The Political Economy of Horn of Africa

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Riyal Politik: The political economy of Gulf investments in the Horn of Africa
Article · April 2018
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Riyal Politik
The political economy of
Gulf investments in the Horn of Africa
Jos Meester
CRU Report
Willem van den Berg
Harry Verhoeven
Riyal Politik
The political economy of Gulf investments
in the Horn of Africa
Jos Meester
Willem van den Berg
Harry Verhoeven
CRU Report
April 2018
April 2018
© Netherlands Institute of International Relations ‘Clingendael’.
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About the authors
Jos Meester – Research Fellow at the Clingendael Institute’s Conflict Research Unit. Jos’
work focuses on the functioning of the private sector in conflict-affected environments. He is
in particular interested in supply chains spanning across political divisions, as well as the close
relationship of political and private-sector elites and its consequences for the stability of political
power structures.
Willem van den Berg – Research Assistant at the Clingendael Institute’s Conflict Research
Unit. Willem van den Berg focuses on the interaction of business and politics in conflict-affected
environments. He is particular interested in the ports and logistics sector, as well as the role of
technology in conflict and international development.
Harry Verhoeven – Assistant Professor at Georgetown University Qatar. Prof Harry Verhoeven
teaches at the School of Foreign Service in Qatar, Georgetown University. He is also an Associate
Member of the Department of Politics and International Relations of the University of Oxford.
His research focuses on elite politics, ideology and international relations. He was founder of the
Oxford University China-Africa Network (OUCAN) in 2008-2009 and remains a Co-Convenor of
OUCAN.
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Contents
Abstract 1
List of figures and boxes 3
Acknowledgements 4
Executive summary 5
List of abbreviations 7
1 Introduction 8
2 A long, long history 12
2.1 After Oil: The bargain between the Horn and the Peninsula since the 1970s 14
2.2 Confrontation and disengagement in the 1990s: Islamism and its enemies 16
2.3 So close, yet so far: Cooperation amidst disappointment and distrust in
recent history 18
3 The determinants of Gulf aid, investment and trade in the Horn 20
3.1 An economic strategy as part of wider foreign policy 20

3.2 (Mostly) economic determinants 24
3.3 Geopolitical determinants 27
3.4 Religion as a determinant of aid, investment and trade? 29
3.5 Policy instruments and actors 33
4 Mapping the extent of Gulf investments and ODA in the Horn of Africa 40
4.1 Overview of Investment activity in the region 41

4.2 Geographic investment patterns 44
4.3 Sectoral investment patterns 50
4.4 Modes of investment 52
4.5 Comparison with Gulf ODA patterns 54
5 Perceptions of Gulf investments in Ethiopia 58
5.1 Gulf largesse in a cash-strapped economy 59

5.2 The other side of the Riyal 62
6 Main conclusions and practical implications for research and policy 68
6.1 Understanding the implications of Gulf activities in the Horn requires a

nuanced understanding of the scope and aims of these activities 68
6.2 Stable economic and political development in the Horn of Africa is strongly
connected to the geopolitical interests of Gulf states 69
6.3 Gulf investments can significantly influence stability in the Horn of Africa 71
7 References 73
7.1 Bibliography 73
7.2 Press, media and digital sources 78
Annex 1 Methodology 80
Annex 1.1 Political Economy Analysis 80

Annex 1.2 Research design 81
Annex 1.3 Mapping methodology 81
Abstract
The Gulf and the Horn of Africa share a long history of economic and political
engagement. In recent years, following a decade of political disengagement, the Gulf
states have become once again major economic and political actors in the Horn region.
Horn states have hardly remained passive clients, however, and actively court Gulf states
for funding, as economic drivers and remittances have been a key factor for maintaining
their domestic political settlements as well as a major determinant of conflict in the
region. This report explores the extent and impact of Gulf state economic engagement
in the Horn as well as the linkages between these financial streams and prospects for
regional stability in the Horn of Africa. It traces the historic ties framing perceptions of
the relationship between the regions, describes the determinants and instruments of
Gulf investment, trade and aid to the Horn. It maps the scope of Gulf investments across
Horn states and economic sectors, identifying approximately USD 13 billion between
2000 and 2017, mainly in Ethiopia and Sudan, across the agriculture, manufacturing
and construction sectors. Such financial streams are key to supporting Horn political
settlements, providing the working capital required for further co-option, and to several
regimes maintaining a degree of macroeconomic stability (especially under sanction
regimes). Gulf states’ largesse is frequently driven by political considerations to limit
Iranian influence as well as intra-Arabian competition, but as the funding volumes
are relatively inconsequential for Gulf states’ budgets they are frequently devoid of a
developed long-term strategy for the Horn. Gulf investments come with risks to Horn
stability as well: where Horn states co-invest non-performing loans may jeopardize state
finances. Moreover, some Gulf funding deepens various pre-existing cleavages within
societies and is, as such, worrying and destabilizing. However, evidence that Gulf money
is causing religious polarization between states in the Horn seems limited.
1
Riyal Politik | CRU Report, April 2018
Figure 1 Map of the Gulf and the Horn of Africa
Kuwait
Qatar
Saudi Arabia
UAE
Re
dS
ea
Sudan
Eritrea
en
of Ad
Gulf
Mandeb Strait
Djibouti
Somaliland
Ethiopia
Indian Ocean
South Sudan
Somalia
2
List of figures and boxes
Figure 1: Map of the Gulf and the Horn of Africa 2

Figure 2: Exports from the Horn of Africa to selected partners 10
Figure 3: Gulf ODA to Middle Eastern and non-Middle Eastern recipients 16
Figure 4: Timeline of important events in the Gulf and the Horn of Africa 19
Figure 5: Actors with the greatest influence on private-sector activity 32
Figure 6: Overview of Gulf interests and instruments in the Horn of Africa 39
Figure 7: Gulf investments in the Horn of Africa and Brent Crude oil prices 42
Figure 8: Gulf investments in the Horn of Africa, 2000–2017 43
Figure 9: Map of Gulf investments in the Horn of Africa, 2000–2017 45
Figure 10: Map of Saudi Arabian investments in the Horn of Africa 45
Figure 11: Map of UAE investments in the Horn of Africa 47
Figure 12: Map of Kuwaiti investments in the Horn of Africa 48
Figure 13: Map Qatari investments in the Horn of Africa 49
Figure 14: Number of Gulf investments in the Horn of Africa by sector and investor 50
Figure 15: Number of Gulf investments in the Horn of Africa by sector and recipient 50
Figure 16: Value of Gulf investments in the Horn of Africa by sector and investor 51
Figure 17: Value of Gulf investments in the Horn of Africa by sector and recipient 51
Figure 18: ODA from Gulf development funds to Horn of Africa and oil prices 54
Figure 19: ODA and FDI from Gulf to Horn of Africa and oil prices 55
Figure 20: Gulf development funds ODA and investments to Horn of Africa,
2000–201756
Figure 21: Number of Gulf ODA projects in the Horn of Africa by sector 57
Figure 22: Value of Gulf ODA projects in the Horn of Africa by sector 57
Figure 23: ODA from Gulf development funds to Horn of Africa by fund, 2000–2017 57
Box 1: Sudan’s Breadbasket gamble 20

Box 2: Somalia and the Gulf 31
Box 3: A cautionary note on quantifying financial transactions 41
Box 4: Sheikh Mohammed Al-Amoudi 52
Box 5: Unconsidered effects and spillover 63
3
Acknowledgements
This report would not have been possible without the funding support of the
Ministry of Foreign Affairs of the Netherlands. The authors are especially grateful
to all the people willing to share their views on this contentious topic, the Ethiopian
Investment Commission being willing to share their data and insights, Dawit Endeshaw
(The Reporter Ethiopia) for expertly facilitating the work in Ethiopia and Marjolein
Jongman en Annemarie van Bolhuis (Dutch Ministry of Foreign Affairs). A special thanks
goes out to the reviewers, amongst others Dereje Feyissa (Life and Peace Institute)
and Paula Schindeler (Dutch Ministry of Foreign Affairs), as well as Anette Hoffmann
and Erwin van Veen (Clingendael’s Conflict Research Unit), who have invested time in
providing comments and suggestions. Finally, we extend our thanks to the respondents
who answered our survey.
4
Executive summary
• Following a decade of disengagement, the Gulf states have again become

increasingly active in the Horn of Africa. Gulf countries are important business
partners and have been known to mix political, business and religious motives
in their interactions.
• Business relations between the Gulf and Horn of Africa are substantial:
approximately 434 investments, worth approximately USD 13 billion, can be traced
from 2000 to 2017. Investment patterns have closely followed oil price fluctuations.
• Gulf investments have been focused on Ethiopia and Sudan and concentrated in
agriculture, manufacturing and construction. The main donors have been Saudi
Arabia and the United Arab Emirates (UAE). In Ethiopia, investments are mainly in
the form of fully owned assets or joint ventures with local partners.
• Official development assistance (ODA) in the same period equalled 309 projects
totalling USD 6.6 billion. ODA projects focus on energy and transport as well as
agriculture, social services, education, the financial sector and health; manufacturing
is largely absent.
• Political motivations determine aid, investment and trade flows rather than economic
variables, both for creditor/donor (the Gulf) and recipient (the Horn states).
• From the Gulf side:
– Two political cleavages predominate. The first is the proxy war between Iran and
Saudi Arabia and, to a lesser extent, the UAE. The second is the enmity amongst
the Gulf Arabs themselves.
– Gulf states also fret over large-scale migration from the Horn and influence in the
Horn, which is seen as key to stability in the greater Middle East.
– Investments depend mainly on significant political backing by Gulf state
governments. Few investors dare autonomously enter markets they struggle to
understand, and an investment’s underlying business case is often questionable.
– Important as religious legitimacy is in public discourse, its importance for foreign
policy and in dynamics of aid, investment and trade should not be overstated.
Proselytization depends mainly on personal and NGO efforts rather than state
policy.
– Little capital in the Gulf is genuinely private. Gulf foreign policy is therefore
often an extension of domestic political and financial dynamics, conducted
through sovereign wealth funds, State owned holding companies, central banks,
ministries of finance, bilateral and multilateral development funds and charities.
• From the Horn of Africa side:
– Horn actors themselves are not passive recipients. Economic drivers have
been key to conflict in the Horn, and actors have at times actively courted Gulf
countries for financing. The implications of such mobilised resources can have
significant consequences on regional stability, migration and security.
5
– Most Horn of Africa societies worry about both the intensifying identity politics
and sectarian extremism that the Gulf exports as well as the pressures they face
in having to choose sides in geopolitical rivalries.
– The relationship is characterised by extraversion, which is not only a lucrative but
also a risky strategy, not least because of the dependence on factors they do not
control (e.g., oil prices).
– Gulf investments and financial streams are key to supporting Horn political
settlements, providing the working capital required for further co-option, and
maintaining a degree of macroeconomic and currency stability.
– Gulf states funding frequently does not incorporate a long-term strategy for the
Horn, which creates risks for some Horn states. The impact along religious lines
appears to be limited, however.
• Gulf-Horn cooperation based on shared economic and political interests is
interwoven with sequential disappointment and distrust persists. Although the Gulf
is seen as an inevitable partner, the relation is ultimately driven by necessity.
• The stakes of political-economic ventures are quite different for both partners:
whereas the sums of money are comparatively small for Gulf states, for the countries
of the Horn they can be transformative or catastrophic.
• These characteristics cannot be expected to hold universally. Neither the Horn
nor the Gulf is a homogenous block, hence extrapolations may obscure important
differences.
• Given the aims, scope and impact of Gulf activities in the Horn, the following
conclusions and recommendations can be defined:
– Policy discussions and engagement strategies seeking to deal with Gulf
influences in the context of the Horn of Africa should be informed by an accurate
assessment of the involved actors, aims and scope of Gulf activities in their
context to effectively mitigate any associated risks.
– Stable economic and political development in the Horn of Africa is strongly
associated with the geopolitical interests of Gulf states. Early warning systems
and context analyses used to inform humanitarian aid, peacebuilding and
migration management policies should take into account the economic and
political developments of Gulf states, and how these developments may influence
the Horn.
– European investments in programming for economic diversification and
employment may improve stability because it may reduce the vulnerability of
Horn states to economic and political shocks from the Gulf.
– Gulf investments have the potential to significantly influence stability in the Horn
of Africa. Strengthening the dialogue between European and Gulf policy makers
could allow actors to capitalise on their shared interest in stability in the Horn
of Africa. To do so would require European policy makers to develop a shared
narrative explicating realistic aims and expectations from such coordination, and
might benefit from increased interactions between Horn-based diplomatic staff
on a bilateral basis.
6
List of abbreviations
ADFD Abu Dhabi Fund for Development

AFESD Arab Fund for Economic and Social Development
BADEA Arab Bank for Economic Development in Africa
CEO chief executive officer
CVE countering violent extremism
DAC Development Assistance Committee (part of the OECD)
EPRDF Ethiopian People’s Revolutionary Democratic Front
FDI foreign direct investment
GERD Grand Ethiopian Renaissance Dam
GCC Cooperation Council for the Arab States of the Gulf
GDP gross domestic product
IDB Islamic Development Bank
IMF International Monetary Fund
KFAED Kuwait Fund for Arab Economic Development
METEC Ethiopian Metals and Engineering Company
NGO nongovernmental organisation
ODA official development assistance
OECD Organisation for Economic Co-operation and Development
OFID OPEC Fund for International Development
OPEC Organization of Petroleum Exporting Countries
SAMA Saudi Arabian Monetary Authority
SFD Saudi Fund for Development
SPLA Sudan People’s Liberation Army
SWF sovereign wealth fund
UAE United Arab Emirates
UN United Nations
US United States
USD United States dollar
7
1 Introduction
As the GCC crisis erupted in the summer of 2017, it surprised audiences around the
world with both the suddenness of escalation and the intractability of the ensuing
conflict.1 As analysts and policy makers scrambled to interpret the causes and
consequences of the unfolding conflict, governments in the Horn of Africa were amongst
the first, and the few outside the Middle East, to publicly take a stance. 2 Although the
Horn of Africa is generally considered in its African context, the speed and intensity
with which developments in the Middle East translated to the opposite shore of the Red
Sea should come as no surprise. The Gulf and the Horn share a long and rich history.
In recent years the Gulf states have become increasingly active in the Red Sea, partly in
response to the war in nearby Yemen.3 They — especially Saudi Arabia, the United Arab
Emirates (UAE) and Qatar — are again influential, capable and active actors in the Horn
of Africa.4
1 Cooperation Council for the Arab States of the Gulf. The group, formerly the Gulf Cooperation Council,
consists of six member states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
Weymouth, L. 2018. ‘Qatar to Saudi Arabia: Quit trying to overthrow our government’, Washington Post,
2 February, https://www.washingtonpost.com/outlook/qatar-to-saudi-arabia-quit-trying-to-overthrow-
our-government/2018/02/02/05a1a848-0759-11e8-8777-2a059f168dd2_story.html?utm_term=.
e8182e0740bb (accessed 19 January 2018). Cooperation Council for the Arab States of the Gulf.
2 The crisis broke on 5 June and Sudan promptly formally declared its support of Kuwaiti mediation efforts
(and offered to mediate itself, though it informally leans towards the Saudi side). Meanwhile, Somaliland
backed the Saudi-led coalition on 10 June, Eritrea on 12 June and Djibouti on 14 June. Discussions
regarding the Somali position are ongoing. Ethiopia has formally remained neutral. See Al Jazeera,
2018. ’Qatar’s blockade in 2017, day by day developments’, 18 February, http://www.aljazeera.com/
news/2017/10/qatar-crisis-developments-october-21-171022153053754.html (accessed 20 March 2018)
and Horn Diplomat, 2017. ‘Somaliland Supports Saudi-led Coalitions cut ties to Qatar’, 10 June, http://
www.horndiplomat.com/2017/06/10/somaliland-supports-saudi-led-coalitions-cut-ties-to-qatar/
(accessed 19 January 2018). For local views from both sides see Al Jazeera. 2017. ‘Africa and the Gulf
crisis: the peril of picking sides’, 15 June, http://www.aljazeera.com/news/2017/06/africa-gulf-crisis-
peril-picking-sides-170615100929852.html (accessed 21 July 2017); for an Ethiopian perspective, see:
The Ethiopian Reporter, 2017. ‘The rift in the GCC and diplomatic responses from the IGAD region’, 1 July,
http://thereporterethiopia.com/content/rift-gcc-and-diplomatic-responses-igad-region (accessed
19 January 2018).
3 Richard, R. 2015. War in Yemen: The African Dimension, London: Oxford Research Group.
4 Abdi, R. 2017. A Dangerous Gulf in the Horn: How the Inter-Arab Crisis Is Fueling Regional Tensions,
Brussels: International Crisis Group; Shiferaw, L. 2016. ‘The role of Gulf states in peace and security and
development in Sub-Saharan Africa’, Working Paper 16, Roma: Instituto Afari Internazionali; Maru, M. 2017.
‘The rift in the GCC and diplomatic responses from the IGAD region’, The Reporter, 1 July, http://www.
thereporterethiopia.com/content/rift-gcc-and-diplomatic-responses-igad-region (accessed 19 January
2018).
8
Some of the ties between the regions, such as the establishment of military bases on
the Red Sea coast and the involvement of Horn states in the Yemeni conflict, have
attracted significant attention, while others remain less examined.5 Specifically, the Horn
of Africa is seeing increasing investments by international businesses, including from
Gulf countries, which rank amongst the most significant export and import partners
for many countries in the Horn. Although China dominates the fossil fuels segment
(mainly from South Sudan) and thus tops aggregate statistics on Horn exports, the Gulf
states are the main trading partner for goods other than fossil fuels from the Djibouti,
Somali, South Sudanese and Sudanese economies (see figure 2). This picture of trade
fits neatly into Vision 2030 and Africa Rising narratives, which stress the need for Gulf
states to diversify their economies and the emerging opportunities in African states,
but Gulf countries have been known to mix political, business and religious motives in
their interactions.6 In addition, modalities can vary considerably, as can be seen in the
contrast between investments through the Qatar Sovereign Wealth Fund, direct financial
support to candidates in the most recent Somali elections7 and alleged displacement
due to substantial land acquisitions across Sudan and Ethiopia by Saudi Arabia.8
5 In recent years, several military bases have been constructed or planned in the Horn of Africa. Examples
include basesd by the United Arab Emirate in Berbera Port (Somaliland), Mogadishu (Somalia) and
Assab (Eritrea); Turkey in Mogadishu (Somalia); China in Obock Port (Djibouti); Saudi Arabia in Djibouti
(planned). For other developments, see Richard, op. cit.; Anyadike, O. 2017. Updated rough guide to foreign
military bases in Africa’, Irin, 15 February, https://www.irinnews.org/feature/2017/02/15/updated-rough-
guide-foreign-military-bases-africa (accessed 19 January 2018).
6 Roxburgh, C., et al. 2010. ‘Lions on the Move: The progress and potential of African Economies’, McKinsey
Global Institute; McSparren, J., et al. 2014. ‘Qatar’s global investment strategy for diversification and
security in the post-financial crisis era’, Centre on governance research paper series (No. 02/17/EN),
Ottowa: University of Ottawa; McSparren, J., et al. 2015. ‘Contours of Qatar–Sub-Saharan Africa Relations:
Shedding Light on Trends and Prospects’, in: Mapping GCC foreign policy resources, recipients and
regional effects, ed. Young, K., and Khatib, L., London, London School of Economics and Political Science;
The Economist Intelligence Unit. 2011. ‘GCC trade and investment flows: The emerging-market surge’,
Economist Intelligence Unit Report, London: The Economist.
7 See for instance: Gettleman, J. 2017. ‘Fueled by Bribes, Somalia’s Election Seen as Milestone of Corruption’,
New York Times, 7 February, https://www.nytimes.com/2017/02/07/world/africa/somalia-election-
corruption.html (accessed 27 September 2017).
8 Examples of tensions over Gulf investments in agricultural land can be found in Middle East Business
Intelligence, 2013. ‘GCC investors eye African farmland’, 23 June, https://www.meed.com/analysis/special-
reports/gcc-investors-eye-african-farmland/3176877.article (accessed 27 September 2017); Hussein, W.
2016. ‘Will Saudi Agricultural Investments in Sudan leave Egypt high and dry?’, Al Monitor, 1 June, http://
www.al-monitor.com/pulse/originals/2016/01/saudi-investments-agriculture-sudan-egypt-fears-water-
nile.html (accessed 27 September 2017).
9
Figure 2 Exports from the Horn of Africa to selected partners

Excluding fossil fuels exports. Data drawn from Chatham House (2018), ‘resourcetrade.earth’, http://resour-
cetrade.earth/, based on UN Comtrade data (accessed 7 March 2018). Inclusion of fossil fuels would move
China to the top spot as export destination, mainly based on South Sudanese oil exports.
4.0 Gulf states

Europe
3.5 China
Exports from the Horn of Africa
3.0
2.5
(USD billions)
2.0
1.5
1.0
0.5
0.0
2012 2013 2014 2015 2016
Horn actors themselves have hardly remained passive recipients.9 Economic drivers
have been central to the outbreak, continuation and cessation of conflict in the region,
and actors have at times actively courted Gulf countries for financing.10 A significant
amount of the politics of the Horn of Africa can be understood through the metaphor
of the political marketplace: political allegiances are traded for various resources, and
additional sources of rent are quickly captured to support or alter the prevailing political
settlement.11 In this context, combined with the Horn’s strong patterns of cross-border
trade, the implications of the resources mobilised through investments, trade flows and
political allegiances can have significant consequences on regional stability, and thereby
on trade through the Gulf of Aden, migration patterns and security.12
9 Clapham, C. 2017. The Horn of Africa. State Formation and Decay. London: Hurst.
10 Love, R. 2009. Economic Drivers of Conflict and Cooperation in the Horn of Africa: A Regional Perspective and
Overview, London: Chatham House; Verhoeven, H. 2015. Water, Civilisation and Power in Sudan. The Political
Economy of Military-Islamist State-Building, Cambridge: Cambridge University Press.
11 De Waal, A. 2015. The Real Politics of the Horn of Africa: Money, War and the Business of Power, Cambridge:
Polity Press.
12 De Waal, A. 2016. ‘Africa’s $700 Billion Problem: Waiting to Happen’, Foreign Policy, 17 March http://
foreignpolicy.com/2016/03/17/africas-700-billion-problem-waiting-to-happen-ethiopia-horn-of-africa/
(accessed 19 January 2018).
10
However influential, the extent of Gulf economic interests in the Horn is rarely explored;
assessments of the impact of these activities are even more limited. This report looks
into the extent of economic engagement by Gulf states in the Horn, and the linkages
between these financial streams and prospects for stability in the Horn region. It sets
out a comprehensive overview and political-economic analysis of Gulf-Horn economic
relations, but does not purport to be exhaustive given the opaque nature of the business
relations and financial transfer this includes. The report begins with an overview of
historic ties between the regions to place current developments in context. It then
examines the determinants of Gulf aid, investment and trade in the Horn from the
perspective of the Gulf investors. Next, it maps the scope of Gulf investments in the
Horn since 2000, comparing it with the more public official development aid (ODA)
instruments before moving on to approach Gulf investments from the perspective of a
recipient country in the Horn, Ethiopia, to highlight both motivations and implications.
The report concludes with an assessment of Gulf-Horn economic relations and some of
the implications for analysts and policy makers active in the region.
The report defines the Gulf as Kuwait, Qatar, Saudi Arabia and the UAE13 and the Horn
of Africa as Djibouti, Eritrea, Ethiopia, Somalia, South Sudan and Sudan, but an in-
depth exploration of the business ties between each of these highly diverse countries
is beyond the scope of this report. As a consequence, examples are mainly drawn from
Ethiopian, Sudanese, Saudi Arabian, United Arab Emirati and Qatari contexts. Such
examples may be generalisable to a certain extent, but neither the Horn nor the Gulf
forms a homogenous block. Extrapolations not taking into account the local context on
either side of the Red Sea may therefore obscure important differences.14 The report
focusses primarily on Gulf funding mobilised through foreign direct investment and
foreign portfolio investment against the backdrop of the wider trade patterns, official
development aid, macroeconomic support to Horn governments and direct individual
payments. Although analytically distinct, these instruments are frequently mixed within
individual projects or transactions, and cannot be neatly separated in most cases.
13 While Turkish influence is substantially related to many of the dynamics discussed, it is left outside the
scope of this report.
14 For instance, although Arabic is widely spoken in the Horn, it is not in Ethiopia, whereas in Djibouti French
is the language of education and government, and in South Sudan the sole official language is English.
Similarly, the proximity to the Arabian Peninsula has ensured that Islam has had a long and profound
impact on the Horn of Africa. It would be a mistake, however, to label the region as Islamic. South Sudan
has a larger Christian than Muslim population, while Ethiopia and Eritrea are split more evenly between the
two religions. These differences influence the material relationships between each Gulf and Horn state.
For example, the Saudi Arabia-based Islamic Development Bank runs projects in the predominantly Muslim
countries Djibouti, Somalia and Sudan, but not in Eritrea, Ethiopia or South Sudan as they are not members
of the Organisation of Islamic Cooperation.
11
2 A long, long history
The material realities and perceptions of Gulf Arab aid, investment and trade into
African states cannot be understood without factoring in the long and deep history
of ambivalent relations between the Arabian Peninsula and the Horn of Africa.
The societies of the Gulf have profoundly influenced the economic, political and
sociocultural landscape of the Horn of Africa and vice versa. From the Sinai Peninsula
and the Gulf of Aqaba in the north to the strait of Bab al-Mandab and the Gulf of Aden
in the south, the Red Sea is at no point wider than 355 kilometres. This geography
underpins a long and deep history of relations that have often swung back and
forth between intimate partnership and prejudiced animosity. Historical experiences
accumulated over the centuries continue to colour how policy makers and ordinary
citizens perceive each other today.
Religion is crucial in this regard. Although the monotheistic faiths had their cradle in
the Middle East, northeast Africa was the site of pivotal moments in their respective
traditions. It was in Egypt that Moses confronted the Pharaoh and that the Holy Family
sought refuge; the legendary Kingdom of Kush, in today’s Sudan, features prominently
in the Bible as the land ruled over by Noah’s grandson; the first Muslim hijra to flee
persecution by the dominant Quraish tribe in Mecca was, following the instructions
of the Prophet Muhammad, to Ethiopia; and the mystical union of the Jewish Prophet-
King Solomon and the Ethiopian Sheba remains an enigmatic story integral to Jewish,
Christian and Islamic traditions. Such narrations, fundamental to family settings and
public education systems, give relationships between both sides of the Red Sea a sense
of great familiarity.
Yet if religious connectivity has often represented the positive dimension to proximity,
other memories — of competing imperialisms and military betrayal — are less cheerful.
No old wound is more painful than the centuries of enslavement of hundreds of
thousands of Africans and those of African descent across the Hejaz, the Najd, Oman
and Yemen.15 Associations between blackness and slavery remain powerful shapers
of attitudes and prejudice on both sides of the Red Sea, framing perceptions of
contemporary labour migration such as the Ethiopian domestic workers employed in
the Gulf. Slavery was in fact only abolished in Saudi Arabia and Yemen in living memory,
15 UNESCO. 1984. Historical and Socio-Cultural Relations between Black Africa and the Arab World from 1935
to the Present, Report and Papers of the Symposium Organized by UNESCO in Paris from 25 to 27 July 1979,
The General History of Africa: Studies and Documents, Paris; Al-Khidr 'Abd al-Baqi, M. 2006. Surat Al-ʿArab
ladha al-Afariqa. Cairo: Jamiʿat al-Duwal al-ʿArabiyya.
12
1962.16 The practice continues to exist and be tolerated in certain parts of Sudan and
Yemen. In the Horn itself, patterns of cross-border labour exploitation persist, such as
South Sudanese employed in Sudan and Eritreans in Djibouti, while labour migration in
the other direction remains limited. Against this historic backdrop, complexion continues
to serve as an important, though contextual, marker of social position.
The movement of ideas, traditions, slaves and pilgrims between the Horn and the
Peninsula was for centuries complemented by a rich and well-balanced trade in food
grains, salts, coffee, frankincense, livestock and much else.17 This relative economic
equilibrium between both regions was also visible in their joint subjugation by various
imperial projects — most prominently those of the Ottomans and the British — which
cut some of the interregional links that had grown organically in the past yet stimulated
intensified interactions between Arabia and Africa in other ways.18
A shared thirst for independence and the spread of ideologies like Pan-Arabism meant
that nationalist aspirations in the Middle East and northeast Africa stimulated each
other.19 Oman, Saudi Arabia and Yemen had long established statehood, the latter two
after World War I, but the independence of Bahrain, Qatar and the UAE in 1971 came
only a few years after that of Somalia and Kenya. Djibouti, in 1977, was the last state
in the region to end European colonial rule. Many observers expected the emerging
autonomous countries in both regions to be natural allies given their shared history and
certain cultural similarities: Arabic is spoken on both sides of the Red Sea (recognised
as one of a number of official languages in Djibouti, Eritrea, Somalia and Sudan);
tastes in food and music overlap to some degree; tribal diaspora populations connect
Yemen with Somalia and Kuwait and Saudi Arabia with Sudan; and the deeply religious
character of all these societies could strengthen transnational solidarities and identities.
Such connections do create a sense of cultural proximity, mainly in Sudan, but other
competing identity markers are relevant as well, creating a substantially more complex
situation in different Horn states and regions. Many groupings identify themselves more
locally through complex ethnic ties, such as Somali identities in Djibouti, while religious
identities may at times drive a divide between Horn and Gulf populations, such as in
South Sudan.
16 Bowen, W. 2014. The History of Saudi Arabia, 2nd edition, Santa Barbara: ABC-CLIO.
17 Verhoeven, H., and Woertz, E. 2016. ’Saudi Arabia and the Horn of Africa’, in: Saudi Arabian Foreign Policy:
Conflict and Cooperation, ed. Patrick, N., London: I.B. Tauris.
18 Ochsenwald, W. 1980. 'Muslim-European Conflict in the Hijaz: The Slave Trade Controversy, 1840–1895’,
Middle Eastern Studies 13, 115–126; Serels, S. 2012. 'Famines of War: The Red Sea Grain Market and Famine
in Eastern Sudan, 1889–1891’, Northeast African Studies, 12 (1), 73–94.
19 Ajami, F. 1978. ‘The End of Pan-Arabism’, Foreign Affairs 57(2), 355–373.
13
Regardless of ethnic and cultural ties, geopolitics at times played a decisive role.
One macro-development that drove the region apart was the Cold War between the
US and the Soviet Union, which divided the Middle East and the African continent and
forced Arab and African states into different camps. 20 Shifting alliances variously pitted
Egypt, Ethiopia, Saudi Arabia, Somalia, South Yemen and Sudan against each other in
the 1960s, 1970s and 1980s. The initial period of the Cold War (1952–1970) saw Cairo,
Damascus, Khartoum and Mogadishu confronting Riyadh, Kuwait, Addis Ababa and
Sana’a. 21 A second phase (1977–1991) reshuffled those coalition structures in the face
of regime change and changing political calculations: now Riyadh, Cairo, Khartoum
and Mogadishu faced Tripoli, Aden and Addis Ababa. 22 The other decisive macro-
development that shaped the international relations of the regions (with one another and
with the global political economy) was the astonishing increase in the oil price in 1973:
one side of the Red Sea emerged almost overnight as a global economic powerhouse,
becoming the main creditor of the other side and the make-or-break patron of regimes
and rebel movements in the Horn of Africa.
2.1 After Oil: The bargain between the Horn and the Peninsula
since the 1970s
An oil price above USD 40 per barrel changed everything after 1973. 23 Not only did it
dramatically bolster the importance of the Gulf states to the superpowers (the Gulf was
the only region with which Western states ran a trade deficit, creating stagflation in the
West), it also rocked the trade balance between the Peninsula and the Horn. All states
on the Western shore of the Red Sea were (and are) net importers of oil, triggering
balance-of-payments crises from Cairo to Mogadishu that coincided with growing
economic difficulties of their own making. 24 To compensate for the acute shortfall in
cash required to import daily necessities (including oil), African governments, including
those in the Horn, stimulated their citizens to join the rapidly expanding labour force of
20 Westad, A.O. 2005. The Global Cold War: Third World Interventions and the Making of our Times. Cambridge:
Cambridge University Press.
21 Al-Rasheed, M. 2002. A History of Saudi Arabia. Cambridge: Cambridge University Press, 106, 130–133.
22 Markakis, J. 1987. National and Class Conflict in the Horn of Africa, Cambridge: Cambridge University Press;
Witty, D.M. 2001. ‘A regular Army in counterinsurgency operations: Egypt in North Yemen, 1962–1967’,
Journal of Military History, 65(2), 401–439; Doran, M. 2006. ‘Egypt. Pan-Arabism in Historical Context’, in:
Diplomacy in the Middle East, ed. Brown, L.C., London: I.B. Tauris, 112–114; Aalen, L. 2014. ‘Ethiopian state
support to insurgency in Southern Sudan from 1962 to 1983: Local, regional and global connections’,
Journal of Eastern African Studies 8, 627–628.
23 Ulrichsen, K. 2011. ‘Repositioning the GCC States in the changing global order’, Journal of Arabian Studies 1,
231–247.
24 Examples include lagging domestic industrial and agricultural production, rising inflation, inability to create
jobs that kept up with rising populations, rampant urbanisation, mounting debt levels, persisting trade
deficits, and so on.
14
Saudi Arabia, Kuwait and the UAE so that they could send back valuable remittances
earned in the Gulf. Moreover, they also positioned themselves as deserving recipients of
ODA and foreign direct investment (FDI) from the Gulf. Invoking historical, religious and
cultural ties as well as underscoring that untapped agricultural potential in the interior
of the Horn could help meet the growing food deficit on the Arabian Peninsula, African
states sought to benefit from the growing asymmetries in wealth and power with the
Gulf. Their courting of aid and investment in exchange for political loyalty and resources
was a deliberate strategy that combined the need to make economic ends meet with a
desire to maintain political stability.25
The positioning of post-independence African presidents during the Cold War was a
classic case of extraversion: an intentional leveraging of limited assets — vital minerals,
military bases and professed loyalty to Moscow or Washington — to attract external
assistance that would help defeat internal rivals. 26 After 1973, extraversion came to
define the previously relatively equal relationship between the shores of the Red Sea.
Egypt, Sudan and Somalia sought Gulf patronage and sent doctors, engineers and
teachers to Riyadh, Jeddah and Abu Dhabi. They pledged loyalty to Saudi Arabia in its
fight against communism and spoke of informal economic union with Gulf states. For
their part, Kuwait, Qatar, Saudi Arabia and the Emirates made unprecedented sums of
money available to help African states weather their balance-of-payments crises. Prior to
the oil crisis, 80 percent of Gulf ODA went to other Arab countries, the Kuwait Fund for
Arab Economic Development being at the centre of this generosity (see figure 3). After
1974, Kuwait began to lend hundreds of millions of dollars for special assistance to non-
Arab nations in Asia and Africa for the first time. Saudi Arabia and, to a lesser extent
the UAE, also established themselves along the world’s top aid donors in both absolute
and per capita terms as they provided significant sums to help poorer nations deal with
the rising cost of oil and imported goods. In 1977, at the Afro-Arab Conference in Anwar
Sadat’s Cairo, Gulf states committed to invest USD 1.35 billion in African development
projects over the next five years. 27
It is the element of continuity between the 1970s and today that is striking. Despite
continual disappointments on both sides with what this partnership actually delivered in
economic terms, the key bargain — political-economic alignment between regional blocs
to help manage dependence and vulnerability in turbulent international waters — has
proven too valuable to abandon. Extraversion is still, as we will see, the order of the day
in Gulf-Horn interactions.
25 Verhoeven, H. 2016. ‘The Gulf States in the Political Economy of the Nile Basin: A Historical Overview’, in:
Water Politics in the Nile River Basin. Challenges and New Investments, ed. Sandström, E., Østigård, T., and
Jagerskog, A., London: I.B. Tauris, 53–72.
26 Clapham, C. 1996. Africa and the International System: the Politics of State Survival, Cambridge: Cambridge
University Press.
27 Miller, R. 2016. Desert Kingdoms to Global Powers, New Haven: Yale University Press.
15
Figure 3 Gulf ODA to Middle Eastern and non–Middle Eastern recipients

Based on ‘Aid (ODA) disbursements to countries and regions [DAC2a]’ datasets of Saudi Arabia, the United
Arab Emirates and Kuwait. Excludes ODA disbursements made through multilateral institutions.
Non-Middle Eastern
Middle East
20
ODA flows from Gulf states
15
(USD billions)
10
0
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
2.2 Confrontation and disengagement in the 1990s: Islamism and

its enemies
The end of the bipolar confrontation between the US and the Soviet Union was a chasm
for the geopolitics of the Red Sea as well. The oil price bubble had already burst in 1986
and thereby limited how much largesse the Gulf states could bestow on their clients,
whether governments as in Somalia or Sudan or rebel movements in Eritrea, but the
demise of the Socialist bloc also meant that the perceived need to do so was much
less acute. The collapse of the Marxist-Leninist Derg government in Ethiopia (1991)
and the disappearance of the People’s Democratic Republic of South Yemen (1990),
combined with the independence of Eritrea (1991/1993), meant that the foreign policy
goals of Saudi Arabia seemed to have been achieved. 28 The 1990s were a decade of
disengagement from Africa by Gulf actors. The implosion of the Somali state meant
that working on the ground there became more difficult — lacking a formal government
serving as interlocutor and security guarantor investments in various factions continued,
albeit on a smaller scale (see box 2) — and a now autonomous that Eritrea was too
small and too distrustful of private-sector activity to be a major recipient of Gulf aid,
investment or trade. 29 The biggest headache was Sudan, which in 1989 had witnessed an
28 Verhoeven and Woertz, op. cit.

29 Historically, Gulf support to Eritrean aspirations for independence had been key: see, for example, Abir, M.
1974. Oil, Power and Politics: Conflict in Arabia, the Red Sea and the Gulf, London: Cass.
16
apparently traditional coup d’état by the army, but which quickly revealed itself as a front
for an Islamic Revolution.
Led by the mercurial scholar and Islamist politician Sheikh Hassan Al-Turabi, the
Khartoum government sought not only to fundamentally reform its domestic society
and to intensify the war in Central and Southern Sudan against the rebels of the Sudan
People’s Liberation Army (SPLA), but also to radically restructure the international
relations of both the Horn of Africa and the Middle East.30 The military-Islamist regime
was fiercely critical of the role of the US and Saudi Arabia in the Islamic world and
decided to side with Saddam Hussein’s Iraq following the latter’s invasion of Kuwait in
1990 and the subsequent Gulf War.31 Turabi invited dissidents from across the region
— including Osama Bin Laden and his Al-Qaeda network, which wanted to overthrow
the House of al-Saud in Riyadh and Hosni Mubarak in Cairo — and established political
and security relations with Iraq and Iran, the two nemeses of King Fahd and Crown
Prince Abdallah. This led the Gulf states, led by Kuwait and Saudi Arabia, to suspend
nearly all aid, investment and trade relationships, public and private, with Sudan in an
effort to isolate and contain Turabi (an objective shared by Ethiopia and Eritrea from
1995 onwards). In the 1990s, Sudan received only a meagre 0.5 percent (USD 0.1 billion)
of pan-Arab development assistance, whereas this figure stood at 5 percent in the
preceding (USD 3.6 billion) and following decade (USD 0.5 billion).32
Initially, this strategy appeared highly unproductive as Egyptian jihadists, with extensive
backing by the Sudanese intelligence services, nearly succeeded in assassinating
Mubarak during a Pan-African summit in Addis Ababa in 1995. However, the total
isolation of Sudan, growing momentum for the SPLA rebellion and the financial cost
of pariah status led to deep internal fissures in the military-Islamist government.
In December 1999, Turabi was betrayed by his former co-conspirators and ousted from
the regime he had created; power passed to Brigadier-General Omar Al-Bashir, who had
since 1989 served as president but had been a mere figurehead until then.33 Immediately,
Cairo threw its political weight behind the reformed Khartoum government (reformed in
the sense that Bashir announced the end to Sudan’s revolutionary foreign policy, whilst
continuing to pursue its domestic agenda) and persuaded the Gulf states too to engage
with the ‘new’ leadership. Sudan once again became the Gulf’s prime point of contact
and engagement in the region.
30 Verhoeven, 2015, op. cit.

31 Faksh, M. 1994. ‘The prospects of Islamic fundamentalism in the post–Gulf War period’, International
Journal, 49(2), 183–218.
32 World Bank. 2010. Arab Development Assistance: Four Decades of Cooperation, Washington DC: World Bank
Group.
33 Roessler, P. 2016. Ethnic Politics and State Power in Africa: The Logic of the Coup-Civil War Trap, Cambridge:
17
2.3 So close, yet so far: Cooperation amidst disappointment and

distrust in recent history
The toppling of Turabi meant, for the Gulf monarchies, the end of a directly hostile
presence on the other side of the Red Sea. Even after 11 September 2001, when Saudi
Arabia came under repeated attack by Al-Qaeda (including the Khobar terrorist strikes
in 2004), Khartoum no longer represented a threat after well-known foreign jihadists
were expelled from Sudan. Yet despite this undeniable foreign policy success, ties
between Sudan and Saudi Arabia over the next decade could not be described as
warm. 34 The reasons for the ambivalent relationship were similar to those for the Saudis’
lukewarm contacts with Eritrea, Ethiopia and Djibouti: from the Gulf Arab perspective,
these African states were quite keen to receive external largesse but often made life
difficult for Gulf investors on the ground by trapping them in a bureaucratic maze.35
Moreover, they offered only half-hearted political support for the international causes
Riyadh and Abu Dhabi deemed vital, such as isolating Iran and stopping support for
Hamas in Gaza and Hezbollah in Lebanon; Sudan in particular disappointed them
because it maintained important political and military contacts with Tehran. However,
from the Horn perspective, it was the Gulf states that did not live up to their side of the
bargain by proving fickle commercial investors and disinterested political partners, for
whom Africa (like for much of the rest of the world) ranked at the bottom of their priority
list. Cash-strapped, African governments have consistently signalled that they will
partner with whoever is able to provide financial and other assistance for their strategies
of regime survival and economic development. Ideological or sectarian preoccupations
— such as the Sunni-Shia rivalry or the three-way competition between Wahhabists,
secularists and Muslim Brothers at the centre of so much of Middle Eastern politics of
the last two decades — are seen as costly distractions from more urgent challenges by
Horn political actors.
This pattern of real cooperation and a quest for mutually beneficial economic and
political ties amidst sequential disappointment and distrust persists today. Gulf states
fret over large-scale migration from the Horn across the Red Sea (whether in transit
to Europe or with the Arabian Peninsula as a final destination) and over the enduring
close connections that Eritrea and Sudan (until very recently) maintained with Iran,
Riyadh’s arch-enemy.36 Horn states on the other hand are faced with refugees and
arms-trading stemming from Yemen. Moreover, a rising Ethiopia’s challenge to Egypt’s
historical hegemony in the Nile Basin — amongst other ways through the construction
of the Grand Ethiopian Renaissance Dam — deeply concerns Saudi Arabia and the UAE,

35 Woertz, E. 2013. ‘The Governance of Gulf Agro-investments’, Globalizations, 10, 87–104.
36 Atarodi, A. 2010. Yemen in Crisis, Consequences for the Horn of Africa, Stockholm: Swedish Defence
Research Agency; Flahaux, M., and De Haas, H. 2016. ‘African migration: trends, patterns, drivers’,
Comparative Migration Studies, 4(1).
18
who see the stability of Egypt as critical to the regional balance of power in the greater
Middle East. Egypt has historically been a gateway for Gulf Arab political and economic
actors to enter the rest of Africa and, as the geographical pivot seated between North
Africa, the Horn, the Levant, the Red Sea and the Arabian Peninsula, its stability directly
shapes the national security of Gulf states. The presence of millions of Egyptians in other
Arab countries, especially the Gulf, as guest labourers only further underlines why Egypt
matters considerably to Riyadh and Abu Dhabi in particular.
For their part, most Horn of Africa societies worry about, on the one hand, the
intensifying identity politics and sectarian extremism that the Gulf exports and, on the
other, the pressures they face in having to choose sides in geopolitical rivalries (whether
between the Gulf Arabs and Iran or amongst the Gulf Cooperation Council member
states themselves) that they would rather stay out of. Djibouti, Eritrea, Somalia and
Sudan know Gulf states cannot take their political allegiance for granted and thus
skilfully play them off against each other for financial gain, but they know this is a
dangerous game to dabble in; their fears about deepening domestic instability and
inter- and intra-religious confrontation are growing. At the same time, the Arabian
Peninsula is a key destination for many youngsters who send back desperately needed
remittances yet who often experience profound racism and violent abuse during their
sojourns in Saudi Arabia, Kuwait, Oman or elsewhere. Thus although the Gulf is seen
as an inevitable partner with long-standing cultural and historical connections to the
Horn (see figure 4 for an overview), the relation is ultimately driven by necessity rather
than a shared cultural and historical legacy, as this legacy can be as divisive as it can be
bonding.
Figure 4 Timeline of important events in the Gulf and the Horn of Africa
Cold war Regime collapses Global War on Terror & Arab Spring
& rise of Islamism
40 USD/barrel
Oil price
1970 2017
1973: 1978: 1985: 1991: Fall of 1998-2000: 2001: 2008: 2017:

First Second Fall of Nimeiri- Ethiopian Derg & Ethio-Eritrean 9/11 & Commodity GCC crisis
Oil Crisis Oil Crisis regime in Sudan Siad Barre in Somalia war War on terror Price Boom Sudan sanctions relief
1971: 1981: 1995: 2000: 2011:

Creation of Bahrain, Creation of Gulf Assassination attempt Al-Turabi ousted Arab Spring
Qatar and the UAE Cooperation Council on Mubarak in Addis in Sudan
Alliances:
Cold war
Eastern
Cold war
Western / Saudi
Non-aligned
19
3 The determinants of Gulf
aid, investment and trade
in the Horn
3.1 An economic strategy as part of wider foreign policy
Contemporary perceptions by Africans of Gulf Arab aid, investment and trade into the
Horn cannot be fully understood without considering the role Gulf societies and states
have played for decades and centuries in Africa. The long record of exchanges and
proximity set out in the previous section have a decisive bearing on the external policy
Gulf states are currently pursuing vis-à-vis the Horn of Africa. This section makes two
core points. First, it posits that the vast majority of economic initiatives by Gulf actors in
the Horn are still directly inspired by and mediated through political factors- politics and
economics are not discrete realms, but two sides of the same coin.37 It thus illustrates
how the current mixture of political and economic drivers is translated in concrete
policy instruments. Second, the section highlights not only the related opportunities
but also the risks, both to elites and to wider populations. Sudan’s experience offers a
concise historical example. Although Sudan’s ties with Gulf states are uniquely close
relative to those of other Horn states, the failure of the Breadbasket gamble illustrates
the opportunities and hazards the Gulf’s mixture of political and economic aims and
instruments in the Horn still carries.
Box 1 Sudan’s Breadbasket Gamble38
On 25 May 1969, leftist officers led by Colonel Ja’afar Nimeiri overthrew the
democratically elected Sudanese government amidst growing doubts that
the promises of peace and prosperity that the political class had made at
independence in 1956 would be kept.39 Nimeiri held the upper hand militarily
37 Halliday, F. 2005. The Middle East in International Relations, Cambridge: Cambridge University Press;
Clapham, C. 1996. Africa and the International System: the Politics of State Survival, Cambridge: Cambridge
University Press; De Waal, 2015, op. cit.
38 Draws on Verhoeven, op. cit., 73–81.
39 Niblock, T. 1987. Class and Power in Sudan: The Dynamics of Sudanese Politics, 1898–1985, Albany: SUNY
Press.
20
but lacked the organization in the form of a national political party and requisite
patronage networks to durably establish control over Sudan. Moreover, once in
power Nimeiri soon realised that promising development was easier than actually
delivering it in a poor African country. Seeking a way out, the new president
gambled that the solution lay in a partnership with the Gulf states whose
revenues were skyrocketing as oil prices shot up in the early 1970s. Nimeiri
knew that Kuwait, the Emirates and Saudi Arabia worried about rising water and
food scarcity as consumption and population levels soared.40 Sudanese officials
trumpeted that 200 million acres of arable land were available in the country’s
interior. Sudan could become the “Breadbasket” of Africa and the Middle East
but, for it to fulfil this historical destiny, Western technology and Gulf Arab
petrodollars would be needed on a massive scale, or so Nimeiri and his aides
said.41 This strategically calibrated message coincided with mounting global fears
about desertification, drought and famine; 1974 had been a devastating year,
hundreds of thousands dying of hunger in the Sahel and Bangladesh. Khartoum’s
offer to put its land, labour and water resources at the disposal of the Gulf thus
simultaneously suggested that a failure to put such unique potential to good use
would spell a Malthusian disaster.42
Funded bilaterally by the dominant states on the Arabian Peninsula, and

multilaterally through multiple Gulf Arab development funds, the Breadbasket
was hailed by the World Bank, IMF and Western governments as a visionary
policy. Yet what presented itself as an economic and environmental proposition
was in fact a deeply political gambit. Nimeiri needed the petrodollars to pay for
his state-building project, the crafting of new coalitions and the penetration of
his rivals’ rural political strongholds. Under the guise of technocratic advice, only
those crops, regions and networks that Nimeiri favoured would benefit from the
Breadbasket largesse as billions of dollars in Gulf money poured into Sudan —
a mechanism that acted as a punishment for recalcitrant local politicians and
businessmen and as an incentive for these groups to switch to the president’s
side. The expansion of mechanised farming in Sudan obeyed an iron political
logic but continued to explain itself in terms of agricultural objectives and
instruments.
40 Woertz, E. 2013. Oil for Food: The Global Food Crisis and the Middle East, Oxford: Oxford University Press,
chapters 2 and 6.
41 Verhoeven, H. 2011. 'Climate Change, Conflict and Development in Sudan: Global Neo-Malthusian
Narratives and Local Power Struggles’, Development and Change, 42(3), 679–707.
42 Wilson, R. 1979. The Economies of the Middle East: The Ghost of Malthus Lingers on, London: MacMillan
Press.
21
Although Riyadh, Kuwait City and other Gulf governments did indeed see
an opportunity to address the rapidly growing “food gap” between lagging
domestic production and soaring consumption (particularly following the post-
1970 economic boom),43 they too had, from the start, political motives too for
partaking in the Breadbasket.44 The Breadbasket was as much about Gulf foreign
and domestic policies as it was internal and external objectives for Sudan.
Nimeiri had initially modelled himself on Egypt’s revolutionary leader Gamal
Abdel Nasser (1952–1970) and had entered into an alliance with the Sudanese
Communist Party, which preoccupied King Faisal of Saudi Arabia greatly. When
the Sudanese ruler fell out with the communists in 1971, Faisal was keen to
put Khartoum on a more conservative trajectory; committing petrodollars to
Sudanese agriculture anchored Nimeiri in a pro-Saudi orbit and kept it safely
away from any socialist allegiances that Riyadh abhorred. Sudan became a loyal
friend of the Gulf Arabs and the West; Washington provided it with military
assistance, turning it into a major client state. Expanding mechanised agriculture
in the Sudanese peripheries thus served greater geopolitical purposes.
The Breadbasket dream and the internal and external alliances it had helped
to build came crashing down in 1985 when protests toppled Ja’afar Nimeiri.
Shortages and rampant inflation were the proximate cause of regime change
but underlying was the failure of the extraversion gambit to which the president
had tied his political fate. Although the Breadbasket had promised to transform
Sudan into an agricultural superpower, by the early 1980s the country faced
the return of famine to its western, central and southern regions.45 Soils were
being exhausted, land was being degraded and productivity was sinking rather
than soaring. Agricultural projects failed to live up to expectations as political
and patronage considerations precluded sound agricultural management and
development practices, leading to various problems such as soil erosion. Tens
of thousands — maybe hundreds of thousands — of people had been displaced
to feed the Middle East and Africa. However, Nimeiri had neither managed to
vanquish the old political elites nor to counter the rising new forces in Sudanese
politics, whether the Islamists of Hassan Al-Turabi or the rebels of the Sudan
People’s Liberation Army/Movement. The latter in particular attracted recruits
and support from those dispossessed by the Breadbasket.46
43 Woertz, E. 2014. ‘Environment, Food Security and Conflict Narratives in the Middle East’, Global
Environment, 7(2), 490–516.
45 De Waal, A. 1989. Famine that Kills: Darfur, Sudan, 1984–85, Oxford: Clarendon Press.
46 Komey, G. 2010. Land, Governance, Conflict & the Nuba of Sudan, Woodbridge: James Currey.
22
Nimeiri’s erstwhile foreign friends had left disappointed too. The oil price had
fallen back from its peak of more than USD 100 in 1979–1980, meaning that
petrodollars were no longer just spare cash at the disposal of the foreign policy
of Gulf states but were actually needed at home to sustain the ballooning cost
of the huge patronage systems the Gulf royals had built to sustain domestic
stability. Moreover, many Gulf investors felt tricked by the Nimeiri regime, losing
their way in Sudan maze’s of crony politics and bureaucracy. As the questionable
hydro-agricultural assumptions underpinning the Breadbasket were exposed by
disappointing production figures, Gulf capital pulled out, seeking easier returns
and more transparent projects to invest in.47
Although Horn states differ significantly in their domestic political and economic
situations as well as in the relationships they maintain with Gulf states, Sudan’s bid in
the 1970s and 1980s to become the Breadbasket of Africa and the Middle East provides
several lessons which apply to some degree to many of the relationships between the
elites of the Arabian Peninsula and those of the Horn. It is a cautionary tale for those
(over)enthusiastically seeking regional integration between both shores of the Red
Sea today. The Breadbasket story underlines the fundamentally political motivations
that often determine aid, investment and trade flows, rather than discrete economic
variables or sound ecological arguments, whether on the side of the donor (the Gulf) or
the recipient (the states of the Horn).48 It also highlights the ways in which extraversion
is not only a lucrative but also a risky strategy for African states to pursue, not least
because of the dependence on factors they do not control (e.g., oil prices). Finally,
it underscores the crucial point that the stakes of political-economic ventures are
quite different for both partners: whereas the sums of money are comparatively small
for Gulf states (and therefore an irritant in case of losses but inconsequential for their
macroeconomic balance sheets), for the countries of the Horn they can be positively
transformative or catastrophically destabilising. Three decades after the collapse of the
Breadbasket, these insights remain highly pertinent.
These lessons are also particularly important in light of the dramatic scaling-up of the
political, military and economic presence of Gulf Arab actors in the Horn of Africa over
the last ten to fifteen years. After a near-total withdrawal in the late 1980s and 1990s,
Emirati, Kuwaiti, Qatari and Saudi actors have returned to the Horn — hesitantly at first,
but with increased vigour since 2008. This comeback began in Sudan: Gulf governments
and multilateral funds provided the lion share of the funding for Khartoum’s multibillion
47 Verhoeven, 2015, op. cit., chapter 5.

48 For a longitudinal analysis of the political determinants of aid specifically, see: Neumayer, E. 2003. ‘What
Factors Determine the Allocation of Aid by Arab Countries and Multilateral Agencies?’, The Journal of
Development Studies, 39(4), 134–147.
23
dollar Dam Programme from 2001 and 2002 onwards.49 Given the close connections
between dam building and the rejuvenation of large-scale, capital-intensive irrigated
agriculture in Sudan, a flurry of Gulf enterprises followed in the wake of visiting
monarchs and scouted out possibilities for an updated version of the Breadbasket:
once again, the Sudanese government was offering its land, water and labour to outside
investors and hoping to capitalise politically and financially on the inflow of FDI and aid.
Some Gulf partners sceptically remembered the debacle of twenty years earlier and
withheld their cash. Those who did invest did so in part because the political imperative
was clear. Just as their support of the Breadbasket had been intended by Riyadh to keep
Nimeiri out of the socialist camp, so the funding of the dams and of Sudan’s Agricultural
Revival Programme sought to bolster the military and business wing of the regime that
came to power in Khartoum in 1989, marginalising the radical Islamists associated
with Hassan Al-Turabi who had been dominant in the 1990s. In more recent years,
Saudi support to Sudan, such as billions in concessional loans and bank deposits, for
the Sudanese regime has been instrumental to securing the continued engagement of
Sudanese troops in Yemen and Sudan’s breaking off ties with Iran in the wake of the
Saudi execution of Shia cleric Sheikh Nimr al-Nimr.50
3.2 (Mostly) economic determinants
Bringing Sudan back into the Saudi-led fold of GCC states has proven a major driver
for Gulf aid, investment and trade. From 2007 onwards, it has been complemented as
a determinant of economic ventures by a dramatic spike in commodity prices. When
Asian states banned rice exports and grain prices spiralled out of control a decade
ago, food riots broke out in several African countries and fears of a Malthusian crunch
returned to the Arabian Peninsula: a repeat of the 1970s seemed to be in the making.51
The prospect of running out of food and water, and the associated risk of political
instability,52 compelled sovereign wealth funds and holding companies from Saudi
Arabia, Qatar and the UAE to aggressively move on international markets with a view to
49 Verhoeven, H. 2016. ‘African Dam Building as Extraversion: the case of Sudan’s Dam Programme, Nubian
Resistance and the Saudi-Iranian Proxy War in Yemen’, African Affairs, 115(461), 562–573.
50 Mohammed, B. 2015. ‘Gulf States Lend Sudan $2 Billion to Boost Foreign Reserves’, Bloomberg, 20 July,
https://www.bloomberg.com/news/articles/2015-07-20/gulf-arab-states-lend-sudan-2-billion-to-boost-
foreign-reserves (accessed 28 February 2018); The Guardian. 2016. ‘Why has Sudan ditched Iran in favour
of Saudi Arabia?’, 12 January, https://www.theguardian.com/world/2016/jan/12/sudan-siding-with-saudi-
arabia-long-term-ally-iran (accessed 28 February 2018).
51 Runge, C.F., and Runge, C.P. 2010. ‘Against the Grain: why failing to complete the green revolution could
bring the next famine’, Foreign Affairs, 89, 8–15.
52 Bellemare, M. 2015. ‘Rising Food Prices, Food Price Volatility, and Social Unrest’, American Journal of
Agricultural Economics, 97(1), 1–21.
24
buying up or leasing productive land and concluding long-term agreements to secure

regular supplies.53 Soaring prices made the cultivation of previously marginal land
attractive again. The geographic proximity of the Horn, coupled with cultural similarities
and people-to-people familiarity in a number of cases, is an obvious pull factor for Gulf
investment in agricultural projects, especially in Sudan and Ethiopia.54 Saudi investments
are further facilitated by the returning Sudanese and Ethiopian diaspora, who frequently
start businesses on their return, drawing on their Saudi connections to find business
partners or investors.
Deradicalising Sudan and concerns about food and water security have therefore
been flanked as determinants of increased Gulf economic activity in the Horn by more
apparently commercial motives as well. Middle Eastern companies have taken up
important positions in the telecoms, banking and hospitality sector as well as opening
for-profit schools, launching mining operations and acquiring valuable real estate. Gulf-
owned enterprises have been central to this move. This presence is in part related to
improved macroeconomic management in many African states and reduced exchange
rate volatility and inflation.55 The much discussed 2010 report by McKinsey & Company,
Lions on the Move: The Progress and Potential of African Economies, has embodied this
recent period of newfound gusto about African markets (often referred to as Africa
Rising). Reports of an emerging middle class with greater than hitherto appreciated
purchasing power have underpinned this bullishness about economies such as Ethiopia’s
and Kenya’s and increased the buzz about investment in them. The claim is twofold.
First, the return on FDI in Africa is higher than anywhere else in the developing world.
Second, the gradual urbanisation of the continent will produce a permanent consumer
bloc that could revolutionise demand for foreign and African-made goods.56
Consumer-facing industries, infrastructure and agriculture across the continent could

generate more than USD 2 trillion in revenue annually, which would turn the likes of
Ethiopia, Kenya and Sudan into African equivalents of Asian Tigers.57 Interestingly,
McKinsey’s public and private work has not just been important in altering some
perceptions regarding (East) Africa’s investment climate, but also in drafting extensive
53 Keulertz, M., and Woertz, E. 2015. ‘Financial Challenges of the Nexus: Pathways for Investment in Water,
Energy and Agriculture in the Arab World’, International Journal of Water Resources Development, 31(3),
312–325.
54 Verhoeven, H. 2012. ‘Sudan and Its Agricultural Revival: A Regional Breadbasket at Last or Another Mirage
in the Desert?’, in: Handbook of African Land- and Watergrabs, ed. Allen, T., et al. London: Routledge, 43–56.
55 Gulf support has been an important factor underpinning the stable exchange rates of the Ethiopian birr and
the Sudanese pound.
56 See also Mahajan, V. 2011. Africa Rising: How 900 million African consumers offer more than you think, Upper
Saddle River: Prentice Hall.
57 Consumer-facing industries are those selling directly to consumers rather than to businesses.
25
reforms to do so in the Gulf as well, notably in close partnership with the office of
Saudi Crown Prince Mohammad bin Salman. It is widely understood that Riyadh’s
much vaunted (and criticised) Saudi Vision 2030, which aims to reduce the Kingdom’s
oil dependence and diversify its economic base by entering into new international
partnerships (including with Africa), was strongly inspired by consultants of McKinsey.58
Even if the main thrust of these reforms has little to do with the Horn and investments
into Africa rank below those envisaged in Asia and Europe, capturing even a fraction
of Saudi Arabia’s USD 2 trillion capital funds available to implement Vision 2030 would
result in a huge bonanza for any East African state.59
This trend of looking towards Africa to recycle some of the Peninsula’s petrodollars in
the form of investment has been further strengthened by the hundreds of thousands of
Ethiopian, Sudanese, Somali, and Eritrean professionals working in the Gulf. Many of
these — especially the Sudanese in Abu Dhabi, Eastern Saudi Arabia and Qatar and the
Somalis in Dubai — have been key conduits for advice and channelling capital inflows
from Gulf economies into their countries of origin. Moreover, diaspora returnees to the
Horn in the last decade have brought substantial savings with them from North America,
Europe and the Gulf, which has boosted domestic demand and led to the expansion of
the banking and services sector. Combined with years of sustained economic growth,
itself driven mostly by high commodity prices and expanding cities, this inflow has
bolstered the disposable income of a small but meaningful middle class in Addis Ababa,
Hargeisa, Khartoum, Mogadishu and Nairobi. For the first time since independence, a
group of people — perhaps 20 to 25 million across the Horn (if Kenya is included) — has
enough purchasing power to acquire some of the consumer goods that multinational
corporations, including Gulf based players in the aforementioned sectors, provide.
Whereas 30 years ago the number of potential customers, say, a profit-driven Emirati
investor would have counted was too limited to warrant the complex procedures of
setting up risky operations on the continent, today’s growing market size is changing the
cost-benefit ratio and bringing Kuwaiti telecom operators, Qatari property developers
and Saudi banks to the Horn. Many investments are further de-risked through the
political backing from their home governments they can potentially call upon.
By way of conclusion, it is worth highlighting that as important as these economic

motivations for augmented Gulf interest in the Horn are, they remain heavily dependent
on political backing by state governments. Few investors would dare to wade into
markets they still struggle to understand and navigate autonomously. Economic
considerations may be cited as a legitimating factor by Gulf entrepreneurs venturing into
58 Khashan, H. 2017. ‘Saudi Arabia's Flawed " Vision 2030"‘, Middle East Quarterly, 24(1). The governments
of Kuwait, the United Arab Emirates and Qatar have published similar strategic plans directed towards
economic diversification.
59 Khashan, H. 2017. ‘Saudi Arabia's Flawed "Vision 2030"’, Middle East Quarterly 24(1).
26
the Horn, especially in the case of agricultural projects, but the underlying business case
is often questionable. For agricultural (excluding livestock) projects, it should be noted
that 1) Gulf states are located on a major shipping route, and could reliably source from
other areas while hedging prices; 2) Horn states are food insecure, indicating difficulties
with food production in the region; 3) developing and operating large-scale farms in a
developing context takes significant expertise, which is not in abundant supply in most
Gulf states; and 4) returns on investment from such projects are rarely evaluated by
investing Gulf parties, making economic motives as a driving factor unlikely.60
3.3 Geopolitical determinants
A third, and currently the most crucial element, that brings Gulf capital to the shores of
northeast Africa is geopolitical. Developments like the Emirati and Saudi investments
in the ports of Berbera (Somaliland), Doraleh (Djibouti), Bosaso (Somalia) and Assab
(Eritrea), the ongoing Saudi support for Sudan’s ambitious Dam Programme and
promises of billions of Qatari riyals for agriculture, and light manufacturing and social
services in Darfur 61 are all to be understood in the context of escalating rivalries
between Middle Eastern states and clashing identity paradigms.62 Two fault lines
are vital. First, the proxy war between Iran and Saudi Arabia (and to a lesser extent
the Emirates) is the main factor shaping the violence and diplomatic jockeying in
the contemporary Middle East.63 Riyadh is convinced that Iran seeks to undermine
the stability of the Gulf and encircle Saudi Arabia with Shia (or at least pro-Iranian)
regimes in Bahrain, Iraq, Lebanon, Syria and Yemen.64 King Salman and Crown Prince
Mohammad bin Salman are supported in this conclusion by de facto ruler Emirati Crown
Prince Mohammad bin Zayed who, like his Saudi peers, is convinced that Tehran is still
pursuing the revolutionary foreign policy it launched in 1979 when the Islamic Revolution
led by Ayatollah Khomeini toppled the shah. Africa’s eastern flank is an extension of
the battlefield of the Saudi-Iranian rivalry — Tehran and Riyadh each accusing the other
60 In practice, mainly Dutch, Israeli and Chinese investors have managed to develop successful productive
farms, though Chinese projects have at times been linked to unsustainable practices and environmental
degradation. Interview with an agricultural manager.
61 Doha acted for much of the last decade as the key peace mediator between the government and Darfuri
rebels.
62 For a good contextualization and theorization, see: Hinnebusch, R. 2016. ‘The Politics of Identity in Middle
East International Relations’, in: International Relations of the Middle East, 4th edition, ed. Fawcett, L.,
Oxford: Oxford University Press, 155–175.
63 Mason, R. 2015. Foreign Policy in Iran and Saudi Arabia: Economics and Diplomacy in the Middle East,
London: I.B. Tauris.
64 Cordesman, A., and Obaid, N. 2005. National Security in Saudi Arabia: Threats, Responses and Challenges,
Westport: Praeger.
27
of seeking to use African allies to commit aggression against the other. Because the
Saudi ruling family sees Iran as an existential threat, no efforts are spared to counter
it. This has not only meant rallying Gulf Cooperation Council states (including Kuwait,
Qatar and UAE) to support the Saudi-led war in Yemen but also persuading Eritrea,
Sudan and Somalia through investments, loans and central bank to central bank
transfers to sign up to the pro-Saudi camp and keep Iranian ships out of the Red Sea.
Sudan’s cutting of ties with Tehran in 2016, despite a previously close politico-military
relationship, should be seen in light of this as well as an attempt to enlist Saudi support
to delist Sudan from the state sponsors of terrorism list and (partial) lifting of the US
sanctions regime.65 In a similar vein, in previous years the port of Assab (Eritrea) saw
frequent Iranian traffic, but is now hosting Saudi and Emirati military presences and
Eritrean fighters are supporting the Saudi-led coalition in Yemen.66 The establishment
of Emirati and Saudi military bases across the Horn coastline could be seen in a similar
light, though the military significance of these bases, when completed, remains rather
limited.
The second defining geopolitical fault line is the enmity amongst the Gulf Arabs
themselves. Saudi Arabia continues to see itself as the unassailable regional hegemon
(and the voice of Sunni Islam globally) whose policies cannot be be challenged by
other actors in the region. Qatar and the UAE feel both capable of and entitled to an
independent foreign policy in which they pursue their own interests in and ideological
vision of the Middle East, North Africa and the Horn of Africa.67 Doha and Abu Dhabi
cannot match the sheer size and firepower of the Saudi armed forces, but by virtue
of their oil and gas wealth and nimble financial management have material resources
that put them in the same league as Riyadh, even if they are not quite equals. Emirati
and Qatari aid and investment into the Horn is thus driven by the same geopolitical
objectives as that of their Saudi friends-cum-rivals: commercial projects are meant to
consolidate political relations and gain greater influence in regional politics; any profit
they might yield is a welcome bonus but not an expected outcome.
This rivalry was mostly hidden from outsiders, but dramatically came to the fore when
Saudi Arabia, the UAE, Bahrain and Egypt imposed a sweeping embargo on Qatar in
June 2017, seeking to force Emir Tamim bin Hamad Al-Thani to either altogether ditch
Qatar’s independent foreign policy in Africa and the Middle East or to be ousted by an
internal coup. The embargo has so far failed to bring about either of these objectives,
65 Verhoeven, H. 2016. ‘African Dam Building as Extraversion: the case of Sudan’s Dam Programme, Nubian
Resistance and the Saudi-Iranian Proxy War in Yemen’, African Affairs, 115(461), 562–573.
66 UN Monitoring Group on Somalia and Eritrea. 2017. Report of the Monitoring Group on Somalia and Eritrea
pursuant to Security Council resolution 2317 (2016): Eritrea, New York: United Nations.
67 Kamrava, M. 2015. Qatar: Small State, Big Politics, Ithaca: Cornell University Press; Ulrichsen, K. 2017.
The United Arab Emirates. Power, Politics and Policymaking, London: Routledge.
28
but it has led to severe economic stress in Qatar and is likely to have a negative impact
on Qatar’s financial and diplomatic ability to project influence and power across the
Red Sea. The Eritrean government has already decided to side with the Saudi coalition,
breaking off ties with its former main economic partner and financial supporter.68
Muhammad bin Salman’s aggressive posturing — complemented by an internal
centralisation of power as evidenced by the dramatic developments of November 2017 —
sends a clear warning to potential other contenders for regional hegemony. Although the
Saudi-Emirati alliance appears solid for the time being, the core interests of Saudi Arabia
and the UAE are not always aligned, including in Yemen69 and in the Horn of Africa,
as demonstrated when Somalia President Mohamed Abdullahi Mohamed Farmaajo
lobbied its backer Saudi Arabia to prevent a UAE military base from being established in
Somaliland.70 The two countries thus may risk clashing in the near future as well. Such
structural geopolitical tensions should temper the buoyant investment bulletins sent into
the world by McKinsey and others.
3.4 Religion as a determinant of aid, investment and trade?
A frequent question in the context of Gulf foreign policies broadly and economic
engagement with the Horn specifically is that of the perceived influence of (religious)
ideology in shaping partners, motives and instruments. As discussed earlier, both
the Arabian Peninsula and the Horn of Africa have deeply religious populations; that
monotheistic traditions originated in this region remains important today as a source
of pride and self-identification. Many ordinary people reject any in their eyes arbitrary
separation between religion and politics and believe strongly that power must be
religiously sanctioned, or, at the very least, that public officeholders must respect the
core tenets of society’s dominant faith. This is most evident in the central position
occupied by the Al Ash Shaykh — the leading family in the Wahhabi clergy — in Mecca
and Medina: the monarchy and the ulema depend on each other for the political,
economic and societal power, a pact at the heart of state formation and consolidation
68 UN Monitoring Group on Somalia and Eritrea. 2011. Report of the Monitoring Group on Somalia and Eritrea
pursuant to Security Council resolution 1916 (2010), New York: United Nations.
69 Salisbury, P. 2016. ‘The UAE’s Yemen Pivot Could Make Differences With Riyadh Unbridgeable’, World
Politics Review, 28 June, https://www.worldpoliticsreview.com/articles/19184/the-uae-s-yemen-pivot-
could-make-differences-with-riyadh-unbridgeable (accessed 28 February 2018).
70 AllAfrica, 2017. ‘Somalia: Farmaajo Seeks Saudi Arabia Intervention in Controversial Berbera UAE
Military Base’, 24 February, http://allafrica.com/stories/201702240588.html (accessed 28 February 2018);
Al-Mutairi, G. 2017. ‘Maqadesho tatlub wasata Saudia li-iqnaá el-Emarat bi-adam iqamat qaeda askariyah
fi Ärd al-Somal,’ (Mogadishu seeks Saudi mediation to convince the UAE not to establish a military base in
Somaliland), Riyadh Post, February 26, http://www.riyadhpost.live/9708.html (accessed 28 February 2018).
29
in Saudi Arabia.71 Yet elsewhere too religion and politics continue to entwine. The rulers
of Qatar and the UAE reject Western interpretations of liberal electoral democracy
by arguing that their form of governance is derived from the Islamic concept of shura
(consultation), which holds far greater legitimacy in the eyes of their subjects.72 This is
also true in the Horn of Africa. Generations of Ethiopian leaders have sought symbiotic
relations with the Ethiopian Orthodox Tewahedo Church and continue to don themselves
in the Orthodox symbolism of power and legitimacy. Even though the current EPRDF
government is officially secular, its interpretation of Ethiopian nationalism is infused with
Orthodox narratives and the Tewahedo Church remains primus inter pares in Ethiopia’s
religious landscape.73 Sudan has been ruled since 1989 by a military-Islamist regime
which saw the Islamization of society — specifically, the functioning of the market, the
education system, the public propagation of Islam and the state’s foreign relations — as
its top priority. Virtually the entire new political establishment in Somalia describes itself,
in some shape or form, as Islamist: many of these individuals studied in Sudan (including
the two last presidents, Sheikh Sharif Sheikh Ahmed and Hassan Sheikh Mohamud) and
returned home with a belief that a more conservative societal orientation and a more
public role for religion would be key ingredients of state reconstruction.
This said, as important as religion is in both public discourse and ideas of political
legitimacy in the Gulf and the Horn of Africa, its importance for foreign policy and in
dynamics of aid, investment and trade should not be overstated either. Saudi Arabia
does indeed seek to aggressively promote its particular interpretation of Islam across
the Red Sea, but has never made its foreign political or economic relations conditional
on embracing Wahhabism. Quite the contrary, it sometimes seems. As outlined earlier,
Riyadh had particularly difficult relations with Sudan when the regime there was
at its most religiously zealous and has quite comfortably dealt with secular military
dictatorships in Egypt. Qatar too, often accused by its detractors of promoting the
Muslim Brotherhood and its Islamist ideology,74 is in practice rather pragmatic when
it comes to business deals and developing diplomatic relations. For two decades,
perhaps its most consistently good relationship in the Horn was with Eritrea, the most
aggressively secular of the Horn of Africa states and which boasts a track record of
71 For an exploration, see Erlich, H. 2007. Saudi Arabia and Ethiopia: Islam, Christianity and politics entwined,
Boulder, Lynne Rienner; Al-Rasheed, M. 2007. Contesting the Saudi state: Islamic voices of a new generation,
New York: Cambridge University Press; Nevo, J. 1998. ‘Religion and national identity in Saudi Arabia’,
Middle Eastern Studies, 34(3), 34–53.
72 Bertelsmann Stiftung. 2016. Bertelsmann Transformation Index — United Arab Emirates Country Report,
Gütersloh; Bertelsmann Stiftung. 2016. Bertelsmann Transformation Index — Qatar Country Report,
Gütersloh.
73 International Crisis Group. 2016. Ethiopia: Governing the Faithful, Crisis Group Africa Briefing no. 117,
Brussels.
74 Roberts, D. 2014. ‘Qatar and the Brotherhood’, Survival, 56(4), 23–32.
30
cracking down ferociously on the likes of the Brotherhood. Thus, leaders from the Horn
of Africa, such as Omar Al-Bashir, often engage in public performances from performing
the pilgrimages of hajj or umrah whenever in Saudi Arabia to lauding King Salman as the
custodian of the Two Holy Mosques of Mecca and Medina (rather than as an ordinary
head of state). But the substance of international relations remains predominantly
dictated by political interests and framed in identity politics, which are much more
multilayered than religious binaries suggest. Religion matters, in other words, but only
up to a point.75
Box 2 Somalia and the Gulf
The engagement of the leading Gulf states with Somalia differs, to some extent,
from that with other partners in the Horn The weakness of the Somali state,
the continuing insecurity in large swathes of the territory and the dominance of
Al-Shabaab in the countryside and in key coastal areas all hinder large-scale
and long-term investments by Gulf actors. Ever since 1991, Somalia has remained
simply too risky for deep economic commitments, especially in immovable
assets. This does not imply that Somalia is of no importance to the states of the
Arabian Peninsula: Omani, Yemeni and Iranian fishermen are active in Somali
waters; Somali charcoal has for years been smuggled (illegally) to the Gulf for
consumption in shisha (hookah) bars and grilled meat & seafood restaurants;
and Somali livestock remains an important source of fresh camel, goat and (to a
lesser extent) cow meat for Gulf customers.76 Economic engagement has been
conducted instead mainly through direct financial transfers and trade incentives,
avoiding the requirements of high risk on the investor’s side of long-term
investments in assets or institutions. Especially the UAE and Saudi Arabia have
been able to claim considerable influence (see figure 5).
Somalia has also been the arena in which Gulf jockeying for influence through
proxies has been going on for years, though with limited success by most
accounts. Ethiopia and the US accused Qatar of supporting Al-Shabaab via
Eritrea between 2008 and 2012. The UAE has provided extensive security
assistance, especially to the Puntland Maritime Police Forces, at different times
to different levels of the nascent Somali government, often pitting them against
75 Calculli, M., and Legrenzi, M. 2016. ‘Middle East Security: Conflict and Securitization of Identities’, in:
International Relations of the Middle East, 4th edition, ed. Fawcett, L., Oxford: Oxford University Press,
218–235.
76 Mahmoud, H. 2010. Livestock Trade in the Kenyan, Somali and Ethiopian Borderlands, London: Chatham
House; Gridneff, I. forthcoming. ‘Burning Somalia’s Future: The Illegal Charcoal Trade between the Horn of
Africa and the Gulf’, in: Environmental Politics in the Middle East, ed. Verhoeven, H., London: Hurst.
31
each other (e.g., Puntland and the federal government). Nonetheless, the Arab
Emirates have also been implicated in Al-Shabaab’s charcoal and sugar trade.
A number of Al-Shabaab–affiliated charcoal traders benefited from tax breaks
in Kismayo port for their charcoal exports to the Emirates, from where it is
transported on by road to Saudi Arabia. One trader allegedly also served as a
conduit for laundering contributions from Saudi individuals to Al-Shabaab.77
Figure 5 Actors with the greatest influence on private-sector activity

Based on a Clingendael survey in October 2016. Share of survey respondents from Mogadishu/Har-
geisa/Garowe indicating actor as influential.
Total Hargeisa
Mogadishu Garowe
60%
55%
52%
48%
45%
39% 39% 38%
38%
30%
25% 27%
24%
15% 15% 13%

12% 10%
8% 8% 10%10%
7%
4% 5% 2% 2%
3%
0% 2% 2% 3% 2% 2% 2% 2%
1% 0% 0% 0%
0% 0% 0% 0%
0%
UAE Turkey Saudi China EU USA Kenya Ethiopia Lebanon Other
Arabia
The Emirates also sought to support former head of state Sheikh Sharif in the
presidential elections of February 2017 against the incumbent, a politician
widely seen as the candidate of Qatar and Turkey, Hassan Sheikh Mohamud.78
However, neither managed to rally a majority of delegates. The eventual winner,
Mohamed Abdullahi Mohamed ‘Farmaajo’, allegedly also received small sums
of cash from Abu Dhabi, Doha and Riyadh but his surprise victory over Sheikh
Sharif and Hassan Sheikh was widely seen by Somalis as a nationalist rebuke
to Gulf interference. Farmaajo has tried to maintain his nationalist credentials
after taking office while balancing relations with creditors of his cash-strapped
government. Thus he refused to endorse the Saudi-Emirati embargo imposed
on Qatar in June 2017, allegedly turning down an initial USD 80 million in
77 UN Monitoring Group on Somalia and Eritrea, 2011, op. cit.

78 UN Monitoring Group on Somalia and Eritrea, 2017. Letter dated 2 November 2017 from the Monitoring
Group on Somalia and Eritrea addressed to the Chair of the Security Council Committee pursuant to
resolutions 751 (1992)and 1907 (2009) concerning Somalia and Eritrea, New York: United Nations.
32
Saudi funds,79 despite facing substantial criticism from the Somali regions,
parliamentarians and the business community.80 He also visited Riyadh and Abu
Dhabi, reassuring them of his continued participation in the Saudi-led Islamic
military counterterrorism coalition. The tiny budget of the Somali federal state
condemns it to a structural dependence on outside funders, perpetuating
patron-client relations with external powers and undermining both the legitimacy
and the effectiveness of the fight of any government in Mogadishu against Al-
Shabaab. A comparable situation exists in Somaliland, where 75 percent of the
state budget is reliant on the livestock exports through Berbera port (mainly to
Saudi Arabia, Egypt and Yemen).81
The influence of the Emirates extends beyond its direct monetary incentives.
The UAE also functions as an important hub for the Somali business community,
as many Somali entrepreneurs operate their Somali businesses out of Dubai.
Gaining residency in this emirate is relatively easy for many in the Somali
diaspora, and operating out of the UAE (sometimes through intermediary
companies) offers these entrepreneurs access to financial services and suppliers
that will not service or deliver to companies incorporated or located within
Somalia itself. Re-exporting supplies received in the UAE to businesses in
Somalia is relatively easy and quick as well. The Somali business diaspora in the
Emirates is thus estimated to approximate 100.000 individuals, many of whom
maintain close ties with (and at times fund) political actors in Somalia.82
3.5 Policy instruments and actors
As discussed earlier, any assessment of Gulf aid, investment or trade into Africa must
take into account the political economy of that activity. That so much of this economic
activity is politically determined in terms of its motivations and expected outcomes is,
unsurprisingly, also reflected in who drives these policies forward and how they are
pursued.
79 Middle East Monitor, 2017. ‘Somalia turns down $80m to cut ties with Qatar’, 12 June, https://www.
middleeastmonitor.com/20170612-somalia-turns-down-80m-to-cut-ties-with-qatar/amp/ (accessed
13 March 2018).
81 Schemm, P. 2015. ‘How a breakaway region of Somalia hopes to build a new country’, Washington Post,
26 December, https://www.washingtonpost.com/world/africa/how-a-breakaway-region-of-somalia-
hopes-to-build-a-new-country/2015/12/26/47ae8f76-a441-11e5-8318-bd8caed8c588_story.html (accessed
3 November 2017).
82 Wikileaks. 2008. ‘Somalia - Political Perspectives from Dubai’, 20 November, https://wikileaks.org/plusd/
cables/08NAIROBI2619_a.html (accessed 21 March 2018).
33
Precious little capital in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE
is genuinely private, that is, has been generated and is reproduced through strictly
competitive economic activity, separate from state patronage networks (for the example
of Ethiopia’s Sheikh Al-Amoudi’s rise to wealth, see box 4). The Gulf states are famous
for being textbook rentier states: in the classic definitions of Hussein Mahdavy, Hazem
Beblawi and Giacomo Luciani, they derive the vast majority of their national revenues
from the rent of extractive economic activities in which external clients play a crucial
role. Rentier states do not require — and probably even preclude — a vibrant internal
productive sector, because the state is able to forgo the taxation of productive activity in
the real economy and can instead fund its operations and the control of its population
through (in this case hydrocarbon) rents. This has important implications for the type of
capitalism that dominates in such systems.83
Capital itself and commercial activity more broadly in economies like those of Abu
Dhabi, Qatar or Saudi Arabia — and even that of Dubai, often assumed to be the
economically most liberal of the Gulf — are mostly concentrated in the hands of
different wings of the royal families and their main supporters. Statistically this is
often categorised as ‘private’ and distinct from state-owned enterprises and state-led
initiatives, but in reality it is the centralisation of rents around the monarch and then
their parcelling out — in the form of contracts, market shares, niche monopolies, etc. —
to loyal clients that is the order of the day.84 This supposedly private activity hence fully
depends on public authority and cannot exist without it. At the same time, what passes
for public expenditure in Gulf economies is mostly spent in function of the needs and
preferences of a small number of private individuals — the monarchs in power and their
close kin. It is true that the strongly tribal basis of all Gulf societies forces the ruler to
both consult and to effectively distribute to societal actors a significant chunk of the
rents that accrue to him, but there can be no denying of the quasi-complete dominance
of the royal elite of both the public and private realms of the economy.85
83 Beblawi, H., and Luciani, G., ed. 1987. The Rentier State: Nation, State and the Integration of the Arab World,
London: Croom Helm.
84 For an approach that sees such strategies as relatively successful, see: Hertog, S. 2010. ‘Defying the
Resource Curse: Explaining Successful State-Owned Enterprises in Rentier States’, World Politics, 62(2),
261–301.
85 Crystal, J. 1990. Oil and Politics in the Gulf: Rulers and Merchants in Kuwait and Qatar, Cambridge:
Cambridge University Press; Jones, T. 2010. Desert Kingdom. How Oil and Water Forged Modern Saudi
Arabia, Cambridge: Harvard University Press.
34
Foreign policy is more often than not an extension of these domestic political and
financial dynamics.86 In the same way that, for example, the construction sector is
carved up by the diwan (ruler’s office) between four or five major enterprises, each
owned by a lesser royal or head of a prominent family, so are contracts for operating
abroad and associated lobbying by Gulf embassies and state visits shared out amongst
constituencies. Letting one firm or family or constituency monopolise all foreign or
domestic activity would be politically foolish from the diwan’s point of view. Balancing is
the order of the day unless a particular sector or investment is deemed of such capital
importance that either a fully state-owned enterprise or a company directly owned by
the ruler must assume leadership. Classic examples of the latter scenario are the roles
played by the UAE’s Mubadala Development Company and its Abu Dhabi Investment
Authority, internally in the Emirates and abroad.87 What further strengthens these
dynamics is the absence of strong expeditionary armies and experienced diplomatic
services on the part of Gulf states. Having neither much willingness nor the requisite
ability to militarily coerce Horn of Africa states to align with their international positions,
pursuing an activist foreign policy necessitates the mobilisation of significant amounts of
private and public capital as the external relations tool par excellence of Gulf states. One
Omani observer wittily dubbed this ‘Riyal Politik’.88
Given this extremely skewed political economy of the Arabian Peninsula and its
dominant states’ particular approach to foreign policy, a number of key instruments
can be drawn upon to pursue these goals. The first instrument are the Gulf sovereign
wealth funds (SWF), state-owned investment vehicles that seek to acquire stakes in
just about every type of asset (stocks, bonds, real estate, agricultural land, strategic
mineral reserves, etc.) the market can make available. Every Gulf state has at least one,
but some, like the UAE, have several at their disposal (both at the federal level and the
level of individual emirates), allowing them to either specialise in specific niches or to
strategically corner pivotal markets. Management of these SWFs is a highly politically
sensitive affair. For instance, although the Abu Dhabi Investment Authority claims
considerable independence from political decision makers, six out of 10 board members
are members of the ruling Al-Nahyan family with limited technical qualifications
86 Nonneman, G. 2004. ‘Analyzing the Foreign Policies of the Middle East and North Africa: a Conceptual
Framework’, in: Analyzing Middle Eastern Foreign Policies, ed. Nonneman, G., London: Routledge, 6–18.
87 Young, K. 2014. The Political Economy of Energy, Finance and Security in the United Arab Emirates, New York:
Palgrave MacMillan.
88 Baaboud, A. 2005. ‘Dynamics and Determinants of the GCC States’ Foreign Policy, with Special Reference
to the EU’, in: Analyzing Middle East Foreign Policies and the Relationship with Europe, ed. Nonneman, G.,
London: Routledge.
35
contradicts such statements.89 Gulf family feuds therefore have a direct bearing on
regional and global economic and political developments. The Abu Dhabi Investment
Authority, Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, the
Investment Corporation of Dubai and the Kuwaiti Investment Authority feature in the
ranking of the 10 biggest SWFs in the world, their combined assets totalling more than
USD 2 trillion.90
Closely related to these SWFs, but analytically somewhat distinct from them, are the
state-owned holding companies that often function in ways similar than SWFs but
do much more than acquire stakes or claim ownership. Often times, they seek to
exert a more direct managerial role. The Emirates provide the best example of how
these operate. Mubadala Development Company, Abu Dhabi’s crown jewel chaired
by Crown Prince Muhammad bin Zayed himself, not only makes capital available for
investments but also provides strategic guidance to join up particular asset acquisition
with broader UAE objectives. Mubadala also directs, through its countless subsidiaries,
on-the-ground operations in overseas markets where it operates, from production
or extraction to product assemblage to marketing and research. Large procurement
orders from Mubadala-controlled companies to foreign companies have been noted in
connection with informal return favours in the form of arms transfers.91 The operations
of these holding companies are often closely associated and coordinated with those
of enterprises with a more apparently straight-forward commercial outlook and global
reach, such as DP World (shipping/infrastructure) and Nakheel (real estate and
hospitality) or even public joint-stock companies such as Emaar (real estate). DP World,
for instance, will do its best to purchase a share or operate ports in the region such as
in Berbera (Somaliland) and Doraleh (Djibouti), but such acquisitions first and foremost
serve Emirati foreign policy and the projection of power in the Red Sea and Indian
Ocean. Similarly, Emaar’s property development in Khartoum and Cairo is not merely
meant to offer Dubai-style luxury accommodation to Sudanese and Egyptian wealthy
families: it is an integral part of the strategy of bringing these elites into the Emirati
political orbit.92
89 For an excellent exploration of SWFs political objectives and connections throughout their organizational
structure, see Bazoobandi, S. 2013. Political economy of the Gulf sovereign wealth funds: A case study of
Iran, Kuwait, Saudi Arabia and United Arab Emirates, New York: Routledge.
90 “Sovereign Wealth Fund Rankings,” Sovereign Wealth Fund Institute, https://www.swfinstitute.org/
sovereign-wealth-fund-rankings/ (accessed 28 March 2018).
91 Bazoobandi, S. 2013. Political economy of the Gulf sovereign wealth funds: A case study of Iran, Kuwait, Saudi
Arabia and United Arab Emirates, New York: Routledge, 69.
92 For an example, see: Elshahed, M. 2014. ‘From Tahrir Square to Emaar Square: Cairo’s private road to a
private city’, The Guardian, 7 April, https://www.theguardian.com/cities/2014/apr/07/tahrir-square-emaar-
square-cairo-private-road-city (accessed 28 February 2018).
36
A third important economic instrument are the central banks of the region. The Saudi
Arabian Monetary Authority (SAMA), the Qatar Central Bank and the Central Bank
of the Emirates do not just provide monetary stability at home, but also engage, when
deemed necessary by the ruler, in central bank to central bank support with partners
on the other side of the Red Sea. Sudan in particular, when it teetered on the edge of
economic collapse in July 2011 after the secession of South Sudan, which broke away
with three-quarters of (united) Sudan’s proven oil reserves, has been a major recipient
of Saudi and Qatari monetary transfers that have helped arrest (or at least slow down)
the depreciation of the Sudanese pound and to manage public unrest following food
price hikes.93 Such assistance proved essential in helping Omar Al-Bashir stay in power.
Similar loans have likely been made to Ethiopia.94 Eritrea too is believed to have benefited
from such help from SAMA and the Central Bank of the Emirates after it gave the green-
light in 2015 for its southern port of Assab to be used as the spearhead of the Saudi and
Emirati bombing campaign against the Houthis in Yemen.95
A fourth conduit that serves to both promote economic interdependence and to provide
political leverage over Horn of Africa states are the development funds operated or
hosted by the Gulf.96 If the Jeddah-based Organisation of Islamic Cooperation mostly
offers Saudi Arabia some diplomatic clout, its financial arm, the Islamic Development
Bank (IDB) with its capital base of more than USD 150 billion allows for more direct
(and hence costly) developmental initiatives, driving development for the recipient
government and supporting wider geopolitical aims of the major donors (especially
Riyadh). Another important player is the Arab Fund for Economic and Social
Development (Kuwait based), which holds close to USD 10 billion in assets and has
been especially active in Sudan, including during the Breadbasket strategy of the 1970s
and 1980s and, more recently, as a prime funder of Sudan’s ambitious but controversial
Dam Programme.97 The OPEC fund plays a more limited and discrete role: in theory all
member states of the Organisation of Petroleum Exporting Countries contribute; its
activities, however, are usually closely aligned with the objectives of the dominant Gulf
states. Of note is that its Director-General has for many years been a Saudi national.
93 Interview with a senior Ethiopian banking executive and institutional investor, Addis Ababa, 2017;
Mohammed, B. 2015. ‘Gulf States Lend Sudan $2 Billion to Boost Foreign Reserves’, Bloomberg, July 20,
https://www.bloomberg.com/news/articles/2015-07-20/gulf-arab-states-lend-sudan-2-billion-to-boost-
foreign-reserves (accessed 28 February 2018).
94 Interview with a senior Ethiopian banking executive and institutional investor, Addis Ababa, 2017.
95 Plaut, M. 2016. Understanding Eritrea: Inside Africa’s Most Repressive State, New York: Oxford University
Press.
96 Villanger, E. 2007. ‘Arab Foreign Aid: Disbursement patterns, aid policies and motives’, Bergen:
Chr. Michelsen Institute.
37
The multilateral funds are complemented by a number of national institutions, including

the national ministries of finance, the Abu Dhabi Development Fund, the Saudi Fund
and the Kuwait Fund for Arab Economic Development.98 The Kuwait Fund is part of the
multiple channels Kuwait uses to garner influence and promote economic prosperity in
Asia and Africa. Kuwait not only has long proven one of the main backers of the World
Bank, it is also the only nation in the world to spend consistently more than 1 percent
of national income on foreign aid.99 Last year more than 2 percent of Kuwaiti GDP
went to overseas development assistance. A mention should be made here to of the
activities of the Qatar Foundation (taking place in Qatar). This organisation is not strictly
speaking either a development fund or even primarily oriented towards projects outside
of Qatar.100 However, as perhaps the biggest not-for-profit organization in the world (its
annual budget is likely to exceed USD 2 billion), its deep involvement in the education
of children in the world’s least developed countries, its leadership in technological
innovation and its dazzling investments in cultural heritage make it a key foreign policy
tool — soft power. The Qatar Foundation is chaired by Sheikha Moza bint Nasser, mother
of the current emir and a global icon for women’s empowerment and cultural activism;
her daughter (and full sister of the emir) Sheikha Hind is its CEO.
A sixth channel involves charity organisations and private foundations. Although

officially totally committed to strictly humanitarian objectives under the umbrella
terms of zakat (the mandatory Islamic tax) and sadaqa (voluntary alms), many such
organisations act as an extension of the objectives of the royal family and its closest
allies. Cases in point are the Sultan bin Abdulaziz Al Saud Foundation (Saudi Arabia),
the Khalifa Foundation (UAE/Abu Dhabi), the Muhammad bin Rashid Al-Maktoum
Foundation (UAE/Dubai), the Muslim World League and the Islamic Relief Fund and,
above all, the various activities organised or sponsored by the various Wuzara Al-Awqaf
(ministries of religious endowment). These ministries often seek to harness the soft
power of their national states by projecting an image of compassionate conservatism
and, especially in the cases of Saudi Arabia and Qatar, they often promote a specific
(mostly literalist) understanding of Islam. Mosque building and the development of
social infrastructure is often a priority, as are scholarships to undertake Islamic Studies
in Medina, Doha or other centres of learning.101 These are for the most part not targeted
solely at the elites in African states, but instead reach a much wider population, often
leading Djibouti, Eritrea and Ethiopia leaders to worry greatly about the potentially
98 Tok, E., et al. 2014. ‘Arab development aid and the new dynamic of multilateralism: Towards better
governance?’ European Scientific Journal, 1, 591–604.
99 Miller, op. cit., 36.
100 Ibnouf, A., Dou, L. and Knight, J. 2014. ‘The evolution of Qatar as an education hub: Moving to a
knowledge-based economy’, in: International Education Hubs, ed. Knight, J., Springer, 43–61.
101 Desplat, P., Østebø, T. 2013. Muslim Ethiopia. The Christian Legacy, Identity Politics, and Islamic Reformism,
New York: Palgrave MacMillan.
38
destabilising effects of such bottom-up promotion of Wahhabism, support for which

frequently bypasses central governments.
Figure 6 summarises the main interests, instruments and actors linked to Gulf states in
the Horn of Africa.102
Figure 6 Overview of Gulf interests and instruments in the Horn of Africa
United Arab
Saudi Arabia Qatar Kuwait
Emirates
Sudan
Main target in the Eritrea Somalia
Sudan Sudan
Horn of Africa: Somaliland Exploring options in
Ethiopia
Leverage vis-à-vis
Dominant Saudi Arabia
Isolating Iran Isolating Iran Regional stability
political interest:
Isolating Iran
Dominant Regional trade Financial

Food production Food production
economic interest: Ports’ expansion diversification
Key policy Budgetary support Budgetary support Central Bank of Qatar Bilateral and multilateral
instruments: Multilateral funds DP World Qatar Foundation development funds
Assab None
Assab (presence on Eritrean-
Military presence: Berbera None
Djibouti Djibouti border
Mogadishu withdrawn)
102 Economic sanctions are not a policy instrument Gulf states are able to draw on. Although Western states
frequently impose sanctions, through concerted efforts in the European Union, through coalition building
in the UN Security Council or unilaterally (in the case of the US), as foreign policy tools, Gulf states have
had neither the hard economic muscle nor the requisite diplomatic instruments to deploy sanctions. Even
in the seemingly obvious case of Iran, Saudi Arabia’s archenemy, the GCC as a regional body was not
able to agree on a resolution to expand already existing UN and US sanctions on the Islamic Republic-
mostly because of Qatari and Emirati resistance against any Saudi ideas (both Qatar and the UAE, Dubai
and Sharjah especially, have deep economic ties with Tehran, as does Oman). No effort by the GCC or
any individual Gulf state has ever been undertaken to slap sanctions on a Horn of Africa state. Even
when Sudan was a pariah state in the 1990s, the Saudi-Kuwaiti isolation of Sudan mostly consisted of
disinvestment and the suspension of aid, not the imposition of blanket sanctions.
39
4 Mapping the extent of Gulf
investments and ODA in
the Horn of Africa
To determine the focus, scope, and developments over time of Gulf investments in the
Horn of Africa, this report maps the extent of these investments. This mapping is derived
from Clingendael’s database on commercial investments by entities connected to Gulf
countries (Saudi Arabia, the UAE, Kuwait, Qatar) in the Horn of Africa (Ethiopia, Sudan,
South Sudan, Somalia, Djibouti, and Somaliland). The investments include foreign direct
investments and foreign portfolio investments, and involve Gulf entities buying assets of
or setting up business interests in the Horn of Africa (both greenfield and brownfield,
including affiliates, fully owned subsidiaries and joint ventures). The database is an
overview of commercial investments and therefore does not include religious funding,
macroeconomic credit, payments to individuals in the Horn, payments for peace
processes or similar activities. Official development assistance by Gulf development
funds is covered in section 4.5.
The database contains 434 investments from 2000 to 2017 in 16 distinct sectors, worth
approximately USD 13 billion. The data includes dates, locations, sectors, investment
amount, investment type, investment partners and employment creation. Not all entries
could be completed in full detail due to differing data quality across sources. Because
not all investment values were traceable for each transaction, the analysis tends to
focus on the number of projects rather than the figure invested (see also box 3).
For countrywide projects and those for which the specific location data is not available,
the project has been coded as taking place in the capital city when represented visually.
Similarly, for regional projects the centre of the region was coded. The data for Ethiopia
is of a higher quality than the other Horn of Africa countries. Consequently, some
parts of the analysis will examine only Ethiopia, and overviews of the entire Horn may
overrepresent Ethiopia. Nonetheless, the data manages to capture important patterns
and trends of Gulf investment in the entire Horn region. The data originates from both
public and private databases, news articles and companies’ annual reports, as well as by
private connections with investment agencies of individual countries. The figures in this
dataset should be seen as an indication of overall investment patterns by Gulf actors in
the Horn rather than a definitive and complete overview (see box 3).
40
Box 3 A cautionary note on quantifying financial transactions
Quantifying the volume, economic and geographic scope of recent investments

is a necessary step to assessing the significance and consequences of Gulf
involvement in the Horn. Quantifying and assessing the relative importance,
the size and operations of different investments and the financing streams are
notoriously difficult however. Elite politics around the world is almost always hard
to penetrate, especially to the extent it includes particularistic and clientelistic
arrangements deliberately kept opaque. The foreign and economic policies
of Gulf states are particularly opaque, however, as even general budgets are
seldom published and contracts almost never disclosed or debated (whether
in parliament or the press). Additionally, the results of investment projects
are seldom systematically assessed, let alone published. Efforts are further
compounded by the generally poor quality of statistical data in the Horn due to
underdeveloped measurement and reporting standards. On top of that, several
Horn states that do produce data have been known to amend the official data
specifically to show consistent growth and development. Analysts therefore often
have to work with low quality data and second-best guestimates, and reason
through inference based on interviews, rumours and imprecise judgements. As a
consequence, data presented in this section ought to be read as indications
of political interest or economic activity in the designated regions and sectors,
rather than as hard numbers. Closer inspection of investment projects is likely
to demonstrate funding that remains unaccounted for, mismatches between
different accounting systems, lacking or unrealistically high reported production
and a variety of other issues. Nonetheless, attempts have been made to keep the
data presented here as reliable as possible (for an overview of the methodology,
see annex 1).
4.1 Overview of Investment activity in the region
The 1990s saw a politically tumultuous period in the Horn of Africa combine with a low
oil price of USD 20 to USD 40 a barrel. The start of this decade witnessed the Derg
regime fall in Ethiopia and Siad Barre’s regime collapse into civil war in Somalia; the end
of it saw Ethiopia and Eritrea fight a two-year war.103 During this period investment was
scant from the Gulf states, which had neither the cash on hand nor the risk appetite for
commercial investments in such fragile states. By 2000, the oil price had begun picking
up; unsurprisingly so did Gulf investments, especially in the wake of the end of overt
Eritrean-Ethiopian hostilities and a peace agreement in Sudan (2005). For example, in
the 1990s there were only 35 Gulf investments in Ethiopia, relative to 365 since 2000.
Figure 7 shows the correlation between the Brent Crude oil price and Gulf investments
103 Tronvoll, K. 2009.War & The Politics of Identity in Ethiopia. Woodbridge: James Currey.
41
in the Horn of Africa from 2000 to 2017. The annual number of investments rose from
fewer than 10 in 2000 to more than 50 in 2012 for the entire Horn of Africa, roughly
following the oil price during that time. Both the oil price and the number of investments
peaked from 2008 to 2014, and have fallen since then.
Figure 7 Gulf investments in the Horn of Africa and Brent Crude oil prices
434 investments.
Number of investment projects

Oil price
60 160
140
50
Oil price (USD/Barrel)

Number of investments
120
40
100
30 80
60
20
40
10
20
0 0
01
04
06
08
09
10
11
12
13
14
15
16
00
02
03
05
07
17
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Investments in Ethiopia more than halved between 2016 and 2017, which could be
explained by the protests in the Oromia region in late 2015. In 2016 Gulf investments
in Oromia declined slightly. In 2017 they dried up completely. Sudan followed a similar
trend. Investments steadily rose there from 2000 to 2008, despite the sanctions from
1997 to 2017. Sudan received 52 investments between 2000 and 2017, the most coming
in 2008. Investments after 2008 decreased in the wake of the decline in the price of
oil. South Sudan saw six investments spread between 2008 and 2014, and no notable
change after its independence in 2011. Somalia saw five investments spread out thinly
between 2000 and 2017. Djibouti saw five between 2000 and 2008, mainly from the UAE.
One explanation for the end of Gulf investments in Djibouti after 2008 is that relations
between Djibouti and the Emirates become strained when the government of Djibouti
accused well-known businessman Abourahman Boreh of corruption and took DP
World to court over the matter.104 Since then, Djibouti has gone through ups and downs
(including the February 2018 nationalisation of the Doraleh facility) and the government
of President Ismail Omar Guelleh has looked to China for many of its key investments,
104 Kerr, S., and Aglionby, J. 2017. ‘DP World wins tribunal case against Djibouti over bribe case’, Financial
Times, February 21, https://www.ft.com/content/9bca1468-f837-11e6-9516-2d969e0d3b65 (accessed
22 December 2017).
42
including port expansions. The lack of commercial investment in Eritrea has several
possible explanations: there is little of commercial interest; the finance that does enter
Eritrea is not commercial and does not go through public channels; and given imposed
sanctions and the nature of the Eritrean regime little reporting covers commercial
investments in the country.
Total spend as well as average spend per project followed a more jagged trend line
than that presented in figure 7. Both did show increases from the early 2000s and
peaked between 2006 and 2010, when the oil price was at its high point, before
declining afterwards. The exception to this trend is a UAE investment in Ethiopian sugar
manufacturing worth around USD 3 billion in 2017, the single largest investment made
in the period. Overall, around 40 percent of the investments have been worth less than
USD 1 million, 36 percent between USD 1 and USD 10 million, 18 percent between USD
10 and USD 100 million, and 6 percent more than USD 100 million.
Figure 8 Gulf investments in the Horn of Africa, 2000–2017

Somaliland is included in Somalia.
National alignment of investor
United Arab
Saudi Arabia Qatar Kuwait
Emirates
233 104 12 16
Ethiopia
16 19 4 13
Sudan
Recipient
1 2 2 1
South Sudan
1 5 - -
Somalia
1 3 - 1
Djibouti
Figure 8 presents a breakdown of the individual investor states and recipient states.
Two patterns are immediately visible. Firstly, Saudi and Emirati actors have made the
43
most investments. Secondly, Ethiopia and Sudan have received the most.105 Clearly,
investments from the UAE and Saudi Arabia into Ethiopia and Sudan make up a large
portion of the total by Gulf countries in the Horn of Africa. However, this does not take
into account the size of the investments. Several sizeable investments have been made
into Djibouti and Somalia; Kuwait has also made large single investments.
4.2 Geographic investment patterns
Figure 8 presents the number of investments from 2000 to 2017 in the Horn of Africa
by each of the four Gulf states. Several important geographic patterns are noticeable.
Firstly, Ethiopia and Sudan received the most investments. Although this pattern may to
some extent reflect Sudan’s historical and religious ties to the Gulf (see section 3), the
focus of investments on both Ethiopia and Sudan also reflects the relative importance of
these two states to politics in the wider Horn, increasing these states’ leverage. Around
one-third of the investments in Ethiopia were in Addis Ababa (mainly manufacturing
and a range of services), another third in the Oromia region and the final third was
spread throughout the rest of the country (both mainly agriculture and manufacturing).
The investments in Sudan tend to focus on Khartoum (especially banking and
telecommunications) and agricultural investments along the Nile. South Sudan has
received several investments, mainly in Juba (banking, telecom, and construction), and
agricultural investments outside of the capital. A limited number of investments have
been made in Djibouti, Somaliland, and Somalia; all are located along the coast. Large
investments have been made in the ports of Djibouti, Berbera, and Bossaso. Additionally,
Djibouti City and Mogadishu have received several small investments in services such
as trading and logistics. Investments in Somalia and South Sudan may be reduced, as
investing in fixed assets has been a difficult undertaking at best given instability there,
and the bargaining power of its political elites may have been undermined given the
fragmentation of the political settlement.
105 Ethiopia is overrepresented because of the higher data availability, but it would likely still be a major target
if the quality of data were equal for all countries.
44
Figure 9 Map of Gulf investments in the Horn of Africa, 2000–2017

434 investments, approximately USD 13 billion.
Sudan
Eritrea
Djibouti
South Ethopia
Sudan
Somalia
To disaggregate the figure 9 map, those that follow show only a single Gulf investor in
order to highlight which countries and regions they invest in, and whether there are any
significant differences (see figures 10–13).
Figure 10 Map of Saudi Arabian investments in the Horn of Africa

252 investments, approximately USD 4.9 billion.
Sudan
Eritrea
Djibouti
Ethopia
South
Sudan
Somalia
45
Most Saudi investments have been in Ethiopia, followed by Sudan. Investments in

Ethiopia have primarily been in agriculture and manufacturing; investments in Sudan
have focussed on agriculture. Only several small investments have been made in South
Sudan (agriculture), Djibouti (trading), and Somalia (trading). The 233 investments
by Saudi actors in Ethiopia are spread throughout the country, the majority in Addis
Ababa and Oromia. By far the most prominent Saudi investor in Ethiopia is Sheikh
Mohammed Al-Amoudi (see box 4). Through his company MIDROC (Mohammed
International Development Research and Organization Companies), he has invested in
a diverse range of sectors, including agriculture, manufacturing, mining and real estate.
He has been a pioneer in investing in Ethiopia, often paving the way for others to follow.
Interviews from Ethiopia suggest that a large proportion of land bought by Saudi Arabia
in Sudan and Ethiopia for agricultural purposes is left undeveloped and does not reach
the operational stage.106 The total value of the investments for Saudi Arabia in the Horn
of Africa is around USD 4.9 billion.
As a side note, one of Saudi Arabia’s political interests in the region is isolating its rival
Iran and denying Iranian access. Although the rivalry is fought out in many domains,
in terms of investments in the region Saudi Arabia dwarfs Iran. For a comparison,
from 2000 to 2017 Iran made 22 investments in Ethiopia worth around USD 20 million.
This asymmetry is unsurprising, as Saudi Arabia shares the Red Sea and a long history
with the Horn of Africa, in addition to having a larger economy and higher oil exports
than Iran. It is interesting to note that the focus of Iranian investments in Ethiopia in
terms of location and sectors is identical to both Saudi Arabia and the UAE. Around half
of Iranian investments were in manufacturing, followed by agriculture. Oromia was the
largest recipient of the investments, followed by Addis Ababa.
106 Interviews with Ethiopian businessmen and researchers, Addis Ababa, December 2017. See also: Woertz, E.
2013. Oil for Food. The global food crisis and the Middle East, Oxford: Oxford University Press.
46
Figure 11 Map of number of UAE investments in the Horn of Africa

Sudan Eritrea
Djibouti
South Ethopia
Sudan
Somalia
Emirati actors have are responsible for the second most investments in the Horn.
Their investments have primarily gone to Ethiopia and Sudan, but it has also had
four other large port investments: two in Djibouti city along with very large recent
deals in Berbera (reportedly worth USD 442 million) in 2016 and Bosaso (reportedly
USD 336 million) in 2017. Those are the only Gulf investments in Berbera and Bosaso.
Because of their size, the UAE is the largest Gulf provider of FDI in Somalia and
Somaliland. These investments were made by DP World, a company formed in 2005
when Dubai Ports Authority and Dubai Ports International merged. It is frequently
perceived as a foreign policy tool by the UAE state that acts in tandem with the UAE’s
security apparatus: for example, immediately following the DP World and Somaliland
government deal for the management of Berbera port in 2016, the UAE was granted
rights by the Somaliland government to set up a military base in the region.107 DP World
and the UAE now face stiff competition in the logistics sector in the region from Chinese
firms, who have supplanted the UAE in Djibouti and are heavily engaged in the Horn of
Africa with their Belt and Road initiative. Although DP World is not (officially) active in
Eritrea, the UAE has established a military base in the port of Assab.
107 The Economist, 2017. ‘The ambitious United Arab Emirates’, 6 April, https://www.economist.com/news/
middle-east-and-africa/21720319-driven-energetic-crown-price-uae-building-bases-far-beyond-its
(accessed 2 February 2018).
47
Like Saudi Arabia’s, Emirati investments in Ethiopia are widespread, with Addis Ababa
and Oromia again hosting the most projects. The single largest Gulf investment
in the Horn is a UAE capital outlay in the Somali region of Ethiopia in 2017 for the
manufacturing of a sugar plantation, worth around USD 3 billion. This is noteworthy
because the UAE is one of the primary destinations for Somalia’s illegal charcoal export,
in which ships carrying charcoal travel from Kismayo in Somalia to the Gulf, and return
with sugar that is smuggled over the Kenyan border into the Common Market for
Eastern and Southern Africa, a free trade area that includes Ethiopia.108 Emiratis also
have made small investments in agriculture and construction in South Sudan. The total
value of UAE investments is around USD 5 billion.
Figure 12 Map of number of Kuwaiti investments in the Horn of Africa

Sudan Eritrea
Djibouti
Ethopia
South
Sudan
Somalia
Kuwait has significantly fewer total investments than Saudi Arabia and the UAE.
However, it has had several large brownfield investments, particularly in Sudan.
Acquiring a 5 percent stake in the Sudanese oil company Sudapet Company and all of
Sudan Telecommunications Company together account for almost USD 2 billion, around
80 percent of Kuwait’s total investment volume. Around a third of Kuwait’s total number
of investments are in agriculture, split between Ethiopia and Sudan, but their value is
low. Kuwaiti companies have also made several large investments in banking in Sudan,
as well as investments in construction and logistics and shipping in Ethiopia.
108 Worden, R. 2018. ‘The UAE still supports al-Shabaab through Somalia's illicit charcoal trade,’ Alaraby,
5 March, https://www.alaraby.co.uk/english/comment/2018/3/5/uae-still-supports-al-shabaab-through-
somalias-illicit-charcoal-trade (accessed 2 February 2018).
48
The brownfield nature of the largest Kuwaiti investments indicate that the country
may be less politically driven than the other Gulf states (given that such assets can be
subjected to relatively high quality due diligence and valuation) and more focussed on
profitability of their investments. Unlike other Gulf states, Kuwaiti investments seem to
be primarily in established and profitable enterprises at realistic valuations. The total
value of the transactions involving Kuwait is around USD 2.4 billion.
Figure 13 Map of number Qatari investments in the Horn of Africa

Sudan Eritrea
Djibouti
Ethopia
South
Sudan
Somalia
Qatar’s investments over the last 20 years have been reasonably limited. It has a small
assortment of investments in Ethiopia, the largest of which is a slaughterhouse in
Harari. In Sudan it has a large real estate investments and an agriculture investment
through Qatar’s Sovereign Wealth Fund, together worth more than USD 500 million.
Qatar National Bank opened a branch in South Sudan in 2011, making it the first foreign
bank to open in the new country.109 Qatar National Bank also owns a substantial stake
in Ecobank, which operates in South Sudan as well. Because of its close ties to Eritrea
— exemplified by Qatari mediation and peacekeeping troops on the Djibouti-Eritrea
border — Qatar has not been as welcome in Ethiopia as other Gulf states even though
Eritrea cut its ties with Qatar in June 2017 following the GCC crisis and pressure from
the Saudi and Emirati side. The total value of the investments for Qatar is around USD
0.6 billion.
109 Qatar National Bank. ‘Welcome to QNB South Sudan’, https://www.qnb.com/cs/Satellite/QNBSouthSudan/

en_SSU/enQNBWelocmemessageSouthSudan (accessed 2 February 2018).
49
4.3 Sectoral investment patterns
The two sectors with the most investments are agriculture and manufacturing, which
have seen significantly more investments than all other sectors combined, as shown in
figures 14 and 15. Despite numerous agricultural investments in Sudan, manufacturing
investments have gone almost exclusively into Ethiopia, though given its higher relative
data quality Ethiopia may be overrepresented in the data.
Figure 14 Gulf investments in the Horn of Figure 15 Gulf investments in the Horn of
Africa by sector and investor Africa by sector and recipient
434 investments. 434 investments.
0 50 100 150 0 50 100 150
Agriculture Agriculture
Manufacturing Manufacturing
Construction Construction
Real estate & Renting Real estate & Renting
Consulting & Business Services Consulting & Business Services
Hospitality & Tourism Hospitality & Tourism
Medical care & Social work Medical care & Social work
Banking Banking
Education Education
Telecommunications Telecommunications
Logistics & Shipping Logistics & Shipping

Ethiopia
Trading Trading
Sudan
Ports Saudi Arabia Ports
United Arab Emirates South Sudan
Oil & Gas Oil & Gas
Kuwait Djibouti
Mining Qatar Mining
Somalia
Agriculture and manufacturing also have the highest investment value of the various
sectors, as shown in figures 16 and 17. As indicated earlier, these two sectors are
frequently cited as a strategic asset to the Gulf and Horn. Large tracts of undeveloped
fertile land in the Horn of Africa are appealing to food-insecure Gulf states. At the
same time, African states, particularly Ethiopia, want to transition from being primarily
commodity exporters into economies with significant manufacturing operations.
Additionally, the economic viability of developing such agricultural lands is often
questionable. Figure 17 also shows that although telecommunications and ports have
relatively few investments, several of them have been quite large. For example, the UAE’s
DP World’s 2016 Berbera Port deal with the government of Somaliland was worth USD
442 million, and Kuwait’s Mobile Telecommunications Company acquired a 61 percent
50
stake in Sudanese Mobile Telephone in 2006 for USD 1.3 billion. This last deal is
particularly interesting as it gives a Kuwaiti company a controlling stake in a Sudanese
telecommunications operator, while foreign investors are usually restricted to a
49 percent stake (often with Sudanese governmental agencies maintaining 51 percent),
and in some countries telecommunications is a protected industry (such as Ethiopia).
Figure 16 Value of Gulf investments in Figure 17 Value of Gulf investments in

the Horn of Africa by sector the Horn of Africa by sector
and investor and recipient
approximately USD 13 billion. approximately USD 13 billion.
Investments in USD billions Investments in USD Billions
0 2 4 6 0 2 4 6
Manufacturing Manufacturing
Construction Construction
Real estate & Renting Real estate & Renting
Consulting & Business Services Consulting & Business Services
Hospitality & Tourism Hospitality & Tourism
Medical care & Social work Medical care & Social work
Banking Banking
Education Education
Telecommunications Telecommunications
Logistics & Shipping Logistics & Shipping
Trading Trading Ethiopia
Ports Sudan
Saudi Arabia Ports
United Arab Emirates South Sudan
Oil & Gas Oil & Gas
Kuwait Djibouti
Mining Qatar Mining Somalia
Within Ethiopia, Gulf investments are estimated to have created close to 300,000 jobs
between 2000 and 2017, about one-third permanent and two-thirds temporary. More
than half are in agriculture and most of the rest in manufacturing. Oromia received
almost half of the total jobs, followed by Benishangul-Gumuz and Addis Ababa at
around 10 percent each. In both sectors, Saudi-led projects created most of the jobs,
followed by those initiated by Emirati actors. The creation of jobs is highly relevant for
the developmental ideology of Ethiopia’s ruling party (see section 5). Gulf investments
that create jobs are one means by which economic development and poverty reduction
are achieved, contributing to the legitimacy of the regime.
51
4.4 Modes of investment
Several noteworthy differences in the ways Gulf countries invest are discernible.
This section considers only Ethiopia, as it provides significant detailed information for
all investing parties. Slightly more than half of the Gulf investments that have gone into
Ethiopia since 2000 have been wholly foreign owned; the rest have been joint ventures
with domestic Ethiopian companies. Saudi Arabian companies that invest in Ethiopia
have done so alone just under half of the time, and with an Ethiopian company just
under half of the time. They have partnered with a range of other foreign investors as
well, most often the USA or Sudan. Saudi companies investing in manufacturing are
significantly more likely to engage in joint ventures with Ethiopian companies than in
agriculture. By far the largest single Gulf investor in Ethiopia is Sheikh Mohammed
Hussein Ali Al-Amoudi, a dual citizen of Ethiopia and Saudi Arabia. Although Al-Amoudi
is half Ethiopian, his investment vehicles such as the MIDROC Ethiopia Investment Group
and Saudi Star are classified as Saudi Arabian and ‘wholly foreign’ given that the origin
of the capital is predominantly Saudi Arabian.
Box 4 Sheikh Mohammed Al-Amoudi
Mohammed Hussein Al-Amoudi was born in Ethiopia in 1946 to an Ethiopian

mother and a Saudi father. He moved to Saudi Arabia in 1963 and built a
fortune through his businesses in a range of industries, including construction,
agriculture and energy. His success is seen by many as attributable to his
connections with the Saudi ruling elite as he was politically selected for several
very profitable public contracts. When he first arrived in Saudi Arabia, he became
the driver of Ali bin Moussalem, who was at that time very close to the Saudi
minister of defence. Through this network, he came into contact with investors
and likely became the Saudi sponsor of a large Swedish construction company.110
In his business ventures he has represented Saudi investors across the world,
and is the public face of Saudi investors in Ethiopia. Al-Amoudi is currently
estimated to be worth around USD 10 billion, is the richest Ethiopian and is one
of the richest Saudis. He has invested heavily in Ethiopia over recent decades
through a variety of companies, notably MIDROC Ethiopia Investment Group.
Al-Amoudi has a close relationship with the ruling EPRDF government in Addis
Ababa and is rumoured to have received favourable treatment in the allocation
of privatisation tenders. Since privatization of state-owned enterprises begun in
Ethiopia in 1994, companies owned by or affiliated with Al-Amoudi have bought
110 Calvary, R. 2017. ‘Ce que signifie la vague d’arrestations dans les milieux d’affaires saoudiens: Le cas
de Mohamed Al-Amoudi’, Orient XXI, 21 November, https://orientxxi.info/magazine/arabie-saoudite-l-
arrestation-de-mohamed-al-amoudi-signe-la-mise-en-garde-du,2136 (accessed 2 February 18).
52
more than half of the dollar value of the sold enterprises.111 His companies
employ more than 100,000 Ethiopians and he has significant leverage with the
government and privileged access to land and investment opportunities.
Al-Amoudi was one of several prominent businessmen to be arrested on

corruption charges in Riyadh in November 2017. It is unclear what effect this will
have on Saudi investment in Ethiopia. Some Ethiopians believe that the arrest
was purely an internal Saudi dispute and that the Saudi state did not anticipate
the consequences of his arrest on Ethiopia. Others in Ethiopia speculate that
Egypt could be behind the arrest as a punishment for Al-Amoudi’s proximity
to the EPRDF.112 Because he is the largest Gulf investor, his arrest could have
considerable consequences for Ethiopia, even though the Ethiopian state has
little leverage in the matter.113
Emirati companies that invest in Ethiopia have frequently done so through joint ventures
(approximately two-third of investments take this form). Approximately half of these joint
ventures involve Ethiopian companies, while the other halve involves a variety of actors
from other countries. investments by UAE companies without partnerships one-third of
the time, and investments with partnerships from other countries one-third of the time.
UAE companies that invest in Ethiopia often partner with Indian companies, but they
have also partnered with a range of other countries, most notably twice with Iran in 2006
and 2013 on bitumen importing and processing. Kuwait’s investments in Ethiopia have
almost all been exclusively foreign owned, without any partnerships with companies
from other countries. Slightly more than half of Qatar’s investments in Ethiopia have
been in partnerships, usually with Ethiopian companies, but they have also had shared
investments with Sudanese, Saudi Arabian and Indian companies.
111 Wikileaks. 2008. ‘Privatization or monopolization in Ethiopia?’, January 11, https://wikileaks.org/plusd/

cables/08ADDISABABA82_a.html (accessed 02 February 2018).
112 Dahir, A. 2017. ´How the Saudi purge will affect detained billionaires’ assets in Africa´, Quartz Africa,
November 23, https://qz.com/1137157/saudi-arabia-purge-effect-on-mohammad-al-amoudi-and-al-
waleed-bin-talals-businesses-in-ethiopia-kenya-and-egypt/ (accessed 2 February 2018); interviews
in Addis Ababa, December 2017; Borkena. 2017. ‘Ethiopian government “diplomatically” following up Al
Amoudi’s case’, November 11, https://www.borkena.com/2017/11/11/al-amoudi-ethiopian-government-
diplomatically/ (accessed 2 February 2018).
113 Interviews with senior Ethiopian banking executives in Addis Ababa, December 2017.
53
4.5 Comparison with Gulf ODA patterns
The Gulf countries also make use of multilateral and national development funds,
which provide official development assistance in the Horn of Africa. The main funds
are the Arab Fund for Economic and Social Development (AFESD), the Kuwait Fund for
Arab Economic Development (KFAED), the Abu Dhabi Fund for Development (ADFD),
the OPEC Fund for International Development (OFID), the Arab Bank for Economic
Development in Africa (BADEA), the Saudi Fund for Development (SFD) and the Islamic
Development Bank. Data from the ADFD could not be disaggregated and so does not
feature in the following analysis. Together these funds (without the ADFD) have begun
309 operations in the Horn of Africa between 2000 and 2017 that are worth a combined
total of USD 6.6 billion (figure 18).
Figure 18 ODA from Gulf development funds to Horn of Africa and oil prices
Approximately USD 6.6 billion of investments; oil prices in Brent Crude Oil.
Value of ODA
Oil Price
900 160
800 140
Value of ODA (USD millions)

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Much like Gulf states investment in the Horn of Africa, ODA value was high between
2008 and 2013 that corresponded with a higher oil price. However, when only the
number of projects is considered (rather than the value), the trend is slightly different,
peaking in 2010 and then declining to 2017. Although the number of investments spiked
between 2008 and 2013, the number of ODA projects did not (see figure 19).
54
Figure 19 ODA and FDI from Gulf to Horn of Africa and oil prices
FDI: 434 investments; ODA: 309 projects; oil prices in Brent Crude Oil.
Number of ODA Projects

Number of investment projects
Oil price
60 160
140
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120
Number of projects

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The commercial investments and public ODA differ in two interesting ways (see
figure 20). Firstly, the investments are heavily focussed on Ethiopia and Sudan, but the
ODA projects also prominently feature Djibouti, which received roughly twice as many
projects and ODA value as Ethiopia. This is particularly striking given that Djibouti has a
population of less than one million, relative to Ethiopia’s roughly 100 million; its strategic
location next to the Bab al-Mandab strait may drive this development. ODA projects
in Djibouti showed the same sectoral patterns as ODA projects in the rest of the Horn,
although they did also prominently feature port developments and the construction of
roads around its ports. Another reason Djibouti received more ODA than Ethiopia is
that the Islamic Development Bank, the most active of the development funds, lends
only to members of the Organisation of Islamic Cooperation. It therefore has no projects
in Ethiopia, Eritrea or South Sudan. Similarly, the Arab Fund for Economic and Social
Development has projects only in Djibouti, Somalia and Sudan. Sudan is the most
frequent recipient of ODA, followed by Djibouti and then Ethiopia. Unlike commercial
investments, Eritrea did receive several ODA projects, with the latest starting in 2014.
But Eritrea, South Sudan and Somalia hosted relatively few projects and a low value
compared to the total ODA. The ODA they did receive was spread over many sectors,
with social services and education seeing most of the funding.
55
Figure 20 Gulf development funds ODA and investments to Horn of Africa, 2000 to 2017
FDI: 434 investments, approximately USD 13 billion; ODA: 309 projects, approximately USD 6.6 billion.
Somalia includes Somaliland. Investment value data could not be found for all investment projects, so the
number of investments column includes entries not included in the value of investments column.
Recipient Number of ODA Value of ODA Number of Value of

projects (USD) investments investments
Sudan 132 4,681 million 52 3,253 million
Djibouti 82 1,359 million 5 330 million
Ethiopia 47 547 million 365 8,595 million
Somalia 32 23 million 6 778 million
Eritrea 14 14 million - -
South Sudan 2 14 million 6 3 million
Secondly, while the investments are heavily focussed on agriculture and manufacturing
in both number of projects and amount invested, the ODA projects are heavily
focussed on energy and transport as well as agriculture, as shown in figures 21 and
22. Many projects go into social services, education, the financial sector and health.
Manufacturing is largely absent. These differences are noteworthy because it may
indicate that ODA serves a different purpose than FDI and may also be regulated in
a different way. Gulf states have been open in using aid to win political support, as
evidenced for example by the role accorded to Kuwait’s significant ODA spending in
garnering support at the time of the Iraqi invasion in 1990.114 This could explain the much
higher importance of ODA on areas like education and health compared with FDI.
Most of the development funds followed the sectoral pattern outlined in figures 21 and
22. The KFAED, however, had a higher proportion of projects in energy and transport.
In addition, the IDB had a lower proportion in energy and transport, and by itself
contributed to considerably more than half of the projects in education, finance and
health.
Of the development banks, the AFESD and the IDB were the most engaged in the Horn
of Africa from 2000 to 2017, as shown in figure 23. Both have projects only in Sudan,
Djibouti and Somalia, as they are primarily Islamic and have large Arab-speaking
populations. The KFAED reaches the most Horn countries: it has projects in every
country except Somalia and is the only fund to have projects in South Sudan. Most of its
projects are in Sudan and Djibouti. The Arab Bank for Economic Development in Africa
has run projects only in Ethiopia and Eritrea. The two projects of the SFD are both in
Djibouti in social housing and a port, but Saudi Arabia is the largest donor of the IDB
and an important donor to the other multilateral development funds.
114 Villanger, op. cit., 18.
56
Figure 21 Number of of Gulf ODA projects Figure 22 Value of Gulf ODA projects in
in the Horn of Africa by sector the Horn of Africa by sector
309 projects. approximately USD 6.6 billion.
ODA number of projects ODA in USD million
0 10 20 30 40 0 500 1000 1500
Energy Energy
Transport Transport
Social Services Social Services
Education Education
Financial Financial
Health Health
Infrastructure Infrastructure
Other Other
Water and Sewage Water and Sewage
Industry and Mining Industry and Mining
Institutional Support Institutional Support
Communications Communications
Rural Development Rural Development
Action Relating To Debt Action Relating To Debt
Trade finance Trade finance
Development Banks Development Banks
Multisector Multisector
Real Estate Real Estate
Figure 23 ODA from Gulf development funds to Horn of Africa by fund, 2000–2017
309 ODA projects, approximately USD 6.6 billion.
Fund Value of ODA Number of ODA

(USD) projects
Arab Fund for Economic and Social Development 2,651 million 58
Islamic Development Bank 2,061 million 139
Kuwait Fund for Arab Economic Development 1,156 million 29
OPEC Fund for International Development 572 million 45
Arab Bank for Economic Development in Africa 163 million 36
Saudi Fund for Development 36 million 2
In summary, relative to investments, Gulf ODA to the Horn of Africa places a higher
importance on Djibouti and a lower one on Ethiopia, and focusses on energy and
transportation in addition to agriculture. Within the separate funds are different
geographic and sectoral focus areas. The main distinctions are that the IDB and AFESD
focus exclusively on Djibouti, Somalia and Sudan, and the IDB provides most of the
funding for education, finance and health. Overall, Gulf ODA has a few important
differences with FDI, but does not represent a radical departure.
57
5 Perceptions of Gulf
investments in Ethiopia
Gulf states are significant actors in the Horn of Africa. Not only, then, do the Gulf states
view the Bab-el-Mandeb strait and the Horn region as a strategic space relevant to both
the containment of Iranian influences and intra-Arabian competition, they also actively
engage Horn actors through a sizeable array of financial and economic instruments
to secure these interests. Nonetheless, Gulf engagement in the Horn is fraught with
differing accounts regarding investments and the impact on the ground, such as
announced agricultural land grabs compared to operational assets on the ground.115
Interpretations stressing the importance of extraversion in the reception of monetary
flows in the Horn may also frame the dynamic as a means of political finance obscuring
the associated foreign policy aims.116 Such claims may cast doubt on the effectiveness
of the economic foreign policy tools, but Gulf largesse and the impact of such ample
availability of funding on the ground (whether intentional or not) is a significant factor
facing cash-strapped Horn governments. Gulf investments in the Horn thus cannot be
fully understood without taking perspectives from recipient countries into consideration.
115 Gulf investments in agricultural land can be found in Middle East Business Intelligence, 2013. ‘GCC
investors eye African farmland’, 23 June, https://www.meed.com/analysis/special-reports/gcc-investors-
eye-african-farmland/3176877.article (accessed 27 September 2017); Hussein, W. 2016. ‘Will Saudi
Agricultural Investments in Sudan leave Egypt high and dry?’, Al Monitor, 1 June, http://www.al-monitor.
com/pulse/originals/2016/01/saudi-investments-agriculture-sudan-egypt-fears-water-nile.html (accessed
27 September 2017). Reports of large-scale displacement of African farmers due to Gulf investment need to
be examined carefully; for a cautionary note see: Verhoeven, H. and Woertz, E. 2012 ‘Mirage in the Desert:
the myth of Africa’s land grab´, CNN Edition, 5 July, https://edition.cnn.com/2012/07/05/business/op-ed-
africa-land-grab/index.html (accessed 5 April 2018).
116 Hagmann, T. 2016. Stabilization, Extraversion and Political Settlements in Somalia, London: The Rift Valley
Institute; Hagmann, T., and Reyntjens, F., eds. 2016. Aid and Authoritarianism in Africa: Development without
Democracy, London: Zed Books.
58
The reflections presented here take perceptions in Ethiopia as a critical case, and are
largely derived from fieldwork in Addis Ababa and Dire Dawa (Ethiopia) throughout
December 2017.117 The relevance of Ethiopia stems from three factors. Firstly, Ethiopia
appears to be amongst the largest recipients of Gulf investment amongst Horn
governments, seeing significant investments coming into primary (agriculture),
secondary (industry) and tertiary (services) sectors. Secondly, Ethiopia, despite long
historic and cultural ties with the Gulf, has not been considered predominantly in
the context of long-standing intra-Islamic disputes. The country’s largely Christian-
dominated heritage is interpreted instead through ambivalent narratives in Islamic
tradition,118 and its Muslim communities are predominantly Sufi (lacking strong political
Muslim Brotherhood or Salafi factions). More recently, Ethiopia has remained neutral
in the GCC crisis and is a recipient of investments from both sides of the divide. Lastly,
frequently touted as a regional hegemon,119 Ethiopia both strongly influences and is
strongly influenced by developments in the wider Horn region, considering trade and
kinship ties spanning multiple states. Although Ethiopia thus has a range of traits shared
with other Horn states, it should be reiterated that the significant ethnic, religious and
economic differences with other Horn states may strongly shape Ethiopian relations with
Gulf states. Dynamics from one case thus may indicate considerations elsewhere, but
cannot be extrapolated to other states without taking into account the influence of the
different (local) dynamics.
5.1 Gulf largesse in a cash-strapped economy
Following the ouster of the Derg regime, the Ethiopian People’s Revolutionary Front
(EPRDF) claimed power in Ethiopia based on a platform of self-determination for
Ethiopia’s nations and nationalities. Influenced by Stalinist interpretations of ethnic
representation through ethnic federation, the party sought to define and mobilise ethnic
groupings in a top-down fashion in an attempt to legitimate itself in contrast to previous
centrally/Amhara-led regimes.120 Although the EPRDF’s ethnic federalism formally gave
considerable autonomy to newly created regions and more than 80 officially recognised
nations and nationalities, the space for locally derived ideas, institutions and governance
remained limited by the party’s revolutionary developmental ideology and the dominant
117 See annex 1 for a description of fieldwork.

118 For an overview, see Erlich, op. cit.
119 Maiyo, J. 2012. ‘Ethiopia: new East African hegemon?’, African Arguments, 20 April, http://
africanarguments.org/2012/04/20/ethiopia-and-somalia-joining-eac-will-transform-regions-security-
architecture-by-josh-maiyo/ (accessed 19 January 2018); Verhoeven, H. 2015. Africa's Next Hegemon:
Behind Ethiopia's Power Plays, Foreign Affairs Snapshot April 12, New York: Council on Foreign Relations;
Cheru, F., et al., ed. 2017. Ethiopia: The Rise of a Regional Hegemon, London: Zed Books.
120 Vaughan, S. 2003. Ethnicity and Power in Ethiopia, PhD diss., University of Edinburgh.
59
role of a predominantly Tigrayan elite in the security apparatus and business sector.
Democratic governance was thus severely limited by the frequent use of instruments
of co-option and coercion, affecting the regime’s domestic legitimacy.121 Instead of
increasing the space for bottom-up ethnic representation and influence, the regime
sought to build support for its rule through developmentalism. As a consequence, its
main claim to domestic and international legitimacy is based on its performance in
delivering a stable environment conducive to persistently high economic growth.122
Subsequently, the ability to showcase a record of economic growth and poverty
reduction has come to be seen as a matter of domestic security, reflected in Ethiopia’s
tendency to securitise key export assets (export routes to Djibouti, special economic
zones, and so on), nontransparent but persistently positive economic accounting, and
the role of the military dominated Ethiopian Metals and Engineering Company (METEC)
in the country’s development.123
Ethiopian foreign policy has historically stemmed from a siege mentality referencing the
threat of Islamic encirclement. Ethiopia’s foreign policy was redefined in 2002. The new
policy sought to move away from the encirclement conception, but largely maintained
the idea of external forays and interventions as a function of internal imperatives.124
Following the definition of domestic poverty as the main threat, relations with Gulf
regimes were reframed to incorporate “the key role these countries can play in our
economic development, and focus on seeking development, finance, investment, and
markets for our products”.125 Reflecting predominance of economic incentives, Ethiopian
121 Ibid.; Vaughan, S., and Tronvoll, K. 2014. ‘The Culture of Power in Contemporary Ethiopian Political Life’, Sida
Studies (10).
122 Interviews with Ethiopian senior researchers, Addis Ababa, December 2017; also see Maru, M. 2016.
‘Economic Development, Democratic Governance, Peace and Security and Regional Integration: the case
of Ethiopia’, Mehari Taddele Maru blog, 17 February, https://meharitaddele.info/2016/02/economic-
development-democratic-governance-peace-and-security-and-regional-integration-the-case-of-ethiopia/
(accessed 19 January 2018); The Ethiopian Herald. 2018. ‘EPRDF’s Executive Committee statement’,
2 January, http://ethpress.gov.et/herald/index.php/editorial-view-point/item/10478-eprdf-s-executive-
committee-statement (accessed 19 January 2018); regarding potential changes in the political settlement
and the widening political space for a number of Ethnic groups, following the continued unrest within
the regions, see: Gedamu, Y. 2018. ‘Ethiopia: A Strong Opposition Is the Only Solution to Dislodging
Ethiopia's Ruling Coalition’, All Africa, 9 January, http://allafrica.com/stories/201801100202.html (accessed
19 January 2018).
123 Interview with Ethiopian senior researchers, Addis Ababa, December 2017; for an exploration of reported
and actual growth and poverty figures in Ethiopia, see: Geda, A., and Yimer, A. forthcoming. Growth,
poverty and inequality in Ethiopia, 2000–2013: A Macroeconomic appraisal; Van Veen, E. 2016. Perpetuating
power: Ethiopia’s political settlement and the organization of security, CRU report, The Hague: Clingendael.
124 Derso, B. 2017. ´How Ethiopia Synergizes Its economic opportunities with Gulf’s Capital´, Ethiopian Herald,
31 August, http://www.ethpress.gov.et/herald/index.php/news/national-news/item/9481-how-ethiopia-
synergizes-its-economic-opportunities-with-gulf-s-capital (accessed 19 January 2018); Erlich, op. cit.;
Verhoeven, H. 2015. Africa's Next Hegemon: Behind Ethiopia's Power Plays, Foreign Affairs Snapshot April 12,
Council on Foreign Relations
125 Ministry of Information, op. cit. 131.
60
officials have largely refrained from commenting on potentially divisive issues, such as
Yemen or the (domestically sensitive) (mis)treatment of Ethiopian migrants in the Gulf.126
Career perspectives in the foreign service became related to diplomats’ ability to secure
foreign investment, reflecting the prominent role accorded to foreign investment in the
key legitimating metric of the regime: development of the country and the reduction
of poverty. A prime example is Mulatu Teshome, who was elevated to the position of
president of Ethiopia in 2013 from his role as ambassador to Turkey (held next to other
ambassadorships to, amongst others, China), which he had used to position himself as
the main channel for the entry and allocation of Turkish investments in Ethiopia, efforts
which are highly valued domestically.127
The pressure to attract foreign funding is further compounded by the persistently

negative balance of payments that Ethiopia, like other Horn countries, has maintained
in recent years. Foreign currency reserves were at a negative USD 7.2 billion by the end
of 2016, and the current account deficit at USD 7.4 billion in July of that year (driven by
a sizeable trade deficit), indicating significant strains on the country’s foreign currency
reserves.128 Although a negative balance on the current account does not by definition
impair growth, the limited availability of hard currencies has limited economic growth in
Ethiopia by making the importation of key goods and services difficult (gaining access
to hard currency can take up to a year for entrepreneurs), risks the country to default on
loans and might jeopardize the significant infrastructural development spending (such
as the Grand Ethiopian Renaissance Dam).129 Stringent currency controls have been put
in place and a crackdown on both popular and elite-level informal currency markets is
in effect, yet the central government remains in a weak financial position.130 Sizeable
Gulf loans and deposits (in the range of several billions) have been key to the continued
solvability of state finances and the relatively stable exchange rate of the birr.131 Similar
loans from Saudi Arabia have been important in helping the Al-Bashir government
bridge the sanctions regime imposed on Sudan and substantial financial support played
an important role in drawing Eritrea into the Saudi-led coalition.132 Eritrea also depends
126 Interviews with Ethiopian researchers, Addis Ababa, December 2017. Issues pertaining to Eritrea appear to
form an exception to this pattern.
127 Interview with Ethiopian journalist, Addis Ababa, December 2017.
128 International Monetary Fund. 2017. ‘World Economic Outlook Database: October, 2017’, https://www.
imf.org (accessed 19 January 2018); International Monetary Fund. 2016. IMF Country Report No. 16/322:
The federal democratic republic of Ethiopia, Washington DC.
129 Interviews with Ethiopian senior researchers, Addis Ababa, December 2017; Abebe, K. 2017.
‘Foreign Exchange Crunch Now, Then, Tomorrow’, AllAfrica, September 2 2017, http://allafrica.com/
stories/201709050401.html (accessed 19 January 2018).
130 ESAT. 2016. ‘Ethiopia: Crackdown on black market following forex crunch’, 3 November, https://ethsat.
com/2016/11/ethiopia-crackdown-black-market-exchanges-following-foreign-currency-crunch/
131 Interviews with Ethiopians in the finance sector, Addis Ababa, December 2017.
61
on Dubai as a central hub in its offshore financial network to discretely facilitate various
payments. Hard currency drawn from the Eritrean diaspora are moved through banks in
Dubai to facilitate procurement of goods and weapons and to finance the armed groups
Eritrea supports in the Horn.133
The developmentalist narrative may frame the public motivation for courting Gulf
investment, but the attracted funds are also important to maintaining the political
settlement. Although the Ethiopian state is highly centralised, its ability to economically
reward selected actors is limited. because most economically viable assets have already
been captured by firmly entrenched elites, and the capacity to maintain economically
non-viable assets is relatively limited and requires a careful balancing act by the EPRDF
politburo between different ethnic, regional and linguistic interests.134 Given the myriad
of ethnic and regional elites co-opted into the political settlement and such limited
working capital for co-option and patronage, the maintenance of settlements stability
is a careful balancing act.135 This challenge has been further intensified owing to the
sustained protests and elite schisms in the last three years.136 Additional patronage
demands have put a strain on resources, in part due to the heightened turnover of elites
in the regional parties. The highly centralised and personalised channels through which
Gulf investments enter Ethiopia allow a limited set of elites significant discretion in
allocating funds.137 Other significant investment flows (e.g., Chinese, Indian, European)
are more tightly controlled by the investors and thus allow far less discretion in their
allocation or are more fragmented across a wider set of small investors or personalized
channels. Additionally, as Gulf investments have frequently run into delays to become
operational, such investments have had relatively low visibility, both domestically and
internationally. This could make it easier to divert funds to suit particularistic needs.
5.2 The other side of the Riyal
Despite the relevance of Gulf economic support to the continuity and stability in the
Horn, the funds provided have not been viewed unequivocally positively by its recipients.

134 Interviews with Ethiopian senior researchers, journalists, and senior banking executives, Addis Ababa,
December 2017.
135 For an example, see: Wikileaks. 2009. ‘Party-statals: How the ruling parties’ "endowments" operate’,
19 March, https://wikileaks.org/plusd/cables/09ADDISABABA677_a.html (accessed 19 January 2018).
136 Záhořík, J. 2017. ‘Reconsidering Ethiopia’s ethnic politics in the light of the Addis Ababa Master Plan and
anti-governmental protests.’ The Journal of the Middle East and Africa 8(3), 257-272; Verhoeven, H. 2016.
’Behind the Violence in Ethiopia’, Foreign Affairs Snapshot August 29, New York: Council on Foreign
Relations.
137 Interviews with Ethiopian senior researchers, Addis Ababa, December 2017.
62
One of the main criticisms is the relatively poor suitability of investment projects
developed and their lack of sensitivity towards the sociopolitical context of the Horn
region, including sub-state inequalities. In many cases, the regional policies of Gulf
actors do not sufficiently take into account realities in the Horn. Such deficiencies arise
as a consequence of two factors. Firstly, overall understanding amongst Gulf actors of
the ethnic profiles, economic activities and trade relations between Horn communities
may be limited in some cases (again, central Sudan with its close ties to the Gulf
may prove an exception). Qatar’s Ahmed bin Abdallah Al Mahmoud, the country’s
Deputy Prime Minister for many years, for example, was rumoured to have had scant
knowledge of Sudan’s many conflicts when he took up the role of lead negotiator in
the Darfur crisis.138 While it is not unusual for mediators to need considerable time to
familiarize themselves with complex dossiers, in foreign policy contexts where there
is little institutional support to rapidly remedy this, important blindspots may lead to
grave consequences. Considerations to invest in certain regions and economic sectors
often stem from state-based logic and do not take into account spillover to communities
that may extend across state borders (see box 5).139 Similarly, Gulf activity in Ethiopia
is driven more by immediate concerns or opportunities than any longer-term strategic
vision of the larger region’s development. Given the asymmetric relations between
the regions, this lack of attention is not surprising in light of the asymmetric relations
between the regions. This limited stake in the region permits the Gulf states to view the
Horn region mainly in terms of short-term Middle Eastern security concerns. This implies
that the aims of Emirati, Saudi and Qatari policy are not necessarily tied to the long-term
internal stability of the Horn region, unless it clearly impinges on the stability of the
wider Red Sea region.
Box 5 Unconsidered effects and spillover
The UAE’s DP World was awarded a 30-year concession to manage the

development and operation of Somaliland’s Berbera Port in 2016, promising
to invest up to USD 442 million in the autonomous region. This investment
will have a profound effect on Somaliland’s political economy and external
relations. It also represents a diplomatic statement from the UAE, as DP World
is perceived to be a central factor in the UAE’s foreign policy. This deal will also
significantly affect Ethiopia and its relationship with Somaliland, given that trade
between Somaliland and Ethiopia (particularly livestock and Khat) generates
more than half of Somaliland government’s revenue. Although the Ethiopian
prime minister was included in the official photograph of the closing of the
deal, the EPRDF reportedly felt marginalised during the process: the UAE’s
138 Roberts, D. 2008. “Qatari Mediation,” University of Durham.

63
growing grip on imports into Ethiopia is seen as a major threat to Addis’ ability to
manoeuvre quickly and with agility in the region.140 In the end, however, the deal
suited Ethiopia, which is interested in diversifying its export routes away from
Djibouti (and it acquired a 19 percent share in the Berbera deal). The feeling of
marginalisation at the hand of DP World and the UAE is characteristic of Gulf
states’ involvement in the Horn, however.
A second issue impeding a balanced approach to the Horn is the highly hierarchical
organisational structure of the Gulf states, which appears to allow for a substantial
gap between political decision makers and ministry staff. While sufficient expertise to
address the above mentioned policy concerns may exist within the organisation, the
extent to which information and policy considerations can flow upward and reach the
highly exclusionary circles of political decision making is questionable. One concern
has been the frequent lack of availability or visibility of a Gulf counterpart on policy
issues that is both informed and politically influential.141 Additional concerns arise
over the experts contracted in policy-making bodies. While arguments can be made
regarding reliance on expats to facilitate national policymaking, of particular concern is
the involvement of experts from third countries with stakes in the process. For example,
the employment of Egyptian personnel in ministries and the offices of the ruler of many
Gulf states undoubtedly deepens the understanding of Horn politics, but has also raised
a sense of suspicion amongst Ethiopian policy makers given the long and chequered
history between Egypt and Ethiopia. Similar rumours exist in Ethiopia regarding potential
conflicts of interest surround the Qatari mediation efforts in Darfur: the Qataris are
mentioned as employing Sudanese staff, relying on expertise from the Eritrean Ministry
of Foreign Affairs, and of foreign experts advising both rebel and government factions.142
Such rumours are raising the level of suspicion with which Gulf initiatives are received in
the Horn.
Additional concerns arise when development of physical assets gets under way.
Considering that the main asset of Horn states is its arable land, a significant share of
Gulf investments aims to capitalise on agricultural opportunities.143 In an attempt to
court external investment, the Ethiopian government has been known to offer large plots
140 Interview with two members of the Ethiopian Federal Government, Ethiopian senior researcher and
Ethiopian journalist, Addis Ababa, March 2018 and December 2017.
141 Interviews with former diplomatic staff of Ethiopia and an Ethiopian senior researcher, Addis Ababa,
December 2017.
142 Interview with Ethiopian senior researcher, Addis Ababa, December 2017. See also: Suleiman, M. 2010.
‘Doha forum is hardly conducive to resolve the crisis in Darfur´, Sudan Tribune, 29 June, https://www.
sudantribune.com/spip.php?iframe&page =imprimable&id_article =35424 (accessed 19 January 2018).
143 Although similar concerns can occur in other land based investment projects, such as real estate.
64
and to facilitate its development by taking responsibility for land clearance to ensure that
development can begin.144 Land clearance frequently involves the forceful displacement
of the local population.145 This issue is not unique to the Horn context, but its
significance in Ethiopia should not be underestimated. The tensions generated through
the coercive role such land sales demand from the central government in peripheral
regions coincide with existing tensions stemming from the de facto dominance of the
federal government over the regional states. Moreover, displaced populations are rarely
allowed to work on the newly settled farms.146 Instead, employees from different ethno-
regional groups fill many of the local vacancies. Although some interviewees indicated
that land clearance practices may be changing, as compensation is more frequently
being granted, many of those who gave up their land find developing a new livelihood
difficult as land prices rise and developing new farmland can prove challenging.147
Challenges involved in moving from land acquisition to developing an operational asset

are not unique to domestic entrepreneurs. Foreign investors face significant hurdles and
delays in developing on-the-ground operations, undermining developmentalist claims to
legitimacy after the initial displacement.148 Gulf investors in particular have been known
to face implementation delays, feeding discussions regarding the discrepancy between
announced large-scale investments and lacklustre activity on the assets.149 Such
discrepancies can in part be attributed to difficulties related to a lack of infrastructure,
an unclear regulatory environment requiring longer due diligence and other interactions
with state bodies as well as the limited experience of many Gulf investors in developing
such large-scale agricultural projects. Nonetheless, the return on investment is
frequently not the main driver of Gulf investments in the region, and the cheap and long
land leases provided by the Ethiopian state do not increase the pressure to develop the
144 For example, Saudi Star acquired 14.000 hectares in the Gambella region, Burgis, T. 2016. ´The great
land rush Ethiopia: The billionaire’s farm´, Financial Times, 1 March, https://ig.ft.com/sites/land-rush-
investment/ethiopia/ (accessed 19 January 2018).
145 Lavers, T. 2012. ’Patterns of agrarian transformation in Ethiopia: State-mediated commercialisation and the
‘land grab’.’ The Journal of Peasant Studies 39(3-4), 795-822.
146 Interview with Ethiopian senior researcher and senior Ethiopian banking executive, Addis Ababa, December
2017; Human Rights Watch. 2012. “Waiting Here for Death” Forced Displacement and “Villagization” in
Ethiopia’s Gambella Region, New York; Vidal, J. 2011. ‘Ethiopia at centre of global farmland rush,’ 21 March
2011, The Guardian, https://www.theguardian.com/world/2011/mar/21/ethiopia-centre-global-farmland-
rush (accessed 19 January 2018).
147 Interview with Ethiopian businessman in the horticulture sector, Addis Ababa, December 2017.
148 Interviews with the Ethiopian Investment Commission and Ethiopians in the finance and horticulture
sectors, Addis Ababa, December 2017. Chinese investments have generally not suffered similar
implementation delays.
149 Keeley, J. , Seide, W., and Eid, A., et al., 2014. Large-scale land deals in Ethiopia: Scale, trends, features
and outcomes to date, London: International Institute for Environment and Development; interview with
Ethiopian businessman in the horticulture sector, Addis Ababa, December 2017.
65
plot or prevent land speculation.150 Many assets are therefore not in operation, which
delays expected hard currency income through export earnings, and leads to a heavy
burden of nonperforming loans with the Ethiopian state. Because the investment policy
provides for government support in start-up financing (up to 70 percent of the initial
investment, depending on the type of investment), the lack of returns on a several such
investments have left the Ethiopian Development Bank under substantial strain.151
Another frequently cited concern relates to proselytization efforts accompanying

Gulf investments.152 Significant Salafi currents, associated with the Saudi export of
its Wahhabi interpretation, can be identified within the Ethiopia´s traditionally Sufi
Muslim community. The rise in Salafi interpretations was to some extent supported
by Saudi Arabian funding, flowing mainly through personal connections and Saudi
NGOs such as the Muslim World League and the Islamic Relief Fund.153 These funds
facilitated the construction and operation of mosques and religious schools (as well
as social and economic relief projects) in the Ethiopian regions such as Oromia.
Developments like these gained a further impetus with the return of Ethiopian students
from Wahhabi institutions in Saudi Arabia (such as Medina University), which has
further strengthened the presence of Salafi strands in Ethiopia.154 The ensuing rise in
the salience and demands for political space from the Muslim community prompted
the federal government to intervene in 2011. Although the heavy-handed approach
prompted substantial conflict in the regions, they appear to have been relatively effective
150 For example, the cost of the 50-year Saudi Star lease on 10.000 hectares in Gambela state amounts to ETB
300.000 (approximately USD 11.000) annually (original contract: ‘Land rent contractual agreement made
between Ministry of Agriculture and Saudi Star Agricultural Development Plc’).
151 Interview with the Ethiopian Investment Commission and with a senior Ethiopian banking executive and
lawyer, Addis Ababa, 2017.
152 See, for instance, Wikileaks. 1997. ‘Allah in Ethiopia: Mostly quiet on the Islamic front’, 1 April, https://
wikileaks.org/plusd/cables/97ADDISABABA2584_a.html (accessed 19 January 2018); Wikileaks. 2009.
‘Growing Wahabi influence in Ethiopia – Amhara region and the “Jama Negus mosque”’, 15 July, https://
wikileaks.org/plusd/cables/09ADDISABABA1672_a.html (accessed 19 January 2018); Shinn, D. 2014.
‘A Look at Muslim-Christian Relations in Ethiopia’, 21 January, http://intpolicydigest.org/2014/01/21/a-look-
at-muslim-christian-relations-in-ethiopia/ (accessed 19 January 2018).
153 Abbink, J. 2014. ‘Religious freedom and the political order: the Ethiopian ‘secular state’ and the containment
of Muslim identity politics’, Journal of Eastern African Studies, 8(3), 346–365; Østebø, T. 2007. The Question
of Becoming: Islamic Reform-Movements in Contemporary Ethiopia, Bergen: Chr. Michelsen Institute;
interview with Ethiopian businessman in the horticulture sector, Addis Ababa, December 2017.
154 Østebø, T. 2009. ‘Religious Change and Islam: The Emergence of the Salafi Movement in Bale, Ethiopia’, in:
Proceedings of the 16th International Conference of Ethiopian Studies, ed. Ege, S. Aspen, H. Teferra, B., et al.,
Trondheim.
66
at stemming foreign funding.155 The changes made to the composition of the Ethiopian
Islamic Affairs Council have interfered with many of the personal channels through
which funding entered the country.156 Further controls on Islamic NGO activity and
stringent reporting requirements for Ethiopian banks on suspicious bank transfers have
effectively cut most other funding channels.157 Nonetheless, proper auditing of financial
streams remains difficult because the Ethiopian state’s capacity is limited and a lack of
clarity persists whether Gulf investors own or merely manage the funds they invest.
Central governmental attempts to control Islamist influences from the Gulf can easily
backfire and fan ethno-regional tensions (e.g. in Oromia), as the case from neighbouring
Djibouti illustrates. The state inherited a strictly secular governance model and tradition
from French colonial rule. In an attempt to accommodate the return of Islamist and
Islamic scholars from their education in Gulf states, the Djiboutian government sought
to establish strictly controlled religious institutions in order to avoid the emergence of
politicised religious movements outside state control. Nonetheless, returning scholars
managed to effectively dominate the newly formed institutions at the expense of
traditional Islamic leaders. Utilising the state’s attempt to control religious institutions,
Islamist leaders have been able to break with secular traditions and bring religious
narratives and actors into the political sphere.158
Lastly, although most Ethiopian foreign policy thinking is based on overcoming

internal tensions, a resurgence of Gulf engagement in the Horn appears to be
reintroducing the historically rooted conceptions of Islamic encirclement into foreign
policy considerations.159 The emergence of Gulf military bases in major ports, Eritrea
moving out of isolation through its Gulf alliance and the Gulf’s influence in Somalia are
underlining both Ethiopia’s vulnerability to its periphery, its reliance on port access and
Ethiopia’s reduced leverage because of substantial Gulf funding. The fault lines imported
from the Gulf are currently relatively separate from conflict dimensions in the Horn, but
there is no guarantee they will remain so in the future.
155 On the promotion of the Al-Abash interpretation by governmental institutions, Nigussie, H. 2013. ‘Audience
reception analysis on “Jihadawi Harakat” documentary film among Addis Ababa communities,’ master’s
thesis, Addis Ababa University; Stockmans, J. 2014. ‘Ethiopian Muslims in the Public Space of Addis Ababa
since 1991,’ master’s thesis, University of Gent; Maasho, A. 2012. ´Ethiopian Muslims protest government
“interference”´; Al Arabiya News. 2012. ´Ethiopia charges 29 Muslims under anti-terror law´, 29 October,
https://english.alarabiya.net/articles/2012/10/29/246554.html (accessed 28 March 2018); interviews with
Ethiopian senior researchers and senior banking executives, Addis Ababa, December 2017.
156 VOA News. 2012. ‘Ethiopia Presents New Islamic Council’, 5 November, https://www.voanews.com/a/
ethiopia_presents_new_islamic_council/1539512.html (accessed 28 March 2018).
157 Interview with a senior Ethiopian banking executive, Addis Ababa, December 2017.
158 Abidllahi, A. 2014. Note 1 - La dimension politique de l’islam à Djibouti, Observatoire des Enjeux Politiques et
Sécuritaires dans la Corne de l’Afrique.
67
6 Main conclusions and
practical implications for
research and policy
This report has presented a comprehensive, though not exhaustive, overview and
political-economic analysis of Gulf-Horn economic relations. Here it explicitly teases out
the main conclusions regarding such economic relations and indicates some of the main
implications these have for policy makers active in the region.
6.1 Understanding the implications of Gulf activities in the Horn

requires a nuanced understanding of the scope and aims of
these activities
An increasing number of analysists and policy makers active in the Horn of Africa
have been noticing the resurgence in Gulf activity and influence in the Horn in recent
years. For some, this activity has raised serious concerns over the methods and aims
of Gulf states as well as their consequences for the stability in the region, including
the development of governance, rule of law and security in the individual Horn states.
From this perspective, Gulf actors can be interpreted as a considerable spoiler to the
European political and developmental activities in the region.
As noted, Gulf states’ activities in the Horn are indeed substantial, and Gulf influence
in the Horn is a long-standing phenomenon deeply entrenched in politics in the Horn.
Actors from both shores have significant interests vested in the continuation of the
relationship. The Horn has a long history of cultural, religious and economic ties with
the other side of the Red Sea. Developments in the Horn hence cannot be understood
without taking into account the influences stemming from the Gulf states, as these
states have had and will continue to play a major role in shaping the contemporary
political and economic landscape in the Horn. Subsequently, any attempts to curb
Gulf influence or isolate the Horn from Gulf funding will likely be an uphill battle. Both
the volume of Gulf funding and its importance to the maintenance of Horn political
settlements is such that attempts to control this influence will require substantial long-
term concerted political efforts and may be prohibitively costly.
Categorising all Gulf influence as a spoiler to European activities in the region may
also be an oversimplification of a more complex reality. Though Gulf policy agendas
significantly deviate from their European counterparts, the practical implications may
68
not always cause a conflict of interest. Examples such as the Kuwaiti acquisition of
Sudan Telecommunications Company, the substantial financial support to stabilise
Horn currencies and the investments in the manufacturing sector cannot be considered
similarly destabilising as Gulf influences in the Somali elections. Gulf influence in the
Horn is by no means homogenous: significant differences exist between each Gulf
state’s’ aims, different instruments, different types of projects and the recipients in the
Horn. Effective engagement in this context thus requires a more nuanced understanding
of the role specific Gulf actors play in a given region, rather than a generalised and
securitised interpretation of the risks associated with Gulf influences. An accurate
assessment of the involved actors, aims and scope of Gulf activities in the context is
required to effectively mitigate any associated risks.
Recommendation: Policy discussions and engagement strategies seeking to deal with

Gulf influences in the context of the Horn of Africa should be informed by an accurate
assessment of the involved actors, aims and scope of Gulf activities in their context to
effectively mitigate any associated risks.
6.2 Stable economic and political development in the Horn of

Africa is strongly connected to the geopolitical interests of
Gulf states
Developments in the Gulf and Horn regions are intertwined, but it would be wrong to
assume the states from both regions are equal partners. Relations have varied from
partnership to animosity over the years, but most Horn states continue to rely heavily
on the continued trade, investment, and remittances from the Arabian Peninsula. Such
influences have even affected cultural and religious interpretations in the Horn, either
through family ties, popular culture or religious traditions. The relationship of Gulf and
Horn states thus cannot be reduced to merely highly visible aspects such as military
emplacements. Soft power is a major constituent in the relationship.
In the short term, most interactions could be considered as largely one-way traffic from
limited attentive Gulf patrons towards relatively eager recipients in the Horn. This means
that Gulf states’ political considerations largely predominate and frame the relationship,
and that intrastate and intraregional tensions within the Horn of Africa take a backseat.
Gulf investments in the Horn of Africa are largely structured along two dimensions:
Arab-Iranian competition and intra-Arabian competition. Developments in the Horn
unrelated to these dimensions are considered relatively inconsequential for the Gulf, and
hence a deep understanding of the ethnic, religious and political make-up of Horn states
is not deemed important. Neither should Gulf interventions in the Horn be interpreted as
part of a long-term, coherent foreign policy on the region. Although economic motives
along the lines of the Africa Rising or Vision 2030 narrative may be used to frame
investments, the availability of finance for such investments is always predicated on a
political motivation routed in Gulf politics. Horn states have a weak negotiating position
and are considered relatively cheap clients.
69
In the longer term, however, Horn states cannot be characterised as merely passive
recipients. Within the political considerations of Gulf states that frame the marketplace,
Horn states actively manoeuvre to positions themselves as worthy recipients of
investment and relevant to the geopolitical considerations of the Gulf states. Although
this extraversion strategy ensures a steady stream of revenue with which to maintain
the domestic political settlement, the relationship built in the process also serves a
strategic function in regional politics. The latter can be seen in Eritrea leveraging its
Gulf connections to break out of the Ethiopian imposed isolation, Ethiopia leveraging
its Arab connections to dampen tensions with Egypt, and the role of the Berbera port
deal to reinforce Somaliland’s independence from Somalia and for Ethiopia to reduce its
dependence on Djibouti.
Important implications for policy makers are that the opportunities for stable economic
development to a considerable extent depend on the short-term political interests from
the Gulf. Horn economies are subject to economic vulnerabilities related to both the
Horn states relevance in the Gulf’s political calculus, shifts in Gulf power arrangements
and the availability of Gulf political financing (which is influenced by oil prices). Sudden
changes in Gulf investments may occur, and may strongly affect the Horn states’
currency stability, governments’ solvability and other macroeconomic indicators. On a
micro level, fluctuations in Gulf finance may heavily influence political stability given that
it directly affects the ability of Horn political actors to finance patronage networks.
Stable economic and political development in the Horn will likely require diversification
of Horn economies. Diversification would reduce the dependence of Horn economies on
those of their Gulf patrons, potentially dampening the effects of an economic slowdown
in the Gulf. Additionally, programming on poverty reduction, employment creation and
improvements in domestic state-revenue generation may reduce the dependence of
Horn actors on Gulf funding. This may in turn increase the bargaining power of Horn
states in their relation to the Gulf, thereby increasing the space for Horn policy makers to
tend to domestic concerns.
Recommendation: Early warning systems and context analyses used to inform

humanitarian aid, peacebuilding and migration management policies should take
into account the economic and political developments of Gulf states, and how these
developments may influence the Horn.
Recommendation: European investments in programming for economic diversification

and employment may improve stability because it may reduce the vulnerability of Horn
states to economic and political shocks from the Gulf.
70
6.3 Gulf investments can significantly influence stability in the

Horn of Africa
As explicated, Gulf funding is an important component in the continued stability

of political settlements in the Horn. On the one hand, Gulf finance is an important
resource keeping a system of clientelistic relations in place; on the other, the substantial
deposits in hard currency are an important support for Horn governments’ economic
solvability and currency stability. Nonetheless, the lack of a sufficiently informed long-
term Gulf policy towards the Horn means that the received funding may reinforce
existing tensions, which easily propagate throughout the Horn’s complex ethnic,
religious and trade structure. Although the appeal of Gulf funding may be high from
a state government’s perspective, implementation of the associated projects may
require a difficult and risky balancing of interests. The highly centralised channels
through which most of the Gulf’s foreign investment operates ties implementation with
centre-periphery tensions. Additional risks may arise from a lack of conflict sensitivity
throughout the implementation process. Horn-based recipients of Gulf largesse should
thus not be considered unequivocally eager participants as the risks associated with
Gulf finance are well understood.
Gulf states have proven willing and able to support stability in the region with sizeable
investments, aid and financial contributions. A part of Gulf financing may be inherently
incompatible with conflict-sensitive investments, but a substantial part is likely to suffer
from weaknesses inherent in Gulf states’ policies and implementing agencies rather than
a clash of political aims amongst stakeholders. To mend this weakness, Gulf institutions
have shown a great willingness to hire the expertise required to execute their function,
even from foreign sources. On a multilateral level, Arab financing institutions such as
the Islamic Development Bank have shown an interest in incorporating conflict-sensitive
approaches in their programming. And though Gulf FDI in the Horn is frequently not
driven primarily by economic considerations, this is an exception rather than a rule,
given that Gulf FDI in other regions often does aim to achieve a return on investment.
European policy makers seeking to engage in the Horn of Africa may be able to find
some common ground with their Gulf counterparts, both having an interest in stability
in the Horn of Africa. Although Gulf actors are unlikely to change their instruments,
an informed dialogue between European and Gulf policy makers may allow both
parties to identify their complementarity in the areas of regional stability and conflict
sensitivity. Such a dialogue would require the development of a shared narrative
amongst European policy makers, illustrating a unified and realistic position setting clear
aims and expectations regarding any potential complementarity. For such a narrative
to form an effective starting point for discussion, it should demonstrate an accurate
understanding of Gulf aims and activities in the Horn, and depart from the recognition
that both European and Gulf states are unlikely to disengage from the region. Increasing
interactions between Horn based diplomatic staff (on a bilateral basis) may be a starting
71
point as it may improve all parties’ understanding of one another’s stakes in the region
and suggest areas in which complementarity may exist. Decision-making capacity is
likely to be limited on this level, however, and the discussion ought to be raised to a
political level in due time. Low levels of coordination on an implementing level may
already reduce unintentional clashes between both region’s activities however, and may
thus contribute to stability in the region.
Recommendation: Strengthening the dialogue between European and Gulf policy

makers could allow actors to capitalise on their shared interest in stability in the Horn
of Africa. To do so would require European policy makers to develop a shared narrative
explicating realistic aims and expectations from such coordination, and might benefit
from increased interactions between Horn-based diplomatic staff on a bilateral basis.
72
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7.2 Press, media and digital sources
African Arguments
Al Araby
Al Jazeera
Al-Monitor
AllAfrica
Bloomberg
Borkena
Chatham House Resource Trade Earth
CNN Edition
Ethiopian Herald
Ethiopian Satellite Television and Radio
Financial Times
Foreign Policy
IRIN News
Meed
Meharitaddele.info
Middle East Business Intelligence
Middle East Monitor
Orient XXI
Qatar National Bank
Quartz Africa
Reuters
Riyadh Post
Sudan Tribune
The Economist
The Ethiopian Herald
The Guardian
The Horn Diplomat
The New York Times
78
The Reporter Ethiopia

The Washington Post
VOA News
Wikileaks
World Politics Review
79
Annex 1 Methodology
Annex 1.1 Political Economy Analysis
This study is conducted in accordance with CRU´s political economy analysis framework.
The purpose of moving the political economy analysis to a sector level is to situate the
private sector and investment opportunities within a deeper context, in which the most
significant power and state connections are understood. The framework combines
traditional conflict analysis with elements from social network and power analysis, and
draws on recent research across a range of disciplines, namely new political economy,
new institutional economics as well as conflict studies. Combined, and especially when
applied to a sector — such as the justice sector, the private sector, the security sector,
or the political arena more generally — these analytical lenses help bring to the surface
the politics and power dynamics that may facilitate or hamper proposed interventions
in conflict-affected situations. This way it uncovers hidden stakeholders, the practices
and exchanges that facilitate the main actors’ relation to power, and the written
and unwritten rules and structures that form the silent backdrop of these relations.
This identification of arrangements of power helps identify potential spoilers and entry
points for action by showing which structures might be amenable to changes and which
structures might be used to the policy maker’s advantage.
The report thus supports conflict sensitivity programming, by recognising that ‘[t]
he success of most development efforts, including efforts to strengthen the state and
build institutions of public accountability, rises or falls according to the degree to which
these efforts are aligned with — or at least do not fundamentally threaten — the interests
of powerful national and local actors who are in a position to thwart or co-opt those
efforts.’160 In a similar vein, the analysis recognises that ‘many times well-intentioned
interventions become ineffective because they reinforce an equilibrium that sustains
the outcome the intervention attempted to change. These situations can arise from
interventions that do not take into account the existing power balance.’161
160 Parks, T., and Cole, W. 2010. Political Settlements: Implications for International Development Policy and
Practice, San Francisco: The Asia Foundation, 5.
161 World Bank 2017. World Development Report 2017: Governance and the Law, Washington DC: World Bank
Group, 27.
80
Annex 1.2 Research design
The research design included desk research, quantitative research (see mapping
methodology below) and field work. Desk research included a literature review of
existing literature and news articles on the topic, as well as initial explorations of the
drivers and motives behind Gulf investment projects. Field research was conducted
by Jos Meester and Willem van den Berg in November and December of 2017 in
Addis Ababa and Dire Dawa, Ethiopia. A total of 23 people were interviewed. These
interviewees included bankers, lawyers, businessmen in the agricultural, horticultural,
pharmaceutical and manufacturing industries, government officials at the Ministry
of Trade and the Ethiopian Investment Commission, former diplomats, researchers
at government funded think tanks, researchers at private think tanks, independent
researchers, religious elders, and journalists. Reflecting the tensions surrounding
the topic, government officials and religious elders are relatively lightly represented.
Most of those approached were either unwilling to be interviewed on this topic, or
were reluctant to share their views past the facts and figures presented in official
government reporting. Only a few were willing to significantly elaborate on their views
and experiences. While the information derived from these interviews is informative and
may be generalisable to a certain extent, it should be noted that neither the Horn nor the
Gulf forms a homogenous block. Extrapolations not taking into account the local context
on either side of the Red Sea may therefore obscure important differences.
Annex 1.3 Mapping methodology
For this mapping Clingendael’s database on commercial investments by Gulf countries

(Saudi Arabia, the UAE, Kuwait, Qatar) in the Horn of Africa (Ethiopia, Sudan, South
Sudan, Somalia, Djibouti, and Somaliland) has been used. These investments include
foreign direct investments as well as foreign portfolio investments, and involve Gulf
entities buying assets of or setting up business interests in the Horn of Africa (both
greenfield and brownfield, including affiliates, fully owned subsidiaries and joint
ventures). The database is an overview of commercial investments and therefore does
not include religious funding, macroeconomic credit, payments to individuals in the
Horn, payments for peace processes or similar activities.
This database draws on data from secondary systematic overviews, including

Land Matrix,162 Grain,163 farmlandgrab.org,164 Zephyr’s comprehensive mergers and
162 See: Land Matrix, ‘Online Public Database on Land Deals’, http://www.landmatrix.org/en/ (accessed
31 March 2018).
163 See: Grain, https://www.grain.org/ (accessed 31 March 2018).
164 See: Farmlandgrab, https://www.farmlandgrab.org/ (accessed 31 March 2018).
81
acquisitions data,165 the International Forum of Sovereign Wealth Funds,166 and the
Ethiopian Investment Commission.167 The team examined the activities of the largest
Gulf companies in six sectors (agriculture, banking, logistics and shipping, sovereign
wealth funds, construction and infrastructure, telecommunications) in each of the Gulf
states in scope. From this examination, all operations and investments partaking in the
Horn of Africa were included in the database (following triangulation with secondary
sources). A number of news websites and business registers were manually searched
for any articles or entries pertaining to Gulf investments in the Horn of Africa. Any
entries encountered that could be verified from multiple sources were included in the
database. The database was further enriched with data on ODA projects drawn from
the websites of the Arab Fund for Economic and Social Development,168 the Kuwait Fund
for Arab Economic Development,169 the OPEC Fund for International Development,170
the Arab Bank for Economic Development in Africa (BADEA),171 the Saudi Fund for
Development,172 and the Islamic Development Bank.173
The database contains 434 investments from 2000 to 2017, spread over 36 locations
across the Horn of Africa, in 16 sectors, worth approximately USD 13 billion, and
309 ODA projects between 2000 and 2017, worth a combined total of USD 6.6 billion.
The data includes dates, locations, sectors, investment amount, investment type,
investment partners and employment creation. For countrywide projects where the
specific city or region location data is not available, the project has been coded as taking
place in the capital city when represented visually. Similarly, for regional projects the
centre of the region was taken as the location of the project for visual representation.
165 See: Zephyr, https://zephyr.bvdinfo.com/version-2018312/Home.serv?product=zephyrneo (accessed

31 March 2018).
166 See: International Forum of Sovereign Wealth Funds, http://www.ifswf.org/research (accessed
31 March 2018).
167 See: Ethiopian Investment Commission, http://www.investethiopia.gov.et/ (accessed 31 March 2018).
168 See: Arab Fund for Economic & Social Development, http://www.arabfund.org/ (accessed 31 March 2018).
169 See: Kuwait Fund for Arab Economic Development, https://www.kuwait-fund.org/en/web/kfund (accessed
31 March 2018).
170 See: OPEC Fund for International Development, http://www.ofid.org/ (accessed 31 March 2018).
171 See: Arab Bank for Economic Development in Africa, http://www.badea.org/ (accessed 31 March 2018).
172 See: The Saudi Fund for Development, http://www.sfd.gov.sa (accessed 31 March 2018).
173 See: Islamic Development Bank, https://www.isdb.org/irj/portal/anonymous/idb_faq_ar (accessed
31 March 2018).
82
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List of figures and boxes  3

2 A long, long history  12

3 The determinants of Gulf aid, investment and trade in the Horn  20

3.1 An economic strategy as part of wider foreign policy  20

4 Mapping the extent of Gulf investments and ODA in the Horn of Africa  40

4.1 Overview of Investment activity in the region  41

5.1 Gulf largesse in a cash-strapped economy  59

6 Main conclusions and practical implications for research and policy  68

6.1 Understanding the implications of Gulf activities in the Horn requires a

Annex 1.1 Political Economy Analysis  80

Figure 1 Map of the Gulf and the Horn of Africa

Figure 1: Map of the Gulf and the Horn of Africa 2

Box 1: Sudan’s Breadbasket gamble 20

• Following a decade of disengagement, the Gulf states have again become

ADFD Abu Dhabi Fund for Development

Figure 2 Exports from the Horn of Africa to selected partners

4.0 Gulf states

Figure 3 Gulf ODA to Middle Eastern and non–Middle Eastern recipients

2.2 Confrontation and disengagement in the 1990s: Islamism and

28 Verhoeven and Woertz, op. cit.

30 Verhoeven, 2015, op. cit.

2.3 So close, yet so far: Cooperation amidst disappointment and

34 Verhoeven and Woertz, op. cit.

1973: 1978: 1985: 1991: Fall of 1998-2000: 2001: 2008: 2017:

1971: 1981: 1995: 2000: 2011:

3.1 An economic strategy as part of wider foreign policy

Box 1 Sudan’s Breadbasket Gamble38

Funded bilaterally by the dominant states on the Arabian Peninsula, and

47 Verhoeven, 2015, op. cit., chapter 5.

3.2 (Mostly) economic determinants

buying up or leasing productive land and concluding long-term agreements to secure

Consumer-facing industries, infrastructure and agriculture across the continent could

By way of conclusion, it is worth highlighting that as important as these economic

3.3 Geopolitical determinants

3.4 Religion as a determinant of aid, investment and trade?

Box 2 Somalia and the Gulf

Figure 5 Actors with the greatest influence on private-sector activity

15% 15% 13%

77 UN Monitoring Group on Somalia and Eritrea, 2011, op. cit.

3.5 Policy instruments and actors

The multilateral funds are complemented by a number of national institutions, including

A sixth channel involves charity organisations and private foundations. Although

destabilising effects of such bottom-up promotion of Wahhabism, support for which

Figure 6 Overview of Gulf interests and instruments in the Horn of Africa

Dominant Regional trade Financial

List of figures and boxes 3

2 A long, long history 12

3 The determinants of Gulf aid, investment and trade in the Horn 20

3.1 An economic strategy as part of wider foreign policy 20

4 Mapping the extent of Gulf investments and ODA in the Horn of Africa 40

4.1 Overview of Investment activity in the region 41

5.1 Gulf largesse in a cash-strapped economy 59

6 Main conclusions and practical implications for research and policy 68

6.1 Understanding the implications of Gulf activities in the Horn requires a

Annex 1.1 Political Economy Analysis 80

Figure 1: Map of the Gulf and the Horn of Africa 2

Box 1: Sudan’s Breadbasket gamble 20

2.2 Confrontation and disengagement in the 1990s: Islamism and

2.3 So close, yet so far: Cooperation amidst disappointment and

6.1 Understanding the implications of Gulf activities in the Horn

6.2 Stable economic and political development in the Horn of

6.3 Gulf investments can significantly influence stability in the