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Kenya’s ‘Economic’ Conflict with Al-Shabaab

Kenya’s recent incursion into southern Somalia demonstrates that the world’s ‘most failed state’ impacts upon the security dynamics of its neighbors.

By Edoardo Totolo

In October 2011, after the kidnapping of three tourists in Lamu and two aid workers in the Dadaab refugee camps, Kenya took the unprecedented decision to send troops to southern Somalia to fight a fundamentalist group with links to al Qaida. Although there was no proof that Al Shabaab was directly involved in the kidnappings, the incidents were utilized by the Kenyan government to justify the intervention. Indeed, Nairobi did not act on its own and coordinated its activities with the Somali and Ethiopian armies. Moreover, Kenya’s largest military operation since achieving independence also received logistical assistance from France.

The incursion in Somali territory was not - as it initially appeared - an improvised retaliation against the fundamentalist group. Although the abductions put pressure on the government to take immediate action, a leaked US embassy cable revealed that Kenyan officials met secretly with delegations from Ethiopia and the United States to discuss the “Jubaland Initiative” at least two years earlier. The plan envisages the creation of a separate state in the Jubaland region of southern Somalia. In doing so, the “Jubaland Initiative” would cut al Shabaab off from the area bordering Kenya and stem the flow of migrants and illegal arms thwarting into the country. The plan, however, was opposed by Ethiopia, as the creation of an autonomous administration in Jubaland could have fueled similar claims in the Somali-dominated Ogaden region in Ethiopian territory.

The limited resources and international support given to the operation have changed the scope of a conflict that is underpinned by economic considerations. Kenya does not have the capacity to install an autonomous administration in Jubaland. Yet it is nevertheless determined to safeguard its growing economic interests in the region. These include a major infrastructural project with Ethiopia and South Sudan and control of the port of Kismayu in southern Somalia. The most pressing need in the short term, however, is the safeguarding of Kenya’s lucrative tourism industry.

Economic Interests behind the Intervention

Although Kenya’s economy has grown considerably since 2009 the short-term economic outlook for the country remains fragile. Kenya’s current account deficit – the difference between the country’s imports and exports – is one of the highest in the world and currently accounts for 13% of Gross Domestic Product (GDP). This in turn contributed to the massive depreciation of the Kenyan currency in 2011 and a parallel rise in inflation. Accordingly, when the kidnappings in Lamu were perceived as a threat to Kenya’s tourism industry, the government quickly realized that it needed to preserve its major source of foreign currency. Indeed, safeguarding Kenya’s tourism industry was as much about protecting a valuable source of income as it was about protecting the whole economy from future shocks.

The strategic importance of Lamu is underscored by the $23bn infrastructural project for a new port and an oil refinery as well as a pipeline, motorway and railway linking the Lamu Port to South Sudan and Ethiopia (LAPSSET). The Lamu port will be at least five times bigger than the one in Mombasa (currently the largest in Kenya) and it will become the main outlet for exporting of goods from East Africa and oil from South Sudan. Moreover, since new oil deposits were found near Kenya’s Lake Turkana - not to mention the ongoing exploration for oil in the Ogaden region, the potential for Lamu to become a major oil hub in East Africa is becoming increasingly apparent. Accordingly, the presence of al-Shabaab in neighboring Somalia poses a significant threat to the project.

The Somali port of Kismayo - around 200 kilometers north of the Kenyan border - is also of geo-economic importance to Kenya. Accoring to the latest United Nations Monitoring Report on Somalia and Eritrea (pdf) al Shabaab generates half of its revenues through this port. The UN estimates, for example, that the group makes between $35 and $50 million a year mostly through taxation at Kismayo. Yet of greater significance to Kenya is that goods smuggled through the port of Kismayo have weakened legitimate Kenyan businesses and reduced the capacity of the government to collect customs revenues. Criminal activities such as the trafficking of small arms, human beings and drugs have also reinforced criminal networks and contributed to further destabilization across the region.

Short-Term Consequences and Long-Term Scenarios

Arguably, the most positive – though unexpected – effect of Kenya’s conflict with al Shabaab has been a sharp reduction of ransom prices demanded by Somali pirates. According to Kenyan shipping experts ransom prices have dropped by at least 50 percent since the conflict started. It is also thought that ransom demands could drop even further if al Shabaab loses its grip over southern Somalia. Although al Shabaab is not directly involved in the business of piracy in the Horn of Africa, it is believed that the group provides protection to pirates as well as arms and logistical support.

Yet despite this seemingly unexpected success, the short term effects of Kenya’s incursion into southern Somalia have been far from positive. In addition to provoking a series of retaliatory attacks in Nairobi and Mombasa, there has been an increase in arrivals at the Dadaab refugee camps. Indeed, prior to the incursion the level of refugees arriving at the camps was at an historical high. Last year, the region suffered its worst drought in sixty years.

Moreover, it is becoming evident that Kenya has neither a clear exit strategy nor the financial capacity to continue the operation. In only six months, the government has created a budget gap of over $150 millions. The decision of African Union Mission in Somalia (AMISOM) to join the Kenyan forces has brought some fresh hope for the stability of the mission. However, AMISOM seems intent on concluding operations as soon as possible. Indeed, it is uncertain whether Kenya will be able to maintain its commitment in the run up to next year’s presidential elections.

The presidential elections scheduled for March 2013 are probably the most important of Kenya’s recent history. In 2007, the dispute surrounding the final result brought the country to the brink of civil war. This prompted the two candidates - the Orange Democratic Movement’s Raila Odinga and the Party of National Unity’s Mwai Kibaki - to create a power-sharing government in the interest of maintaining peace and addressing the root causes of the violence. And while the power-sharing government has been moderately successful in stabilizing Kenya, tension appears to be resurfacing ahead of the next elections. Accordingly, the social, economic and political future of Kenya and East Africa may for a time be dependent on the capacity of Nairobi to ensure a smooth election process and peaceful transfer of power to the new government. Whoever wins the election will, however, need to address the impact that Somalia in general - and al Shabaab in particular - has upon the peace and security of Kenya.