Investing in Troubled Territories The Oil and Gas Industry in the Ogaden region of Eastern Ethiopia: An Increasing Political Risk to Foreign Investors

Abstract

The central research question of this study concerns the level of political risk in the Ogaden region of eastern Ethiopia for companies in the oil and gas industry. It is practically impossible and very costly to gather all relevant information for a political risk analysis. The aim here is to illustrate such an analysis using a methodological approach, and selecting the most salient variables for an industryspecific model that would yield realistic and practical results. The political risk indication put the Ogaden in the high-risk bracket and the investment indication showed a moderate to high risk. This does not mean that investors should avoid the region, as a high degree of risk
– if sufficiently managed – can result in increased opportunities for higher returns.