In a Visual Capitalist report of September 17th, 2024, it was noted that the US Dollar dominates the world reserve currencies at 59%. It is followed by the Euro at 20%, the Japanese Yen at 6% and the British Pound at 5%. All other currencies followed with smaller shares, indicating that despite the great fanfare of BRICS Plus, most reserves are still held in the West’s major currencies. The above four currencies control some 90% of world currency reserves. The Chinese Renminbi held only 2% while all the others together held some 8% of the US$ 11.5 trillion of global reserves.
The US Dollar’s share came down from 70% in 2000 but nevertheless remains the main currency of reserves in the world. It is expected to continue in this leading position in the decades to come, although there is a growing usage of non-traditional reserves, such as the Chinese Renminbi. The BRICS Plus countries are the biggest holders of most non-traditional currencies and mostly the Chinese Renminbi, which contributed some 25% of the shift away from the US Dollar.
We will attempt to address in this article the impact of the shifting away from the US Dollar or the impact of the BRICS Plus on the Horn of Africa States region. The region is one of the poorest in the world and when it comes to volumes, nothing much will happen to the issue of reserves. Indeed, the region has no impact on what happens on the world’s reserves at present. Ethiopia has the largest reserves in the region with only a minuscule US$ 3 billion including gold, as of 2020, as reported by the World Bank earlier in this month of November 2024.
However, when it comes to politicking and the challenges of the region, there appears to be reasons to watch. Ethiopia earlier this year embarked on challenging Somalia’s territorial integrity and sovereignty as a nation by signing an illegal MoU with one of the regions of country without going through the Federal authorities of the country. Somalia’s reaction was severe and quickly and forcefully defended its territorial integrity through all the diplomatic channels available to it.
This included among other seeking help from other countries like Türkiye and Egypt to defend the country’s lands and waters from the blatant invasion, expelled Ethiopia’s ambassador and refused to include Ethiopia in the AUSOM force of the African Union to be deployed in the country after the mandate of the ATMIS force ends on December 31st, 2024.
The world held its breath during the whole year and scrambled to avoid a physical war between the two countries. The irony is that two new members of the BRICS Plus countries include Egypt and Ethiopia, which have their own difficulties on the issue of the Blue Nile and the GERD built by Ethiopia on the river. Ethiopia has not so far moved into the realization of the illegal MoU and since then, there was a change of governance in the Somali region, which was forced to sign the MoU by the Ethiopian administration.
Somalia has not yet taken other steps which could include suspension of Ethiopian Airlines flights to the country or overflights in Somalia’s airspace, which is vast or other more serious actions that may adversely affect Ethiopia without firing a shot of its own. Ethiopia is currently undergoing one of the most serious not only financial difficulties but also existential threats.
The IMF and the World Bank have recently organized extending some conditioned financial assistance for the country, but this may not help in the ethnic-based conflicts in the country. The war in the Amhara State, the OLA war, the Tigray war shimmering under the ashes, the Afar Somali states continuing war, the attempts of the Oromia state to move on to the Somali State and the antagonistic relations the country has developed with all the neighboring countries, all point to a country barely surviving and trying to export its woes to others. Somalia, another fragile country in the region, appears to have been its main target and hence the illegal MoU.
Negotiations between Somalia and Ethiopia was organized by the international community and Türkiye played the central role in this respect, but these negotiations have brought any good results fruits, so far, with Ethiopia still insisting on proceeding with the materialization of the MoU.
It is not clear whether the new administration of the Somali region, which changed hands recently through a well-organized election process, will follow the policies of the old administration or not. However, there is reason to believe that it would not and would change priorities to meet the needs of its population. This may lead to a more stable region, which will step back from the brink of war.
It is most unfortunate that the Ethiopian regime has underestimated the Somali resolve to defend their territories at all costs, including the large Somali population within Ethiopia who number anywhere between twenty-five to thirty million people, although the fake statistics given by the Ethiopian government does not report this.
How does one read the Ethiopian BRICS adventure and the region? In this respect, one must note that the West where the Bretton Woods multilateral financial organizations of the World Bank and the IMF are rooted, would vehemently oppose this ill-thought of move on the part of Ethiopia. This is a direct assault on these institutions, which are economically and financially competing with the Chinese BRI project and other financial institutions. It is not clear what the intentions of the arrangements of the two organizations with Ethiopia are or represent.
The move of Ethiopia to the BRICS may, however, lead Somalia to move closer to the West. Note the region overlooks a major shipping route connecting Asia, Africa and Europe. It is also reported to own vast natural resources including oil and gas, which seems to have been identified most recently by the Turkish Exploration ship Oruc Reis. If one has already arrangements with the country that owns the longest coast in the region, would there be a need to create new and unpredictable processes such as the Ethiopian forced MoU with one of the regions of Somalia imply?
It is clear that Ethiopia is being used by outsider forces. The United Arab Emirates, which has substantial interests in the region is generally reported to be behind the adventure story of Ethiopia as financiers and political backers. Ethiopia, a poor nation grappling with its multitude of problems would not venture into such a major project, some say. The UAE is already in Berbera, a major port of Somalia in the north but does not trust the owners of the port, Somalis and it is why it is pushing, some say, Ethiopia to launch the search for a port in Somali waters and take over Somali territories.
Both the UAE and Ethiopia and eventually the BRICS seem to be underestimating the Somali despite the weaknesses in Somali governance. What they do not know is that Somalis are generally better Somalis when foreigners invade their country, and as families, they all congregate to defend the home.
The oil and gas potential recently discovered in the country and its seas would generally provide the financial needs of the country and money is what counts in the world of today. Somalia is already improving and rebuilding its land, air and naval forces and its relations with the West is expected to be a wall against the adventures of BRICS Plus and its ally, Ethiopia, an economically small country with not much to contribute.
