WATER POLITICS

A year after Prime Minister Abiy Ahmed inaugurated the Grand Ethiopian Renaissance Dam (GERD) at an international ceremony, his government is celebrating a startling success. The project is making money, powering a bitcoin mining boom and helping local farmers manage the flooding of the Nile waters.

That is not a picture that neighbouring Egypt recognises. Outmanoeuvred by Ethiopia over the GERD project, Egyptian President Abdel Fattah el-Sisi has warned his government won’t “stand idly by as Ethiopia continues its irresponsible” actions.

Sisi’s foreign minister Badr Abdelatty has called on Addis Ababa to abandon plans for three more dams on the Blue Nile. The mooted dams at Karadobi, Mandaya and Beko Abo are estimated to cost around $10.5bn and could generate a further 5,700MW.

Egyptian officials say they will not allow Ethiopia to build any more dams on the Nile, but they won’t explain how they intend to intervene. Regional schisms over the Sudan war and access to the Red Sea have turbo-charged hostility between Addis Ababa and Cairo.

“Ethiopia believes in equitable, reasonable utilisation and cooperation. We always invite Egypt to come to this principle and discuss and resolve any issues,” Ethiopia’s former water minister Alemayehu Tegenu told the state news agency on 8 September.

“Egypt’s behaviour always stands against Ethiopia’s development,” he added. “GERD is operational now. It doesn’t reduce their water. They receive sufficient water currently while the dam is functioning.”

The numbers that make the case for GERD

For Ethiopians, the bigger question is the dam’s generating power and commercial viability. GERD cost about $5bn to build over 14 years. The government says most of that was raised domestically – via central bank financing, government bonds and public “diaspora” subscriptions that raised over 20bn birr (around $124m).

The main external component was a $1bn China Exim Bank loan for turbines and electrical equipment. Independent economists estimate the project should deliver a rate of return at 10%-12% over 7-12 years. The key factors here are the revenues from power exports and domestic electricity tariffs. However, projected earnings are in contention, according to industry sources.

The government sees the dam as massively boosting the country’s economy. Ethiopian Electric Power (EEP) reports national generating capacity at 9,730MW, most of it coming from GERD and the new Aysha and Assela wind farms. “The [EEP] has moved from a 168% loss to recording 39.5bn birr in gross profit [for the 2025-2026 fiscal year],” CEO Ashebir Balcha told the utility’s directors this month, citing gains in transmission, collection and generation.

GERD alone generated 18.3TWh over the past year – that amounts to 52% of Ethiopia’s total output. According to the GERD project office, the dam is running about 17% above the original projections. Export revenue climbed to $475.7m, up 27% year on year, with Kenya paying roughly $86.96m and Djibouti about $30.95m for Ethiopian power.

A bitcoin boom facing new rules

Some of the surplus power never leaves the country. Data mining operations, drawn by cheap hydropower, now take about a third of Ethiopia’s electricity. The miners paid more than 50bn birr ($335m) for that power over the past year; around 5bn birr more than the EEP earns from local customers.

Ethiopia opened the door to bitcoin mining in 2022, although cryptocurrency trading remains illegal. The government has signed power-purchase agreements with 25 licensed foreign-owned mining operators over the past four years. Most are backed by Chinese companies that relocated after Beijing’s mining crackdown in 2021. And they have been joined by at least one United Arab Emirates firm.

Several of the Chinese companies buying GERD’s power also helped build it. Bitmain, one of the world’s biggest mining-rig manufacturers, is pushing Ethiopia as a bitcoin mining hub to rival Texas.

Ethiopian Investment Holdings, the sovereign fund under the prime minister’s office, has been considering a more direct role in the industry, according to some investors. Others report that officials want to tighten control over the sector and raise revenues at the same time.

New tariffs – a base rate near 4 cents/kWh from December 2025, rising toward 5 cents/kWh by 2026-2027 – are squeezing margins. A leading industry group in Ethiopia, QRB Labs, reckons that some mining operations could become unprofitable by the end of this year. Although the dollar payments from GERD have become key towards the federal budget, the government is yet to clarify its regulatory plans.

The Nile is about diplomacy, not just power

But GERD is about more than electricity, say officials. Kifle Horo, the head of the project, says the dam’s year-round regulation of the Blue Nile spares downstream farmers the floods and droughts that once disrupted their seasons. The project is “not only a power plant; it’s a catalyst for regional stability and shared growth”.

Egypt disagrees and is hardening its language. “It is well known that Ethiopia has plans to build new dams, but will the Egyptian state allow that? No,” Egypt’s Irrigation Minister Hani Sewilam told reporters on 4 August.

On 20 August, Abdelatty told Al Arabiya that Egypt has a “legitimate right to defend its interests and water security”, describing the planned dams as an existential threat.

Reinforcing the threat argument, Abbas Mohamed Sharaky, a professor at Cairo University’s African Natural Resources Department, says GERD’s maximum capacity was altered from the 11.1bn cubic metres specified in the original design, submitted by the US Bureau of Reclamation in 1964, to 74bn cubic metres.

But, says Sharaky, there were no “studies confirming the dam’s safety or ensuring no harm to downstream nations during the first filling”. None of the studies carried out the potential risk of partial or total collapse of the dam.

Who can, and should, use the Nile waters?

Sharaky says that Ethiopia’s mountainous terrain rules out large-scale irrigation or drinking-water use from the reservoir: “The communities live in remote areas 2,000m above sea-level … the maximum water level of the dam’s reservoir is only 640m above sea-level.”

Fekahmed Negash Nuru, a hydro-politics expert, says that the planned dams are “not a provocation, but an inevitability grounded in law”. He cites Ethiopia’s sovereign right to use water within its borders “in an equitable and reasonable manner” under the 1997 UN Watercourses Convention, which Ethiopia has ratified.

Sharaky says Egypt is not reflexively opposed to African hydropower – noting Cairo supported Uganda’s Owen Falls Dam, completed in 1954, and is helping build Tanzania’s Julius Nyerere Dam. Cairo is taking a hard line because Ethiopia “has refused to recognise Egypt’s current water allocation of 55.5bn cubic metres”, a figure rooted in a 1959 agreement between Egypt and Sudan, he says.

After a year of GERD’s operations, neither Addis nor Cairo is backing down. And with Ethiopia lining up with the UAE – sharing ambitions to gain access to the Red Sea, while Egypt has moved close to the rival regional bloc led by Saudi Arabia and Turkey – an accord over GERD and future projects on the Nile looks further away than ever.