Kenya: Oil Pipeline Deal with Ethiopia Now in Doubt

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Kenya’s oil pipeline troubles look set to continue after Ethiopia denied claims of a deal between the two countries.

Reports recently suggested an agreement was reached after Uganda pulled out of a previous deal with Kenya, opting to sign with Tanzania instead. Ethiopia supposedly stepped in to sign a deal but the government now insists this isn’t the case.

 

No project deal, MoU only

Ethiopia’s Foreign Affairs Cabinet Secretary Amina Mohamed moved to clarify reports over a deal last week. She said no agreement was reached on an oil pipeline project, although the two countries did sign a Memorandum of Understanding (MoU).

“Kenya and Ethiopia signed Memoranda of Understanding in five key areas of cooperation among them Cooperation in the Oil and Gas Sector,” she said. “The two countries expressed desire to advance the mutual benefit that the parties can draw by cooperating in the oil and gas sector.”

An MoU is simply a declaration of intent between two countries – not a legally binding agreement. So, even if a joint pipeline project is mentioned in the document, it would have no official bearing.

 

Kenya running out of options

The fact there’s no agreement between Kenya and Ethiopia at this stage doesn’t mean there won’t be. Ethiopia is carefully considering the idea, but the concern for Kenya is it’s running out of options.

The episode with Uganda and Tanzania wasn’t only embarrassing, it was economically damaging as well. Uganda provided the best economic option for Kenya so losing out was always going to be a blow. However, it was the nature of how the deal fell apart that was most damaging.

Investigations by key investors publicly labelled Kenya as a security threat and a problematic partner logistically. While losing out to Tanzania dented Kenya’s reputation as the go-to nation in East Africa for developmental projects.

In many ways, Ethiopia is the only option left. Despite being landlocked, Ethiopia’s pipeline deal with Djibouti gives it one of the most prized trade routes on the continent.

Kenya’s only other option would be a problematic deal with Somalia. A border dispute and fight over oil resources would make for tricky negotiations and any pipeline would be an easy target for Al-Shabaab. Which could leave Kenya facing the economic burden of constructing its own pipeline – something the country can’t realistically afford right now.

 

Featured image:

By shannonpatrick17 from Swanton, Nebraska, U.S.A. – keystone pipeline, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=17773281