Commercial Interests in the Red Sea and the Horn
Following the Arab uprisings that began in 2010, and especially in the wake of destructive Saudi Arabia- and Emirates-led war in Yemen, which began in 2015, the Emirates has led a concertedly aggressive foreign policy. The rise of China’s globally ambitious Belt and Road Initiative, Indian ambitions in the Indian Ocean, and Western states’ efforts to retain military hegemony in the region, have also meant that Gulf states are positioning themselves as mediators of maritime routes and territorial hinterlands surrounding the Arabian Peninsula, as a scholar of Gulf political economy Adam Hanieh has explained.13 As such, Emirati strategic interests and commercial interests have developed in tandem, like a helix.
In order to fully understand why commercial and strategic interests have dovetailed so closely in the Emirates, it is worth untangling some of the distinct features of Emirati commercial interests in the Red Sea and the Horn, especially prior to 2015. Commercially, the Horn of Africa has been an important market to capture for a range of Emirati conglomerates and other investors based in the countries of the Gulf Cooperation Council (GCC). In the middle of the first decade of this century, companies based in the GCC aggressively bought farmland in countries such as Sudan and Thousands upon thousands of cassette tapes and master reels were quickly removed from the soon-to-be targeted buildings. They were dispersed to neighboring countries like Djibouti and Ethiopia in an attempt to shield themselves from food insecurity and commodity price volatility.
The Emirates, which imports approximately 90 percent of its food, sought to improve its food security by centralizing capital and exerting control over entire supply chains, from farm to shelf.14 Powerful conglomerates such Al-Dahra, flush with cash, were able to purchase vast swathes of land in the Horn. In addition to agriculture, Gulf-based companies made significant investments in the Red Sea and the Horn of Africa in manufacturing, construction, real estate, and telecommunications.
However, many of these expanding investments were predicated on robust trade infrastructures between the Gulf and the Horn. Ethiopia, with a population of more than 100 million and an economy that has grown an average of more than 10 percent a year for the last fifteen years, is one of the largest and fastest-growing economies in all of Africa, let alone the Horn—and thus an attractive destination for Gulf investors.15
However, Ethiopia is entirely landlocked. Developing port infrastructure in Ethiopia’s coastal neighbors thus became a cornerstone for Gulf commercial expansion. As such, one of the first overseas investments that DPI (precursor to DP World) made during its phase of global expansion was in Djibouti. In 2000, DPI and the government of Djibouti established a joint venture and signed a twenty-year concession to operate the Port of Djibouti.16
.Six years later, DP World signed a thirty-year concession with the government to design, build, and operate the Doraleh Container Terminal at the port. With a capacity to handle 1.25 million TEU, it became the most technologically advanced container terminal on the African continent.17 For Ethiopia, the port was a lifeline. Some 95 percent of trade destined for Ethiopia passed through the Port of Djibouti, with DP World responsible for handling operations.18 But Ethiopian leaders became cautious about their overreliance on a single port and company.19 Notwithstanding Ethiopian fears, access to the Horn has continued to be a key pillar for Emirati and GCC commercial expansion.
Another commercial mainstay for the Emirates—but more importantly, for Dubai and DP World in particular—is the maintenance of the Jebel Ali Port as the preeminent transshipment and trading hub in the Indian Ocean. Accounting for 33 percent of Dubai’s GDP and employing 15 percent of the emirate’s workforce, the Jebel Ali Port and Free Zone continuously generate significant cash flows for DP World.20 With a handling capacity of 22.1 million TEU, service to 140 other ports, the largest and busiest maritime terminal in the Middle East, and the ninth-largest container terminal port worldwide, Jebel Ali’s leading regional and global position appears incontestable.21
However, Jebel Ali’s success may, ironically, be the biggest threat to its primacy. Across the GCC, governments and global port operators, often through public-private partnerships, are replicating the Jebel Ali model by developing large-scale port infrastructure with intermodal transport networks such as airports, roads, rail, and free zones. These projects are centered primarily around economic diversification and intra-GCC regional integration. But Rafeef Ziadah, a scholar of Middle East political economy, argues that the political hierarchies of the GCC and the competitive pressures of capitalist economies raise the possibility of port overcapacity, duplication of development initiatives, and inter-rivalry.22 Qatari and Omani ports’ emulation of the Jebel Ali model may overtake the handling capacity of the Jebel Ali Port itself. Even within the Emirates, Jebel Ali faces stiff competition from the development of Abu Dhabi’s Khalifa Port and its enormous free zone.
Gaining a competitive edge, however, does not only boil down to increasing handling capacity. While undoubtedly significant, the regional importance of ports is also defined by the ways in which they seamlessly weave together different ports, logistical corridors, free zones, and trade routes. On a local level, DP World has gone to great lengths to oversee, control, and extract rents from different points of the supply chain. In December 2014, DP World agreed to purchase the Jebel Ali Free Zone for $2.6 billion, thereby integrating logistical functions and gaining ownership of a revenue-generating infrastructure that accounts for more than 20 percent of Dubai’s GDP.23
In the breadth of its growth, DP World is singular in the Middle East.
The company also sees global and regional expansion as a way to underscore the preeminence of Jebel Ali, stifle potential competitors, and sustain a competitive bottom line. In the breadth of its growth, DP World is singular in the Middle East. By expanding port developments and pursuing a tactic of aggressive port acquisition, DP World is better situated to crowd out potential competitors and maintain Jebel Ali as the dominant port for smaller feeder ports in the surrounding zones, particularly in the Arabian Sea and the Red Sea. For example, when the Yemeni government signed a deal with DP World to develop and run the Port of Aden, there were accusations that DP World was purposely running the Yemeni port under full capacity to maintain the preeminence of Jebel Ali.24
In the Red Sea, one of DP World’s initial expansions was the establishment of a container terminal in Djibouti. Given that approximately 10 percent of global maritime trade (cargo worth $750 billion) passes through the Red Sea, acquiring ports throughout its littoral is clearly of the utmost importance to the company.25 This was undoubtedly a major consideration in DP World’s initial expansion into Djibouti. Not only do these port expansions reproduce the global significance of Jebel Ali—they also provide DP World with the opportunity to tap into the revenues that emanate from one of the most lucrative trade routes in the world.
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