September 19, 2021

Africa

ETHIOPIA: Piling on sanctions pressure

BY Anne Frühauf

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US President Joe Biden today, 17 September, signed an executive order authorizing sanctions on Ethiopia. In the first instance, the order is an attempt to force ceasefire negotiations in the 10-month-old Tigray conflict. US Secretary of State Antony Blinken’s accompanying statement signaled the US’ willingness to delay the implementation of sanctions if the federal government and the Tigray People’s Liberation Front (TPLF) “cease ongoing hostilities and enter into ceasefire negotiations immediately and without preconditions.” Yet it may remain difficult to bring the two sides to the negotiating table, meaning the progressive implementation of targeted sanctions represents a growing risk.

The executive order highlights growing diplomatic frustration with the lack of progress towards resolving the Tigray conflict and addressing the fast-deteriorating humanitarian emergency (with 5.2mn people now in immediate need of aid). The order represents a clear attempt to force the players in the Tigray conflict to negotiate a ceasefire and a broader political solution. However, at least in public, both sides will rebuff such demands. The US’ even-handed targeting of all sides in the conflict sparked an immediate rhetorical backlash from Prime Minister Abiy Ahmed today, who berated the world for failing to support the Ethiopian government against a “terrorist group” (Addis Ababa’s official classification of the TPLF). The TPLF, for its part, has previously outlined a long list of preconditions for any negotiations, which it will be reluctant to disregard given the existential threat it perceives from the “genocidal” federal forces. At the current stage of the conflict, a best-case scenario would be one of back-channel exchanges paving the way for negotiations, probably in secret initially.

If efforts to birth negotiations fail, Biden’s executive order will allow the Secretary of Treasury (in conjunction with the State Department and other agencies) to take punitive action against the Ethiopian and Eritrean governments, the TPLF, and the Amhara regional government and forces. The order provides broad scope to target any individuals or entities involved in any activities ranging from human rights abuses, obstructing aid deliveries or attacking aid personnel to any activities “that threaten the peace, security, or stability of Ethiopia.”

In addition to targeted visa and financial sanctions against individuals or entities, the sanctions menu – outlined in Section 2 of the order – includes specific wording to “prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person”; “prohibit any United States financial institution from making loans or providing credit to the sanctioned person”; and “prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the sanctioned person has any interest.”

With officials hoping to increase the cost of warfare for the key actors, Ethiopia’s fragile macro outlook may deteriorate further. At a 16 September IMF briefing, Communications Director Gerry Rice signaled that “it’s too soon to precisely map out staff engagement with the authorities over any possible new program.” (Ethiopia’s Extended Credit Facility (ECF) expires this month, though its Extended Fund Facility (EFF) remains in place.) Rice would not be drawn on whether questions over outstanding disbursements or new facilities were in any way related to the war. The IMF is meant to play a central role in a planned restructuring of some of Ethiopia’s USD 29.5bn external debt under the G20’s Common Framework; today the establishment of a creditors’ committee was finally reported, but a formal announcement is pending.

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