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 focussed 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.
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.