Somaliland: Why an Unrecognised Territory Is Gaining Global Economic Significance

It does not have a seat at the United Nations (UN). The overwhelming majority of countries do not formally recognise it as a sovereign state. Official maps show it as part of Somalia. Despite this inescapable reality, in the past two years, Somaliland has considerably expanded its global economic profile in trade, energy security, US-China competition, West Asian geopolitics, African economic integration and even the future of Taiwan’s international relationships. So, how can a territory that does not exist as an independent state in the eyes of the international community be garnering so much attention?

Much of the answer to that question lies in Somaliland’s advantageous geographical location, especially its stretch of coastline along the Gulf of Aden that is directly adjacent to the Bab-el-Mandeb Strait. A crucial maritime chokepoint that not only links the Red Sea to the Indian Ocean but also serves as the southern gateway to the Suez Canal, Bab-el-Mandeb sees substantial volumes of oil, liquefied natural gas (LNG), manufactured goods and containerised trade pass through it as a corridor connecting Europe, the Middle East and Asia.

Bab-el-Mandeb represents a key artery of the global economy, and even more so in recent years due in no small part to a regional shipping crisis involving attacks by Yemen’s Ansar Allah (Houthis) on commercial vessels bound for Israel, forcing many shipping companies to reroute traffic around South Africa’s Cape of Good Hope. For investors, policymakers and military planners alike, the episode has highlighted the dependence of well-functioning global markets on a select number of critical maritime corridors. Somaliland sits directly beside one of them, underscoring its strategic geographical importance.

Somaliland’s economic significance is also attributable to Berbera, a port located within the territory on the Gulf of Aden. Underutilised for decades, Berbera is fast becoming one of Africa’s most significant logistics projects, especially since the United Arab Emirates’ (UAE’s) DP World invested hundreds of millions of dollars to secure a 65-percent controlling stake in the port’s development (the Somaliland government owns the remaining 35 percent). New container facilities, road links and logistics projects are gradually transforming the port into a serious regional trade hub.

With its facilitation of access to global markets, therefore, Berbera could prove economically crucial to countries in the region, none more so than Ethiopia. Ethiopia, Africa’s second-most populous country with more than 120 million people, depends heavily on neighbouring countries for maritime access, with most of the country’s trade historically flowing through Djibouti.

The landlocked country has endured high transport costs, diminished competitiveness and considerable dependence on its neighbours-situations that have only worsened in recent decades after it lost direct access to the sea following Eritrea’s independence in the early 1990s. As Ethiopia’s economy and population continue to expand, access to reliable trade corridors becomes ever more essential.

Berbera offers a solution to this need. If trade volumes continue to grow, the port could become a major gateway that not only links Ethiopia to international markets but also creates a raft of new commercial opportunities across the Horn of Africa. It is perhaps through Berbera that Somaliland’s economic significance is most clearly illuminated. Beyond simply creating local jobs, infrastructure projects within the territory are restructuring trade routes across one of the world’s most strategically important regions.

That said, the investments have also transformed Berbera into a distinct geopolitical flashpoint. Somalia’s federal government has repeatedly objected to agreements involving Somaliland and foreign partners, arguing that they undermine its sovereignty. Tensions with the UAE, in particular, were inflamed after Israel officially recognised Somaliland as an independent state in December 2025. “Somalia views this as an infringement of its territorial integrity and believes the UAE played a behind-the-scenes role in supporting the outcome,” according to Omar Mahmood, a senior researcher at the International Crisis Group think tank.

“The region is increasingly defined by divergent geopolitical blocs, with the UAE and Israel on one side, and Saudi Arabia, Turkey and others on the other,” Mahmood told the British Broadcasting Corporation (BBC) in January, adding that Somalia’s relationship with the UAE had soured since the Gulf state’s ally, Ethiopia, indicated in 2024 that it would recognise Somaliland’s independence in return for establishing a naval base along the breakaway state’s coast. “But Ethiopia only promised recognition. Israel went ahead and did it, and that raises the stakes.”

As security concerns in the region have increased, partnerships around the Red Sea have taken on greater geopolitical significance. Despite operating its own government, currency and institutions, Somaliland remains largely excluded from many of the international systems that facilitate global commerce, with businesses facing obstacles to accessing correspondent-banking relationships, trade finance, insurance and development funding. Recognition is, therefore, regarded as an economic necessity for unlocking investment, integrating with global markets and accelerating growth. It also explains in part why Israel-its trade links with Asia being heavily dependent on maritime routes passing through Bab-el-Mandeb-officially recognised Somaliland.

Perhaps the most surprising aspect of Somaliland’s rise has been its growing relationship with Taiwan. The two territories share an uncommon characteristic: Both function as self-governing political entities while facing international disputes over their status. In recent years, Somaliland and Taiwan have established representative offices and expanded cooperation in areas such as education, healthcare, technology and development.

Given that China regards Taiwan as part of its territory, the deepening Taiwan-Somaliland relations have prompted China to expand its engagement with Somalia simultaneously. “Both sides reaffirmed the strength of the China-Somalia strategic partnership and their mutual support on core interests. They welcomed the positive momentum in bilateral relations, agreed to deepen political trust and practical cooperation, and underscored their shared commitment to sovereignty, unity, and non-interference,” according to Beijing’s readout of the phone call held in January between the foreign ministers of China and Somalia. “China reiterated its firm support for Somalia’s territorial integrity, stressing that Somaliland is an inalienable part of Somalia, while Somalia reaffirmed its steadfast support for the one-China principle and all of China’s efforts for national reunification, and the authority of UNGA Resolution 2758.”

As China’s influence expands across Africa through infrastructure investment, trade and diplomatic engagement, the United States has become increasingly focused on maintaining its own influence in the Horn of Africa.

“The question of Somaliland remains particularly sensitive. While some international actors like Israel and the UAE have shown growing interest in the territory due to its relative stability and strategic location near the Bab al-Mandeb, neighbouring states and the African Union have traditionally favoured preserving Somalia’s territorial integrity because they believe recognition of Somaliland might catalyse secessionist movements in other countries,” the Atlantic Council recently reported. “Regardless of the ultimate status question, the US can deepen commercial engagement, maritime cooperation, private-sector dialogue, and technical exchanges with Somaliland while maintaining support for broader regional stability.”

Some of the more virulent anti-China factions of the Republican Party have been keen to advance the recognition of Somaliland. To “counter malign Chinese activity” in Sub-Saharan Africa, the American right-wing think tank the Heritage Foundation stated in its Project 2025 conservative policy blueprint that US measures should include “the recognition of Somaliland statehood as a hedge against the US’ deteriorating position in Djibouti”. What’s more, a bill to “recognize Somaliland of the Federal Republic of Somalia as a separate, independent country” was introduced in December by U.S. Representative Scott Perry (R-PA), although it has yet to pass the House of Representatives.

“Stronger US engagement with Somaliland risks neglecting Somalia. Mogadishu depends on external military assistance in its battle against the advancing violent Islamist extremist group, Al-Shabaab. It also faces increasing defiance from two federal regions, Puntland and Jubaland,” explained Aleksi Ylönen, a professor at United States International University-Africa (USIU) and researcher at the Center for International Studies, ISCTE-University Institute of Lisbon (CEI-IUL), in a May 2025 article for The Conversation.

“US recognition would reward Hargeisa for its persistent effort to maintain stability and promote democracy,” Ylönen added. “However, it could encourage other nations to recognise Somaliland. This would deliver a blow to Somali nationalists who want one state for all Somalis.”

The question of recognition remains unresolved for the time being. Most governments continue to support Somalia’s territorial integrity and remain reluctant to establish a precedent that might encourage other separatist movements. Yet Somaliland’s position today differs markedly from where it stood a decade ago.

Indeed, it is becoming increasingly clear that recognition is no longer the only measure of significance. Somaliland is increasingly becoming a meeting point between global trade, great-power rivalry and regional economic transformation. For most of the world, Somaliland remains an unrecognised state. For investors, policymakers and geopolitical strategists, it is becoming much harder to ignore.