On July 9, the leaders of Ethiopia and Eritrea signed a historic peace accord and a set of trade and security agreements ending a long-running conflict that has been a key regional fault line destabilizing the Horn of Africa. The previously unimaginable trip to Asmara, Eritrea’s capital, by Ethiopia’s new prime minister, Abiy Ahmed, capped a month of whirlwind diplomacy across the region by the 41-year-old Abiy. His initiative has set the stage for a seismic reordering that could bring the fractious countries of the region into strategic and economic alignment for the first time. The ripple effects will be felt across the Horn of Africa and broader East Africa region, and even in the Gulf Arab states. At the same time, since he came to power in April, Abiy has overseen an even more revolutionary domestic agenda, inviting opposition parties to join the political process, delisting terrorist groups, apologizing for state repression, and pledging to liberalize parts of the state-controlled economy.

Background

In 1991, with the Soviet Union no longer able to provide support, Ethiopia’s Marxist-Leninist Derg military dictatorship was overthrown by a coalition of rebel groups led by the Tigray People’s Liberation Front. The Ethiopian rebels, themselves Marxist-Leninist, had allied with an Eritrean rebel group to defeat the dictatorship. But the Eritreans quickly declared independence, the two countries supported proxy militants against one another, and then fought a bloody war from 1998-2000 over a disputed border village. They have been in a state of frozen conflict ever since, with Ethiopia refusing to honor a U.N.-brokered agreement to cede the town, Badme, to Eritrea.

This period of “cold” war helped Ethiopia strengthen, to a degree, a panethnic national identity, while the regime of the former rebel leader, Eritrean President Isaias Afwerki used it to justify its repressive, militarized rule. The Ethiopian state in the meantime became a key ally for the United States and Europe in the war on terror, and astutely utilized donor assistance from the West and foreign investment and loans from China to rapidly grow its agriculture-based economy at a double-digit pace. Infrastructure and educational projects have brought significant gains to the 100 million plus population of the country. But they have also created a foreign exchange crisis, souring the relationship with China over unpaid loans and uncompleted projects, and stifled the private sector it hopes will industrialize the economy by extracting capital from the financial system to fund its developmental projects, enriching elites, and depriving the private sector of sources of financing.

More significantly, the economic growth has exacerbated inequality and created resentment, especially among the largest ethnic group, the Oromo. In 2015, a widespread protest movement erupted in the Oromo region over land rights issues and lasted until early 2018, when Abiy’s predecessor, Hailemariam Desalegn, resigned. Since assuming office, Abiy has gone far beyond what observers expected and has been embraced fervently by young Ethiopians. So far, his revolutionary reform project appears to be proceeding successfully, although one sign of serious dissent was a grenade attack targeting Abiy during his address to hundreds of thousands of supporters at a rally in the Ethiopian capital of Addis Ababa on June 23. Dozens of police and government officials have been arrested in connection with the attack.

Ethiopia-UAE Engagement

While the structural contradictions in Ethiopia’s political economy are fundamental to understanding today’s developments, they also would likely not have been possible without key diplomatic support from a new player in the Horn of Africa – the United Arab Emirates. During the Cold War and through the 1990s, Ethiopia had poor relations with Gulf countries, who its leaders saw as supporting Egypt, Eritrea, Sudan, and Somalia against it. But as the balance of power in the Middle East has shifted toward the Gulf, and as Gulf Arab states began to look more closely at the Horn of Africa as key to food security and their strategic interests more broadly, relations have slowly strengthened.

The UAE and Ethiopia began tentative diplomatic engagement based on mutual economic interests in 2013, before the decline in oil prices. In the case of Eritrea, when the UAE military was ejected from Djibouti at the beginning of the Saudi-led intervention in Yemen in 2015, Abu Dhabi quickly engaged with the government in Asmara over access to its port of Assab. Until then, Eritrea had been close to Iran, receiving aid and allowing the Iranian navy use of Assab. Eritrea also had good relations with Qatar, which had kept a contingent of troops along a disputed Djibouti-Eritrea border until Eritrea sided with the UAE and Saudi Arabia in their dispute with Qatar. Eritrea cut ties with Iran and agreed to allow the UAE to build up military facilities just across the Bab el-Mandeb from Yemen’s southwest coast. The bases there have played a crucial role in the UAE’s ability to conduct military operations in southern Yemen, including the amphibious assault to retake Aden from Houthi forces in August 2015. In exchange, according to experts, the UAE and Saudi Arabia have helped modernize Eritrea’s power grid and have given in-kind assistance of oil, among other aid. According to the U.N. panel of experts on Somalia and Eritrea sanctions, Eritrea deployed around 400 troops to Yemen as part of the coalition forces. Eritrea’s budding ties to the UAE and Saudi Arabia – an apparent lifeline offering relief from its international isolation – triggered an alarmed response in Addis Ababa.

Ethiopian officials flew to Abu Dhabi for talks in late 2015. The exchange was rocky, partly because the Ethiopians felt slighted by the transactional and tactical approach of their Emirati counterparts, according to a former Western official. Whatever the learning curve was for both sides, however, it appears that Abu Dhabi and the Hailemariam government quickly found a modus vivendi that worked and steered the relationship through confidence building to an increasingly strategic partnership. An understanding was reached over the UAE’s relationship with Ethiopia’s enemy Eritrea, as well as Abu Dhabi’s close ties to Cairo. Egypt and Ethiopia have been in a heated dispute over water rights and Ethiopia’s construction of the upper riparian Grand Ethiopian Renaissance Dam. When it came to Ethiopia’s sphere of influence in the Horn of Africa, the UAE would not abet any potential efforts by Egypt to undermine Ethiopia, according to a source close to Ethiopian security officials.

This initial cooperation soon grew more strategic. Ethiopia had for at least a decade tried to find an international partner to develop Somaliland’s Berbera port into a facility capable of handling large volumes of cargo and thereby reduce land-locked Ethiopia’s almost total dependence on the port of Djibouti for trade. According to scholars at Khalifa University in Abu Dhabi, Ethiopia worked to steer Emirati interest in developing Berbera by offering to guarantee trade volumes and eventually use the port for 30 percent of its trade. In addition to the Berbera port talks, Abu Dhabi began discussions with Somaliland to refurbish a former Soviet and, subsequently, U.S. airstrip near the port city and build a naval base. Many analysts have speculated that Ethiopia supported the Emirati military base buildup in Berbera in order to dilute the importance of Assab. In fact, Ethiopia asked the UAE to remain in Assab so that Eritrea would not be able to offer the empty bases to Egypt, according to the source close to Ethiopian officials. Ethiopia signed a deal with Somaliland in February 2015 to develop Berbera port, a month before a subsidiary of DP World began its own discussions with the government in Somaliland’s capital of Hargeisa that were finalized in May 2016 with the signing of a $442 million agreement to develop the port and some related human capital and infrastructure. A year later, Ethiopia was given a 19 percent stake in the port and agreed to spend $80 million, in contributions in kind or cash, to develop connectivity infrastructure linking it to its border, according to Somaliland officials. The Ethiopian push to involve the UAE in developing Berbera benefited from the legal dispute between DP World and Djibouti over its 2006 concession to run the largest container terminal there, which culminated in Djibouti seizing the terminal from DP World in February.

There is still anger in Abu Dhabi with Djibouti’s moves against it – and vice versa. The mutual animosity has coincided with growing frustration in Washington over Djibouti’s expanding relationship with China, which built a military base and naval facility close to the U.S. Camp Lemonnier base. A Chinese company may also take over the Doraleh container terminal seized from DP World, and Beijing is providing loans and strengthening its ties to the strategically located state, including through the construction of four new ports. The U.S. military has declared a move away from counterterrorism operations in Africa and toward great power competition with China and Russia, and Eritrea’s coastline may provide an attractive alternative or addition to Djibouti. A U.S. official said that great power competition in the Horn of Africa must also provide an economic dividend for the United States, not just in countering Chinese influence for its own sake, though the U.S. private sector lags far behind Chinese and Middle Eastern state-backed, private companies and small- and medium-size enterprise entrepreneurs in eastern Africa. Ethiopia’s economic reforms and desire to partner with international port operators to develop alternatives to Djibouti and increase trade may provide the needed economic justification. Normalization between Ethiopia and Eritrea could also foster cooperation on counterterrorism and security at a time when Washington wants partners to take on more of the burden. Regardless, U.S. officials were engaged in diplomacy between Ethiopia and Eritrea since at least January, before Abiy came to office, according to an expert on African politics and analysts based in the Horn of Africa.

The UAE was likely leading the mediation efforts, and its role became increasingly apparent in the final stages of the rapprochement between Ethiopia and Eritrea. On June 15, 10 days after Abiy said Ethiopia would honor the 2002 boundary agreement to accept Eritrean sovereignty over Badme, Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan, along with a high-level delegation, visited Addis Ababa to meet Abiy at a key moment in the prime minister’s reform rollout. The two countries announced that the UAE would inject $1 billion into Ethiopia’s state bank in order to help stabilize the country’s foreign exchange reserves and provide $2 billion in additional aid. The two leaders also discussed Emirati investment in Ethiopia as its economy privatizes.

The countries’ economic interests are highly complementary. Ethiopia’s infrastructure boom, which includes a number of power projects that will boost capacity to double current domestic needs, desperately requires private and foreign investment. The privatization of telecom conglomerates and Ethiopia’s national airline as well as other growing industries offer significant opportunities for Emirati private investors and state-backed companies that are looking for more international investment opportunities as fiscal budgets shrink in the Gulf. While Abiy is privatizing some sectors of the economy, the state still plays a controlling role. For the UAE, this makes for a familiar economic environment in which to invest. Ethiopia’s economic development plans are premised on the expansion of its industrial base, spurred through the massive development of its agricultural sector, which employs 85 percent of Ethiopian workers as small subsistence farmers. The Agricultural Development Led Industrialization plan aims to increase industrial sectors built around the core agricultural economy, such as textiles and leather goods, and eventually transition to a fully industrialized economy.

But this long-held goal has still not been met. Currently only a quarter of arable land is being cultivated, although Ethiopia has a surplus of water. It is in need of investments in agriculture, and the UAE has a prevailing food-security interest in developing this sector in eastern Africa, though the politics around land use are likely to continue to make this a fraught undertaking.

After Mohammed bin Zayed’s trip to Ethiopia, a high-level Eritrean delegation traveled to Addis Ababa on June 25 for the first time for talks, landing in the capital in an Emirates Airlines jet. Afwerki had not clearly or publicly accepted Abiy’s move over Badme, and Boston University political scientist Michael Woldemariam said that the sequencing of the announcements and meetings appeared to have been planned to give the Eritrean president domestic breathing room to pursue the final rapprochement. On July 3, Afwerki visited Abu Dhabi and met with Mohammed bin Zayed. The two leaders agreed that the UAE would pursue greater investment in Eritrea through agriculture and manufacturing and assist in developing the country’s physical infrastructure. Then, on July 9, Abiy and Afwerki embraced in Asmara to cement a historic peace deal and pledged to increase economic, security, and cultural cooperation.

UAE Interests

Over the past year, the rivalry among Gulf countries and Turkey has played out most vividly in the Horn of Africa, a region of increasing importance for aspiring world powers and new regional powers alike. The field for this competition has mostly been Somalia, where the Middle East powers’ interests are less clear, but where the fragmented body politic and predatory political entrepreneurs in charge have made it a particularly conducive environment for intrigue. Both client and patron exploit one another for short-term gains, and the particularly zero-sum battle for influence between Qatar and the UAE has contributed in key ways to destabilizing dynamics in the country.

The UAE-Ethiopia partnership is already having ripple effects, especially in Somalia. After meeting with Mohammed bin Zayed in Addis Ababa, Abiy flew to the Somali capital of Mogadishu for talks with President Mohamed Abdullahi Mohamed, known as “Farmajo,” which resulted in a vague memorandum of understanding committing to greater political and economic integration between the two uneasy neighbors, including joint development of four unnamed ports. Alongside Ethiopia’s interests in better relations with Somalia, Abiy’s trip was also a bid to mediate between the UAE and Farmajo’s government, which has stridently opposed the Berbera port and the UAE’s relationships with Somali federal member states that bypassed the central government. Farmajo is backed by Qatar and Turkey, and his government’s ties to the UAE have disintegrated as the Gulf rivalry has played out in the country. Remarkably, since Abiy’s visit, Farmajo has spoken about resuming talks with Somaliland, the autonomous Somali state and UAE ally. Former Somali officials, members of parliament, and Western diplomats in Somalia have said that Farmajo appears to have calculated that in order to avoid strengthening opponents among the leaders of the Somali federal member states, he will try to balance his government’s relations with Qatar and the UAE. It is unclear if this will indeed occur, and what promises may have been made or Abiy’s exact role, but a dilution of Qatari influence in Mogadishu would be another – albeit smaller – victory for UAE foreign policy objectives.

Its new relationship with Ethiopia also holds potential challenges for the UAE. At the top of the list is Egypt, a close ally. Cairo was likely alarmed by Abiy’s announcement of his aim to relaunch the Ethiopian navy, as it does not want to see its rival become a Red Sea naval power. If the UAE and Saudi Arabia are looking to increase agricultural investments in Ethiopia, Egypt may also lose diplomatic support over the Grand Ethiopian Renaissance Dam and safeguarding what it sees as its national security interest in the Nile waters. But the UAE has successfully mediated between its allies and Egypt in the recent past – most notably with Saudi Arabia in 2016. According to a former Western official, at that time officials from a Horn of Africa country approached their Emirati counterparts during talks and asked for mediation with Cairo over the Blue Nile dam dispute, just as they were doing for Riyadh. “Yes, yes, we are dealing with this first,” the UAE official reportedly said. “And then we will get to that problem.”

As China’s experience in Ethiopia has illustrated, economic gains may be more difficult to realize than political goals. For the UAE and other Gulf countries, a short-term return on investments for state and private firms is an economic imperative. For Abiy’s economic liberalization program to be successful it will have to navigate a newly empowered citizenry with sky-high expectations. Past Gulf state attempts at agribusiness in the Horn of Africa have failed for a number of reasons, but the local political realities around land use were central.

Despite the undeniable challenges ahead, the sudden peace between Ethiopia and Eritrea is a positive geopolitical development that has brought immediate hope to the majority of the two countries’ people and has been embraced by every neighboring state in the Horn of Africa, a region that until now has been most notable for its conflicts and human suffering. The growing Gulf role in the Horn of Africa over the past three years has increased uncertainty. But the developments between Ethiopia and Eritrea illustrate the valuable role Gulf actors with longer-term stakes in the region can play in helping even seemingly implacable foes pursue common interests. It also underscores the ways in which the UAE, under the right conditions, is becoming increasingly sophisticated at using diplomacy as a means to pursue its strategic geopolitical ambitions.