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Despite hemorrhaging nearly $10 billion in foreign reserves since 2020, and Suez Canal revenues that plunged 38 percent in early 2024 as a result of Houthi-linked Red Sea disruptions around the Horn of Africa, Egypt is playing a high-stakes regional game with remarkable tactical discipline. Cairo is pursuing an asymmetric strategy rooted in diplomatic agility, encirclement, and targeted military cooperation.

At home, inflation remains stubbornly above 35 percent, with the Egyptian pound having lost more than half its value since 2022, and the threat of International Monetary Fund-led austerity measures hanging heavy. Yet abroad, Egyptian policy architects are engineering low-cost counter-offensives that are shifting power dynamics, from the Gulf of Aden to the Eastern Mediterranean. By drawing closer to Somalia, reviving dormant ties with Eritrea, and aligning with Turkiye against an ascendant Ethiopia, Egypt has effectively militarized its diplomacy without breaching its fiscal constraints.

Cairo’s posture in the Horn of Africa is less about projection of power and more about geopolitical denial: boxing out Ethiopia’s Red Sea ambitions and forcing negotiations from an advantageous position.

While Addis Ababa lobbies to legitimize Somaliland in exchange for coastal access, Cairo is quietly encircling, exploiting every fracture from Puntland to Djibouti. It is a strategy shaped by scarcity but executed with sharp calculation. It is less a case of empire building than geopolitical maneuvering, redirecting the momentum of rival states to serve its own ends.

If Egypt’s maneuvers succeed in Somalia, and resonate into Yemen, it might reposition itself not as a power in decline but as the regional broker-in-chief.

So, what triggered all this? Ethiopia’s agreement in January 2024 to lease 20 km of coastline from Somaliland, a self-declared state not recognized by the UN, for a naval base ignited immediate regional tremors. From Cairo’s perspective, the deal threatened to establish an Ethiopian military presence along the Bab Al-Mandab Strait, a maritime bottleneck through which passes 12 percent of global trade and 30 percent of the world’s container traffic, and which is critical to nearly $10 billion of annual Suez Canal revenues.

Moreover, Ethiopia’s activation of the Nile Basin Agreement, a framework that challenges colonial-era water allocations, directly threatened Egypt’s freshwater lifeline, the Nile, which supplies more than 90 percent of the country’s freshwater for agriculture and domestic use.

Surprisingly, unlike the bluster and saber-rattling of the past, especially concerning perceived threats to Nile flows downstream, Cairo’s immediate response was calibrated for cost-efficiency rather than kinetic escalation.

Cairo is pursuing an asymmetric strategy rooted in diplomatic agility and military cooperation.

Hafed Al-Ghwell

Egypt quickly established a military pact with Somalia that permitted the deployment of up to 5,000 Egyptian troops, alongside modest arms transfers to Mogadishu. Yet these commitments, worth an estimated $300 million annually, are dwarfed by investments from regional rivals.

Hence, Egypt’s strategy has had to bet on tactical alliances rather than financial heft, capitalizing on existing regional fissures in an attempt to isolate Ethiopia.

At the core of Cairo’s rather frugal approach is the pursuit of strategic triangulation in hopes of limiting Addis Ababa’s options. By partnering with Turkiye, a former adversary that now shares concerns about Red Sea instability, Egypt gains indirect access to Ankara’s extensive drone capabilities and naval assets without footing the bill for their deployment.

Simultaneously, a trilateral summit with Eritrea and Somalia consolidated a coalition anchored in the former’s 30-year rivalry with Ethiopia, during which Eritrea has hosted foreign military bases and maintained a 300,000-strong standing army. The end result is a loose coalition that amplifies Egypt’s influence at minimal cost, contrasting sharply with Ethiopia’s $1.4 billion military expenditure.

But there are looming risks. Cairo’s $4.8 billion defense budget is already stretched thin by concurrent crises in Libya and Gaza. Regardless, Egypt’s moves have so far managed to avoid the pitfalls of mission creep. As the African Union Transition Mission in Somalia has wound down after 17 years and $21 billion of expenditure, Egyptian troop deployments, focusing on the training of Somali forces and securing supply lines, have been a targeted investment with plausible deniability.

The restraint is deliberate. With nearly 90 percent of its military assets concentrated on the Sinai and Libyan fronts, Egypt cannot afford to divert resources to open-ended conflicts. Instead, it must capitalize on the overextension of others.

Another critical factor in Egypt’s strategy for the Horn of Africa is its inextricable links to developments in Yemen. Cairo’s sudden openness to hosting delegations from a group it once rejected signals more than just a tactical pivot; it is a calculated overture in regional geopolitics that now includes both Yemen’s war economy and Red Sea security.

By adopting the role of mediator in Yemen while quietly reshaping supply-chain security, from Bab Al-Mandab to the Gulf of Aden, Egypt is transforming its fiscal scarcity into valuable geopolitical currency. It is not appeasement but conditional engagement, an approach that costs little upfront and yields regional influence.

Whether the bet will pay off remains uncertain. But for a country that is managing $165 billion in external debt and facing persistent inflation, even modest diplomatic gains count as a credible return on investment.

Overall, while Egypt’s clever maneuvering in the Horn of Africa is not without its share of risks, for now it all seems to be paying off rather well.

• Hafed Al-Ghwell is a senior fellow and executive director of the North Africa Initiative at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies in Washington, DC. X: @HafedAlGhwell