The Grand Renaissance Dam Further Isolates Addis Ababa from its Neighbours

• The Nile Basin countries have entered a new stage of conflict over water allocation, as the completion of Ethiopia’s Great Ethiopian Renaissance Dam (GERD) enters its seventh month. The country has affirmed itself as a regional water hegemon but failed to find an amicable solution with downstream countries, such as Egypt and Sudan, over their potential water security concerns; exacerbating diplomatic and security tensions.
• However, the GERD project has both potential benefits and risks for not only Nile Basin countries but also businesses operating in this region. For Ethiopia, it means controlling the tap valve and exporting electricity to neighbouring countries, providing the potential for regional economic and business cooperation between the Nile Basin countries and alleviating their rolling power blackout issues. In contrast, Egypt remains concerned that the GERD’s growing capabilities will negatively impact its water-dependent but economically important sectors – such as agriculture – and result in the loss of its agency over its water security during droughts.
• With more recurring droughts and the region’s growing populations, the risk of escalation via kinetic or cyber means remains notable. While such incidents will likely have limited impact on businesses operating in Ethiopia, there remains a moderate-high threat level posed to local and foreign organisations engaged in work with the Ethiopian government related to the GERD - such as construction, maintenance, or other logistical industries – that could present a high-value target for physical or cyber sabotage operations.

On September 10, 2023, Ethiopian Prime Minister Abiy Ahmed announced the success of the fourth and final filling of the Great Ethiopian Renaissance Dam (GERD), a monumental 1.8 km long and 145 metres high gravity dam in the Benishangul-Gumuz region of western Ethiopia managing the flow of the Nile Basin. The dam supplies the Nile with about 85.6% of its water flow during the rainy season. However, the GERD has remained a major source of contention between Ethiopia - which now controls the tap valve - and the countries downstream of the dam, such as Sudan and Egypt. Egypt, in particular, relies on the Nile for 90% of its water supply and it already experiences seasonal deficits that average 90 billion cubic metres before reaching national demand. The increasingly recurring droughts and exacerbated climate conditions among the Nile River countries have raised concern amongst downstream countries that Ethiopia could utilise the dam to gain unrivalled control of the Blue Nile.

Multiple rounds of negotiations since 2010 mediated by various parties, such as the World Bank and the African Union, failed to form an agreement on water security cooperation between the various nation-states. As a result, the Egyptian Ministry of Irrigation and Water Resources framed the end of the GERD talks on cautionary terms. The ministry claimed that the latest unsuccessful rounds in December 2023 were the result of Ethiopia’s exploitation of the negotiations “as a cover to solidify a fait accompli on the ground while negotiating solely to obtain approval from the downstream countries for unregulated and absolute Ethiopian control of the Blue Nile”. Failure to negotiate the Nile Basin’s water supply not only limits the socio-economic development of the region but also heightens the threat of conflict between the Basin-states.

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Several arguments forwarded by hydrology specialists and diplomacy experts illustrate the possible benefits and risks of the biggest infrastructure project on the continent. These range from prospective development strategies to water conflict during drought periods, which are expected to be more intense and last longer in the future due to exacerbating climate issues.

On February 20^th, 2022, it was announced that the GERD started producing hydropower. At full capacity, the dam is able to double Ethiopia’s energy production to 6,450 MW, thereby providing electricity to the 60% of the population that previously had no access to it. In a country that suffers from frequent blackouts, increased electricity production has presented notable business opportunities for both local and foreign firms in electricity-dependent sectors - such as manufacturing, mining and agriculture. As such, increased electrical capacity will allow all firms operating in Ethiopia to engage in more frequent and undisrupted business activities, potentially increasing their overall revenue streams.

On a geopolitical level, there is a high likelihood that the higher electricity supply can also be used by Addis Ababa to buy support from its neighbouring countries, including Sudan, South Sudan, Kenya, Djibouti, and Eritrea, by allowing them to access the power surplus and alleviate their energy concerns and improve their economic capacity. In addition, hydrology experts argue that the GERD may allow downstream countries to better manage shifting weather patterns by either collecting water during floods or releasing it during droughts.

Sudan’s capital Khartoum, which sits at the White Nile and Blue Nile convergence point, is inundated by changing weather patterns periodically, and both Sudan and Egypt have built their own dams, respectively the Merowe High Dam and the Aswan High Dam. However, the GERD’s position on the Blue Nile River will likely give it more influence than the aforementioned dams in managing water allocation – limiting the water flow to downstream countries – and limiting their electricity production. This could potentially reduce the electricity produced by these dams and impact businesses connected to these power grids. However, such energy shortages are likely to be compensated by electricity produced by the GERD once or if an energy-sharing pact is agreed upon.

Addis Ababa could, in times of drought, fill the dam reservoir with water to increase its generating capacity, instead of letting it flow downstream, thereby endangering downstream countries' water security.

On the other hand, Egypt has expressed concerns based on its water needs for households and agriculture. These concerns continue to increase due to the country’s growing population and its agricultural irrigation requirements, such as Cairo’s export of water-intensive crops including cotton, sugar cane, and rice. The country’s leaders also point out that Ethiopia currently has complete agency over water taps. In other words, Addis Ababa could, in times of drought, fill the dam reservoir with water to increase its generating capacity, instead of letting it flow downstream, thereby endangering downstream countries’ water security. While such a scenario would ensure that water-dependent industries in Ethiopia – such as agriculture or horticulture – are unlikely to experience any significant droughts near the GERD, water-dependent industries in Egypt or Sudan – such as fishery, agriculture, and construction – will likely experience supply shortages or other business operational disruptions.

In addition to economic risks and benefits, there also is a latent risk of tensions linked to this issue spilling over into a kinetic conflict. For example, In 2012, WikiLeaks acquired documents from a US strategic intelligence company, Stratfor, that showcased Cairo’s and Khartoum’s plans to build an airstrip for “bombing a dam on the Nile in Ethiopia”. A year later, Egyptian politicians, chaired by then-President Mohammed Morsi, called the dam a “declaration of war”, and proposed military action to thwart the project. Ultimately this kinetic conflict did not materialise but a standing president making public statements about “declarations of war” underscores the high level of political tensions surrounding the GERD. While there is a heightened risk of further inflammatory statements being made by regional leaders in response to GERD’s increasing operational capabilities, there is a low to medium likelihood of a kinetic conflict breaking out as it would have an extremely depressing effect on the socioeconomic stability in the Nile Basin countries.

Instead of kinetic conflict, the more likely scenario for these political tensions to be expressed would be sabotage, either physical or cyber. For example, the Ethiopian government accused the Egyptian and Sudanese governments in September 2021 of supporting and prompting local rebel groups – e.g. the Tigray People’s Liberation Front (TPLF) – to engage in sabotage operations against the GERD. Whilst Addis Ababa has claimed that they have successfully repelled these attempts, the ongoing and renewed tensions between the TPLF and the Ethiopian government heighten the risk of sabotage and/or occupation attempts against the GERD re-emerging in the coming 6-12 months. While such incidents will likely have limited impact on businesses operating in Ethiopia, there remains a moderate-high threat level posed to local and foreign organisations engaged in work with the Ethiopian government related to the GERD- such as construction, maintenance, or other logistical industries – that could present a high-value target for TPLF operations.

In tandem with kinetic operations, the GERD also remains vulnerable to targeted cyberattacks from state-linked actors.

In tandem with kinetic operations, the GERD also remains vulnerable to targeted cyberattacks from state-linked actors. For example, In 2020, the CyberHorus Group - allegedly affiliated with the Egyptian authorities - targeted the websites of Ethiopia-based government service providers, security agencies, and private sites to create multi-faceted pressure on Ethiopia in connection with the GERD filling. Since then, follow-up cyberattacks have been launched against not only the GERD but also businesses linked to the dam. In May 2022, the Ethiopian Information Network Security Administration (INSA) disclosed that they foiled cyberattacks targeting 37,000 interlinked computers used by Ethiopian financial institutions and the GERD to impede the dam’s progress.

Such incidents underscore the high threat that GERD-related cyber activity poses to organisations engaged in private-public partnerships in Ethiopia. Future cyber operations are likely to primarily target GERD-related infrastructure or Ethiopian government agencies to disrupt the GERD’s operational capabilities or express rival nation-states’ political grievances. However, local and Western firms that are providing support services or closely cooperate with the Ethiopian government will also be at a heightened but latent risk of being impacted by these cyberattacks, with sectors such as finance, IT, or energy having the highest level of exposure given their likely involvement in supporting critical infrastructure linked to the GERD. Given the Nile Basin nation-states’ nascent or limited cyber capabilities, any future attacks are likely to take the form of ransomware or defacement operations.

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With the growing impact of issues such as climate change placing increasing pressure on nation-states to secure critical resources – such as water – set to intensify in the coming years, there is a heightened risk of tension surrounding the GERD further escalating in tandem. Such pressures are likely to be magnified in proportion to the GERD’s growing operational capabilities, with Egypt and Sudan both likely to raise further political complaints about the dam’s impact on their water security and critical economic sectors, such as agriculture, if they feel their access to the Nile Basin’s water supply is declining. Despite this, Ethiopia is likely to proceed with maintaining the dam reservoir unilaterally, disregarding the objections of Egypt and Sudan. This would elevate the risk of military posturing between the riparian states escalating. Such a scenario elevates the potential for armed conflict and grey zone operations that rely on unattributable proxy forces and maintain the region’s mercurial business operating environment.

In contrast, a successful diplomatic resolution from these riparian parties which allows effective water management would lead to enhanced regional cooperation and mutual benefits, such as effective water flow during floods and droughts, and increased electricity supply. This scenario also would see the improvement of economic integration and infrastructure development across theNile Basin region.

Ensuring your business is able to maintain good operational continuity, pivot to the region’s developing geopolitical particularities, and prepare for the aforementioned forecasts requires long-term planning and monitoring of the political developments between the aforementioned Riparian states. Amid worsening droughts caused by climate change and the growing populations of Egypt, Sudan and Ethiopia, the GERD project will increasingly create inter-state tensions and be a source of instability at the regional level. The Nile Basin nation-states’ business environment especially the agriculture and horticulture sector is likely to experience heightened vulnerabilities in the foreseeable future. Therefore, several measures can be implemented by leadership to ensure business continuity, including:

• Continuous monitoring of regional tensions between Ethiopia, Egypt, and Sudan allows companies in the region to improve their risk management. By tracking political developments, propaganda campaigns, and diplomatic manoeuvres, businesses can better understand the potential threats to their interests and operational continuity, and at the same time stay ahead of emerging threats and anticipate potential disruptions.
• By leveraging the insights of third-party specialists, companies can develop contingency plans to address potential disruptions and safeguard their operations during ‘worst case’ scenarios to enhance companies' ability to navigate complex political landscapes and inform decision-making processes.

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