Turkey And The Gulf States In The Horn Of Africa

Gulf states: Economic statecraft and chequebook diplomacy

Compared to Turkey, the hydrocarbon exporting countries in the Gulf are significantly better endowed to pursue investment and bilateral assistance programs to support their political agendas. In the Horn of Africa, however, this approach is pursed unevenly between Saudi Arabia, the UAE, and Qatar. The relationship that Saudi Arabia and the UAE have with the Horn of Africa is, broadly, a transactional one. While this may be a simplistic approach, it rests on a series of complex trade-offs between various actors with different economic and political objectives.^[112] In particular, the hands-on, paternalistic and mostly bilateral political style of Riyadh and Abu Dhabi allows them to trade loyalties and secure allegiances through promises of generous financial support.^[113] This plays well in the competitive political marketplace of the Horn of Africa, particularly in Somalia and Sudan.^[114]

This approach has enabled Saudi Arabia and the UAE to swiftly establish and project power in a region where, until quite recently, their presence at a political level was only lightly felt. Both countries have become serious ‘agents of development finance’ in the region but this is largely being deployed ‘for their own financial and political interests’.^[115] In contrast, the Qatari appetite for investments in the Horn of Africa has been comparatively restrained. Qatari financial flows are channeled more often via development assistance or more opaque political finance, through unofficial engagement with key elite actors (especially in Sudan, Eritrea, and Somalia).

Political incentives for the Gulf states in the Horn of Africa frequently result from security considerations, which are tied up with development issues. For example, chronic insecurity on land and sea may cause problems for neighbors, such as piracy in the Indian Ocean region. The Gulf states increasingly recognize this development–security nexus. At the same time, their economies benefit from long-term strategic investments in African food, agriculture, energy, and real estate. As a consequence, Riyadh and Abu Dhabi have targeted Ethiopia and Sudan—both of which have great potential as agricultural and energy suppliers—with the most investment in the region, although the strategic positioning of the ports in Djibouti has also made it a target for Gulf investment, particularly from the UAE.^[116] Ethiopia, the most populous country in the region, and the second in Africa, also has a large consumer market that GCC countries are keen to exploit.^[117] The (more limited) Qatari investment profile has deeper roots in Sudan, although these relations have been disrupted by the 2019 revolution. While Ethiopia is an increasing priority for Qatar, its investment approach is still in an early, and tentative, phase.

The Gulf states practice economic statecraft in the Horn of Africa through foreign direct investments (FDI), official development assistance (ODA) and aid to central banks. These tools and instruments support the growing political influence of the Gulf states. Sovereign wealth funds, state-owned companies, national institutions and charity organizations are the primary tools through which funds are channeled.^[118] State-level actors are the most engaged since Gulf investments in the Horn ‘depend mainly on significant political backing by … governments’.^[119]

Saudi and Emirati investment strategies

The following tables and figures provide an overview of Saudi and Emirati economic flows since 2003 in Djibouti, Ethiopia and Sudan.^[120]

Table 1. UAE economic statecraft in Sudan, Ethiopia, and Djibouti in USD million (2003–June 2020)

Table 2. Saudi Arabia economic statecraft in Sudan, Ethiopia, and Djibouti in USD million (2003-June 2020)

Table 1 and Table 2, along with Figure 1 and Figure 2, provide a snapshot of the economic statecraft of The UAE and Saudi Arabia in the Horn of Africa. They show that the Saudis have generally deployed fewer economic means than the Emiratis to widen their sphere of influence.^[121] In contrast, the UAE chequebook diplomacy approach—in terms of the amounts spent or invested—is far more significant. In effect, Abu Dhabi strives to carve out a legitimate and robust hold in a region where, due to its small size and location across the Arabian Peninsula, it is not a natural hegemon. Aid and investments flowing from the Emirates are also more strategically deployed than those of Saudi Arabia.^[122] A Saudi adviser at the ministry of investment puts it this way:

We [the kingdom] need to do a lot more to develop our Africa strategy and approaches. The Horn is primary here. It is our near abroad, our neighborhood. We must develop things around Vision 2030, the public investment fund, development and job creation. … At present, things are a little scattered.^[123]

Figure 1. Saudi Arabia and UAE economic flows to Djibouti, Ethiopia, and Sudan, by country (USD millions) (2003–June 2020)

Figure 2. Saudi Arabia and UAE economic flows to Djibouti, Ethiopia, and Sudan by type (USD millions) (2003–2020)

While Table 1, Table 2, Figure 1 and Figure 2 offer an overview of financial support and investments, they are incomplete. Due to the opacity of Gulf states over financing streams, this dataset is inaccurate with regard to the breadth of government-related and private FDI, especially from Saudi Arabia. In 2018, the Clingendael Institute outlined a representative database of 434 GCC investment projects in the Horn of Africa (Djibouti, Ethiopia, Sudan, South Sudan and Somalia).^[124] Between 2000 and 2017, Saudi investments—both private and government-related—reached approximately USD 4.9 billion. Of 252 projects, 233 are related to the agricultural and manufacturing sectors in Ethiopia, primarily in Addis Ababa and in the Oromia Region.^[125]

A Saudi commercial attaché describes the evolving view of the Horn of Africa in the minds of investors from the kingdom:

Beyond food security, the Horn is becoming more of a consumer market for telecoms and an energy market as things develop. … You will know that Saudi business people regularly trade with Ethiopia. … And the biggest employer after the government was a Saudi Ethiopian Sheikh, Al-Amoudi.^[126]

Figure 3. Emirati FDI flows, public and private (USD millions)

The same trend is observed with the UAE, the investments of which amount to USD 5.1 billion over the same period. Of 133 projects, 104 are in Ethiopia, which Gulf states consider to be an agricultural powerhouse.^[127] Many of these projects are not publicized, as inferred by data gaps and asymmetries in reports covering FDI.

The majority of capital investment in Djibouti comes from the GCC. Between 2003 and 2020, Gulf countries invested USD 3.5 billion—mostly between 2003 and 2011.^[128] The UAE invested USD 1.8 billion to build the Doraleh port terminal during the 2000s. The 2018 investment surge in Ethiopia occurred at the same time Abu Dhabi was signing a USD 3 billion aid and investment agreement with Ethiopia (see Figure 4).

Figure 4. UAE and Saudi Arabia aid or intervention (ODA) (USD millions)

Of the USD 3 billion pledged, USD 1 billion was transferred to the National Bank of Ethiopia as balance-of-payments support. The rest is to be invested in energy, agricultural and tourism projects.^[129] Along with transportation, these are the most important sectors targeted by ODA in general.

In the same vein, the surge in Saudi and Emirati assistance to Sudan in 2019 (see Figure 5 and Figure 6) is linked to the USD 3 billion pledge made to the new military authorities in Khartoum in April of that year, which swiftly followed the ousting of al-Bashir following a sustained popular and largely nonviolent uprising.^[130] Saudi Arabia and the UAE had been supporters of al-Bashir’s regime prior to his fall. In 2018, for example, the UAE transferred USD 1.4 billion to the Sudanese central bank—seemingly as an attempt to prop up al-Bashir in the face of an accelerating economic crisis, the seeds of which had been sown by the secession of South Sudan in 2011 and the resultant drop in Sudanese oil revenues.^[131]

Similarly, in 2015 Saudi Arabia reportedly deposited USD 1 billion with the Sudanese central bank as a quid pro quo for al-Bashir’s decision to cut ties with Iran—the main rival of the kingdom in the region—and commit troops to the war in Yemen.^[132] While al-Bashir’s ability to leverage shifts in the regional geopolitical landscape to win support from the Gulf powers was a singular talent, the Gulf states increasing became tired of this opportunistic behavior. The inability of al-Bashir’s corrupt government to provide a stable environment for their inward investment was also problematic. For example, their ask-no-questions support for al-Bashir garnered disapproval from Western countries, the views of which were influenced by the sympathy of al-Bashir’s regime for extremist Islamist groups in the 1990s, and violent counterinsurgency and genocide in southern Sudan and Darfur in the 2000s. For these reasons, the Gulf states showed little regret in channeling their support to the new Transitional Military Council in Khartoum in 2019.

During the Sudanese revolution, Egypt, the UAE and Saudi Arabia all supported a continued leading role for the Transitional Military Council in the political transition. There was, however, disagreement about which security institutions should be on top. Egypt backed the Sudan Armed Forces under General Burhan,^[133] while the UAE supported the Rapid Support Forces under General Hemedti.^[134] Sudanese actors involved in the revolution pushed back against Egypt, stressing differences between the role of the military in Sudan and Egypt^[135] (where a 2013 coup re-asserted effective military control over the post-revolutionary trajectory in Egypt).

According to some Sudanese interviewees, one of the main factors underlying the difference in positions between the UAE and Saudi Arabia, on one hand, and Egypt, on the other, regarding the political setup following the revolution is that ‘Egypt knows it has influence over some SAF individuals’,^[136] while the UAE and Saudi believe they have influence over the RSF ‘as an institution’.^[137] The Egyptian concern was that if the SAF members with whom the country has ties were removed for any reason, Cairo would lose influence over the SAF as an institution.^[138]

Saudi and Emirati investment beyond the headlines

While the headline figures of Saudi and Emirati investments in Ethiopia, Sudan and Djibouti may appear impressive, these numbers do not capture the wide range of private but government-assisted investment activity that Gulf companies engage in across the region. There is a pattern of linkages between such projects and key figures in the governments and ruling families of the Gulf states and their individual political and commercial agendas. Their investments in the Horn of Africa are no exception to this general pattern.

In 2015, a UAE–Sudan investment forum was held in Abu Dhabi, where Khartoum made USD 59 billion worth of investments available to companies based in the UAE.^[139] By 2018, it was reported that 17 Emirati companies were operating in Sudan across several different sectors, including tourism, agriculture, aviation, oil, and gas.^[140]

Similarly in Ethiopia, a UAE–Ethiopia Business Advisory Council was established in 2018. This group is jointly led by the UAE embassy in Addis Ababa and supported by the Dubai Chamber of Commerce and Industry. It aims to help to connect Emirati investors and Ethiopian business people.^[141] In March 2019, the second Emirati–Ethiopian Business Forum held in Addis Ababa brought together 60 business and government delegations.

Table 3. Select Emirati private and public investments in Ethiopia, Sudan, and Djibouti[142]

SOURCE: Various, as indicated in relevant footnotes

UAE companies are also engaged in investment activities in Djibouti, Somalia, and Eritrea. Given the strategic advantages of these three countries, coupled with their comparatively small size, poor infrastructure, and political marginalization (particularly in the case of Eritrea), most investments are related to coastal areas, which offer opportunities to Gulf countries. In particular, investments in port infrastructure in Djibouti, Somaliland and Puntland are estimated to total around USD 2.5 billion.^[150] Related projects (for example, the extension of Bosasso airport in Puntland) are also attractive to Emirati investors, which already hold the concession for nearby Bosasso port.

Given its strategic location, Djibouti has attracted Saudi investment. For example, in 2018, the Saudi Development Fund agreed to build a corridor from Djibouti city to Galafi on the Ethiopian border.^[151] Saudi investment comes to Djibouti despite the fractious relationship the latter has had with the Emiratis since 2014, amid a dispute over the Dubai Ports World concession to run the Doraleh container facility (which it built from 2006).^[152]

Saudi Arabia uses similar methods to bring economic opportunities in the Horn of Africa to the attention of Saudi investors. For example, in December 2019 the Ethio–Saudi Arabia Business Forum was held in Addis Ababa. Some 229 separate Saudi investors appear to be active in Ethiopia at present.

The countries in the Horn of Africa have benefited from the increases in Saudi and Emirati investment that has materialized in recent years. Nonetheless, there are some concerns from the African shores of the Red Sea that these flagship projects often do not actually materialize or progress at a very slow pace.

For example, in 2018, the Abu Dhabi-based real estate company Eagle Hills revealed a USD 1.5 billion housing project in Addis Ababa called ‘La Gare’. Two years later, there is little evidence of progress being made in its construction, despite a January 2020 sales campaign for space in the first tower.^[153] While Dubai Ports World (DP World) recently delivered some significant commitments in Berbera in Somaliland,^[154] its subsidiary in Puntland, P&O Ports, has been criticized for mismanaging the Port of Bosaso, where the USD 336 million pledged in 2017 had yet to be spent by mid-2020.^[155]

Table 4. Diverse Saudi private and public investments in Ethiopia and Sudan

Source: Various, as indicated in relevant footnotes

Another recent example is the Dubai-based construction company ALEC Engineering & Contracting LLC (one of the largest in the Middle East), which recently kicked off the revamping of Addis Ababa municipality headquarters for nearly USD 50 million. Previously, the same company had been involved in the refurbishment of the prime minister’s office.^[159] There has been some domestic criticism over the selection of foreign firms for these projects but use of such firms fits with Prime Minister Abiy Ahmed’s vision of the transformation of the Ethiopian capital city, which includes a number of high-profile projects.[160]

Limited investment appetite: Qatar

The investment track record of Doha presents a contrast to the Saudi and Emirati approaches to the Horn of Africa. While Qatar, particularly the Qatar Investment Authority (QIA), has aspirations to increase its investments in the Horn of Africa (evidenced by the decision to form a new unit to find investment opportunities in the region),^[161] at present they remain fairly limited, particularly when compared with other Gulf countries and Turkey. With its large consumer market, Ethiopia is the most likely destination for QIA projects but investment has been limited over the last two decades and is still at the exploration stage.^[162] A Qatari diplomat anticipates, ‘In the future, I envisage that we will develop more ties with Ethiopia, Nigeria and the bigger states from an investment and trade perspective.’^[163] Up to 2020, there have only been 18 significant Qatari investment projects documented in the Horn of Africa: 12 in Ethiopia, 4 in Sudan and 2 in South Sudan, totaling USD 0.6 billion.^[164]

The Ethiopian chamber of commerce reports eight investments between 2008 and 2017 in various fields, including agriculture, manufacturing, real estate, construction, and transport, totaling USD 50 million.^[165] The visit of the Ethiopian prime minister to Qatar in March 2019 was aimed at bolstering both political and economic ties.^[166] Neither Abiy’s visit nor the Ethio–Qatar business forum organized in Doha in 2020 have resulted in Qatari ambitions in Ethiopia being translated into reality.^[167]

Likewise, investments in Sudan have fallen short of stated objectives. There have been a range of planned projects in agricultural land to ensure food security—a seemingly recurring but overstated driver of engagement. In June 2018, the state-owned company Hassad Food (the QIA food investment subsidiary) signed a memorandum of understanding in Khartoum to invest half a billion US dollars in agricultural projects over three years.^[168] It is unknown whether the agreement has persisted following the downfall of al-Bashir in 2019.

Qatar National Bank (QNB) and Qatar Islamic Bank (QIB) both have offices in Sudan. In an interview conducted in November 2017 in Khartoum, a QNB high-level agent explains that:

Doing business in Sudan in very hard. … There are many unforeseen costs such as the taxes from one state to another. … Also, Sudan is not competitive at all for the moment for the Gulf states, which import a lot more [for example, food products] from Brazil or Australia], for instance.^[169]

Gulf investment and the Chinese Belt and Road Initiative

The Chinese Belt and Road Initiative (BRI), which promises vast investment in an infrastructure network—or series of networks—stretching from China to southern Europe, is likely to present opportunities for further Gulf expansion into the Horn of Africa. At present, however, these opportunities seem to be being exploited most effectively by the UAE, which has been able to leverage its strength in maritime infrastructure (notably ports) to carve a niche as a key partner for Chinese infrastructure expansion in the Horn of Africa region.

The focus of the BRI in the eastern side of Africa on maritime infrastructure (known as ‘The Maritime Silk Road’)—shipping routes and their requirements on land—has given the UAE, with its focus on ports, a particular advantage in benefiting from Chinese ambitions in the region.^[170] Rather than being supplanted by Beijing, Emiratis are leveraging their status as the second most important Chinese trading partner in the Middle East to position themselves as a truly strategic partner; for instance, they are one of five comprehensive strategic partners in the region, along with Algeria, Egypt, Iran and Saudi Arabia.^[171] The Emiratis believe that the diminishing power of the United States has paved the way for the continued ascent of China; in turn, Emirati integration into the BRI project requires engagement along the maritime and digital routes.^[172] The UAE is an important middle-size power upon which China hopes to rely in order to better enhance its global project.^[173]

Against this backdrop, in 2019, China and the UAE brokered a USD 3.4 billion deal^[174] covering investments that include a USD 2.4 billion ‘international station for the Belt and Road Initiative in Dubai’ that will be used to ‘store and ship Chinese products from Jebel Ali to the world’.^[175] While they are benefiting from the opportunities provided by the BRI, the Emirates ‘don’t see themselves [simply] as clients of China but, in fact, see their network as complementary and intertwined with the BRI’.^[176] This perception was given fuel by the 2015 establishment of a USD 10 billion UAE–China Joint Investment Fund. This has enabled the two powers to work in synergy in the Horn of Africa, as well as in the broader Middle East and South Asia.^[177]

Despite seemingly overlapping Interests in ports and infrastructures, there is a lack of genuine cooperation between China and the UAE in the Horn.^[178] In Ethiopia, both countries vie for the logistics sector. In 2018, the DP World chairperson, Sultan Ahmed bin Sulayem, announced company intentions to develop infrastructure in Ethiopia; namely, in Dire Dawa, where most goods transit from Berbera.^[179] In the same year, the UAE suggested it would build an oil pipeline connecting the Port of Assab in Eritrea to Ethiopia to allow for exports in the future,^[180] although this plan remains far from implementation. Elsewhere and also in 2018, the Beijing takeover of the formerly Emirati-run Doraleh container terminal in Djibouti led DP World to file a lawsuit at the high court of Hong Kong against the state-owned China Merchants Port Holdings over breach of its exclusive port agreement.^[181] The tussle between these two state-backed companies is illustrative of the complementary and competitive nature of Emirati and Chinese intentions in the region. A security adviser to the UAE government sums up this way:

The BRI is important. It is yet to be seen what the fallout of the pandemic is but we work closely with China, a major player in Africa and globally. We are not competitors in the Horn. Our population is not one Chinese city. We have qualitative propositions in the region but China is China. We hope to benefit from mutual cooperation. Having said that, the USA is our primary security partner and ally outside of the region.^[182]

The BRI is also an opportunity for Riyadh. According to some interviewees, Saudis have been increasingly mindful of the many possibilities offered by China. As one commentator notes, ‘Rather than putting all their eggs in one basket [the United States]’, they realize ‘that there are other opportunities’.[183] This is exemplified by King Salman’s Asian tour in 2017.

Ultimately, however, Saudi Arabia is considered a less reliable partner than the UAE for the Chinese.^[184] In contrast, the UAE is much more proactive in attempts to attract Chinese investments. Arguing that ‘the BRI in the Horn of Africa is becoming increasingly a way for the Gulf states to prove themselves as valuable partners’^[185] seems more the case for the UAE and less so for Saudi Arabia. Indeed, as one observer asserts, the Saudis ‘are absolutely not welcoming any Turkish or Iranian, or even Chinese and Russian presence in the Red Sea of the Horn of Africa’.^[186]

Overall, given the connections between individual, state and economic agendas in the Gulf states, it is difficult to envision a stable partnership emerging with China on BRI-related projects in the Horn of Africa. Instead, continued competition likely suits the interests of the governments in the Horn of Africa, both those with port assets seeking investment and in Ethiopia, which is seeking internal investment in logistical infrastructure and industry, as well as markets for growing exports. States in the region have decades of experience in leveraging external interest to further their domestic and regional goals.

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