Ethiopia-Eritrea peace deal provides momentum to regional reform – Horn of Africa Special Analysis Report

This intelligence report was written by:

Gautham Ashok – MAX Security’s Senior Analyst for East Africa

And reviewed by:

Tzahi Shraga – MAX Security’s Chief Intelligence Officer, ret. LTC from the Israeli intelligence community

Rachel Jacob – MAX Security’s Regional Director of Intelligence, Sub-Saharan Africa Division

Executive Summary

Ethiopia’s unexpected move to implement the peace deal with Eritrea comes amid a series of reforms by new PM Abiy Ahmed that will improve the security of both countries, and the economic benefits of gaining access to Eritrean ports will likely ensure the peace’s durability.

Eritrea will take advantage of the opportunity to emerge from international isolation and re-establish political and economic relations with its neighbors, though the lack of internal reforms for its notoriously closed society is likely to drive domestic unrest and tensions along the border.

Djibouti’s regional position has weakened as its ports lose the near-monopolistic hold on Ethiopian trade and must hold on to its leases to foreign military bases to secure its economy, though these developments may undermine the government and raise the risk of civil unrest.

Somalia benefits from improved relations with Ethiopia and Eritrea in likely halting Eritrea’s support for al-Shabaab, as well as Ethiopia potentially recommitting more troops to Somalia in light of its military withdrawals from the Eritrean border.

As a whole, the Ethiopia-Eritrea peace deal will improve the stability of the Horn of Africa and increase opportunities for foreign investment and growth across the region.

Current Situation

On June 6, the Ethiopian government unexpectedly announced that it would fully implement the 2000 Algiers Agreement, ending Ethiopia’s war with Eritrea, as well as the subsequent 2002 Boundary Commission ruling that awarded contested territories, including the border town of Badme, to Eritrea.

During a joint meeting in Asmara on July 8, Ethiopian PM Abiy Ahmed and Eritrean President Isaias Afwerki announced that they agreed to set up embassies in their respective countries and resume flights and direct phone connections. On September 11, the Ethiopian government announced that the armed forces of both Ethiopia and Eritrea would be shifted back from their shared border. Border points were later opened for trade and movement of people for the first time in 20 years.

On July 23, Eritrean President Isaias announced that nationwide compulsory conscription would last only for 18 months, instead of lifetime service, due to “changed dynamics” in the region.

Ethiopia, Eritrea, and Somalia signed a tripartite agreement to strengthen political, economic, social, and security ties on September 5 in a meeting in Asmara. They formed a joint committee to further coordinate on these matters.

On September 7, Eritrea and Djibouti agreed to normalize ties more than a decade after a border dispute at Cape Dumeira led to military clashes and the establishment of a peacekeeping operation.


Since taking office in April, Ethiopian PM Abiy Ahmed has taken a series of steps that have transformed the political map and begun to restore public trust in the government. PM Abiy ordered the release of thousands of political prisoners, met with the political opposition and civil society, invited previously exiled opposition groups to return to Ethiopia, and embarked on major institutional reforms, including in economic, security, and justice sectors. The most significant of these was the implementation of peace with Eritrea. The announcement, and quick moves toward reconciliation with Eritrean President Isaias Afwerki, underscores the shift that Abiy brought to the Ethiopian government and ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) coalition. Although previous Ethiopian leaders had called for peace with Eritrea, no effort was made toward that end, and animosity between the leading Tigrayan People’s Liberation Front (TPLF) and the Eritrean government from Eritrea’s liberation war meant there was little chance of progress. Abiy’s ascension, and that he is an Oromo and lacked much of the political constraints that weighed down previous Ethiopian leaders, likely made it much easier to restart relations with Eritrea.

Security Implications – One of the clearer benefits of revitalizing the 2000 Algiers Agreement is its effect on the security landscape. First and foremost, it reduces the potential for conflict along the Ethiopian-Eritrean border, which had flared up periodically, with the most recent exchange of fire in July 2017. Moreover, both Ethiopia and Eritrea have sponsored rebel groups in each other’s countries, with groups such as Patriotic Ginbot 7 and various Amhara militias receiving funding and supplies from Eritrea, including physical bases of support in Eritrean territory.
FORECAST: Although it is likely that there will still be some measure of support by both countries to the others’ rebel groups, as they will continue to seek to limit their neighbors’ power as is seen across eastern Africa, this is likely to be substantially reduced. The reconciliation with Eritrea drastically reduces this threat inside Ethiopia, particularly as it has been coupled with efforts by PM Abiy to reach out to armed opposition groups and reintegrate them into civilian political life.

Political Indications – This was also an astute political maneuver by Abiy, which has largely worked. The new peace deal has widespread support in Ethiopia as well as the international community as a whole, and both of which are crucial to both consolidating his leadership and expanding Ethiopia’s influence. The contested town of Badme along the border saw isolated protests, but major protests that were expected out of Tigray Region, which takes up most of Ethiopia’s border with Eritrea, did not manifest. Apart from a series of statements demanding the government take into consideration the views of concerned stakeholders, the lack of public resistance from the TPLF further underscores their gradual sidelining in Ethiopian politics by Abiy and his Oromo party, the Oromo Peoples’ Democratic Organization (OPDO).

Economic Potential – Economically, the peace deal will give Ethiopia access to the underdeveloped Eritrean market and allow for exports to flow through the Red Sea. Ethiopia has relied on the ports of neighboring countries, especially Djibouti, to transit almost all of its bulky goods and services since the country became landlocked with the loss of Eritrea in 1993. This often incurred high prices, as Djibouti exploited its unique advantage as Ethiopia’s primary route to the sea. That these developments with Eritrea has led to the opening up of Eritrean ports and new plans to construct roads and railways between Ethiopia and the Eritrean ports of Massawa and Assab underscores the economic motivations for peace.
FORECAST: Using the Eritrean ports would allow Ethiopia more scope to ship its goods, as well as gain bargaining leverage with other ports it uses, particularly in Djibouti as well as more recently in Somaliland. This will expand Ethiopia’s options in drawing foreign investment, which would alleviate the country’s acute foreign exchange crisis. As a whole, these economic and financial interests are likely one of the key indicators that the peace deal with Eritrea will be durable.


Internal Developments – For decades, Eritrea has been a notoriously closed country, with authoritarian rule and little freedom of movement or information. The armed conflict and subsequent “no peace, no war” status quo with Ethiopia only exacerbated the situation in the country, as President Isaias utilized the external threats to consolidate internal control. The peace deal with Ethiopia, and subsequent steps to re-establish contact with their southern neighbor in terms of reopening border, represent positive developments for Eritrea’s intent to open up to the wider international community. However, there remains considerable doubt over whether these developments will translate into real political change within Eritrea.
FORECAST: To this point, reports in October have indicated that high numbers of Eritreans are taking advantage of the new open borders to flee to Ethiopia, with nearly 10,000 crossing in a single month. Although bilateral relations have improved, the movement of people suggests that this has not been met with corresponding domestic reforms within Eritrea. The continued restrictive environment is likely to further drive the exodus of those in search of political and economic opportunity, though this increasing refugee population may put pressure on Ethiopia and cause tensions with Eritrea over the coming months.

President Isaias’s announcement that nationwide compulsory conscription would last only for 18 months instead of lifetime service due to “changed dynamics” in the region was highly unexpected. Isaias has used Ethiopia’s policies toward Eritrea as a means of strengthening his rule, presenting Ethiopia as an existential threat and blaming it for much of his restrictive policies. However, given Ethiopia’s gestures toward peace, Eritrea’s policies against its own people can no longer be fully justified.
FORECAST: However, if and when the conscription time limit is implemented, soldiers who have been freed from conscription will likely to return to farms or seek employment in towns. However, one possible consequence is that, given mass unemployment is chronic problem in Eritrea, the discharging of hundreds of soldiers poses a threat to government stability. This threat is likely to grow, unless the government is able to mitigate it by directing the new civilians toward employment in the new sectors that will grow to accommodate the new Ethiopian investment.

Economic Potential – Given that the Eritrean economy has largely stagnated from 20 years of international isolation and UN sanctions for allegedly supporting militant organizations in Somalia, it is likely that the government finally acceded to using its geographical advantage to reinvigorate the economy. The revitalization of the Assab and Massawa ports will also be crucial to Eritrea’s ambitions of exporting potash, which is being mined in its Southern Red Sea Region and in Ethiopia’s Afar Region. Furthermore, the overall increased trade links to Ethiopia, currently Africa’s fastest growing economy, will serve as a reassurance for investors, as the economic ties will speak to the decreased risks of war. To this point, one important step in the process of bringing in Eritrea from its isolation has been the efforts by other East African countries to lobby the UN to lift economic sanctions. The joint appeal is likely to carry weight as it comes from countries such as Ethiopia and Djibouti, which were regarded as adversaries only months earlier.

Military Opportunities – In addition, it is likely that Eritrea hopes to become a key component of the region’s security architecture given that it is located on the Red Sea near the Bab al-Mandeb strait, a shipping choke-point used by oil tankers and other cargo vessels moving through the Suez Canal. The UAE has already used this geographical advantage to set up a military base in Assab, with additional bases representing another potentially lucrative source of income.
FORECAST: If the Eritrean government does genuinely allow reforms and an improvement of its human rights record, it is possible that other countries could choose to establish military bases in Eritrea, as they have done in Djibouti, which could further boost the economy and consolidate Eritrea’s military and political power in the region.


Economic Ramifications – One major effect of the Ethiopia-Eritrea rapprochement has been on neighboring Djibouti and its economic dependence on providing the landlocked Ethiopia with a port. Djibouti’s relative political stability and investor-friendly atmosphere have made it a regional hub for deep-sea shipping and has enjoyed a near-monopoly on moving goods to and from Ethiopia, with 95 percent of Ethiopian trade flowing through its ports. Profits from Ethiopian trade account for 1.5 billion USD annually and are a key source of government revenue, making the moves to develop Massawa and Assab ports in Eritrea is more or less catastrophic for Djibouti. This additionally comes alongside Ethiopian investment in Berbera Port in Somaliland, further diversifying its trade routes and weakening Djibouti’s position. This likely forced President Ismail Omar Guelleh’s hand in normalizing relations with Eritrea and restoring diplomatic ties. Although the Djibouti Embassy in Somalia had initially expressed surprise at Somalia’s call for UN sanctions on Eritrea to be lifted, Guelleh reversed course within six days to restore relations with Eritrea. This quick turnaround is suggestive of the Guelleh government’s understanding of the peace deal’s momentum and their unwillingness to remain isolated amid the region’s reconciliation.

FORECAST: With the thaw between Ethiopia and Eritrea increasing economic pressure, it is likely that Djibouti will increase its dependence on its other pillar, which is renting out land for foreign military bases. Djibouti has exploited its strategic coastline on the Red Sea to offer its territory for military bases, now hosting six foreign powers, including the US, France, Japan, Italy, Saudi Arabia, and China. However, this is also a delicate situation, as Djibouti allegedly upset the US when it allowed the construction of the Chinese base near the US’s facilities at Camp Lemonnier. This highlights the small country’s need to balance the extraction of as much value as possible from retning its land with keeping its client states content. Moreover, the emergence of Eritrea and its possible improving position within the international community could further undercut Djibouti’s position on the Red Sea.

Regional Relationships – An additional complication for Djibouti has been the involvement of Arab Gulf states in brokering peace in the Horn of Africa, with indications that the UAE played a major role in urging Eritrean President Isaias to accept Ethiopia’s overtures. Djibouti has seen its relationship with the UAE deteriorate since February, after the Djiboutian government canceled the contract of a Dubai-based company to operate its main container shipping terminal at Doraleh. The UAE took the matter to international arbitration, which ruled in the Dubai company’s favor, though Djibouti has refused to return the facility, stating that it does not recognize the arbitration court’s jurisdiction. This conflict raises further doubts over Djibouti’s reliability as an investment destination when the country is already at a somewhat precarious moment.

FORECAST: With that said, it is unlikely that Ethiopia will cease using Djibouti’s port facilities altogether as it would not want to be overly reliant upon Eritrea. However, this exposes Djibouti’s somewhat insecure position, as shipping and land lease profits directly supplement the President Guelleh’s tight political control over Djibouti. Moreover, it is also possible that other countries will grow to view Eritrea as a preferable location for their military bases and likewise terminate contracts with Djibouti. Speculation that the government is at risk of losing its key sources of income may undermine Guelleh’s leadership and increase the government’s vulnerability to popular grievances about corruption and repression. Civil unrest is relatively uncommon in Djibouti City at this time, with occasional protests occurring in Tadjourah. Given the already poor socioeconomic conditions in much of the country, this loss in revenue increases the overall risks of popular unrest.


Potential Improvement in Security – The tripartite deal signed by Eritrea, Ethiopia, and Somalia in September represents a major breakthrough in relations between the three countries. Somalia and Ethiopia have been historical enemies, while Somalia’s strained relations with Eritrea date back more than a decade. Eritrea reportedly provided funding, weapons, and training to al-Shabaab when it first formed in 2006, as Eritrea had hoped to encourage an anti-Ethiopia government in Somalia. This eventually led to the UN imposing sanctions on Eritrea, with Security Council monitoring indicating that Eritrea did not halt its support for al-Shabaab during the interim years. That Somalia asked for sanctions to be lifted in July underscores the thaw in relations that was further cemented by the signing of the agreement.
FORECAST: More crucially, it is possible that Eritrea’s improved relations with Ethiopia will disincentivize Eritrea from supplying al-Shabaab in opposition to Ethiopia, which could have a positive effect on the Somali government’s struggle to defeat the militant group for control over the southern half of the country.

The implementation of the peace deal between Ethiopia and Eritrea may also result in something of a shift on the ground in Somalia. Ethiopia has thousands of troops deployed in Somalia, both as part of the African Union Mission in Somalia (AMISOM) as well as part of a separate bilateral defense agreement with the Mogadishu government. In 2016, thousands of Ethiopian soldiers withdrew from central Somalia during a period of intense unrest in Ethiopia and were suspected to be re-deployed to suppress internal unrest at home.
FORECAST: It is possible that with the withdrawal of forces from the Eritrean border that Ethiopia may recommit more of its military to its front lines in Somalia. This could be particularly key given that AMISOM is slated to begin its withdrawal in February 2019, which would leave critical gaps that the Somali military is yet unable to fill. In this context, the movement of troops would allow the Ethiopian government extra security against al-Shabaab, while also influencing further pro-Ethiopia policy in Mogadishu.

Regional, International Relations – Another likely reason for Somalia’s interest in normalizing ties with both Eritrea and Ethiopia is that it can viewed as a way to manage its ongoing tensions with the Arab Gulf states, which has caused a rift within Somalia’s own federal government as well as affected the financial investment it receives. Somalia has had strained relations with the UAE since April and has grown somewhat isolated as the only country in the region that is perceived as aligning with Qatar, a rival of the UAE and Saudi Arabia. Eritrea and Ethiopia’s favor toward the UAE and Saudi Arabia has been clear with the establishment of the Gulf military bases in their countries as well as other economic deals. Ethiopia has already played a mediating role between Somalia and the UAE in recent months, which has resulted in financial benefits as the UAE agreed to give 1 billion USD to Ethiopia to ease its foreign currency shortages, after which Somalia signed an agreement for joint investment with Ethiopia to develop its ports. To this point, an improvement in ties with Ethiopia and Eritrea may ease Somalia’s reconciliation with the UAE and Saudi Arabia, which could be financially lucrative and politically beneficial as Mogadishu seeks reconciliation within its government.


Travel to Addis Ababa may continue while maintaining heightened vigilance in crowded areas in high threat of non-violent personal property crime.

Travel to Asmara may continue while adhering to proper administrative procedures and following general security protocols.

Travel to Djibouti City may continue while adhering to standard security precautions regarding the risk of crime and civil unrest.

We continue to advise against all travel to Somalia with the exception of the Puntland and Somaliland regions. Travel within these regions should be restricted to cities and be for essential purposes only, while avoiding travel to outlying areas.

Appendix – Background

Ethiopian Prime Minister Hailemariam Desalegn abruptly resigned on February 15, announcing on state television that it would be necessary for reforms. Subsequently, on April 2, Abiy Ahmed was selected to be PM in a vote by the council of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF). This became the first time in Ethiopia’s history that the ruler is an ethnic Oromo.

The EPRDF was formed in 1988 as a rebel group, and later transformed into a political coalition consisting of four ethno-regional political parties: the Oromo Peoples’ Democratic Organization (OPDO), Amhara National Democratic Movement (ANDM), Southern Ethiopian People’s Democratic Movement (SEPDM), and Tigrayan People’s Liberation Front (TPLF). Of these, the TPLF was dominant, with the minority Tigrayans holding an outsize role in the government, military, and economy.

Following a 30-year war of independence, Eritrea voted for its independence in a referendum in 1993, after which Eritrean People’s Liberation Front (EPLF) leader Isaias Afwerki came to power as the first, and only, president of Eritrea.

In 1998, border clashes between Ethiopian and Eritrean troops over the disputed town of Badme led to a full-scale war in which approximately 70,000 people were killed. A peace agreement was brokered in 2000 to cease hostilities as well as establish a commission to delimit the border.

Thus, in 2002, Ethiopia accepted “in principle” the ruling of the Boundary Commission ruling that the border village of Badme belonged to Eritrea, though nonetheless refused to hand over the disputed territory and withdraw its soldiers.

Subsequently, a policy of “no peace, no war” was adopted by Ethiopia, in which soldiers were permanently stationed at the shared border and in disputed areas, while diplomatic relations were severed. Although there were occasional and brief border skirmishes, this largely held true until 2018.