Understanding the Evolving U.S. Sanctions and Restrictions on Ethiopia and Eritrea

This article is an update to a previous article on the topic: “Navigating U.S. Sanctions and Restrictions on Ethiopia and Eritrea.”

Several U.S. sanctions and restrictions on Ethiopia and Eritrea remain in place due to the countries’ failure to fully implement the peace deal reached with the Tigray People’s Liberation Front in November 2022.¹ While progress has been made toward ceasing hostilities, reports of human rights abuses in the region persist. The ongoing restrictions continue to create uncertainty for those seeking to do business in Ethiopia, Eritrea, and the Greater Horn of Africa region, even as foreign investment in Ethiopian telecommunications and aviation has resumed. Those with interest in investing in the region should take careful note of the current status of sanctions and restrictions in the region in order to avoid negative impacts on their business.

Background

After two years of armed conflict, a peace deal was reached between the Ethiopian government and the Tigray People’s Liberation Front in November 2022.² Since then, some efforts have been made to carry out the terms of the agreement. For example, Tigray People’s Liberation Front members began handing over heavy weapons to the Ethiopian national army on January 10, 2023, and the active fighting has ended.³However, there are ongoing allegations that the government is committing human rights abuses against civilians.⁴

Status of U.S. Sanctions, Restrictions, and Aid

While U.S. officials have acknowledged the progress that has been made thus far to implement the peace deal,⁵ most sanctions and restrictions remain in place.

Since the peace agreement was reached, the United States has taken the following measures:

• On September 9, 2022, President Biden issued a one-year extension⁶ to Executive Order 14046, which declared a national emergency and authorized sanctions on individuals who were involved in corruption, violence, and human rights abuses in northern Ethiopia.⁷
• The following individuals and organizations remain on the Office of Foreign Assets Control’s sanctions list, as authorized by Executive Order 14046⁸:
  • The People’s Front for Democracy and Justice, the sole legal political party in Eritrea;
  • Eritrean Defense Forces, the Eritrean military;
  • Abraha Kassa Nemariam, the head of the Eritrean National Security Office;
  • Red Sea Trading Corporation, which funds the Eritrean Defense Forces and manages its property and financial interests;
  • Hagos Ghebrehiwet W Kidan, chief executive officer of Red Sea Trading Corporation; and
  • Hidri Trust, the holding company of all People’s Front for Democracy and Justice businesses and enterprises.⁹
• On December 13, 2022, President Biden gave a one-year extension¹⁰ to Executive Order 13818, which authorizes sanctions against those “responsible for or complicit in . . . serious human rights abuses.”¹¹
• The Office of the United States Trade Representative did not designate Ethiopia and Eritrea as eligible to receive African Growth and Opportunity Act (AGOA) benefits in the Annual Review of Country Eligibility for Calendar Year 2024.¹² In previous years, AGOA has brought Ethiopia $1 million annually and generated employment for roughly 100,000 people.¹³ U.S. Secretary of State Antony Blinken has stated Ethiopia is “moving in the right direction” toward returning to the AGOA.¹⁴
• In December 2022, Secretary of Homeland Security Alejandro Mayorkas designated Ethiopian nationals affected by the conflict as eligible for Temporary Protected Status until June 12, 2024.¹⁵
• On March 15, 2023, Secretary of State Antony J. Blinken announced that the United States will provide $331 million in aid to fight hunger across Ethiopia.¹⁶ This is in line with recent policy, under which the United States has given over $3 billion in aid to Ethiopia in the last three years.¹⁷
• The U.S. Agency for International Development (USAID) and the U.N. World Food Programme paused their food distribution services in May 2023 after learning that significant amounts of food had been stolen.¹⁸ USAID believes that the food donations were being diverted to members of the Ethiopian military by federal and regional governments, although these parties have denied the allegations.¹⁹
• In June 2023, the Biden administration determined Ethiopia is “no longer engaging in a ‘pattern of gross violations of human rights,’” thereby lifting a legal designation that had been preventing aid.²⁰

Implications of the Peace Deal on Private Investment

The Ethiopian government first announced plans to liberalize the economy in 2018,²¹ but the conflict in Tigray hindered attempts to attract investment.²² In February 2022, the Ethiopian government launched a fund to attract investment for $150 billion worth of state-owned companies and assets, marking a significant step towards privatization.²³ However, the ongoing conflict and the government’s reputation for turning off internet and phone services created hesitancy for many investors.²⁴ Since the peace deal was reached, discussions around strengthening the Ethiopian economy and privatizing key sectors, such as telecommunications and aviation, have resumed.²⁵

The Telecommunications Industry

The peace agreement has helped Ethiopia’s private telecommunications industry recover after a faltering start. Before the peace deal was finalized, the U.S. International Development Finance Corporation (DFC) announced that it was considering recalling its $500 million loan to Safaricom Ethiopia, the first private telecommunications operator in the country,²⁶ because of the human rights violations committed against civilians during the conflict.²⁷ However, discussions with the DFC ended after the World Bank Group’s private investment arm and guarantee agency, the International Finance Corporation (IFC),²⁸ reached an investment agreement with Safaricom.²⁹ In June 2023, the IFC and the Multilateral Investment Guarantee Agency (MIGA) committed to making 10-year guarantees of $1 billion to Safaricom’s shareholders, Vodafone Group, Vodacom, Safaricom, and British International Investment, and a $100 million A-loan to Safaricom itself.³⁰ The IFC will hold a minority position in the company.³¹

Safaricom is not the only Ethiopian telecommunications provider to seek outside investment following the ceasefire. In November 2022, Ethiopia resumed the process of selling a 45% stake³² in Ethio Telecom, a state-owned telecommunications company, after initially having to postpone the sale.³³ Currently, Emirates Telecommunications Group Co. and France’s Orange SA are exploring bids for the 45% stake, but the sale has not been finalized.³⁴ The Ethiopian telecommunications market as a whole is attractive to investors, as Ethiopia has the second-largest population in Africa and is one of the largest telecommunications markets that can still grant a new license to mobile operators.³⁵ Ethio Telecom in particular may be desirable to investors, as the company reported a 20% rise in half-year revenue, amounting to $633 million.³⁶

The Aviation Industry

Although the peace agreement has reinvigorated some foreign funding in the aviation industry, concerns around the implementation of the peace deal have presented a challenge to securing it.

The Export-Import Bank of the United States, an independent executive agency and a U.S. government corporation,³⁷ received an application from Ethiopian Airlines, Africa’s largest carrier, for a $100 million loan to purchase Boeing passenger and cargo airplanes in November 2022.³⁸ Discussion around the loan was a source of tension in Congress.³⁹ Several members of Congress expressed concerns that approving a loan to Ethiopian Airlines Group at this stage would “deprive the State Department of a critical tool to ensure the full implementation of the peace agreement.”⁴⁰ Despite these concerns, the Export-Import Bank approved a $281 million loan from the Private Export Funding Corporation to Ethiopian Airlines Group in December 2022.⁴¹ Ethiopian Airlines Group recently reported a $6.1 billion revenue for the current fiscal year, a 20% increase from last year.⁴²

Moving Forward

Several significant U.S. sanctions and restrictions on Ethiopia and Eritrea remain in place, as the peace deal has yet to be fully implemented. However, foreign investment in newly liberalized sectors, such as telecommunications and aviation, has resumed at least in part.

Companies looking to do business in the region, or with concerns about these sanctions, should continue to closely monitor the situation for additional sanctions and contact Ahmad Murrar or Parker White to discuss these topics further.

Foley’s International Trade & National Security practice can help companies navigate this maze of sanctions and restrictions. Its partners include former officials from the Office of Foreign Asset Control, which administers Treasury Department sanctions, and the Department of Commerce. Foley’s Federal Public Affairs practice also can provide companies with up-to-the-minute information about legislative trends.

2023 Foley & Lardner LLP Summer Associate Casey Glasser contributed to the drafting and research of this article.