Date: Thursday, 07 September 2023
This article is an update to a previous article on the topic: “Navigating U.S. Sanctions and Restrictions on Ethiopia and Eritrea.”
Several U.S. sanctions and restrictions on Ethiopia and Eritrea remain in place due to the countries’ failure to fully implement the peace deal reached with the Tigray People’s Liberation Front in November 2022.1 While progress has been made toward ceasing hostilities, reports of human rights abuses in the region persist. The ongoing restrictions continue to create uncertainty for those seeking to do business in Ethiopia, Eritrea, and the Greater Horn of Africa region, even as foreign investment in Ethiopian telecommunications and aviation has resumed. Those with interest in investing in the region should take careful note of the current status of sanctions and restrictions in the region in order to avoid negative impacts on their business.
After two years of armed conflict, a peace deal was reached between the Ethiopian government and the Tigray People’s Liberation Front in November 2022.2 Since then, some efforts have been made to carry out the terms of the agreement. For example, Tigray People’s Liberation Front members began handing over heavy weapons to the Ethiopian national army on January 10, 2023, and the active fighting has ended.3However, there are ongoing allegations that the government is committing human rights abuses against civilians.4
While U.S. officials have acknowledged the progress that has been made thus far to implement the peace deal,5 most sanctions and restrictions remain in place.
Since the peace agreement was reached, the United States has taken the following measures:
The Ethiopian government first announced plans to liberalize the economy in 2018,21 but the conflict in Tigray hindered attempts to attract investment.22 In February 2022, the Ethiopian government launched a fund to attract investment for $150 billion worth of state-owned companies and assets, marking a significant step towards privatization.23 However, the ongoing conflict and the government’s reputation for turning off internet and phone services created hesitancy for many investors.24 Since the peace deal was reached, discussions around strengthening the Ethiopian economy and privatizing key sectors, such as telecommunications and aviation, have resumed.25
The peace agreement has helped Ethiopia's private telecommunications industry recover after a faltering start. Before the peace deal was finalized, the U.S. International Development Finance Corporation (DFC) announced that it was considering recalling its $500 million loan to Safaricom Ethiopia, the first private telecommunications operator in the country,26 because of the human rights violations committed against civilians during the conflict.27 However, discussions with the DFC ended after the World Bank Group’s private investment arm and guarantee agency, the International Finance Corporation (IFC),28 reached an investment agreement with Safaricom.29 In June 2023, the IFC and the Multilateral Investment Guarantee Agency (MIGA) committed to making 10-year guarantees of $1 billion to Safaricom’s shareholders, Vodafone Group, Vodacom, Safaricom, and British International Investment, and a $100 million A-loan to Safaricom itself.30 The IFC will hold a minority position in the company.31
Safaricom is not the only Ethiopian telecommunications provider to seek outside investment following the ceasefire. In November 2022, Ethiopia resumed the process of selling a 45% stake32 in Ethio Telecom, a state-owned telecommunications company, after initially having to postpone the sale.33 Currently, Emirates Telecommunications Group Co. and France’s Orange SA are exploring bids for the 45% stake, but the sale has not been finalized.34 The Ethiopian telecommunications market as a whole is attractive to investors, as Ethiopia has the second-largest population in Africa and is one of the largest telecommunications markets that can still grant a new license to mobile operators.35 Ethio Telecom in particular may be desirable to investors, as the company reported a 20% rise in half-year revenue, amounting to $633 million.36
Although the peace agreement has reinvigorated some foreign funding in the aviation industry, concerns around the implementation of the peace deal have presented a challenge to securing it.
The Export-Import Bank of the United States, an independent executive agency and a U.S. government corporation,37 received an application from Ethiopian Airlines, Africa’s largest carrier, for a $100 million loan to purchase Boeing passenger and cargo airplanes in November 2022.38 Discussion around the loan was a source of tension in Congress.39 Several members of Congress expressed concerns that approving a loan to Ethiopian Airlines Group at this stage would “deprive the State Department of a critical tool to ensure the full implementation of the peace agreement."40 Despite these concerns, the Export-Import Bank approved a $281 million loan from the Private Export Funding Corporation to Ethiopian Airlines Group in December 2022.41 Ethiopian Airlines Group recently reported a $6.1 billion revenue for the current fiscal year, a 20% increase from last year.42
Several significant U.S. sanctions and restrictions on Ethiopia and Eritrea remain in place, as the peace deal has yet to be fully implemented. However, foreign investment in newly liberalized sectors, such as telecommunications and aviation, has resumed at least in part.
Companies looking to do business in the region, or with concerns about these sanctions, should continue to closely monitor the situation for additional sanctions and contact Ahmad Murrar or Parker White to discuss these topics further.
Foley’s International Trade & National Security practice can help companies navigate this maze of sanctions and restrictions. Its partners include former officials from the Office of Foreign Asset Control, which administers Treasury Department sanctions, and the Department of Commerce. Foley’s Federal Public Affairs practice also can provide companies with up-to-the-minute information about legislative trends.
2023 Foley & Lardner LLP Summer Associate Casey Glasser contributed to the drafting and research of this article.