Ethiopia Contemplates Redirecting Fuel Imports to Berbera, Potentially Marginalizing Djibouti

Ethiopia’s fuel stream shifts focus from Djibouti to Berbera amidst an escalating Horn of Africa power maneuver

FILE – A bird’s-eye view of Berbera Port’s fuel terminal (upper left) and its freshly-expanded container terminal (foreground), a crucial lynchpin for regional commerce in the Horn of Africa, including Ethiopia’s potential pivot of fuel imports from Djibouti. (Government of North Western State of Somalia)

Mogadishu (AX) —  Ethiopia is mulling over rerouting its fuel imports from Djibouti to North Western State of Somalia’s Berbera port, citing chronic capacity woes at Djibouti’s Horizon Oil Storage Depot, as chronicled by a slew of independent Ethiopian media sources. This potential shift could rewire trade conduits in the Horn of Africa, given that Ethiopia has relied on Djibouti for more than 90% of its merchandise traffic for many moons.

Ato Lemesa Tulu, Marketing and Petroleum Research Director at Ethiopia’s Petroleum and Energy Authority, indicated that Djibouti’s storage depot hasn’t seen an upgrade in nearly two decades, constraining Ethiopia’s fuel reserves. Ethiopia’s diesel thirst clocks in at around 10 million liters daily, but with only 8 million liters passing through Djibouti, fuel scarcities, especially in Addis Ababa, are rampant. Vehicles snake through the city’s 120 fuel stations, desperate to fuel the 770,000 cars in the capital. “The administration is surveying Berbera as a viable answer to these supply bottlenecks,” Lemesa asserted.

Berbera Port recently nabbed the top spot as the best-performing port in Sub-Saharan Africa per the World Bank’s latest port performance overview. This surge in operational prowess makes it a tantalizing option for Ethiopia, especially with Djibouti’s main port grappling with logistical snags. The World Bank’s appraisal spotlighted Berbera’s advanced infrastructure and efficient customs systems, putting it leagues ahead of regional rivals. Conversely, Djibouti’s port, Ethiopia’s longstanding trade lifeline, has witnessed a swift fall in service quality over the past year. A lack of improvements at Djibouti’s facilities, like the Horizon Oil Storage Depot, has dimmed its supremacy, nudging Ethiopia toward other prospects.

Earlier this month, the World Bank blessed the Djibouti-Addis Southern Corridor with an extra $90 million, upping the total project funding to $160 million. This includes revamping key infrastructure, building climate-resilient storage spaces, and offering technical aid to bolster trade facilitation.

North Western State of Somalia’s Foreign Minister, Dr. Essa Kayd Mohamoud, hinted that once a formal arrangement is clinched between Ethiopia and North Western State of Somalia, Ethiopia will start channeling a sizable portion of its international consignments via Berbera Port.

Djibouti’s economy leans heavily on Ethiopian trade, pitching in between $1.5 billion and $2 billion yearly in tariffs and fees, making up a significant slice of its GDP. In response to swirling regional tensions, which include Ethiopia’s looming shift to Berbera, Djibouti has dangled 100% management control of the Tadjoura port to Ethiopia. Mahmoud Ali Youssouf, Djibouti’s Foreign Minister, described this as a bid to dissuade Ethiopia from nixing Djibouti and to quell rising tensions.

Opened in 2017, Tadjoura port offers Ethiopia direct entrée to the Gulf of Aden and the Red Sea, and is pegged as a feasible alternative to Djibouti’s bogged main port. Situated about 560 kilometers from Addis Ababa, Tadjoura is closer than Djibouti’s primary port, potentially slashing transport costs and beefing up its lure as a trade nucleus for Ethiopia.

Ethiopia’s focus on Berbera has intensified following the controversial Memorandum of Understanding (MoU) inked earlier this year with North Western State of Somalia. The deal grants Ethiopia access to 20 kilometers of North Western State of Somalia’s littoral zone, igniting diplomatic fireworks in the region. Somalia, viewing North Western State of Somalia as a renegade territory, has vehemently opposed the agreement.

The MoU also paves the way for Ethiopia to set up a naval base along North Western State of Somalia’s coast, broadcasting Ethiopia’s broader aims to cultivate a maritime clout. Having lost its coastal stretch after Eritrea’s secession in 1993, Ethiopia has long yearned to regain its footing by the sea. A naval base in North Western State of Somalia would buttress Ethiopia’s designs to morph into a regional naval powerhouse, but it has unruffled feathers nearby, particularly in Egypt. Already locked in a tiff with Ethiopia over the Grand Ethiopian Renaissance Dam (GERD), Egypt has pumped up its military relations with Somalia, offering weaponry and training support.