The March 6 agreement emerged from a three-day gathering of ministers from Egypt, Ethiopia and Sudan in Khartoum. It laid out governing principles following months of negotiations, recognizing Egypt's security concerns as well as Ethiopia's right to use its water resources for economic development. The agreement is not final, however, and will give way to further rounds of talks. The same is also probably true of whatever agreement emerges March 23.
Ethiopia, Sudan and Egypt are all to some degree reliant on the water of the Nile, but as upstream nations, Ethiopia and Sudan have a distinct geopolitical advantage. Both countries have the potential to regulate downstream flows and are not as vulnerable to disruption themselves. As the last in a line of nine nations, Egypt, on the other hand, is dependent on continued flows. Ethiopia's dam would give the country the ability to all but cut off the flow of the Blue Nile, which supplies 85 percent of water to the Nile Valley, where nearly all of Egypt's 82 million people live.
Making matters worse for Egypt is the country's current fragility. Cairo recently emerged from a period of political chaos. Ethiopia took advantage of Egypt's chaos to start construction on the dam in early 2011.
Al-Sisi, Egypt's president, is working to balance political factions and revive the ailing economy. Egypt's economy is highly reliant on its cotton exports, and the country needs steady imports of wheat to feed the population; in the 2013-2014 fiscal year, wheat imports made up 55 percent of domestic consumption. Any water disruptions in the future could be catastrophic for Egypt.
Ethiopia also needs the Nile River, though for different purposes. Sustained growth is essential to decreasing the country's high poverty rates and to allocate resources in order to consolidate its numerous ethnic factions. To sustain its pace of economic growth at around 10 percent, Ethiopia has pursued a strategy to attract low-end manufacturing. With domestic energy demand rising at an average of 20 percent per year and only 35 percent of the population having access to electricity, this is becoming challenging. Combined with Ethiopia's high population and low wages, the cheap, excess electricity could serve to attract more industry to the country. The government sees Ethiopia's hydropower potential, estimated at 45,000 megawatts, as a potential bulwark for the economy. Set to be complete by 2017, the Grand Ethiopian Renaissance Dam is projected to generate around 6,000 MW of electricity, adding to Ethiopia's current 2,000-MW capacity. Other projects would contribute an additional 2,000 MW, bringing total production to around 10,000 MW. Addis Ababa also already has plans to sell electricity to Kenya and other neighbors to generate revenue.
Egypt's Limitations
Egypt's options to counter Ethiopia's plans are few. Cairo does not have the ability to stop the dam militarily before its construction or, once the dam is finished, pose a credible threat to its continued operation. It is simply too distant from Egypt's airfields, and Cairo has neither aerial refueling abilities nor access to nearby Sudanese bases.
Egypt has turned to pursuing key international partners in order to pressure Ethiopia, but Cairo has failed to garner sufficient support. Europe, the United States, the Gulf countries and Turkey have all proved unwilling to push Ethiopia through diplomacy. Both the United States and the Europeans maintain strong ties with Ethiopia to fight terrorism in the Horn of Africa. The Gulf states, especially Saudi Arabia, have strategic economic interests in Ethiopia's commercial agriculture sector. Turkey, a key regional player, is also invested heavily in Ethiopia's manufacturing sector and is thus interested in increased electricity generation, not in stopping the dam.
This dead end and the progress of the dam's construction past initial phases has left Egypt with only one option: negotiation.
Dam Obstacles
In spite of its strategic advantage, Ethiopia has encountered serious headwinds in efforts to complete the dam project. The current deadline of 2017 will probably have to be pushed back because of funding constraints. Ethiopia's bids for financing from the European Investment Bank, the African Development Bank and the Chinese government have each failed. This is primarily due to Ethiopia's national debt — debt left over from other projects. The controversy of the dam project has made investors reluctant to provide funding as well.
Addis Ababa's capacity to fund the project is now in question. The total cost of the dam is estimated at $5 billion. Addis Ababa has turned to Ethiopians to raise some of the money through mandatory income contributions from every citizen and the issuance of public bonds. This approach has raised only about $400 million so far. The government has also allocated an undisclosed amount of the national budget for funding, but the budget is itself a limited resource.
Because of both parties' constraints, Egypt and Ethiopia have come to the bargaining table. Egypt is now offering to ease its opposition to the dam in exchange for guarantees that Ethiopia ensure uninterrupted flows to Egypt. This will likely focus first on the period immediately following the dam's completion. The dam's reservoir requires around 74 billion cubic meters of water, and filling it will take an estimated 3-5 years, depending on the volume of rainfall. This means that reductions in flow are possible, provoking Cairo's national security concerns. The two sides will have to negotiate this process carefully and conduct independent impact assessment studies.
Whatever agreement emerges from these negotiations will be all but impossible for Egypt to enforce. With no military options and no foreign guarantees, Ethiopia would have the ability to violate the agreement when it needs to. Therefore, whatever the agreement, there is likely to be continued tension over the project at least in the near term.
