Eritrea
The Economist Intelligence Unit (EIU) said that its GDP forecast for Eritrea factored in a possible improvement of relations between Eritrea, Ethiopia and the United States.
The executive summary states also that activity in the mining sector will lead to robust real GDP growth, but that it will have little impact on broader income levels given the government’s economic mismanagement.
Event
Several former senior US diplomats have called for an end to the unresolved border dispute between Eritrea and Ethiopia and a rapprochement between the US and Eritrea.
Analysis
There has been a series of open letters in recent weeks from prominent members of the US foreign policy establishment, including the US ambassador to Ethiopia in the late 1990s, David Shinn, and a former ambassador to Nigeria and South Africa, Princeton Lyman. All advocate a thaw in relations between the US and Eritrea and for Eritrea and Ethiopia to commence moves towards normalising their relations. Talk of a possible easing of Eritrea’s international political isolation was initiated in mid-December 2013, when a former US assistant secretary of state for African affairs, Herman Cohen, wrote an article arguing for an end to UN sanctions that would “bring Eritrea in from the cold”, leading ultimately to a normalisation of Ethiopian-Eritrean relations, and promising a “win-win future for both nations”.
Eritrea has frequently stated that its only condition to enter into dialogue is for Ethiopia to remove its troops from border territory awarded to Eritrea by the UN-backed Eritrean-Ethiopian Boundary Commission, including the town of Badme, the original flashpoint of the war between Eritrea and Ethiopia in 1998-2000. The US is one of the few countries that has enough influence to have a chance of cajoling Ethiopia into making such a move.
Any initiative to ease the long-standing tensions between Ethiopia and Eritrea will be widely welcomed in the international community, with important implications for peace and security across the entire Horn of Africa region. Reducing Eritrea’s general mistrust of the international community politically will inevitably be a protracted process, but it would narrow the gap between political isolation on the one hand and Eritrea’s increasing economic linkages via mining.
The buoyancy of Eritrea’s mining sector was demonstrated on January 13th when a UK-based exploration and development company, Ortac Resources, announced an arrangement to acquire up to 42.2% of shares in UK-based Andiamo Exploration, which has a portfolio of advanced-stage high-grade copper and gold projects in Eritrea.
The deal follows an announcement in December by China-based Sichuan Road and Bridge Group (SRBG) that it had entered into a long-term agreement with the government-owned Eritrean National Mining Corporation (Enamco) to develop and explore an area between the existing Bisha and Zara gold mining projects.
Impact on the forecast
There is a reasonable chance over the forecast period of Eritrean officials meeting their counterparts from Ethiopia to begin discussions of the two countries’ long-running border dispute, which we will factor into our forecasts.
