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Ethiopia should agree to accept compensation for Egypt’s demand to delay the filling of the Ethiopian Dam: a breakthrough for the stalled negotiations

Ethiopia should agree to accept compensation for Egypt’s demand to delay the filling of the Ethiopian Dam: a breakthrough for the stalled negotiations

By Susana Ibrahim 11-21-19

In a recent proposal presented by Egypt to the tripartite table of Egypt, Sudan and Ethiopia, it demanded Lake Nasser to be kept at an absolute minimum of 165 meters above sea level. This requires Ethiopia to release 40 billion cubic meters of water every year.

According to Ethiopian and international experts, the Egyptian proposal could extend the filling period of the Dam by several years and cause a permanent annual under capacity power generation of below 3000MW. This is less than half the total anticipated power generation capacity of the Dam. If kept idle for an extended period, the infrastructure will also likely sustain some damage.

Filling the dam within a period of two years, as Ethiopia claims to be technically feasible and practically attractive, would cause significant harm to Egypt. Agricultural production would be reduced while unemployment and trade deficit will rise.  This could lead to a long term economic and political instability.

Filling period and the amount of water to be released during and after the first filling appears to be the point on which both Egypt and Ethiopia dag their hills on the ground. This also appears to be a point that no mediator can help to resolve without involving a financial package.

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Looking at the subject with no political considerations and from a strict business perspective, it can be resolved by a simple financial transaction. According to a recent leak, the U.S. has seriously been considering options to assist Egypt to compensate Ethiopia for losses that will be incurred due to delays in the operation of the dam.

Ethiopia sustains a loss of between 1,000,000,000-1,500,000,000 US dollars every year because of delays in the operation of the dam.  Ethiopian and some international experts suggest that the Egyptian proposal will delay the filling of the dam by up to 20 years. 

TheTrump administration, in its most unusual intervention on African matters, has assigned a case that is normally handled by the State Department to the Treasury Department and invited the World Bank to be part of the process. This appears to be in anticipation of a likely failure in the negotiations and that the US, as a mediator, may need to make a proposition for a financial arrangement, for which the Treasurer is most suited for, and the World Bank can play an important role in both providing and managing the funds. 

Considering the strategic impact of the reduction in the flow of water to the Egyptian economy, covering Ethiopia's annual loss of more than one billion dollars for ten consecutive years may be a win for Egypt. However, the economy is already struggling to pay off its debt in billions of dollars while at the same time dealing with the rising cost of living and unemployment. Compensation can't be made possible without additional loans and support from possibly the World Bank and the U.S.

According to some speculative sources, such a loan package to help Egypt compensate losses to Ethiopia is to be made public following the 15 January cutoff date for the ill-fated three-party talks. 

Within the period between2020, the date on which the filling of the dam should start, and 2030, while Egypt may incur a cost of some ten plus billions of dollars, it will have ample time to- prepare for the inevitable reduction in the flow of water by implementing conservation and desalination projects, make its population psychologically ready to face the reality of sharing the Nile and consider a more comprehensive approach to deal with the general problem of equitable sharing.

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