The Petrodollar Lifeline That Could Break Ethiopia

The death rumour of Sheikh Mohamed bin Zayed has placed the survival of Abiy Ahmed’s government under uncomfortable scrutiny. For eight years, Abu Dhabi’s billions have underwritten Ethiopian stability. The question now is whether a new ruler in the Gulf will honour the debts of a very personal friendship.

By Sewasew Teklemariam Ethiopian Tribune Columnist

THERE IS A THEORY in Ethiopian political circles, unspoken at cabinet level but widely understood by the civil servants who carry the trays in and out: that the government’s stability does not rest chiefly upon its democratic mandate, its macroeconomic competence, or even the loyalty of the federal army. It rests, with the elegant fragility of a line of dominoes, upon a single telephone number in Abu Dhabi.

The death of UAE President Sheikh Mohamed bin Zayed Al Nahyan, known universally as MBZ has, in the days since his unconfirmed passing, given that unspoken theory a rather urgent public airing. In financial ministries and foreign embassies across Addis Ababa, officials are engaged in conversations they are characterising, carefully, as expressions of condolence. Those outside the ministries are characterising them, with rather less diplomatic restraint, as emergency planning.

The stakes are not trivial. Since 2018, the bilateral relationship between Abiy Ahmed’s Ethiopia and the UAE has constituted one of the most consequential and least institutionally robust financial and security arrangements in the Horn of Africa. Understanding why MBZ’s death matters so profoundly in Addis Ababa requires understanding precisely what was built, how it was built, and upon whose personal authority it depended.

A state whose foundation rests upon another leader’s personal cheque-book is not a state at all. It is a house of cards, waiting for a change in the wind.

A THREE-BILLION-DOLLAR WAGER ON ONE MAN

In June 2018, weeks after Abiy Ahmed’s improbable ascent to the premiership of Africa’s second most populous nation, the UAE pledged a $3 billion (approximately £2.4 billion) aid package to Ethiopia. A substantial portion took the form of a direct central bank deposit a sovereign intervention in Ethiopia’s foreign exchange reserves at a moment of acute liquidity crisis (Reuters, 2018).

The effect was threefold. The deposit stabilised the country’s foreign currency reserves, signalled Gulf confidence in the new premier’s reform programme, and critically furnished Abiy with the domestic political capital to present himself as a leader who could attract serious international investment. The economy did not collapse. The birr did not become, in 2018, a collector’s curiosity. The new Prime Minister stood before his countrymen as a man capable of conjuring order from chaos. He could, admittedly, do so in part because a prince in the Gulf had decided he was worth the gamble.

This was not philanthropy in the conventional sense. The UAE’s Horn of Africa strategy is a coherent piece of middle-power geopolitics, positioning Ethiopia with its 130 million citizens and considerable agricultural and logistical assets as a demographic and commercial anchor for Gulf ambitions. Emirati sovereign wealth funds and private investors expressed interest in logistics, port access, agriculture and renewable energy. The arrangement delivered concrete returns for both parties.

What it did not deliver and this is the crux of the present difficulty was institutional durability. ‘Institutionalised alliances tend to survive leadership change more easily than relationships centred on interpersonal trust,’ notes one analysis of the bilateral relationship. The Abiy-MBZ partnership was, by diplomatic accounts, unusually personal: high-frequency direct communication, strategic backchannel discussions, and mediation roles including in the normalisation of Ethiopia-Eritrea relations that bypassed conventional diplomatic machinery entirely.

Personal diplomacy of this kind is efficient. It is fast. It gets things done. The cost — that everything constructed through a personal channel is only as durable as the relationship itself was a cost that neither party had strong incentives to acknowledge whilst the arrangement was working.

DRONES, TIGRAY, AND THE UNACKNOWLEDGED PILLAR

The financial dimension of the relationship is the one most readily discussed. The security dimension is, by contrast, the subject of sustained official silence on both sides.

During the Tigray conflict the war that consumed the northern highlands between November 2020 and November 2022, and which claimed, by various credible estimates, between 162,000 and 378,000 lives multiple international reporting organisations documented the presence of armed unmanned aerial vehicles in Ethiopian military operations, some reportedly linked to Emirati supply chains (International Crisis Group, 2021). Neither government has confirmed this. The drones, in the official record, have therefore never existed.

The strategic implication was, however, sufficiently clear. The Ethiopian National Defence Force entered the Tigray conflict and, within eighteen months, had experienced a near-catastrophic reversal before reclaiming Mekelle in late 2022. Aerial surveillance and strike capability represented, by most informed assessments, a decisive technological advantage for a force stretched across multiple theatres simultaneously. A government that might otherwise have fallen did not fall. The connection to Emirati materiel support — however formally unconfirmed — is one that analysts in Nairobi, Washington and London have drawn with some consistency.

This forms the third pillar of the Ethiopia-UAE axis, and its vulnerability to a change in Abu Dhabi’s leadership posture is as significant as the financial dimension perhaps more so, given the current security environment.

THE DOMINO SEQUENCE: FROM RIYADH ROAD TO ARAT KILO

Geopolitical analysis of the potential consequences of MBZ’s death has converged, with some unanimity, upon a domino-effect model: the sequential collapse of interdependent structural supports, each toppled by the failure of the one before it.

The sequence begins with personal trust. A successor in Abu Dhabi, even one from the same ruling family, does not inherit personal relationships. He inherits a strategic calculus. In that unsentimental light, the risks associated with Ethiopia a nation managing multiple simultaneous armed conflicts, persistent macroeconomic fragility, and a deteriorating human rights record may rapidly appear to outweigh the perceived returns. The first domino falls.

The loss of personal trust triggers the financial domino. Without Emirati backing, Ethiopia’s underlying economic vulnerabilities are exposed with some brutality. The birr has already shed approximately 57 per cent of its value against the dollar since 2022. The foreign exchange reserves that the 2018 deposit helped to stabilise have no equivalent replacement in prospect. A liquidity shock of any severity would extinguish the political capital with which Abiy Ahmed has managed elite networks and contained centrifugal pressures within his ruling coalition.

The financial domino topples the security domino. A government running on depleted reserves cannot sustain the Ethiopian National Defence Force’s operational tempo across Amhara, Oromia and the western lowlands simultaneously. The Fano militia has been conducting operations in Amhara since 2023; the Oromo Liberation Army remains undefeated in the field. Each of these conflicts has been containable partly because the government has retained the resources to fund counter-operations. A government under acute financial strain cannot offer that guarantee.

A new leader in Abu Dhabi does not inherit personal relationships. He inherits a strategic calculus. In that unsentimental light, Ethiopia’s risks may rapidly appear to outweigh its returns.

The collapse of the security pillar produces what analysts term the market signalling shock, the final and, in some respects, most damaging stage of the cascade. When a substantial backer is seen to disengage from a developing-nation government, the message transmitted to every other participant in the system is unambiguous: the risk profile has changed. Domestic investors redirect their capital. China, Turkey and the multilateral lenders begin quietly reassessing their exposure. Political factions within and without the ruling Prosperity Party sense the vulnerability and mobilise accordingly.

WHAT THE GOVERNMENT IS SAYING AND WHAT IT MEANS

The Ethiopian government has, since MBZ’s passing, issued statements describing the late President as a visionary leader and a close friend of the Ethiopian people. Prime Minister Abiy Ahmed attended the funeral in Abu Dhabi, where he was photographed alongside Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the new UAE President.

Officials at the Ministry of Finance speaking to this correspondent on terms that precluded direct attribution reported that urgent conversations have been initiated at both technical and political levels to ensure the continuity of existing financial arrangements. One official used the word continuity seven times during a ten-minute exchange. The statistical frequency was noted.

The official position is that the Ethiopia-UAE relationship is, in the preferred formulation, institutionally embedded, and therefore durable beyond any individual leadership. There is a degree of truth in this. The bilateral relationship does encompass investment frameworks, development agreements and humanitarian partnerships with formal standing. What it conspicuously lacks, after eight years of deepening engagement between two governments that were always better at closing deals than building architecture is the kind of treaty-grade institutional infrastructure that would render the relationship genuinely indifferent to the question of who sits on the Abu Dhabi throne.

THE REPUTATIONAL FACTOR

There is one further element in this analysis, and it is perhaps the most uncomfortable to discuss in a family newspaper. The global reckoning with elite financial networks intensified, in the assessment of economic historian Adam Tooze, by revelations including those arising from the Epstein investigations has materially altered the reputational arithmetic for Gulf states that serve as financial hubs (Tooze, 2020).

This newspaper is clear: no verified evidence links Ethiopian or Emirati leadership to any such network. The structural effect is, however, real regardless of individual culpability: philanthropic channels now attract investigative scrutiny; sovereign financial flows face enhanced anti-money laundering compliance demands; and reputational risk has become, for Gulf states seeking to maintain their standing as well-governed jurisdictions, a factor of genuine strategic weight.

A new Emirati leadership, establishing itself in its first months, would be acutely sensitive to the optics of sustaining a highly personalised, backchannel-intensive financial relationship with a government managing active conflicts and a contested human rights record. The institutional incentives to proceed with greater caution, to formalise, slow, or simply allow the relationship to cool, are likely to be considerable.

THE PARABLE OF THE BORROWED FOUNDATION

Since 2018, Ethiopia’s macroeconomic floor its foreign exchange stability, its capacity to service external debts, its ability to project state authority across a large and fractious federation has rested in substantial part upon a foundation borrowed from Abu Dhabi. This was not a secret arrangement; it was a deliberate strategy, and for several years it worked. The floor held. The country, despite everything, did not collapse. The Prime Minister received a Nobel Peace Prize, which in retrospect may mark the precise moment at which the arrangement began to look, to the sharper-eyed observers, somewhat precarious.

The challenge confronting the Ethiopian government is not simply one of mourning an ally, though by informed accounts the grief in certain quarters of the palace compound in Addis Ababa is sincere. It is the rather more pressing task of identifying, at some speed, an alternative foundation or, better still, beginning the uncomfortable work of building one.

China stands ready with its customary combination of generous credit lines and demanding conditionality. Turkey has been making encouraging noises. The International Monetary Fund remains perennially available, provided the recipient government is prepared to accept the attendant structural adjustment conditions, which have historically enjoyed approximately the same popularity in Ethiopian coalition politics as a proposal to relocate the capital.

None of these alternatives carries the particular warmth, the operational speed, or the uncomplicated financial generosity of a direct line to Abu Dhabi. They are, however, foundations. And a foundation of one’s own, however demanding of maintenance, is considerably more durable than borrowed architecture particularly when the person who lent it has, without much warning, departed the building.

SOURCES

Hall, T. and Yarhi-Milo, K. (2012) ‘The personal touch: leaders’ impressions, costly signalling, and assessments of sincerity in international affairs’, International Studies Quarterly, 56(3), pp. 560-573.

International Crisis Group (2021) Ethiopia’s Tigray War: A Deadly, Dangerous Stalemate. Brussels: ICG.

Koch, N. (2019) The Geopolitics of Spectacle: Space, Synecdoche, and the New Capitals of Asia. Cornell University Press.

Lancet (2023) ‘Estimating conflict-related mortality in Ethiopia’s Tigray region.’ The Lancet, March 2023.

Reuters (2018) ‘UAE pledges $3 billion aid package to Ethiopia’, 16 June.

Tooze, A. (2020) Shutdown: How Covid Shook the World’s Economy. London: Allen Lane.

This article contains satirical commentary alongside factual reportage. All sourced claims are attributed. The Ethiopian Tribune is an independent publication. Reproduced under editorial agreement.

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