The instability in the volatile Horn of Africa will cement Ethiopia's position as the key ally of the US in the region, and relations with Eritrea and Somalia will continue to dominate the foreign-policy agenda. The protracted border dispute with Eritrea remains at an impasse and attempts at a diplomatic solution have failed. The risk of conflict remains, although continued deadlock is the most likely scenario. Somalia will remain a source of tension, and this danger has escalated following bomb attacks carried out by a radical Islamist group, al-Shabab, in Uganda in mid-2010. Ethiopia will continue to offer support to the government of Sheikh Sharif Sheikh Ahmed and has some troops in Somalia, but it is likely to stop short of a large, official military intervention, given the economic, military and diplomatic costs that this would entail.

The Ethiopian government will closely monitor the situation in Sudan as the south of the country will almost certainly vote to secede in a referendum in January. Sudan has become a key trading partner, and Ethiopia relies on it for almost all of its oil needs. The border between the north and south has still not been defined and if renewed violence broke out over negotiations it could disrupt Ethiopian oil supplies, forcing the country to resort to more expensive imports from the Middle East. As a result, the government will take a measured diplomatic approach to developments in Sudan as it seeks to remain neutral and to protect its economic interests.