The advertisement could read as follows: Landlocked country seeks a stretch of seacoast; payment for lease or purchase is negotiable, but cash is out of the question; motivated buyer is prepared to sweeten any contract with some freebies.
Sovereign real-estate deals might sound like ancient history — but they are still a thing. Even this year, a nation’s territory could be a commodity to be sold or rented at the right price. The practice might sound like pillage, but it is a better alternative to military coercion. On Monday, Ethiopia, the world’s most populous country without sea access, signed a preliminary deal to rent a 20km expanse of coast from its neighbor for half a century. Further negotiations, including over price and payment terms, are expected, and a final deal could come as soon as this year.
The problem? Well, there are many. For starters, the seller is a breakaway nation called Somaliland, which lacks international standing. The UN-recognized owner of the land — Somalia — says the deal is illegal. Then there is also the question of money: Ethiopia, embroiled in a simmering civil war, is an impoverished nation that defaulted on its international sovereign debt on Christmas day; instead of cash, it is offering a chunk of its state-owned airline. Ethiopia is also throwing in a diplomatic freebie: It would accept Somaliland as an independent state, further inflaming tensions in the Horn of Africa. The region is already witnessing several armed conflicts, plus mounting piracy in the Red Sea and the Gulf of Aden, including across the sea from Yemen. So far, only Taiwan formally recognizes Somaliland as a nation, despite the African region having declared its independence in 1991.
Illustration: Louise Ting
The African continent’s last experiment with creating an independent state — South Sudan, in 2011 — did not work as planned, with the country falling back into civil conflict.
Splitting Somalia into two — or even three, as another breakaway region of Somalia called Puntland could follow suit — could create further failed states in a region that controls the mouth of the Red Sea. As such, the deal between Ethiopia and Somaliland is more than a historical oddity: It could deepen difficulties in a crucial choke point for global trade.
The history of international relations is dotted with countries buying or renting land from other sovereigns. In an early example, Scotland bought the Isle of Man and several other territories from Norway in 1266. Over the following centuries, countries including France, Russia, Denmark, the UK and Brazil engaged in land transactions. The US is in a class of its own: It bought large chunks of land from France in the Louisiana Purchase of the Mississippi basin; Florida from Spain; and Alaska from Russia as it assembled its transcontinental land mass.
The two most recent examples of sovereign land deals came in 1958 and 1963. In the former, Pakistan bought the port city of Gwadar, until then an enclave controlled by Oman, for the equivalent of US$2 billion in today’s money. In the latter, Germany bought back three small towns that it lost to the Netherlands at the end of World War II for the equivalent of 715 million euros — US$780 million today. Since then, the market for sovereign land acquisition has dried up. International borders have changed, mainly due to conflict. For example, Ethiopia lost its access to the sea in 1993 after Eritrea’s war for independence. Not too far away, Saudi Arabia and Egypt have been negotiating the fate of two islands in the Red Sea. Riyadh and Cairo agreed in 2017 that the Tiran and Sanafir islands in the northern Red Sea would be owned by Saudi Arabia. Shortly before the 2017 deal was signed, Saudi Arabia agreed to provide more than US$20 billion in financial and oil aid to Cairo, prompting many to see the two agreements as linked. Since then, Egyptian President Abdel-Fattah al-Sisi, under economic pressure at home, has been seeking further financial incentives. Of course, it takes two to deal, and the wannabe buyer often finds no seller or it thinks it already owns the land, such as in the current case of Venezuela claiming land controlled by Guyana. I do not see Ukraine renting its land to Russia — or Moscow offering to pay Kyiv.
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. He is coauthor of The World For Sale: Money, Power and the Traders Who Barter the Earth’s Resources. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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