Djibouti has invested heavily in making itself a hub for deep-sea shipping in the Horn of Africa, and much of its business depends upon its status as the sole seaport for landlocked Ethiopia. However, its port revenues could be challenged by the re-emergence of neighboring Eritrea that could soon regain access to global commerce.
Eritrea won its independence from Ethiopia in 1991, and it remained in a permanent “state of war” with its former occupier until this July, when Ethiopian Prime Minister and Eritrean President Isaias Afwerki signed a landmark peace agreement.
The deal opens the path to resumed commercial ties, explicitly including the possibility for joint seaport development – much to the consternation of Djibouti, which has a cold relationship with Eritrea and would not benefit from a neighboring competitor.
An Eritrean port development plan could have foreign backers. The United Arab Emirates has longstanding ties with Eritrea, and in 2015 it built a naval base at the Eritrean port of Assab to support its military operations in Yemen, just across the Red Sea.
Emirati diplomats helped to broker the peace agreement between Ethiopia and Eritrea this July – after Djibouti took control of the Doraleh container terminal from UAE-owned DP World, sparking protests from the UAE.
Analysts note that the Emirates could underwrite the expansion of competing port facilities in Eritrea to handle Ethiopian cargo.
DP World has already made similar moves in Berbera, Somaliland, where it is investing $440 million in a new multipurpose port to serve the Ethiopian market – potentially drawing business away from Doraleh.