Friday September 27, 2024
Ethiopia’s fuel lifeline drifts from Djibouti to Berbera amidst a wider Horn of Africa power shift
FILE - An aerial view of Berbera Port's fuel terminal (upper left) and its newly expanded container terminal (foreground), a vital hub for regional trade in the Horn of Africa, including Ethiopia’s potential shift of fuel imports from Djibouti. (Government of Somaliland)
Mogadishu (HOL) — Ethiopia is considering shifting its fuel imports from Djibouti to Somaliland's Berbera port, citing long-standing capacity issues at Djibouti's Horizon Oil Storage Depot, according to reports from multiple independent Ethiopian media outlets. The move could reshape trade routes in the Horn of Africa, as Ethiopia has depended on Djibouti for over 90% of its imports and exports for decades.
Ato Lemesa Tulu, Director of Marketing and Petroleum Research at Ethiopia's Petroleum and Energy Authority, confirmed that Djibouti's storage depot has not been upgraded in 18 years, significantly limiting Ethiopia's fuel supply. Ethiopia's daily diesel demand is approximately 10 million litres, but only 8 million litres are being supplied through Djibouti, causing widespread fuel shortages, particularly in Addis Ababa. Long lines of vehicles are forming at the city's 120 fuel stations, struggling to serve the 770,000 cars in the capital. "The government is looking into Berbera as a solution to these supply constraints," Lemesa said.
Berbera Port has been ranked the top-performing port in Sub-Saharan Africa by the World Bank's latest port performance report. Its rise in operational efficiency has made it a strategic alternative for Ethiopia, especially as Djibouti's main port faces increasing logistical challenges. The World Bank report highlighted Berbera's modernized infrastructure and streamlined customs processes, placing it ahead of regional competitors. Meanwhile, Djibouti's port, which has long been Ethiopia's primary trade gateway, saw a sharp decline in service delivery last year. The lack of upgrades to Djibouti's storage facilities, like the Horizon Oil Storage Depot, has weakened its dominance, prompting Ethiopia to explore alternatives.
Earlier this month, the World Bank approved an additional $90 million to expand the Djibouti-Addis Southern Corridor, bringing the total project funding to $160 million. The project includes rehabilitating key infrastructure, constructing climate-friendly storage facilities, and providing technical support to enhance trade facilitation.
Somaliland's Foreign Minister, Dr. Essa Kayd Mohamoud, stated that once a formal agreement between Ethiopia and Somaliland is reached, Ethiopia will begin routing a significant portion of its international imports through Berbera Port.
Djibouti's economy heavily depends on Ethiopian trade, which contributes between $1.5 billion and $2 billion annually through tariffs and fees, making up a large chunk of its GDP. In response to regional tensions that include Ethiopia's potential shift to Berbera, Djibouti has offered Ethiopia 100% management control of the Tadjoura port, a strategic facility 100 kilometres from the Ethiopian border. Djibouti's Foreign Minister, Mahmoud Ali Youssouf, described the offer as an attempt to prevent Ethiopia from diverting its trade away from Djibouti and to calm rising tensions in the region.
Tadjoura port, opened in 2017, provides Ethiopia with direct access to the Gulf of Aden and the Red Sea, and is viewed as a viable alternative to Djibouti's overburdened main port. Situated approximately 560 kilometres from Addis Ababa, Tadjoura is closer than Djibouti's main port, potentially reducing transportation costs and enhancing its appeal as a trade hub for Ethiopia.
Ethiopia's interest in Berbera has intensified in the wake of the controversial Memorandum of Understanding (MoU) signed earlier this year with Somaliland. The agreement grants Ethiopia access to 20 kilometres of Somaliland's coastline, which has sparked diplomatic tensions across the region. Somalia, which considers Somaliland a breakaway region, has fiercely opposed the deal.
The MoU also includes provisions for Ethiopia to establish a naval base along Somaliland's coast, signalling Ethiopia's broader ambitions to develop a maritime presence. Ethiopia, which lost its coastline after Eritrea's independence in 1993, has long sought to reestablish its access to the sea. A naval base in Somaliland would support Ethiopia's aspirations to become a regional maritime power, but it has raised concerns in the region, particularly Egypt. Already engaged in a dispute with Ethiopia over the Grand Ethiopian Renaissance Dam (GERD), Egypt has strengthened military ties with Somalia, providing weapons and training.