Ethiopia-Eritrea: After the low-hanging fruit: The appointment of Abiy Ahmed as Ethiopian prime minister has led to a dramatic improvement in relations with Eritrea, but will the countries be able to seize the opportunities this offers?

Author:Collins, Tom

Stepping off the plane in Asmara, Eritrea's modest capital, Ethiopian prime minister Abiy Ahmed was welcomed as a returning hero amid banners carrying his name, brotherly hugs and a long red carpet. A few months ago these scenes would have been unthinkable. Nevertheless the northeast-African neighbours have found a way to overturn a near 20year military standoff in a matter of days.

Since Abiy's visit, Eritrean president Isaias Afwerki has returned the favour in Addis Ababa, embassies have been re-opened and inter-country flights resumed. Yet between various garland-clad photo opportunities many are wondering exactly how this new relationship will pan out.

Without a doubt any resumption of diplomatic and economic ties spells good news for Ethiopia and Eritrea and the region in general. After the celebrations are over, however, it remains to be seen whether the relationship will bear any real and meaningful fruit.

Cooperation and conflict

Perhaps the best way to project into any future economic ties is by understanding the delicate and complex link between Addis Ababa and Asmara. For the most part, the relationship has been formed and defined through personal connections. Afwerki and Meles Zenawi, Ethiopia's former prime minister, formed close ties while fighting Mengistu Haile Mariam's communist regime in the bush. The two leaders spoke the same Tigrinya language and were from roughly the same region.

In fact, Afwerki's Eritrean forces, by far the better military force at the time, helped train Zenawi's Tigrayan People's Liberation Front (TPLF). After the regime was defeated and the liberation forces assumed power these ties continued into Eritrean statehood in the 1990s. Indeed the economies of both countries, having been one for so long, were heavily intertwined. Bilateral agreements, many of which benefited Eritrea, were hashed out and a free-trade area, partial customs union, and monetary union created.

The Assab refinery in Eritrea is a prime example. The refinery was built by Ethiopia's Haile Selassie when Ethiopia and Eritrea were part of the same country. After Eritrea's secession, Ethiopia transferred ownership of the refinery to Asmara. Under a signed agreement, Ethiopia could continue using the refinery, while providing petroleum products for both countries. The IMF reported that it wasn't necessary for Eritrea to spend any foreign currency on importing petroleum goods.

Ethiopia, a land-locked country, also had to pay fees for...

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