Djibouti’s debt to China has the US and France worried

By Nicholas Norbrook
Posted on Monday, 8 April 2019 10:48

Djibouti's foreign minister, Mahamoud Ali Youssouf, greets his Chinese counterpart, Wang Yi, in Beijing in February. How Hwee Young/Pool Photo via AP

Djibouti is in the midst of a port and rail spending spree estimated at over $12bn, and the US and France are not happy about it.

The strategic fight over control of global shipping lines comes into sharp focus in the tiny Horn of Africa state, Nizar Manek of Bloomberg reports in a deep dive into Djibouti’s Chinese infrastructure lending.

  • “About a third of all the world’s shipping steams past this barren land on the northeast edge of Africa en route to and from the Suez Canal, the Red Sea, and the Indian Ocean,” Manek writes.
  • “China’s bridgehead here is part of its globe-girding ‘Belt and Road’ initiative, an amalgam of economic strategy, foreign policy, and charm offensive that’s fueled by a torrent of Chinese money and is designed to rebalance global alliances.”

Djibouti’s spending on port and rail projects is estimated at over $12bn, while its GDP in 2017 was only $1.85bn – triggering warnings from the IMF over debt sustainability.

But Djibouti’s finance minister Ilyas Moussa Dawaleh, who has just returned from Beijing where he sought to restructure Chinese loans, says Djiboutian state enterprises should not be included in the IMF’s assessment because they “are overperforming or have the capacity to overperform”.

Balance of power

For US Secretary of State John Bolton things are, as always, more apocalyptic:

  • “Bolton warned of the consequences if, as has been rumoured, China Merchants were to gain control of the Doraleh Container Terminal via a debt-for-equity swap. ‘Should this occur,’ he said, ‘the balance of power in the Horn of Africa – astride major arteries of maritime trade between Europe, the Middle East, and South Asia – would shift in favour of China,’” Manek reports.

Even French President Emmanuel Macron is getting in on the act.

Troops in the picture

Ultimately this is about military might as well as trade dominance, and the shadow of the Cold War emerges from Manek’s report:

  • “Farther along the tracks, from the train station at the Doraleh Multi-Purpose Port, you can see the high walls that hide much of the Chinese People’s Liberation Army support base from view. The roofs of several large three- and four-story buildings look like something vaguely out of the Forbidden City in Beijing. ‘Yes, it’s very nice,’ says the port’s commercial director, Habon Abdourahman Cher. ‘But don’t take a picture.’

Bottom line:

The US, France, Japan, Italy, Spain and soon Saudi Arabia all have a military foothold in Djibouti, but they can rail as much as they like: the Chinese remain the friends with the deepest pockets.

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