HOT WA­TERS

Dji­bouti’s seizure of an Emi­rati-run port sug­gests the tiny Horn of Africa coun­try is look­ing to lever­age its strate­gic po­si­tion

Financial Mail - - FEATURE - Michael Sch­midt

With a land mass just larger than SA’S Kruger Na­tional Park and a pop­u­la­tion of 1-mil­lion, Dji­bouti punches well above its weight po­lit­i­cally. The Horn of Africa coun­try con­trols the mouth of the Red Sea and, with that, ac­cess to the Suez Canal, one of the busiest ship­ping lanes in the world. As a re­sult, it hosts US, French, Ital­ian, Chi­nese and Ja­panese mil­i­tary bases; a Saudi base is also in the works.

But the gov­ern­ment’s seizure of an Emi­rati-run con­tainer ter­mi­nal — a move al­legedly pro­voked by

China — sug­gests it is look­ing to lever­age its strate­gic sta­tus.

Back in 2006, Dji­bouti’s pres­i­dent, Omar Guelleh, signed a 30-year deal with

Dubai-based DP World — one of the largest port man­age­ment com­pa­nies in the world — to build, man­age and op­er­ate the

Do­raleh con­tainer ter­mi­nal.

The ter­mi­nal opened in

2009 as a joint ven­ture be­tween DP World, with a

33% stake, and the Dji­bouti port authority, the PDSA, with 67%. Then, in 2013,

Hong Kong-listed China

Mer­chants Port Hold­ings

Com­pany (Cm­port) took a

23.5% hold­ing in PDSA.

The port “proved to be a tremen­dous success, gen­er­at­ing an­nual prof­its worth tens of mil­lions of US dol­lars”, ac­cord­ing to a re­port in Global News.

But re­la­tions be­tween Dji­bouti and the United Arab Emi­rates (UAE) are said to have soured in 2015, af­ter Dji­bouti re­fused to lease ground to the UAE for mil­i­tary op­er­a­tions.

A year later, DP World signed a 30-year agree­ment with au­thor­i­ties in the un­recog­nised but de facto in­de­pen­dent state of So­ma­liland to de­velop and man­age the port of Ber­bera.

In Fe­bru­ary, Dji­bouti uni­lat­er­ally ter­mi­nated the Do­raleh con­ces­sion, claim­ing in court pa­pers that its sovereignty was un­der threat and that the ter­mi­nal con­tract was “se­ri­ously prej­u­di­cial to the coun­try’s de­vel­op­ment im­per­a­tives and to the con­trol of its most strate­gic in­fras­truc­ture”, ac­cord­ing to Forbes. This, it said, made tak­ing con­trol of the ter­mi­nal “nec­es­sary and un­avoid­able [and] in ac­cor­dance with in­ter­na­tional pub­lic law”. It then gave op­er­a­tional con­trol of the ter­mi­nal to Cm­port.

DP World con­tested the seizure, and in July the Lon­don Court of In­ter­na­tional Ar­bi­tra­tion ruled that Dji­bouti’s uni­lat­eral ter­mi­na­tion of the agree­ment was un­law­ful and in­valid. Dji­bouti did not par­tic­i­pate in the ar­bi­tra­tion, nor in an Eng­land and Wales high court case in Septem­ber that also backed DP World. The coun­try has sim­ply re­fused to abide by the rul­ings.

In Au­gust, DP World sub­sidiaries sued Cm­port in the High Court of Hong Kong for al­legedly un­law­fully in­duc­ing Dji­bouti to breach the deal with DP World. The court has yet to rule on the mat­ter.

Le­gal de­tails aside, the port seizure pro­vides a glimpse into the tan­gle of broader po­lit­i­cal power plays and sim­mer­ing ten­sions in the re­gion.

Ethiopia, for one, has ben­e­fited from the fall­out. Roughly 95% of the land­locked coun­try’s im­ports and ex­ports go through Do­raleh — ac­count­ing for about 70% of the port’s ac­tiv­ity, ac­cord­ing to in­tel­li­gence com­pany Strat­for. This year it off­set that de­pen­dence by buying into the $442m Ber­bera con­ces­sion, tak­ing a 19% share against So­ma­liland’s 30% and DP World’s con­trol­ling 51%.

The deal with the So­ma­liland au­thor­i­ties has not sat well with those in Somalia it­self, given that the gov­ern­ment in Mo­gadishu has un­re­al­is­tic pre­ten­sions of rul­ing all of Somalia, in­clud­ing the break­away So­ma­liland.

Such agree­ments are likely to boost the ter­ri­tory’s push for recog­ni­tion as an in­de­pen­dent state.

Then there are the larger play­ers. In the wake of the Fe­bru­ary port seizure, Strat­for re­ported that Dji­bouti seemed likely to strike a deal with Chi­nese in­vestors, though the coun­try has de­nied this. Cm­port has al­ready in­vested $600m in an ad­di­tional ter­mi­nal at Do­raleh, ad­ja­cent to China’s first over­seas mil­i­tary base. Dji­bouti has given the coun­try per­mis­sion to house 10,000 sol­diers at the base through to 2026, ac­cord­ing to Al Jazeera.

Dji­bouti has thus come to con­sti­tute “the sharpest edge of the Wash­ing­ton-bei­jing ri­valry”, Africa Con­fi­den­tial ed­i­to­ri­alised ear­lier this year.

The move has also set the US be­hind Bei­jing in the strat­egy stakes in Africa, the pub­li­ca­tion re­ported Marine Corps gen­eral Thomas Wald­hauser as say­ing. He told the US Congress in March that Chi­nese con­trol of Do­raleh would af­fect the US’S abil­ity to run its own base in the coun­try, and that “we are care­fully mon­i­tor­ing Chi­nese en­croach­ment and emer­gent mil­i­tary pres­ence”.

Dji­bouti’s seizure of Do­raleh and the pol­i­tick­ing around it may just turn the great pow­ers’ “great game” at the Red Sea bot­tle­neck into a tense stand­off.

What it means: Dji­bouti’s seizure of Do­raleh and the pol­i­tick­ing around it may lead to a stand­off be­tween the great pow­ers

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