxist-Leninist military council often referred to simply as the Derg), took control of the country in 1974. Before then, the monarchy held off interacting with Nasser, forcing Egypt to explore other means of establishing influence over the Blue Nile.
Consequently, Nasser's government began to undermine the Ethiopian government. By supporting Eritrea and Somalia, Egypt attempted to distract and weaken Addis Ababa by inspiring the Muslim population of Ethiopia to resist the Christian emperor, in part through propaganda operations out of Radio Cairo. They also provided facilities to Eritrean revolutionaries to broadcast their own propaganda, and even provided military training to Eritreans, many of which went on to become part of the current ruling class following Eritrea's independence in 1991. Nasser also exploited the ethnic Somali struggle to unify greater Somalia, which spans across southeastern Ethiopia. Egypt provided military support here as well.
However, this interference eventually led to war between Ethiopia and Somalia over the disputed Ogaden region. By this time, communists had come to power in Ethiopia, and Nasser no longer ruled Egypt. Ethiopia's military eventually defeated Somalia after the Soviet Union sided with Addis Ababa, beginning an era of communism in Ethiopia. During this period, Anwar Sadat became president of Egypt, and the country's priorities changed. Ethiopia was in no position to continue its competition with Egypt regardless: It was distracted by internal conflict, not to mention Eritrea's war of independence. And so, for a time, the two countries' attempts to undermine one another declined markedly.
But tensions rekindled in 2011, when Ethiopia started the construction of the Grand Ethiopian Renaissance Dam near the Sudanese-Ethiopian border. Seeking reassurances that the dam will not endanger the crucial flow of the Nile River, Egypt has taken part in round after round of negotiations. The construction of the dam — and the diplomatic process surrounding it — has since progressed at a slow but steady pace.
Despite collaboration, partially explained by the fact that Egypt simply has few alternatives to halt the dam's construction, historical concerns between Cairo and Addis Ababa endure. Even now, Ethiopia faces internal unrest driven by ethnic discontent, and accusations of Egyptian support to opposition fighters have again emerged. Countries such as Saudi Arabia have also reached out, hoping to use the Grand Ethiopian Renaissance Dam as a lever to influence Egypt, which has recently sought greater independence in its Middle East foreign policy, resisting any attempts to bring it further under outside influence. Geography dictates that Egypt and Ethiopia will continue compete.
Where Is Ethiopia Headed? Signs Past and Present Point the Way
SEPTEMBER 07, 2018
- Ethiopia's unique status in sub-Saharan Africa comes from the advantageous geography of its highland core relative to the surrounding lowland areas.
- Though Ethiopia's various states have risen and fallen throughout history with shifts in diplomacy and trade, recent strategic overtures suggest the country will be able to project more power in the region in the years ahead.
- To do so, however, the country will need to maintain internal cohesion and secure access to nearby ports and, by extension, to outside markets.
Editor's Note: This assessment is part of a series of analyses supporting Stratfor's upcoming 2018 Fourth-Quarter Forecast. These assessments are designed to provide more context and in-depth analysis on key developments to watch in the coming quarter.
Ethiopia is a rarity in Africa. It has existed in a coherent form for more than 2,000 years and largely escaped European colonization. The country's lineage — tracing back to the kingdom of Aksum in the first century — makes it stand out among its neighbors, and its advantageous location between the ancient trade routes of Rome and India makes it stand out on a map. The country's recent push for reform and desire for strategic partnerships in the Horn of Africa provides a timely reason to explore Ethiopia's geopolitical environment.
The Highland Core and Lowland Periphery
East Africa has three power cores: the Nile River Basin, the Kenyan Highlands and the Ethiopian Highlands. The Ethiopian Highlands — which run roughly from Asmara, the capital of Eritrea, to the center of modern-day Ethiopia in the capital of Addis Ababa, continuing along the Great Rift Valley — have been crucial to Ethiopia's development. For thousands of years, they protected its peoples from marauding hordes and foreign armies, which would have had to overcome mountains and a harsh desert to invade. The country's higher elevation also reduced threats from malaria and other diseases, while waterways provided transport arteries. Fertile lowlands made settlements and agriculture viable, supporting a large population base from which governments could draw taxes and labor.
The Tigrinya- and Amharic-speaking peoples who live there have used the highland core's natural advantages to project power into nearby zones, including the surrounding lowland periphery. The government in Addis Ababa, for example, has long tried to control the ethnic Somali-majority Ogaden region in the east in an effort to weaken a perennial competitor and to buffer its core from potential attacks from the east. As a result, cyclical flare-ups of violence have occurred as Somali nationalist militants strive to reunite the province with Greater Somalia, providing meddling regional powers a conduit to weaken Ethiopia.
Ethno-Linguistic Regional States and Population Density
Ethiopia and its predecessor states have long grappled with ethnic conflict between different groups vying for control of the country. Given Ethiopia's large territorial size and geographical barriers, the central government has struggled to exert control over the diverse populations of the hinterlands. Ethnic insurgencies have been a near constant feature of the country's history, and managing them is a key imperative for its leaders. To that end, they have tried a variety of tactics, from reconciliation to repression. But neighboring states have seized on the issue and supported several of these ethnic insurgencies to keep Ethiopia's attention on its domestic problems rather than on regional activities. (Ethiopia, likewise, has supported insurgencies against its neighbors).
Ethiopia's Great Game
Though battles with the peoples of the lowlands have kept it focused inward at times, Ethiopia's highland core has also managed periodically to project power well beyond its borders. The boom-and-bust cycle of power projection dates back to Aksum's centurieslong command of trade routes through the Red Sea and the African interior, which enabled the kingdom's Christian rulers to send delegations to Europe and elephant-mounted troops into southern Arabia in the sixth century. Only with the consolidation of power in northern Arabia around the Islamic caliphate and the redirection of trade routes from the Red Sea toward Damascus, in modern-day Syria, did Aksum begin to lose its hold. Infighting among the Aksumite elite helped create additional problems for the kingdom as Islam spread through the region.
In subsequent periods of history, Addis Ababa has thrown its weight around in the Horn of Africa — for example, by intervening in and occupying war-torn Somalia for more than a decade. But it has not since been able to project power farther afield, onto the Arabian Peninsula, for instance. Instead, Ethiopia (or Abyssinia, as it was known in the Middle Ages) used outside diplomatic and military support — from powers as diverse as Catholic Portugal and Orthodox Russia — to overcome some of its challenges, such as encroaching Italian colonization in the late 19th century, as they arose.
In the modern era, the loss of the coastal province of Eritrea stripped Ethiopia of its access to the sea, increasing the costs of imports and exports and making port access a priority for the country's leaders. Ethiopia has come to rely on tiny Djibouti, which has harnessed its strategic position on the Bab el-Mandeb strait to great effect, to transport some 95 percent of its imports and exports, an arrangement that exposes its large and growing market to supply chain risk. While Addis Ababa has not had the money in recent decades to finance the multibillion-dollar infrastructure projects it would need to ensure supply chain redundancy, China's rise as a global economic player has expanded its options. In 2017, for example, a Chinese-funded rail project added another link from the port of Djibouti to Addis Ababa, bypassing a congested and risky road route.
The Abiy Factor
Similarly, the country's political environment is looking more stable today than it has in recent years, thanks in large part to Abiy Ahmed, who became prime minister in April after months of protests in the country and increased infighting in the ruling coalition. Abiy is a new kind of Ethiopian leader: He is young compared to his predecessors, at 42 years old; he is also a member of the Oromo ethnic group, which has played a prominent role in protests since 2016, and a former military officer. And after the previous administration, backed by ethnic Tigray hard-liners, strove to crack down on dissent, Abiy is reaching out to different ethnic groups, ending draconian security measures, and promising free and fair elections in the years ahead. So far, rebel groups and other dissidents have warmed to his overtures, though Ethiopia's internal cohesion problems persist.
Abiy's efforts are notable for their speed, but his strategies for stabilizing his country and the region still follow Ethiopia's core imperatives. The prime minister, for example, has focused on normalizing relations between Ethiopia and its nemesis, Eritrea, in support of his country's need for port access. In fact, his government has also increased its stakes in ports in nearby Djibouti, Sudan and Somaliland — a semiautonomous region of Somalia — and promised to forge stronger ties with Somalia itself, all in the name of improved supply chain connectivity.
Ensuring internal ethnic cohesion and port access will remain essential pursuits as Ethiopia embarks on this ambitious journey under Abiy. If it can execute on these imperatives, the country may once again be able to project power beyond the region in the years ahead.
UPDATES ON ETHIOPIA
ETHIOPIA'S TOTAL FOREIGN TRADE
Egypt, Ethiopia: Presidents Talk Fence Mending And Dam Building
Jan 18, 2018
In our 2018 Annual Forecast, we said that Ethiopia would forge ahead with its flagship Grand Ethiopian Renaissance Dam project on the Blue Nile River, despite Egypt's concerns. Though talks about how to balance the needs of all parties fell apart in November, there are signs that Egypt may once more be willing to discuss the impact of the inevitable dam.
Neither Ethiopian Prime Minister Hailemariam Desalegn nor his Egyptian counterpart President Abdel Fattah al-Sisi are eager to see relations between their two countries deteriorate any further than they already have. To that end, on Jan. 18, Al Ahram reported that the two leaders met in Cairo, just one day after talks between the Ethiopian and Egyptian foreign ministers on Jan. 17. Tensions remain high over progress on Ethiopia’s flagship Grand Ethiopian Renaissance Dam (GERD), and high-level representatives appear committed to managing the dynamic between the countries to prevent any serious disputes.
Ethiopia is continuing its work on the GERD, a multibillion-dollar gravity dam project on the Blue Nile River designed to provide hydroelectric power to the electricity-starved country and tentatively scheduled for completion in late 2018. But Egypt, which has been critically dependent on the Nile to sustain itself for millennia, is worried that the dam will put its water access at risk.
Though both parties — as well as other countries related to the project such as Sudan — had been engaged in negotiations about how to ensure that their needs are met, Egypt pulled out of GERD talks at the ministerial level in November 2017, claiming Ethiopia was not adequately addressing its demands. The reality of a finished GERD has loomed over Egypt since 2011, and the country has frequently oscillated between diplomacy and hostility toward Ethiopia and Sudan. Now, negotiations between the various countries remain stalled over how to best manage the impact of the dam.
Egypt’s bargaining position is very weak compared to Ethiopia’s, as the country depends on the Nile's flow yet does not control the source. On Jan. 18, al-Sisi noted his "extreme concern" over the lack of current negotiations over the dam, and his recent meeting with Desalegn signals that a more open dialogue may be on its way. Still, the issue will continue to be a sticky one for Egypt, Ethiopia and Sudan in the months and even years ahead
A behind the scenes documentary. Over a year after principle photography of People of the Delta, Joey returns to the Omo Valley to collect the last missing pieces of the film. Joey must track down his nomadic subjects one last time, who have moved away to other corners of Ethiopia.
Sent in by Bill Phillipson
The following articles are prepared by STRATFOR out of Austin, Texas.
Articles are listed here in descending order of date published.
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ETHIOPIA'S TOP IMPORT PARTNERS