Information contained in this report is the best available as of March 2003 and is subject to change.

DJIBOUTI
The French Territory of the Somali Coast became Djibouti in 1977. In November 1991, the mainly Afar-supported Front for the Restoration of Unity and Democracy (FRUD) began fighting the Somali majority government. French peacekeeping forces were sent to help stop the fighting in early 1992, and FRUD signed a peace accord with the government in December 1994, ending the conflict. As Djibouti geared up for the 1997 general elections, dissident FRUD rebels attacked and fought government troops in the north. In February 2000, another faction of FRUD signed a peace accord with the government. On May 12, 2001, President Ismail Omar Guelleh presided over the signing of what is termed the final peace accord officially ending the decade-long civil war between the government and the armed faction of the FRUD. France maintains one of its largest military bases outside France in Djibouti. France has some 2,700 troops as well as warships, aircraft and armored vehicles in the country.

Djibouti's main economic asset is its strategic location. The city of Djibouti, capital and home to nearly two-thirds of the country's population, is a major transshipment port and bunkering facility. The Addis Ababa-Djibouti railroad is the only line serving central and southeastern Ethiopia. Business increased at Djibouti's port when hostilities between Eritrea and Ethiopia closed Ethiopian access to the Eritrean port of Assab. Djibouti became the only significant port for landlocked Ethiopia, handling all its imports and exports during the war. The city of Djibouti has the only paved airport in the country. Its relatively good transport infrastructure also enables several landlocked African countries to fly in their goods for re-export. This earns Djibouti much-needed transit taxes and harbor fees.

Djibouti's real gross domestic product (GDP) is expected to again grow 1.6% in 2002, following estimated growth of 1.6% in 2001, and 0.7% in 2000. An unemployment rate of 40% to 50% continues to be a major problem for Djibouti's economy. Inflation, which is expected to fall to 2.0% in 2002, has averaged over 2.4% annually for the last two years. Inflation is not a concern, however, because of the fixed peg of the Djiboutian franc to the US dollar. In November 2001, the International Monetary Fund (IMF) approved the second disbursement of funds from a Poverty Reduction and Growth Facility (PRGF) signed with Djibouti in 1999.

OIL
There is currently no upstream (exploration or production) oil activity in Djibouti. The downstream oil sector is an important aspect of Djibouti's economy, given the role the capital city plays as a significant regional bunkering and refueling facility. Three companies, ExxonMobil, Shell and TotalFinaElf, handle refueling at Djibouti's port. The companies, along with ChevronTexaco, also distribute and market petroleum products in the country. Total storage capacity at the port facility is 1.26 million barrels (200,000 cubic meters). The Dubai Ports Authority (DPA) was awarded a 20-year contract in June 2000 to manage the port. DPA hopes to increase Djibouti's handling capacity from 125,000 metric tons to 300,000 metric tons per year and to make it the leading transshipment point on the African continent. Planned port expansion and modernization will also entail an upgrade to the petroleum receiving and storage facilities. Two-thirds of the port's trade comes from Ethiopia, which stopped using Assab in Eritrea when the two countries went to war in 1998. Ethiopian oil imports through Djibouti nearly doubled in 1999 following the outbreak of war.

POWER
Djibouti currently has installed electricity generating capacity of 85 megawatts (MW), all of which is thermal (oil-fired). In January 2001, U.S.-based Geothermal Development Associates (GDA) announced that it had completed a feasibility study on the development of a 30-MW geothermal power plant in Djibouti. The study, which commenced in August 2000, established the commercial viability of the proposed generating facility. The $115-million plant, to be located in the Lake Assal region west of the capital, will be constructed on the build own operate (BOO) financing scheme. The Global Environmental Facility (GEF), a joint initiative of the World Bank and the United Nations (UN), has approved a $3 million financing package to pay for the drilling of three production-sized assessment wells. GDA anticipates signing a power purchase agreement with state-owned utility Electricite de Djibouti (EDD) by the end of 2001. EDD, which plans to remove aging diesel-fired generating units when the project begins operations, forecasts expanding the Assal geothermal facility to meet growing demand for electricity. The plant is expected to have a capacity of 100 MW by 2015.

ERITREA
In 1952, a UN resolution federating the former Italian colony of Eritrea with Ethiopia went into effect. In 1962, Emperor Haile Selassie unilaterally dissolved the Eritrean parliament and annexed the country. The Eritrean fight for independence continued even after Haile Selassie was ousted in a coup in 1974. A 30-year struggle for independence ended in 1991, with Eritrean rebels defeating the governmental forces led by Mengistu Haile Miriam. In May 1991, the Eritrean People's Liberation Front (EPLF) established the Provisional Government of Eritrea (PGE) to administer Eritrean affairs until a referendum was held on independence and a permanent government established. EPLF leader Isaias Afwerki became the head of the PGE, and the EPLF Central Committee served as its legislative body. On April 23-25, 1993, Eritreans voted overwhelmingly for independence from Ethiopia in a UN-monitored free and fair referendum. The Eritrean authorities declared Eritrea an independent state on April 27, 1993. The government was reorganized and after a national, freely contested election, the National Assembly, which chose Isaias as President of the PGE, was expanded to include both EPLF and non-EPLF members.

Relations between Ethiopia and Eritrea began to deteriorate soon afterwards. When Eritrea and Ethiopia separated amicably in 1993, several border issues remained unresolved. In November 1997, a border commission between the two countries was established, but no progress on the delineation of the countries' boundaries was made. Fighting broke out between the two countries in May 1998 over the disputed Badme region. Eritrea seized Badme and two other areas of previously Ethiopian-administered territory. In February 1999, Ethiopia seized back the border area of Badme. Following a breakdown in talks, Ethiopia, in May 2000, launched a series of attacks to recover the remaining areas seized in 1998. In June 2000, both sides accepted an Organization of African Unity (OAU) peace proposal. The peace plan includes troop withdrawals back to the previous border, a 15.5-mile-wide (25 kilometer) security zone monitored by UN forces, and the eventual demarcation of the border. The formal treaty ending the war was signed on December 12, 2000.

Growth of the Eritrean economy was hampered by the war. Eritrea's real GDP growth in the two years prior to the conflict averaged 7.4%. Real GDP growth fell to 4.0% in 1998, 0.0% in 1999 and -1.0% in 2000. With the cessation of hostilities, real GDP growth of 1.0% is expected in 2001, and a return to prewar real GDP growth of 7.5% is forecast for 2002. Inflation, which reached 27% in 2000, declined to 15% in 2001, and is expected to be around 5% in 2002. Multilateral and bilateral donors have pledged nearly $132 million towards the demobilization of 200,000 Eritrean soldiers. Donor development funding is seen as crucial in the improvement of the country's economy.

OIL
Hydrocarbon exploration, primarily offshore in the Red Sea, began in the 1960's when Eritrea was still federated with Ethiopia. In 1995, Eritrea signed a production sharing contract (PSC) with U.S.-based Anadarko Petroleum (Anadarko) for the offshore Zula Block. Anadarko signed a second PSC for the offshore Edd Block, located south of the Zula Block, in September 1997. Anadarko announced, in December 1997, that it had reached an agreement with ENI/Agip (Agip) to swap interests in exploration acreage. Anadarko received a 25% interest in a Tunisian block operated by Agip, and Agip received a 30% share in the 6.7-million acre Zula Block and 30% interest in the Edd Block. Burlington Resources, a U.S.-based independent, later joined the consortium by acquiring a 20% interest in both acreages. Anadarko's first two exploration wells, both drilled on the Zula Block, were unsuccessful. In January 1999, a third dry well, Edd-1 on the Edd Block, was drilled. Citing the disappointing exploration results, Anadarko and its partners ceased exploration activities and relinquished their rights to the offshore blocks.

In May 2001, U.S.-firm CMS Energy signed an exploration agreement with Eritrea. The agreement grants CMS Energy exploration rights on the nearly 14,000-square kilometer (onshore and offshore) Dismin Block in northeastern Eritrea.

Bab el-Mandeb (Mandab)
The Bab el-Mandeb is a narrow waterway situated between Eritrea, Djibouti and Yemen that connects the Red Sea with the Gulf of Aden and the Arabian Sea. In 2000, it was estimated that more than 3 million barrels per day (bbl/d) of oil flowed through the Bab el-Mandeb. Disruptions or closure of the Bab el-Mandeb could keep tankers from the Persian Gulf from reaching the Suez Canal/Sumed Pipeline complex, diverting them around the southern tip of Africa (the Cape of Good Hope). This would add greatly to transit time and cost, and effectively tie up spare tanker capacity. The Bab el-Mandeb could be bypassed (for northbound oil traffic) by utilizing the East-West oil pipeline, which traverses Saudi Arabia and has a capacity of about 4.8 million bbl/d. However, southbound oil traffic would still be blocked. In addition, closure of the Bab el-Mandeb would effectively block non-oil shipping from using the Suez Canal, except for limited trade within the Red Sea region.

In December 1995 and again in August 1996, Eritrean and Yemeni forces clashed over control of the Hanish Islands, located just north of the Bab el-Mandeb. In October 1996, the two countries signed an agreement over the islands. The two sides agreed to put their case before an international court of arbitration (Permanent Court of Arbitration-PCA). The court will then issue two rulings; one on who has sovereignty over the disputed area, and one on the demarcation of the two sides' maritime boundary. In October 1998, the PCA ruled that the Hanish Islands are subject to the territorial sovereignty of Yemen. In December of 1999, the PCA issued its ruling on the maritime boundary.

Downstream and Refining
Eritrea has crude refining capacity of 18,000 bbl/d, but the refinery located in the Red Sea port of Assab has been shutdown since 1997 due to the high operating and maintenance costs. Ethiopia and Eritrea, joint operators of the facility, decided to close the Assab refinery in August 1997 and import refined petroleum products to meet domestic needs.

Eritrea's petroleum consumption was estimated at 8,000 bbl/d in 2000. Marketing and distribution of petroleum products is performed by ExxonMobil, Shell and TotalFinaElf. In June 2000, Shell purchased the downstream operations of Agip in several African countries including Eritrea and Ethiopia. The Eritrean assets included service stations, two petroleum product depots and an LPG (liquefied petroleum gas) filling station.

In August 2000, Sudan's National Petroleum Company announced plans to lay pipelines to supply Eritrea and Ethiopia with petroleum products from its Khartoum refinery. Sudan already exports oil to other fellow members of COMESA (Common Market for Eastern and Southern Africa). Under COMESA, trade within the zone is not subject to tariffs, which means that Sudanese oil likely will be cheaper for COMESA members than other alternatives.

ELECTRICITY
Eritrea has approximately 60 MW of diesel-fired generating capacity. The Eritrean Electricity Authority (EEA) handles generation, transmission and distribution of electricity. In 1997, South Korean firms Daewoo and Hanjung signed an agreement to build a heavy oil-fired plant in at Hirgigo, just outside of Massawa. The plant, which was nearly completed, was damaged in a bombing raid by Ethiopia in 2000. In April 2001, the governments of Eritrea and the United Arab Emirates signed a loan agreement for the facility's repair. Saudi Arabia and Eritrea signed a $16.6 million loan agreement in September 2001. The loan will be used for infrastructure improvements including electricity generation.

Electricity is only available in Eritrea's larger cities and towns, leaving about 80% of the Eritrean population without access to electricity. Some smaller villages have community diesel generators which can provide small amounts of electricity to households. Photovoltaic (PV) electricity generation is being used in special applications throughout the country. Twenty-six rural health centers are each supplied with 2-kilowatt (kW) solar photovoltaic power systems for refrigeration, lighting, operating theaters, fans, and laboratory equipment. Additionally, the majority of the 140 rural clinics are equipped with solar powered vaccine refrigerators. Approximately 3% (about 60 villages) of Eritrea's villages have been supplied with PV systems (0.8 to 1.2kW) to power water pumps to supply drinking water. Each system serves a minimum of 300 households. Over 70 rural schools (out of 700) have been provided with PV systems for lighting and power.

ETHIOPIA
Ethiopia is the oldest independent country in Africa and one of the oldest in the world. Unique among African countries, Ethiopia maintained its freedom from colonial rule, except during the Italian occupation of 1936-41. In 1974, a military junta, the Derg, deposed Emperor Haile Selassie, who had ruled since 1930, and established a socialist state. The Derg was toppled by a coalition of rebel forces, the Ethiopian People's Revolutionary Democratic Front (EPRDF), in 1991. A constitution was adopted in 1994 and Ethiopia's first multiparty elections were held in 1995. A two-year border war with Eritrea ended when a peace treaty was signed in December 2000.

Ethiopia's economy is primarily agrarian, with the agricultural sector accounting for 45% of GDP and 80% of the workforce. Coffee, Ethiopia's primary export crop, accounted for 58% of total exports in 1999, and has averaged two-thirds of all export earnings over the last 20 years. Other important agricultural exports include qat (khat), a mild stimulant from the leaves of the Catha Edulis shrub, pulses, oilseeds, live animals and hides. Ethiopia's real GDP growth averaged 5% from 1996 to 2000. Real GDP growth of 7.3% is estimated for 2001, and is forecast at 6.8% for 2002. It is estimated that consumer prices fell 6.8% in 2001.The decline is a result of improved grain harvests. Inflation is expected to average 5.1% in 2002.

Continued donor support is seen as the crucial element in Ethiopia's economic reform and poverty reduction strategies. In 1998, the IMF approved a $42 million loan under its Enhanced Structural Adjustment Facility (ESAF). Earlier in the year the World Bank approved $500 million in loans for Ethiopia's power and transportation sectors. Following the outbreak of hostilities with Eritrea, the IMF and World Bank suspended new lending to Ethiopia. The suspension was lifted after the signing of the peace accord in December 2000. The World Bank approved a $400 million loan to finance emergency recovery, military demobilization and reintegration projects. In July 2001, the IMF approved a $112 million PGRF to support Ethiopia's economic program. In November 2001, the IMF and World Bank announced that Ethiopia was eligible for a $1.9 billion debt relief package under the Heavily Indebted Poor Countries (HIPC) Initiative, becoming the 24th country to qualify for debt relief under the HIPC's enhanced framework. The savings in debt service resulting from the HIPC are substantial, amounting to about $96 million per year on average until 2021. The resources made available by debt relief provided under the HIPC will be allocated to key anti-poverty programs. Poverty-targeted expenditures are projected to increase steadily, from 10.9% of GDP in 2001, to 14.7% in 2002, and 15.5% in 2003.

OIL AND GAS
Ethiopia's current proven hydrocarbon reserves are minimal, but the potential to increase reserves to commercial viability is seen as promising. The country's geology is similar to that of its oil-producing neighbors to the east (on the Arabian peninsula) and the west (Sudan). In April 2001, the Ministry of Mines and Energy reported that hydrocarbon seeps had been discovered in several regions. The government plans to conduct feasibility studies to establish the extent and viability of the deposits.

Hydrocarbon exploration in Ethiopia's Ogaden Basin began over eighty years ago (Standard Oil in 1920). In 1972, U.S.-based Tenneco made two natural gas discoveries, Calub and Hilala in the Ogaden region. Tenneco relinquished the acreage, and the Ethiopian government formed the Calub Gas Share Company (CGSC) to develop the fields. In 1994, the World Bank approved a $74 million loan to develop the Ogaden Basin fields. The Ethiopian Privatization Agency (EPA) put up the CGSC for privatization in 1998, but the EPA, citing weak bids, withdrew the tender. In December 1999, Houston-based Sicor announced that it had signed a $1.4-billion joint-venture deal to develop the Calub natural gas project. Under the terms of the agreement, Gasoil Ethiopia Project (GEP), the joint-venture firm, will acquire 95% of the CGSC under the Ethiopian government's privatization law. Currently, 5% of the CGSC is held by local private investors. The Ethiopian government will hold a 20% interest in GEP with Sicor holding the remaining share. GEP plans to construct a 375-mile, 24-inch pipeline to transmit natural gas to the town of Awash, which is approximately 75 miles east of the capital Addis Ababa. At Awash, plans call for construction of a cryogenic liquids plant and two gas-to-liquids process systems with capacity to process 200 million cubic feet per day (Mmcf/d) of natural gas. The end products will be synthetic fuels and petrochemical feedstocks plus steam that will generate electricity and help produce 20,000 bbl/d of potable water. A planned refinery will produce products including diesel, gasoline, kerosene and jet fuels. The gas-to-liquids system will also produce some 500 tons of ammonia per day as feedstock for a urea plant to be constructed. It was announced in April 2000, that CGSC and Sicor had signed a memorandum of understanding (MOU). The purpose of the agreement was to strengthen oil-prospecting activities in the Calub and the Lalla areas.

In 1989, U.S.-independent Hunt Oil signed a PSC for the Genale River concession in the Ogaden Basin.

In January 2001, the Ethiopian government and Canada's Pinewood Resources (Pinewood) signed a PSC to explore and develop the Gambela oil concession located in the Gambela area of southwestern Ethiopia bordering on Sudan. The concession encompasses an area of 5,900-square miles (15,356-square kilometers). No seismic data has been acquired or wells drilled in the Gambela concession. In May 2001, Pinewood announced that it had relinquished all rights to the Gambela oil concession located in the Gambela region of Ethiopia. Pinewood stated that it was unable to obtain financing to develop the project.

Downstream
Ethiopia's petroleum consumption was estimated to be 22,000 bbl/d in 2000. With the closure of the Assab refinery in 1997, Ethiopia is totally reliant on imports to meet its petroleum requirements. Petroleum imports are received at the port of Djibouti, and shipped via rail and tanker truck to Ethiopia. The Ethio-Djibouti Railway Company (jointly owned by Ethiopia and Djibouti) plans to rehabilitate the railway between Djibouti-Addis Ababa. This is part of a $40 million project which is being funded by the European Union (EU). The project is expected to begin in the first half of the year 2002 and take two years to complete.

Sudan and Ethiopia signed an agreement in June 2001, where Ethiopia will begin importing Sudanese petroleum products. Imports are expected to begin in early 2002, when the road linking Gallabat in Sudan to Gondar, Ethiopia is completed. Officials from the Ethiopian Petroleum Corporation (EPC), the state-owned firm responsible for the country's downstream operations, stated that as much as 85% of its petroleum requirements will be met by Sudanese imports. The EPC plans to build an oil depot in Sudan to facilitate storage and transportation. It was reported in November 2001, that the EPC would lease oil depots in Khartoum until its storage facilities can be built.

Marketing and distribution of petroleum products is performed by ExxonMobil, Shell and TotalFinaElf. In June 2000, Shell purchased the downstream operations of Agip in several African countries including Ethiopia. The Ethiopian assets included over 100 service stations, two depots and four LPG filling plants.

ELECTRICITY
Ethiopia has approximately 456 MW of installed generating capacity. The vast majority of Ethiopia's existing capacity (83%) is hydroelectric. The Ethiopian Electric Power Corporation (EEPCO), the state-owned firm responsible for electricity generation, plans to construct several new generating facilities to provide electricity to Ethiopia. Currently, less than half of Ethiopia's towns have access to electricity. Droughts and repairs on several hydroelectric facilities have led to power rationing to EEPCO's current customers.

In February 2001, EEPCO announced that repair and maintenance work had been completed at four hydroelectric facilities: Awash 1 & 2, Koka, and Tis Abay 1. U.S.-based Harza Engineering (now MWH Global) is overseeing the construction of an additional 34-MW unit at the Finchaa hydroelectric facility in western Ethiopia. When completed, the four-unit Finchaa dam will have a capacity of 134 MW. The 73-MW Tis Abay 2 facility, located on the Blue Nile (Abay) was expected to be operational in 2001. Completion of the Finchaa expansion and the Tis Abay 2 projects will increase Ethiopia's generating capacity by nearly 25%.

EEPCO expects to have the Gilgel Gibe hydroelectric facility online by mid-2003. Gilgel Gibe, located on the Omo River in southwestern Ethiopia, will have a generating capacity of 184 MW. The Ethiopian government is funding $23 million of the $259 million cost of the Gilgel Gibe project. The World Bank has provided a $190 million loan, and another loan of $46 million has been granted by the European Investment Bank. EEPCO plans to build Ethiopia's largest generating facility at Tekeze. The 300-MW hydroelectric facility will be located in northern Ethiopia. Germany's Lahmeyer has been commissioned to conduct feasibility studies on three potential hydroelectric sites in Ethiopia: a 195-MW scheme at Beles, 370-MW facility at Halele-Werabesa and a 440-MW plant at Chemoga-Yeda.

Construction of Ethiopia's first Independent Power Project (IPP) was set to commence in early 2002. The Gojeb IPP will consist of a 150-MW hydroelectric facility in western Ethiopia. The project is being developed by Mohammed International Development Research Organization & Companies (Midroc). When completed, Midroc will sell the output from Gojeb to EEPCO. It was reported in December 2001, that construction of the Gojeb facility was being delayed due to the lack of a signed purchase power agreement (PPA) between Midroc and the government. Details and signing of the PPA were expected to be completed in the first quarter of 2002.

Agreements on additional IPP projects were signed in June 2001. EEPCO and Italy's ENERCO signed a MOU for the construction of three power plants in the country. The Bilbi Moya plant will be a 75-MW coal-fired plant. Bilbi Moya will utilize local coal deposits for fuel. The planned Awash 4 hydroelectric facility will have generating capacity of 40 MW. The largest facility will be the 162-MW Genale hydroelectric facility located on the border between the Oromia Region and the Southern Peoples Nationalities Regional State. The plants will be built under the Build-Operate-Transfer (BOT) system. ENERCO will operate the facilities for 30 years, which would be renewable for another 30 years.

In April 2001, Ethiopia signed agreements to export electricity to neighboring Djibouti and Sudan. Exports are expected to begin in 2004, following the interconnection of the countries electric grids.

SOMALIA
The Somali Republic gained independence on July 1, 1960. Somalia was formed by the union of British Somaliland and Italian Somaliland. Fighting erupted with Ethiopia in 1964 over the Ogaden region, which Somalia claims. A socialist state was established following a coup led by Major General Muhammad Siad Barre. Somalia helped Somali region (Ethiopia) region in 1978 but was defeated by Ethiopian forces. Skirmishes between the two countries continued into the early 1980s. Rebel forces ousted the Barre regime in 1991, but turmoil, factional fighting, and anarchy ensued. The Somali National Movement (SNM) gained control of the north, while in the capital of Mogadishu and most of southern Somalia the United Somali Congress achieved control.

In 1992, responding to the political chaos and humanitarian disaster in Somalia, the United States and other nations launched Operation Restore Hope. The U.S.-led Unified Task Force (UNITAF), was mandated to create an environment in which assistance could be delivered to the Somali people. UNITAF, which was a UN-sanctioned operation, was granted the authority to use all necessary means, including military force in the protection of humanitarian assistance and other peace-enforcement operations. Beginning in 1993, UNITAF was replaced by a UN humanitarian effort, UNOSOM II, which included forces from the United States. By March 1993, the potential for mass starvation in Somalia had been overcome, but the security situation remained fragile. On October 3, 1993 U.S. troops recieved significant casuualties (19 dead over 80 others wounded) in a battle with Somali gunmen. When the United States (in 1994) and the UN withdrew (in 1995) their forces from Somalia, after suffering significant casualties, order still had not been restored.

In May of 1991, the areas controlled by SNM (the administrative regions of Awdal, Woqooyi Galbeed, Togdheer, Sanaag, and Sool) declared itself as the independent Republic of Somaliland. Although not recognized internationally, Somaliland has maintained a stable existence. In 1998, the neighboring regions of Bari and Nugaal declared themselves independent as the Republic of Puntland. A Transitional National Government (TNG) was created in October 2000 in Arta, Djibouti during a conference that was attended by a broad representation of Somali clans. The TNG has a three-year mandate to create a permanent national Somali government. The TNG does not recognize Somaliland or Puntland as independent republics but so far has been unable to reunite them with the unstable regions in the south. A former official in the Barre regime, Abdikassim Salad Hassan, was chosen as the president of the TNG.

Somalia's economy, one of the world's least developed, has been further hampered by the country's ongoing internal strife. Reliable economic data is scarce, and the TNG cannot manage the national economy while it struggles to gain control over the country. Livestock production (cattle, goats & sheep) is the mainstay and largest foreign exchange earner of the Somali economy. An outbreak of Rift Valley Fever (RVF) in southern Saudi Arabia and Yemen (the first reported outside Africa) in September and October 2000 left dozens of people dead and hundreds infected. As a consequence, six Gulf States - Saudi Arabia, Bahrain, Oman, Qatar, Yemen and the United Arab Emirates - have now banned livestock imports from nine African countries, principally from the Horn of Africa. The economic impacts of this ban are likely to be devastating. A similar ban by Saudi Arabia, following a RVF outbreak in 1998, saw the volume of livestock exports tumble from the port of Berbera in Somaliland from nearly three million head in 1997 to just over one million in 1998 (roughly $100 million of lost exports). Another significant portion of the Somali economy, foreign remittances, have fallen significantly following the U.S. government's closure of the Al-Barakat transfer company and the freezing of its assets. Al-Barakat, the largest money transfer company operating in Somalia's informal banking sector, has been accused of transferring funds on behalf of Osama bin Laden and the Al-Qaida terrorist network. Remittances from abroad are estimated to be $200-$500 million annually.

The TNG is in the process of re-establishing Somalia's Central Bank. Somalia is unable to receive IMF, and other multilateral aid due to the lack of institutions/financial infrastructure in place. Somaliland has established a Central Bank (and issues its own currency), and Puntland's Central Bank became operational in August 1999.

OIL AND GAS
Somalia has no proven oil reserves, and only 200 billion cubic feet of proven natural gas reserves. Somalia currently has no hydrocarbon production. Oil seeps were first identified by Italian and British geologists during the colonial era. Exploration activities were focused in northern Somalia, and several foreign firms, including Agip, Amoco, Chevron, Conoco and Phillips, held concessions in the area. The firms all declared force majeure following the collapse of the central government.

Exploration activity remains hindered by the internal security situation, and the multiple sovereignty issues. In February 2001 TotalFinaElf signed an exploration agreement with the TNG. The twelve-month agreement grants TotalFinaElf the rights to explore in the Indian Ocean off southern Somalia. Hassan Farah, TNG's Minister for Water and Mineral Resources, stated that the government would provide security during the exploration activities. Several factional leaders have denounced the agreement, and stated that the TNG did not have the authority to sanction the agreement, nor the power to guarantee the safety and security of the exploration operations.

In May 2001, Somaliland signed an agreement with U.K.-registered Rovagold and two Chinese firms,