Country Report Djibouti November 2006

Outlook for 2007-08: International relations

US forces serving in the joint task force for counter-terrorist operations in the Horn of Africa and the Red Sea region will remain stationed in Djibouti throughout the forecast period. In the interests of preserving Djibouti's political stability, the US administration will continue to turn a blind eye to civil and human rights abuses by the regime, but will apply some behind-the-scenes pressure on the government to improve its record. In an effort to maintain good diplomatic relations with the host of its only permanent military base in Sub-Saharan Africa, the US will support Djibouti's negotiations with international financial institutions.

Djibouti also hosts France's largest military base in Africa and is therefore important to France's political and strategic interests on the continent. France is Djibouti's main donor, and its military presence in Djibouti is estimated by the French military authorities to bring at least US$150m into the country each year. However, an allegation that Mr Guelleh was involved in the murder of a French judge in 1995, which has gained momentum in the past year, is placing an increasing strain on the relationship between the two countries. The suspension by the Djibouti government of formal judicial co-operation with France and its request to the International Court of Justice in The Hague to assume responsibility for the case makes a long-drawn-out battle likely. Attempts by the government to develop Djibouti's economic ties with Middle Eastern countries may weaken France's influence, but the value of its support will continue to reinforce its strategic alliance with Djibouti.

Djibouti port is the mainstay of the country's economy, and Ethiopia is its most important customer. It is in the interests of both countries to maintain good commercial and diplomatic relations, and throughout 2007-08 Ethiopia will continue to rely on Djibouti for the shipment of a substantial proportion of its foreign trade. However, in the long term Ethiopia will seek to develop other trading routes to the outside world, through Sudan, Somaliland and Kenya.

In the interests of Djibouti's long-term development, the government will continue to foster good relations with the Gulf states. A Kuwaiti company, Independent Petroleum Group, is currently planning to build an oil pipeline from Djibouti to Addis Ababa. In addition, the United Arab Emirates, particularly Dubai, will remain an important ally. Dubai Ports International has a 20-year contract to manage Djibouti's port and its international airport, and is developing and financing a new deepwater port complex at Doraleh, 10 km from the old port. Other Dubai-based investors are planning to make major investments, including the new five-star Djibouti Palace Kempinski hotel, to develop Djibouti as a luxury tourist destination. The government has signed trade agreements with Iran and Qatar in recent years, as well as co-operation agreements with China.

© 2006 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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