Djibouti’s Relations with Ethiopia

Djibouti is greatly affected by events in Somalia and Ethiopia, so relations are important and, at times, delicate. The 1991 falls of the Siad Barre and Mengistu governments in Somalia and Ethiopia, respectively, caused Djibouti to face national security threats due to instability in the neighboring states and a massive influx of refugees estimated at 100,000 from Somalia and Ethiopia.

Djibouti became Ethiopia's sole link to the sea when fighting broke out between Ethiopia and Eritrea in 1998. Djibouti’s relations with Eritrea have become strained after a military confrontation in June 2008 along their shared border. The new railway line from Ethiopia's capital to neighboring Djibouti- built and paid for by China - went into operation in January 2018. Over a century ago, the French had already built a rail line between the two African nations. It essentially stopped worked ten years ago, but a few cars kept running. Now, in cities where the old line stopped, expectations for the new one are high.

In 2000, after 3 years of insufficient rain, 50,000 drought victims entered Djibouti. The number of refugees in Djibouti doubled from 2006 to late 2009, with approximately 12,000 registered with the UN High Commissioner for Refugees (UNHCR), predominantly from Somalia and Ethiopia. As of fall 2011, UNHCR reported 18,000 registered Somali refugees in Djibouti.

Tensions exist between neighboring Ethiopia and Eritrea due to their long-running border dispute. Relations were further aggravated in January 2012 when ethnic Afar gunmen attacked a Western tourist convoy travelling in Ethiopia's northeastern region that borders Djibouti. In March and May 2012, Ethiopia staged raids across the Eritrean border, bringing tensions to their highest point since the 1998-2000 war between the two countries.

Djibouti continues to cultivate cordial relations with Ethiopia, reflecting the fundamental economic ties between the two countries and a long tradition of interchanges. However, rising tensions in Somalia and Ethiopian military involvement in Somalia in 2007 fueled widespread criticism of Ethiopia among Djibouti's majority Somali-speaking population. President Guelleh attended the 2007 Africa Union summit in Ethiopia and supports the African Union peacekeeping operation for Somalia (AMISOM).

Ethiopia is one of Djibouti’s major trading partners. President Guelleh expanded Djibouti-Ethiopian cooperation in political, economic, and social integration. Both countries have committed to securing peace and stability in the region. The two countries also cooperate in their struggle against movements aimed at forming a sovereign “Greater Afar” land, a goal of some separatist parties in Ethiopia, Djibouti, and Eritrea.

In 1996, as a result of a trade and security agreement with Ethiopia, Djibouti handed over Somali rebels to Ethiopia and imposed restrictions on cross-border migration. Ethiopia’s use of Djibouti’s port has tripled since 1998, benefitting Djibouti’s economy.

On 23 February 2015 Ethiopia and Djibouti concluded an agreement giving a green light for the construction of an oil pipeline that stretches across the two countries. The pipeline is going to be managed by the US based African infrastructure development company Black Rhino.

The agreement was signed at the beginning of February 2015 by Tolosa Shagi, Ethiopian Minister of Mines and Ali Yacoub Mahamoud, Djibouti’s Minister of Energy in charge of Natural Resources Department. The fuel reservoir project is said to cost US$1.4 billion and expected to minimise fuel transportation costs.

The land locked country, Ethiopia, imports petroleum via road using trucks, which is costly. The plan is to construct a pipeline that stretches from the Djiboutian sea ports to a fuel depot in Awash, via Ethiopia’s eastern town, Dire Dawa. The pipeline will be 550 km long and is expected to minimise fuel trucks that make the trek from Ethiopia to Djibouti.

The Horn of Africa Pipeline is a ~550 km multiproduct fuel pipeline project, aimed at supplying Ethiopian jet fuel, diesel and gasoline demand. The Pipeline will transport refined oil products from the Port of Djibouti to storage facilities in Awash, Ethiopia (near Addis Ababa).

Currently, Ethiopia imports fuel through the Port of Djibouti. Tanker trucks transport jet fuel, diesel and gasoline from the Port of Djibouti into Ethiopia. 500 trucks per day transport fuel to the load-center in the greater Addis Ababa area, travelling ~800 km of narrow two lane road.

Ethiopia’s demand for refined oil products is growing at a rate >15% year on year. If compared to historically similar countries in a similar development path, Ethiopia’s demand for fuel will continue to increase at approximately 20% annually. The Project will expand import efficiencies and capacities, immediately unlocking GDP growth potential by filling nascent demand, and providing the country’s cheapest option for fuel transportation.

The current fuel transportation system is reaching the upper limits of its capacity, and a purely trucking scheme will not be able to logistically meet Ethiopia’s demand requirements. Trucking fuel will reach its ceiling, and start curbing Ethiopia’s economic growth within the next two years. The trucking system causes issues with adulteration and theft of product in transit and road conditions.

Black Rhino has developed the Horn of Africa Pipeline Project in joint-venture with MOGS, a wholly owned subsidiary of Royal Bafokeng Holdings. The Horn of Africa Pipeline JV has developed this Project from the concept stage, and upon completion the Project will represent an investment of $1.55 bn. The Pipeline is expected to be fully operational by Q4 2018.