By Tesfaye Hailu, Mark Gilkes and Rahul Kandoi
Ethiopia’s recent fuel shock illustrates how energy dependence constitutes a direct national security vulnerability, not merely an economic challenge. Despite generating one of the highest proportions of renewable electricity globally, mainly from hydropower, the state remains critically exposed to external energy supply chains. A shortfall of 180,000 metric tonnes of contracted fuel (as a direct result of the war in Iran) linked to has reduced daily diesel availability from 9.2 million to 4.5 million litres. With white diesel prices reaching USD 230 per barrel and petrol at USD 150, the cost of sustaining basic state and market functions has escalated sharply. Read More about this here.
Strategic exposure and macro-fiscal fragility
The security implications of this shock are amplified by Ethiopia’s constrained macro-fiscal position. In 2024, IMF assessments indicated that foreign-exchange reserves covered only 0.5 months of imports, leaving the state acutely exposed to external price and supply disruptions. Although medium-term projections anticipated recovery to two months by 2026, these assumptions did not account for the current conflict in the Middle East and the associated disruption of global energy supply chains.
The fiscal response to fuel scarcity further tightens the security–economy nexus. The government is absorbing 15–20 billion Birr per month in fuel subsidies (totalling approximately 262 billion Birr to date) to contain social and political fallout.2 While necessary in the short term, these expenditures significantly reduce fiscal space for security-relevant public goods, including infrastructure maintenance, service delivery, and institutional capacity. Persistent reliance on imported fuel therefore represents a structural risk to both fiscal sustainability and state resilience.
Energy infrastructure as critical national security infrastructure
Ethiopia’s comparative advantage lies in its abundant, low-cost renewable electricity generation. However, weaknesses in transmission and distribution systems prevent this asset from translating into strategic resilience. Technical losses, reliability constraints, and limited grid reach reduce the state’s ability to substitute domestic electricity for imported fuels during external shocks.
The National Electrification Programme (NEP 2.0) is therefore both an energy reform agenda and a national security instrument. By reducing technical losses, improving dispatch reliability, and modernising grid management, NEP 2.0 strengthens the resilience of critical infrastructure. A more reliable grid allows the state to displace fuel-dependent backup generation, reducing exposure to price volatility and supply disruption. In support of these objectives, the GCIEP Ethiopia team is working with EEU to support their gradual adoption of GIS integration into smart grid technology with the ultimate goal of more efficient management of the grid energy; and with EEP to empower grid inspection mechanisms to augment grid efficiency and reliability.
Decentralised energy and resilience against systemic shock
From a security perspective, excessive centralisation creates single points of failure. As a way of mitigating this, Distributed Renewable Energy (DRE) systems provide a complementary layer of resilience by diversifying supply and reducing systemic risk. This is particularly salient in rural, agricultural, and industrial zones where fuel scarcity directly threatens food security, export earnings, and local stability.
Even with a substantial 95 Birr (45 pence) per litre diesel subsidy, the physical absence of fuel can halt production entirely. DRE solutions, such as solar-powered mills, irrigation pumps, and local mini-grids, remove this vulnerability by severing the link between productive activity and external fuel supply chains. In security terms, this shifts dependence away from contested international shipping routes and towards domestically controlled energy sources, strengthening both economic continuity and local resilience.
To accelerate this transition, the GCIEP Ethiopia team has conducted extensive fieldwork, including primary community surveys, to address critical data gaps on Decentralised Renewable Energy (DRE) systems. In addition, the team developed detailed financial models to support evidence-based decision-making by policymakers, particularly the Ministry of Water and Energy (MoWE). These efforts also aim to help private sector actors under the ESEDA umbrella identify viable and sustainable business models, thereby facilitating the shift to DRE systems and attracting the necessary private sector investment.
Transport, logistics, and strategic mobility
The transport and logistics sectors represent the most acute national security exposure. Fuel shortages and price spikes transmit inflationary pressure across fertiliser supply, food distribution, and construction. Sectors critical to employment, social stability, and state legitimacy. While the ban
on internal combustion engine passenger vehicles signals long-term intent, the logistics sector remains structurally dependent on imported fuel.
China’s experience with heavy-vehicle electrification offers a potential pathway for reducing this vulnerability. The deployment of battery-swapping technology for heavy-duty freight vehicles along strategic corridors particularly the Addis Ababa–Djibouti route would allow Ethiopia to decouple national logistics from global oil markets. This would preserve strategic mobility and commercial continuity while leveraging domestic electricity generation, including power from the Grand Ethiopian Renaissance Dam.
Internal stability, governance, and state authority
Fuel scarcity also poses direct risks to internal stability and governance. Supply shocks commonly generate market distortions, including hoarding, price manipulation, and the expansion of informal and black markets. Recent enforcement actions, resulting in over 600 arrests and the seizure of 720,000 litres of fuel, illustrate the strain placed on regulatory and enforcement institutions during periods of scarcity.
Energy transition as a national security imperative
A durable response to Ethiopia’s fuel vulnerability requires disciplined implementation of NEP 2.0 and a sustained transition towards a diversified, renewable-led energy and transport system. Leveraging domestic renewable resources is a core strategic requirement for national security.
By reducing reliance on external fuel markets, Ethiopia can better insulate itself from geopolitical shocks and protect fiscal stability. Ethiopia’s shift towards a more resilient grid, powered by domestically produced green energy and augmented by a decentralised supply of renewably powered off-grid systems is therefore a central pillar of long-term stability and state security. The GCIEP Ethiopia team is proud to contribute to these efforts, supporting Ethiopia’s transition from energy vulnerability towards energy sovereignty.
Published
21/04/26