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 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.

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.

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 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.