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KenOpalo.Substack.com: Ethiopia needs a reliable seaport and a navy

Posted by: Berhane Habtemariam

Date: Monday, 06 November 2023

In order to secure its economic future, Eastern Africa's wobbly giant must overcome the landlockedness penalty.

     I: The largest landlocked country in the world

I have always found it puzzling that, in negotiating the potential future independence of Eritrea, Meles Zenawi and the Tigray People’s Liberation Front (TPLF) did not put up a spirited fight to lock in direct ownership of a port on the Red Sea. Throughout the war to dislodge the Derg from power, the TPLF never wavered on its support for eventual Eritrean independence. Perhaps it was the ineluctable consequence of the Eritrea Peoples Liberation Front’s (EPLF) upper hand in the early stages of the military alliance against the Derg, especially after the 1985 ideological fallout; a resignation to the fact that federation or annexation was never going to work; or a belief that Eritrea would see the economic benefits of being the gateway to a post-Derg Ethiopia.

It is also possible that the TPLF leadership thought they could keep the EPLF onside to honor port access rights by directly interfering in Eritrean politics after independence. After all, during the war the TPLF cultivated the Democratic Movement for the Liberation of Eritrea (DMLE) as an alternative to the EPLF; and had advocated for its brand of ethnic federalism in Eritrea as a means of settling the “national question” (Eritrea has nine recognized ethnic groups). An Eritrean internal reckoning with demands for subnational self-government would have presumably kept Asmara distracted and compliant with Ethiopia’s negotiated seaport access rights.

Whatever the explanation(s), Eritrea’s formal independence on May 24, 1993 made Ethiopia the most populous landlocked country in the world.

The question of Ethiopia’s access to the sea recently made the headlines when Prime Minister Abiy Ahmed expressed the need to secure reliable seaport access, either peacefully or by force:

Abiy has identified sea access as a strategic objective for landlocked Ethiopia and warned that failure to secure it could lead to conflict down the road. In a televised lecture, he called for talks with neighboring countries and suggested that they could be given shares in the Grand Ethiopian Renaissance Dam in return for similar stakes in their ports. He also referenced the nineteenth century Abyssinian warrior, Ras Alula Abanega, who said the Red Sea was Ethiopia’s “natural boundary.”

As expected, there were murmurs in Eritrea, Djibouti, and Somalia, countries whose ports are leading candidates for an Ethiopian acquisition through commercial deals or (highly unlikely) force. Abiy’s careless statement about force — typical of his elevated sense of self-importance and very likely to be a misguided negotiating tactic vis-a-vis Djibouti — was catnip for the Horn commentariat that delights in pillorying the gaffe-prone Ethiopian Prime Minister. Consequently, few (with some exceptions) paid attention to the economic case for Ethiopia acquiring a reliable access to a seaport as well as the capacity to militarily protect such access.

Ethiopia’s economic case for reliable and cost-effective seaport access is strong. In order to secure its economic future, the country must minimize or completely erase the economic costs associated with being landlocked. Overall, landlocked countries tend to be 20% less developed than they would be if they had access to the sea. This is partially due to cost of trade, with transportation costs being between 50%-262% higher for landlocked countries.

Given the significant economic costs associated with being landlocked, it is a no-brainer that for Ethiopia to achieve its ambitious developmentalist agenda — which will necessarily require export-oriented industrialization and improved agricultural productivity — it needs to have more control over trade-related costs and policy (or procure stability on both fronts from its neighbors). According to the Ethiopian government, transportation costs gobble up 16% of the value of international trade (which seems really high). Foreign trade currently amounts to 24% of GDP, and needs to grow by orders of magnitude. With an annual output of US$127b, Ethiopia is already Eastern Africa’s biggest economy (Kenya is second at US$113b) but with lots of low-hanging opportunities for even bigger trade-driven output.

Last year Djibouti cut stay of cargo days from 45 to 8 days. In addition, the port is more expensive relative to neighbors, often lacks storage space, and suffers from untimely availability of empty containers for exports. These factors have are the motivation behind Ethiopia’s aggressive port diversification initiative. As of early last year, Djibouti City’s share of Ethiopian trade cargo had declined from 95% to just under 86%, with the Kenyan border Moyale dry port (0.02%), Somaliland’s Berbera (5%), and Djibouti’s Tadjoura (9.6%) emerging as alternatives. These latter routes, however, lack the infrastructure (roads, petrol stations, service and repair stops, etc) to support bulk haulage logistics.

His careless bluster notwithstanding, Abiy has significant leverage over Djibouti (population 1.1m). Ethiopia is Djibouti’s leading revenue generator, ahead of the naval base leases by China, France, the United States, Saudi Arabia, Italy, and Japan. Ethiopian trade reportedly generates more than US$1b each year for the Djiboutian economy. Rents from foreign military bases estimated to be at least US$120m per year. The service sector accounts for nearly 80% of Djiboutian GDP (US$3.5b in 2022), much of it related to ports and logistics. Ethiopia accounts for upwards of 85% of all cargo passing through Djibouti.

     II: The economic case for securing reliable seaport access

As shown below, over the last decade Ethiopia has quintupled its industrial output and is quickly catching up with its regional neighbors. If these trends are to continue and if Ethiopia is to attract both domestic and foreign investments into its manufacturing sector, the state must guarantee investors that they will be able to access global markets at reasonable prices. The same goes for investments in the agricultural sector, which still has a commanding share of exports. Agriculture accounts for nearly 38% of GDP (including 50% of manufacturing production), 80% of employment, and about 90% of forex earnings.

Source: Author using World Bank data

Ethiopia’s planned rail network (see below) reflects the country’s industrialization agenda (the same goes for the overall transport masterplan, including road infrastructure). The proposed lines are all designed to serve specific industrial parks. Currently the main rail network (red) terminates at Djibouti City (Doraleh Multipurpose Port), with a planned alternative route to the opposite side of the Gulf of Tadjoura (in Tadjoura). While the rail network will certainly serve domestic production and distribution of goods once completed, an equally important objective should be to guarantee high-enough international traffic volumes to pay for its construction and ongoing maintenance.

As revealed by the planned railway network below, Ethiopia’s seaport options are largely limited to Djibouti — which is cause for believing that Abiy’s comments, if he really meant them and was not just carelessly thinking out loud that he is the latter day Ras Alula Abanega, were a negotiating tactic vis-a-vis Djibouti. Given its importance for Ethiopia’s maritime trade, is also likely that Djibouti is Addis Ababa’s first choice for the location of the planned naval base.

Ethiopia’s industrial parks are in Jimma, Hawassa, Adama, Dire Dawa, Bole Lemi, Debre Birhan, Semera, Kombolcha, Bahir Dar, and Mekelle. Source: Wikipedia

While Ethiopia should certainly diversify its trade and logistics networks — including through the purchase of stakes on regional ports and the construction of road links to alternative ports across the region — Djibouti dominates the other options on the table as the prime candidate for the title of “Gateway to Ethiopia.” In ascending order of distance from Addis Ababa (see below), the options include: Djibouti (867km), Tadjoura (880km), Assab (883km), Berbera (936km), Lamu (1279km), Massawa (1317km), and Port Sudan (1770km).

Source: Mitsui & Co

Djibouti’s advantage is twofold: 1) it offers the most cost-effective option (based on distance and terrain); and 2) it already has a working trade and logistics arrangement with Ethiopia. Moving forward, this arrangement ought to be strengthened through the establishment of a joint authority to manage the Djibouti-Ethiopia trade corridor. Such a corridor would handle the construction and maintenance of all shared infrastructure, port operations, trade policy and customs, and serve as the vehicle through which third parties can invest in the shared infrastructure. To sweeten the deal, Abiy should follow through on the offer to give Djibouti a stake in Ethiopian strategic state-owned enterprises like Ethiopian Airways and telecoms firms. On its part, Djibouti should signal credible commitment to uninterrupted port access by allowing Ethiopia to set up a naval base either in Tadjoura or Djibouti City.

Infrastructure projects funded by actors like the African Development Bank, the World Bank, and China should be designed to crowd in all manner of cross-border cooperation and minimize political risk for either side. To this end, more projects like the Ethio–Djibouti Transboundary Water Project that connects water from Ethiopia to 68% of Djiboutians are required.

Beyond Djibouti, Ports in Eritrea (Assab) and Somaliland (Berbera) would be the second-best options. Massawa would be unsuitable on account of distance and terrain. From Massawa to Asmara is a climb of 2300km in just over 65km, making it hard to build and operate infrastructure for bulk haulage. In addition to the costs of building and maintaining new infrastructure, Assab and Berbera would come with elevated political risk were they to become Ethiopia’s principal ports. Assab would have the advantage of history, having once handled the majority of Ethiopia’s trade, a small naval base, and its first refinery.

Yet while it is plausible that Addis Ababa would find reason to tie Eritrea economically to itself as a means of guaranteeing future peace, the medium term unpredictable political environment in Asmara exposes Ethiopia to hold-up problems once the port and logistics infrastructure are in place. Choosing Berbera would also be risky as it would drive a wedge between Addis Ababa and Mogadishu, and risk inviting attacks from Somalia nationalists. These are good reasons to use these ports as means of diversification but not as principal ports. The same goes for the third-tier options of Lamu and Port Sudan, which also come with security risks — potential attacks by Al Shabab in along the route from Lamu, and conflicts and hold-up problems in Sudan.

     III: The economic case for an Ethiopia navy

Ethiopia exists in a geopolitical neighborhood racked by security threats. This reality goes back centuries and shaped the evolution of Ethiopia’s transport infrastructure, a fact illustrated by Abiy’s invocation of Ras Alula Abanega. Therefore, no one should be surprised than a history-conscious elite in Addis Ababa would find reason to build the military capacity needed to protect Ethiopian economic interests.

To this end, Ethiopia’s leadership should learn the right lessons from the two times in the modern period that the country acquired access to the sea: diplomacy backed by a military guarantee works better than naked coercion.

Emperor Yohannes famously resisted the construction of railways, fearing that such an innovation would expose Ethiopia to foreign influence and eventual domination. Even Menelik II, the Great Modernizer (and imperial expansionist), feared that building a railway to the coast would lower the cost of a foreign invasion (at the time the Ottomans, Egypt, Mahdist Sudan, and Italians were the main threat). He must have remembered that when the British invaded Ethiopia in 1868 under Tewodros II’s watch, Napier had built a temporary railway to transport troops and weapons on the coastal plain (the track was dismantled after Napier’s departure). One of the emperor’s advisers sent him a grim warning:

When the railway reaches Harar, Harar will be no longer yours, and when it reaches Addis Ababa, Shoa will be no longer yours.

Menelik eventually concluded that the economic benefits of a railway to a seaport outweighed the security risks. Some have argued that it helped that he came from Shoa, an imperial province that leveraged its autonomous status to promote international commerce:

since the time of Prince Abiyye who won the battle with the royal troops from Gondar in the middle of the 18th century, [Shoa] was attractive for the European and Muslim traders because of the uniform customs charges and sensible regulations issued by its princes who were fully aware of the inconveniences of mule transport and its costs that greatly hindered the trade in various commodities such as coffee, ivory, wax or hides and skins.

A delicate balancing of competing European imperial powers dictated the construction of the first railway line to the coast. Italy had already grabbed Eritrea, a fact that foreclosed on any links to either Massawa, Assab, or Zula. The British, ever focused on controlling the headwaters of the Nile, were more interested in linking Ethiopia to the sea through Sudan and ensuring that the Ethiopian state did not become a French pawn. Understandably, Ethiopia was suspicious of opening itself up to dependence on Egypt. Eventually, British investors settled on balancing French interests in the wider region by acquiring shares in a line constructed by the French through their colony of French Somaliland (Djibouti).

Ethiopia and the French firm Duparchy and Vigouroux signed a contract in January 1896. However, the French delayed any financial commitments until Italy’s quest to conquer Ethiopia was put to the test (the matter was famously settled two months later in Adwa). The solution of the Italian problem generated new French problems. France was keen on neutralizing Ethiopia as a state power and dividing it up into European spheres of influence (with the Brits and Italians). Menelik, the British, and even the Italians did not like this plan (control of Ethiopia’s main transportation artery gave France a massive advantage). The back-and-forth on this question, and Menelik’s willingness to delay construction to get his way, partially explains why it took two decades to finish construction. Even after completion, the substantial taxes demanded by France made the line one of the most expensive freight lines in the world — a fact that certainly slowed down Ethiopian economic performance in the late imperial years.

Fascist Italian occupation after 1937 came with a road link to Assab, thereby giving Ethiopia an alternative sea route. This arrangement persisted throughout the British mandate in Eritrea (1941-1952). Following the creation of the Federation of Ethiopia and Eritrea (1952-1962), the imperial government diverted trade from Djibouti to the ports in Massawa and Assab. It also established a navy in 1955, headquartered in Massawa. This arrangement persisted after Ethiopia dissolved the federation and annexed Eritrea outright (1962-1991). By the 1970s, Assab had supplanted Djibouti as Ethiopia’s primary seaport. Unfortunately for Addis Ababa, annexation ignited an armed rebellion that culminated in Eritrean independence in 1993 after almost three decades of war.

Contemporary Ethiopia faces similar geopolitical challenges. The port of Djibouti, its most important access to global markets, is crowded with foreign naval bases that could some day be used as tools of coercive diplomacy against Addis Ababa (see above). Under the circumstances, it would be negligent of Ethiopia’s leadership to not consider investing in a navy — if only to ensure that the country gets a seat at the table when matters related to Red Sea and Indian Ocean sea lanes are discussed.

Sudan (Port Sudan), Eritrea (especially Assab) and Somaliland (Berbera) are alternatives, but also come with historical baggage and significant political risk in the case of breakdown of bilateral relations or conflict (see Sudan). In the case of Berbera, Mogadishu has made it clear that it considers treaties with Somaliland as violations of its sovereignty. The Kenyan port of Lamu comes with exposure of large parts of the long logistical chain to terror attacks from Al Shabaab and/or subnational armed groups in Ethiopia (including proxies of geopolitical rivals).

And then there is Egypt. Whether operating directly or through potential proxies in Somalia, Eritrea, Sudan, or within Ethiopia, Egypt is Addis Ababa’s most important geopolitical rival. While much of the rivalry is focused on the Nile and influence in Khartoum and Juba, the two countries also compete for the title of pre-eminent African Red Sea power. On this score Egypt currently enjoys a significant lead. It has the largest navy in Africa (12th largest globally), with an economy almost four times larger than Ethiopia’s. It is conceivable that as Ethiopia begins to narrow the economic and military gap, Egypt might find good reasons to disrupt Ethiopia’s rise.

All this to say that it is in Ethiopia’s long-term economic interest to have a powerful green water navy (in addition to any brown water units it might have to protect important riverine and lacustrine assets). Having a navy would be vital for protecting Ethiopian economic interests in Djibouti, guaranteeing seaport treaties with transit countries, patrolling both the Red Sea and the Indian Ocean to protect Ethiopian cargo, and deterring aggression from geopolitical rivals.

Building a navy would also come with the direct economic effect of having a ship-building industry and lots of jobs in related sectors — both in Djibouti (the most likely location of an Ethiopian navy) and Bahir Dar (the likely command headquarters of such a navy).

     IV: Conclusion

It had to disagree with the claim that the Imperial Ethiopian Navy (1955-1974) was mostly a prestige pastime for Emperor Haile Selassie. The nepotistic circumstances of its founding (it was headed by the emperor’s grandson between 1958-1974), its use largely as a nationalist symbol of modernization throughout the late imperial era, and the attempted development and gradual degradation under an inwardly-focused Derg may persuade some of the disutility of an Ethiopian navy. However, it would be a mistake to project the same conclusions on the current Ethiopian state.

Sentiments towards Abiy Ahmed, admittedly not the ideal person to be leading Ethiopia at this crucial moment in its history, should not distract from the real needs of the Ethiopian state, its economy, and its people. Ethiopia is much bigger than Abiy and his shortcomings. It is also too important a country to be understood solely through an inwardly-focused “governance” lens.

The fact of the matter is that the case for an Ethiopian navy as a guarantor of its economic interests in the Red Sea and the Indian Ocean is strong. There are real costs associated with being landlocked, which can only be overcome by having a reliable access to a seaport backed by a credible joint trade corridor administrations with Ethiopia’s neighbors — most importantly with Djibouti. Such arrangements would guarantee policy stability, institutionalize the sharing of the gains from trade, reduce political risk, and bolster Ethiopia’s attractiveness as an investment destination. It would be a dereliction of duty for Addis Ababa to assume that its economic rise will go unchallenged (militarily) both in the Horn and wider Red Sea basin.


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