Ethiopia utilizes only half its export potential, Afrexim Bank report indicates

Ethiopia navigates Middle East conflict, balancing neutrality and economic stability

As the conflict involving the United States and Israel on one side and Iran on the other continues, Ethiopia faces indirect but serious consequences. Geographically removed from the Middle East battlegrounds, Ethiopia confronts economic, diplomatic, and security challenges. Economically, the country imports most of its fuel, and disruptions in the Strait of Hormuz have driven global oil prices upward, threatening to worsen inflation, strain foreign reserves, and increase transport and food costs. Ethiopia is urged to diversify energy sources, invest in renewables, and build strategic reserves. Diplomatically, Ethiopia maintains a policy of non-alignment, but the escalation makes "strategic ambiguity" difficult. The country has longstanding partnerships with the United States and Israel, with relations with Israel recently elevated. Simultaneously, Ethiopia maintains security ties with Iran. The Red Sea corridor, crucial for Ethiopia's international trade, adds to the complexity, as several Gulf states are also involved in tensions with Iran. Ethiopia's policy emphasizes careful neutrality, balanced diplomacy, and maintaining open communication with all parties. Domestically, rising energy and food prices risk aggravating public frustration. The government must consider targeted subsidies, social protection measures, and transparent communication. Strengthening internal resilience is also important from a security perspective. Ethiopia's response to the conflict will shape its