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Abstract - Ariel Dinar

The Grand Ethiopian Renaissance Dam (GERD) on the Eastern/Blue Nile River Basin: Should it be a Reason for Cooperation or a Source for Conflict?

Conflicts over the allocation of the Nile waters and especially over the Eastern/Blue Nile waters between Ethiopia, Sudan, and Egypt do exist for many years. Nearly 85% of the Nile water originate in the Ethiopian Highland, making Ethiopia claim that it should have a higher share of the water than what was allocated to it in the 1959 Nile treaty. Egypt (the downstream riparian) on the other hand, argues that its total dependency on the Nile water should not be infringed. For several decades, Ethiopia was not able to obtain loans from international development institutions to build reservoirs to help regulate the Blue Nile flow from Lake Tana in the Ethiopian Highlands. With changes in the dynamics of politics and power in the basin, Ethiopia was able to complete the construction of the GERD. The existing conflicts between Ethiopia, Sudan and Egypt just escalated with the beginning of construction of the GERD in 2011, and the impoundment of the reservoir behind the dam earlier in 2020. Previous speakers in this session referred to the history of that conflict. This presentation highlights possible benefits from the GERD that, putting politics aside, might be attractive to all three basin riparian states. Departing from the existing water rights allocation schemes, an ‘allocate-and-trade’ institution is proposed to manage the Eastern Nile River Basin for Ethiopia, Sudan and Egypt in the new reality of operational GERD. If the motivation of the 3 riparian states is to increase their welfare, from joint management of the Nile waters, a regional ‘social planner’ allocation institution could increase the region’s economic welfare by assigning water rights to the riparian states. An alternative intra-basin water rights arrangement and trade could achieve more than 95 per cent of the welfare created by the social planner allocation. GERD could change both the economic benefits and hydrological positions of the riparian countries. Economic benefits from alternative water use would be sufficient to make riparian countries better off compared with the status quo. Furthermore, riparian countries could raise more than US$680 million annually to address soil erosion problems in the basin.