UAE moves to squeeze Djibouti’s economy, opens alternative shipping line for Ethiopia
Relations between UAE and Djibouti soared, thus prompting Dubai to search for an alternative destination in which to invest.
by Jeff Mwaura, email@example.com
NAIROBI– One year after the Djiboutian government annulled the Dubai-based ports operator DP World’s terminal contract and launched arbitration proceedings over alleged corruption by the company, prompting UAE to search for alternative, striking a 30-year contract with the breakaway northern Somalia republic of Somaliland to manage its largest port of Berbera.
In response, the UAE government has taken a retaliatory move as parts of its new economy war to choke off the tiny horn of Africa nation’s economic sources and also established a significant trade relations with the landlocked Ethiopia in an attempt to sway it from Djibouti’s port to use its new $442 million investment platform of Berbera port.
Nearly 98pc of Ethiopia’s import and export cargo is shuttled via the ports in Djibouti with less than two per cent of this cargo, largely of food aid, come through Berbera, with only five berths, compared to Doraleh’s 15 and Djibouti’s 18.
The businessman who persuaded Dubai to invest in Djibouti, the dissident Abdurahiman Boreh, is believed to be behind last week’s deal, brokering it with Somaliland officials, according to a person knowledgeable of the process, according to Ethiopia’s Addis Tribune newspaper.
Boreh’s hand in the process is marked by his presence in Hargessa at the signing on May 9, 2016.
However, economists played down any immediate impact the UAE’s economic war with tiny nation which involves attempts to pull Djibouti port’s shipping clients to Berbera port will have on Djibouti which boasts one of the largest African shipping ports.
The Emirates’ DP World hasn’t however made its intention to open an alternative port for Ethiopia secret.
“Berbera will contribute to our continued growth in the developing markets of Africa in the years ahead. It is also a breakthrough in developing access to the sea for landlocked Ethiopia, the region’s largest economy. We look forward to bringing DP World’s world class productivity enhancing, security, safety and environmental best practices in container terminal development and operation to Somaliland.” said Sultan Ahmed Bin Sulayem, the CEO of DP World.
Meanwhile, Djibouti’s government insisted that Ethiopia’s use of Djibouti port may not end soon.
“Everything that Ethiopia imports or exports via the sea pass through Djibouti.” said Saad Omar Guelleh, the General Manager of the Port of Djibouti.
“The economic development actually ongoing in Ethiopia requires the importation of factories elements, all project cargo, and all kinds of vehicles as well as general cargo and containerization activities of most manufactured products.” He said.
The new railway between Ethiopia and Djibouti may also help Ethiopia and Djibouti to maintain their partnership for a long time.
In the face of competition and challenges over UAE’s Berbera investment, Djibouti will not take chances as it eyes to increase traffic to its port which is a backbone for the country’s economy to attract new clients.
“We want to develop several things. First of all the traffic we have with Ethiopia is based on imports and exports of Ethiopia, but we want to go further for instance to South Sudan. Our objective is to create a multi-modal platform in Djibouti; we want to handle all the traffic coming to East Africa from Djibouti and dispatch it through railway.” Mr. Guelleh said.
Emirates’ economic war with Djibouti started after the UAE consulate in Djibouti was closed last year followed by the departure of the Gulf Cooperation Council (GCC) troops based on a plot of land that Djibouti had put at its disposal in Haramous to set up its military base.
The crisis had since continued, leading to a vast reshuffle of the regional alliances.
“It’s a full-blown diplomatic and economic war, but given US and China’s alliance with both nations, chances of crippling Djibouti’s economy by the UAE are slim in the long term.” said Michael Kuff, a regional economist based in Addis Ababa.
Still using his country’s strategic position in the Gulf of Aden, Djibouti President Ismaïl Omar Guelleh has moved to strengthen his country’s ties with China.
Speaking to AFP, Mr. Guelleh declared that he was in negotiation with China about setting up a permanent Chinese military base in Djibouti, taking a slap in the face by the Americans, particularly as it came just four days after the official visit to Djibouti by US Secretary of State John Kerry.
China is developing massive port, rail and airport infrastructure in Djibouti. But so far, they have been purely civilian investments.
In response, the United Arab Emirates has forged an alliance with Eritrea, in an attempt to isolate Djibouti, using its neighboring countries.
However, Saudi Arabia, a regional partner of UAE has also joined the war with Djibouti; with King Salman bin Abdulaziz al-Saud of Saudi Arabia concluded a security and military partnership agreement with Eritrea’s president Issayas Afeworki last year. The Indian Ocean Newsletter has learned that Asmara offered Riyadh to have the GCC military base in Eritrea rather than Djibouti.
The US secretary of State John Kerry declined to intervene with the Emirates to settle the diplomatic crisis with Djibouti during two official visits to both countries last year.
(Additional reporting by stringer in Djibouti, editing by John Thiongo)